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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549-1004



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FORM 10-Q



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(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, 2007

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



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GRAHAM PACKAGING HOLDINGS
COMPANY

(Exact name of registrant as specified in its charter)



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|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|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)



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

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

Large accelerated filer ̈Accelerated filer ̈Non-accelerated filer  x

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



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GRAHAM PACKAGING HOLDINGS COMPANY

INDEX



|                              |  |                                                                                                                               |  |   
|----------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------- |  | --
|                              |  | PageNumber                                                                                                                   
|PART I. FINANCIAL INFORMATION |  |                                                                                                                              
|                              |  |                                                                                                                              
|Item 1:                       |  | Financial Statements:                                                                                                         |  |   
|                              |  |                                                                                                                              
|                              |  | CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)  At September 30, 2007 and December 31, 2006                               |  | 3 
|                              |  |                                                                                                                              
|                              |  | CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)  For the three and nine months ended September 30, 2007 and 2006 |  | 4 
|                              |  |                                                                                                                              
|                              |  | CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)  For the nine months ended September 30, 2007 and 2006           |  | 5 
|                              |  |                                                                                                                              
|                              |  | NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)                                                              |  | 6 
|                              |  |                                                                                                                              
|Item 2:                       |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                                         |  | 27
|                              |  |                                                                                                                              
|Item 3:                       |  | Quantitative and Qualitative Disclosures About Market Risk                                                                    |  | 38
|                              |  |                                                                                                                              
|Item 4:                       |  | Controls and Procedures                                                                                                       |  | 39
|                              | 
|PART II. OTHER INFORMATION    |  |                                                                                                                              
|                              |  |                                                                                                                              
|Item 1:                       |  | Legal Proceedings                                                                                                             |  | 41
|                              |  |                                                                                                                              
|Item 1A:                      |  | Risk Factors                                                                                                                  |  | 41
|                              |  |                                                                                                                              
|Item 6:                       |  | Exhibits                                                                                                                      |  | 41
|                              | 
|Signature                     |  | 42                                                                                                                           



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##### Table of Contents

PART I. FINANCIAL INFORMATION



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

GRAHAM PACKAGING HOLDINGS COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)



|                                                             |  |                   |           |   |                  |   |           |  
|------------------------------------------------------------ |  | ----------------- | --------- | - | ---------------- | - | --------- | -
|                                                             |  | September 30,2007 |           |   | December 31,2006 |  
|                                                             |  | (In thousands)    |          
|ASSETS                                                       |  |                   |           |   |                  |   |           |  
|Current assets:                                              |  |                   |           |   |                  |   |           |  
|Cash and cash equivalents                                    |  | $                 | 78,703    |   |                  | $ | 13,327    |  
|Accounts receivable, net                                     |  |                   | 259,122   |   |                  |   | 240,692   |  
|Inventories                                                  |  |                   | 244,169   |   |                  |   | 238,941   |  
|Deferred income taxes                                        |  |                   | 17,138    |   |                  |   | 15,409    |  
|Prepaid expenses and other current assets                    |  |                   | 47,138    |   |                  |   | 64,870    |  
|                                                             |  |                   |           |   |                  |   |           |  
|Total current assets                                         |  |                   | 646,270   |   |                  |   | 573,239   |  
|Property, plant and equipment, net                           |  |                   | 1,378,137 |   |                  |   | 1,426,012 |  
|Intangible assets, net                                       |  |                   | 74,828    |   |                  |   | 78,511    |  
|Goodwill                                                     |  |                   | 306,246   |   |                  |   | 303,394   |  
|Other non-current assets                                     |  |                   | 56,388    |   |                  |   | 60,781    |  
|                                                             |  |                   |           |   |                  |   |           |  
|Total assets                                                 |  | $                 | 2,461,869 |   |                  | $ | 2,441,937 |  
|                                                             |  |                   |           |   |                  |   |           |  
|LIABILITIES AND PARTNERS CAPITAL (DEFICIT)                  |  |                   |           |   |                  |   |           |  
|Current liabilities:                                         |  |                   |           |   |                  |   |           |  
|Accounts payable                                             |  | $                 | 193,336   |   |                  | $ | 206,672   |  
|Accrued expenses and other current liabilities               |  |                   | 236,969   |   |                  |   | 194,837   |  
|Current portion of long-term debt                            |  |                   | 37,542    |   |                  |   | 32,308    |  
|                                                             |  |                   |           |   |                  |   |           |  
|Total current liabilities                                    |  |                   | 467,847   |   |                  |   | 433,817   |  
|Long-term debt                                               |  |                   | 2,494,893 |   |                  |   | 2,514,579 |  
|Deferred income taxes                                        |  |                   | 34,340    |   |                  |   | 28,538    |  
|Other non-current liabilities                                |  |                   | 80,849    |   |                  |   | 62,759    |  
|Commitments and contingent liabilities (see Notes 10 and 11) |  |                   |           |   |                  |   |           |  
|Partners capital (deficit):                                 |  |                   |           |   |                  |   |           |  
|General partners                                             |  |                   | (32,398   | ) |                  |   | (30,965   | )
|Limited partners                                             |  |                   | (622,326  | ) |                  |   | (595,148  | )
|Notes and interest receivable for ownership interests        |  |                   | (3,370    | ) |                  |   | (3,295    | )
|Accumulated other comprehensive income                       |  |                   | 42,034    |   |                  |   | 31,652    |  
|                                                             |  |                   |           |   |                  |   |           |  
|Total partners capital (deficit)                            |  |                   | (616,060  | ) |                  |   | (597,756  | )
|                                                             |  |                   |           |   |                  |   |           |  
|Total liabilities and partners capital (deficit)            |  | $                 | 2,461,869 |   |                  | $ | 2,441,937 |  
|                                                             |  |                   |           |   |                  |   |           |  

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, |  
|                                             |  | 2007                            |         |   | 2006                           |   |         | 2007 |  |   | 2006      |  
|                                             |  | (In thousands)                  |        
|Net sales                                    |  | $                               | 621,535 |   |                                | $ | 643,037 |      |  | $ | 1,894,289 |   |  | $ | 1,941,326 |  
|Cost of goods sold                           |  |                                 | 534,362 |   |                                |   | 571,057 |      |  |   | 1,628,754 |   |  |   | 1,716,318 |  
|                                             |  |                                 |         |   |                                |   |         |      |  |   |           |   |  |   |           |  
|Gross profit                                 |  |                                 | 87,173  |   |                                |   | 71,980  |      |  |   | 265,535   |   |  |   | 225,008   |  
|Selling, general and administrative expenses |  |                                 | 33,953  |   |                                |   | 29,085  |      |  |   | 102,235   |   |  |   | 93,424    |  
|Impairment charges                           |  |                                 | 1,238   |   |                                |   |        |      |  |   | 1,238     |   |  |   | 1,112     |  
|Net loss on disposal of fixed assets         |  |                                 | 7,767   |   |                                |   | 2,907   |      |  |   | 10,222    |   |  |   | 4,001     |  
|                                             |  |                                 |         |   |                                |   |         |      |  |   |           |   |  |   |           |  
|Operating income                             |  |                                 | 44,215  |   |                                |   | 39,988  |      |  |   | 151,840   |   |  |   | 126,471   |  
|Interest expense, net                        |  |                                 | 50,742  |   |                                |   | 48,286  |      |  |   | 158,442   |   |  |   | 152,696   |  
|Other expense, net                           |  |                                 | 802     |   |                                |   | 45      |      |  |   | 1,504     |   |  |   | 133       |  
|                                             |  |                                 |         |   |                                |   |         |      |  |   |           |   |  |   |           |  
|Loss before income taxes                     |  |                                 | (7,329  | ) |                                |   | (8,343  | )    |  |   | (8,106    | ) |  |   | (26,358   | )
|Income tax provision                         |  |                                 | 6,062   |   |                                |   | 6,642   |      |  |   | 15,769    |   |  |   | 13,879    |  
|                                             |  |                                 |         |   |                                |   |         |      |  |   |           |   |  |   |           |  
|Net loss                                     |  | $                               | (13,391 | ) |                                | $ | (14,985 | )    |  | $ | (23,875   | ) |  | $ | (40,237   | )
|                                             |  |                                 |         |   |                                |   |         |      |  |   |           |   |  |   |           |  
|Net loss allocated to general partners       |  | $                               | (670    | ) |                                | $ | (749    | )    |  | $ | (1,194    | ) |  | $ | (2,012    | )
|Net loss allocated to limited partners       |  | $                               | (12,721 | ) |                                | $ | (14,236 | )    |  | $ | (22,681   | ) |  | $ | (38,225   | )

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, |         
|                                                                                |  | 2007                           |          |   | 2006 |  
|                                                                                |  | (In thousands)                 |         
|Operating activities:                                                           |  |                                |          |   |      |   |          |  
|Net loss                                                                        |  | $                              | (23,875  | ) |      | $ | (40,237  | )
|Adjustments to reconcile net loss to net cash provided by operating activities: |  |                                |          |   |      |   |          |  
|Depreciation and amortization                                                   |  |                                | 152,836  |   |      |   | 152,275  |  
|Amortization of debt issuance fees                                              |  |                                | 12,301   |   |      |   | 9,896    |  
|Net loss on disposal of fixed assets                                            |  |                                | 10,222   |   |      |   | 4,001    |  
|Pension expense                                                                 |  |                                | 2,253    |   |      |   | 9,398    |  
|Impairment charges                                                              |  |                                | 1,238    |   |      |   | 1,112    |  
|Stock compensation expense                                                      |  |                                | 438      |   |      |   | 146      |  
|Foreign currency transaction loss (gain)                                        |  |                                | 1,811    |   |      |   | (616     | )
|Interest on receivable for ownership interests                                  |  |                                | (75      | ) |      |   | (145     | )
|Changes in operating assets and liabilities:                                    |  |                                |          |   |      |   |          |  
|Accounts receivable                                                             |  |                                | (13,552  | ) |      |   | (27,563  | )
|Inventories                                                                     |  |                                | (2,489   | ) |      |   | 49,508   |  
|Prepaid expenses and other current assets                                       |  |                                | 9,347    |   |      |   | (3,904   | )
|Other non-current assets                                                        |  |                                | (6,781   | ) |      |   | 1,924    |  
|Pension contributions                                                           |  |                                | (7,139   | ) |      |   | (9,915   | )
|Other non-current liabilities                                                   |  |                                | 16,461   |   |      |   | 3,201    |  
|Accounts payable and accrued expenses                                           |  |                                | 40,582   |   |      |   | 72,967   |  
|                                                                                |  |                                |          |   |      |   |          |  
|Net cash provided by operating activities                                       |  |                                | 193,578  |   |      |   | 222,048  |  
|                                                                                |  |                                |          |   |      |   |          |  
|Investing activities:                                                           |  |                                |          |   |      |   |          |  
|Cash paid for property, plant and equipment                                     |  |                                | (107,686 | ) |      |   | (143,571 | )
|Proceeds from sale of property, plant and equipment                             |  |                                | 3,668    |   |      |   | 9,751    |  
|Acquisitions of/investments in businesses, net of cash acquired                 |  |                                |         |   |      |   | (1,426   | )
|                                                                                |  |                                |          |   |      |   |          |  
|Net cash used in investing activities                                           |  |                                | (104,018 | ) |      |   | (135,246 | )
|                                                                                |  |                                |          |   |      |   |          |  
|Financing activities:                                                           |  |                                |          |   |      |   |          |  
|Proceeds from issuance of long-term debt                                        |  |                                | 617,944  |   |      |   | 616,584  |  
|Payment of long-term debt                                                       |  |                                | (635,166 | ) |      |   | (710,208 | )
|Buyout of partnership units                                                     |  |                                | (3,140   | ) |      |   |         |  
|Debt issuance fees                                                              |  |                                | (4,500   | ) |      |   | (1,005   | )
|                                                                                |  |                                |          |   |      |   |          |  
|Net cash used in financing activities                                           |  |                                | (24,862  | ) |      |   | (94,629  | )
|                                                                                |  |                                |          |   |      |   |          |  
|Effect of exchange rate changes on cash and cash equivalents                    |  |                                | 678      |   |      |   | 408      |  
|                                                                                |  |                                |          |   |      |   |          |  
|Increase (decrease) in cash and cash equivalents                                |  |                                | 65,376   |   |      |   | (7,419   | )
|Cash and cash equivalents at beginning of period                                |  |                                | 13,327   |   |      |   | 26,684   |  
|                                                                                |  |                                |          |   |      |   |          |  
|Cash and cash equivalents at end of period                                      |  | $                              | 78,703   |   |      | $ | 19,265   |  
|                                                                                |  |                                |          |   |      |   |          |  
|Supplemental disclosures                                                        |  |                                |          |   |      |   |          |  
|Cash paid for interest, net of amounts capitalized                              |  | $                              | 135,520  |   |      | $ | 113,784  |  
|Cash paid for income taxes                                                      |  |                                | 12,810   |   |      |   | 12,348   |  
|Non-cash investing and financing activities:                                    |  |                                |          |   |      |   |          |  
|Capital leases                                                                  |  |                                | 2,324    |   |      |   | 4,319    |  
|Accruals related to investing activities                                        |  |                                | 19,258   |   |      |   | 35,578   |  

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, 2006 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, 2006. The results of operations for the nine months ended
September 30, 2007 are not necessarily indicative of the results to be expected for the full year ending December 31, 2007.

Recent Accounting
Pronouncements

In September 2006, the Financial Accounting Standards Board (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. SFAS 157 is effective for fiscal years beginning after November 15, 2007. Therefore, the Company will adopt SFAS 157 on January 1, 2008. The Company is currently in the process of assessing the impact of the
adoption of SFAS 157 on its financial statements.

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 as of the beginning of a companys first fiscal year that begins after November 15, 2007. Therefore, the Company may
adopt SFAS 159 on January 1, 2008. The Company is currently in the process of assessing the impact of the adoption of SFAS 159 on its financial statements.

In June 2006, the 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. See Note 9 for additional discussion regarding the impact of the Companys adoption of FIN 48.



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GRAHAM PACKAGING HOLDINGS COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-Continued



In June 2006, the Emerging Issues Task Force (EITF) reached a consensus on EITF 06-3,
How Taxes Collected from Customers and Remitted to Governmental Authorities Should Be Presented in the Income Statement (That Is, Gross versus Net Presentation). EITF 06-3 provides that the presentation of taxes assessed by a
governmental authority that is directly imposed on a revenue producing transaction between a seller and a customer on either a gross basis (included in revenues and costs) or on a net basis (excluded from revenues) is an accounting policy decision
that should be disclosed. EITF 06-3 was effective January 1, 2007. The Company presents these taxes on a net basis for all periods presented.

Derivatives

During 2004, the Company entered into four interest rate swap agreements, under which the Company receives
variable interest based on the Eurodollar rate and pays 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 receives variable interest based on the Eurodollar rate and pays fixed interest at a weighted average rate of 4.43%, on $225.0 million of term loans. The interest rate swaps 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 effective portion of the cash flow hedges is recorded in other comprehensive income (OCI) and was an unrealized loss of $2.8
million and $8.5 million for the three months ended September 30, 2007 and 2006, respectively, and was an unrealized loss of $8.1 million and $3.0 million for the nine months ended September 30, 2007 and 2006, respectively. 100% of the
amount recorded within accumulated OCI as of September 30, 2007 is expected to be recognized in interest expense in the next twelve months.

Comprehensive Income

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

Option Plans

In 2004, the FASB issued SFAS 123(R), Share-Based Payment. SFAS 123(R) revises SFAS 123, Accounting for Stock-Based Compensation, and requires companies to expense the fair value of employee stock options and other
forms of stock-based compensation. Under SFAS 123(R), companies are to (1) use fair value to measure stock-based compensation awards and (2) cease using the intrinsic value method of accounting, which Accounting Principles
Board Opinion (APB) 25, Accounting for Stock Issued to Employees, allowed and resulted in no expense for many awards of stock options for which the exercise price of the option equaled the price of the underlying stock at the
grant date. In addition, SFAS 123(R) retains the modified grant date model from SFAS 123. Under that model, compensation cost is measured at the fair value of an award on the grant date and adjusted to reflect estimated forfeitures and the outcome
of certain conditions over the requisite service period of the award. The fair value of an award is not re-measured after its initial estimation on the grant date (except in the case of a liability award or if the award is modified). The Company
adopted SFAS 123(R) 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 adoption
of SFAS 123(R) has not had a significant impact on the Companys financial statements.

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 APB 25. SFAS 123 established accounting and disclosure requirements using a fair value based method of accounting for
equity based employee compensation plans. The exercise prices of all unit options were equal to or greater than the fair market value of the units on the dates of the grants and, accordingly, no compensation cost has been recognized under the
provisions of APB 25. Under SFAS 123, compensation cost is measured at the grant date based on the value of the award and is recognized over the service (or vesting) period. There were 15.8 options granted during the nine months ended
September 30, 2007 and no options granted during the nine months ended September 30, 2006.



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GRAHAM PACKAGING HOLDINGS COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-Continued



A summary of the changes in the option units outstanding under the option plans for the nine months
ended September 30, 2007 is as follows:



|                                  |  |                  |   |  |                                   |        |                                                   |     |                                      |   |    
|--------------------------------- |  | ---------------- | - |  | --------------------------------- | ------ | ------------------------------------------------- | --- | ------------------------------------ | - | ---
|                                  |  | UnitsUnderOption |   |  | WeightedAverageExercisePrice/Unit |        | WeightedAverageRemainingContractualTerm(in years) |     | AggregateIntrinsicValue(in millions)
|Outstanding at January 1, 2007    |  | 1,778.4          |   |  | $                                 | 36,150 |                                                   |     |                                      |   |    
|Granted                           |  | 15.8             |   |  |                                   | 44,253 |                                                   |     |                                      |   |    
|Exercised                         |  |                 |   |  |                                   |       |                                                   |     |                                      |   |    
|Forfeited                         |  | (352.8           | ) |  |                                   | 40,779 |                                                   |     |                                      |   |    
|                                  |  |                  |   |  |                                   |        |                                                   |     |                                      |   |    
|Outstanding at September 30, 2007 |  | 1,441.4          |   |  | $                                 | 35,106 |                                                   | 6.4 |                                      | $ | 6.4
|                                  |  |                  |   |  |                                   |        |                                                   |     |                                      |   |    
|Vested or expected to vest        |  | 1,219.6          |   |  | $                                 | 36,800 |                                                   |     |                                      |   |    
|Exercisable at September 30, 2007 |  | 590.1            |   |  | $                                 | 34,425 |                                                   | 3.5 |                                      |   | N/A

Reclassifications

Certain reclassifications have been made to the 2006 financial statements to conform to the 2007 presentation, including the following:



| |  |  | a reclassification to reflect as a separate line item within operating income on the Condensed Consolidated Statements of Operations the net loss on disposal of
fixed assets. Amounts for this line item were previously included predominantly in cost of goods sold. Amounts (in thousands) were $2,907 and $4,001 for the three and nine months ended September 30, 2006, respectively.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | a reclassification to reflect as separate components of cash provided by operating activities in the Condensed Consolidated Statements of Cash Flows, pension
expense and pension contributions. Amounts for these line items were previously included in changes in other non-current liabilities and changes in accounts payable and accrued expenses. The amounts (in thousands) were a non-cash adjustment to net
loss of $9,398 and a cash outflow of $9,915 for pension expense and pension contributions, respectively, for the nine months ended September 30, 2006.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

2. Debt Arrangements

Long-term debt consisted of the following:



|                                              |  |                   |           |                  |   |          
|--------------------------------------------- |  | ----------------- | --------- | ---------------- | - | ---------
|                                              |  | September 30,2007 |           | December 31,2006
|                                              |  | (In thousands)   
|Term loans                                    |  | $                 | 1,865,625 |                  | $ | 1,819,861
|Revolving Credit Facility                     |  |                   |          |                  |   | 56,000   
|Foreign and other revolving credit facilities |  |                   | 6,690     |                  |   | 7,174    
|Senior Notes                                  |  |                   | 250,000   |                  |   | 250,000  
|Senior Subordinated Notes                     |  |                   | 375,000   |                  |   | 375,000  
|Capital leases                                |  |                   | 34,344    |                  |   | 37,607   
|Other                                         |  |                   | 776       |                  |   | 1,245    
|                                              |  |                   |           |                  |   |          
|                                              |  |                   | 2,532,435 |                  |   | 2,546,887
|Less amounts classified as current            |  |                   | 37,542    |                  |   | 32,308   
|                                              |  |                   |           |                  |   |          
|Total                                         |  | $                 | 2,494,893 |                  | $ | 2,514,579
|                                              |  |                   |           |                  |   |          



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GRAHAM PACKAGING HOLDINGS COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-Continued



In connection with the acquisition of the blow molded plastic container business of Owens-Illinois,
Inc. (O-I Plastic) on October 7, 2004, the Operating Company, Holdings, GPC Capital Corp. I, Holdings wholly-owned subsidiary (CapCo I), and a syndicate of lenders entered into a first-lien credit agreement (the
Credit Agreement) and a second-lien credit agreement (the Second-Lien Credit Agreement and, together with the Credit Agreement, the Credit Agreements). Pursuant to its terms, on March 30, 2007, the Credit
Agreement was amended in order to, among other things, increase the Term Loan B facility provided under the Credit Agreement by approximately $305.0 million (the Amendment). Proceeds of the Amendment were used to pay off the Second-Lien
Credit Agreement ($250.0 million), with $50.0 million being used to reduce outstanding borrowings on the existing revolving credit facility provided for under the Credit Agreement and approximately $5.0 million being used to pay fees and expenses.
The Amendment also eliminated one of the Companys financial ratio covenants, increased the maximum allowable leverage under another financial ratio covenant and waived any potential excess cash flow payment required for the year ended
December 31, 2006. After giving effect to the Amendment, the Credit Agreement consists of a senior secured term loan B to the Operating Company totaling $1,865.6 million (the Term Loan or Term Loan Facility) and a $250.0
million revolving credit facility (the Revolving Credit Facility). The obligations of the Operating Company under the Credit Agreement are guaranteed by Holdings and certain other subsidiaries of Holdings. After giving effect to the
Amendment, the Term Loan is payable in quarterly installments and requires payments of $14.1 million in 2007 and $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 Companys Revolving Credit Facility as of September 30, 2007 was $239.3 million (as reduced by $10.7 million of outstanding letters of credit). Interest under the Credit Agreement is payable at (a) the
Alternate Base Rate (ABR) (the higher of the Prime Rate or the Federal Funds Rate plus 0.50%) plus a margin ranging from 1.00% to 1.75%; or (b) the Eurodollar Rate (the applicable interest rate offered to
banks in the London interbank eurocurrency market) plus a margin ranging from 2.00% to 2.75%. A commitment fee of 0.50% is due on the unused portion of the revolving loan commitment. In addition, the Credit Agreement contains certain affirmative and
negative covenants as to the operations and financial condition of the Company, as well as certain restrictions on the payment of dividends and other distributions to Holdings. As of September 30, 2007, 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.

The acquisition of O-I Plastic and the related refinancing of the indebtedness of the Company also included the issuance
of $250.0 million in Senior Notes of the Operating Company and $375.0 million in Senior Subordinated Notes of the Operating Company (collectively, the Notes). The Notes are unconditionally guaranteed, jointly and severally, by Holdings
and domestic subsidiaries of the Operating Company and mature on October 7, 2012 (Senior Notes) and October 7, 2014 (Senior Subordinated Notes). Interest on the Senior Notes is payable semi-annually at 8.50% and interest on the Senior
Subordinated Notes is payable semi-annually at 9.875%.

3. Sales Concentration

The Company had sales to one customer, PepsiCo, which exceeded 10% of total sales for the three and nine months ended September 30, 2007 and 2006.
The Companys sales to PepsiCo, approximately 100% of which were made in North America, were 12.2% and 17.5% of total sales for the three months ended September 30, 2007 and 2006, respectively, and 14.3% and 18.0% of total sales for the
nine months ended September 30, 2007 and 2006, respectively.

4. Inventories

Inventories consisted of the following:



|                        |  |                   |         |                  |   |        
|----------------------- |  | ----------------- | ------- | ---------------- | - | -------
|                        |  | September 30,2007 |         | December 31,2006
|                        |  | (In thousands)   
|Finished goods          |  | $                 | 173,375 |                  | $ | 175,362
|Raw materials and parts |  |                   | 70,794  |                  |   | 63,579 
|                        |  |                   |         |                  |   |        
|Total                   |  | $                 | 244,169 |                  | $ | 238,941
|                        |  |                   |         |                  |   |        



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GRAHAM PACKAGING HOLDINGS COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-Continued



5. Impairment Charges

Due to changes in the ability to utilize certain assets in the United States, the Company evaluated the recoverability of these assets. For these assets to be held and used, the Company determined that the
undiscounted cash flows were below the carrying value of these long-lived 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 $1.2 million for the three months ended September 30, 2007 and $1.2 million and $1.1 million for the nine months ended September 30, 2007 and 2006,
respectively.

6. Intangible Assets, Net

The gross carrying amount and accumulated amortization of the Companys intangible assets subject to amortization as of September 30, 2007 were as follows:



|                       |  |                      |        |                         |   |         |     |  |                                    |        |  |         
|---------------------- |  | -------------------- | ------ | ----------------------- | - | ------- | --- |  | ---------------------------------- | ------ |  | --------
|                       |  | Gross CarryingAmount |        | AccumulatedAmortization |   |         | Net |  | Weighted AverageAmortizationPeriod
|                       |  | (In thousands)       |        |                        
|Patented technology    |  | $                    | 25,667 |                         | $ | (6,744  | )   |  | $                                  | 18,923 |  | 11 years
|Customer relationships |  |                      | 42,547 |                         |   | (7,615  | )   |  |                                    | 34,932 |  | 18 years
|Licensing agreements   |  |                      | 28,000 |                         |   | (7,636  | )   |  |                                    | 20,364 |  | 11 years
|Non-compete agreements |  |                      | 1,544  |                         |   | (935    | )   |  |                                    | 609    |  | 5 years 
|                       |  |                      |        |                         |   |         |     |  |                                    |        |  |         
|Total                  |  | $                    | 97,758 |                         | $ | (22,930 | )   |  | $                                  | 74,828 |  |         
|                       |  |                      |        |                         |   |         |     |  |                                    |        |  |         

The gross carrying amount and accumulated amortization of the Companys intangible assets
subject to amortization as of December 31, 2006 were as follows:



|                       |  |                      |        |                         |   |         |     |  |                                    |        |  |         
|---------------------- |  | -------------------- | ------ | ----------------------- | - | ------- | --- |  | ---------------------------------- | ------ |  | --------
|                       |  | Gross CarryingAmount |        | AccumulatedAmortization |   |         | Net |  | Weighted AverageAmortizationPeriod
|                       |  | (In thousands)       |        |                        
|Patented technology    |  | $                    | 23,982 |                         | $ | (5,011  | )   |  | $                                  | 18,971 |  | 11 years
|Customer relationships |  |                      | 41,982 |                         |   | (5,559  | )   |  |                                    | 36,423 |  | 18 years
|Licensing agreements   |  |                      | 28,000 |                         |   | (5,727  | )   |  |                                    | 22,273 |  | 11 years
|Non-compete agreements |  |                      | 1,544  |                         |   | (700    | )   |  |                                    | 844    |  | 5 years 
|                       |  |                      |        |                         |   |         |     |  |                                    |        |  |         
|Total                  |  | $                    | 95,508 |                         | $ | (16,997 | )   |  | $                                  | 78,511 |  |         
|                       |  |                      |        |                         |   |         |     |  |                                    |        |  |         

Amortization expense for each of the nine months ended September 30, 2007 and 2006 was $5.8
million. Estimated aggregate amortization expense for 2007 and each of the next five years ending December 31 is as follows (in millions):



|     |  |   |    
|---- |  | - | ---
|2007 |  | $ | 7.4
|2008 |  |   | 7.4
|2009 |  |   | 7.3
|2010 |  |   | 7.1
|2011 |  |   | 7.0
|2012 |  |   | 7.0



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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, 2006             |  | $                   | 284,840 |   |               | $ | 15,827              |  | $     | 2,727 |  | $ | 303,394
|Foreign currency translation adjustments |  |                     | (161    | ) |               |   | 1,305               |  |       | 143   |  |   | 1,287  
|Other adjustments*                       |  |                     | 1,565   |   |               |   |                    |  |       |      |  |   | 1,565  
|                                         |  |                     |         |   |               |   |                     |  |       |       |  |   |        
|Balance at September 30, 2007            |  | $                   | 286,244 |   |               | $ | 17,132              |  | $     | 2,870 |  | $ | 306,246
|                                         |  |                     |         |   |               |   |                     |  |       |       |  |   |        

---

|* | Settlement of tax audit of purchase price allocation and tax adjustment related to opening balance of pension liability.
|- | ------------------------------------------------------------------------------------------------------------------------

8. Accrued Expenses

Accrued expenses consisted of
the following:



|                                           |  |                   |         |                  |   |        
|------------------------------------------ |  | ----------------- | ------- | ---------------- | - | -------
|                                           |  | September 30,2007 |         | December 31,2006
|                                           |  | (In thousands)   
|Accrued employee compensation and benefits |  | $                 | 68,598  |                  | $ | 58,491 
|Accrued interest                           |  |                   | 45,865  |                  |   | 34,885 
|Accrued sales allowance                    |  |                   | 35,844  |                  |   | 20,254 
|Other                                      |  |                   | 86,662  |                  |   | 81,207 
|                                           |  |                   |         |                  |   |        
|                                           |  | $                 | 236,969 |                  | $ | 194,837
|                                           |  |                   |         |                  |   |        

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, 2007, the Company incurred costs of employee termination benefits in the United States of $1.4 million (which is reflected in selling, general and
administrative expenses), which included the legal liability of severing 37 employees, 31 of which were terminated by September 30, 2007 and the remainder of which will be terminated by December 31, 2007. Substantially all of the cash
payments for these termination benefits are expected to be made by September 30, 2008. For the year ended December 31, 2006, the Company incurred costs of employee termination benefits in the United States of $1.6 million, which included
the legal liability of severing 46 employees, all of which were terminated by September 30, 2007. Substantialy all of the cash payments for these termination benefits are expected to be made by March 31, 2008. For the year ended
December 31, 2006, the Company also incurred costs of employee termination benefits in the United States of $5.3 million related to the separation of its 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 incurred costs of employee termination benefits in the United States of
$2.3 million, which included the legal liability of severing 16 employees, all of which were terminated by September 30, 2007. Substantially all of the cash payments for these termination benefits are expected to be made by December 31,
2007. For the year ended December 31, 2005, the Company incurred costs of employee termination benefits in France of $3.8 million, which included the legal liability of severing 37 employees, all of which were terminated by September 30,
2007. Substantially all of the cash payments for these termination benefits are expected to be made by December 31, 2007. Additional employee termination benefits were incurred in 2002 and 2003 in France and North America; the remaining cash
payments for these benefits are expected to be made by December 31, 2007.



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GRAHAM PACKAGING HOLDINGS COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-Continued



The following table reflects a rollforward of these costs, $2.1 million of which is included in other
non-current liabilities and the remainder of which is included in accrued employee compensation and benefits as of September 30, 2007 (in thousands):



|                                |  |                                  |      |   |                                   |   |      |                                   |  |   |                             |   |  |                                   |        |   |                        |   |       |                                   |  |   |        |   |  |   |       |   |  |   |        |  
|------------------------------- |  | -------------------------------- | ---- | - | --------------------------------- | - | ---- | --------------------------------- |  | - | --------------------------- | - |  | --------------------------------- | ------ | - | ---------------------- | - | ----- | --------------------------------- |  | - | ------ | - |  | - | ----- | - |  | - | ------ | -
|                                |  | 2002/2003FranceReductionin Force |      |   | 2003NorthAmericaReductionin Force |   |      | 2005UnitedStatesReductionin Force |  |   | 2005FranceReductionin Force |   |  | 2006UnitedStatesReductionin Force |        |   | 2006CEO/CFOSeparations |   |       | 2007UnitedStatesReductionin Force |  |   | Total  |  
|Reserves at December 31, 2005   |  | $                                | 399  |   |                                   | $ | 472  |                                   |  |   | 1,571                       |   |  | $                                 | 3,845  |   |                        | $ |      |                                   |  | $ |       |   |  | $ |      |   |  | $ | 6,287  |  
|(Decrease) increase in reserves |  |                                  | (101 | ) |                                   |   |     |                                   |  |   | 101                         |   |  |                                   |       |   |                        |   | 1,608 |                                   |  |   | 5,256  |   |  |   |      |   |  |   | 6,864  |  
|Cash payments                   |  |                                  | (5   | ) |                                   |   | (232 | )                                 |  |   | (1,214                      | ) |  |                                   | (3,066 | ) |                        |   | (672  | )                                 |  |   | (128   | ) |  |   |      |   |  |   | (5,317 | )
|                                |  |                                  |      |   |                                   |   |      |                                   |  |   |                             |   |  |                                   |        |   |                        |   |       |                                   |  |   |        |   |  |   |       |   |  |   |        |  
|Reserves at December 31, 2006   |  |                                  | 293  |   |                                   |   | 240  |                                   |  |   | 458                         |   |  |                                   | 779    |   |                        |   | 936   |                                   |  |   | 5,128  |   |  |   |      |   |  |   | 7,834  |  
|Increase (decrease) in reserves |  |                                  |     |   |                                   |   |     |                                   |  |   | 3                           |   |  |                                   | 62     |   |                        |   | (1    | )                                 |  |   |       |   |  |   | 1,425 |   |  |   | 1,489  |  
|Cash payments                   |  |                                  | (34  | ) |                                   |   | (179 | )                                 |  |   | (343                        | ) |  |                                   | (512   | ) |                        |   | (815  | )                                 |  |   | (1,280 | ) |  |   | (28   | ) |  |   | (3,191 | )
|                                |  |                                  |      |   |                                   |   |      |                                   |  |   |                             |   |  |                                   |        |   |                        |   |       |                                   |  |   |        |   |  |   |       |   |  |   |        |  
|Reserves at September 30, 2007  |  | $                                | 259  |   |                                   | $ | 61   |                                   |  | $ | 118                         |   |  | $                                 | 329    |   |                        | $ | 120   |                                   |  | $ | 3,848  |   |  | $ | 1,397 |   |  | $ | 6,132  |  
|                                |  |                                  |      |   |                                   |   |      |                                   |  |   |                             |   |  |                                   |        |   |                        |   |       |                                   |  |   |        |   |  |   |       |   |  |   |        |  

In addition to the above costs, as of December 31, 2006, the Company had accrued (within
current liabilities) payments made on January 5, 2007 to Philip R. Yates and John E. Hamilton, the Companys former Chief Executive Officer and Chief Financial Officer, for the repurchase of all of their outstanding partnership units and
unit options, pursuant to separation agreements dated as of December 3, 2006. The gross amounts accrued as of December 31, 2006 and paid in 2007 to Mr. Yates and Mr. Hamilton were $2.7 million and $0.7 million, respectively.

9. 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 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 2007, the valuation
allowance was increased approximately $15.6 million, in principal part, due to losses in the U.S. subsidiaries.

The Company adopted FIN 48
effective January 1, 2007. The transition adjustments of $4.8 million, resulting from intercompany transactions, were shown as a reduction to partners capital.

The Company had $10.0 million of Unrecognized Tax Benefits (UTB) as of January 1, 2007, including income taxes payable of $3.0 million, interest of $2.2 million and penalties of $4.8 million. The
Company also had offsetting non-current deferred tax assets in the amount of $5.2 million. As of September 30, 2007, the UTB were $12.4 million, including taxes payable of $4.2 million, interest of $3.2 million and penalties of $5.0 million.
The offsetting non-current deferred tax assets were $3.8 million. Approximately $4.8 million of UTB at January 1, 2007 and $8.6 million of UTB at September 30, 2007, if recognized, would impact the Companys effective tax rate.

It is reasonably possible that certain UTB may increase or decrease within the next twelve months due to tax examination changes,
settlement activities, expirations of statute of limitations or the impact on recognition and measurement considerations related to the results of published tax cases or other similar activities. The Company does not expect that statute expirations
will result in any decrease of any UTB over the next twelve months. At this time an estimate of the possible outcome of any changes cannot be made.



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GRAHAM PACKAGING HOLDINGS COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-Continued



Upon adoption of FIN 48, the Company has elected to begin treating interest and penalties related to
taxes as a component of income tax expense and as a result has reported $0.7 million and $1.2 million in the aggregate related to interest and penalty exposure as income tax expense in the income statement for the three and nine months ended
September 30, 2007, respectively. The Companys prior policy was to treat interest related to tax issues as interest expense and to record penalties as other expenses.

The Company has operations in sixteen countries and files income tax returns in approximately forty tax jurisdictions, in some cases for multiple legal
entities per jurisdiction. Generally, the Company has open tax years subject to tax audit scrutiny on average of between three years to six years in these taxing jurisdictions. The U.S. corporate subsidiaries have open tax years from 2001 forward
for federal and certain state tax purposes. The U.S. corporate subsidiaries are currently under Federal audit for 2004 and 2005. There is an ongoing audit in Mexico which may result in future changes to reported tax. The Company has evaluated the
need for additional tax contingencies for these audits as part of computing its UTB.

10. Commitments

The Company is party to various capital and operating leases involving real property and equipment. Total rent expense for operating leases amounted to
$13.6 million and $41.2 million for the three and nine months ended September 30, 2007, respectively, and $12.4 million and $40.1 million for the three and nine months ended September 30, 2006, respectively.

On July 9, 2002, the Company and Graham Engineering Corporation (Graham Engineering), an affiliated company, executed a First Amendment
to the equipment sales, services and license agreement (the Equipment Sales Agreement) to, among other things, (i) permit the Company to purchase certain extrusion blow molding wheel systems from a third party under certain
circumstances if Graham Engineering is provided the opportunity to bid on supplying the same equipment; (ii) clarify that the Companys exclusivity rights under the Equipment Sales Agreement do not apply to certain new generations of
Graham Engineering equipment; (iii) in the event of the sale of Graham Engineering to a competitor, provide the Company the option to require the transfer of the existing agreement or obtain a perpetual, royalty-free license to make and use
wheel equipment and components; (iv) provide Graham Engineering with the ability to terminate the Equipment Sales Agreement if an arbitrator determines that the Company has purchased certain high output extrusion blow molding equipment from
another supplier in breach of the Equipment Sales Agreement; and (v) obligate the Company, retroactive to January 1, 2002, and subject to certain credits and carry-forwards, to make payments for products and services to Graham Engineering
in the amount of at least $12.0 million per calendar year, or else pay to Graham Engineering a shortfall payment.

Subsequently, on
January 13, 2004, the parties executed a Second Amendment to the Equipment Sales Agreement. Such amendment removed restrictions originally placed upon the Company with respect to the Companys use of Graham Engineering technology to
manufacture containers at blow molding plants co-located with dairies or dairy-focused facilities.

The Equipment Sales Agreement
terminates on December 31, 2007, unless mutually extended by the parties.

11. Contingencies and Legal Proceedings

On November 3, 2006, the Company filed a complaint with the Supreme Court of the State of New York against Owens-Illinois, Inc. and OI Plastic
Products FTS, Inc. (collectively, OI). The complaint alleges certain misrepresentations by OI in connection with the Companys 2004 purchase of O-I Plastic and seeks damages in excess of $30 million. In December 2006, OI
filed an Answer and Counterclaim, seeking to rescind a Settlement Agreement entered into between OI and the Company in April 2005, and disgorgement of more than $39 million paid by OI to the Company in compliance
with that Settlement Agreement. The Company filed a Motion to Dismiss the Counterclaim in July 2007, which was granted by the Court in October 2007. On August 1, 2007, the Company filed an Amended Complaint to add
additional claims seeking indemnification from OI for claims made against the Company by former OI employees pertaining to their pension benefits. The litigation is proceeding.



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GRAHAM PACKAGING HOLDINGS COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-Continued



The Company is party to various other 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.

12. 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. The notes were issued under
Indentures issued on October 7, 2004. Holdings and the domestic subsidiaries of the Operating Company have fully and unconditionally guaranteed these notes. These guarantees are both joint and several. Both the Operating Company and CapCo I are
100%-owned subsidiaries of Holdings.

The following condensed consolidating information presents, in separate columns, the condensed
consolidating balance sheets as of September 30, 2007 and December 31, 2006 and the related condensed consolidating statements of operations for the three and nine months ended September 30, 2007 and September 30, 2006 and
condensed consolidating statements of cash flows for the nine months ended September 30, 2007 and September 30, 2006 for (i) Holdings on a parent only basis, with its investments in the Operating Company and CapCo I recorded under the
equity method, (ii) 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, Holdings wholly-owned subsidiary, 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, 2007

(In thousands)



|                                                  |  |                                |          |   |                             |   |           |            |  |                |           |         |   |              |  |   |              |  |   |            |   |  |   |           |  
|------------------------------------------------- |  | ------------------------------ | -------- | - | --------------------------- | - | --------- | ---------- |  | -------------- | --------- | ------- | - | ------------ |  | - | ------------ |  | - | ---------- | - |  | - | --------- | -
|                                                  |  | GrahamPackagingHoldingsCompany |          |   | GrahamPackagingCompany,L.P. |   |           | Guarantors |  | Non-Guarantors |           | CapCo I |   | Eliminations |  |   | Consolidated | 
|ASSETS                                            |  |                                |          |   |                             |   |           |            |  |                |           |         |   |              |  |   |              |  |   |            |   |  |   |           |  
|Current assets:                                   |  |                                |          |   |                             |   |           |            |  |                |           |         |   |              |  |   |              |  |   |            |   |  |   |           |  
|Cash and cash equivalents                         |  | $                              |         |   |                             | $ | 52,479    |            |  | $              | 2         |         | $ | 26,222       |  | $ |             |  | $ |           |   |  | $ | 78,703    |  
|Accounts receivable, net                          |  |                                |         |   |                             |   | 85,859    |            |  |                | 91,082    |         |   | 82,181       |  |   |             |  |   |           |   |  |   | 259,122   |  
|Inventories                                       |  |                                |         |   |                             |   | 92,642    |            |  |                | 106,089   |         |   | 45,438       |  |   |             |  |   |           |   |  |   | 244,169   |  
|Deferred income taxes                             |  |                                |         |   |                             |   |          |            |  |                | 13,398    |         |   | 3,740        |  |   |             |  |   |           |   |  |   | 17,138    |  
|Prepaid expenses and other current assets         |  |                                |         |   |                             |   | 12,232    |            |  |                | 8,857     |         |   | 26,049       |  |   |             |  |   |           |   |  |   | 47,138    |  
|                                                  |  |                                |          |   |                             |   |           |            |  |                |           |         |   |              |  |   |              |  |   |            |   |  |   |           |  
|Total current assets                              |  |                                |         |   |                             |   | 243,212   |            |  |                | 219,428   |         |   | 183,630      |  |   |             |  |   |           |   |  |   | 646,270   |  
|Property, plant and equipment, net                |  |                                |         |   |                             |   | 556,193   |            |  |                | 521,947   |         |   | 299,997      |  |   |             |  |   |           |   |  |   | 1,378,137 |  
|Intangible assets, net                            |  |                                |         |   |                             |   | 5,819     |            |  |                | 62,309    |         |   | 6,700        |  |   |             |  |   |           |   |  |   | 74,828    |  
|Goodwill                                          |  |                                |         |   |                             |   | 9,246     |            |  |                | 235,924   |         |   | 61,076       |  |   |             |  |   |           |   |  |   | 306,246   |  
|Net intercompany                                  |  |                                |         |   |                             |   | 1,159,521 |            |  |                |          |         |   |             |  |   |             |  |   | (1,159,521 | ) |  |   |          |  
|Investment in subsidiaries                        |  |                                |         |   |                             |   | 310,679   |            |  |                | 289,477   |         |   |             |  |   |             |  |   | (600,156   | ) |  |   |          |  
|Other non-current assets                          |  |                                |         |   |                             |   | 49,126    |            |  |                | 221       |         |   | 7,041        |  |   |             |  |   |           |   |  |   | 56,388    |  
|                                                  |  |                                |          |   |                             |   |           |            |  |                |           |         |   |              |  |   |              |  |   |            |   |  |   |           |  
|Total assets                                      |  | $                              |         |   |                             | $ | 2,333,796 |            |  | $              | 1,329,306 |         | $ | 558,444      |  | $ |             |  | $ | (1,759,677 | ) |  | $ | 2,461,869 |  
|                                                  |  |                                |          |   |                             |   |           |            |  |                |           |         |   |              |  |   |              |  |   |            |   |  |   |           |  
|LIABILITIES AND PARTNERS CAPITAL (DEFICIT)       |  |                                |          |   |                             |   |           |            |  |                |           |         |   |              |  |   |              | 
|Current liabilities:                              |  |                                |          |   |                             |   |           |            |  |                |           |         |   |              |  |   |              |  |   |            |   |  |   |           |  
|Accounts payable                                  |  | $                              |         |   |                             | $ | 76,452    |            |  | $              | 64,278    |         | $ | 52,606       |  | $ |             |  | $ |           |   |  | $ | 193,336   |  
|Accrued expenses and other current liabilities    |  |                                |         |   |                             |   | 128,023   |            |  |                | 49,744    |         |   | 59,202       |  |   |             |  |   |           |   |  |   | 236,969   |  
|Current portion of long-term debt                 |  |                                |         |   |                             |   | 30,539    |            |  |                | 174       |         |   | 6,829        |  |   |             |  |   |           |   |  |   | 37,542    |  
|                                                  |  |                                |          |   |                             |   |           |            |  |                |           |         |   |              |  |   |              |  |   |            |   |  |   |           |  
|Total current liabilities                         |  |                                |         |   |                             |   | 235,014   |            |  |                | 114,196   |         |   | 118,637      |  |   |             |  |   |           |   |  |   | 467,847   |  
|Long-term debt                                    |  |                                |         |   |                             |   | 2,493,963 |            |  |                | 582       |         |   | 348          |  |   |             |  |   |           |   |  |   | 2,494,893 |  
|Deferred income taxes                             |  |                                |         |   |                             |   | 741       |            |  |                | 20,080    |         |   | 13,519       |  |   |             |  |   |           |   |  |   | 34,340    |  
|Other non-current liabilities                     |  |                                |         |   |                             |   | 33,049    |            |  |                | 16,940    |         |   | 30,860       |  |   |             |  |   |           |   |  |   | 80,849    |  
|Investment in subsidiaries                        |  |                                | 428,971  |   |                             |   |          |            |  |                |          |         |   |             |  |   |             |  |   | (428,971   | ) |  |   |          |  
|Net intercompany                                  |  |                                | 187,089  |   |                             |   |          |            |  |                | 920,120   |         |   | 52,312       |  |   |             |  |   | (1,159,521 | ) |  |   |          |  
|Commitments and contingent liabilities            |  |                                |          |   |                             |   |           |            |  |                |           |         |   |              |  |   |              |  |   |            |   |  |   |           |  
|Partners capital (deficit)                       |  |                                | (616,060 | ) |                             |   | (428,971  | )          |  |                | 257,388   |         |   | 342,768      |  |   |             |  |   | (171,185   | ) |  |   | (616,060  | )
|                                                  |  |                                |          |   |                             |   |           |            |  |                |           |         |   |              |  |   |              |  |   |            |   |  |   |           |  
|Total liabilities and partners capital (deficit) |  | $                              |         |   |                             | $ | 2,333,796 |            |  | $              | 1,329,306 |         | $ | 558,444      |  | $ |             |  | $ | (1,759,677 | ) |  | $ | 2,461,869 |  
|                                                  |  |                                |          |   |                             |   |           |            |  |                |           |         |   |              |  |   |              |  |   |            |   |  |   |           |  



15



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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, 2006

(In thousands)



|                                                  |  |                                |          |   |                             |   |           |            |  |                |           |         |   |              |  |   |              |  |   |            |   |  |   |           |  
|------------------------------------------------- |  | ------------------------------ | -------- | - | --------------------------- | - | --------- | ---------- |  | -------------- | --------- | ------- | - | ------------ |  | - | ------------ |  | - | ---------- | - |  | - | --------- | -
|                                                  |  | GrahamPackagingHoldingsCompany |          |   | GrahamPackagingCompany,L.P. |   |           | Guarantors |  | Non-Guarantors |           | CapCo I |   | Eliminations |  |   | Consolidated | 
|ASSETS                                            |  |                                |          |   |                             |   |           |            |  |                |           |         |   |              |  |   |              |  |   |            |   |  |   |           |  
|Current assets:                                   |  |                                |          |   |                             |   |           |            |  |                |           |         |   |              |  |   |              |  |   |            |   |  |   |           |  
|Cash and cash equivalents                         |  | $                              |         |   |                             | $ | 1,456     |            |  | $              | 1         |         | $ | 11,870       |  | $ |             |  | $ |           |   |  | $ | 13,327    |  
|Accounts receivable, net                          |  |                                |         |   |                             |   | 83,134    |            |  |                | 85,872    |         |   | 71,686       |  |   |             |  |   |           |   |  |   | 240,692   |  
|Inventories                                       |  |                                |         |   |                             |   | 81,170    |            |  |                | 116,371   |         |   | 41,400       |  |   |             |  |   |           |   |  |   | 238,941   |  
|Deferred income taxes                             |  |                                |         |   |                             |   |          |            |  |                | 11,838    |         |   | 3,571        |  |   |             |  |   |           |   |  |   | 15,409    |  
|Prepaid expenses and other current assets         |  |                                |         |   |                             |   | 24,832    |            |  |                | 10,747    |         |   | 29,291       |  |   |             |  |   |           |   |  |   | 64,870    |  
|                                                  |  |                                |          |   |                             |   |           |            |  |                |           |         |   |              |  |   |              |  |   |            |   |  |   |           |  
|Total current assets                              |  |                                |         |   |                             |   | 190,592   |            |  |                | 224,829   |         |   | 157,818      |  |   |             |  |   |           |   |  |   | 573,239   |  
|Property, plant and equipment, net                |  |                                |         |   |                             |   | 570,811   |            |  |                | 568,732   |         |   | 286,469      |  |   |             |  |   |           |   |  |   | 1,426,012 |  
|Intangible assets, net                            |  |                                |         |   |                             |   | 4,664     |            |  |                | 66,981    |         |   | 6,866        |  |   |             |  |   |           |   |  |   | 78,511    |  
|Goodwill                                          |  |                                |         |   |                             |   | 9,246     |            |  |                | 234,359   |         |   | 59,789       |  |   |             |  |   |           |   |  |   | 303,394   |  
|Net intercompany                                  |  |                                |         |   |                             |   | 1,191,899 |            |  |                |          |         |   |             |  |   |             |  |   | (1,191,899 | ) |  |   |          |  
|Investment in subsidiaries                        |  |                                |         |   |                             |   | 319,980   |            |  |                | 273,213   |         |   |             |  |   |             |  |   | (593,193   | ) |  |   |          |  
|Other non-current assets                          |  |                                |         |   |                             |   | 58,235    |            |  |                | 523       |         |   | 2,023        |  |   |             |  |   |           |   |  |   | 60,781    |  
|                                                  |  |                                |          |   |                             |   |           |            |  |                |           |         |   |              |  |   |              |  |   |            |   |  |   |           |  
|Total assets                                      |  | $                              |         |   |                             | $ | 2,345,427 |            |  | $              | 1,368,637 |         | $ | 512,965      |  | $ |             |  | $ | (1,785,092 | ) |  | $ | 2,441,937 |  
|                                                  |  |                                |          |   |                             |   |           |            |  |                |           |         |   |              |  |   |              |  |   |            |   |  |   |           |  
|LIABILITIES AND PARTNERS CAPITAL (DEFICIT)       |  |                                |          |   |                             |   |           |            |  |                |           |         |   |              |  |   |              | 
|Current liabilities:                              |  |                                |          |   |                             |   |           |            |  |                |           |         |   |              |  |   |              |  |   |            |   |  |   |           |  
|Accounts payable                                  |  | $                              |         |   |                             | $ | 81,390    |            |  | $              | 80,246    |         | $ | 45,036       |  | $ |             |  | $ |           |   |  | $ | 206,672   |  
|Accrued expenses and other current liabilities    |  |                                |         |   |                             |   | 105,564   |            |  |                | 41,576    |         |   | 47,697       |  |   |             |  |   |           |   |  |   | 194,837   |  
|Current portion of long-term debt                 |  |                                |         |   |                             |   | 26,504    |            |  |                |          |         |   | 5,804        |  |   |             |  |   |           |   |  |   | 32,308    |  
|                                                  |  |                                |          |   |                             |   |           |            |  |                |           |         |   |              |  |   |              |  |   |            |   |  |   |           |  
|Total current liabilities                         |  |                                |         |   |                             |   | 213,458   |            |  |                | 121,822   |         |   | 98,537       |  |   |             |  |   |           |   |  |   | 433,817   |  
|Long-term debt                                    |  |                                |         |   |                             |   | 2,514,174 |            |  |                |          |         |   | 405          |  |   |             |  |   |           |   |  |   | 2,514,579 |  
|Deferred income taxes                             |  |                                |         |   |                             |   |          |            |  |                | 17,894    |         |   | 10,644       |  |   |             |  |   |           |   |  |   | 28,538    |  
|Other non-current liabilities                     |  |                                |         |   |                             |   | 28,462    |            |  |                | 18,534    |         |   | 15,763       |  |   |             |  |   |           |   |  |   | 62,759    |  
|Investment in subsidiaries                        |  |                                | 410,667  |   |                             |   |          |            |  |                |          |         |   |             |  |   |             |  |   | (410,667   | ) |  |   |          |  
|Net intercompany                                  |  |                                | 187,089  |   |                             |   |          |            |  |                | 934,927   |         |   | 69,883       |  |   |             |  |   | (1,191,899 | ) |  |   |          |  
|Commitments and contingent liabilities            |  |                                |          |   |                             |   |           |            |  |                |           |         |   |              |  |   |              |  |   |            |   |  |   |           |  
|Partners capital (deficit)                       |  |                                | (597,756 | ) |                             |   | (410,667  | )          |  |                | 275,460   |         |   | 317,733      |  |   |             |  |   | (182,526   | ) |  |   | (597,756  | )
|                                                  |  |                                |          |   |                             |   |           |            |  |                |           |         |   |              |  |   |              |  |   |            |   |  |   |           |  
|Total liabilities and partners capital (deficit) |  | $                              |         |   |                             | $ | 2,345,427 |            |  | $              | 1,368,637 |         | $ | 512,965      |  | $ |             |  | $ | (1,785,092 | ) |  | $ | 2,441,937 |  
|                                                  |  |                                |          |   |                             |   |           |            |  |                |           |         |   |              |  |   |              |  |   |            |   |  |   |           |  



16



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##### Table of Contents

GRAHAM PACKAGING HOLDINGS COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-Continued



GRAHAM PACKAGING HOLDINGS COMPANY

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

FOR THE THREE MONTHS ENDED
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  |  
|Impairment charges                           |  |                                |        |   |                             |   |        |            |  |   | 1,238          |   |  |         |        |              |  |   |             |  |   |        |   |  |   | 1,238   |  
|Net loss (gain) on disposal of fixed assets  |  |                                |        |   |                             |   | 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 | )
|                                             |  |                                |         |   |                             |   |         |            |  |   |                |   |  |         |         |              |  |   |              |  |   |         |   |  |   |         |  



17



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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   |  
|Impairment charges                           |  |                                |        |   |                             |   |        |            |  |   | 1,238          |   |  |         |        |              |  |   |             |  |   |        |   |  |   | 1,238     |  
|Net loss (gain) on disposal of fixed assets  |  |                                |        |   |                             |   | 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   | )
|                                             |  |                                |         |   |                             |   |         |            |  |   |                |   |  |         |         |              |  |   |              |  |   |         |   |  |   |           |  



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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, 2006

(In thousands)



|                                             |  |                                |         |   |                             |   |         |            |  |   |                |   |  |         |         |              |  |   |              |  |   |         |   |  |   |         |  
|-------------------------------------------- |  | ------------------------------ | ------- | - | --------------------------- | - | ------- | ---------- |  | - | -------------- | - |  | ------- | ------- | ------------ |  | - | ------------ |  | - | ------- | - |  | - | ------- | -
|                                             |  | GrahamPackagingHoldingsCompany |         |   | GrahamPackagingCompany,L.P. |   |         | Guarantors |  |   | Non-Guarantors |   |  | CapCo I |         | Eliminations |  |   | Consolidated | 
|Net sales                                    |  | $                              |        |   |                             | $ | 272,420 |            |  | $ | 273,533        |   |  | $       | 119,682 |              |  | $ |             |  | $ | (22,598 | ) |  | $ | 643,037 |  
|Cost of goods sold                           |  |                                |        |   |                             |   | 231,606 |            |  |   | 254,743        |   |  |         | 107,306 |              |  |   |             |  |   | (22,598 | ) |  |   | 571,057 |  
|                                             |  |                                |         |   |                             |   |         |            |  |   |                |   |  |         |         |              |  |   |              |  |   |         |   |  |   |         |  
|Gross profit                                 |  |                                |        |   |                             |   | 40,814  |            |  |   | 18,790         |   |  |         | 12,376  |              |  |   |             |  |   |        |   |  |   | 71,980  |  
|Selling, general and administrative expenses |  |                                |        |   |                             |   | 14,323  |            |  |   | 8,949          |   |  |         | 5,813   |              |  |   |             |  |   |        |   |  |   | 29,085  |  
|Net loss on disposal of fixed assets         |  |                                |        |   |                             |   | 2,338   |            |  |   | 286            |   |  |         | 283     |              |  |   |             |  |   |        |   |  |   | 2,907   |  
|                                             |  |                                |         |   |                             |   |         |            |  |   |                |   |  |         |         |              |  |   |              |  |   |         |   |  |   |         |  
|Operating income                             |  |                                |        |   |                             |   | 24,153  |            |  |   | 9,555          |   |  |         | 6,280   |              |  |   |             |  |   |        |   |  |   | 39,988  |  
|Interest expense, net                        |  |                                |        |   |                             |   | 26,721  |            |  |   | 20,212         |   |  |         | 1,353   |              |  |   |             |  |   |        |   |  |   | 48,286  |  
|Other expense (income), net                  |  |                                |        |   |                             |   | 22,528  |            |  |   | (91            | ) |  |         | 181     |              |  |   |             |  |   | (22,573 | ) |  |   | 45      |  
|Equity in loss (earnings) of subsidiaries    |  |                                | 14,985  |   |                             |   | (10,697 | )          |  |   | 4,711          |   |  |         |        |              |  |   |             |  |   | (8,999  | ) |  |   |        |  
|                                             |  |                                |         |   |                             |   |         |            |  |   |                |   |  |         |         |              |  |   |              |  |   |         |   |  |   |         |  
|(Loss) income before income taxes            |  |                                | (14,985 | ) |                             |   | (14,399 | )          |  |   | (15,277        | ) |  |         | 4,746   |              |  |   |             |  |   | 31,572  |   |  |   | (8,343  | )
|Income tax provision (benefit)               |  |                                |        |   |                             |   | 586     |            |  |   | (564           | ) |  |         | 6,620   |              |  |   |             |  |   |        |   |  |   | 6,642   |  
|                                             |  |                                |         |   |                             |   |         |            |  |   |                |   |  |         |         |              |  |   |              |  |   |         |   |  |   |         |  
|Net (loss) income                            |  | $                              | (14,985 | ) |                             | $ | (14,985 | )          |  | $ | (14,713        | ) |  | $       | (1,874  | )            |  | $ |             |  | $ | 31,572  |   |  | $ | (14,985 | )
|                                             |  |                                |         |   |                             |   |         |            |  |   |                |   |  |         |         |              |  |   |              |  |   |         |   |  |   |         |  



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 NINE MONTHS ENDED
SEPTEMBER 30, 2006

(In thousands)



|                                             |  |                                |         |   |                             |   |         |            |  |   |                |   |  |         |         |              |  |   |              |  |   |         |   |  |   |           |  
|-------------------------------------------- |  | ------------------------------ | ------- | - | --------------------------- | - | ------- | ---------- |  | - | -------------- | - |  | ------- | ------- | ------------ |  | - | ------------ |  | - | ------- | - |  | - | --------- | -
|                                             |  | GrahamPackagingHoldingsCompany |         |   | GrahamPackagingCompany,L.P. |   |         | Guarantors |  |   | Non-Guarantors |   |  | CapCo I |         | Eliminations |  |   | Consolidated | 
|Net sales                                    |  | $                              |        |   |                             | $ | 827,523 |            |  | $ | 829,764        |   |  | $       | 347,460 |              |  | $ |             |  | $ | (63,421 | ) |  | $ | 1,941,326 |  
|Cost of goods sold                           |  |                                |        |   |                             |   | 700,117 |            |  |   | 768,793        |   |  |         | 310,829 |              |  |   |             |  |   | (63,421 | ) |  |   | 1,716,318 |  
|                                             |  |                                |         |   |                             |   |         |            |  |   |                |   |  |         |         |              |  |   |              |  |   |         |   |  |   |           |  
|Gross profit                                 |  |                                |        |   |                             |   | 127,406 |            |  |   | 60,971         |   |  |         | 36,631  |              |  |   |             |  |   |        |   |  |   | 225,008   |  
|Selling, general and administrative expenses |  |                                |        |   |                             |   | 39,308  |            |  |   | 35,075         |   |  |         | 19,041  |              |  |   |             |  |   |        |   |  |   | 93,424    |  
|Impairment charges                           |  |                                |        |   |                             |   | 1,112   |            |  |   |               |   |  |         |        |              |  |   |             |  |   |        |   |  |   | 1,112     |  
|Net loss on disposal of fixed assets         |  |                                |        |   |                             |   | 3,117   |            |  |   | 651            |   |  |         | 233     |              |  |   |             |  |   |        |   |  |   | 4,001     |  
|                                             |  |                                |         |   |                             |   |         |            |  |   |                |   |  |         |         |              |  |   |              |  |   |         |   |  |   |           |  
|Operating income                             |  |                                |        |   |                             |   | 83,869  |            |  |   | 25,245         |   |  |         | 17,357  |              |  |   |             |  |   |        |   |  |   | 126,471   |  
|Interest expense, net                        |  |                                |        |   |                             |   | 91,111  |            |  |   | 57,539         |   |  |         | 4,046   |              |  |   |             |  |   |        |   |  |   | 152,696   |  
|Other expense (income), net                  |  |                                |        |   |                             |   | 21,640  |            |  |   | (649           | ) |  |         | 1,714   |              |  |   |             |  |   | (22,572 | ) |  |   | 133       |  
|Equity in loss of subsidiaries               |  |                                | 40,237  |   |                             |   | 9,266   |            |  |   | 10,091         |   |  |         |        |              |  |   |             |  |   | (59,594 | ) |  |   |          |  
|                                             |  |                                |         |   |                             |   |         |            |  |   |                |   |  |         |         |              |  |   |              |  |   |         |   |  |   |           |  
|(Loss) income before income taxes            |  |                                | (40,237 | ) |                             |   | (38,148 | )          |  |   | (41,736        | ) |  |         | 11,597  |              |  |   |             |  |   | 82,166  |   |  |   | (26,358   | )
|Income tax provision (benefit)               |  |                                |        |   |                             |   | 2,089   |            |  |   | (1,695         | ) |  |         | 13,485  |              |  |   |             |  |   |        |   |  |   | 13,879    |  
|                                             |  |                                |         |   |                             |   |         |            |  |   |                |   |  |         |         |              |  |   |              |  |   |         |   |  |   |           |  
|Net (loss) income                            |  | $                              | (40,237 | ) |                             | $ | (40,237 | )          |  | $ | (40,041        | ) |  | $       | (1,888  | )            |  | $ |             |  | $ | 82,166  |   |  | $ | (40,237   | )
|                                             |  |                                |         |   |                             |   |         |            |  |   |                |   |  |         |         |              |  |   |              |  |   |         |   |  |   |           |  



20



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GRAHAM PACKAGING HOLDINGS COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-Continued



GRAHAM PACKAGING HOLDINGS COMPANY

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

FOR THE 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 | )
|Buyout 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



GRAHAM PACKAGING HOLDINGS COMPANY

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 2006

(In thousands)



|                                                                |  |                                |   |                             |   |          |            |  |   |                |   |  |         |         |              |  |              |   |  |   |   |  |   |          |  
|--------------------------------------------------------------- |  | ------------------------------ | - | --------------------------- | - | -------- | ---------- |  | - | -------------- | - |  | ------- | ------- | ------------ |  | ------------ | - |  | - | - |  | - | -------- | -
|                                                                |  | GrahamPackagingHoldingsCompany |   | GrahamPackagingCompany,L.P. |   |          | Guarantors |  |   | Non-Guarantors |   |  | CapCo I |         | Eliminations |  | Consolidated |  
|Operating activities:                                           |  |                                |   |                             |   |          |            |  |   |                |   |  |         |         |              |  |              |   |  |   |   |  |   |          |  
|Net cash provided by operating activities                       |  | $                              |  |                             | $ | 150,802  |            |  | $ | 43,601         |   |  | $       | 27,645  |              |  | $            |  |  | $ |  |  | $ | 222,048  |  
|                                                                |  |                                |   |                             |   |          |           
|Investing activities:                                           |  |                                |   |                             |   |          |            |  |   |                |   |  |         |         |              |  |              |   |  |   |   |  |   |          |  
|Net cash paid for property, plant and equipment                 |  |                                |  |                             |   | (68,212  | )          |  |   | (46,252        | ) |  |         | (19,356 | )            |  |              |  |  |   |  |  |   | (133,820 | )
|Acquisitions of/investments in businesses, net of cash acquired |  |                                |  |                             |   | 5,507    |            |  |   | 2,651          |   |  |         | (9,584  | )            |  |              |  |  |   |  |  |   | (1,426   | )
|                                                                |  |                                |   |                             |   |          |            |  |   |                |   |  |         |         |              |  |              |   |  |   |   |  |   |          |  
|Net cash used in investing activities                           |  |                                |  |                             |   | (62,705  | )          |  |   | (43,601        | ) |  |         | (28,940 | )            |  |              |  |  |   |  |  |   | (135,246 | )
|                                                                |  |                                |   |                             |   |          |           
|Financing activities:                                           |  |                                |   |                             |   |          |            |  |   |                |   |  |         |         |              |  |              |   |  |   |   |  |   |          |  
|Proceeds from issuance of long-term debt                        |  |                                |  |                             |   | 588,770  |            |  |   |               |   |  |         | 27,814  |              |  |              |  |  |   |  |  |   | 616,584  |  
|Payment of long-term debt                                       |  |                                |  |                             |   | (678,268 | )          |  |   |               |   |  |         | (31,940 | )            |  |              |  |  |   |  |  |   | (710,208 | )
|Debt issuance fees                                              |  |                                |  |                             |   | (1,005   | )          |  |   |               |   |  |         |        |              |  |              |  |  |   |  |  |   | (1,005   | )
|                                                                |  |                                |   |                             |   |          |            |  |   |                |   |  |         |         |              |  |              |   |  |   |   |  |   |          |  
|Net cash used in financing activities                           |  |                                |  |                             |   | (90,503  | )          |  |   |               |   |  |         | (4,126  | )            |  |              |  |  |   |  |  |   | (94,629  | )
|                                                                |  |                                |   |                             |   |          |           
|Effect of exchange rate changes on cash and cash equivalents    |  |                                |  |                             |   |         |            |  |   |               |   |  |         | 408     |              |  |              |  |  |   |  |  |   | 408      |  
|                                                                |  |                                |   |                             |   |          |            |  |   |                |   |  |         |         |              |  |              |   |  |   |   |  |   |          |  
|Decrease in cash and cash equivalents                           |  |                                |  |                             |   | (2,406   | )          |  |   |               |   |  |         | (5,013  | )            |  |              |  |  |   |  |  |   | (7,419   | )
|Cash and cash equivalents at beginning of period                |  |                                |  |                             |   | 11,307   |            |  |   | 1              |   |  |         | 15,376  |              |  |              |  |  |   |  |  |   | 26,684   |  
|                                                                |  |                                |   |                             |   |          |            |  |   |                |   |  |         |         |              |  |              |   |  |   |   |  |   |          |  
|Cash and cash equivalents at end of period                      |  | $                              |  |                             | $ | 8,901    |            |  | $ | 1              |   |  | $       | 10,363  |              |  | $            |  |  | $ |  |  | $ | 19,265   |  
|                                                                |  |                                |   |                             |   |          |            |  |   |                |   |  |         |         |              |  |              |   |  |   |   |  |   |          |  



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GRAHAM PACKAGING HOLDINGS COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-Continued



13. Comprehensive Income (Loss)

Comprehensive income (loss) for the three and nine months ended September 30, 2007 and 2006 was as follows:



|                                                                                                                                                                         |  |                                 |         |   |                                |   |         |      |  |   |         |   |  |   |         |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ------------------------------- | ------- | - | ------------------------------ | - | ------- | ---- |  | - | ------- | - |  | - | ------- | -
|                                                                                                                                                                         |  | Three Months EndedSeptember 30, |         |   | Nine Months EndedSeptember 30, |  
|                                                                                                                                                                         |  | 2007                            |         |   | 2006                           |   |         | 2007 |  |   | 2006    |  
|                                                                                                                                                                         |  | (In thousands)                  |        
|Net loss                                                                                                                                                                 |  | $                               | (13,391 | ) |                                | $ | (14,985 | )    |  | $ | (23,875 | ) |  | $ | (40,237 | )
|Changes in fair value of derivatives, net of taxes                                                                                                                       |  |                                 | (2,840  | ) |                                |   | (8,454  | )    |  |   | (8,004  | ) |  |   | (3,041  | )
|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 taxes |  |                                 | 103     |   |                                |   | 1       |      |  |   | (4,579  | ) |  |   | (73     | )
|Cumulative translation adjustments, net of taxes                                                                                                                         |  |                                 | 12,592  |   |                                |   | 4,703   |      |  |   | 22,965  |   |  |   | 10,988  |  
|                                                                                                                                                                         |  |                                 |         |   |                                |   |         |      |  |   |         |   |  |   |         |  
|Comprehensive loss                                                                                                                                                       |  | $                               | (3,536  | ) |                                | $ | (18,735 | )    |  | $ | (13,493 | ) |  | $ | (32,363 | )
|                                                                                                                                                                         |  |                                 |         |   |                                |   |         |      |  |   |         |   |  |   |         |  



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GRAHAM PACKAGING HOLDINGS COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-Continued



14. 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, 2007 and
2006, representing the reportable segments currently utilized by the chief operating decision maker, was as follows:



|                                                                                                                                                                 |  |                                       |  |                |           |   |  |              |         |   |              |   |        |       |  |   |         |   |  |   |          
|---------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------- |  | -------------- | --------- | - |  | ------------ | ------- | - | ------------ | - | ------ | ----- |  | - | ------- | - |  | - | ---------
|                                                                                                                                                                 |  | NorthAmerica                          |  |                | Europe    |   |  | SouthAmerica |         |   | Eliminations |   |        | Total
|                                                                                                                                                                 |  |                                       |  |                |           |   |  |              |         |   |              |   | (a)    |       |  |  
|                                                                                                                                                                 |  |                                       |  | (In thousands)
|Net sales (b) (c)                                                                                                                                                |  | Three months ended September 30, 2007 |  | $              | 528,691   |   |  | $            | 71,382  |   |              | $ | 21,559 |       |  | $ | (97     | ) |  | $ | 621,535  
|                                                                                                                                                                 |  | Three months ended September 30, 2006 |  |                | 566,660   |   |  |              | 59,308  |   |              |   | 17,181 |       |  |   | (112    | ) |  |   | 643,037  
|                                                                                                                                                                 |  | Nine months ended September 30, 2007  |  |                | 1,633,775 |   |  |              | 207,479 |   |              |   | 54,894 |       |  |   | (1,859  | ) |  |   | 1,894,289
|                                                                                                                                                                 |  | Nine months ended September 30, 2006  |  |                | 1,718,985 |   |  |              | 176,262 |   |              |   | 46,304 |       |  |   | (225    | ) |  |   | 1,941,326
|                                                                                                                                                                 |  |                                       |  |                |           |  
|Operating income                                                                                                                                                 |  | Three months ended September 30, 2007 |  |                | 34,560    |   |  |              | 8,505   |   |              |   | 1,150  |       |  |   |        |   |  |   | 44,215   
|                                                                                                                                                                 |  | Three months ended September 30, 2006 |  |                | 35,996    |   |  |              | 2,682   |   |              |   | 1,310  |       |  |   |        |   |  |   | 39,988   
|                                                                                                                                                                 |  | Nine months ended September 30, 2007  |  |                | 130,033   |   |  |              | 18,850  |   |              |   | 2,957  |       |  |   |        |   |  |   | 151,840  
|                                                                                                                                                                 |  | Nine months ended September 30, 2006  |  |                | 111,485   |   |  |              | 12,025  |   |              |   | 2,961  |       |  |   |        |   |  |   | 126,471  
|                                                                                                                                                                 |  |                                       |  |                |           |  
|Depreciation and amortization                                                                                                                                    |  | Three months ended September 30, 2007 |  |                | 44,396    |   |  |              | 5,752   |   |              |   | 1,004  |       |  |   |        |   |  |   | 51,152   
|                                                                                                                                                                 |  | Three months ended September 30, 2006 |  |                | 45,365    |   |  |              | 4,951   |   |              |   | 1,248  |       |  |   |        |   |  |   | 51,564   
|                                                                                                                                                                 |  | Nine months ended September 30, 2007  |  |                | 132,721   |   |  |              | 16,698  |   |              |   | 3,417  |       |  |   |        |   |  |   | 152,836  
|                                                                                                                                                                 |  | Nine months ended September 30, 2006  |  |                | 133,802   |   |  |              | 15,041  |   |              |   | 3,432  |       |  |   |        |   |  |   | 152,275  
|                                                                                                                                                                 |  |                                       |  |                |           |  
|Impairment charges                                                                                                                                               |  | Three months ended September 30, 2007 |  |                | 1,238     |   |  |              |        |   |              |   |       |       |  |   |        |   |  |   | 1,238    
|                                                                                                                                                                 |  | Three months ended September 30, 2006 |  |                |          |   |  |              |        |   |              |   |       |       |  |   |        |   |  |   |         
|                                                                                                                                                                 |  | Nine months ended September 30, 2007  |  |                | 1,238     |   |  |              |        |   |              |   |       |       |  |   |        |   |  |   | 1,238    
|                                                                                                                                                                 |  | Nine months ended September 30, 2006  |  |                | 1,112     |   |  |              |        |   |              |   |       |       |  |   |        |   |  |   | 1,112    
|                                                                                                                                                                 |  |                                       |  |                |           |  
|Interest expense, net                                                                                                                                            |  | Three months ended September 30, 2007 |  |                | 49,546    |   |  |              | 880     |   |              |   | 316    |       |  |   |        |   |  |   | 50,742   
|                                                                                                                                                                 |  | Three months ended September 30, 2006 |  |                | 47,293    |   |  |              | 751     |   |              |   | 242    |       |  |   |        |   |  |   | 48,286   
|                                                                                                                                                                 |  | Nine months ended September 30, 2007  |  |                | 154,998   |   |  |              | 2,457   |   |              |   | 987    |       |  |   |        |   |  |   | 158,442  
|                                                                                                                                                                 |  | Nine months ended September 30, 2006  |  |                | 149,778   |   |  |              | 2,267   |   |              |   | 651    |       |  |   |        |   |  |   | 152,696  
|                                                                                                                                                                 |  |                                       |  |                |           |  
|Other expense (income), net                                                                                                                                      |  | Three months ended September 30, 2007 |  |                | 904       |   |  |              | (34     | ) |              |   | (68    | )     |  |   |        |   |  |   | 802      
|                                                                                                                                                                 |  | Three months ended September 30, 2006 |  |                | 22,368    |   |  |              | 128     |   |              |   | 122    |       |  |   | (22,573 | ) |  |   | 45       
|                                                                                                                                                                 |  | Nine months ended September 30, 2007  |  |                | (10,872   | ) |  |              | 117     |   |              |   | 15     |       |  |   | 12,244  |   |  |   | 1,504    
|                                                                                                                                                                 |  | Nine months ended September 30, 2006  |  |                | 21,834    |   |  |              | 503     |   |              |   | 369    |       |  |   | (22,573 | ) |  |   | 133      
|                                                                                                                                                                 |  |                                       |  |                |           |  
|Income tax provision                                                                                                                                             |  | Three months ended September 30, 2007 |  |                | 3,360     |   |  |              | 2,302   |   |              |   | 400    |       |  |   |        |   |  |   | 6,062    
|                                                                                                                                                                 |  | Three months ended September 30, 2006 |  |                | 5,008     |   |  |              | 1,130   |   |              |   | 504    |       |  |   |        |   |  |   | 6,642    
|                                                                                                                                                                 |  | Nine months ended September 30, 2007  |  |                | 7,812     |   |  |              | 6,996   |   |              |   | 961    |       |  |   |        |   |  |   | 15,769   
|                                                                                                                                                                 |  | Nine months ended September 30, 2006  |  |                | 7,744     |   |  |              | 5,116   |   |              |   | 1,019  |       |  |   |        |   |  |   | 13,879   
|                                                                                                                                                                 |  |                                       |  |                |           |  
|Identifiable assets (b) (c) (d)                                                                                                                                  |  | As of September 30, 2007              |  |                | 1,146,012 |   |  |              | 190,504 |   |              |   | 41,621 |       |  |   |        |   |  |   | 1,378,137
|                                                                                                                                                                 |  | As of December 31, 2006               |  |                | 1,207,000 |   |  |              | 182,119 |   |              |   | 36,893 |       |  |   |        |   |  |   | 1,426,012
|                                                                                                                                                                 |  |                                       |  |                |           |  
|Goodwill                                                                                                                                                         |  | As of September 30, 2007              |  |                | 286,244   |   |  |              | 17,132  |   |              |   | 2,870  |       |  |   |        |   |  |   | 306,246  
|                                                                                                                                                                 |  | As of December 31, 2006               |  |                | 284,840   |   |  |              | 15,827  |   |              |   | 2,727  |       |  |   |        |   |  |   | 303,394  
|                                                                                                                                                                 |  |                                       |  |                |           |  
|Cash paid for property, plant and equipment, net of proceeds from sale of property, plant and equipment and excluding acquisitions of/
investments in businesses |  | Nine months ended September 30, 2007  |  |                | 89,586    |   |  |              | 9,249   |   |              |   | 5,183  |       |  |   |        |   |  |   | 104,018  
|                                                                                                                                                                 |  | Nine months ended September 30, 2006  |  |                | 117,510   |   |  |              | 11,896  |   |              |   | 4,418  |       |  |   | (4      | ) |  |   | 133,820  



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##### Table of Contents

GRAHAM PACKAGING HOLDINGS COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-Continued



---

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

|(b) | The Companys net sales for Europe include sales in France, Poland, Rotselaar (Belgium) and Spain which totaled approximately $15.1 million, $14.7 million, $11.3 million and
$10.2 million, respectively, for the three months ended September 30, 2007, and approximately $13.0 million, $10.8 million, $9.2 million and $9.4 million, respectively, for the three months ended September 30, 2006. The Companys net
sales for Europe include sales in France, Poland, Rotselaar (Belgium) and Spain which totaled approximately $42.3 million, $45.3 million, $34.2 million and $28.1 million, respectively, for the nine months ended September 30, 2007, and
approximately $39.1 million, $33.0 million, $29.2 million and $27.0 million, respectively, for the nine months ended September 30, 2006. Identifiable assets in France, Poland, Rotselaar (Belgium) and Spain totaled approximately $56.6 million,
$42.1 million, $30.2 million and $28.5 million, respectively, as of September 30, 2007, and $56.4 million, $42.2 million, $28.8 million and $27.5 million, respectively, as of December 31, 2006.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(c) | The Companys net sales for North America include sales in Mexico which totaled approximately $36.4 million and $38.3 million for the three months ended September 30, 2007
and 2006, respectively, and $105.7 million and $108.2 million for the nine months ended September 30, 2007 and 2006, respectively. Identifiable assets in Mexico totaled approximately $59.1 million and $59.2 million as of September 30, 2007
and December 31, 2006, 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,
|                        |  | 2007                            |         | 2006                           |   | 2007    |  | 2006
|                        |  | (In thousands)                 
|Food and Beverage       |  | $                               | 366,653 |                                | $ | 381,927 |  | $    | 1,152,122 |  | $ | 1,148,795
|Household               |  |                                 | 130,712 |                                |   | 129,922 |  |      | 386,278   |  |   | 386,421  
|Automotive Lubricants   |  |                                 | 71,389  |                                |   | 71,988  |  |      | 202,114   |  |   | 219,509  
|Personal Care/Specialty |  |                                 | 52,781  |                                |   | 59,200  |  |      | 153,775   |  |   | 186,601  
|                        |  |                                 |         |                                |   |         |  |      |           |  |   |          
|Total Net Sales         |  | $                               | 621,535 |                                | $ | 643,037 |  | $    | 1,894,289 |  | $ | 1,941,326
|                        |  |                                 |         |                                |   |         |  |      |           |  |   |          

15. 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 Months EndedSeptember 30, |  
|                                         |  | 2007                            |        |   | 2006                           |   |        | 2007 |  |   | 2006   |  
|                                         |  | (In thousands)                  |       
|Components of net periodic pension cost: |  |                                 |        |   |                                |   |        |      |  |   |        |   |  |   |        |  
|Service cost                             |  | $                               | 777    |   |                                | $ | 2,778  |      |  | $ | 2,314  |   |  | $ | 8,324  |  
|Interest cost                            |  |                                 | 1,311  |   |                                |   | 1,256  |      |  |   | 3,915  |   |  |   | 3,759  |  
|Expected return on plan assets           |  |                                 | (1,520 | ) |                                |   | (1,189 | )    |  |   | (4,539 | ) |  |   | (3,557 | )
|Net amortization and deferral            |  |                                 | 216    |   |                                |   | 313    |      |  |   | 642    |   |  |   | 937    |  
|Employee contributions                   |  |                                 | (27    | ) |                                |   | (22    | )    |  |   | (79    | ) |  |   | (65    | )
|                                         |  |                                 |        |   |                                |   |        |      |  |   |        |   |  |   |        |  
|Net periodic pension cost                |  | $                               | 757    |   |                                | $ | 3,136  |      |  | $ | 2,253  |   |  | $ | 9,398  |  
|                                         |  |                                 |        |   |                                |   |        |      |  |   |        |   |  |   |        |  



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##### Table of Contents

GRAHAM PACKAGING HOLDINGS COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-Continued



The decrease in net periodic pension cost in the first nine months of 2007 was primarily attributable
to the December 31, 2006 freeze of the Companys hourly and salaried pension plan.

The Company previously disclosed in its
financial statements for the year ended December 31, 2006 that it expected to contribute $7.4 million to its pension plans in 2007. As of September 30, 2007, $7.1 million of contributions to its pension plans have been made.

The Company recognized $2.2 million and $0.8 million of expense for its 401(k) plans in the third quarter of 2007 and 2006, respectively, and $6.4
million and $2.5 million in the first nine months of 2007 and 2006, respectively. The increase in 401(k) expense is primarily a result of a new 3% contribution to hourly and salaried employees which began January 1, 2007 following the freeze of
the Companys hourly and salaried pension plan.

16. Transactions with Related Parties

In addition to the information disclosed in Note 10 with respect to Graham Engineering, the Company also had transactions with other entities affiliated
through common ownership. The Graham Family Investors (defined as Graham Capital Company, GPC Investments LLC and Graham Alternative Investment Partners I or affiliates thereof or other entities controlled by Donald C. Graham and his family) and
Blackstone Management Partners III L.L.C. have supplied management services to the Company since 1998. The Company has recorded approximately $1.3 million of expense for each of the three months ended September 30, 2007 and 2006, and
approximately $3.8 million of expense for each of the nine months ended September 30, 2007 and 2006.



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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 the future financial position, economic performance and results of operations of the Company, as well as the Companys business
strategy, budgets and projected costs and plans and objectives of management for future operations, and the information referred to under Quantitative and Qualitative Disclosures About Market Risk (Part I, Item 3), are
forward-looking statements. In addition, forward-looking statements generally can be identified by the use of forward-looking terminology such as may, will, expect, intend, estimate,
anticipate, believe or continue or similar terminology. These forward-looking statements are not historical facts, and are based on current expectations, estimates and projections about the Companys
industry, managements beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond the Companys control. Accordingly, readers are cautioned that any such forward-looking
statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict. Although the Company believes that the expectations reflected in such forward-looking statements are
reasonable as of the date made, expectations may prove to have been materially different from the results expressed or implied by such forward-looking statements. Unless otherwise required by law, the Company also disclaims any obligation to update
its view of any such risks or uncertainties or to announce publicly the result of any revisions to the forward-looking statements made in this report. Readers should carefully review the risks and uncertainties under Risk Factors(Part I,
Item 1A) in the Annual Report on Form 10-K of Graham Packaging Holdings Company (Holdings) for the fiscal year ended December 31, 2006. All forward-looking statements attributable to the Company, or persons acting on its
behalf, are expressly qualified in their entirety by the cautionary statements set forth in this paragraph.

Overview

Management believes the Company is a worldwide leader in the design, manufacture and sale of customized blow molded plastic containers for the branded
food and beverage, household, automotive lubricants and personal care/specialty product categories and, as of the end of September 2007, operated 85 manufacturing facilities throughout North America, Europe and South America. The Companys
primary strategy is to operate in select markets that will position it to benefit from the growing conversion to value-added plastic packaging from more commodity packaging.

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



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



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



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



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



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##### Table of Contents

Management believes that the area with the greatest opportunity for growth continues to be in producing
containers for the food and beverage product category because of the continued conversion to plastic packaging, including the demand for containers for juices, juice drinks, nutritional beverages, sports drinks, teas, yogurt drinks, snacks, beer and
other food products. Since much of the growth in this area has been in the sale of smaller sized containers, over the past few years the Company has experienced an overall mix shift toward smaller containers. Based on internal estimates, management
believes the Company has become a leader in the value-added segment for hot-fill PET juice containers. Management also believes the Company has recently become a leading participant in the rapidly growing market of yogurt drinks and nutritional
beverages where the Company manufactures containers using polyolefin resins. From the beginning of 2003 through September 30, 2007, the Company has invested over $1,175.0 million in capital expenditures, which includes approximately $658.0
million of purchase price allocations related to the acquisition of the blow molded plastic container business of Owens-Illinois, Inc. (O-I Plastic), in the food and beverage product category.

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

The Companys North American one quart motor oil container product category is in a mature industry. Unit volume in the one
quart motor oil industry decreased approximately 8% in 2006 as compared to 2005. Prior to 2003 annual volumes declined an average of approximately 1% to 2%. Management believes that the expected rate of decline in one quart motor oil containers is
anticipated to be 8% to 10% per year over the next few years as the product category continues to migrate towards the quick-lube market and larger multi-quart packages.

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

As of September 30, 2007, the Company operated 29 manufacturing facilities outside of the United States in Argentina, Belgium, Brazil, Canada,
Ecuador, England, Finland, France, Hungary, Mexico, the Netherlands, Poland, Spain, Turkey and Venezuela. Over the past few years, the Company has expanded its international operations with the addition of new plants in Argentina, Mexico and the
Netherlands, as well as the acquisition of O-I Plastic, which included plants in Ecuador, England, Finland, Mexico, the Netherlands and Venezuela, and the acquisition of certain Tetra-Pak operations on March 24, 2005, which included plants in
Belgium, Brazil and Turkey.

For the nine months ended September 30, 2007, 71.3% of the Companys net sales were generated by the
top twenty customers. The majority of the top twenty customers were under long-term contracts with terms up to ten years, while the balance of the top twenty customers represent customers with whom the Company has been doing business for over 20
years on average. Prices under these arrangements are typically tied to market standards and, therefore, vary with market conditions. In general, the contracts are requirements contracts that do not obligate the customer to purchase any given amount
of product from the Company. The Company had sales to one customer, PepsiCo, which exceeded 10% of total sales for the three and nine months ended September 30, 2007 and 2006. The Companys sales to PepsiCo, approximately 100% of which
were made in North America, were 12.2% and 17.5% of total sales for the three months ended September 30, 2007 and 2006, respectively, and 14.3% and 18.0% of total sales for the nine months ended September 30, 2007 and 2006, respectively.



28



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##### Table of Contents

The largest component of the Companys cost of goods sold is resin costs. Based on industry data,
the following table summarizes average market prices per pound of polyethylene terephthalate (PET) and high-density polyethylene (HDPE) resins in the United States during the three and nine months ended September 2007 and
2006:



|     |  |                             |      |                            |   |      |  |      |      |  |   |     
|---- |  | --------------------------- | ---- | -------------------------- | - | ---- |  | ---- | ---- |  | - | ----
|     |  | Three Months EndedSeptember |      | Nine Months EndedSeptember
|     |  | 2007                        |      | 2006                       |   | 2007 |  | 2006
|PET  |  | $                           | 0.75 |                            | $ | 0.80 |  | $    | 0.74 |  | $ | 0.75
|HDPE |  | $                           | 0.74 |                            | $ | 0.73 |  | $    | 0.68 |  | $ | 0.71

Changes in the cost of resin are passed through to customers by means of corresponding changes in
product pricing in accordance with the Companys agreements with these customers and industry practice. As resin prices can fluctuate significantly, the Company believes that its gross profit, as well as certain expense items, should not be
analyzed solely on a percentage of net sales basis. A sustained increase in resin prices, to the extent that those costs are not passed on to the end-consumer, would make plastic containers less economical for the Companys customers and could
result in a slower pace of conversions to plastic containers.

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

Results of Operations

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



|                |  |                                  |       |  |                                 |   |  |      |       |  |       |   |  |   |         |  |       |   |  |   |         |  |       |  
|--------------- |  | -------------------------------- | ----- |  | ------------------------------- | - |  | ---- | ----- |  | ----- | - |  | - | ------- |  | ----- | - |  | - | ------- |  | ----- | -
|                |  | Three Months Ended September 30, |       |  | Nine Months Ended September 30, |  
|                |  | 2007                             |       |  | 2006                            |   |  | 2007 |       |  | 2006  |  
|                |  | (Dollars in millions)            |      
|North America   |  | $                                | 528.6 |  | 85.1                            | % |  | $    | 566.5 |  | 88.1  | % |  | $ | 1,633.4 |  | 86.2  | % |  | $ | 1,718.8 |  | 88.5  | %
|Europe          |  |                                  | 71.4  |  | 11.5                            |   |  |      | 59.3  |  | 9.2   |   |  |   | 206.0   |  | 10.9  |   |  |   | 176.2   |  | 9.1   |  
|South America   |  |                                  | 21.5  |  | 3.4                             |   |  |      | 17.2  |  | 2.7   |   |  |   | 54.9    |  | 2.9   |   |  |   | 46.3    |  | 2.4   |  
|                |  |                                  |       |  |                                 |   |  |      |       |  |       |   |  |   |         |  |       |   |  |   |         |  |       |  
|Total Net Sales |  | $                                | 621.5 |  | 100.0                           | % |  | $    | 643.0 |  | 100.0 | % |  | $ | 1,894.3 |  | 100.0 | % |  | $ | 1,941.3 |  | 100.0 | %
|                |  |                                  |       |  |                                 |   |  |      |       |  |       |   |  |   |         |  |       |   |  |   |         |  |       |  



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|                        |  |                                  |       |  |                                 |   |  |      |       |  |       |   |  |   |         |  |       |   |  |   |         |  |       |  
|----------------------- |  | -------------------------------- | ----- |  | ------------------------------- | - |  | ---- | ----- |  | ----- | - |  | - | ------- |  | ----- | - |  | - | ------- |  | ----- | -
|                        |  | Three Months Ended September 30, |       |  | Nine Months Ended September 30, |  
|                        |  | 2007                             |       |  | 2006                            |   |  | 2007 |       |  | 2006  |  
|                        |  | (Dollars in millions)            |      
|Food and Beverage       |  | $                                | 366.6 |  | 59.0                            | % |  | $    | 381.9 |  | 59.4  | % |  | $ | 1,152.1 |  | 60.8  | % |  | $ | 1,148.8 |  | 59.2  | %
|Household               |  |                                  | 130.7 |  | 21.0                            |   |  |      | 129.9 |  | 20.2  |   |  |   | 386.3   |  | 20.4  |   |  |   | 386.4   |  | 19.9  |  
|Automotive Lubricants   |  |                                  | 71.4  |  | 11.5                            |   |  |      | 72.0  |  | 11.2  |   |  |   | 202.1   |  | 10.7  |   |  |   | 219.5   |  | 11.3  |  
|Personal Care/Specialty |  |                                  | 52.8  |  | 8.5                             |   |  |      | 59.2  |  | 9.2   |   |  |   | 153.8   |  | 8.1   |   |  |   | 186.6   |  | 9.6   |  
|                        |  |                                  |       |  |                                 |   |  |      |       |  |       |   |  |   |         |  |       |   |  |   |         |  |       |  
|Total Net Sales         |  | $                                | 621.5 |  | 100.0                           | % |  | $    | 643.0 |  | 100.0 | % |  | $ | 1,894.3 |  | 100.0 | % |  | $ | 1,941.3 |  | 100.0 | %
|                        |  |                                  |       |  |                                 |   |  |      |       |  |       |   |  |   |         |  |       |   |  |   |         |  |       |  

Three Months Ended September 30, 2007 Compared to Three Months Ended September 30, 2006

Net Sales.Net sales for the three months ended September 30, 2007 decreased $21.5 million, or 3.3%, to $621.5 million from
$643.0 million for the three months ended September 30, 2006. The decrease in sales was primarily due to decreased volume, higher sales of lower priced products, price reductions in response to competitive pressure and a decrease in resin costs
which are passed through to customers. Container units sold decreased 3.5%. On a geographic basis, sales for the three months ended September 30, 2007 in North America decreased $37.9 million, or 6.7%, from the three months ended
September 30, 2006, primarily due to decreased volume, higher sales of lower priced products, price reductions in response to competitive pressure and a decrease in resin costs which are passed through to customers. North American sales in the
food and beverage, household, automotive lubricants and personal care/specialty product categories contributed $26.0 million, $3.7 million, $0.7 million and $7.5 million, respectively, to the decrease. Container units sold in North America decreased
in the food and beverage, household, automotive lubricants and personal care/specialty product categories by 7.9%, 2.7%, 8.7% and 10.4%, respectively. Sales for the three months ended September 30, 2007 in Europe increased $12.1 million, or
20.4%, from the three months ended September 30, 2006. The increase in sales was primarily due to favorable exchange rate changes of $5.9 million and higher container units sold of 6.6% compared to the same period last year. Sales for the three
months ended September 30, 2007 in South America increased $4.3 million, or 25.0%, from the three months ended September 30, 2006. The increase in sales was primarily due to increased volume and favorable exchange rate changes of $1.8
million.

Gross Profit.Gross profit for the three months ended September 30, 2007 increased $15.2 million to $87.2 million
from $72.0 million for the three months ended September 30, 2006. Gross profit for the three months ended September 30, 2007 increased in North America, Europe and South America by $10.1 million, $4.6 million and $0.5 million,
respectively, when compared to the three months ended September 30, 2006. The increase in gross profit was driven by several factors including ongoing expense reduction initiatives, lower project startup costs of $3.5 million, lower integration
expenses for the O-I Plastic acquisition of $2.6 million, a weakening of the dollar against the euro and other currencies of $1.4 million and the absence in 2007 of expenses related to the hurricanes in the United States in the second half of 2005
of $0.6 million.

Selling, General & Administrative Expenses.Selling, general and administrative expenses for the three
months ended September 30, 2007 increased $4.9 million to $34.0 million from $29.1 million for the three months ended September 30, 2006. The increase was primarily due to increases in compensation-related expenses and consulting expenses,
partially offset by a decrease in development costs. Selling, general and administrative expenses as a percent of sales increased to 5.5% of sales for the three months ended September 30, 2007 from 4.5% of sales for the three months ended
September 30, 2006.



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Impairment Charges. Impairment charges for the three months ended September 30, 2007 were
$1.2 million as compared to no impairment charges for the three months ended September 30, 2006. In 2007, due to a change in the ability to utilize certain assets in the United States, the Company evaluated the recoverability of these assets.
For these assets to be held and used, the Company determined that the undiscounted cash flows were below the carrying value of these long-lived assets. Accordingly, the Company 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.

Interest Expense, Net. Interest expense, net increased $2.4 million to $50.7 million for the three months ended September 30, 2007 from $48.3
million for the three months ended September 30, 2006. The increase was primarily related to lower capitalized interest in the three months ended September 30, 2007 as compared to the three months ended September 30, 2006.

Income Tax Provision.Income tax provision decreased $0.5 million to $6.1 million for the three months ended September 30, 2007 from $6.6
million for the three months ended September 30, 2006. The decrease was primarily related to tax planning strategies implemented in Mexico, Europe and the United States during the three months ended September 30, 2007 as compared to the
three months ended September 30, 2006.

Net Loss.Primarily as a result of the factors discussed above, net loss was $13.4
million for the three months ended September 30, 2007 compared to net loss of $15.0 million for the three months ended September 30, 2006.

Nine months Ended September 30, 2007 Compared to Nine months Ended September 30, 2006

Net Sales.Net sales
for the nine months ended September 30, 2007 decreased $47.0 million, or 2.4%, to $1,894.3 million from $1,941.3 million for the nine months ended September 30, 2006. The decrease in sales was primarily due to a decrease in resin costs
which are passed through to customers, higher sales of lower priced products and price reductions in response to competitive pressure. Container units sold decreased 0.2%. On a geographic basis, sales for the nine months ended September 30,
2007 in North America decreased $85.4 million, or 5.0%, from the nine months ended September 30, 2006, primarily due to a decrease in resin costs which are passed through to customers, higher sales of lower priced products and price reductions
in response to competitive pressure. North American sales in the food and beverage, household, automotive lubricants and personal care/specialty product categories contributed $24.4 million, $8.8 million, $18.3 million and $33.9 million,
respectively, to the decrease. Container units sold in North America increased in the household product category by 2.8% and decreased in the food and beverage, automotive lubricants and personal care/specialty product categories by 2.1%, 9.0% and
16.2%, respectively. Sales for the nine months ended September 30, 2007 in Europe increased $29.8 million, or 16.9%, from the nine months ended September 30, 2006. The increase in sales was primarily due to favorable exchange rate changes
of $16.2 million and higher container units sold of 8.5% compared to the same period last year. Sales for the nine months ended September 30, 2007 in South America increased $8.6 million, or 18.6%, from the nine months ended September 30,
2006. The increase in sales was primarily due to increased volume and favorable exchange rate changes of $3.2 million.

Gross Profit.Gross profit for the nine months ended September 30, 2007 increased $40.5 million to $265.5 million from $225.0 million for the nine months ended September 30, 2006. Gross profit for the nine months ended September 30, 2007
increased in North America, Europe and South America by $34.0 million, $6.2 million and $0.3 million, respectively, when compared to the nine months ended September 30, 2006. The increase in gross profit was driven by several factors including
ongoing expense reduction initiatives, the absence in 2007 of expenses related to the hurricanes in the United States in the second half of 2005 of $7.0 million, lower project startup costs of $6.3 million, lower integration expenses for the O-I
Plastic acquisition of $4.9 million and a weakening of the dollar against the euro and other currencies of $3.2 million.

Selling,
General & Administrative Expenses.Selling, general and administrative expenses for the nine months ended September 30, 2007 increased $8.8 million to $102.2 million from $93.4 million for the nine months ended September 30,
2006. The increase was primarily due to increases in consulting expenses and compensation-related expenses, partially offset by a decrease in costs associated with aborted acquisitions and development costs. Selling, general and administrative
expenses as a percent of sales increased to 5.4% of sales for the nine months ended September 30, 2007 from 4.8% of sales for the nine months ended September 30, 2006.



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Impairment Charges.Impairment charges for the nine months ended September 30, 2007 were $1.2
million as compared to $1.1 million for the nine months ended September 30, 2006. Due to changes in the ability to utilize certain assets in the United States in 2007 and 2006, the Company evaluated the recoverability of these assets. For these
assets to be held and used, the Company determined that the undiscounted cash flows were below the carrying value of these long-lived assets. Accordingly, the Company adjusted the carrying value of these long-lived assets to their estimated fair
value in accordance with SFAS 144.

Interest Expense, Net. Interest expense, net increased $5.7 million to $158.4 million for the
nine months ended September 30, 2007 from $152.7 million for the nine months ended September 30, 2006. The increase was primarily related to the write-off in 2007 of $4.5 million of deferred financing fees in connection with the
March 30, 2007 amendment to the Companys Credit Agreement (as compared to the write-off in 2006 of $2.1 million of deferred financing fees in connection with a 2006 amendment to the Companys Credit Agreement) and an increase in
interest rates (average 90-day LIBOR increased from 5.14% for the nine months ended September 30, 2006 to 5.39% for the nine months ended September 30, 2007), partially offset by lower debt levels in the nine months ended
September 30, 2007.

Income Tax Provision.Income tax provision increased $1.9 million to $15.8 million for the nine months
ended September 30, 2007 from $13.9 million for the nine months ended September 30, 2006. The increase was primarily related to improved results in jurisdictions where the Company has income tax liabilities, principally Europe.

Net Loss.Primarily as a result of the factors discussed above, net loss was $23.9 million for the nine months ended September 30, 2007
compared to net loss of $40.2 million for the nine months ended September 30, 2006.

Effect of Changes in Exchange Rates

In general, the Companys results of operations are affected by changes in foreign exchange rates. Subject to market conditions, the Company prices
its products in its foreign operations in local currencies. As a result, a decline in the value of the U.S. dollar relative to the local currencies of profitable foreign subsidiaries can have a favorable effect on the profitability of the Company,
and an increase in the value of the U.S. dollar relative to the local currencies of profitable foreign subsidiaries can have a negative effect on the profitability of the Company. Exchange rate fluctuations decreased comprehensive loss by $12.6
million and $4.7 million for the three months ended September 30, 2007 and 2006, respectively, and decreased comprehensive loss by $23.0 million and $11.0 million for the nine months ended September 30, 2007 and 2006, respectively.

Derivatives

During 2004, the Company
entered into four interest rate swap agreements, under which the Company receives variable interest based on the Eurodollar rate and pays 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 receives variable interest based on the Eurodollar rate and pays fixed interest at a weighted average rate of 4.43%, on $225.0 million of term loans. The interest
rate swaps 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 effective portion of the cash flow hedges is recorded in other
comprehensive income (OCI) and was an unrealized loss of $2.8 million and $8.5 million for the three months ended September 30, 2007 and 2006, respectively, and was an unrealized loss of $8.1 million and $3.0 million for the nine
months ended September 30, 2007 and 2006, respectively. 100% of the amount recorded within accumulated OCI as of September 30, 2007 is expected to be recognized in interest expense in the next twelve months.



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Liquidity and Capital Resources

In the nine months ended September 30, 2007, the Company funded, through its operating activities, $104.0 million of investing activities and $24.9 million of financing activities.

In connection with the acquisition of O-I Plastic on October 7, 2004, the Operating Company, Holdings, GPC Capital Corp. I, Holdings
wholly-owned subsidiary (CapCo I), and a syndicate of lenders entered into a first-lien credit agreement (the Credit Agreement) and a second-lien credit agreement (the Second-Lien Credit Agreement and, together
with the Credit Agreement, the Credit Agreements). Pursuant to its terms, on March 30, 2007, the Credit Agreement was amended in order to, among other things, increase the term loan B facility provided under the Credit Agreement by
approximately $305.0 million (the Amendment). Proceeds of the Amendment were used to pay off the Second-Lien Credit Agreement ($250.0 million), with $50.0 million being used to reduce outstanding borrowings on the existing revolving
credit facility provided for under the Credit Agreement and approximately $5.0 million being used to pay fees and expenses. The Amendment also eliminated one of the Companys financial ratio covenants, increased the maximum allowable leverage
under another financial ratio covenant and waived any potential excess cash flow payment required for the year ended December 31, 2006. The Credit Agreement consists of a senior secured term loan B to the Operating Company totaling $1,865.6
million (the Term Loan or Term Loan Facility) and a $250.0 million revolving credit facility (the Revolving Credit Facility). The unused availability of the Revolving Credit Facility at September 30, 2007 was
$239.3 million (as reduced by $10.7 million of outstanding letters of credit). The Term Loan is payable in quarterly installments and requires payments of $14.1 million in 2007 and $18.7 million in each of 2008, 2009 and 2010 and $1,804.8 million in
2011. The Company expects to fund scheduled debt repayments from cash from operations and unused lines of credit. The Revolving Credit Facility expires on October 7, 2010. The obligations of the Operating Company and CapCo I under the Credit
Agreement are guaranteed by Holdings and certain other subsidiaries of Holdings. As of September 30, 2007, the Company was in compliance with all covenants.

The acquisition of O-I Plastic and the related refinancing of the indebtedness of the Company also included the issuance of $250.0 million in Senior Notes of the Operating Company and $375.0 million in Senior
Subordinated Notes of the Operating Company (collectively the Notes). The Notes are unconditionally guaranteed, jointly and severally, by Holdings and domestic subsidiaries of the Operating Company and mature on October 7, 2012
(Senior Notes) and October 7, 2014 (Senior Subordinated Notes). Interest on the Senior Notes is payable semi-annually at 8.50% and interest on the Senior Subordinated Notes is payable semi-annually at 9.875%.

At September 30, 2007, the Companys total indebtedness was $2,532.4 million.

The Credit Agreement and the Notes contain a number of significant covenants. The Company believes that these covenants are material terms of these
agreements and that information about the covenants is material to an investors understanding of the Companys financial condition and liquidity. Covenant compliance EBITDA (as defined below) is used to determine the Companys
compliance with many of these covenants. Any breach of covenants in the Credit Agreement that are tied to financial ratios based on covenant compliance EBITDA could result in a default under the Credit Agreement and the lenders could elect to
declare all amounts borrowed to be immediately due and payable. Any such acceleration would also result in a default under the Notes. Additionally, these covenants restrict the Companys ability to dispose of assets, repay other indebtedness,
incur additional indebtedness, pay dividends, prepay subordinated indebtedness, incur liens, make capital expenditures, investments or acquisitions, engage in mergers or consolidations, engage in transactions with affiliates and otherwise restrict
the Companys activities. Under the Credit Agreement, the Company is required to satisfy specified financial ratios and tests. The Company may also be required to make annual excess cash flow payments as defined in the Credit Agreement. The
March 30, 2007 Amendment eliminated the interest coverage ratio, increased the maximum allowable leverage under another financial ratio covenant and waived any potential excess cash flow payment required for the year ended December 31,
2006. As of September 30, 2007, the Company was in compliance with the financial ratios and tests specified in the Credit Agreement.

Covenant compliance EBITDA is defined as EBITDA (i.e., earnings before interest, taxes, depreciation and amortization) further adjusted to exclude non-recurring items, non-cash items and other adjustments required in calculating covenant
compliance under the Credit Agreement and the Notes, as shown in the table below. Covenant compliance EBITDA is not intended to represent cash flow from operations as defined by generally accepted accounting principles and should not be used as an
alternative to net income as an indicator of operating performance or to cash flow as a measure of liquidity. The Company believes that the inclusion of covenant compliance EBITDA in this quarterly report on Form 10-Q is appropriate to provide
additional information to



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investors about the calculation of certain financial covenants in the Credit Agreement and the Notes. Because not all companies use identical calculations,
these presentations of covenant compliance EBITDA may not be comparable to other similarly titled measures of other companies. A reconciliation of net loss to covenant compliance EBITDA is as follows:

Reconciliation of net loss to EBITDA



|                              |  |                                       |        |  
|----------------------------- |  | ------------------------------------- | ------ | -
|                              |  | Four Quarters EndedSeptember 30, 2007 |       
|                              |  | (In millions)                         |       
|Net loss                      |  | $                                     | (104.0 | )
|Interest income               |  |                                       | (0.7   | )
|Interest expense              |  |                                       | 213.4  |  
|Income tax provision          |  |                                       | 29.5   |  
|Depreciation and amortization |  |                                       | 206.0  |  
|                              |  |                                       |        |  
|EBITDA                        |  | $                                     | 344.2  |  
|                              |  |                                       |        |  

Reconciliation of EBITDA to covenant compliance EBITDA



|                           |  |                                       |      
|-------------------------- |  | ------------------------------------- | -----
|                           |  | Four Quarters EndedSeptember 30, 2007
|                           |  | (In millions)                        
|EBITDA                     |  | $                                     | 344.2
|Impairment charges         |  |                                       | 26.0 
|Other non-cash charges (a) |  |                                       | 20.1 
|Management fees (b)        |  |                                       | 5.0  
|Non-recurring items (c)    |  |                                       | 39.0 
|                           |  |                                       |      
|Covenant compliance EBITDA |  | $                                     | 434.3
|                           |  |                                       |      

---

|(a) | Represents the net loss on disposal of fixed assets.
|--- | ----------------------------------------------------

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

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



|                                   |  |                                       |     
|---------------------------------- |  | ------------------------------------- | ----
|                                   |  | Four Quarters EndedSeptember 30, 2007
|                                   |  | (In millions)                        
|Reorganization and other costs (i) |  | $                                     | 26.1
|Project startup costs (ii)         |  |                                       | 12.9
|                                   |  |                                       |     
|                                   |  | $                                     | 39.0
|                                   |  |                                       |     

---

|(i) | Represents non-recurring costs related to the integration of O-I Plastic, expenses related to the hurricanes in the United States in the second half of 2005, executive officer
severance and other costs defined in the Credit Agreement.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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



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Under the debt agreements, the Companys ability to engage in activities such as incurring
additional indebtedness, making investments and paying dividends is also tied to ratios based on covenant compliance EBITDA. The Credit Agreement requires that the Company maintain a senior secured net leverage 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, 2007, the Operating Companys covenant compliance EBITDA was $434.3 million. The senior secured net leverage to covenant compliance
EBITDA ratio was 4.21x for the four quarters ended September 30, 2007. The ability of the Operating Company to incur additional subordinated indebtedness under the Credit Agreement is tied to a covenant compliance EBITDA to interest coverage
ratio of 2.0x. The covenant compliance EBITDA to interest coverage ratio was 2.14x for the four quarters ended September 30, 2007. 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 2.14x for the four quarters ended September 30, 2007.

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

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



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



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

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

Cash paid for property, plant and equipment, net of proceeds from sales of property,
plant and equipment and excluding acquisitions, for the nine months ended September 30, 2007 was $104.0 million. Management believes that capital investment to maintain and upgrade property, plant and equipment is important to remain
competitive. Management estimates that on average the annual capital expenditures required to maintain the Companys current facilities are approximately $42 million per year. Additional capital expenditures beyond this amount will be required
to expand capacity or improve the cost structure.

For the fiscal year 2007, the Company expects to incur capital investments ranging from
$160 million to $175 million. For the fiscal year 2008, the Company expects 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. The Companys principal sources of cash to fund ongoing operations and capital requirements have been and are expected to continue to be net cash provided by operating activities and borrowings under the Credit Agreement.
Management believes that these sources will be sufficient to fund the Companys ongoing operations and its foreseeable capital requirements.

On July 9, 2002, the Company and Graham Engineering Corporation (Graham Engineering), an affiliated company, executed a First Amendment to the equipment sales, services and license agreement (the Equipment



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Sales Agreement) to, among other things, (i) permit the Company to purchase certain extrusion blow molding wheel systems from a third party under
certain circumstances if Graham Engineering is provided the opportunity to bid on supplying the same equipment; (ii) clarify that the Companys exclusivity rights under the Equipment Sales Agreement do not apply to certain new generations
of Graham Engineering equipment; (iii) in the event of the sale of Graham Engineering to a competitor, provide the Company the option to require the transfer of the existing agreement or obtain a perpetual, royalty-free license to make and use
wheel equipment and components; (iv) provide Graham Engineering with the ability to terminate the Equipment Sales Agreement if an arbitrator determines that the Company has purchased certain high output extrusion blow molding equipment from
another supplier in breach of the Equipment Sales Agreement; and (v) obligate the Company, retroactive to January 1, 2002, and subject to certain credits and carry-forwards, to make payments for products and services to Graham Engineering
in the amount of at least $12.0 million per calendar year, or else pay to Graham Engineering a shortfall payment.

Subsequently, on
January 13, 2004, the parties executed a Second Amendment to the Equipment Sales Agreement. Such amendment removed restrictions originally placed upon the Company with respect to the Companys use of Graham Engineering technology to
manufacture containers at blow molding plants co-located with dairies or dairy-focused facilities.

The Equipments Sales Agreement
terminates on December 31, 2007, unless mutually extended by the parties.

Off-Balance Sheet Arrangements

Other than letter of credit agreements and operating leases, as of September 30, 2007, the Company did not have any off-balance sheet arrangements as
defined in Item 303(a)(4)(ii) of SEC Regulation S-K. The Company had letter of credit agreements in the amount of $10.7 million as of September 30, 2007.

Recent Accounting Pronouncements

In September 2006, the Financial Accounting Standards Board (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.
SFAS 157 is effective for fiscal years beginning after November 15, 2007. Therefore, the Company will adopt SFAS 157 on January 1, 2008. The Company is currently in the process of assessing the impact of the adoption of SFAS 157 on its
financial statements.

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 as of the beginning of a companys first fiscal year that begins after November 15, 2007. Therefore, the Company may adopt SFAS 159 on
January 1, 2008. The Company is currently in the process of assessing the impact of the adoption of SFAS 159 on its financial statements.

In June 2006, the 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. See Note 9 of the Notes to Condensed Consolidated Financial Statements (Unaudited) for additional discussion regarding the impact of the Companys adoption of FIN 48.



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In June 2006, the Emerging Issues Task Force (EITF) reached a consensus on EITF 06-3,
How Taxes Collected from Customers and Remitted to Governmental Authorities Should Be Presented in the Income Statement (That Is, Gross versus Net Presentation). EITF 06-3 provides that the presentation of taxes assessed by a
governmental authority that is directly imposed on a revenue producing transaction between a seller and a customer on either a gross basis (included in revenues and costs) or on a net basis (excluded from revenues) is an accounting policy decision
that should be disclosed. EITF 06-3 was effective January 1, 2007. The Company presents these taxes on a net basis for all periods presented.

Change in Critical Accounting Policy

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. Due to the significant amounts involved and judgment required, the Company deems this policy to be critical to its financial statements.

Inherent in determining the Companys effective tax rate are judgments regarding business plans and expectations about future
operations. These judgments include the amount and geographic mix of future taxable income, limitations on usage of net operating loss carry-forwards, potential tax law changes, the impact of ongoing or potential tax audits, earnings repatriation
plans and other future tax consequences.

The Company establishes contingencies for certain tax positions that management believes are
supportable, but are potentially subject to successful challenge by the applicable taxing authority. The Company reviews these tax uncertainties in light of the changing facts and circumstances and adjusts them when significant changes warrant it.



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

The following table provides disclosure as of September 30, 2007 for financial instruments that have experienced material changes in fair value since December 31, 2006.



|                                        |  |                                                                               |         |   |            |   |         |                        |  |      |   |      |   |            |  |       |   |  |                   |   |  |   |         |   |  |   |      
|--------------------------------------- |  | ----------------------------------------------------------------------------- | ------- | - | ---------- | - | ------- | ---------------------- |  | ---- | - | ---- | - | ---------- |  | ----- | - |  | ----------------- | - |  | - | ------- | - |  | - | -----
|                                        |  | Expected Maturity Date of Interest Rate Swap Agreements at September 30, 2007 |         |   | Fair Value
|                                        |  | 2007                                                                          |         |   | 2008       |   |         | 2009                   |  | 2010 |   | 2011 |   | Thereafter |  | Total |   |  | September 30,2007
|                                        |  |                                                                               |         |   |            |   |         | (Dollars in thousands) |  |      |   |      |   |            |  |       |  
|Derivatives matched against liabilities |  |                                                                               |         |   |            |   |         |                        |  |      |   |      |   |            |  |       |   |  |                   |   |  |   |         |   |  |   |      
|Pay fixed swaps                         |  | $                                                                             | 650,000 |   |            | $ | 275,000 |                        |  | $    |  |      | $ |           |  | $     |  |  | $                 |  |  | $ | 925,000 |   |  | $ | 2,861
|Pay rate                                |  |                                                                               | 3.98    | % |            |   | 4.11    | %                      |  |      |  |      |   |           |  |       |  |  |                   |  |  |   | 4.02    | % |  |   |      
|Receive rate                            |  |                                                                               | 5.53    | % |            |   | 5.29    | %                      |  |      |  |      |   |           |  |       |  |  |                   |  |  |   | 5.46    | % |  |   |      



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



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

The Companys principal executive officer and principal financial officer evaluated the effectiveness of the Companys disclosure controls and procedures (as defined in rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of
the end of the period covered by this report. Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in the Companys report filed or submitted 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. Disclosure controls and procedures include, without limitation, controls and procedures
designed to ensure that information required to be disclosed in the Companys reports filed under the Exchange Act is accumulated and communicated to management, including the Companys principal executive officer and principal financial
officer as appropriate, to allow timely decisions regarding required disclosure. Based on their evaluation and material weaknesses in the Companys internal controls as described below, the Companys principal executive officer and
principal financial officer have concluded the Companys system of disclosure controls and procedures was ineffective as of September 30, 2007.

The Company identified a material weakness in its internal controls related to its income tax accounting as of December 31, 2005. The Companys tax structure is complex with significant tax jurisdictions
located outside of the United States. The acquisition of O-I Plastic added to the complexity of the tax structure, involved significant issues with regard to purchase accounting and significantly added to the Companys operations in Mexico. The
Company had insufficient resources to determine that income tax accounting complied with generally accepted accounting principles, particularly as it relates to the tax accounting for the O-I Plastic acquisition and the tax accounting for its
Mexican operations. This deficiency in the design and operation of internal controls could result in misstatements in the reported amount of current and deferred income tax balances, income tax provisions and in the required disclosures of income
tax amounts.

In response to the above determination, the Company has implemented certain remedies, including, among other
items, the deployment of greater resources in the area of income tax accounting. In addition, the Company has engaged qualified outside consultants to oversee the tax return preparation and the tax accounting reconciliations as well as conducted
extensive management reviews for its Mexican operations. During 2006 and the nine months ended September 30, 2007, the Company also reviewed and documented its income tax accounting processes and identified areas to strengthen the design and
operation of its tax related controls. Although these improvements were implemented, the Company has concluded that, as of September 30, 2007, these changes were either not yet fully implemented or not operating effectively for a sufficient
period of time in order to provide a reasonable possibility that a material misstatement in its income tax accounts would not occur. The Company expects to continue to implement additional changes relating to tax resources, training and policies
during the remainder of 2007.



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During the fourth quarter of 2006, the Company also identified various other
deficiencies that, when considered on an aggregate basis, constitute a material weakness. These deficiencies relate to matters such as segregation of duties and computer system access and approval processes. These deficiencies in the design and
operation of internal controls could result in misstatements in the reported amount of various financial statement amounts. In order to eliminate certain segregation of duties concerns, the Company has created a separate department to handle certain
customer and pricing matters and segregated certain responsibilities relating to the human resources and payroll processes in the first nine months of 2007. In addition, the Company is implementing procedures to more closely limit user access to its
information technology systems. Although these improvements were implemented, the Company has concluded that, as of September 30, 2007, these changes were either not yet fully implemented or not operating effectively for a sufficient period of
time in order to provide a reasonable possibility that a material misstatement in its financial statement accounts would not occur. The Company plans to make additional changes in its personnel, policies, systems and procedures during the remainder
of 2007 in order to specifically address the deficiencies identified and strengthen its internal controls.

The Company
will be required to issue an internal control report beginning with its 2007 Annual Report on Form 10-K and will be required to receive an independent assessment beginning with its 2008 Annual Report on Form 10-K.



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

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



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PART II. OTHER INFORMATION



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

For a
description of the Companys legal proceedings, see Note 11 of the Notes to the Unaudited Condensed Consolidated Financial Statements 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, 2006, which could
materially affect the Companys business, financial condition or future results. The risk factors in Holdings Annual Report on Form 10-K have not materially changed.



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



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



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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 2, 2007



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



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