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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 September 30, 2008

OR



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

For the transition period from  to

Commission file number: 333-53603-03





GRAHAM PACKAGING HOLDINGS COMPANY

(Exact name of registrant as specified in
its charter)







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



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

(717) 849-8500

(Registrants telephone number, including area code)





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

The registrant 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.

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



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

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









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GRAHAM PACKAGING HOLDINGS COMPANY

INDEX



|                              |  |     |  |                                                                                                                               |  |            
|----------------------------- |  | --- |  | ----------------------------------------------------------------------------------------------------------------------------- |  | -----------
|                              |  |     |  |                                                                                                                               |  | Page Number
|PART I. FINANCIAL INFORMATION |  |    
|                              |  |     | 
|Item                          |  | 1:  |  | Financial Statements:                                                                                                         |  |            
|                              |  |     | 
|                              |  |     |  | CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)  At September 30, 2008 and December 31, 2007                               |  | 3          
|                              |  |     | 
|                              |  |     |  | CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)  For the three and nine months ended September 30, 2008 and 2007 |  | 4          
|                              |  |     | 
|                              |  |     |  | CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)  For the nine months ended September 30, 2008 and 2007           |  | 5          
|                              |  |     | 
|                              |  |     |  | NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)                                                              |  | 6          
|                              |  |     | 
|Item                          |  | 2:  |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                                         |  | 29         
|                              |  |     | 
|Item                          |  | 3:  |  | Quantitative and Qualitative Disclosures About Market Risk                                                                    |  | 42         
|                              |  |     | 
|Item                          |  | 4T: |  | Controls and Procedures                                                                                                       |  | 43         
|                              | 
|PART II. OTHER INFORMATION    |  |    
|                              |  |     | 
|Item                          |  | 1:  |  | Legal Proceedings                                                                                                             |  | 44         
|                              |  |     | 
|Item                          |  | 1A: |  | Risk Factors                                                                                                                  |  | 44         
|                              |  |     | 
|Item                          |  | 6:  |  | Exhibits                                                                                                                      |  | 44         
|                              | 
|Signature                     |  | 45 



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PART I. FINANCIAL INFORMATION



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

GRAHAM PACKAGING HOLDINGS COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)



|                                                             |  |                   |           |   |                  |   |           |  
|------------------------------------------------------------ |  | ----------------- | --------- | - | ---------------- | - | --------- | -
|                                                             |  | September 30,2008 |           |   | December 31,2007 |  
|                                                             |  | (In thousands)    |          
|ASSETS                                                       |  |                   |           |   |                  |   |           |  
|Current assets:                                              |  |                   |           |   |                  |   |           |  
|Cash and cash equivalents                                    |  | $                 | 110,927   |   |                  | $ | 18,314    |  
|Accounts receivable, net                                     |  |                   | 239,972   |   |                  |   | 247,953   |  
|Inventories                                                  |  |                   | 259,098   |   |                  |   | 266,184   |  
|Deferred income taxes                                        |  |                   | 3,697     |   |                  |   | 7,520     |  
|Prepaid expenses and other current assets                    |  |                   | 51,470    |   |                  |   | 40,698    |  
|                                                             |  |                   |           |   |                  |   |           |  
|Total current assets                                         |  |                   | 665,164   |   |                  |   | 580,669   |  
|Property, plant and equipment, net                           |  |                   | 1,180,584 |   |                  |   | 1,242,418 |  
|Intangible assets, net                                       |  |                   | 49,917    |   |                  |   | 52,852    |  
|Goodwill                                                     |  |                   | 307,220   |   |                  |   | 306,719   |  
|Other non-current assets                                     |  |                   | 48,559    |   |                  |   | 51,175    |  
|                                                             |  |                   |           |   |                  |   |           |  
|Total assets                                                 |  | $                 | 2,251,444 |   |                  | $ | 2,233,833 |  
|                                                             |  |                   |           |   |                  |   |           |  
|                                                             |  |                  
|LIABILITIES AND PARTNERS CAPITAL (DEFICIT)                  |  |                   |           |   |                  |   |           |  
|Current liabilities:                                         |  |                   |           |   |                  |   |           |  
|Current portion of long-term debt                            |  | $                 | 37,176    |   |                  | $ | 45,695    |  
|Accounts payable                                             |  |                   | 161,358   |   |                  |   | 166,573   |  
|Accrued expenses and other current liabilities               |  |                   | 198,526   |   |                  |   | 184,559   |  
|Deferred revenue                                             |  |                   | 28,471    |   |                  |   | 25,024    |  
|                                                             |  |                   |           |   |                  |   |           |  
|Total current liabilities                                    |  |                   | 425,531   |   |                  |   | 421,851   |  
|Long-term debt                                               |  |                   | 2,472,718 |   |                  |   | 2,488,637 |  
|Deferred income taxes                                        |  |                   | 21,025    |   |                  |   | 25,778    |  
|Other non-current liabilities                                |  |                   | 86,390    |   |                  |   | 84,964    |  
|Commitments and contingent liabilities (see Notes 13 and 14) |  |                   |           |   |                  |   |           |  
|Partners capital (deficit):                                 |  |                   |           |   |                  |   |           |  
|General partners                                             |  |                   | (39,620   | ) |                  |   | (41,508   | )
|Limited partners                                             |  |                   | (758,637  | ) |                  |   | (796,694  | )
|Notes and interest receivable for ownership interests        |  |                   | (2,030    | ) |                  |   | (1,939    | )
|Accumulated other comprehensive income                       |  |                   | 46,067    |   |                  |   | 52,744    |  
|                                                             |  |                   |           |   |                  |   |           |  
|Total partners capital (deficit)                            |  |                   | (754,220  | ) |                  |   | (787,397  | )
|                                                             |  |                   |           |   |                  |   |           |  
|Total liabilities and partners capital (deficit)            |  | $                 | 2,251,444 |   |                  | $ | 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 EndedSeptember 30, |         |   | Nine Months EndedSeptember 30, |  
|                                                      |  | 2008                            |         |   | 2007                           |   |         | 2008 |  |   | 2007      |  
|                                                      |  | (In thousands)                  |        
|Net sales                                             |  | $                               | 665,573 |   |                                | $ | 621,535 |      |  | $ | 2,023,220 |   |  | $ | 1,894,289 |  
|Cost of goods sold                                    |  |                                 | 565,353 |   |                                |   | 534,362 |      |  |   | 1,722,355 |   |  |   | 1,628,754 |  
|                                                      |  |                                 |         |   |                                |   |         |      |  |   |           |   |  |   |           |  
|Gross profit                                          |  |                                 | 100,220 |   |                                |   | 87,173  |      |  |   | 300,865   |   |  |   | 265,535   |  
|Selling, general and administrative expenses          |  |                                 | 31,804  |   |                                |   | 33,953  |      |  |   | 100,954   |   |  |   | 102,235   |  
|Asset impairment charges                              |  |                                 | 11,807  |   |                                |   | 1,238   |      |  |   | 11,821    |   |  |   | 1,238     |  
|Net loss on disposal of property, plant and equipment |  |                                 | 5,330   |   |                                |   | 7,767   |      |  |   | 5,615     |   |  |   | 10,222    |  
|                                                      |  |                                 |         |   |                                |   |         |      |  |   |           |   |  |   |           |  
|Operating income                                      |  |                                 | 51,279  |   |                                |   | 44,215  |      |  |   | 182,475   |   |  |   | 151,840   |  
|Interest expense                                      |  |                                 | 42,272  |   |                                |   | 51,054  |      |  |   | 135,288   |   |  |   | 159,049   |  
|Interest income                                       |  |                                 | (193    | ) |                                |   | (312    | )    |  |   | (520      | ) |  |   | (607      | )
|Other expense (income), net                           |  |                                 | 615     |   |                                |   | 802     |      |  |   | (720      | ) |  |   | 1,504     |  
|                                                      |  |                                 |         |   |                                |   |         |      |  |   |           |   |  |   |           |  
|Income (loss) before income taxes                     |  |                                 | 8,585   |   |                                |   | (7,329  | )    |  |   | 48,427    |   |  |   | (8,106    | )
|Income tax provision                                  |  |                                 | 2,898   |   |                                |   | 6,062   |      |  |   | 10,674    |   |  |   | 15,769    |  
|                                                      |  |                                 |         |   |                                |   |         |      |  |   |           |   |  |   |           |  
|Net income (loss)                                     |  | $                               | 5,687   |   |                                | $ | (13,391 | )    |  | $ | 37,753    |   |  | $ | (23,875   | )
|                                                      |  |                                 |         |   |                                |   |         |      |  |   |           |   |  |   |           |  
|Net income (loss) allocated to general partners       |  | $                               | 284     |   |                                | $ | (670    | )    |  | $ | 1,888     |   |  | $ | (1,194    | )
|Net income (loss) allocated to limited partners       |  | $                               | 5,403   |   |                                | $ | (12,721 | )    |  | $ | 35,865    |   |  | $ | (22,681   | )

See accompanying notes to condensed consolidated financial statements.



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GRAHAM PACKAGING HOLDINGS COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)



|                                                                                         |  |                                |          |   |      |   |          |  
|---------------------------------------------------------------------------------------- |  | ------------------------------ | -------- | - | ---- | - | -------- | -
|                                                                                         |  | Nine Months EndedSeptember 30, |         
|                                                                                         |  | 2008                           |          |   | 2007 |  
|                                                                                         |  | (In thousands)                 |         
|Operating activities:                                                                    |  |                                |          |   |      |   |          |  
|Net income (loss)                                                                        |  | $                              | 37,753   |   |      | $ | (23,875  | )
|Adjustments to reconcile net income (loss) to net cash provided by operating activities: |  |                                |          |   |      |   |          |  
|Depreciation and amortization                                                            |  |                                | 133,136  |   |      |   | 152,836  |  
|Amortization of debt issuance fees                                                       |  |                                | 7,760    |   |      |   | 12,301   |  
|Net loss on disposal of property, plant and equipment                                    |  |                                | 5,615    |   |      |   | 10,222   |  
|Pension expense                                                                          |  |                                | 1,997    |   |      |   | 2,253    |  
|Asset impairment charges                                                                 |  |                                | 11,821   |   |      |   | 1,238    |  
|Stock compensation expense                                                               |  |                                | 2,192    |   |      |   | 438      |  
|Foreign currency transaction loss                                                        |  |                                | 203      |   |      |   | 1,811    |  
|Interest on receivable for ownership interests                                           |  |                                | (91      | ) |      |   | (75      | )
|Changes in operating assets and liabilities:                                             |  |                                |          |   |      |   |          |  
|Accounts receivable                                                                      |  |                                | 7,388    |   |      |   | (13,552  | )
|Inventories                                                                              |  |                                | 5,692    |   |      |   | (2,489   | )
|Prepaid expenses and other current assets                                                |  |                                | 545      |   |      |   | 9,347    |  
|Other non-current assets                                                                 |  |                                | (7,928   | ) |      |   | (6,781   | )
|Accounts payable and accrued expenses                                                    |  |                                | 15,963   |   |      |   | 40,582   |  
|Pension contributions                                                                    |  |                                | (7,267   | ) |      |   | (7,139   | )
|Other non-current liabilities                                                            |  |                                | 1,928    |   |      |   | 16,461   |  
|                                                                                         |  |                                |          |   |      |   |          |  
|Net cash provided by operating activities                                                |  |                                | 216,707  |   |      |   | 193,578  |  
|                                                                                         |  |                                |          |   |      |   |          |  
|Investing activities:                                                                    |  |                                |          |   |      |   |          |  
|Cash paid for property, plant and equipment                                              |  |                                | (99,306  | ) |      |   | (107,686 | )
|Proceeds from sale of property, plant and equipment                                      |  |                                | 3,299    |   |      |   | 3,668    |  
|                                                                                         |  |                                |          |   |      |   |          |  
|Net cash used in investing activities                                                    |  |                                | (96,007  | ) |      |   | (104,018 | )
|                                                                                         |  |                                |          |   |      |   |          |  
|Financing activities:                                                                    |  |                                |          |   |      |   |          |  
|Proceeds from issuance of long-term debt                                                 |  |                                | 296,564  |   |      |   | 617,944  |  
|Payment of long-term debt                                                                |  |                                | (322,980 | ) |      |   | (635,166 | )
|Purchase of partnership units                                                            |  |                                |         |   |      |   | (3,140   | )
|Debt issuance fees                                                                       |  |                                |         |   |      |   | (4,500   | )
|                                                                                         |  |                                |          |   |      |   |          |  
|Net cash used in financing activities                                                    |  |                                | (26,416  | ) |      |   | (24,862  | )
|                                                                                         |  |                                |          |   |      |   |          |  
|Effect of exchange rate changes on cash and cash equivalents                             |  |                                | (1,671   | ) |      |   | 678      |  
|                                                                                         |  |                                |          |   |      |   |          |  
|Increase in cash and cash equivalents                                                    |  |                                | 92,613   |   |      |   | 65,376   |  
|Cash and cash equivalents at beginning of period                                         |  |                                | 18,314   |   |      |   | 13,327   |  
|                                                                                         |  |                                |          |   |      |   |          |  
|Cash and cash equivalents at end of period                                               |  | $                              | 110,927  |   |      | $ | 78,703   |  
|                                                                                         |  |                                |          |   |      |   |          |  
|Supplemental disclosures                                                                 |  |                                |          |   |      |   |          |  
|Cash paid for interest, net of amounts capitalized                                       |  | $                              | 119,144  |   |      | $ | 135,520  |  
|Cash paid for income taxes (net of refunds)                                              |  |                                | 5,470    |   |      |   | 12,810   |  
|Non-cash investing activities:                                                           |  |                                |          |   |      |   |          |  
|Capital leases                                                                           |  |                                | 2,196    |   |      |   | 2,324    |  
|Accruals for purchases of property, plant and equipment                                  |  |                                | 11,500   |   |      |   | 19,258   |  

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 nine months ended September 30, 2008, are not
necessarily indicative of the results to be expected for the full year ending December 31, 2008.

Recent Accounting Pronouncements

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

In September 2006, the FASB issued Statement of Financial Accounting Standards (SFAS) 157, Fair Value Measurements. This
statement establishes a single authoritative definition of fair value, sets out a framework to classify the source of information used in fair value measurements, identifies additional factors that must be disclosed about assets and liabilities
measured at fair value based on their placement in the new framework and modifies the long-standing accounting presumption that the transaction price of an asset or liability equals its initial fair value. In February 2008, the FASB delayed the
effective date for certain non-financial assets and liabilities until January 1, 2009. The Company adopted SFAS 157 effective January 1, 2008, for financial assets and liabilities (see Note 11). The Company is currently in the process of
assessing the impact of the adoption of SFAS 157 on its financial statements as it relates to its non-financial assets and liabilities.

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

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



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GRAHAM PACKAGING HOLDINGS COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-Continued



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

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

In May 2008, the FASB issued SFAS 162, The Hierarchy of Generally Accepted Accounting Principles. This statement identifies the sources of
accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles in the United
States. This statement is effective on November 15, 2008. The Company does not expect the adoption to have any impact on its financial statements.

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,
respectively. 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 four interest rate swap agreements which become effective in August 2009, under which the Company will receive variable interest based on the Eurodollar rate and
pay fixed interest at a weighted average rate of 4.08%, on $350.0 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 September 30, 2008, the Company had contracts for Canadian Dollars and Pound Sterling totalling $8.9 million and expiring within the next six months. 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 $1.4 million and $2.8 million for the three months ended September 30, 2008 and 2007, respectively, and was an unrealized loss of $1.8 million and $8.1 million for the
nine months ended September 30, 2008 and 2007, respectively. Of the amount recorded within accumulated other comprehensive income (loss) as of September 30, 2008, 36% is expected to be recognized in interest expense in the next twelve
months.

With respect to the cash flow hedges, the Company routinely considers the possible impact of counterparty default when assessing
whether a hedging relationship continues to be effective. The Company has considered the recent market events in determining the impact, if any, of counterparty default on its cash flow hedges. The cash flow hedges that the Company currently has are
with major banking institutions that have not, in Managements opinion, been significantly impacted by the current market conditions. Accordingly, the Company has concluded that the likelihood of counterparty default is remote.



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GRAHAM PACKAGING HOLDINGS COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-Continued



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.

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 nine months ended September 30, 2008, is as follows:



|                                  |  |         |   |  |                                     |        |                                                   |     |                                      |   |     
|--------------------------------- |  | ------- | - |  | ----------------------------------- | ------ | ------------------------------------------------- | --- | ------------------------------------ | - | ----
|                                  |  | Options |   |  | WeightedAverageExercisePrice/Option |        | WeightedAverageRemainingContractualTerm(in years) |     | AggregateIntrinsicValue(in millions)
|Outstanding at January 1, 2008    |  | 1,446.4 |   |  | $                                   | 34,921 |                                                   |     |                                      |   |     
|Granted (1)                       |  | 356.7   |   |  |                                     | 36,747 |                                                   |     |                                      |   |     
|Exercised                         |  |        |   |  |                                     |       |                                                   |     |                                      |   |     
|Forfeited (1)                     |  | (441.5  | ) |  |                                     | 45,244 |                                                   |     |                                      |   |     
|                                  |  |         |   |  |                                     |        |                                                   |     |                                      |   |     
|Outstanding at September 30, 2008 |  | 1,361.6 |   |  | $                                   | 32,051 |                                                   | 7.8 |                                      | $ | 23.7
|                                  |  |         |   |  |                                     |        |                                                   |     |                                      |   |     
|Vested or expected to vest        |  | 1,098.2 |   |  | $                                   | 33,139 |                                                   | 7.6 |                                      | $ | 17.9
|Exercisable at September 30, 2008 |  | 534.7   |   |  | $                                   | 30,749 |                                                   | 6.8 |                                      | $ | 10.0



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

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

On February 1, 2008, the Company extended the term for
certain options granted on February 2, 1998, for which any unexercised options would have expired on February 2, 2008. No change was made to the number of options, nor the exercise price, and the options remained fully vested. This
extension of the term was 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.



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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 September 30, 2008, and December 31, 2007, respectively. Management performs ongoing credit evaluations of its customers and generally does not
require collateral.



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

For the nine months
ended September 30, 2008 and 2007, respectively, 70.7% and 71.3% of the Companys net sales were generated by its top twenty customers. The Company had sales to one customer, PepsiCo, which exceeded 10% of total sales for the nine months
ended September 30, 2008 and 2007. The Companys sales to PepsiCo, approximately 100% of which were made in North America, were 13.8% and 14.3% of total sales for the nine months ended September 30, 2008 and 2007, respectively.

The Company had $138.4 million and $148.5 million of accounts receivable from its top twenty customers as of September 30, 2008, and
December 31, 2007, respectively. The Company had $14.6 million and $24.3 million of accounts receivable from PepsiCo as of September 30, 2008, and December 31, 2007, respectively.



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

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



|               |  |                   |         |                  |   |        
|-------------- |  | ----------------- | ------- | ---------------- | - | -------
|               |  | September 30,2008 |         | December 31,2007
|               |  | (In thousands)   
|Finished goods |  | $                 | 180,858 |                  | $ | 188,236
|Raw materials  |  |                   | 78,240  |                  |   | 77,948 
|               |  |                   |         |                  |   |        
|Total          |  | $                 | 259,098 |                  | $ | 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) |  | September 30,2008 |           | December 31,2007
|                                                |  |                               |  | (In thousands)   
|Land                                            |  |                               |  | $                 | 40,983    |                  | $ | 45,560   
|Buildings and improvements                      |  | 7-31.5                        |  |                   | 234,011   |                  |   | 239,914  
|Machinery and equipment                         |  | 3-15                          |  |                   | 1,842,143 |                  |   | 1,804,497
|Construction in progress                        |  |                               |  |                   | 58,997    |                  |   | 91,413   
|                                                |  |                               |  |                   |           |                  |   |          
|Property, plant and equipment                   |  |                               |  |                   | 2,176,134 |                  |   | 2,181,384
|Less: accumulated depreciation and amortization |  |                               |  |                   | 995,550   |                  |   | 938,966  
|                                                |  |                               |  |                   |           |                  |   |          
|Property, plant and equipment, net              |  |                               |  | $                 | 1,180,584 |                  | $ | 1,242,418
|                                                |  |                               |  |                   |           |                  |   |          

Depreciation expense, including depreciation expense on assets recorded under capital leases, for
the three months ended September 30, 2008 and 2007, was $43.5 million and $48.9 million, respectively, and for the nine months ended September 30, 2008 and 2007, was $127.8 million and $145.3 million, respectively.



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GRAHAM PACKAGING HOLDINGS COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-Continued



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 nine months ended September 30, 2008 and 2007, was $3.2 million and $4.1 million,
respectively.

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



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

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



|                       |  |                      |        |                         |   |         |     |  |                                    |        |  |         
|---------------------- |  | -------------------- | ------ | ----------------------- | - | ------- | --- |  | ---------------------------------- | ------ |  | --------
|                       |  | Gross CarryingAmount |        | AccumulatedAmortization |   |         | Net |  | Weighted AverageAmortizationPeriod
|                       |  | (In thousands)       |        |                        
|Patented technology    |  | $                    | 25,734 |                         | $ | (7,484  | )   |  | $                                  | 18,250 |  | 11 years
|Customer relationships |  |                      | 36,291 |                         |   | (5,113  | )   |  |                                    | 31,178 |  | 18 years
|Licensing agreements   |  |                      | 601    |                         |   | (412    | )   |  |                                    | 189    |  | 1 year  
|Non-compete agreement  |  |                      | 1,500  |                         |   | (1,200  | )   |  |                                    | 300    |  | 5 years 
|                       |  |                      |        |                         |   |         |     |  |                                    |        |  |         
|Total                  |  | $                    | 64,126 |                         | $ | (14,209 | )   |  | $                                  | 49,917 |  |         
|                       |  |                      |        |                         |   |         |     |  |                                    |        |  |         

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



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

Amortization expense for the nine months ended September 30, 2008 and 2007, was $4.3 million
and $5.8 million, respectively. Remaining estimated aggregate amortization expense for 2008 is $1.3 million. The estimated aggregate amortization expense for each of the next five years ending December 31 is as follows (in thousands):



|     |  |   |      
|---- |  | - | -----
|2009 |  | $ | 5,000
|2010 |  |   | 4,700
|2011 |  |   | 4,600
|2012 |  |   | 4,600
|2013 |  |   | 4,500



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GRAHAM PACKAGING HOLDINGS COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-Continued



|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 |  |                     | 145     |               |   | 431                 |  |   | (75   | ) |  |   | 501    
|                                         |  |                     |         |               |   |                     |  |   |       |   |  |   |        
|Balance at September 30, 2008            |  | $                   | 286,440 |               | $ | 19,038              |  | $ | 1,742 |   |  | $ | 307,220
|                                         |  |                     |         |               |   |                     |  |   |       |   |  |   |        



|8. | Asset Impairment Charges
|-- | ------------------------

Due to changes in the
ability to utilize certain assets in Brazil, Canada, Mexico and the United States in 2008 and the United States in 2007, the Company evaluated the recoverability of these assets. For these assets to be held and used, the Company determined that the
undiscounted future cash flows were below the carrying value of these long-lived assets. The majority of these assets were no longer in productive use and during the third quarters of 2008 and 2007 Management determined that the Company had no plans
to redeploy these assets. Accordingly, the Company adjusted the carrying value of these long-lived assets to their estimated fair value in accordance with SFAS 144, Accounting for the Impairment or Disposal of Long-Lived Assets,
resulting in impairment charges of $11.8 million and $1.2 million for the three months ended September 30, 2008 and 2007, respectively, and $11.8 million and $1.2 million for the nine months ended September 30, 2008 and 2007, respectively.



|9. | Accrued Expenses and Other Current Liabilities
|-- | ----------------------------------------------

Accrued expenses and other current liabilities consisted of the following:



|                                           |  |                   |         |                  |   |        
|------------------------------------------ |  | ----------------- | ------- | ---------------- | - | -------
|                                           |  | September 30,2008 |         | December 31,2007
|                                           |  | (In thousands)   
|Accrued employee compensation and benefits |  | $                 | 62,212  |                  | $ | 68,409 
|Accrued interest                           |  |                   | 40,453  |                  |   | 32,069 
|Accrued sales allowance                    |  |                   | 30,497  |                  |   | 29,622 
|Other                                      |  |                   | 65,364  |                  |   | 54,459 
|                                           |  |                   |         |                  |   |        
|                                           |  | $                 | 198,526 |                  | $ | 184,559
|                                           |  |                   |         |                  |   |        

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

For the nine months ended September 30, 2008, the Company recognized severance expense
in the United States of $2.0 million (reflected in cost of goods sold) related to the closure of its plant in Edison, New Jersey and the related severing of 115 employees, 105 of whom were terminated by September 30, 2008. The total expected
severance expense related to this plant closure is approximately $2.1 million. Substantially all of the cash payments for these termination benefits are expected to be made by March 31, 2009. The Company also recognized severance expense of
$1.8 million (reflected in selling, general and administrative expenses) related to the separation of its former Chief Operating Officer on April 30, 2008. Substantially all of the cash payments for these termination benefits are expected to be
made by June 30, 2010.

For the year ended December 31, 2007, the Company recognized severance expense in the United States of
$2.1 million (reflected predominantly in selling, general and administrative expenses) in 2007, and increased the accrual in 2008 by $0.2 million, related to the severing of 59 employees, all of whom were terminated by September 30, 2008.
Substantially all of the cash payments for these termination benefits are expected to be made by March 31, 2009. The Company also recognized severance expense in France of $1.9 million (reflected in selling, general and administrative expenses)
in 2007, and reduced the accrual in 2008 by $0.2 million, related to the severing of 12 employees, eleven of whom were terminated as of September 30, 2008. 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, 2006, the Company recognized severance expense in the United States of
$1.6 million (reflected predominantly in selling, general and administrative expenses) related to the severing of 46 employees, all of whom were



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GRAHAM PACKAGING HOLDINGS COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-Continued



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

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

The following table summarizes these severance accruals, and related expenses and payments, by operating
segment. At September 30, 2008, $0.8 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     |  |                | 4,031  |   |        |   | 86     |       |  |   | 4,117  |  
|Payments during the period               |  |                | (4,111 | ) |        |   | (1,489 | )     |  |   | (5,600 | )
|Foreign currency translation adjustments |  |                |       |   |        |   | 46     |       |  |   | 46     |  
|Other adjustments                        |  |                | (8     | ) |        |   | (517   | )     |  |   | (525   | )
|                                         |  |                |        |   |        |   |        |       |  |   |        |  
|Balance at September 30, 2008            |  | $              | 4,574  |   |        | $ | 252    |       |  | $ | 4,826  |  
|                                         |  |                |        |   |        |   |        |       |  |   |        |  

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



|10. | Debt Arrangements
|--- | -----------------

Long-term debt consisted of the
following:



|                                              |  |                   |           |                  |   |          
|--------------------------------------------- |  | ----------------- | --------- | ---------------- | - | ---------
|                                              |  | September 30,2008 |           | December 31,2007
|                                              |  | (In thousands)   
|Term loan                                     |  | $                 | 1,846,875 |                  | $ | 1,860,938
|Revolving Credit Facility                     |  |                   |          |                  |   |         
|Foreign and other revolving credit facilities |  |                   | 11,776    |                  |   | 14,501   
|Senior Notes                                  |  |                   | 250,000   |                  |   | 250,000  
|Senior Subordinated Notes                     |  |                   | 375,000   |                  |   | 375,000  
|Capital leases                                |  |                   | 24,142    |                  |   | 33,180   
|Other                                         |  |                   | 2,101     |                  |   | 713      
|                                              |  |                   |           |                  |   |          
|                                              |  |                   | 2,509,894 |                  |   | 2,534,332
|Less amounts classified as current            |  |                   | 37,176    |                  |   | 45,695   
|                                              |  |                   |           |                  |   |          
|Total                                         |  | $                 | 2,472,718 |                  | $ | 2,488,637
|                                              |  |                   |           |                  |   |          



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GRAHAM PACKAGING HOLDINGS COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-Continued



The Companys credit agreement consists of a term loan B to the Operating Company totaling
$1,846.9 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 domestic subsidiaries of the Operating Company. 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 September 30, 2008, was $239.2 million (as reduced by $10.8 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 Credit Facility. In addition, the Credit Agreement contains certain affirmative and negative covenants as to the operations and financial condition of the Company, as well as certain restrictions on the payment of dividends and other
distributions to Holdings. As of September 30, 2008, the Company was in compliance with all covenants.

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

Pursuant to its
terms, on March 30, 2007, the Credit Agreement was amended in order to, among other things, increase the Term Loan Facility by approximately $305.0 million (the Amendment). Proceeds of the Amendment were used to pay off a
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 co-issued by the Operating Company and GPC Capital Corp. I (CapCo I) and $375.0
million in Senior Subordinated Notes co-issued by the Operating Company and CapCo I (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%.



|11. | Fair Value Measurement
|--- | ----------------------

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



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

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



|                                 |  |                               |   |         |   |         |  |   |  
|-------------------------------- |  | ----------------------------- | - | ------- | - | ------- |  | - | -
|                                 |  | Fair Value Measurements Using
|                                 |  | Level 1                       |   | Level 2 |   | Level 3
|                                 |  | (In thousands)               
|Assets:                          |  |                               |   |         |   |         |  |   |  
|Derivative financial instruments |  | $                             |  |         | $ | 498     |  | $ | 
|Liabilities:                     |  |                               |   |         |   |         |  |   |  
|Derivative financial instruments |  | $                             |  |         | $ | 3,030   |  | $ | 



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GRAHAM PACKAGING HOLDINGS COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-Continued



The Companys derivative financial instruments are interest rate collars and swaps 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.



|12. | 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 nine months of 2008, the valuation allowance decreased by $12.3 million, primarily as a result of changes in deferred tax liabilities.

The Company had $9.7 million of Unrecognized Tax Benefits (UTB), exclusive of interest and penalties, as of September 30, 2008,
resulting primarily from related party interest free loans, related party technical assistance payments and related party administrative allocations in various non-U.S. subsidiaries of the Company and disallowed related party interest expense in
various U.S. states and in certain non-U.S. subsidiaries. For the nine months ended September 30, 2008, the Company recorded a net increase in UTB of $0.5 million, exclusive of interest and penalties, resulting from an increase of $0.8 million
for tax positions taken in prior periods, a decrease of $1.2 million related to expired statutes of limitation on prior tax positions and an increase of $0.9 million for current year tax positions. Offsetting long-term deferred income tax assets at
September 30, 2008, were $0.8 million. Upon adoption of FIN 48, the Company elected to treat interest and penalties related to taxes as a component of income tax expense. As of September 30, 2008, the Company had recorded additional UTB of
$7.0 million related to interest and penalties. The Company expects that the UTB balance will decrease within the next twelve months by approximately $2.3 million as a result of expiring statutes of limitation. Approximately $11.3 million of UTB at
September 30, 2008, if recognized, would impact the Companys effective tax rate.



|13. | Commitments
|--- | -----------

The Company is a party to various
capital and operating leases involving real property and equipment. Total rent expense for operating leases was $13.0 million and $40.5 million for the three and nine months ended September 30, 2008, respectively, and $13.6 million and $41.2
million for the three and nine months ended September 30, 2007, respectively. Under monitoring agreements, the Company is obligated to make annual payments of $2.0 million and $3.0 million to 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., respectively. See Note 19 for
further discussion of the Companys obligations under these monitoring agreements.



|14. | 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.



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GRAHAM PACKAGING HOLDINGS COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-Continued



|15. | Condensed Guarantor Data
|--- | ------------------------

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

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

(In thousands)



|                                                  |  |                                |          |   |                             |   |           |            |  |                |           |         |   |              |  |   |              |  |   |            |   |  |   |           |  
|------------------------------------------------- |  | ------------------------------ | -------- | - | --------------------------- | - | --------- | ---------- |  | -------------- | --------- | ------- | - | ------------ |  | - | ------------ |  | - | ---------- | - |  | - | --------- | -
|                                                  |  | GrahamPackagingHoldingsCompany |          |   | GrahamPackagingCompany,L.P. |   |           | Guarantors |  | Non-Guarantors |           | CapCo I |   | Eliminations |  |   | Consolidated | 
|ASSETS                                            |  |                                |          |   |                             |   |           |            |  |                |           |         |   |              |  |   |              |  |   |            |   |  |   |           |  
|Current assets:                                   |  |                                |          |   |                             |   |           |            |  |                |           |         |   |              |  |   |              |  |   |            |   |  |   |           |  
|Cash and cash equivalents                         |  | $                              |         |   |                             | $ | 76,047    |            |  | $              | 1         |         | $ | 34,879       |  | $ |             |  | $ |           |   |  | $ | 110,927   |  
|Accounts receivable, net                          |  |                                |         |   |                             |   | 85,748    |            |  |                | 71,530    |         |   | 82,694       |  |   |             |  |   |           |   |  |   | 239,972   |  
|Inventories                                       |  |                                |         |   |                             |   | 94,081    |            |  |                | 107,015   |         |   | 58,002       |  |   |             |  |   |           |   |  |   | 259,098   |  
|Deferred income taxes                             |  |                                |         |   |                             |   |          |            |  |                |          |         |   | 3,697        |  |   |             |  |   |           |   |  |   | 3,697     |  
|Prepaid expenses and other current assets         |  |                                |         |   |                             |   | 8,810     |            |  |                | 18,720    |         |   | 23,940       |  |   |             |  |   |           |   |  |   | 51,470    |  
|                                                  |  |                                |          |   |                             |   |           |            |  |                |           |         |   |              |  |   |              |  |   |            |   |  |   |           |  
|Total current assets                              |  |                                |         |   |                             |   | 264,686   |            |  |                | 197,266   |         |   | 203,212      |  |   |             |  |   |           |   |  |   | 665,164   |  
|Property, plant and equipment, net                |  |                                |         |   |                             |   | 466,935   |            |  |                | 420,173   |         |   | 293,476      |  |   |             |  |   |           |   |  |   | 1,180,584 |  
|Intangible assets, net                            |  |                                |         |   |                             |   | 7,064     |            |  |                | 36,588    |         |   | 6,265        |  |   |             |  |   |           |   |  |   | 49,917    |  
|Goodwill                                          |  |                                |         |   |                             |   | 9,246     |            |  |                | 235,924   |         |   | 62,050       |  |   |             |  |   |           |   |  |   | 307,220   |  
|Net intercompany                                  |  |                                |         |   |                             |   | 1,125,858 |            |  |                |          |         |   |             |  |   |             |  |   | (1,125,858 | ) |  |   |          |  
|Investment in subsidiaries                        |  |                                |         |   |                             |   | 235,080   |            |  |                | 296,789   |         |   |             |  |   |             |  |   | (531,869   | ) |  |   |          |  
|Other non-current assets                          |  |                                |         |   |                             |   | 42,315    |            |  |                | 267       |         |   | 5,977        |  |   |             |  |   |           |   |  |   | 48,559    |  
|                                                  |  |                                |          |   |                             |   |           |            |  |                |           |         |   |              |  |   |              |  |   |            |   |  |   |           |  
|Total assets                                      |  | $                              |         |   |                             | $ | 2,151,184 |            |  | $              | 1,187,007 |         | $ | 570,980      |  | $ |             |  | $ | (1,657,727 | ) |  | $ | 2,251,444 |  
|                                                  |  |                                |          |   |                             |   |           |            |  |                |           |         |   |              |  |   |              |  |   |            |   |  |   |           |  
|                                                  |  |                                |          |  
|LIABILITIES AND PARTNERS CAPITAL (DEFICIT)       |  |                                |          |   |                             |   |           |            |  |                |           |         |   |             
|Current liabilities:                              |  |                                |          |   |                             |   |           |            |  |                |           |         |   |              |  |   |              |  |   |            |   |  |   |           |  
|Current portion of long-term debt                 |  | $                              |         |   |                             | $ | 25,058    |            |  | $              | 269       |         | $ | 11,849       |  | $ |             |  | $ |           |   |  | $ | 37,176    |  
|Accounts payable                                  |  |                                |         |   |                             |   | 63,552    |            |  |                | 46,048    |         |   | 51,758       |  |   |             |  |   |           |   |  |   | 161,358   |  
|Accrued expenses and other current liabilities    |  |                                |         |   |                             |   | 103,125   |            |  |                | 37,804    |         |   | 57,597       |  |   |             |  |   |           |   |  |   | 198,526   |  
|Deferred revenue                                  |  |                                |         |   |                             |   | 16,234    |            |  |                | 6,839     |         |   | 5,398        |  |   |             |  |   |           |   |  |   | 28,471    |  
|                                                  |  |                                |          |   |                             |   |           |            |  |                |           |         |   |              |  |   |              |  |   |            |   |  |   |           |  
|Total current liabilities                         |  |                                |         |   |                             |   | 207,969   |            |  |                | 90,960    |         |   | 126,602      |  |   |             |  |   |           |   |  |   | 425,531   |  
|Long-term debt                                    |  |                                |         |   |                             |   | 2,470,198 |            |  |                | 591       |         |   | 1,929        |  |   |             |  |   |           |   |  |   | 2,472,718 |  
|Deferred income taxes                             |  |                                |         |   |                             |   | 302       |            |  |                | 6,170     |         |   | 14,553       |  |   |             |  |   |           |   |  |   | 21,025    |  
|Other non-current liabilities                     |  |                                |         |   |                             |   | 39,846    |            |  |                | 15,347    |         |   | 31,197       |  |   |             |  |   |           |   |  |   | 86,390    |  
|Investment in subsidiaries                        |  |                                | 567,131  |   |                             |   |          |            |  |                |          |         |   |             |  |   |             |  |   | (567,131   | ) |  |   |          |  
|Net intercompany                                  |  |                                | 187,089  |   |                             |   |          |            |  |                | 905,723   |         |   | 33,046       |  |   |             |  |   | (1,125,858 | ) |  |   |          |  
|Commitments and contingent liabilities            |  |                                |          |   |                             |   |           |            |  |                |           |         |   |              |  |   |              |  |   |            |   |  |   |           |  
|Partners capital (deficit)                       |  |                                | (754,220 | ) |                             |   | (567,131  | )          |  |                | 168,216   |         |   | 363,653      |  |   |             |  |   | 35,262     |   |  |   | (754,220  | )
|                                                  |  |                                |          |   |                             |   |           |            |  |                |           |         |   |              |  |   |              |  |   |            |   |  |   |           |  
|Total liabilities and partners capital (deficit) |  | $                              |         |   |                             | $ | 2,151,184 |            |  | $              | 1,187,007 |         | $ | 570,980      |  | $ |             |  | $ | (1,657,727 | ) |  | $ | 2,251,444 |  
|                                                  |  |                                |          |   |                             |   |           |            |  |                |           |         |   |              |  |   |              |  |   |            |   |  |   |           |  



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GRAHAM PACKAGING HOLDINGS COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-Continued



GRAHAM PACKAGING HOLDINGS COMPANY

CONDENSED CONSOLIDATING BALANCE SHEET

AS OF DECEMBER 31, 2007

(In thousands)



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



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GRAHAM PACKAGING HOLDINGS COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-Continued



GRAHAM PACKAGING HOLDINGS COMPANY

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

FOR THE THREE MONTHS ENDED
SEPTEMBER 30, 2008

(In thousands)



|                                                      |  |                                |        |   |                             |   |         |            |  |   |                |   |         |   |              |  |   |              |  |   |         |   |  |   |        
|----------------------------------------------------- |  | ------------------------------ | ------ | - | --------------------------- | - | ------- | ---------- |  | - | -------------- | - | ------- | - | ------------ |  | - | ------------ |  | - | ------- | - |  | - | -------
|                                                      |  | GrahamPackagingHoldingsCompany |        |   | GrahamPackagingCompany,L.P. |   |         | Guarantors |  |   | Non-Guarantors |   | CapCo I |   | Eliminations |  |   | Consolidated
|Net sales                                             |  | $                              |       |   |                             | $ | 290,620 |            |  | $ | 239,130        |   |         | $ | 152,431      |  | $ |             |  | $ | (16,608 | ) |  | $ | 665,573
|Cost of goods sold                                    |  |                                |       |   |                             |   | 240,587 |            |  |   | 214,879        |   |         |   | 126,495      |  |   |             |  |   | (16,608 | ) |  |   | 565,353
|                                                      |  |                                |        |   |                             |   |         |            |  |   |                |   |         |   |              |  |   |              |  |   |         |   |  |   |        
|Gross profit                                          |  |                                |       |   |                             |   | 50,033  |            |  |   | 24,251         |   |         |   | 25,936       |  |   |             |  |   |        |   |  |   | 100,220
|Selling, general and administrative expenses          |  |                                |       |   |                             |   | 13,049  |            |  |   | 11,873         |   |         |   | 6,882        |  |   |             |  |   |        |   |  |   | 31,804 
|Asset impairment charges                              |  |                                |       |   |                             |   | 7,190   |            |  |   | 4,283          |   |         |   | 334          |  |   |             |  |   |        |   |  |   | 11,807 
|Net loss on disposal of property, plant and equipment |  |                                |       |   |                             |   | 3,122   |            |  |   | 2,194          |   |         |   | 14           |  |   |             |  |   |        |   |  |   | 5,330  
|                                                      |  |                                |        |   |                             |   |         |            |  |   |                |   |         |   |              |  |   |              |  |   |         |   |  |   |        
|Operating income                                      |  |                                |       |   |                             |   | 26,672  |            |  |   | 5,901          |   |         |   | 18,706       |  |   |             |  |   |        |   |  |   | 51,279 
|Interest expense, net                                 |  |                                |       |   |                             |   | 24,962  |            |  |   | 15,690         |   |         |   | 1,427        |  |   |             |  |   |        |   |  |   | 42,079 
|Other (income) expense, net                           |  |                                |       |   |                             |   | (70     | )          |  |   | 632            |   |         |   | 53           |  |   |             |  |   |        |   |  |   | 615    
|Equity in earnings of subsidiaries                    |  |                                | (5,687 | ) |                             |   | (4,398  | )          |  |   | (9,262         | ) |         |   |             |  |   |             |  |   | 19,347  |   |  |   |       
|                                                      |  |                                |        |   |                             |   |         |            |  |   |                |   |         |   |              |  |   |              |  |   |         |   |  |   |        
|Income (loss) before income taxes                     |  |                                | 5,687  |   |                             |   | 6,178   |            |  |   | (1,159         | ) |         |   | 17,226       |  |   |             |  |   | (19,347 | ) |  |   | 8,585  
|Income tax provision                                  |  |                                |       |   |                             |   | 491     |            |  |   | 65             |   |         |   | 2,342        |  |   |             |  |   |        |   |  |   | 2,898  
|                                                      |  |                                |        |   |                             |   |         |            |  |   |                |   |         |   |              |  |   |              |  |   |         |   |  |   |        
|Net income (loss)                                     |  | $                              | 5,687  |   |                             | $ | 5,687   |            |  | $ | (1,224         | ) |         | $ | 14,884       |  | $ |             |  | $ | (19,347 | ) |  | $ | 5,687  
|                                                      |  |                                |        |   |                             |   |         |            |  |   |                |   |         |   |              |  |   |              |  |   |         |   |  |   |        



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GRAHAM PACKAGING HOLDINGS COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-Continued



GRAHAM PACKAGING HOLDINGS COMPANY

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 2008

(In thousands)



|                                                             |  |                                |         |   |                             |   |         |            |  |   |                |   |  |         |         |              |  |   |              |  |   |         |   |  |   |           |  
|------------------------------------------------------------ |  | ------------------------------ | ------- | - | --------------------------- | - | ------- | ---------- |  | - | -------------- | - |  | ------- | ------- | ------------ |  | - | ------------ |  | - | ------- | - |  | - | --------- | -
|                                                             |  | GrahamPackagingHoldingsCompany |         |   | GrahamPackagingCompany,L.P. |   |         | Guarantors |  |   | Non-Guarantors |   |  | CapCo I |         | Eliminations |  |   | Consolidated | 
|Net sales                                                    |  | $                              |        |   |                             | $ | 875,713 |            |  | $ | 773,462        |   |  | $       | 440,534 |              |  | $ |             |  | $ | (66,489 | ) |  | $ | 2,023,220 |  
|Cost of goods sold                                           |  |                                |        |   |                             |   | 727,406 |            |  |   | 690,655        |   |  |         | 370,783 |              |  |   |             |  |   | (66,489 | ) |  |   | 1,722,355 |  
|                                                             |  |                                |         |   |                             |   |         |            |  |   |                |   |  |         |         |              |  |   |              |  |   |         |   |  |   |           |  
|Gross profit                                                 |  |                                |        |   |                             |   | 148,307 |            |  |   | 82,807         |   |  |         | 69,751  |              |  |   |             |  |   |        |   |  |   | 300,865   |  
|Selling, general and administrative expenses                 |  |                                |        |   |                             |   | 41,637  |            |  |   | 37,114         |   |  |         | 22,203  |              |  |   |             |  |   |        |   |  |   | 100,954   |  
|Asset impairment charges                                     |  |                                |        |   |                             |   | 10,452  |            |  |   | 777            |   |  |         | 592     |              |  |   |             |  |   |        |   |  |   | 11,821    |  
|Net loss (gain) on disposal of property, plant and equipment |  |                                |        |   |                             |   | 2,395   |            |  |   | 3,271          |   |  |         | (51     | )            |  |   |             |  |   |        |   |  |   | 5,615     |  
|                                                             |  |                                |         |   |                             |   |         |            |  |   |                |   |  |         |         |              |  |   |              |  |   |         |   |  |   |           |  
|Operating income                                             |  |                                |        |   |                             |   | 93,823  |            |  |   | 41,645         |   |  |         | 47,007  |              |  |   |             |  |   |        |   |  |   | 182,475   |  
|Interest expense, net                                        |  |                                |        |   |                             |   | 80,534  |            |  |   | 49,814         |   |  |         | 4,420   |              |  |   |             |  |   |        |   |  |   | 134,768   |  
|Other expense (income), net                                  |  |                                |        |   |                             |   | 121     |            |  |   | (187           | ) |  |         | (654    | )            |  |   |             |  |   |        |   |  |   | (720      | )
|Equity in earnings of subsidiaries                           |  |                                | (37,753 | ) |                             |   | (25,976 | )          |  |   | (20,369        | ) |  |         |        |              |  |   |             |  |   | 84,098  |   |  |   |          |  
|                                                             |  |                                |         |   |                             |   |         |            |  |   |                |   |  |         |         |              |  |   |              |  |   |         |   |  |   |           |  
|Income (loss) before income taxes                            |  |                                | 37,753  |   |                             |   | 39,144  |            |  |   | 12,387         |   |  |         | 43,241  |              |  |   |             |  |   | (84,098 | ) |  |   | 48,427    |  
|Income tax provision                                         |  |                                |        |   |                             |   | 1,391   |            |  |   | 364            |   |  |         | 8,919   |              |  |   |             |  |   |        |   |  |   | 10,674    |  
|                                                             |  |                                |         |   |                             |   |         |            |  |   |                |   |  |         |         |              |  |   |              |  |   |         |   |  |   |           |  
|Net income (loss)                                            |  | $                              | 37,753  |   |                             | $ | 37,753  |            |  | $ | 12,023         |   |  | $       | 34,322  |              |  | $ |             |  | $ | (84,098 | ) |  | $ | 37,753    |  
|                                                             |  |                                |         |   |                             |   |         |            |  |   |                |   |  |         |         |              |  |   |              |  |   |         |   |  |   |           |  



19



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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
SEPTEMBER 30, 2007

(In thousands)



|                                                             |  |                                |         |   |                             |   |         |            |  |   |                |   |  |         |         |              |  |   |              |  |   |         |   |  |   |         |  
|------------------------------------------------------------ |  | ------------------------------ | ------- | - | --------------------------- | - | ------- | ---------- |  | - | -------------- | - |  | ------- | ------- | ------------ |  | - | ------------ |  | - | ------- | - |  | - | ------- | -
|                                                             |  | GrahamPackagingHoldingsCompany |         |   | GrahamPackagingCompany,L.P. |   |         | Guarantors |  |   | Non-Guarantors |   |  | CapCo I |         | Eliminations |  |   | Consolidated | 
|Net sales                                                    |  | $                              |        |   |                             | $ | 263,098 |            |  | $ | 246,005        |   |  | $       | 135,175 |              |  | $ |             |  | $ | (22,743 | ) |  | $ | 621,535 |  
|Cost of goods sold                                           |  |                                |        |   |                             |   | 220,161 |            |  |   | 223,343        |   |  |         | 113,601 |              |  |   |             |  |   | (22,743 | ) |  |   | 534,362 |  
|                                                             |  |                                |         |   |                             |   |         |            |  |   |                |   |  |         |         |              |  |   |              |  |   |         |   |  |   |         |  
|Gross profit                                                 |  |                                |        |   |                             |   | 42,937  |            |  |   | 22,662         |   |  |         | 21,574  |              |  |   |             |  |   |        |   |  |   | 87,173  |  
|Selling, general and administrative expenses                 |  |                                |        |   |                             |   | 12,093  |            |  |   | 14,966         |   |  |         | 6,894   |              |  |   |             |  |   |        |   |  |   | 33,953  |  
|Asset impairment charges                                     |  |                                |        |   |                             |   |        |            |  |   | 1,238          |   |  |         |        |              |  |   |             |  |   |        |   |  |   | 1,238   |  
|Net loss (gain) on disposal of property, plant and equipment |  |                                |        |   |                             |   | 1,275   |            |  |   | 7,473          |   |  |         | (981    | )            |  |   |             |  |   |        |   |  |   | 7,767   |  
|                                                             |  |                                |         |   |                             |   |         |            |  |   |                |   |  |         |         |              |  |   |              |  |   |         |   |  |   |         |  
|Operating income (loss)                                      |  |                                |        |   |                             |   | 29,569  |            |  |   | (1,015         | ) |  |         | 15,661  |              |  |   |             |  |   |        |   |  |   | 44,215  |  
|Interest expense, net                                        |  |                                |        |   |                             |   | 29,588  |            |  |   | 19,843         |   |  |         | 1,311   |              |  |   |             |  |   |        |   |  |   | 50,742  |  
|Other expense (income), net                                  |  |                                |        |   |                             |   | 609     |            |  |   | (365           | ) |  |         | 558     |              |  |   |             |  |   |        |   |  |   | 802     |  
|Equity in loss (earnings) of subsidiaries                    |  |                                | 13,391  |   |                             |   | 14,976  |            |  |   | (3,024         | ) |  |         |        |              |  |   |             |  |   | (25,343 | ) |  |   |        |  
|                                                             |  |                                |         |   |                             |   |         |            |  |   |                |   |  |         |         |              |  |   |              |  |   |         |   |  |   |         |  
|(Loss) income before income taxes                            |  |                                | (13,391 | ) |                             |   | (15,604 | )          |  |   | (17,469        | ) |  |         | 13,792  |              |  |   |             |  |   | 25,343  |   |  |   | (7,329  | )
|Income tax (benefit) provision                               |  |                                |        |   |                             |   | (2,213  | )          |  |   | 2,497          |   |  |         | 5,778   |              |  |   |             |  |   |        |   |  |   | 6,062   |  
|                                                             |  |                                |         |   |                             |   |         |            |  |   |                |   |  |         |         |              |  |   |              |  |   |         |   |  |   |         |  
|Net (loss) income                                            |  | $                              | (13,391 | ) |                             | $ | (13,391 | )          |  | $ | (19,966        | ) |  | $       | 8,014   |              |  | $ |             |  | $ | 25,343  |   |  | $ | (13,391 | )
|                                                             |  |                                |         |   |                             |   |         |            |  |   |                |   |  |         |         |              |  |   |              |  |   |         |   |  |   |         |  



20



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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 NINE MONTHS ENDED
SEPTEMBER 30, 2007

(In thousands)



|                                                             |  |                                |         |   |                             |   |         |            |  |   |                |   |  |         |         |              |  |   |              |  |   |         |   |  |   |           |  
|------------------------------------------------------------ |  | ------------------------------ | ------- | - | --------------------------- | - | ------- | ---------- |  | - | -------------- | - |  | ------- | ------- | ------------ |  | - | ------------ |  | - | ------- | - |  | - | --------- | -
|                                                             |  | GrahamPackagingHoldingsCompany |         |   | GrahamPackagingCompany,L.P. |   |         | Guarantors |  |   | Non-Guarantors |   |  | CapCo I |         | Eliminations |  |   | Consolidated | 
|Net sales                                                    |  | $                              |        |   |                             | $ | 795,741 |            |  | $ | 783,866        |   |  | $       | 384,443 |              |  | $ |             |  | $ | (69,761 | ) |  | $ | 1,894,289 |  
|Cost of goods sold                                           |  |                                |        |   |                             |   | 665,383 |            |  |   | 704,283        |   |  |         | 328,849 |              |  |   |             |  |   | (69,761 | ) |  |   | 1,628,754 |  
|                                                             |  |                                |         |   |                             |   |         |            |  |   |                |   |  |         |         |              |  |   |              |  |   |         |   |  |   |           |  
|Gross profit                                                 |  |                                |        |   |                             |   | 130,358 |            |  |   | 79,583         |   |  |         | 55,594  |              |  |   |             |  |   |        |   |  |   | 265,535   |  
|Selling, general and administrative expenses                 |  |                                |        |   |                             |   | 36,239  |            |  |   | 46,250         |   |  |         | 19,746  |              |  |   |             |  |   |        |   |  |   | 102,235   |  
|Asset impairment charges                                     |  |                                |        |   |                             |   |        |            |  |   | 1,238          |   |  |         |        |              |  |   |             |  |   |        |   |  |   | 1,238     |  
|Net loss (gain) on disposal of property, plant and equipment |  |                                |        |   |                             |   | 3,015   |            |  |   | 8,501          |   |  |         | (1,294  | )            |  |   |             |  |   |        |   |  |   | 10,222    |  
|                                                             |  |                                |         |   |                             |   |         |            |  |   |                |   |  |         |         |              |  |   |              |  |   |         |   |  |   |           |  
|Operating income                                             |  |                                |        |   |                             |   | 91,104  |            |  |   | 23,594         |   |  |         | 37,142  |              |  |   |             |  |   |        |   |  |   | 151,840   |  
|Interest expense, net                                        |  |                                |        |   |                             |   | 94,733  |            |  |   | 59,227         |   |  |         | 4,482   |              |  |   |             |  |   |        |   |  |   | 158,442   |  
|Other (income) expense, net                                  |  |                                |        |   |                             |   | (11,245 | )          |  |   | (656           | ) |  |         | 1,160   |              |  |   |             |  |   | 12,245  |   |  |   | 1,504     |  
|Equity in loss (earnings) of subsidiaries                    |  |                                | 23,875  |   |                             |   | 31,558  |            |  |   | (5,370         | ) |  |         |        |              |  |   |             |  |   | (50,063 | ) |  |   |          |  
|                                                             |  |                                |         |   |                             |   |         |            |  |   |                |   |  |         |         |              |  |   |              |  |   |         |   |  |   |           |  
|(Loss) income before income taxes                            |  |                                | (23,875 | ) |                             |   | (23,942 | )          |  |   | (29,607        | ) |  |         | 31,500  |              |  |   |             |  |   | 37,818  |   |  |   | (8,106    | )
|Income tax (benefit) provision                               |  |                                |        |   |                             |   | (67     | )          |  |   | 1,257          |   |  |         | 14,579  |              |  |   |             |  |   |        |   |  |   | 15,769    |  
|                                                             |  |                                |         |   |                             |   |         |            |  |   |                |   |  |         |         |              |  |   |              |  |   |         |   |  |   |           |  
|Net (loss) income                                            |  | $                              | (23,875 | ) |                             | $ | (23,875 | )          |  | $ | (30,864        | ) |  | $       | 16,921  |              |  | $ |             |  | $ | 37,818  |   |  | $ | (23,875   | )
|                                                             |  |                                |         |   |                             |   |         |            |  |   |                |   |  |         |         |              |  |   |              |  |   |         |   |  |   |           |  



21



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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 NINE MONTHS ENDED
SEPTEMBER 30, 2008

(In thousands)



|                                                              |  |                                |   |                             |   |          |            |  |   |                |   |  |         |         |              |  |   |              |  |   |         |   |  |   |          |  
|------------------------------------------------------------- |  | ------------------------------ | - | --------------------------- | - | -------- | ---------- |  | - | -------------- | - |  | ------- | ------- | ------------ |  | - | ------------ |  | - | ------- | - |  | - | -------- | -
|                                                              |  | GrahamPackagingHoldingsCompany |   | GrahamPackagingCompany,L.P. |   |          | Guarantors |  |   | Non-Guarantors |   |  | CapCo I |         | Eliminations |  |   | Consolidated | 
|Operating activities:                                         |  |                                |   |                             |   |          |            |  |   |                |   |  |         |         |              |  |   |              |  |   |         |   |  |   |          |  
|Net cash provided by operating activities                     |  | $                              |  |                             | $ | 91,076   |            |  | $ | 65,888         |   |  | $       | 59,743  |              |  | $ |             |  | $ |        |   |  | $ | 216,707  |  
|Investing activities:                                         |  |                                |   |                             |   |          |            |  |   |                |   |  |         |         |              |  |   |              |  |   |         |   |  |   |          |  
|Net cash paid for property, plant and equipment               |  |                                |  |                             |   | (37,129  | )          |  |   | (28,392        | ) |  |         | (30,486 | )            |  |   |             |  |   |        |   |  |   | (96,007  | )
|Acquisition of/investment in a business, net of cash acquired |  |                                |  |                             |   |         |            |  |   | (4,025         | ) |  |         | 4,025   |              |  |   |             |  |   |        |   |  |   |         |  
|Intercompany investing activities                             |  |                                |  |                             |   | 43,552   |            |  |   |               |   |  |         |        |              |  |   |             |  |   | (43,552 | ) |  |   |         |  
|                                                              |  |                                |   |                             |   |          |            |  |   |                |   |  |         |         |              |  |   |              |  |   |         |   |  |   |          |  
|Net cash provided by (used in) investing activities           |  |                                |  |                             |   | 6,423    |            |  |   | (32,417        | ) |  |         | (26,461 | )            |  |   |             |  |   | (43,552 | ) |  |   | (96,007  | )
|                                                              |  |                                |   |                             |   |          |            |  |   |                |   |  |         |         |              |  |   |              |  |   |         |   |  |   |          |  
|Financing activities:                                         |  |                                |   |                             |   |          |            |  |   |                |   |  |         |         |              |  |   |              |  |   |         |   |  |   |          |  
|Proceeds from issuance of long-term debt                      |  |                                |  |                             |   | 217,402  |            |  |   |               |   |  |         | 79,162  |              |  |   |             |  |   |        |   |  |   | 296,564  |  
|Payment of long-term debt                                     |  |                                |  |                             |   | (242,669 | )          |  |   | (193           | ) |  |         | (80,118 | )            |  |   |             |  |   |        |   |  |   | (322,980 | )
|Intercompany financing activities                             |  |                                |  |                             |   |         |            |  |   | (33,279        | ) |  |         | (10,273 | )            |  |   |             |  |   | 43,552  |   |  |   |         |  
|                                                              |  |                                |   |                             |   |          |            |  |   |                |   |  |         |         |              |  |   |              |  |   |         |   |  |   |          |  
|Net cash used in financing activities                         |  |                                |  |                             |   | (25,267  | )          |  |   | (33,472        | ) |  |         | (11,229 | )            |  |   |             |  |   | 43,552  |   |  |   | (26,416  | )
|                                                              |  |                                |   |                             |   |          |            |  |   |                |   |  |         |         |              |  |   |              |  |   |         |   |  |   |          |  
|Effect of exchange rate changes on cash and cash equivalents  |  |                                |  |                             |   |         |            |  |   |               |   |  |         | (1,671  | )            |  |   |             |  |   |        |   |  |   | (1,671   | )
|                                                              |  |                                |   |                             |   |          |            |  |   |                |   |  |         |         |              |  |   |              |  |   |         |   |  |   |          |  
|Increase (decrease) in cash and cash equivalents              |  |                                |  |                             |   | 72,232   |            |  |   | (1             | ) |  |         | 20,382  |              |  |   |             |  |   |        |   |  |   | 92,613   |  
|Cash and cash equivalents at beginning of period              |  |                                |  |                             |   | 3,815    |            |  |   | 2              |   |  |         | 14,497  |              |  |   |             |  |   |        |   |  |   | 18,314   |  
|                                                              |  |                                |   |                             |   |          |            |  |   |                |   |  |         |         |              |  |   |              |  |   |         |   |  |   |          |  
|Cash and cash equivalents at end of period                    |  | $                              |  |                             | $ | 76,047   |            |  | $ | 1              |   |  | $       | 34,879  |              |  | $ |             |  | $ |        |   |  | $ | 110,927  |  
|                                                              |  |                                |   |                             |   |          |            |  |   |                |   |  |         |         |              |  |   |              |  |   |         |   |  |   |          |  



22



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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 NINE MONTHS ENDED
SEPTEMBER 30, 2007

(In thousands)



|                                                              |  |                                |   |                             |   |          |            |  |   |                |   |  |         |         |              |  |              |   |  |   |   |  |   |          |  
|------------------------------------------------------------- |  | ------------------------------ | - | --------------------------- | - | -------- | ---------- |  | - | -------------- | - |  | ------- | ------- | ------------ |  | ------------ | - |  | - | - |  | - | -------- | -
|                                                              |  | GrahamPackagingHoldingsCompany |   | GrahamPackagingCompany,L.P. |   |          | Guarantors |  |   | Non-Guarantors |   |  | CapCo I |         | Eliminations |  | Consolidated |  
|Operating activities:                                         |  |                                |   |                             |   |          |            |  |   |                |   |  |         |         |              |  |              |   |  |   |   |  |   |          |  
|Net cash provided by operating activities                     |  | $                              |  |                             | $ | 125,269  |            |  | $ | 40,466         |   |  | $       | 27,843  |              |  | $            |  |  | $ |  |  | $ | 193,578  |  
|                                                              |  |                                |   |                             |   |          |            |  |   |                |   |  |         |         |              |  |              |   |  |   |   |  |   |          |  
|Investing activities:                                         |  |                                |   |                             |   |          |            |  |   |                |   |  |         |         |              |  |              |   |  |   |   |  |   |          |  
|Net cash paid for property, plant and equipment               |  |                                |  |                             |   | (44,652  | )          |  |   | (39,692        | ) |  |         | (19,674 | )            |  |              |  |  |   |  |  |   | (104,018 | )
|Acquisition of/investment in a business, net of cash acquired |  |                                |  |                             |   | (4,331   | )          |  |   | (651           | ) |  |         | 4,982   |              |  |              |  |  |   |  |  |   |         |  
|                                                              |  |                                |   |                             |   |          |            |  |   |                |   |  |         |         |              |  |              |   |  |   |   |  |   |          |  
|Net cash used in investing activities                         |  |                                |  |                             |   | (48,983  | )          |  |   | (40,343        | ) |  |         | (14,692 | )            |  |              |  |  |   |  |  |   | (104,018 | )
|                                                              |  |                                |   |                             |   |          |            |  |   |                |   |  |         |         |              |  |              |   |  |   |   |  |   |          |  
|Financing activities:                                         |  |                                |   |                             |   |          |            |  |   |                |   |  |         |         |              |  |              |   |  |   |   |  |   |          |  
|Proceeds from issuance of long-term debt                      |  |                                |  |                             |   | 570,774  |            |  |   |               |   |  |         | 47,170  |              |  |              |  |  |   |  |  |   | 617,944  |  
|Payment of long-term debt                                     |  |                                |  |                             |   | (588,397 | )          |  |   | (122           | ) |  |         | (46,647 | )            |  |              |  |  |   |  |  |   | (635,166 | )
|Purchase of partnership units                                 |  |                                |  |                             |   | (3,140   | )          |  |   |               |   |  |         |        |              |  |              |  |  |   |  |  |   | (3,140   | )
|Debt issuance fees                                            |  |                                |  |                             |   | (4,500   | )          |  |   |               |   |  |         |        |              |  |              |  |  |   |  |  |   | (4,500   | )
|                                                              |  |                                |   |                             |   |          |            |  |   |                |   |  |         |         |              |  |              |   |  |   |   |  |   |          |  
|Net cash (used in) provided by financing activities           |  |                                |  |                             |   | (25,263  | )          |  |   | (122           | ) |  |         | 523     |              |  |              |  |  |   |  |  |   | (24,862  | )
|                                                              |  |                                |   |                             |   |          |            |  |   |                |   |  |         |         |              |  |              |   |  |   |   |  |   |          |  
|Effect of exchange rate changes on cash and cash equivalents  |  |                                |  |                             |   |         |            |  |   |               |   |  |         | 678     |              |  |              |  |  |   |  |  |   | 678      |  
|                                                              |  |                                |   |                             |   |          |            |  |   |                |   |  |         |         |              |  |              |   |  |   |   |  |   |          |  
|Increase in cash and cash equivalents                         |  |                                |  |                             |   | 51,023   |            |  |   | 1              |   |  |         | 14,352  |              |  |              |  |  |   |  |  |   | 65,376   |  
|Cash and cash equivalents at beginning of period              |  |                                |  |                             |   | 1,456    |            |  |   | 1              |   |  |         | 11,870  |              |  |              |  |  |   |  |  |   | 13,327   |  
|                                                              |  |                                |   |                             |   |          |            |  |   |                |   |  |         |         |              |  |              |   |  |   |   |  |   |          |  
|Cash and cash equivalents at end of period                    |  | $                              |  |                             | $ | 52,479   |            |  | $ | 2              |   |  | $       | 26,222  |              |  | $            |  |  | $ |  |  | $ | 78,703   |  
|                                                              |  |                                |   |                             |   |          |            |  |   |                |   |  |         |         |              |  |              |   |  |   |   |  |   |          |  



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GRAHAM PACKAGING HOLDINGS COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-Continued



|16. | Comprehensive Income (Loss)
|--- | ---------------------------

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



|                                                                                                                                                                                                                                                                                                                |  |                                 |         |   |                                |   |         |      |  |   |        |   |  |   |         |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------- | ------- | - | ------------------------------ | - | ------- | ---- |  | - | ------ | - |  | - | ------- | -
|                                                                                                                                                                                                                                                                                                                |  | Three Months EndedSeptember 30, |         |   | Nine Months EndedSeptember 30, |  
|                                                                                                                                                                                                                                                                                                                |  | 2008                            |         |   | 2007                           |   |         | 2008 |  |   | 2007   |  
|                                                                                                                                                                                                                                                                                                                |  | (In thousands)                  |        
|Net income (loss)                                                                                                                                                                                                                                                                                               |  | $                               | 5,687   |   |                                | $ | (13,391 | )    |  | $ | 37,753 |   |  | $ | (23,875 | )
|Changes in fair value of derivatives, net of tax of $0 for all periods presented in 2008 and 2007                                                                                                                                                                                                               |  |                                 | (1,421  | ) |                                |   | (2,840  | )    |  |   | (1,825 | ) |  |   | (8,004  | )
|Change in amortization of prior service costs and unrealized actuarial losses included in net periodic benefit costs for pension and
post-retirement plans, net of a tax benefit of $85 and $66 for the three and nine months ended September 30, 2008, respectively, and $0 for both periods presented in 2007 |  |                                 | (52     | ) |                                |   | 103     |      |  |   | 422    |   |  |   | (4,579  | )
|Currency translation adjustments, net of a tax benefit of $440 and $91 for the three and nine months ended September 30, 2008,
respectively, and $0 for both the three and nine months ended September 30, 2007                                                                                                 |  |                                 | (31,831 | ) |                                |   | 12,592  |      |  |   | (5,274 | ) |  |   | 22,965  |  
|                                                                                                                                                                                                                                                                                                                |  |                                 |         |   |                                |   |         |      |  |   |        |   |  |   |         |  
|Comprehensive income (loss)                                                                                                                                                                                                                                                                                     |  | $                               | (27,617 | ) |                                | $ | (3,536  | )    |  | $ | 31,076 |   |  | $ | (13,493 | )
|                                                                                                                                                                                                                                                                                                                |  |                                 |         |   |                                |   |         |      |  |   |        |   |  |   |         |  



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GRAHAM PACKAGING HOLDINGS COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-Continued



|17. | Segment Information
|--- | -------------------

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



|                                            |  |                                       |  |                |           |   |        |   |         |              |  |   |              |   |  |       |        |   |  |   |           |  
|------------------------------------------- |  | ------------------------------------- |  | -------------- | --------- | - | ------ | - | ------- | ------------ |  | - | ------------ | - |  | ----- | ------ | - |  | - | --------- | -
|                                            |  |                                       |  | NorthAmerica   |           |   | Europe |   |         | SouthAmerica |  |   | Eliminations |   |  | Total |       
|                                            |  |                                       |  |                |           |   |        |   |         |              |  |   | (a)          |   |  |       |       
|                                            |  |                                       |  | (In thousands) |          
|Net sales (b) (c)                           |  | Three months ended September 30, 2008 |  | $              | 562,054   |   |        | $ | 77,219  |              |  | $ | 26,687       |   |  | $     | (387   | ) |  | $ | 665,573   |  
|                                            |  | Three months ended September 30, 2007 |  |                | 528,691   |   |        |   | 71,382  |              |  |   | 21,559       |   |  |       | (97    | ) |  |   | 621,535   |  
|                                            |  | Nine months ended September 30, 2008  |  |                | 1,719,288 |   |        |   | 234,241 |              |  |   | 70,893       |   |  |       | (1,202 | ) |  |   | 2,023,220 |  
|                                            |  | Nine months ended September 30, 2007  |  |                | 1,633,775 |   |        |   | 207,479 |              |  |   | 54,894       |   |  |       | (1,859 | ) |  |   | 1,894,289 |  
|                                            |  |                                       |  |                |           |  
|Operating income                            |  | Three months ended September 30, 2008 |  | $              | 39,886    |   |        | $ | 9,081   |              |  | $ | 2,312        |   |  | $     |       |   |  | $ | 51,279    |  
|                                            |  | Three months ended September 30, 2007 |  |                | 34,560    |   |        |   | 8,505   |              |  |   | 1,150        |   |  |       |       |   |  |   | 44,215    |  
|                                            |  | Nine months ended September 30, 2008  |  |                | 156,589   |   |        |   | 23,862  |              |  |   | 2,024        |   |  |       |       |   |  |   | 182,475   |  
|                                            |  | Nine months ended September 30, 2007  |  |                | 130,033   |   |        |   | 18,850  |              |  |   | 2,957        |   |  |       |       |   |  |   | 151,840   |  
|                                            |  |                                       |  |                |           |  
|Depreciation and amortization               |  | Three months ended September 30, 2008 |  | $              | 38,491    |   |        | $ | 5,582   |              |  | $ | 1,306        |   |  | $     |       |   |  | $ | 45,379    |  
|                                            |  | Three months ended September 30, 2007 |  |                | 44,396    |   |        |   | 5,752   |              |  |   | 1,004        |   |  |       |       |   |  |   | 51,152    |  
|                                            |  | Nine months ended September 30, 2008  |  |                | 112,435   |   |        |   | 16,836  |              |  |   | 3,865        |   |  |       |       |   |  |   | 133,136   |  
|                                            |  | Nine months ended September 30, 2007  |  |                | 132,721   |   |        |   | 16,698  |              |  |   | 3,417        |   |  |       |       |   |  |   | 152,836   |  
|                                            |  |                                       |  |                |           |  
|Asset impairment charges                    |  | Three months ended September 30, 2008 |  | $              | 11,521    |   |        | $ |        |              |  | $ | 286          |   |  | $     |       |   |  | $ | 11,807    |  
|                                            |  | Three months ended September 30, 2007 |  |                | 1,238     |   |        |   |        |              |  |   |             |   |  |       |       |   |  |   | 1,238     |  
|                                            |  | Nine months ended September 30, 2008  |  |                | 11,535    |   |        |   |        |              |  |   | 286          |   |  |       |       |   |  |   | 11,821    |  
|                                            |  | Nine months ended September 30, 2007  |  |                | 1,238     |   |        |   |        |              |  |   |             |   |  |       |       |   |  |   | 1,238     |  
|                                            |  |                                       |  |                |           |  
|Interest expense, net                       |  | Three months ended September 30, 2008 |  | $              | 40,613    |   |        | $ | 780     |              |  | $ | 686          |   |  | $     |       |   |  | $ | 42,079    |  
|                                            |  | Three months ended September 30, 2007 |  |                | 49,546    |   |        |   | 880     |              |  |   | 316          |   |  |       |       |   |  |   | 50,742    |  
|                                            |  | Nine months ended September 30, 2008  |  |                | 130,598   |   |        |   | 2,269   |              |  |   | 1,901        |   |  |       |       |   |  |   | 134,768   |  
|                                            |  | Nine months ended September 30, 2007  |  |                | 154,998   |   |        |   | 2,457   |              |  |   | 987          |   |  |       |       |   |  |   | 158,442   |  
|                                            |  |                                       |  |                |           |  
|Other expense (income), net                 |  | Three months ended September 30, 2008 |  | $              | 825       |   |        | $ | (269    | )            |  | $ | 59           |   |  | $     |       |   |  | $ | 615       |  
|                                            |  | Three months ended September 30, 2007 |  |                | 904       |   |        |   | (34     | )            |  |   | (68          | ) |  |       |       |   |  |   | 802       |  
|                                            |  | Nine months ended September 30, 2008  |  |                | 246       |   |        |   | (473    | )            |  |   | (493         | ) |  |       |       |   |  |   | (720      | )
|                                            |  | Nine months ended September 30, 2007  |  |                | (10,872   | ) |        |   | 117     |              |  |   | 15           |   |  |       | 12,244 |   |  |   | 1,504     |  
|                                            |  |                                       |  |                |           |  
|Income tax (benefit) provision              |  | Three months ended September 30, 2008 |  | $              | (8        | ) |        | $ | 2,345   |              |  | $ | 561          |   |  | $     |       |   |  | $ | 2,898     |  
|                                            |  | Three months ended September 30, 2007 |  |                | 3,360     |   |        |   | 2,302   |              |  |   | 400          |   |  |       |       |   |  |   | 6,062     |  
|                                            |  | Nine months ended September 30, 2008  |  |                | 3,047     |   |        |   | 6,884   |              |  |   | 743          |   |  |       |       |   |  |   | 10,674    |  
|                                            |  | Nine months ended September 30, 2007  |  |                | 7,812     |   |        |   | 6,996   |              |  |   | 961          |   |  |       |       |   |  |   | 15,769    |  
|                                            |  |                                       |  |                |           |  
|Identifiable assets (b) (c) (d)             |  | As of September 30, 2008              |  | $              | 955,668   |   |        | $ | 176,747 |              |  | $ | 48,169       |   |  | $     |       |   |  | $ | 1,180,584 |  
|                                            |  | As of December 31, 2007               |  |                | 1,014,642 |   |        |   | 182,497 |              |  |   | 45,279       |   |  |       |       |   |  |   | 1,242,418 |  
|                                            |  |                                       |  |                |           |  
|Goodwill                                    |  | As of September 30, 2008              |  | $              | 286,440   |   |        | $ | 19,038  |              |  | $ | 1,742        |   |  | $     |       |   |  | $ | 307,220   |  
|                                            |  | As of December 31, 2007               |  |                | 286,295   |   |        |   | 18,607  |              |  |   | 1,817        |   |  |       |       |   |  |   | 306,719   |  
|                                            |  |                                       |  |                |           |  
|Cash paid for property, plant and equipment |  | Nine months ended September 30, 2008  |  | $              | 77,677    |   |        | $ | 13,142  |              |  | $ | 8,487        |   |  | $     |       |   |  | $ | 99,306    |  
|                                            |  | Nine months ended September 30, 2007  |  |                | 90,198    |   |        |   | 12,275  |              |  |   | 5,213        |   |  |       |       |   |  |   | 107,686   |  



|(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 $16.9 million, $15.3 million, $12.8 million and $11.5 million, respectively, for the three
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-Continued



| | months ended September 30, 2008, and approximately $14.7 million, $15.1 million, $11.3 million and $10.2 million, respectively, for the three months
ended September 30, 2007. The Companys net sales for Europe include countries having significant sales as follows: Poland, France, Rotselaar (Belgium) and Spain which totaled approximately $50.0 million, $46.8 million, $40.1 million and
$31.7 million, respectively, for the nine months ended September 30, 2008, and approximately $45.3 million, $42.3 million, $34.2 million and $28.1 million, respectively, for the nine months ended September 30, 2007. The Companys
identifiable assets for Europe include countries having significant identifiable assets as follows: Poland, France, Rotselaar (Belgium) and Spain which totaled approximately $46.3 million, $33.9 million, $32.8 million and $28.9 million,
respectively, as of September 30, 2008, and $46.7 million, $38.3 million, $33.0 million and $30.1 million, respectively, as of December 31, 2007.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(c) | The Companys net sales for North America include sales in Mexico which totaled approximately $43.1 million and $36.4 million for the three months ended September 30, 2008
and 2007, respectively, and $117.7 million and $105.7 million for the nine months ended September 30, 2008 and 2007, respectively. Identifiable assets in Mexico totaled approximately $64.9 million and $59.7 million as of September 30,
2008, and December 31, 2007, respectively. Approximately all of the North America reportable segments remaining net sales and identifiable assets are in the United States.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

Product Net Sales
Information

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



|                        |  |                                 |         |                                |   |         |  |      |           |  |   |          
|----------------------- |  | ------------------------------- | ------- | ------------------------------ | - | ------- |  | ---- | --------- |  | - | ---------
|                        |  | Three Months EndedSeptember 30, |         | Nine Months EndedSeptember 30,
|                        |  | 2008                            |         | 2007                           |   | 2008    |  | 2007
|                        |  | (In thousands)                 
|Food and Beverage       |  | $                               | 401,438 |                                | $ | 366,653 |  | $    | 1,243,924 |  | $ | 1,152,122
|Household               |  |                                 | 130,717 |                                |   | 130,712 |  |      | 379,480   |  |   | 386,278  
|Automotive Lubricants   |  |                                 | 86,732  |                                |   | 71,389  |  |      | 258,506   |  |   | 202,114  
|Personal Care/Specialty |  |                                 | 46,686  |                                |   | 52,781  |  |      | 141,310   |  |   | 153,775  
|                        |  |                                 |         |                                |   |         |  |      |           |  |   |          
|Total Net Sales         |  | $                               | 665,573 |                                | $ | 621,535 |  | $    | 2,023,220 |  | $ | 1,894,289
|                        |  |                                 |         |                                |   |         |  |      |           |  |   |          



|18. | Pension Plans
|--- | -------------

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



|                                                     |  |                                 |        |   |                               |   |        |      |  |   |        |   |  |   |        |  
|---------------------------------------------------- |  | ------------------------------- | ------ | - | ----------------------------- | - | ------ | ---- |  | - | ------ | - |  | - | ------ | -
|                                                     |  | Three Months EndedSeptember 30, |        |   | Nine Moths EndedSeptember 30, |  
|                                                     |  | 2008                            |        |   | 2007                          |   |        | 2008 |  |   | 2007   |  
|                                                     |  | (In thousands)                  |       
|Components of net periodic pension cost:             |  |                                 |        |   |                               |   |        |      |  |   |        |   |  |   |        |  
|Service cost                                         |  | $                               | 580    |   |                               | $ | 777    |      |  | $ | 1,988  |   |  | $ | 2,314  |  
|Interest cost                                        |  |                                 | 1,406  |   |                               |   | 1,311  |      |  |   | 4,235  |   |  |   | 3,915  |  
|Expected return on plan assets                       |  |                                 | (1,673 | ) |                               |   | (1,520 | )    |  |   | (5,038 | ) |  |   | (4,539 | )
|Net amortization and deferral of prior service costs |  |                                 | 216    |   |                               |   | 216    |      |  |   | 653    |   |  |   | 642    |  
|Special benefits charge                              |  |                                 | 239    |   |                               |   |       |      |  |   | 239    |   |  |   |       |  
|Employee contributions                               |  |                                 | (26    | ) |                               |   | (27    | )    |  |   | (80    | ) |  |   | (79    | )
|                                                     |  |                                 |        |   |                               |   |        |      |  |   |        |   |  |   |        |  
|Net periodic pension cost                            |  | $                               | 742    |   |                               | $ | 757    |      |  | $ | 1,997  |   |  | $ | 2,253  |  
|                                                     |  |                                 |        |   |                               |   |        |      |  |   |        |   |  |   |        |  

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. This amount was increased in the third quarter of 2008 due to the application of the Adjusted Funding Target Attainment Percentage for the U.S. defined benefit plans. As
of September 30, 2008, $7.3 million of contributions to its pension plans have been made and the Company expects to make an additional $0.8 million of contributions in the fourth quarter of 2008.

The Company recognized $2.1 million and $2.2 million of expense for its 401(k) plans in the third quarters of 2008 and 2007, respectively, and $6.3
million and $6.4 million of expense for its 401(k) plans in the first nine months of 2008 and 2007, respectively.



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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-Continued



|19. | 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 $0.1 million and $1.3 million for the three months ended September 30, 2008 and 2007,
respectively, and $1.1 million and $4.6 million for the nine months ended September 30, 2008 and 2007, respectively. The Graham Family Investors 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 month periods ended September 30, 2008 and 2007, and $3.8 million of expense for these services for each of the nine month periods ended
September 30, 2008 and 2007. Under monitoring agreements, the Company is obligated to make annual payments of $2.0 million and $3.0 million to the Graham Family Investors and Blackstone Management Partners III L.L.C., respectively.

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

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



|20. | Pending Transaction
|--- | -------------------

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

Under the terms of the Purchase Agreement:



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



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



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| | expenses and discharge of liabilities and which will be divided pro rata among all of the Sellers such that the Sellers maintain their proportionate levels
of ownership in GPC);
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



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



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



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

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

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

The Company is currently evaluating the timing and status of the transaction.



28



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##### Table of Contents

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

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

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

Overview

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

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



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



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



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



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



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Management believes that the area with the greatest opportunity for growth continues to be in producing
containers for the food and beverage product category because of the industrys continued conversion to plastic packaging, including the demand for containers for juices, juice drinks, nutritional beverages, sports drinks, teas, yogurt drinks,
snacks, beer and other food products. Since much of the growth in this area has been in the sale of smaller sized containers, over the past few years we have experienced an overall mix shift toward smaller containers. Based on internal estimates,
management believes we are a leader in the value-added segment for hot-fill polyethylene terephthalate (PET) juice containers. Management also believes we are a leading participant in the rapidly growing market of yogurt drinks and
nutritional beverages where we manufacture containers using polyolefin resins. From the beginning of 2005 through September 30, 2008, we have invested over $475.0 million in capital expenditures, including acquisitions, in the food and beverage
product category.

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

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

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

As of September 30, 2008, we operated 29 manufacturing facilities outside of the United States in Argentina, Belgium, Brazil, Canada, Finland,
France, Hungary, Mexico, the Netherlands, Poland, Spain, Turkey, the United Kingdom and Venezuela. Over the past few years, we have expanded our international operations with the addition of a new plant in each of Brazil and the Netherlands, as well
as the acquisition of the blow-molded plastic container business of Owens-Illinois Inc. (O-I Plastic) in 2004, 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. in 2005.

For the nine months ended September 30,
2008, 70.7% of our net sales were generated by our top twenty customers. The majority of the top twenty customers were under long-term contracts with terms up to ten years, while the balance represents customers with whom we have been doing business
for over 20 years on average. Prices under these arrangements are typically tied to market standards and, therefore, vary with market conditions. In general, the contracts are requirements contracts that do not obligate the customer to purchase any
given amount of product from us. We had sales to one customer, PepsiCo, which exceeded 10% of total sales for the nine months ended September 30, 2008 and 2007. Our sales to PepsiCo, approximately 100% of which were made in North America, were
13.8% and 14.3% of total sales for the nine months ended September 30, 2008 and 2007, respectively.



30



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##### Table of Contents

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



|     |  |                                 |      |                                |   |      |  |      |      |  |   |     
|---- |  | ------------------------------- | ---- | ------------------------------ | - | ---- |  | ---- | ---- |  | - | ----
|     |  | Three Months EndedSeptember 30, |      | Nine Months EndedSeptember 30,
|     |  | 2008                            |      | 2007                           |   | 2008 |  | 2007
|PET  |  | $                               | 0.96 |                                | $ | 0.82 |  | $    | 0.92 |  | $ | 0.81
|HDPE |  | $                               | 1.01 |                                | $ | 0.76 |  | $    | 0.92 |  | $ | 0.70

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

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

Results of Operations

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



|                        |  |                                 |       |  |                                |   |  |      |       |  |       |   |  |   |         |  |       |   |  |   |         |  |       |  
|----------------------- |  | ------------------------------- | ----- |  | ------------------------------ | - |  | ---- | ----- |  | ----- | - |  | - | ------- |  | ----- | - |  | - | ------- |  | ----- | -
|                        |  | Three Months EndedSeptember 30, |       |  | Nine Months EndedSeptember 30, |  
|                        |  | 2008                            |       |  | 2007                           |   |  | 2008 |       |  | 2007  |  
|                        |  | (Dollars in millions)           |      
|North America           |  | $                               | 561.7 |  | 84.4                           | % |  | $    | 528.6 |  | 85.1  | % |  | $ | 1,718.2 |  | 84.9  | % |  | $ | 1,633.4 |  | 86.2  | %
|Europe                  |  |                                 | 77.2  |  | 11.6                           |   |  |      | 71.4  |  | 11.5  |   |  |   | 234.1   |  | 11.6  |   |  |   | 206.0   |  | 10.9  |  
|South America           |  |                                 | 26.7  |  | 4.0                            |   |  |      | 21.5  |  | 3.4   |   |  |   | 70.9    |  | 3.5   |   |  |   | 54.9    |  | 2.9   |  
|                        |  |                                 |       |  |                                |   |  |      |       |  |       |   |  |   |         |  |       |   |  |   |         |  |       |  
|Total Net Sales         |  | $                               | 665.6 |  | 100.0                          | % |  | $    | 621.5 |  | 100.0 | % |  | $ | 2,023.2 |  | 100.0 | % |  | $ | 1,894.3 |  | 100.0 | %
|                        |  |                                 |       |  |                                |   |  |      |       |  |       |   |  |   |         |  |       |   |  |   |         |  |       |  
|                        |  |                                
|                        |  | Three Months EndedSeptember 30, |       |  | Nine Months EndedSeptember 30, |  
|                        |  | 2008                            |       |  | 2007                           |   |  | 2008 |       |  | 2007  |  
|                        |  | (Dollars in millions)           |      
|Food and Beverage       |  | $                               | 401.5 |  | 60.3                           | % |  | $    | 366.6 |  | 59.0  | % |  | $ | 1,243.9 |  | 61.5  | % |  | $ | 1,152.1 |  | 60.8  | %
|Household               |  |                                 | 130.7 |  | 19.7                           |   |  |      | 130.7 |  | 21.0  |   |  |   | 379.5   |  | 18.7  |   |  |   | 386.3   |  | 20.4  |  
|Automotive Lubricants   |  |                                 | 86.7  |  | 13.0                           |   |  |      | 71.4  |  | 11.5  |   |  |   | 258.5   |  | 12.8  |   |  |   | 202.1   |  | 10.7  |  
|Personal Care/Specialty |  |                                 | 46.7  |  | 7.0                            |   |  |      | 52.8  |  | 8.5   |   |  |   | 141.3   |  | 7.0   |   |  |   | 153.8   |  | 8.1   |  
|                        |  |                                 |       |  |                                |   |  |      |       |  |       |   |  |   |         |  |       |   |  |   |         |  |       |  
|Total Net Sales         |  | $                               | 665.6 |  | 100.0                          | % |  | $    | 621.5 |  | 100.0 | % |  | $ | 2,023.2 |  | 100.0 | % |  | $ | 1,894.3 |  | 100.0 | %
|                        |  |                                 |       |  |                                |   |  |      |       |  |       |   |  |   |         |  |       |   |  |   |         |  |       |  



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

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



|                                                      |  |                                 |       |   |                       |   |       |   |  |         |  
|----------------------------------------------------- |  | ------------------------------- | ----- | - | --------------------- | - | ----- | - |  | ------- | -
|                                                      |  | Three Months EndedSeptember 30, |       |   | % Increase/(Decrease) |  
|                                                      |  | 2008                            |       |   | 2007                  |   |      
|                                                      |  | (Dollars in millions)           |       |   |                       |  
|Net sales                                             |  | $                               | 665.6 |   |                       | $ | 621.5 |   |  | 7.1     | %
|Cost of goods sold                                    |  |                                 | 565.4 |   |                       |   | 534.3 |   |  | 5.8     |  
|                                                      |  |                                 |       |   |                       |   |       |   |  |         |  
|Gross profit                                          |  |                                 | 100.2 |   |                       |   | 87.2  |   |  | 14.9    |  
|% of net sales (1)                                    |  |                                 | 15.1  | % |                       |   | 14.0  | % |  |         |  
|Selling, general and administrative expenses          |  |                                 | 31.8  |   |                       |   | 34.0  |   |  | (6.5    | )
|% of net sales (1)                                    |  |                                 | 4.8   | % |                       |   | 5.5   | % |  |         |  
|Asset impairment charges                              |  |                                 | 11.8  |   |                       |   | 1.2   |   |  | >100.0  |  
|Net loss on disposal of property, plant and equipment |  |                                 | 5.3   |   |                       |   | 7.8   |   |  | (32.1   | )
|                                                      |  |                                 |       |   |                       |   |       |   |  |         |  
|Operating income                                      |  |                                 | 51.3  |   |                       |   | 44.2  |   |  | 16.1    |  
|% of net sales (1)                                    |  |                                 | 7.7   | % |                       |   | 7.1   | % |  |         |  
|Interest expense                                      |  |                                 | 42.3  |   |                       |   | 51.0  |   |  | (17.1   | )
|Interest income                                       |  |                                 | (0.2  | ) |                       |   | (0.3  | ) |  | (33.3   | )
|Other expense, net                                    |  |                                 | 0.6   |   |                       |   | 0.8   |   |  | (25.0   | )
|Income tax provision                                  |  |                                 | 2.9   |   |                       |   | 6.1   |   |  | (52.5   | )
|                                                      |  |                                 |       |   |                       |   |       |   |  |         |  
|Net income (loss)                                     |  | $                               | 5.7   |   |                       | $ | (13.4 | ) |  | > 100.0 | %
|                                                      |  |                                 |       |   |                       |   |       |   |  |         |  



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

Net Sales.Net sales for the three months ended September 30, 2008, increased $44.1 million, or 7.1%, from the
three months ended September 30, 2007. The increase in sales was primarily due to an increase in resin costs which are passed through to customers and the positive impact of changes in exchange rates, offset by lower volume and price reductions
both from operational cost savings shared with our customers and in response to competitive pressure. Container units sold decreased 2.9%. On a geographic basis, sales for the three months ended September 30, 2008, in North America increased
$33.1 million, or 6.3%, from the three months ended September 30, 2007, primarily due to an increase in resin costs which are passed through to customers, offset by lower volume and price reductions both from operational cost savings shared
with our customers and in response to competitive pressure. North American sales in the food and beverage and automotive lubricants product categories contributed $26.6 million and $12.7 million, respectively, to the increase, while the household
and personal care/specialty product categories decreased $2.0 million and $4.2 million, respectively. Container units sold in North America decreased in the food and beverage, household, automotive lubricants and personal care/specialty product
categories by 0.9%, 0.2%, 6.0% and 14.1%, respectively. Sales for the three months ended September 30, 2008, in Europe increased $5.8 million, or 8.1%, from the three months ended September 30, 2007. The increase in sales was primarily due
to currency conversion of $7.9 million. Sales for the three months ended September 30, 2008, in South America increased $5.2 million, or 24.2%, from the three months ended September 30, 2007. The increase in sales was primarily due to
currency conversion of $2.8 million, an increase in volume and an increase in resin costs which are passed through to customers.

Gross
Profit.Gross profit for the three months ended September 30, 2008, increased $13.0 million, or 14.9%, from the three months ended September 30, 2007. Gross profit for the three months ended September 30, 2008, increased in North
America, Europe and South America by $9.8 million, $2.0 million and $1.2 million, respectively, when compared to the three months ended September 30, 2007. The overall increase in gross profit was driven by several factors including ongoing
expense reduction initiatives, lower depreciation and amortization expense of $5.6 million, a weakening of the U.S. Dollar against the Euro and other currencies of $3.2 million and lower project startup costs (primarily costs associated with
the startup of equipment and new plants) of $1.7 million, partially offset by an increase in expenses related to the rationalization of our plant network of $2.1 million and hurricane-related costs of $1.0 million and price reductions referred to
above.

Selling, General & Administrative Expenses.Selling, general and administrative expenses for the three months ended
September 30, 2008, decreased $2.2 million, or 6.5%, from the three months ended September 30, 2007. The decrease was primarily due to a decrease in consulting expenses and employee severance and ongoing expense reduction efforts,
partially offset by an increase in professional fees related to the pending acquisition (as further described in   Pending Transaction) and a weakening of the U.S. Dollar against the Euro and other currencies.



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Asset Impairment Charges. Due to changes in our ability to utilize certain assets in Brazil,
Canada, Mexico and the United States in 2008 and the United States in 2007, we evaluated the recoverability of these assets. For these assets to be held and used, we determined that the undiscounted furture cash flows were below the carrying value
of these long-lived assets. The majority of these assets were no longer in productive use and during the third quarters of 2008 and 2007 management determined that we had no plans to redeploy these assets. Accordingly, we adjusted the carrying value
of these long-lived assets to their estimated fair value in accordance with Statement of Financial Accounting Standards (SFAS) 144, Accounting for the Impairment or Disposal of Long-Lived Assets, resulting in impairment
charges of $11.8 million and $1.2 million for the three months ended September 30, 2008 and 2007, respectively.

Interest
Expense. Interest expense for the three months ended September 30, 2008, decreased $8.7 million from the three months ended September 30, 2007. The decrease was primarily related to a decrease in interest rates (average 90-day LIBOR
decreased from 5.4% for the three months ended September 30, 2007, to 2.9% for the three months ended September 30, 2008).

Income Tax Provision.Income tax provision for the three months ended September 30, 2008 decreased $3.2 million from the three months ended September 30, 2007. The decrease was primarily related to a decrease in deferred
tax expense due to the issuance of additional guidance from the Mexican tax authorities on the utilization of prior year asset tax credits in Mexico which increased the subsidiarys deferred tax assets. The decrease was partially offset by
increases related to improved profitability in our Canadian and Belgian subsidiaries and an income tax benefit recorded during 2007 on repatriation of unremitted earnings to the U.S. due to a restructuring of our Polish subsidiary.

Net Income.Primarily as a result of the factors discussed above, net income was $5.7 million for the three months ended September 30, 2008,
compared to a net loss of $13.4 million for the three months ended September 30, 2007.

Nine Months Ended September 30, 2008, Compared to Nine
Months Ended September 30, 2007

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



|                                                      |  |                                |         |   |                       |   |         |   |  |         |  
|----------------------------------------------------- |  | ------------------------------ | ------- | - | --------------------- | - | ------- | - |  | ------- | -
|                                                      |  | Nine Months EndedSeptember 30, |         |   | % Increase/(Decrease) |  
|                                                      |  | 2008                           |         |   | 2007                  |   |        
|                                                      |  | (Dollars in millions)          |         |   |                       |  
|Net sales                                             |  | $                              | 2,023.2 |   |                       | $ | 1,894.3 |   |  | 6.8     | %
|Cost of goods sold                                    |  |                                | 1,722.3 |   |                       |   | 1,628.8 |   |  | 5.7     |  
|                                                      |  |                                |         |   |                       |   |         |   |  |         |  
|Gross profit                                          |  |                                | 300.9   |   |                       |   | 265.5   |   |  | 13.3    |  
|% of net sales (1)                                    |  |                                | 14.9    | % |                       |   | 14.0    | % |  |         |  
|Selling, general and administrative expenses          |  |                                | 101.0   |   |                       |   | 102.2   |   |  | (1.2    | )
|% of net sales (1)                                    |  |                                | 5.0     | % |                       |   | 5.4     | % |  |         |  
|Asset Impairment charges                              |  |                                | 11.8    |   |                       |   | 1.2     |   |  | >100.0  |  
|Net loss on disposal of property, plant and equipment |  |                                | 5.6     |   |                       |   | 10.3    |   |  | (45.6   | )
|                                                      |  |                                |         |   |                       |   |         |   |  |         |  
|Operating income                                      |  |                                | 182.5   |   |                       |   | 151.8   |   |  | 20.2    |  
|% of net sales (1)                                    |  |                                | 9.0     | % |                       |   | 8.0     | % |  |         |  
|Interest expense                                      |  |                                | 135.3   |   |                       |   | 159.0   |   |  | (14.9   | )
|Interest income                                       |  |                                | (0.5    | ) |                       |   | (0.6    | ) |  | (16.7   | )
|Other (income) expense, net                           |  |                                | (0.8    | ) |                       |   | 1.5     |   |  | > 100.0 |  
|Income tax provision                                  |  |                                | 10.7    |   |                       |   | 15.8    |   |  | (32.3   | )
|                                                      |  |                                |         |   |                       |   |         |   |  |         |  
|Net income (loss)                                     |  | $                              | 37.8    |   |                       | $ | (23.9   | ) |  | > 100.0 | %
|                                                      |  |                                |         |   |                       |   |         |   |  |         |  



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

Net Sales.Net sales for the nine months ended September 30, 2008, increased $128.9 million, or 6.8%, from the
nine months ended September 30, 2007. The increase in sales was primarily due to an increase in resin costs which are passed through to customers and the positive impact of changes in exchange rates, offset by lower volume and price reductions
both from operational cost savings shared with our customers and in response to competitive pressure. Container units sold decreased 2.4%. On a geographic basis, sales for the nine months ended September 30, 2008, in North America increased
$84.8 million, or 5.2%, from the nine months ended September 30, 2007, primarily due to an increase in resin costs which are passed through to customers, offset by lower volume and price reductions both from operational cost savings shared with
our customers and in response to competitive pressure. North American sales in the food and beverage and automotive lubricants product categories contributed $67.2 million and $47.6 million, respectively, to the increase, while the household and
personal care/specialty product categories decreased $18.5 million and $11.5 million, respectively. Container units sold in North America increased in the automotive lubricants product category by 0.3% and decreased in the food and beverage,
household and personal care/specialty product categories by 0.3%, 6.8% and 11.6%, respectively. Sales for the nine months ended September 30, 2008, in Europe increased $28.1 million, or 13.6%, from the nine months ended September 30, 2007.
The increase in sales was primarily due to currency conversion of $29.8 million. Sales for the nine months ended September 30, 2008, in South America increased $16.0 million, or 29.1%, from the nine months ended September 30, 2007. The
increase in sales was primarily due to currency conversion of $8.5 million, an increase in volume and an increase in resin costs which are passed through to customers.

Gross Profit.Gross profit for the nine months ended September 30, 2008, increased $35.4 million, or 13.3%, from the nine months ended September 30, 2007. Gross profit for the nine months ended
September 30, 2008, increased in North America and Europe by $27.5 million and $8.0 million, respectively, while South America decreased by $0.1 million, when compared to the nine months ended September 30, 2007. The overall increase in
gross profit was driven by several factors including ongoing expense reduction initiatives, lower depreciation and amortization expense of $19.3 million and a weakening of the U.S. Dollar against the Euro and other currencies of $10.7 million,
partially offset by an increase in expenses related to the rationalization of our plant network of $4.3 million and price reductions referred to above.

Selling, General & Administrative Expenses.Selling, general and administrative expenses for the nine months ended September 30, 2008, decreased $1.2 million, or 1.2%, from the nine months ended
September 30, 2007. The decrease was primarily due to a decrease in consulting expenses and employee severance (excluding our former Chief Operating Officer) and ongoing expense reduction efforts, partially offset by an increase in professional
fees related to the pending acquisition (as further described in   Pending Transaction), an increase in severance costs related to the termination of employment of our former Chief Operating Officer, a weakening of the
U.S. Dollar against the Euro and other currencies and an increase in stock-based compensation expense.

Asset Impairment
Charges.Due to changes in our ability to utilize certain assets in Brazil, Canada, Mexico and the United States in 2008 and the United States in 2007, we evaluated the recoverability of these assets. For these assets to be held
and used, we determined that the undiscounted furture cash flows were below the carrying value of these long-lived assets. The majority of these assets were no longer in productive use and during the third quarters of 2008 and 2007 management
determined that we had no plans to redeploy these assets. Accordingly, we adjusted the carrying value of these long-lived assets to their estimated fair value in accordance with SFAS 144, resulting in impairment charges of $11.8 million and $1.2
million for the nine months ended September 30, 2008 and 2007, respectively.

Interest Expense. Interest expense for the nine
months ended September 30, 2008, decreased $23.7 million from the nine months ended September 30, 2007. The decrease was primarily related to the write-off in 2007 of $4.5 million of deferred financing fees in connection with the
March 30, 2007 amendment to our Credit Agreement and a decrease in interest rates (average 90-day LIBOR decreased from 5.4% for the nine months ended September 30, 2007, to 3.0% for the nine months ended September 30, 2008).

Income Tax Provision.Income tax provision for the nine months ended September 30, 2008 decreased $5.1 million from the nine
months ended September 30, 2007. The decrease was primarily related to a decrease in unrecognized tax benefits associated with intercompany transactions in Mexico, a decrease in valuation allowances placed on Mexico deferred tax assets and a
decrease in deferred tax expense due to the issuance of additional guidance from the Mexican tax authorities on the utilization of prior year asset



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tax credits in Mexico which increased the subsidiarys deferred tax assets. The decrease was partially offset by income tax benefits recorded during
2007 associated with a 2004 Internal Revenue Service audit for our U.S. corporate group and an income tax benefit recorded during 2007 on repatriation of unremitted earnings to the U.S. due to a restructuring of our Polish subsidiary.

Net Income (Loss).Primarily as a result of the factors discussed above, net income was $37.8 million for the nine months ended September 30,
2008, compared to net loss of $23.9 million for the nine months ended September 30, 2007.

Effect of Changes in Exchange Rates

In general, our results of operations are affected by changes in foreign exchange rates. Income and expense accounts and cash flow items are translated at
average monthly exchange rates during the period. As a result, a decline in the value of the U.S. Dollar relative to the local currencies of profitable foreign subsidiaries can have a favorable effect on our profitability, and an increase in
the value of the U.S. Dollar relative to the local currencies of profitable foreign subsidiaries can have a negative effect on our profitability. Current market conditions have resulted in a rise of the U.S. Dollar relative to these other
local currencies. The strength of the U.S. Dollar relative to other currencies, if not reversed, could negatively impact our profitability, and the impact could be significant.

We generally conduct business in our foreign operations in local currencies. We manage foreign currency exposures (primarily to the Euro, Canadian
Dollar, Polish Zloty, Pound Sterling and certain non-U.S. subsidiaries purchases of raw materials in U.S. Dollars) at the operating unit level. Exposures that cannot be naturally offset within an operating unit are hedged with derivative
financial instruments where possible and cost effective in our judgment. Foreign exchange contracts which hedge defined exposures generally mature within twelve months. We do not generally hedge our exposure to translation gains or losses on our
non-U.S. net assets. There were forward exchange contracts of $8.9 million outstanding as of September 30, 2008. There were no forward exchange contracts outstanding as of December 31, 2007. Included in other expense (income), net were
foreign exchange losses of $0.6 million and $0.8 million for the three months ended September 30, 2008 and 2007, respectively, and foreign exchange gains of $0.8 million and foreign exchange losses of $1.5 million for the nine months ended
September 30, 2008 and 2007, respectively.

Assets and liabilities are translated at exchange rates in effect at the balance sheet
date. Net exchange gains or losses resulting from the translation of foreign financial statements are recorded as a separate component of Partners Capital (Deficit) under the caption accumulated other comprehensive income. Exchange
rate fluctuations increased comprehensive loss by $31.8 million and decreased comprehensive loss by $12.6 million for the three months ended September 30, 2008 and 2007, respectively, and decreased comprehensive income by $5.3 million and
decreased comprehensive loss by $23.0 million for the nine months ended September 30, 2008 and 2007, respectively.

Derivatives

During 2004, we entered into four interest rate swap agreements, under which we received variable interest based on the Eurodollar rate and paid fixed
interest at a weighted average rate of 3.89%, on $700.0 million of term loans. During 2005, we entered into three additional interest rate swap agreements, under which we received variable interest based on the Eurodollar rate and paid 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, respectively. During 2007, we entered into two interest rate collar agreements, which
became effective in January 2008, under which we purchased a cap at a Eurodollar rate of 4.70% and sold a floor at a weighted average Eurodollar rate of 2.88%, on $385.0 million of term loans. During 2008, we entered into four interest rate swap
agreements which become effective in August 2009, under which we will receive variable interest based on the Eurodollar rate and pay fixed interest at a weighted average rate of 4.08%, on $350.0 million of term loans. During 2008, we entered into
forward exchange contracts to hedge the exchange rate exposure on transactions that are denominated in foreign currencies. At September 30, 2008, we had contracts for Canadian Dollars and Pound Sterling totalling $8.9 million and expiring
within the next six months. 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



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these cash flow hedges is recorded in other comprehensive income (loss) and was an unrealized loss of $1.4 million and $2.8 million for the three months
ended September 30, 2008 and 2007, respectively, and was an unrealized loss of $1.8 million and $8.1 million for the nine months ended September 30, 2008 and 2007, respectively. Of the amount recorded within accumulated other comprehensive
income (loss) as of September 30, 2008, 36% is expected to be recognized in interest expense in the next twelve months.

With respect
to our cash flow hedges, we routinely consider the possible impact of counterparty default when assessing whether a hedging relationship continues to be effective. We have considered the recent market events in determining the impact, if any, of
counterparty default on our cash flow hedges. The cash flow hedges that we currently have are with major banking institutions that have not, in managements opinion, been significantly impacted by the current market conditions. Accordingly, we
have concluded that the likelihood of counterparty default is remote.

Liquidity and Capital Resources

In the nine months ended September 30, 2008, through our operating activities of $216.7 million, we funded $96.0 million of investing activities and
$26.4 million of financing activities.

Our credit agreement consists of a senior secured term loan in an aggregate principal amount of
$1,846.9 million outstanding as of September 30, 2008 (the Term Loan or Term Loan Facility) and a $250.0 million senior secured revolving credit facility (the Revolving Credit Facility and, together with the
Term Loan, the Credit Agreement). The obligations of the Operating Company and GPC Capital Corp. I (CapCo I) under the Credit Agreement are guaranteed by Holdings and certain domestic subsidiaries of the Operating Company.
The Term Loan is payable in quarterly installments and requires payments of $18.7 million in each of 2008, 2009 and 2010 and $1,804.8 million in 2011 (disregarding any mandatory or voluntary prepayments that may reduce such scheduled amortization
payments). The final maturity date of the Term Loan Facility is October 7, 2011. The Revolving Credit Facility expires on October 7, 2010. Availability under the Revolving Credit Facility as of September 30, 2008, was $239.2 million
(as reduced by $10.8 million of outstanding letters of credit). We expect to fund scheduled debt repayments from cash from operations and unused lines of credit. Substantially all unused lines of credit have no major restrictions and are provided
under notes between us and the respective lending institution. As of September 30, 2008, we were in compliance with all covenants in the Credit Agreement.

As of September 30, 2008, we have outstanding $250.0 million in Senior Notes co-issued by the Operating Company and CapCo I and $375.0 million in Senior Subordinated Notes co-issued by the Operating Company and
CapCo I (collectively the Notes). The Notes are unconditionally guaranteed, jointly and severally, by Holdings and certain 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 September 30, 2008, our total indebtedness was $2,509.9 million.

The global capital markets recently experienced unprecedented adverse conditions. We have reviewed the listing of banks and institutions providing commitments to our revolving credit facility. Management believes our
ability to generate cash from operations and the availability of our revolving credit facility will be adequate to meet anticipated cash requirements to fund working capital, capital spending and other cash needs. We are closely monitoring our
liquidity as well as the condition of the capital markets and can not predict with any certainty the impact on us of further disruption in these markets.

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



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required to satisfy specified financial ratios and tests. We may also be required to make annual excess cash flow payments as defined in the Credit
Agreement. As of September 30, 2008, we were 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 Indentures, as shown in the table below. Covenant compliance EBITDA is not intended to represent cash flow from operations as defined by generally accepted accounting principles and should not be used as
an alternative to net income as an indicator of operating performance or to cash flow as a measure of liquidity. We believe that the inclusion of covenant compliance EBITDA in this quarterly report on Form 10-Q is appropriate to provide additional
information to investors about the calculation of certain financial covenants in the Credit Agreement and the Indentures. Because not all companies use identical calculations, these presentations of covenant compliance EBITDA may not be comparable
to other similarly titled measures of other companies. A reconciliation of net loss to covenant compliance EBITDA is as follows:

Reconciliation of net
loss to EBITDA



|                              |  |                                       |        |  
|----------------------------- |  | ------------------------------------- | ------ | -
|                              |  | Four Quarters EndedSeptember 30, 2008 |       
|                              |  | (In millions)                         |       
|Net loss                      |  | $                                     | (144.4 | )
|Interest income               |  |                                       | (0.8   | )
|Interest expense              |  |                                       | 186.8  |  
|Income tax provision          |  |                                       | 14.7   |  
|Depreciation and amortization |  |                                       | 183.3  |  
|                              |  |                                       |        |  
|EBITDA                        |  | $                                     | 239.6  |  
|                              |  |                                       |        |  

Reconciliation of EBITDA to covenant compliance EBITDA



|                                          |  |                                       |      
|----------------------------------------- |  | ------------------------------------- | -----
|                                          |  | Four Quarters EndedSeptember 30, 2008
|                                          |  | (In millions)                        
|EBITDA                                    |  | $                                     | 239.6
|Asset impairment charges                  |  |                                       | 168.4
|Other non-cash charges (a)                |  |                                       | 17.0 
|Fees related to monitoring agreements (b) |  |                                       | 5.0  
|Non-recurring items (c)                   |  |                                       | 34.2 
|                                          |  |                                       |      
|Covenant compliance EBITDA                |  | $                                     | 464.2
|                                          |  |                                       |      



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

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

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



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|                                   |  |                                       |     
|---------------------------------- |  | ------------------------------------- | ----
|                                   |  | Four Quarters EndedSeptember 30, 2008
|                                   |  | (In millions)                        
|Reorganization and other costs (i) |  | $                                     | 25.2
|Project startup costs (ii)         |  |                                       | 9.0 
|                                   |  |                                       |     
|                                   |  | $                                     | 34.2
|                                   |  |                                       |     



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

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

Under the applicable debt agreements, our ability to engage in activities such as incurring additional indebtedness, making investments and paying dividends is also tied to ratios based on covenant compliance EBITDA. The Credit Agreement
requires that we maintain a senior secured debt to covenant compliance EBITDA ratio at a maximum of 5.50x for the most recent four quarter period. For the four quarters ended September 30, 2008, the Operating Companys covenant compliance
EBITDA was $464.2 million and the senior secured debt to covenant compliance EBITDA ratio was 3.82x. Given the level of senior secured debt as of September 30, 2008, the Operating Companys covenant compliance EBITDA could have fallen by
$141.7 million to $322.5 million for the four quarters ended September 30, 2008 and the Company still would have been in compliance with the covenants in the Credit Agreement. The ability of the Operating Company to incur additional debt and
make certain restricted payments under its Notes is tied to a covenant compliance EBITDA to fixed charges (primarily cash interest expense) ratio of 2.0x, except that the Operating Company may incur certain debt and make certain restricted payments
without regard to the ratio, such as up to $2.2 billion under the Credit Agreement and investments equal to 7.5% of the Operating Companys total assets. The covenant compliance EBITDA to fixed charges ratio was 2.57x for the four quarters
ended September 30, 2008.

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

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



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



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

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

Cash paid for property, plant and equipment, excluding
acquisitions, for the nine months ended September 30, 2008, was $99.3 million. Management believes that capital expenditures to maintain and upgrade property, plant and equipment are important to remain competitive. Management estimates that on
average the annual maintenance capital expenditures are approximately $30 million to $40 million per year. Additional capital expenditures beyond this amount will be required to expand capacity or improve our cost structure.



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For the fiscal year 2008, we expect to incur capital investments ranging from $150 million to $165
million. For the fiscal year 2009, we expect to incur capital investments ranging from $150 million to $160 million. However, total capital investments will depend on the size and timing of growth related opportunities. Our principal sources of cash
to fund ongoing operations and capital requirements have been and are expected to continue to be net cash provided by operating activities and borrowings under the Credit Agreement. Management believes that these sources will be sufficient to fund
our ongoing operations and our foreseeable capital requirements.

Off-Balance Sheet Arrangements

Other than letter of credit agreements and operating leases, as of September 30, 2008, we did not have any off-balance sheet arrangements as defined
in Item 303(a)(4)(ii) of SEC Regulation S-K. We had letter of credit agreements outstanding in the amount of $10.8 million and $11.0 million as of September 30, 2008 and December 31, 2007, respectively.

We have entered into agreements with an unrelated third-party for the financing of specific accounts receivable of certain foreign subsidiaries. The
financing of accounts receivable under these agreements is accounted for as sales in accordance with SFAS 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities. Under the terms of the financing
agreements, we transfer ownership of eligible accounts receivable without recourse to the third-party purchaser in exchange for cash. Proceeds on the transfer reflect the face value of the accounts receivable less a discount. The discount is
recorded against net sales on the Consolidated Statement of Operations in the period of the sale. The eligible receivables financed pursuant to this factoring agreement are excluded from accounts receivable on the Consolidated Balance Sheet and are
reflected as cash provided by operating activities on the Consolidated Statement of Cash Flows, while non-eligible receivables remain on the balance sheet with a corresponding liability established when those receivables are financed. We do not
continue to service, administer and collect the eligible receivables under this program. The third-party purchaser has no recourse to us for failure of debtors constituting eligible receivables to pay when due. We maintain insurance on behalf of the
third-party purchaser to cover any losses due to the failure of debtors constituting eligible receivables to pay when due. At September 30, 2008 and December 31, 2007, we had sold $18.3 million and $32.4 million of eligible accounts
receivable, respectively, which represent the face amounts of total outstanding receivables at those dates.

Recent Accounting Pronouncements

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

In September 2006, the FASB issued SFAS 157, Fair Value Measurements. This statement establishes a single authoritative definition of fair
value, sets out a framework to classify the source of information used in fair value measurements, identifies additional factors that must be disclosed about assets and liabilities measured at fair value based on their placement in the new framework
and modifies the long-standing accounting presumption that the transaction price of an asset or liability equals its initial fair value. In February 2008, the FASB delayed the effective date for certain non-financial assets and liabilities until
January 1, 2009. We adopted SFAS 157 effective January 1, 2008, for financial assets and liabilities (see Note 11 of the Notes to Condensed Consolidated Financial Statements (Unaudited) for further discussion). We are currently in the
process of assessing the impact of the adoption of SFAS 157 on our financial statements as it relates to non-financial assets and liabilities.

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



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

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

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

In May 2008, the FASB issued SFAS 162, The Hierarchy of Generally Accepted Accounting Principles. This statement identifies
the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles in
the United States. This statement is effective on November 15, 2008. We do not expect the adoption to have any impact on our financial statements.

Pending Transaction

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

Under the terms
of the Purchase Agreement:



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



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



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



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



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



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

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

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

We are currently evaluating the timing and status of the transaction.



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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

Our long-term debt consists of both variable-rate and fixed-rate debt. Our variable-rate debt, including our Credit Agreement, totaled $1,860.4 million
and $1,875.7 million at September 30, 2008, and December 31, 2007, respectively. The fair value of this long-term debt, including the current portion, was approximately $1,657.3 million and $1,875.7 million at September 30, 2008, and
December 31, 2007, respectively. Our fixed-rate debt, including $250.0 million of Senior Notes and $375.0 million of Senior Subordinated Notes, totaled $649.5 million and $658.7 million at September 30, 2008, and December 31, 2007,
respectively. The fair value of this long-term debt, including the current portion, was approximately $582.0 million and $588.8 million at September 30, 2008, and December 31, 2007, respectively. Based on the outstanding amount of our
variable rate indebtedness at September 30, 2008, a one percentage point change in the interest rates for our variable rate indebtedness would impact interest expense by an aggregate of approximately $17.2 million, after taking into account the
outstanding notional amount of our interest rate collar agreements at September 30, 2008.

Derivatives

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



|                               |  |                    |         |   |                   |   |         |  
|------------------------------ |  | ------------------ | ------- | - | ----------------- | - | ------- | -
|                               |  | September 30, 2008 |         |   | December 31, 2007 |  
|                               |  | (In thousands)     |        
|Collars:                       |  |                    |         |   |                   |   |         |  
|Notional amount                |  | $                  | 385,000 |   |                   | $ | 385,000 |  
|Fair value  (liability)       |  |                    | (1,183  | ) |                   |   | (785    | )
|Swaps:                         |  |                    |         |   |                   |   |         |  
|Notional amount                |  |                    | 350,000 |   |                   |   | 275,000 |  
|Fair value  (liability) asset |  |                    | (1,847  | ) |                   |   | 78      |  
|Forward exchange contracts:    |  |                    |         |   |                   |   |         |  
|Notional amount                |  |                    | 8,923   |   |                   |   |        |  
|Fair value  asset             |  |                    | 498     |   |                   |   |        |  



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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, with the participation of the Companys Chief Executive Officer and Chief Financial Officer, performed an evaluation of the effectiveness of
the design and operation of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act. Our disclosure controls and procedures are designed to ensure that information required to be disclosed in the
reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commissions rules and forms, and that such information is accumulated and
communicated to our Management, including the Chief Executive Officer and the Chief Financial Officer, to allow timely decisions regarding required disclosures. Any controls and procedures, no matter how well designed and operated, can provide only
reasonable assurance of achieving the desired control objective. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of September 30, 2008, the design and operation of our disclosure controls and
procedures were effective.



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

As disclosed
in our Annual Report on Form 10-K for the year ended December 31, 2007, and in our Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2008, Management identified the following material weaknesses in our internal control
over financial reporting:



| | a. | We did not maintain an effective control environment over financial reporting regarding the development of accounting estimates, specifically asset impairment, and the adequacy of
review procedures over account reconciliations; and
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | b. | We did not maintain an effective control environment over computer system access and segregation of duties.
| | -- | -----------------------------------------------------------------------------------------------------------

Management has engaged in substantial efforts to remediate the material weaknesses in our internal control over financial reporting. The
following describes the changes made to our internal control over financial reporting that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting:



| | a. | We have revised our asset impairment procedures so as to more timely identify idle or impaired assets, and have enhanced our overall oversight and review procedures regarding the
account reconciliation process; and
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | b. | We have implemented procedures to limit and periodically monitor user access to our information technology systems.
| | -- | -------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

PART II. OTHER INFORMATION



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

For a
description of our legal proceedings, see Note 14 of the Notes to the Condensed Consolidated Financial Statements (Unaudited) which is incorporated by reference in response to this item.



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

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



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



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



*  Filed herewith.



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##### Table of Contents

SIGNATURE

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

Dated: November 6, 2008



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



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##### Table of Contents

EXHIBIT LIST



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



*  Filed herewith.



46