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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549-1004





FORM 10-Q





(Mark One)

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

For the quarterly period ended March 31, 2008

OR



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

For the transition period from  to

Commission file number: 333-53603-03





GRAHAM PACKAGING HOLDINGS COMPANY

(Exact name of registrant as specified in
its charter)







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



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

(717) 849-8500

(Registrants telephone number, including area code)





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

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

Large accelerated filer   ̈    Accelerated filer   ̈

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act).    Yes   ̈    No  x









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GRAHAM PACKAGING HOLDINGS COMPANY

INDEX



|                              |  |                                                                                                                  |  |           
|----------------------------- |  | ---------------------------------------------------------------------------------------------------------------- |  | ----------
|                              |  |                                                                                                                  |  | PageNumber
|PART I. FINANCIAL INFORMATION
|                              |  |                                                                                                                 
|Item 1:                       |  | Financial Statements:                                                                                            |  |           
|                              |  |                                                                                                                 
|                              |  | CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)  At March 31, 2008 and December 31, 2007                      |  | 3         
|                              |  |                                                                                                                 
|                              |  | CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)  For the three months ended March 31, 2008 and 2007 |  | 4         
|                              |  |                                                                                                                 
|                              |  | CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)  For the three months ended March 31, 2008 and 2007 |  | 5         
|                              |  |                                                                                                                 
|                              |  | NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)                                                 |  | 6         
|                              |  |                                                                                                                 
|Item 2:                       |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                            |  | 24        
|                              |  |                                                                                                                 
|Item 3:                       |  | Quantitative and Qualitative Disclosures About Market Risk                                                       |  | 33        
|                              |  |                                                                                                                 
|Item 4T:                      |  | Controls and Procedures                                                                                          |  | 34        
|                             
|PART II. OTHER INFORMATION   
|                              |  |                                                                                                                 
|Item 1:                       |  | Legal Proceedings                                                                                                |  | 36        
|                              |  |                                                                                                                 
|Item 1A:                      |  | Risk Factors                                                                                                     |  | 36        
|                              |  |                                                                                                                 
|Item 6:                       |  | Exhibits                                                                                                         |  | 36        
|                              | 
|Signature                     |  | 37                                                                                                              



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PART I. FINANCIAL INFORMATION



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

GRAHAM PACKAGING HOLDINGS COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)



|                                                             |  |                |           |   |                  |   |           |  
|------------------------------------------------------------ |  | -------------- | --------- | - | ---------------- | - | --------- | -
|                                                             |  | March 31,2008  |           |   | December 31,2007 |  
|                                                             |  | (In thousands) |          
|ASSETS                                                       |  |                |           |   |                  |   |           |  
|Current assets:                                              |  |                |           |   |                  |   |           |  
|Cash and cash equivalents                                    |  | $              | 32,794    |   |                  | $ | 18,314    |  
|Accounts receivable, net                                     |  |                | 281,707   |   |                  |   | 247,953   |  
|Inventories                                                  |  |                | 257,462   |   |                  |   | 266,184   |  
|Deferred income taxes                                        |  |                | 7,783     |   |                  |   | 7,520     |  
|Prepaid expenses and other current assets                    |  |                | 35,067    |   |                  |   | 40,698    |  
|                                                             |  |                |           |   |                  |   |           |  
|Total current assets                                         |  |                | 614,813   |   |                  |   | 580,669   |  
|Property, plant and equipment, net                           |  |                | 1,248,885 |   |                  |   | 1,242,418 |  
|Intangible assets, net                                       |  |                | 52,142    |   |                  |   | 52,852    |  
|Goodwill                                                     |  |                | 309,065   |   |                  |   | 306,719   |  
|Other non-current assets                                     |  |                | 48,883    |   |                  |   | 51,175    |  
|                                                             |  |                |           |   |                  |   |           |  
|Total assets                                                 |  | $              | 2,273,788 |   |                  | $ | 2,233,833 |  
|                                                             |  |                |           |   |                  |   |           |  
|                                                             |  |               
|LIABILITIES AND PARTNERS CAPITAL (DEFICIT)                  |  |                |           |   |                  |   |           |  
|Current liabilities:                                         |  |                |           |   |                  |   |           |  
|Current portion of long-term debt                            |  | $              | 45,713    |   |                  | $ | 45,695    |  
|Accounts payable                                             |  |                | 175,056   |   |                  |   | 166,573   |  
|Accrued expenses and other current liabilities               |  |                | 191,594   |   |                  |   | 184,559   |  
|Deferred revenue                                             |  |                | 31,506    |   |                  |   | 25,024    |  
|                                                             |  |                |           |   |                  |   |           |  
|Total current liabilities                                    |  |                | 443,869   |   |                  |   | 421,851   |  
|Long-term debt                                               |  |                | 2,482,380 |   |                  |   | 2,488,637 |  
|Deferred income taxes                                        |  |                | 28,348    |   |                  |   | 25,778    |  
|Other non-current liabilities                                |  |                | 90,689    |   |                  |   | 84,964    |  
|Commitments and contingent liabilities (see Notes 12 and 13) |  |                |           |   |                  |   |           |  
|Partners capital (deficit):                                 |  |                |           |   |                  |   |           |  
|General partners                                             |  |                | (41,320   | ) |                  |   | (41,508   | )
|Limited partners                                             |  |                | (791,806  | ) |                  |   | (796,694  | )
|Notes and interest receivable for ownership interests        |  |                | (1,970    | ) |                  |   | (1,939    | )
|Accumulated other comprehensive income                       |  |                | 63,598    |   |                  |   | 52,744    |  
|                                                             |  |                |           |   |                  |   |           |  
|Total partners capital (deficit)                            |  |                | (771,498  | ) |                  |   | (787,397  | )
|                                                             |  |                |           |   |                  |   |           |  
|Total liabilities and partners capital (deficit)            |  | $              | 2,273,788 |   |                  | $ | 2,233,833 |  
|                                                             |  |                |           |   |                  |   |           |  

See accompanying notes to condensed consolidated financial statements.



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GRAHAM PACKAGING HOLDINGS COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)



|                                                |  |                             |         |   |      |   |         |  
|----------------------------------------------- |  | --------------------------- | ------- | - | ---- | - | ------- | -
|                                                |  | Three Months EndedMarch 31, |        
|                                                |  | 2008                        |         |   | 2007 |  
|                                                |  | (In thousands)              |        
|Net sales                                       |  | $                           | 669,402 |   |      | $ | 621,785 |  
|Cost of goods sold                              |  |                             | 576,299 |   |      |   | 541,625 |  
|                                                |  |                             |         |   |      |   |         |  
|Gross profit                                    |  |                             | 93,103  |   |      |   | 80,160  |  
|Selling, general and administrative expenses    |  |                             | 32,937  |   |      |   | 35,185  |  
|Asset impairment charges                        |  |                             | 15      |   |      |   |        |  
|Net loss on disposal of fixed assets            |  |                             | 146     |   |      |   | 1,565   |  
|                                                |  |                             |         |   |      |   |         |  
|Operating income                                |  |                             | 60,005  |   |      |   | 43,410  |  
|Interest expense                                |  |                             | 50,834  |   |      |   | 55,884  |  
|Interest income                                 |  |                             | (149    | ) |      |   | (161    | )
|Other (income) expense, net                     |  |                             | (821    | ) |      |   | 110     |  
|                                                |  |                             |         |   |      |   |         |  
|Income (loss) before income taxes               |  |                             | 10,141  |   |      |   | (12,423 | )
|Income tax provision                            |  |                             | 6,384   |   |      |   | 3,192   |  
|                                                |  |                             |         |   |      |   |         |  
|Net income (loss)                               |  | $                           | 3,757   |   |      | $ | (15,615 | )
|                                                |  |                             |         |   |      |   |         |  
|Net income (loss) allocated to general partners |  | $                           | 188     |   |      | $ | (781    | )
|Net income (loss) allocated to limited partners |  | $                           | 3,569   |   |      | $ | (14,834 | )

See accompanying notes to condensed consolidated financial statements.



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GRAHAM PACKAGING HOLDINGS COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)



|                                                                                         |  |                             |          |   |      |   |          |  
|---------------------------------------------------------------------------------------- |  | --------------------------- | -------- | - | ---- | - | -------- | -
|                                                                                         |  | Three Months EndedMarch 31, |         
|                                                                                         |  | 2008                        |          |   | 2007 |  
|                                                                                         |  | (In thousands)              |         
|Operating activities:                                                                    |  |                             |          |   |      |   |          |  
|Net income (loss)                                                                        |  | $                           | 3,757    |   |      | $ | (15,615  | )
|Adjustments to reconcile net income (loss) to net cash provided by operating activities: |  |                             |          |   |      |   |          |  
|Depreciation and amortization                                                            |  |                             | 43,781   |   |      |   | 49,729   |  
|Amortization of debt issuance fees                                                       |  |                             | 2,589    |   |      |   | 7,135    |  
|Net loss on disposal of fixed assets                                                     |  |                             | 146      |   |      |   | 1,565    |  
|Pension expense                                                                          |  |                             | 627      |   |      |   | 747      |  
|Asset impairment charges                                                                 |  |                             | 15       |   |      |   |         |  
|Stock compensation expense                                                               |  |                             | 1,318    |   |      |   | 114      |  
|Foreign currency transaction (gain) loss                                                 |  |                             | (461     | ) |      |   | 138      |  
|Interest on receivable for ownership interests                                           |  |                             | (30      | ) |      |   | (26      | )
|Changes in operating assets and liabilities:                                             |  |                             |          |   |      |   |          |  
|Accounts receivable                                                                      |  |                             | (30,919  | ) |      |   | (35,676  | )
|Inventories                                                                              |  |                             | 10,715   |   |      |   | (3,375   | )
|Prepaid expenses and other current assets                                                |  |                             | 7,313    |   |      |   | 7,539    |  
|Other non-current assets                                                                 |  |                             | (1,171   | ) |      |   | (640     | )
|Pension contributions                                                                    |  |                             | (200     | ) |      |   | (285     | )
|Other non-current liabilities                                                            |  |                             | 4,628    |   |      |   | 2,017    |  
|Accounts payable and accrued expenses                                                    |  |                             | 14,290   |   |      |   | 22,472   |  
|                                                                                         |  |                             |          |   |      |   |          |  
|Net cash provided by operating activities                                                |  |                             | 56,398   |   |      |   | 35,839   |  
|                                                                                         |  |                             |          |   |      |   |          |  
|Investing activities:                                                                    |  |                             |          |   |      |   |          |  
|Cash paid for property, plant and equipment                                              |  |                             | (35,762  | ) |      |   | (32,623  | )
|Proceeds from sale of property, plant and equipment                                      |  |                             | 317      |   |      |   | 369      |  
|                                                                                         |  |                             |          |   |      |   |          |  
|Net cash used in investing activities                                                    |  |                             | (35,445  | ) |      |   | (32,254  | )
|                                                                                         |  |                             |          |   |      |   |          |  
|Financing activities:                                                                    |  |                             |          |   |      |   |          |  
|Proceeds from issuance of long-term debt                                                 |  |                             | 127,110  |   |      |   | 435,082  |  
|Payment of long-term debt                                                                |  |                             | (133,626 | ) |      |   | (435,080 | )
|Purchase of partnership units                                                            |  |                             |         |   |      |   | (2,762   | )
|Debt issuance fees                                                                       |  |                             |         |   |      |   | (4,500   | )
|                                                                                         |  |                             |          |   |      |   |          |  
|Net cash used in financing activities                                                    |  |                             | (6,516   | ) |      |   | (7,260   | )
|                                                                                         |  |                             |          |   |      |   |          |  
|Effect of exchange rate changes on cash and cash equivalents                             |  |                             | 43       |   |      |   | (44      | )
|                                                                                         |  |                             |          |   |      |   |          |  
|Increase (decrease) in cash and cash equivalents                                         |  |                             | 14,480   |   |      |   | (3,719   | )
|Cash and cash equivalents at beginning of period                                         |  |                             | 18,314   |   |      |   | 13,327   |  
|                                                                                         |  |                             |          |   |      |   |          |  
|Cash and cash equivalents at end of period                                               |  | $                           | 32,794   |   |      | $ | 9,608    |  
|                                                                                         |  |                             |          |   |      |   |          |  
|Supplemental disclosures                                                                 |  |                             |          |   |      |   |          |  
|Cash paid for interest, net of amounts capitalized                                       |  | $                           | 36,534   |   |      | $ | 56,743   |  
|Cash paid for income taxes                                                               |  |                             | 2,947    |   |      |   | 4,819    |  
|Non-cash investing activities:                                                           |  |                             |          |   |      |   |          |  
|Accruals for purchases of property, plant and equipment                                  |  |                             | 15,564   |   |      |   | 34,666   |  

See accompanying notes to condensed consolidated financial statements.



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GRAHAM PACKAGING HOLDINGS COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)



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

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

Recent Accounting Pronouncements

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

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

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

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



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GRAHAM PACKAGING HOLDINGS COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-Continued



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

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

Derivatives

During 2004,
the Company entered into four interest rate swap agreements, under which the Company received variable interest based on the Eurodollar rate and paid fixed interest at a weighted average rate of 3.89%, on $700.0 million of term loans. During 2005,
the Company entered into three additional interest rate swap agreements, under which the Company received variable interest based on the Eurodollar rate and paid fixed interest at a weighted average rate of 4.43%, on $225.0 million of term loans.
These interest rate swap agreements expired in December 2007 and January 2008. During 2007, the Company entered into two interest rate collar agreements, which became effective in January 2008, under which the Company purchased a cap at a Eurodollar
rate of 4.70% and sold a floor at a weighted average Eurodollar rate of 2.88%, on $385.0 million of term loans. During 2008, the Company entered into forward exchange contracts to hedge the exchange rate exposure on transactions that are denominated
in foreign currencies. At March 31, 2008, the Company had contracts for Canadian Dollars, Polish Zloty and Pound Sterling totalling $15.4 million. The interest rate swaps, interest rate collars and forward exchange contracts are accounted
for as cash flow hedges. The hedges are highly effective as defined in SFAS 133, Accounting for Derivative Instruments and Hedging Activities. The change in fair value on the effective portion of these cash flow hedges is recorded in
other comprehensive income (loss) and was an unrealized loss of $3.3 million and $3.0 million for the three months ended March 31, 2008 and 2007, respectively. Of the amount recorded within accumulated other comprehensive income (loss) as of
March 31, 2008, 57% is expected to be recognized in interest expense in the next twelve months.

Comprehensive Income

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

Option Plans

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



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GRAHAM PACKAGING HOLDINGS COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-Continued



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

A summary of the changes in the options outstanding under the option plans for the three months ended March 31, 2008, is as follows:



|                               |  |         |   |  |                                     |        |                                                   |     |                                      |   |     
|------------------------------ |  | ------- | - |  | ----------------------------------- | ------ | ------------------------------------------------- | --- | ------------------------------------ | - | ----
|                               |  | Options |   |  | WeightedAverageExercisePrice/Option |        | WeightedAverageRemainingContractualTerm(in years) |     | AggregateIntrinsicValue(in millions)
|Outstanding at January 1, 2008 |  | 1,446.4 |   |  | $                                   | 34,921 |                                                   |     |                                      |   |     
|Granted(1)                     |  | 329.6   |   |  |                                     | 36,747 |                                                   |     |                                      |   |     
|Exercised                      |  |        |   |  |                                     |       |                                                   |     |                                      |   |     
|Forfeited (1)                  |  | (387.3  | ) |  |                                     | 45,151 |                                                   |     |                                      |   |     
|                               |  |         |   |  |                                     |        |                                                   |     |                                      |   |     
|Outstanding at March 31, 2008  |  | 1,388.7 |   |  | $                                   | 32,502 |                                                   | 8.2 |                                      | $ | 12.9
|                               |  |         |   |  |                                     |        |                                                   |     |                                      |   |     
|Vested or expected to vest     |  | 1,128.9 |   |  | $                                   | 33,677 |                                                   | 8.0 |                                      | $ | 9.3 
|Exercisable at March 31, 2008  |  | 492.3   |   |  | $                                   | 31,168 |                                                   | 6.9 |                                      | $ | 5.5 



|(1) | Includes 264.6 options that had a weighted average exercise price of $51,579, which were cancelled and re-granted at an exercise price of $36,747 in March 2008.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------

In March 2008, the Company cancelled 264.6 options of approximately 100 employees that had a weighted average exercise price
of $51,579 and re-granted 264.6 options at an exercise price of $36,747, which was the Companys fair value on March 7, 2008. As a result, the Company will incur an incremental compensation expense of approximately $1.0 million over the
vesting period of the re-granted options of 4 years. The incremental expense recorded during the three months ended March 31, 2008, was $0.02 million.

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

Reclassification

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



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



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GRAHAM PACKAGING HOLDINGS COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-Continued



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

Accounts receivable, net
are presented net of an allowance for doubtful accounts of $5.9 million and $5.7 million at March 31, 2008, and December 31, 2007, respectively. Management performs ongoing credit evaluations of its customers and generally does not require
collateral.



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

For the three months
ended March 31, 2008, 71.8% of the Companys net sales were generated by its top twenty customers. The Company had sales to one customer, PepsiCo, which exceeded 10% of total sales in each of the three months ended March 31, 2008 and
2007. The Companys sales to PepsiCo, approximately 100% of which were made in North America, were 15.3% and 14.9% of total sales for the three months ended March 31, 2008 and 2007, respectively.

The Company had $187.4 million and $148.5 million of accounts receivable from its top twenty customers as of March 31, 2008, and December 31,
2007, respectively. The Company had $37.8 million and $24.3 million of accounts receivable from PepsiCo as of March 31, 2008, and December 31, 2007, respectively.



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

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



|                        |  |                |         |                  |   |        
|----------------------- |  | -------------- | ------- | ---------------- | - | -------
|                        |  | March 31,2008  |         | December 31,2007
|                        |  | (In thousands)
|Finished goods          |  | $              | 181,332 |                  | $ | 188,236
|Raw materials and parts |  |                | 76,130  |                  |   | 77,948 
|                        |  |                |         |                  |   |        
|Total                   |  | $              | 257,462 |                  | $ | 266,184
|                        |  |                |         |                  |   |        



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

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



|                                                |  |                               |  |               |           |                  |   |          
|----------------------------------------------- |  | ----------------------------- |  | ------------- | --------- | ---------------- | - | ---------
|                                                |  | ExpectedUsefulLives(in years) |  | March 31,2008 |           | December 31,2007
|                                                |  | (In thousands)               
|Land                                            |  |                               |  | $             | 45,978    |                  | $ | 45,560   
|Buildings and improvements                      |  | 7-31.5                        |  |               | 240,451   |                  |   | 239,914  
|Machinery and equipment                         |  | 3-15                          |  |               | 1,848,469 |                  |   | 1,804,497
|Construction in progress                        |  |                               |  |               | 84,882    |                  |   | 91,413   
|                                                |  |                               |  |               |           |                  |   |          
|Property, plant and equipment                   |  |                               |  |               | 2,219,780 |                  |   | 2,181,384
|Less: accumulated depreciation and amortization |  |                               |  |               | 970,895   |                  |   | 938,966  
|                                                |  |                               |  |               |           |                  |   |          
|Property, plant and equipment, net              |  |                               |  | $             | 1,248,885 |                  | $ | 1,242,418
|                                                |  |                               |  |               |           |                  |   |          

Depreciation expense, including depreciation expense on assets recorded under capital leases, for
the three months ended March 31, 2008 and 2007, was $42.1 million and $47.1 million, respectively.

The Company capitalizes interest
on borrowings during the active construction period of major capital projects. Capitalized interest is added to the cost of the underlying assets and is amortized over the useful lives of assets. Interest capitalized for the three months ended
March 31, 2008 and 2007, was $1.3 million and $2.0 million, respectively.



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GRAHAM PACKAGING HOLDINGS COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-Continued



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

The gross carrying amount
and accumulated amortization of the Companys intangible assets subject to amortization as of March 31, 2008, were as follows:



|                       |  |                     |        |                         |   |         |     |  |                                    |        |  |         
|---------------------- |  | ------------------- | ------ | ----------------------- | - | ------- | --- |  | ---------------------------------- | ------ |  | --------
|                       |  | GrossCarryingAmount |        | AccumulatedAmortization |   |         | Net |  | Weighted AverageAmortizationPeriod
|                       |  |                     |        | (In thousands)          |   |         |     |  |                                   
|Patented technology    |  | $                   | 24,982 |                         | $ | (6,256  | )   |  | $                                  | 18,726 |  | 11 years
|Customer relationships |  |                     | 36,591 |                         |   | (4,090  | )   |  |                                    | 32,501 |  | 18 years
|Licensing agreements   |  |                     | 601    |                         |   | (137    | )   |  |                                    | 464    |  | 1 year  
|Non-compete agreements |  |                     | 1,544  |                         |   | (1,093  | )   |  |                                    | 451    |  | 5 years 
|                       |  |                     |        |                         |   |         |     |  |                                    |        |  |         
|Total                  |  | $                   | 63,718 |                         | $ | (11,576 | )   |  | $                                  | 52,142 |  |         
|                       |  |                     |        |                         |   |         |     |  |                                    |        |  |         

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



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

Amortization expense for the three months ended March 31, 2008 and 2007, was $1.4 million and
$1.9 million, respectively. Estimated aggregate amortization expense for 2008 and each of the next five years ending December 31 is as follows (in thousands):



|     |  |   |      
|---- |  | - | -----
|2008 |  | $ | 5,300
|2009 |  |   | 4,800
|2010 |  |   | 4,500
|2011 |  |   | 4,400
|2012 |  |   | 4,400
|2013 |  |   | 4,200



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

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



|                                         |  |                     |         |               |   |                     |  |       |       |  |   |        
|---------------------------------------- |  | ------------------- | ------- | ------------- | - | ------------------- |  | ----- | ----- |  | - | -------
|                                         |  | NorthAmericaSegment |         | EuropeSegment |   | SouthAmericaSegment |  | Total
|                                         |  | (In thousands)     
|Balance at December 31, 2007             |  | $                   | 286,295 |               | $ | 18,607              |  | $     | 1,817 |  | $ | 306,719
|Foreign currency translation adjustments |  |                     | 736     |               |   | 1,592               |  |       | 18    |  |   | 2,346  
|                                         |  |                     |         |               |   |                     |  |       |       |  |   |        
|Balance at March 31, 2008                |  | $                   | 287,031 |               | $ | 20,199              |  | $     | 1,835 |  | $ | 309,065
|                                         |  |                     |         |               |   |                     |  |       |       |  |   |        



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GRAHAM PACKAGING HOLDINGS COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-Continued



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

Accrued expenses and other current liabilities consisted of the following:



|                                           |  |                |         |                  |   |        
|------------------------------------------ |  | -------------- | ------- | ---------------- | - | -------
|                                           |  | March 31,2008  |         | December 31,2007
|                                           |  | (In thousands)
|Accrued employee compensation and benefits |  | $              | 60,494  |                  | $ | 68,409 
|Accrued interest                           |  |                | 43,780  |                  |   | 32,069 
|Accrued sales allowance                    |  |                | 32,033  |                  |   | 29,622 
|Other                                      |  |                | 55,287  |                  |   | 54,459 
|                                           |  |                |         |                  |   |        
|                                           |  | $              | 191,594 |                  | $ | 184,559
|                                           |  |                |         |                  |   |        

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

For the three months ended March 31, 2008, the Company recognized severance expense in
the United States of $0.8 million (which is reflected in cost of goods sold) related to the announced closure of its plant in Edison, New Jersey and the related severing of 115 employees, none of whom were terminated by March 31, 2008. The
total expected severance expense related to this plant closure is approximately $2.1 million. Substantially all of the cash payments for these termination benefits are expected to be made by March 31, 2009.

For the year ended December 31, 2007, the Company recognized severance expense in the United States of $2.1 million related to the severing of 59
employees, all of whom were terminated by March 31, 2008. Substantially all of the cash payments for these termination benefits are expected to be made by September 30, 2008. The Company also recognized severance expense in France of $1.9
million related to the severing of 14 employees, three of whom were terminated as of March 31, 2008. Substantially all of the cash payments for these termination benefits are expected to be made by December 31, 2008.

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

For the year ended December 31, 2005, the Company recognized severance expense in the United States of $2.3 million related to the severing of 16
employees. All of the cash payments for these termination benefits have been made as of March 31, 2008. The Company also recognized severance expense in France of $3.8 million related to the severing of 37 employees. Substantially all of the
cash payments for these termination benefits are expected to be made by December 31, 2008.

The following table summarizes these
severance accruals, and related expenses and payments, by operating segment. At March 31, 2008, $1.2 million of the consolidated balance was included in other non-current liabilities and the remainder was included in accrued employee
compensation and benefits:



|                                         |  |                |        |   |        |   |       |       |  |   |        |  
|---------------------------------------- |  | -------------- | ------ | - | ------ | - | ----- | ----- |  | - | ------ | -
|                                         |  | NorthAmerica   |        |   | Europe |   |       | Total | 
|                                         |  | (In thousands) |       
|Balance at January 1, 2007               |  | $              | 6,762  |   |        | $ | 1,072 |       |  | $ | 7,834  |  
|Charged to expense during the year       |  |                | 2,067  |   |        |   | 1,951 |       |  |   | 4,018  |  
|Payments during the year                 |  |                | (4,125 | ) |        |   | (711  | )     |  |   | (4,836 | )
|Foreign currency translation adjustments |  |                |       |   |        |   | 84    |       |  |   | 84     |  
|Other adjustments                        |  |                | (42    | ) |        |   | (270  | )     |  |   | (312   | )
|                                         |  |                |        |   |        |   |       |       |  |   |        |  
|Balance at December 31, 2007             |  |                | 4,662  |   |        |   | 2,126 |       |  |   | 6,788  |  
|Charged to expense during the period     |  |                | 814    |   |        |   |      |       |  |   | 814    |  
|Payments during the period               |  |                | (1,124 | ) |        |   | (236  | )     |  |   | (1,360 | )
|Foreign currency translation adjustments |  |                |       |   |        |   | 150   |       |  |   | 150    |  
|Other adjustments                        |  |                | (8     | ) |        |   |      |       |  |   | (8     | )
|                                         |  |                |        |   |        |   |       |       |  |   |        |  
|Balance at March 31, 2008                |  | $              | 4,344  |   |        | $ | 2,040 |       |  | $ | 6,384  |  
|                                         |  |                |        |   |        |   |       |       |  |   |        |  



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GRAHAM PACKAGING HOLDINGS COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-Continued



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



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

Long-term debt consisted of the
following:



|                                              |  |                |           |                  |   |          
|--------------------------------------------- |  | -------------- | --------- | ---------------- | - | ---------
|                                              |  | March 31,2008  |           | December 31,2007
|                                              |  | (In thousands)
|Term loan                                     |  | $              | 1,856,250 |                  | $ | 1,860,938
|Revolving Credit Facility                     |  |                |          |                  |   |         
|Foreign and other revolving credit facilities |  |                | 14,805    |                  |   | 14,501   
|Senior Notes                                  |  |                | 250,000   |                  |   | 250,000  
|Senior Subordinated Notes                     |  |                | 375,000   |                  |   | 375,000  
|Capital leases                                |  |                | 31,409    |                  |   | 33,180   
|Other                                         |  |                | 629       |                  |   | 713      
|                                              |  |                |           |                  |   |          
|                                              |  |                | 2,528,093 |                  |   | 2,534,332
|Less amounts classified as current            |  |                | 45,713    |                  |   | 45,695   
|                                              |  |                |           |                  |   |          
|Total                                         |  | $              | 2,482,380 |                  | $ | 2,488,637
|                                              |  |                |           |                  |   |          

The Companys credit agreement consists of a term loan B to the Operating Company totaling
$1,856.2 million (the Term Loan or Term Loan Facility) and a $250.0 million revolving credit facility (the Revolving Credit Facility and, together with the Term Loan, the Credit Agreement). The
obligations of the Operating Company under the Credit Agreement are guaranteed by Holdings and certain other subsidiaries of Holdings. The Term Loan is payable in quarterly installments and requires payments of $18.7 million in each of 2008, 2009
and 2010 and $1,804.8 million in 2011. The Revolving Credit Facility expires on October 7, 2010. Availability under the Revolving Credit Facility as of March 31, 2008, was $239.1 million (as reduced by $10.9 million of outstanding letters
of credit). Interest under the Credit Agreement is payable at (a) the Alternate Base Rate (ABR) (the higher of the Prime Rate or the Federal Funds Rate plus 0.50%) plus a margin ranging from 1.00% to 1.75%; or
(b) the Eurodollar Rate (the applicable interest rate offered to banks in the London interbank eurocurrency market) plus a margin ranging from 2.00% to 2.75%. A commitment fee of 0.50% is due on the unused portion of the revolving
loan commitment. In addition, the Credit Agreement contains certain affirmative and negative covenants as to the operations and financial condition of the Company, as well as certain restrictions on the payment of dividends and other distributions
to Holdings. As of March 31, 2008, the Company was in compliance with all covenants.

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

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

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



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GRAHAM PACKAGING HOLDINGS COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-Continued



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

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



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

The following table presents the Companys financial assets and liabilities that were
accounted for at fair value on a recurring basis as of March 31, 2008, by level within the fair value hierarchy:



|                                 |  |                               |   |         |   |         |  |   |  
|-------------------------------- |  | ----------------------------- | - | ------- | - | ------- |  | - | -
|                                 |  | Fair Value Measurements Using
|                                 |  | Level 1                       |   | Level 2 |   | Level 3
|                                 |  | (In thousands)               
|Assets:                          |  |                               |   |         |   |         |  |   |  
|Derivative financial instruments |  | $                             |  |         | $ | 545     |  | $ | 
|Liabilities:                     |  |                               |   |         |   |         |  |   |  
|Derivative financial instruments |  | $                             |  |         | $ | 4,562   |  | $ | 

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



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

Holdings and the Operating Company,
as limited partnerships, do not pay U.S. federal income taxes under the provisions of the Internal Revenue Code, as the applicable income or loss is included in the tax returns of the partners. However, certain U.S. subsidiaries acquired as part of
the acquisition in 2004 of the blow molded plastic container business of Owens-Illinois, Inc. (O-I Plastic) are corporations and are subject to U.S. federal and state income taxes. The Companys foreign operations are subject to tax
in their local jurisdictions. Deferred income tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and
their respective tax bases and are measured using enacted tax rates expected to apply to taxable income in the years in which the temporary differences are expected to reverse. The Company previously established a valuation allowance with respect to
certain deferred tax assets. During the first three months of 2008, the valuation allowance increased by $5.4 million as a result of currency translation adjustments of $4.9 million and current operating losses of $0.5 million.

The Company had $10.1 million of Unrecognized Tax Benefits (UTB), exclusive of interest and penalties, as of March 31, 2008, resulting
primarily from related party interest free loans, related party technical assistance payments and related party administrative allocations in various non-U.S. subsidiaries of the Company and disallowed related party interest expense in various U.S.
states and in certain non-U.S. subsidiaries. For the three months ended March 31, 2008, the Company recorded $0.8 million of UTB, exclusive of interest and penalties, related to tax positions taken in prior periods. Offsetting long-term
deferred income tax assets at March 31, 2008, were $0.9 million. Upon adoption of FIN 48, the Company elected to treat interest and penalties related to taxes as a component of income tax expense. As of March 31, 2008, the Company had
recorded additional UTB of $8.7 million related to interest and penalties, including $1.3 million for the three months ended March 31, 2008. Approximately $13.7 million of UTB at March 31, 2008, if recognized, would impact the
Companys effective tax rate.



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GRAHAM PACKAGING HOLDINGS COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-Continued



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

The Company is a party to various
capital and operating leases involving real property and equipment. Total rent expense for operating leases was $13.8 million and $14.2 million for the three months ended March 31, 2008 and 2007, respectively.



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

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



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

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

The following condensed consolidating information presents, in separate columns, the condensed consolidating balance sheets as of
March 31, 2008, and December 31, 2007, and the related condensed consolidating statements of operations and condensed consolidating statements of cash flows for the three months ended March 31, 2008 and 2007, for (i) Holdings on
a parent only basis, with its investments in the Operating Company and CapCo I recorded under the equity method, (ii) the Operating Company, a wholly-owned subsidiary of Holdings, on a parent only basis, with its investments in subsidiaries
recorded under the equity method, (iii) the guarantor domestic subsidiaries of the Operating Company, (iv) the non-guarantor subsidiaries of the Company, (v) CapCo I, a co-issuer of the Notes, and (vi) the Company on a
consolidated basis.



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GRAHAM PACKAGING HOLDINGS COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-Continued



GRAHAM PACKAGING HOLDINGS COMPANY

CONDENSED CONSOLIDATING BALANCE SHEET

AS OF MARCH 31, 2008

(In thousands)



|                                                  |  |                                |          |   |                              |   |           |            |  |                |           |         |   |              |  |   |              |  |   |            |   |  |   |           |  
|------------------------------------------------- |  | ------------------------------ | -------- | - | ---------------------------- | - | --------- | ---------- |  | -------------- | --------- | ------- | - | ------------ |  | - | ------------ |  | - | ---------- | - |  | - | --------- | -
|                                                  |  | GrahamPackagingHoldingsCompany |          |   | GrahamPackagingCompany, L.P. |   |           | Guarantors |  | Non-Guarantors |           | CapCo I |   | Eliminations |  |   | Consolidated | 
|ASSETS                                            | 
|Current assets:                                   |  |                                |          |   |                              |   |           |            |  |                |           |         |   |              |  |   |              |  |   |            |   |  |   |           |  
|Cash and cash equivalents                         |  | $                              |         |   |                              | $ | 18,895    |            |  | $              | 2         |         | $ | 13,897       |  | $ |             |  | $ |           |   |  | $ | 32,794    |  
|Accounts receivable, net                          |  |                                |         |   |                              |   | 89,101    |            |  |                | 105,221   |         |   | 87,385       |  |   |             |  |   |           |   |  |   | 281,707   |  
|Inventories                                       |  |                                |         |   |                              |   | 83,991    |            |  |                | 118,691   |         |   | 54,780       |  |   |             |  |   |           |   |  |   | 257,462   |  
|Deferred income taxes                             |  |                                |         |   |                              |   |          |            |  |                | 4,151     |         |   | 3,632        |  |   |             |  |   |           |   |  |   | 7,783     |  
|Prepaid expenses and other current assets         |  |                                |         |   |                              |   | 5,464     |            |  |                | 1,380     |         |   | 28,223       |  |   |             |  |   |           |   |  |   | 35,067    |  
|                                                  |  |                                |          |   |                              |   |           |            |  |                |           |         |   |              |  |   |              |  |   |            |   |  |   |           |  
|Total current assets                              |  |                                |         |   |                              |   | 197,451   |            |  |                | 229,445   |         |   | 187,917      |  |   |             |  |   |           |   |  |   | 614,813   |  
|Property, plant and equipment, net                |  |                                |         |   |                              |   | 488,136   |            |  |                | 452,191   |         |   | 308,558      |  |   |             |  |   |           |   |  |   | 1,248,885 |  
|Intangible assets, net                            |  |                                |         |   |                              |   | 6,734     |            |  |                | 38,634    |         |   | 6,774        |  |   |             |  |   |           |   |  |   | 52,142    |  
|Goodwill                                          |  |                                |         |   |                              |   | 9,246     |            |  |                | 235,924   |         |   | 63,895       |  |   |             |  |   |           |   |  |   | 309,065   |  
|Net intercompany                                  |  |                                |         |   |                              |   | 1,175,176 |            |  |                |          |         |   |             |  |   |             |  |   | (1,175,176 | ) |  |   |          |  
|Investment in subsidiaries                        |  |                                |         |   |                              |   | 233,061   |            |  |                | 287,519   |         |   |             |  |   |             |  |   | (520,580   | ) |  |   |          |  
|Other non-current assets                          |  |                                |         |   |                              |   | 44,245    |            |  |                | 325       |         |   | 4,313        |  |   |             |  |   |           |   |  |   | 48,883    |  
|                                                  |  |                                |          |   |                              |   |           |            |  |                |           |         |   |              |  |   |              |  |   |            |   |  |   |           |  
|Total assets                                      |  | $                              |         |   |                              | $ | 2,154,049 |            |  | $              | 1,244,038 |         | $ | 571,457      |  | $ |             |  | $ | (1,695,756 | ) |  | $ | 2,273,788 |  
|                                                  |  |                                |          |   |                              |   |           |            |  |                |           |         |   |              |  |   |              |  |   |            |   |  |   |           |  
|                                                  |  |                                |          |   |                              |   |          
|LIABILITIES AND PARTNERS CAPITAL (DEFICIT)       |  |                                |          |   |                              |   |           |            |  |                |           |         |   |              |  |   |              |  |   |            |   |  |   |           |  
|Current liabilities:                              |  |                                |          |   |                              |   |           |            |  |                |           |         |   |              |  |   |              |  |   |            |   |  |   |           |  
|Current portion of long-term debt                 |  | $                              |         |   |                              | $ | 30,654    |            |  | $              | 180       |         | $ | 14,879       |  | $ |             |  | $ |           |   |  | $ | 45,713    |  
|Accounts payable                                  |  |                                |         |   |                              |   | 65,043    |            |  |                | 56,102    |         |   | 53,911       |  |   |             |  |   |           |   |  |   | 175,056   |  
|Accrued expenses and other current liabilities    |  |                                |         |   |                              |   | 102,833   |            |  |                | 34,724    |         |   | 54,037       |  |   |             |  |   |           |   |  |   | 191,594   |  
|Deferred revenue                                  |  |                                |         |   |                              |   | 17,337    |            |  |                | 7,903     |         |   | 6,266        |  |   |             |  |   |           |   |  |   | 31,506    |  
|                                                  |  |                                |          |   |                              |   |           |            |  |                |           |         |   |              |  |   |              |  |   |            |   |  |   |           |  
|Total current liabilities                         |  |                                |         |   |                              |   | 215,867   |            |  |                | 98,909    |         |   | 129,093      |  |   |             |  |   |           |   |  |   | 443,869   |  
|Long-term debt                                    |  |                                |         |   |                              |   | 2,481,531 |            |  |                | 485       |         |   | 364          |  |   |             |  |   |           |   |  |   | 2,482,380 |  
|Deferred income taxes                             |  |                                |         |   |                              |   | 300       |            |  |                | 13,424    |         |   | 14,624       |  |   |             |  |   |           |   |  |   | 28,348    |  
|Other non-current liabilities                     |  |                                |         |   |                              |   | 40,760    |            |  |                | 15,434    |         |   | 34,495       |  |   |             |  |   |           |   |  |   | 90,689    |  
|Investment in subsidiaries                        |  |                                | 584,409  |   |                              |   |          |            |  |                |          |         |   |             |  |   |             |  |   | (584,409   | ) |  |   |          |  
|Net intercompany                                  |  |                                | 187,089  |   |                              |   |          |            |  |                | 943,221   |         |   | 44,866       |  |   |             |  |   | (1,175,176 | ) |  |   |          |  
|Commitments and contingent liabilities            |  |                                |          |   |                              |   |           |            |  |                |           |         |   |              |  |   |              |  |   |            |   |  |   |           |  
|Partners capital (deficit)                       |  |                                | (771,498 | ) |                              |   | (584,409  | )          |  |                | 172,565   |         |   | 348,015      |  |   |             |  |   | 63,829     |   |  |   | (771,498  | )
|                                                  |  |                                |          |   |                              |   |           |            |  |                |           |         |   |              |  |   |              |  |   |            |   |  |   |           |  
|Total liabilities and partners capital (deficit) |  | $                              |         |   |                              | $ | 2,154,049 |            |  | $              | 1,244,038 |         | $ | 571,457      |  | $ |             |  | $ | (1,695,756 | ) |  | $ | 2,273,788 |  
|                                                  |  |                                |          |   |                              |   |           |            |  |                |           |         |   |              |  |   |              |  |   |            |   |  |   |           |  



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GRAHAM PACKAGING HOLDINGS COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-Continued



GRAHAM PACKAGING HOLDINGS COMPANY

CONDENSED CONSOLIDATING BALANCE SHEET

AS OF DECEMBER 31, 2007

(In thousands)



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



16



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##### Table of Contents

GRAHAM PACKAGING HOLDINGS COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-Continued



GRAHAM PACKAGING HOLDINGS COMPANY

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

FOR THE THREE MONTHS ENDED
MARCH 31, 2008

(In thousands)



|                                             |  |                                |        |   |                              |   |         |            |  |   |                |   |  |         |         |              |  |   |              |  |   |         |   |  |   |         |  
|-------------------------------------------- |  | ------------------------------ | ------ | - | ---------------------------- | - | ------- | ---------- |  | - | -------------- | - |  | ------- | ------- | ------------ |  | - | ------------ |  | - | ------- | - |  | - | ------- | -
|                                             |  | GrahamPackagingHoldingsCompany |        |   | GrahamPackagingCompany, L.P. |   |         | Guarantors |  |   | Non-Guarantors |   |  | CapCo I |         | Eliminations |  |   | Consolidated | 
|Net sales                                    |  | $                              |       |   |                              | $ | 294,413 |            |  | $ | 263,725        |   |  | $       | 136,991 |              |  | $ |             |  | $ | (25,727 | ) |  | $ | 669,402 |  
|Cost of goods sold                           |  |                                |       |   |                              |   | 248,616 |            |  |   | 236,302        |   |  |         | 117,108 |              |  |   |             |  |   | (25,727 | ) |  |   | 576,299 |  
|                                             |  |                                |        |   |                              |   |         |            |  |   |                |   |  |         |         |              |  |   |              |  |   |         |   |  |   |         |  
|Gross profit                                 |  |                                |       |   |                              |   | 45,797  |            |  |   | 27,423         |   |  |         | 19,883  |              |  |   |             |  |   |        |   |  |   | 93,103  |  
|Selling, general and administrative expenses |  |                                |       |   |                              |   | 13,268  |            |  |   | 11,942         |   |  |         | 7,727   |              |  |   |             |  |   |        |   |  |   | 32,937  |  
|Asset impairment charges                     |  |                                |       |   |                              |   | 3,262   |            |  |   | (3,507         | ) |  |         | 260     |              |  |   |             |  |   |        |   |  |   | 15      |  
|Net (gain) loss on disposal of fixed assets  |  |                                |       |   |                              |   | (814    | )          |  |   | 985            |   |  |         | (25     | )            |  |   |             |  |   |        |   |  |   | 146     |  
|                                             |  |                                |        |   |                              |   |         |            |  |   |                |   |  |         |         |              |  |   |              |  |   |         |   |  |   |         |  
|Operating income                             |  |                                |       |   |                              |   | 30,081  |            |  |   | 18,003         |   |  |         | 11,921  |              |  |   |             |  |   |        |   |  |   | 60,005  |  
|Interest expense, net                        |  |                                |       |   |                              |   | 30,290  |            |  |   | 18,844         |   |  |         | 1,551   |              |  |   |             |  |   |        |   |  |   | 50,685  |  
|Other expense (income), net                  |  |                                |       |   |                              |   | 107     |            |  |   | (658           | ) |  |         | (270    | )            |  |   |             |  |   |        |   |  |   | (821    | )
|Equity in earnings of subsidiaries           |  |                                | (3,757 | ) |                              |   | (4,431  | )          |  |   | (1,349         | ) |  |         |        |              |  |   |             |  |   | 9,537   |   |  |   |        |  
|                                             |  |                                |        |   |                              |   |         |            |  |   |                |   |  |         |         |              |  |   |              |  |   |         |   |  |   |         |  
|Income (loss) before income taxes            |  |                                | 3,757  |   |                              |   | 4,115   |            |  |   | 1,166          |   |  |         | 10,640  |              |  |   |             |  |   | (9,537  | ) |  |   | 10,141  |  
|Income tax provision                         |  |                                |       |   |                              |   | 358     |            |  |   | 195            |   |  |         | 5,831   |              |  |   |             |  |   |        |   |  |   | 6,384   |  
|                                             |  |                                |        |   |                              |   |         |            |  |   |                |   |  |         |         |              |  |   |              |  |   |         |   |  |   |         |  
|Net income (loss)                            |  | $                              | 3,757  |   |                              | $ | 3,757   |            |  | $ | 971            |   |  | $       | 4,809   |              |  | $ |             |  | $ | (9,537  | ) |  | $ | 3,757   |  
|                                             |  |                                |        |   |                              |   |         |            |  |   |                |   |  |         |         |              |  |   |              |  |   |         |   |  |   |         |  



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##### Table of Contents

GRAHAM PACKAGING HOLDINGS COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-Continued



GRAHAM PACKAGING HOLDINGS COMPANY

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

FOR THE THREE MONTHS ENDED
MARCH 31, 2007

(In thousands)



|                                             |  |                                |         |   |                              |   |         |            |  |   |                |   |         |   |              |  |   |              |  |   |         |   |  |   |         |  
|-------------------------------------------- |  | ------------------------------ | ------- | - | ---------------------------- | - | ------- | ---------- |  | - | -------------- | - | ------- | - | ------------ |  | - | ------------ |  | - | ------- | - |  | - | ------- | -
|                                             |  | GrahamPackagingHoldingsCompany |         |   | GrahamPackagingCompany, L.P. |   |         | Guarantors |  |   | Non-Guarantors |   | CapCo I |   | Eliminations |  |   | Consolidated | 
|Net sales                                    |  | $                              |        |   |                              | $ | 264,611 |            |  | $ | 257,859        |   |         | $ | 123,246      |  | $ |             |  | $ | (23,931 | ) |  | $ | 621,785 |  
|Cost of goods sold                           |  |                                |        |   |                              |   | 223,704 |            |  |   | 234,733        |   |         |   | 107,119      |  |   |             |  |   | (23,931 | ) |  |   | 541,625 |  
|                                             |  |                                |         |   |                              |   |         |            |  |   |                |   |         |   |              |  |   |              |  |   |         |   |  |   |         |  
|Gross profit                                 |  |                                |        |   |                              |   | 40,907  |            |  |   | 23,126         |   |         |   | 16,127       |  |   |             |  |   |        |   |  |   | 80,160  |  
|Selling, general and administrative expenses |  |                                |        |   |                              |   | 13,688  |            |  |   | 14,768         |   |         |   | 6,729        |  |   |             |  |   |        |   |  |   | 35,185  |  
|Net loss on disposal of fixed assets         |  |                                |        |   |                              |   | 1,039   |            |  |   | 524            |   |         |   | 2            |  |   |             |  |   |        |   |  |   | 1,565   |  
|                                             |  |                                |         |   |                              |   |         |            |  |   |                |   |         |   |              |  |   |              |  |   |         |   |  |   |         |  
|Operating income                             |  |                                |        |   |                              |   | 26,180  |            |  |   | 7,834          |   |         |   | 9,396        |  |   |             |  |   |        |   |  |   | 43,410  |  
|Interest expense, net                        |  |                                |        |   |                              |   | 34,306  |            |  |   | 19,586         |   |         |   | 1,831        |  |   |             |  |   |        |   |  |   | 55,723  |  
|Other expense (income), net                  |  |                                |        |   |                              |   | 68      |            |  |   | (160           | ) |         |   | 202          |  |   |             |  |   |        |   |  |   | 110     |  
|Equity in loss (earnings) of subsidiaries    |  |                                | 15,615  |   |                              |   | 6,460   |            |  |   | (343           | ) |         |   |             |  |   |             |  |   | (21,732 | ) |  |   |        |  
|                                             |  |                                |         |   |                              |   |         |            |  |   |                |   |         |   |              |  |   |              |  |   |         |   |  |   |         |  
|(Loss) income before income taxes            |  |                                | (15,615 | ) |                              |   | (14,654 | )          |  |   | (11,249        | ) |         |   | 7,363        |  |   |             |  |   | 21,732  |   |  |   | (12,423 | )
|Income tax provision (benefit)               |  |                                |        |   |                              |   | 961     |            |  |   | (1,516         | ) |         |   | 3,747        |  |   |             |  |   |        |   |  |   | 3,192   |  
|                                             |  |                                |         |   |                              |   |         |            |  |   |                |   |         |   |              |  |   |              |  |   |         |   |  |   |         |  
|Net (loss) income                            |  | $                              | (15,615 | ) |                              | $ | (15,615 | )          |  | $ | (9,733         | ) |         | $ | 3,616        |  | $ |             |  | $ | 21,732  |   |  | $ | (15,615 | )
|                                             |  |                                |         |   |                              |   |         |            |  |   |                |   |         |   |              |  |   |              |  |   |         |   |  |   |         |  



18



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##### Table of Contents

GRAHAM PACKAGING HOLDINGS COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-Continued



GRAHAM PACKAGING HOLDINGS COMPANY

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

FOR THE THREE MONTHS ENDED
MARCH 31, 2008

(In thousands)



|                                                             |  |                                |   |                              |   |          |            |  |   |                |   |  |         |         |              |  |              |   |  |   |   |  |   |          |  
|------------------------------------------------------------ |  | ------------------------------ | - | ---------------------------- | - | -------- | ---------- |  | - | -------------- | - |  | ------- | ------- | ------------ |  | ------------ | - |  | - | - |  | - | -------- | -
|                                                             |  | GrahamPackagingHoldingsCompany |   | GrahamPackagingCompany, L.P. |   |          | Guarantors |  |   | Non-Guarantors |   |  | CapCo I |         | Eliminations |  | Consolidated |  
|Operating activities:                                        |  |                                |   |                              |   |          |            |  |   |                |   |  |         |         |              |  |              |   |  |   |   |  |   |          |  
|Net cash provided by operating activities                    |  | $                              |  |                              | $ | 33,015   |            |  | $ | 12,685         |   |  | $       | 10,698  |              |  | $            |  |  | $ |  |  | $ | 56,398   |  
|                                                             |  |                                |   |                              |   |          |            |  |   |                |   |  |         |         |              |  |              |   |  |   |   |  |   |          |  
|Investing activities:                                        |  |                                |   |                              |   |          |            |  |   |                |   |  |         |         |              |  |              |   |  |   |   |  |   |          |  
|Net cash paid for property, plant and equipment              |  |                                |  |                              |   | (11,485  | )          |  |   | (12,604        | ) |  |         | (11,356 | )            |  |              |  |  |   |  |  |   | (35,445  | )
|                                                             |  |                                |   |                              |   |          |            |  |   |                |   |  |         |         |              |  |              |   |  |   |   |  |   |          |  
|Net cash used in investing activities                        |  |                                |  |                              |   | (11,485  | )          |  |   | (12,604        | ) |  |         | (11,356 | )            |  |              |  |  |   |  |  |   | (35,445  | )
|                                                             |  |                                |   |                              |   |          |            |  |   |                |   |  |         |         |              |  |              |   |  |   |   |  |   |          |  
|Financing activities:                                        |  |                                |   |                              |   |          |            |  |   |                |   |  |         |         |              |  |              |   |  |   |   |  |   |          |  
|Proceeds from issuance of long-term debt                     |  |                                |  |                              |   | 103,767  |            |  |   |               |   |  |         | 23,343  |              |  |              |  |  |   |  |  |   | 127,110  |  
|Payment of long-term debt                                    |  |                                |  |                              |   | (110,217 | )          |  |   | (81            | ) |  |         | (23,328 | )            |  |              |  |  |   |  |  |   | (133,626 | )
|                                                             |  |                                |   |                              |   |          |            |  |   |                |   |  |         |         |              |  |              |   |  |   |   |  |   |          |  
|Net cash (used in) provided by financing activities          |  |                                |  |                              |   | (6,450   | )          |  |   | (81            | ) |  |         | 15      |              |  |              |  |  |   |  |  |   | (6,516   | )
|                                                             |  |                                |   |                              |   |          |            |  |   |                |   |  |         |         |              |  |              |   |  |   |   |  |   |          |  
|Effect of exchange rate changes on cash and cash equivalents |  |                                |  |                              |   |         |            |  |   |               |   |  |         | 43      |              |  |              |  |  |   |  |  |   | 43       |  
|                                                             |  |                                |   |                              |   |          |            |  |   |                |   |  |         |         |              |  |              |   |  |   |   |  |   |          |  
|Increase (decrease) in cash and cash equivalents             |  |                                |  |                              |   | 15,080   |            |  |   |               |   |  |         | (600    | )            |  |              |  |  |   |  |  |   | 14,480   |  
|Cash and cash equivalents at beginning of period             |  |                                |  |                              |   | 3,815    |            |  |   | 2              |   |  |         | 14,497  |              |  |              |  |  |   |  |  |   | 18,314   |  
|                                                             |  |                                |   |                              |   |          |            |  |   |                |   |  |         |         |              |  |              |   |  |   |   |  |   |          |  
|Cash and cash equivalents at end of period                   |  | $                              |  |                              | $ | 18,895   |            |  | $ | 2              |   |  | $       | 13,897  |              |  | $            |  |  | $ |  |  | $ | 32,794   |  
|                                                             |  |                                |   |                              |   |          |            |  |   |                |   |  |         |         |              |  |              |   |  |   |   |  |   |          |  



19



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GRAHAM PACKAGING HOLDINGS COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-Continued



GRAHAM PACKAGING HOLDINGS COMPANY

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

FOR THE THREE MONTHS ENDED
MARCH 31, 2007

(In thousands)



|                                                              |  |                                |   |                              |   |          |            |  |   |                |   |  |         |         |              |  |              |   |  |   |   |  |   |          |  
|------------------------------------------------------------- |  | ------------------------------ | - | ---------------------------- | - | -------- | ---------- |  | - | -------------- | - |  | ------- | ------- | ------------ |  | ------------ | - |  | - | - |  | - | -------- | -
|                                                              |  | GrahamPackagingHoldingsCompany |   | GrahamPackagingCompany, L.P. |   |          | Guarantors |  |   | Non-Guarantors |   |  | CapCo I |         | Eliminations |  | Consolidated |  
|Operating activities:                                         |  |                                |   |                              |   |          |            |  |   |                |   |  |         |         |              |  |              |   |  |   |   |  |   |          |  
|Net cash provided by (used in) operating activities           |  | $                              |  |                              | $ | 24,633   |            |  | $ | 12,791         |   |  | $       | (1,585  | )            |  | $            |  |  | $ |  |  | $ | 35,839   |  
|                                                              |  |                                |   |                              |   |          |            |  |   |                |   |  |         |         |              |  |              |   |  |   |   |  |   |          |  
|Investing activities:                                         |  |                                |   |                              |   |          |            |  |   |                |   |  |         |         |              |  |              |   |  |   |   |  |   |          |  
|Net cash paid for property, plant and equipment               |  |                                |  |                              |   | (14,823  | )          |  |   | (12,791        | ) |  |         | (4,640  | )            |  |              |  |  |   |  |  |   | (32,254  | )
|Acquisition of/investment in a business, net of cash acquired |  |                                |  |                              |   | (171     | )          |  |   |               |   |  |         | 171     |              |  |              |  |  |   |  |  |   |         |  
|                                                              |  |                                |   |                              |   |          |            |  |   |                |   |  |         |         |              |  |              |   |  |   |   |  |   |          |  
|Net cash used in investing activities                         |  |                                |  |                              |   | (14,994  | )          |  |   | (12,791        | ) |  |         | (4,469  | )            |  |              |  |  |   |  |  |   | (32,254  | )
|                                                              |  |                                |   |                              |   |          |            |  |   |                |   |  |         |         |              |  |              |   |  |   |   |  |   |          |  
|Financing activities:                                         |  |                                |   |                              |   |          |            |  |   |                |   |  |         |         |              |  |              |   |  |   |   |  |   |          |  
|Proceeds from issuance of long-term debt                      |  |                                |  |                              |   | 421,274  |            |  |   |               |   |  |         | 13,808  |              |  |              |  |  |   |  |  |   | 435,082  |  
|Payment of long-term debt                                     |  |                                |  |                              |   | (423,014 | )          |  |   |               |   |  |         | (12,066 | )            |  |              |  |  |   |  |  |   | (435,080 | )
|Purchase of partnership units                                 |  |                                |  |                              |   | (2,762   | )          |  |   |               |   |  |         |        |              |  |              |  |  |   |  |  |   | (2,762   | )
|Debt issuance fees                                            |  |                                |  |                              |   | (4,500   | )          |  |   |               |   |  |         |        |              |  |              |  |  |   |  |  |   | (4,500   | )
|                                                              |  |                                |   |                              |   |          |            |  |   |                |   |  |         |         |              |  |              |   |  |   |   |  |   |          |  
|Net cash (used in) provided by financing activities           |  |                                |  |                              |   | (9,002   | )          |  |   |               |   |  |         | 1,742   |              |  |              |  |  |   |  |  |   | (7,260   | )
|                                                              |  |                                |   |                              |   |          |            |  |   |                |   |  |         |         |              |  |              |   |  |   |   |  |   |          |  
|Effect of exchange rate changes on cash and cash equivalents  |  |                                |  |                              |   |         |            |  |   |               |   |  |         | (44     | )            |  |              |  |  |   |  |  |   | (44      | )
|                                                              |  |                                |   |                              |   |          |            |  |   |                |   |  |         |         |              |  |              |   |  |   |   |  |   |          |  
|Increase (decrease) in cash and cash equivalents              |  |                                |  |                              |   | 637      |            |  |   |               |   |  |         | (4,356  | )            |  |              |  |  |   |  |  |   | (3,719   | )
|Cash and cash equivalents at beginning of period              |  |                                |  |                              |   | 1,456    |            |  |   | 1              |   |  |         | 11,870  |              |  |              |  |  |   |  |  |   | 13,327   |  
|                                                              |  |                                |   |                              |   |          |            |  |   |                |   |  |         |         |              |  |              |   |  |   |   |  |   |          |  
|Cash and cash equivalents at end of period                    |  | $                              |  |                              | $ | 2,093    |            |  | $ | 1              |   |  | $       | 7,514   |              |  | $            |  |  | $ |  |  | $ | 9,608    |  
|                                                              |  |                                |   |                              |   |          |            |  |   |                |   |  |         |         |              |  |              |   |  |   |   |  |   |          |  



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GRAHAM PACKAGING HOLDINGS COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-Continued



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

Comprehensive income
(loss) for the three months ended March 31, 2008 and 2007, was as follows:



|                                                                                                                                                                                              |  |                             |        |   |      |   |         |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------- | ------ | - | ---- | - | ------- | -
|                                                                                                                                                                                              |  | Three Months EndedMarch 31, |       
|                                                                                                                                                                                              |  | 2008                        |        |   | 2007 |  
|                                                                                                                                                                                              |  | (In thousands)              |       
|Net income (loss)                                                                                                                                                                             |  | $                           | 3,757  |   |      | $ | (15,615 | )
|Changes in fair value of derivatives, net of tax of $0 in 2008 and 2007                                                                                                                       |  |                             | (3,310 | ) |      |   | (2,853  | )
|Change in amortization of prior service costs and unrealized actuarial losses included in net periodic benefit costs for pension and
post-retirement plans, net of tax of $0 in 2008 and 2007 |  |                             | 283    |   |      |   | (4,765  | )
|Cumulative translation adjustments, net of a tax provision of $190 in 2008 and $0 in 2007                                                                                                     |  |                             | 13,881 |   |      |   | 957     |  
|                                                                                                                                                                                              |  |                             |        |   |      |   |         |  
|Comprehensive income (loss)                                                                                                                                                                   |  | $                           | 14,611 |   |      | $ | (22,276 | )
|                                                                                                                                                                                              |  |                             |        |   |      |   |         |  



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GRAHAM PACKAGING HOLDINGS COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-Continued



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

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



|                                |  |                                   |  |                |           |   |        |   |         |              |  |   |              |   |  |       |        |   |  |   |           |  
|------------------------------- |  | --------------------------------- |  | -------------- | --------- | - | ------ | - | ------- | ------------ |  | - | ------------ | - |  | ----- | ------ | - |  | - | --------- | -
|                                |  |                                   |  | NorthAmerica   |           |   | Europe |   |         | SouthAmerica |  |   | Eliminations |   |  | Total |       
|                                |  |                                   |  |                |           |   |        |   |         |              |  |   | (a)          |   |  |       |       
|                                |  |                                   |  | (In thousands) |          
|Net sales (b) (c)               |  | Three months ended March 31, 2008 |  | $              | 573,123   |   |        | $ | 76,610  |              |  | $ | 20,105       |   |  | $     | (436   | ) |  | $ | 669,402   |  
|                                |  | Three months ended March 31, 2007 |  |                | 539,180   |   |        |   | 67,693  |              |  |   | 16,539       |   |  |       | (1,627 | ) |  |   | 621,785   |  
|Operating income                |  | Three months ended March 31, 2008 |  | $              | 53,508    |   |        | $ | 5,980   |              |  | $ | 517          |   |  | $     |       |   |  | $ | 60,005    |  
|                                |  | Three months ended March 31, 2007 |  |                | 37,862    |   |        |   | 4,815   |              |  |   | 733          |   |  |       |       |   |  |   | 43,410    |  
|Depreciation and                |  | Three months ended March 31, 2008 |  | $              | 36,899    |   |        | $ | 5,646   |              |  | $ | 1,236        |   |  | $     |       |   |  | $ | 43,781    |  
|amortization                    |  | Three months ended March 31, 2007 |  |                | 43,223    |   |        |   | 5,312   |              |  |   | 1,194        |   |  |       |       |   |  |   | 49,729    |  
|Asset impairment charges        |  | Three months ended March 31, 2008 |  | $              | 15        |   |        | $ |        |              |  | $ |             |   |  | $     |       |   |  | $ | 15        |  
|                                |  | Three months ended March 31, 2007 |  |                |          |   |        |   |        |              |  |   |             |   |  |       |       |   |  |   |          |  
|Interest expense, net           |  | Three months ended March 31, 2008 |  | $              | 49,323    |   |        | $ | 662     |              |  | $ | 700          |   |  | $     |       |   |  | $ | 50,685    |  
|                                |  | Three months ended March 31, 2007 |  |                | 54,780    |   |        |   | 618     |              |  |   | 325          |   |  |       |       |   |  |   | 55,723    |  
|Other (income) expense, net     |  | Three months ended March 31, 2008 |  | $              | (308      | ) |        | $ | (188    | )            |  | $ | (325         | ) |  | $     |       |   |  | $ | (821      | )
|                                |  | Three months ended March 31, 2007 |  |                | 119       |   |        |   | (81     | )            |  |   | 72           |   |  |       |       |   |  |   | 110       |  
|Income tax provision            |  | Three months ended March 31, 2008 |  | $              | 3,865     |   |        | $ | 2,312   |              |  | $ | 207          |   |  | $     |       |   |  | $ | 6,384     |  
|                                |  | Three months ended March 31, 2007 |  |                | 852       |   |        |   | 2,257   |              |  |   | 83           |   |  |       |       |   |  |   | 3,192     |  
|Identifiable assets (b) (c) (d) |  | As of March 31, 2008              |  | $              | 1,005,544 |   |        | $ | 196,192 |              |  | $ | 47,149       |   |  | $     |       |   |  | $ | 1,248,885 |  
|                                |  | As of December 31, 2007           |  |                | 1,014,642 |   |        |   | 182,497 |              |  |   | 45,279       |   |  |       |       |   |  |   | 1,242,418 |  
|Goodwill                        |  | As of March 31, 2008              |  | $              | 287,031   |   |        | $ | 20,199  |              |  | $ | 1,835        |   |  | $     |       |   |  | $ | 309,065   |  
|                                |  | As of December 31, 2007           |  |                | 286,295   |   |        |   | 18,607  |              |  |   | 1,817        |   |  |       |       |   |  |   | 306,719   |  
|Cash paid for property,         |  | Three months ended March 31, 2008 |  | $              | 25,941    |   |        | $ | 7,239   |              |  | $ | 2,582        |   |  | $     |       |   |  | $ | 35,762    |  
|plant and equipment             |  | Three months ended March 31, 2007 |  |                | 28,969    |   |        |   | 2,575   |              |  |   | 1,079        |   |  |       |       |   |  |   | 32,623    |  



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

|(b) | The Companys net sales for Europe include countries having significant sales as follows: Poland, France, Rotselaar (Belgium) and Spain which totaled approximately $16.1
million, $15.7 million, $13.5 million and $9.7 million, respectively, for the three months ended March 31, 2008, and approximately $15.8 million, $13.4 million, $12.0 million and $8.2 million, respectively, for the three months ended March 31, 2007.
The Companys identifiable assets for Europe include countries having significant identifiable assets as follows: Poland, France, Rotselaar (Belgium) and Spain which totaled approximately $50.7 million, $40.0 million, $36.5 million and $32.9
million, respectively, as of March 31, 2008, and $46.7 million, $38.3 million, $33.0 million and $30.1 million, respectively, as of December 31, 2007.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(c) | The Companys net sales for North America include sales in Mexico which totaled approximately $34.1 million and $34.3 million for the three months ended March 31, 2008 and
2007, respectively. Identifiable assets in Mexico totaled approximately $61.1 million and $59.7 million as of March 31, 2008, and December 31, 2007, respectively. Approximately all of the North America reportable segments remaining net sales
and identifiable assets are in the United States.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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



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GRAHAM PACKAGING HOLDINGS COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-Continued



Product Net Sales Information

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



|                        |  |                             |         |      |   |        
|----------------------- |  | --------------------------- | ------- | ---- | - | -------
|                        |  | Three Months EndedMarch 31,
|                        |  | 2008                        |         | 2007
|                        |  | (In thousands)             
|Food and Beverage       |  | $                           | 416,700 |      | $ | 375,350
|Household               |  |                             | 124,317 |      |   | 131,493
|Automotive Lubricants   |  |                             | 82,106  |      |   | 64,193 
|Personal Care/Specialty |  |                             | 46,279  |      |   | 50,749 
|                        |  |                             |         |      |   |        
|Total Net Sales         |  | $                           | 669,402 |      | $ | 621,785
|                        |  |                             |         |      |   |        



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

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



|                                                     |  |                             |        |   |      |   |        |  
|---------------------------------------------------- |  | --------------------------- | ------ | - | ---- | - | ------ | -
|                                                     |  | Three Months EndedMarch 31, |       
|                                                     |  | 2008                        |        |   | 2007 |  
|                                                     |  | (In thousands)              |       
|Components of net periodic pension cost:             |  |                             |        |   |      |   |        |  
|Service cost                                         |  | $                           | 704    |   |      | $ | 766    |  
|Interest cost                                        |  |                             | 1,415  |   |      |   | 1,298  |  
|Expected return on plan assets                       |  |                             | (1,683 | ) |      |   | (1,505 | )
|Net amortization and deferral of prior service costs |  |                             | 218    |   |      |   | 214    |  
|Employee contributions                               |  |                             | (27    | ) |      |   | (26    | )
|                                                     |  |                             |        |   |      |   |        |  
|Net periodic pension cost                            |  | $                           | 627    |   |      | $ | 747    |  
|                                                     |  |                             |        |   |      |   |        |  

The Company previously disclosed in its financial statements for the year ended December 31,
2007, that it expected to contribute $5.9 million to its pension plans in 2008. As of March 31, 2008, $0.2 million of contributions to its pension plans have been made.

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



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

The Company had
transactions with entities affiliated through common ownership. The Company made payments to Graham Engineering Company for equipment and related services of $0.6 million and $1.4 million for the three months ended March 31, 2008 and 2007,
respectively. The Graham Family Investors (defined as Graham Capital Company, GPC Investments LLC and Graham Alternative Investment Partners I or affiliates thereof or other entities controlled by Donald C. Graham and his family) and Blackstone
Management Partners III L.L.C. have supplied management services to the Company since 1998. The Company has recorded $1.3 million of expense for these services for each of the three months ended March 31, 2008 and 2007.

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



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

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

All statements other than statements of historical facts included in this Report on Form 10-Q, including statements regarding the future financial position, economic performance and results of operations of the
Company, 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 similar terminology. These forward-looking statements are not historical facts, and are based on current expectations, estimates and
projections about the Companys industry, managements beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond the Companys control. Accordingly, readers are cautioned
that any such forward-looking statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict. Although the Company believes that the expectations reflected in such
forward-looking statements are reasonable as of the date made, expectations may prove to have been materially different from the results expressed or implied by such forward-looking statements. Unless otherwise required by law, the Company also
disclaims any obligation to update its view of any such risks or uncertainties or to announce publicly the result of any revisions to the forward-looking statements made in this report. Readers should carefully review the risks and uncertainties
under Risk Factors (Part I, Item 1A) in the Annual Report on Form 10-K of Graham Packaging Holdings Company (Holdings) for the fiscal year ended December 31, 2007. All forward-looking statements attributable to the
Company, or persons acting on its behalf, are expressly qualified in their entirety by the cautionary statements set forth in this paragraph.

Overview

Management believes 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, automotive lubricants and personal care/specialty product categories. As of the end of March 2008, the Company operated 83 manufacturing facilities throughout North America,
Europe and South America. The Companys primary strategy is to operate in select markets that will position it to benefit from the growing conversion to value-added plastic packaging from more commodity packaging.

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



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



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



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



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



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Management believes that the area with the greatest opportunity for growth continues to be in producing
containers for the food and beverage product category because of the continued conversion to plastic packaging, including the demand for containers for juices, juice drinks, nutritional beverages, sports drinks, teas, yogurt drinks, snacks, beer and
other food products. Since much of the growth in this area has been in the sale of smaller sized containers, over the past few years the Company has experienced an overall mix shift toward smaller containers. Based on internal estimates, management
believes the Company is a leader in the value-added segment for hot-fill polyethylene terephthalate (PET) juice containers. Management also believes the Company is a leading participant in the rapidly growing market of yogurt drinks and
nutritional beverages where the Company manufactures containers using polyolefin resins. From the beginning of 2005 through March 31, 2008, the Company has invested over $430.0 million in capital expenditures in the food and beverage product
category.

Growth in the Companys household container product category was fueled in prior years by conversions from powders to
liquids for such products as detergents, household cleaners and automatic dishwashing detergent. Powdered products are typically packaged in paper-based containers such as fiber wound cans and paperboard cartons. The Companys strongest
position is in fabric care, where management believes the Company is a leader in plastic container design and manufacture. It should be noted the fabric care industry is now offering some brands in a concentrated formula which management believes
will negatively impact sales in this product category by $50 million to $70 million on an annual basis. The Company has continually upgraded its machinery, principally in the United States, to new, larger, more productive blow molders in order to
standardize production lines, improve flexibility and reduce manufacturing costs.

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

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

As of
March 31, 2008, the Company operated 28 manufacturing facilities outside of the United States in Argentina, Belgium, Brazil, Canada, Finland, France, Hungary, Mexico, the Netherlands, Poland, Spain, Turkey, the United Kingdom and Venezuela.
Over the past few years, the Company has expanded its international operations with the addition of a new plant in the Netherlands, as well as the acquisition of the blow-molded plastic container business of Owens-Illinois Inc. (O-I
Plastic), which included the addition of plants in Finland, Mexico, the Netherlands, the United Kingdom and Venezuela, and the acquisition of certain plants in Brazil, Belgium and Turkey from Tetra-Pak Inc. on March 24, 2005.

For the three months ended March 31, 2008, 71.8% of the Companys net sales were generated by its top twenty customers. The majority of the
top twenty customers were under long-term contracts with terms up to ten years, while the balance represents customers with whom the Company has been doing business for over 20 years on average. Prices under these arrangements are typically tied to
market standards and, therefore, vary with market conditions. In general, the contracts are requirements contracts that do not obligate the customer to purchase any given amount of product from the Company. The Company had sales to one customer,
PepsiCo, which exceeded 10% of total sales in each of the three months ended March 31, 2008 and 2007. The Companys sales to PepsiCo, approximately 100% of which were made in North America, were 15.3% and 14.9% of total sales for the three
months ended March 31, 2008 and 2007, respectively.



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The largest component of the Companys cost of goods sold is resin costs. Based on industry data,
the following table summarizes average market prices per pound of PET and high-density polyethylene (HDPE) resins in the United States during the three months ended March 31, 2008 and 2007:



|     |  |                             |      |      |   |     
|---- |  | --------------------------- | ---- | ---- | - | ----
|     |  | Three Months EndedMarch 31,
|     |  | 2008                        |      | 2007
|PET  |  | $                           | 0.88 |      | $ | 0.77
|HDPE |  | $                           | 0.85 |      | $ | 0.64

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

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

Results of Operations

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



|                |  |                              |       |  |       |   |  |   |       |  |       |  
|--------------- |  | ---------------------------- | ----- |  | ----- | - |  | - | ----- |  | ----- | -
|                |  | Three Months Ended March 31, |      
|                |  | 2008                         |       |  | 2007  |  
|                |  | (Dollars in millions)        |      
|North America   |  | $                            | 572.8 |  | 85.6  | % |  | $ | 539.0 |  | 86.7  | %
|Europe          |  |                              | 76.5  |  | 11.4  |   |  |   | 66.3  |  | 10.7  |  
|South America   |  |                              | 20.1  |  | 3.0   |   |  |   | 16.5  |  | 2.6   |  
|                |  |                              |       |  |       |   |  |   |       |  |       |  
|Total Net Sales |  | $                            | 669.4 |  | 100.0 | % |  | $ | 621.8 |  | 100.0 | %
|                |  |                              |       |  |       |   |  |   |       |  |       |  



|                        |  |                              |       |  |       |   |  |   |       |  |       |  
|----------------------- |  | ---------------------------- | ----- |  | ----- | - |  | - | ----- |  | ----- | -
|                        |  | Three Months Ended March 31, |      
|                        |  | 2008                         |       |  | 2007  |  
|                        |  | (Dollars in millions)        |      
|Food and Beverage       |  | $                            | 416.7 |  | 62.2  | % |  | $ | 375.4 |  | 60.4  | %
|Household               |  |                              | 124.3 |  | 18.6  |   |  |   | 131.5 |  | 21.2  |  
|Automotive Lubricants   |  |                              | 82.1  |  | 12.3  |   |  |   | 64.2  |  | 10.3  |  
|Personal Care/Specialty |  |                              | 46.3  |  | 6.9   |   |  |   | 50.7  |  | 8.1   |  
|                        |  |                              |       |  |       |   |  |   |       |  |       |  
|Total Net Sales         |  | $                            | 669.4 |  | 100.0 | % |  | $ | 621.8 |  | 100.0 | %
|                        |  |                              |       |  |       |   |  |   |       |  |       |  



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Three Months Ended March 31, 2008 Compared to Three Months Ended March 31, 2007

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



|                                             |  |                             |       |   |      |   |       |                       |  |         |  
|-------------------------------------------- |  | --------------------------- | ----- | - | ---- | - | ----- | --------------------- |  | ------- | -
|                                             |  | Three Months EndedMarch 31, |       |   |      |  
|                                             |  | 2008                        |       |   | 2007 |   |       | % Increase/(Decrease) | 
|                                             |  | (Dollars in millions)       |      
|Net sales                                    |  | $                           | 669.4 |   |      | $ | 621.8 |                       |  | 7.7     | %
|Cost of goods sold                           |  |                             | 576.3 |   |      |   | 541.6 |                       |  | 6.4     |  
|                                             |  |                             |       |   |      |   |       |                       |  |         |  
|Gross profit                                 |  |                             | 93.1  |   |      |   | 80.2  |                       |  | 16.1    |  
|% of net sales (1)                           |  |                             | 13.9  | % |      |   | 12.9  | %                     |  |         |  
|Selling, general and administrative expenses |  |                             | 33.0  |   |      |   | 35.2  |                       |  | (6.3    | )
|% of net sales (1)                           |  |                             | 4.9   | % |      |   | 5.7   | %                     |  |         |  
|Net loss on disposal of fixed assets         |  |                             | 0.1   |   |      |   | 1.6   |                       |  | (93.8   | )
|                                             |  |                             |       |   |      |   |       |                       |  |         |  
|Operating income                             |  |                             | 60.0  |   |      |   | 43.4  |                       |  | 38.2    |  
|% of net sales (1)                           |  |                             | 9.0   | % |      |   | 7.0   | %                     |  |         |  
|Interest expense                             |  |                             | 50.8  |   |      |   | 55.9  |                       |  | (9.1    | )
|Interest income                              |  |                             | (0.2  | ) |      |   | (0.2  | )                     |  |        |  
|Other (income) expense, net                  |  |                             | (0.8  | ) |      |   | 0.1   |                       |  | > 100.0 |  
|Income tax provision                         |  |                             | 6.4   |   |      |   | 3.2   |                       |  | 100.0   |  
|                                             |  |                             |       |   |      |   |       |                       |  |         |  
|Net income (loss)                            |  | $                           | 3.8   |   |      | $ | (15.6 | )                     |  | > 100.0 | %
|                                             |  |                             |       |   |      |   |       |                       |  |         |  



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

Net Sales.Net sales for the three months ended March 31, 2008, increased $47.6 million, or 7.7%, to
$669.4 million from $621.8 million for the three months ended March 31, 2007. The increase in sales was primarily due to an increase in resin costs which are passed through to customers and the positive impact of changes in exchange rates,
offset by lower volume and price reductions in response to competitive pressure. Container units sold decreased 1.0%. On a geographic basis, sales for the three months ended March 31, 2008, in North America increased $33.8 million, or 6.3%,
from the three months ended March 31, 2007, primarily due to an increase in resin costs which are passed through to customers, offset by price reductions in response to competitive pressure. North American sales in the food and beverage and
automotive lubricants product categories contributed $32.8 million and $15.3 million, respectively, to the increase, while the household and personal care/specialty product categories decreased $9.9 million and $4.4 million, respectively. Container
units sold in North America increased in the food and beverage and automotive lubricants product categories by 2.9% and 1.4%, respectively, and decreased in the household and personal care/specialty categories by 13.3% and 12.4%, respectively. Sales
for the three months ended March 31, 2008, in Europe increased $10.2 million, or 15.4%, from the three months ended March 31, 2007. The increase in sales was primarily due to currency conversion of $10.2 million. Sales for the three months
ended March 31, 2008, in South America increased $3.6 million, or 21.8%, from the three months ended March 31, 2007. The increase in sales was primarily due to currency conversion of $2.6 million.

Gross Profit.Gross profit for the three months ended March 31, 2008, increased $12.9 million to $93.1 million from $80.2 million for the
three months ended March 31, 2007. Gross profit for the three months ended March 31, 2008, increased in North America and Europe by $10.8 million and $2.1 million, respectively, while South America remained the same, when compared to the
three months ended March 31, 2007. The increase in gross profit was driven by several factors including ongoing expense reduction initiatives, lower depreciation expense of $4.8 million, a weakening of the dollar against the euro and other
currencies of $2.5 million and lower project startup costs (primarily costs associated with the startup of equipment and new plants) of $0.6 million, partially offset by price reductions in response to competitive pressure.

Selling, General & Administrative Expenses.Selling, general and administrative expenses for the three months ended March 31, 2008,
decreased $2.2 million to $33.0 million from $35.2 million for the three months ended March 31, 2007. The decrease was primarily due to a decrease in consulting expenses associated with restructuring of the business, partially offset by an
increase in stock-based compensation expense. Selling, general and administrative expenses as a percent of sales decreased to 4.9% for the three months ended March 31, 2008, from 5.7% for the three months ended March 31, 2007.

Interest Expense. Interest expense decreased $5.1 million to $50.8 million for the three months ended March 31, 2008, from $55.9 million
for the three months ended March 31, 2007. The decrease was primarily related to the write-off in 2007 of $4.5 million of deferred financing fees in connection with the March 30, 2007 amendment to the Companys Credit Agreement.



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##### Table of Contents

Income Tax Provision.Income tax provision increased $3.2 million to $6.4 million for the three
months ended March 31, 2008, from $3.2 million for the three months ended March 31, 2007. The increase was primarily related to increased profitability in Mexico, an increase in unrecognized tax benefits associated with intercompany
transactions in Mexico and income tax benefits recorded during the first quarter of 2007 associated with a 2004 Internal Revenue Service audit for the Companys U.S. corporate group.

Net Income (Loss).Primarily as a result of the factors discussed above, net income was $3.8 million for the three months ended March 31,
2008, compared to net loss of $15.6 million for the three months ended March 31, 2007.

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. Income and expense accounts and cash flow items are translated at average monthly exchange rates during the period. As a result, a decline in the value of the U.S. dollar relative to the
local currencies of profitable foreign subsidiaries can have a favorable effect on the profitability of the Company, and an increase in the value of the U.S. dollar relative to the local currencies of profitable foreign subsidiaries can have a
negative effect on the profitability of the Company. Included in other income (expense) were foreign exchange gains of $0.9 million for the three months ended March 31, 2008, and foreign exchange losses of $0.1 million for the three months
ended March 31, 2007.

Assets and liabilities are translated at exchange rates in effect at the balance sheet date. Net exchange gains
or losses resulting from the translation of foreign financial statements are recorded directly as a separate component of Partners Capital (Deficit) under the caption accumulated other comprehensive income. Exchange rate
fluctuations increased comprehensive income by $13.9 million and decreased comprehensive loss by $1.0 million for the three months ended March 31, 2008 and 2007, respectively.

Derivatives

During 2004, the Company entered into four interest rate swap agreements, under which
the Company received variable interest based on the Eurodollar rate and paid fixed interest at a weighted average rate of 3.89%, on $700.0 million of term loans. During 2005, the Company entered into three additional interest rate swap agreements,
under which the Company received variable interest based on the Eurodollar rate and paid fixed interest at a weighted average rate of 4.43%, on $225.0 million of term loans. These interest rate swap agreements expired in December 2007 and January
2008. During 2007, the Company entered into two interest rate collar agreements, which became effective in January 2008, under which the Company purchased a cap at a Eurodollar rate of 4.70% and sold a floor at a weighted average Eurodollar rate of
2.88%, on $385.0 million of term loans. During 2008, the Company entered into forward exchange contracts to hedge the exchange rate exposure on transactions that are denominated in foreign currencies. At March 31, 2008, the Company had
contracts for Canadian Dollars, Polish Zloty and Pound Sterling totalling $15.4 million. The interest rate swaps, interest rate collars and forward exchange contracts are accounted for as cash flow hedges. The hedges are highly effective as
defined in Statement of Financial Accounting Standards (SFAS) 133, Accounting for Derivative Instruments and Hedging Activities. The change in fair value on the effective portion of these cash flow hedges is recorded in other
comprehensive income (loss) and was an unrealized loss of $3.3 million and $3.0 million for the three months ended March 31, 2008 and 2007, respectively. Of the amount recorded within accumulated other comprehensive income (loss) as of
March 31, 2008, 57% is expected to be recognized in interest expense in the next twelve months.

Liquidity and Capital Resources

In the three months ended March 31, 2008, through its operating activities of $56.4 million, the Company funded $35.4 million of investing activities
and $6.5 million of financing activities.

The Companys credit agreement consists of a senior secured term loan B to the Operating
Company totaling $1,856.2 million (the Term Loan or Term Loan Facility) and a $250.0 million revolving credit facility (the Revolving Credit Facility and, together with the Term Loan, the Credit
Agreement). The obligations of the Operating Company and GPC Capital Corp. I



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(CapCo I) under the Credit Agreement are guaranteed by Holdings and certain other subsidiaries of Holdings. The Term Loan is payable in quarterly
installments and requires payments of $18.7 million in each of 2008, 2009 and 2010 and $1,804.8 million in 2011. The Revolving Credit Facility expires on October 7, 2010. Availability under the Revolving Credit Facility as of March 31,
2008, was $239.1 million (as reduced by $10.9 million of outstanding letters of credit). The Company expects to fund scheduled debt repayments from cash from operations and unused lines of credit. As of March 31, 2008, the Company was in
compliance with all covenants.

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

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

At March 31, 2008, the Companys total indebtedness was
$2,528.1 million.

The Credit Agreement and the Notes contain a number of significant covenants. The Company believes that these covenants
are material terms of these agreements and that information about the covenants is material to an investors understanding of the Companys financial condition and liquidity. Covenant compliance EBITDA (as defined below) is used to
determine the Companys compliance with many of these covenants. Any breach of covenants in the Credit Agreement that are tied to financial ratios based on covenant compliance EBITDA could result in a default under the Credit Agreement and the
lenders could elect to declare all amounts borrowed to be immediately due and payable. Any such acceleration would also result in a default under the Notes. Additionally, these covenants restrict the Companys ability to dispose of assets,
repay other indebtedness, incur additional indebtedness, pay dividends, prepay subordinated indebtedness, incur liens, make capital expenditures, investments or acquisitions, engage in mergers or consolidations, engage in transactions with
affiliates and otherwise restrict the Companys activities. Under the Credit Agreement, the Company is required to satisfy specified financial ratios and tests. The Company may also be required to make annual excess cash flow payments as
defined in the Credit Agreement. As of March 31, 2008, the Company was in compliance with the financial ratios and tests specified in the Credit Agreement.

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

Reconciliation of net loss to EBITDA



|                              |  |                                   |        |  
|----------------------------- |  | --------------------------------- | ------ | -
|                              |  | Four Quarters EndedMarch 31, 2008 |       
|                              |  | (In millions)                     |       
|Net loss                      |  | $                                 | (186.7 | )
|Interest income               |  |                                   | (0.8   | )
|Interest expense              |  |                                   | 205.5  |  
|Income tax provision          |  |                                   | 22.9   |  
|Depreciation and amortization |  |                                   | 197.1  |  
|                              |  |                                   |        |  
|EBITDA                        |  | $                                 | 238.0  |  
|                              |  |                                   |        |  



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Reconciliation of EBITDA to covenant compliance EBITDA



|                                          |  |                                   |      
|----------------------------------------- |  | --------------------------------- | -----
|                                          |  | Four Quarters EndedMarch 31, 2008
|                                          |  | (In millions)                    
|EBITDA                                    |  | $                                 | 238.0
|Asset impairment charges                  |  |                                   | 157.9
|Other non-cash charges (a)                |  |                                   | 19.4 
|Fees related to monitoring agreements (b) |  |                                   | 5.0  
|Non-recurring items (c)                   |  |                                   | 29.4 
|                                          |  |                                   |      
|Covenant compliance EBITDA                |  | $                                 | 449.7
|                                          |  |                                   |      



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

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

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



|                                   |  |                                   |     
|---------------------------------- |  | --------------------------------- | ----
|                                   |  | Four Quarters EndedMarch 31, 2008
|                                   |  | (In millions)                    
|Reorganization and other costs (i) |  | $                                 | 20.2
|Project startup costs (ii)         |  |                                   | 9.2 
|                                   |  |                                   |     
|                                   |  | $                                 | 29.4
|                                   |  |                                   |     



|(i) | Represents non-recurring costs related to consulting expenses associated with restructuring of the business, employee severance, an aborted acquisition and other costs defined in
the Credit Agreement.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

Under the debt agreements, the Companys ability to engage in activities such as incurring additional indebtedness, making investments and paying dividends is also tied to ratios based on covenant compliance EBITDA. The Credit
Agreement requires that the Company maintain a senior secured debt to covenant compliance EBITDA ratio at a maximum of 5.50x for the most recent four quarter period. For the four quarters ended March 31, 2008, the Operating Companys
covenant compliance EBITDA was $449.7 million and the senior secured debt to covenant compliance EBITDA ratio was 4.16x. The ability of the Operating Company to



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incur additional debt and make certain restricted payments under its Notes is tied to a covenant compliance EBITDA to fixed charges (primarily cash interest
expense) ratio of 2.0x, except that the Operating Company may incur certain debt and make certain restricted payments without regard to the ratio, such as up to $2.2 billion under the Credit Agreement and investments equal to 7.5% of the Operating
Companys total assets. The covenant compliance EBITDA to fixed charges ratio was 2.26x for the four quarters ended March 31, 2008.

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

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



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



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

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

Cash paid for property, plant and equipment, excluding acquisitions, for the three
months ended March 31, 2008, was $35.8 million. Management believes that capital expenditures to maintain and upgrade property, plant and equipment are important to remain competitive. Management estimates that on average the annual maintenance
capital expenditures are approximately $30 million to $40 million per year. Additional capital expenditures beyond this amount will be required to expand capacity or improve the Companys cost structure.

For the fiscal year 2008, the Company expects to incur capital investments ranging from $150 million to $175 million. However, total capital investments
will depend on the size and timing of growth related opportunities. The Companys principal sources of cash to fund ongoing operations and capital requirements have been and are expected to continue to be net cash provided by operating
activities and borrowings under the Credit Agreement. Management believes that these sources will be sufficient to fund the Companys ongoing operations and its foreseeable capital requirements.

Off-Balance Sheet Arrangements

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

Recent Accounting Pronouncements

In June 2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation No. (FIN) 48, Accounting for
Uncertainty in Income Taxes  an interpretation of FASB Statement No. 109. FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or
expected to be taken in a tax return. FIN 48 also provides guidance on accounting for derecognition, interest, penalties, accounting in interim periods, disclosure and classification of matters related to uncertainty in income taxes and transitional
requirements upon adoption of FIN 48. The Company adopted FIN 48 effective January 1, 2007, which resulted in an increase in the Companys other non-current liabilities for



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unrecognized tax benefits of $10.0 million (including interest of $2.2 million and penalties of $4.8 million), an increase in the Companys non-current
deferred tax assets of $5.2 million and a corresponding decrease in partners capital of $4.8 million.

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

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

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

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

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



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

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

Long-Term Debt

The Companys long-term debt consists of both variable-rate and fixed-rate debt. The Companys variable-rate debt, including the Companys
Credit Agreement, totaled $1,871.3 million and $1,875.7 million at March 31, 2008, and December 31, 2007, respectively. The fair value of this long-term debt, including the current portion, was approximately $1,722.8 million and $1,875.7
million at March 31, 2008, and December 31, 2007, respectively. The Companys fixed-rate debt, including $250.0 million of Senior Notes and $375.0 million of Senior Subordinated Notes, totaled $656.8 million and $658.7 million at
March 31, 2008, and December 31, 2007, respectively. The fair value of this long-term debt, including the current portion, was approximately $571.8 million and $588.8 million at March 31, 2008, and December 31, 2007,
respectively.

Derivatives

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



|                            |  |                |         |   |                  |   |         |  
|--------------------------- |  | -------------- | ------- | - | ---------------- | - | ------- | -
|                            |  | March 31,2008  |         |   | December 31,2007 |  
|                            |  | (In thousands) |        
|Collars:                    |  |                |         |   |                  |   |         |  
|Notional amount             |  | $              | 385,000 |   |                  | $ | 385,000 |  
|Fair value - (liability)    |  |                | (4,559  | ) |                  |   | (785    | )
|Swaps:                      |  |                |         |   |                  |   |         |  
|Notional amount             |  |                |        |   |                  |   | 275,000 |  
|Fair value - asset          |  |                |        |   |                  |   | 78      |  
|Forward exchange contracts: |  |                |         |   |                  |   |         |  
|Notional amount             |  |                | 15,387  |   |                  |   |        |  
|Fair value - asset          |  |                | 542     |   |                  |   |        |  



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



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

As of the end of the period covered by this Quarterly Report on Form 10-Q, Management performed an evaluation of the effectiveness of the Companys disclosure controls and procedures as defined in Rules 13a-15(e) and
15d-15(e) of the Exchange Act. The Companys disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports the Company files or submits under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the Securities and Exchange Commissions rules and forms, and that such information is accumulated and communicated to the Companys Management, including the Chief Executive
Officer and the Chief Financial Officer, to allow timely decisions regarding required disclosures. Based on the identification and the evaluation of the material weaknesses in internal control over financial reporting described below, the
Companys Chief Executive Officer and Chief Financial Officer concluded that, as of March 31, 2008, the Companys disclosure controls and procedures were not effective.

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



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



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



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



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



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

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



| | 1. | Actions taken to Remediate Financial Reporting Weaknesses
| | -- | ---------------------------------------------------------



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



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



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The Company believes that many of the financial reporting remediations have been
implemented in the first quarter of 2008, however, it is unable to appropriately assess their effectiveness as testing has not been performed to validate their implementation.



| | 2. | Plans to Remediate System Access/Segregation of Duties Weaknesses
| | -- | -----------------------------------------------------------------

The Company is currently implementing procedures to more closely limit user access to its information technology systems.

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



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

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



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##### Table of Contents

PART II. OTHER INFORMATION



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

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



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

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



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



|             |  |                                                                                                                                                                                                                                                                                        
|------------ |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit 3.1  |  | Certificate of Limited Partnership of Graham Packaging Holdings Company (incorporated herein by reference to Exhibit 3.5 to the Registration Statement on Form S-4 filed by the Company on July
13, 1998 (File No. 333-53603-03)).                                                     
|             | 
|Exhibit 3.2  |  | Fifth Amended and Restated Agreement of Limited Partnership of Graham Packaging Holdings Company dated as of February 2, 1998 (incorporated herein by reference to Exhibit 3.6 to the Registration
Statement on Form S-4 filed by the Company on May 26, 1998 (File No. 333-53603-03)).
|             | 
|Exhibit 31.1 |  | Certification required by Rule 15d-14(a).                                                                                                                                                                                                                                              
|             | 
|Exhibit 31.2 |  | Certification required by Rule 15d-14(a).                                                                                                                                                                                                                                              
|             | 
|Exhibit 32.1 |  | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                
|             | 
|Exhibit 32.2 |  | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                



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##### Table of Contents

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Dated: May 9, 2008



|                                  |  |                                                       
|--------------------------------- |  | ------------------------------------------------------
|GRAHAM PACKAGING HOLDINGS COMPANY
|(Registrant)                     
|                                  | 
|By:                               |  | /s/ Mark S. Burgess                                   
|                                  |  | Mark S. Burgess                                       
|                                  |  | Chief Operating Officer and Chief Financial Officer   
|                                  |  | (chief accounting officer and duly authorized officer)



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