Graham Packaging Co. IPOreport

Financial analysis adjusted for IPO price . $10 versus expected mid-range of $15 . Shares sold reduced to 16.7mm from 23.2mm . Gross IPO proceeds reduced to $167mm from $350mm . Market cap reduced to to $597mm from $1010mm . Shares outstanding post-IPO reduced to 59.7 from 67.3mm

BUSINESS

A worldwide leader in the design, manufacture and sale of value-added, custom blow molded plastic containers for branded consumer products.

BLACKSTONE (BX)

Owns 75% preIPO. This is a Blackstone bailout to the public market

OPERATING ISSUES

Declining sales

Sales are down 13.3% for the nine months ended Sept 30, 2009 versus a year earlier

If sales continue to deteriorate and if the operating margin declines, then the lenders may close in on the equity holders.

Manipulating the income statement pre-IPO

Sales & marketing got trimmed by $11mm to $90mm from $101mm for the nine months ended Sept 30, 2009 This is somewhat typical of how leveraged buyout companies manipulate their income statements prior to the IPO

It’s usually a one shot improvement the may be hard to maintain in the future, in any case investors shouldn’t count on similar % improvements (cuts) to sales & marketing

Gross margin improvement

Gross margin improvement due to declining resin costs

Resin costs are a large component to GPC’s cost of goods solds For the nine months ende Sept 30, 2009 resin costs declined to $.685 (ave) from $.92 for the year earlier period. Resin is a commodity and is subject to price flucuations.

Interest costs

For the nine months ended Sept 30 paid 60% of ‘improved’ operating profit for interest charges, pre-IPO

NEGATIVE NET WORTH even post-IPO, of -$568mm

USE OF IPO PROCEEDS

$228.8 million from the sale of 16.7mm shares Shareholders intend to sell 6.7mm shares

. Repay debt: $193mm . Fee payment to Blackstone: $26.3mm . Payment to Graham family: $8.8mm

Graham Packaging	GRM, C, 6					Post-IPO actual shares: 59.7mm
Plastic containers						pre-IPO est shares: 67.3mm
York, PA	2006	2007	2008	'Sept08,3mo	'Sept09,3mo	IPO Mkt
Revenue ($mm)	$2,500	$2,470	$2,559	$2,003	$1,736	Cap (mm)
Gross profit %	12%	14%	15%	15%	18%	$597
Operating income %	5%	1%	6%	9%	12%	@$10
Profit (loss)	-$121	$207	$58	$37	$51	mid-range
Profit (loss) % of revenue	-5%	8%	2%	2%	3%	was $15
VALUATION RATIOS	IPO Mrkt	Price /	Price /	Price /	Price /	% offered
	Cap (mm)	Sales	Earnings	BookValue	TangibleBV	in IPO
GRM --IPO price of $10	$597	1.0	9	-0.9	-0.6	28%
Pre-IPO mid-range $15	$1,010	1.7	15	-1.8	-1.0	35%
SCORECARD		Mgt	Market	Market Do-	Proprie-	Total
1-5, 5 is high			Growth	mination	tary	rating
20 is perfect		2	1	2	1	6
COMPARE & CONTRAST -- post IPO adjusted for prices, Friday Feb 12
Enterprise Value =	Mrk Cap	+Total	-Cash	=Enterprise	Price
Balance sheet: Sept 30 '09	($mm)	debt		Value (EV)	Feb 12
Graham PackagingGRM	$597	$2,252	-$193	$2,656	$10.28
Ball Corp (BLL)	$4,800	$4,905	-$531	$9,174	$51.07
Crown Holdings (CCK)	$4,200	$7,045	-$438	$10,807	$25.98
Silgan Holdings (SLGN)	$210	$1,633	-$67	$1,776	$54.83
ENTERPRISE VALUE	Enterprise	EV /	EV /	EV /	EV /	EV /
annualized Sept 9 mos	Value, $mm	Sales	Earnings	BookValue	TangibleBV	EBITDA
Graham PackagingGRM	$2,656	1.15	39.1	-4.1	-0.6	7.9
Ball Corp (BLL)	$9,174	1.19	21.6	6.2	-14.4	2.4
Crown Holdings (CCK)	$10,807	1.30	27.6	81.3	-5.6	2.7
Silgan Holdings (SLGN)	$1,776	0.24	33.4	2.7	6.0	0.9
COMPARE & CONTRAST -- pre-IPO
Enterprise Value =	Mrk Cap	+Total	-Cash	=Enterprise	Price
Balance sheet: Sept 30 '09	($mm)	debt		Value (EV)	Feb 4
Graham PackagingGRM	$1,010	$2,252	-$193	$3,069
Ball Corp (BLL)	$4,700	$4,905	-$531	$9,074	$49.99
Crown Holdings (CCK)	$4,030	$7,045	-$438	$10,637	$25.29
Silgan Holdings (SLGN)	$2,004	$1,633	-$67	$3,570	$53.55
ENTERPRISE VALUE	Enterprise	EV /	EV /	EV /	EV /	EV /
annualized Sept 9 mos	Value, $mm	Sales	Earnings	BookValue	TangibleBV	EBITDA
Graham PackagingGRM	$3,069	1.33	45.1	-5.4	-2.9	9.2
Ball Corp (BLL)	$9,074	1.18	21.4	6.1	-14.2	2.4
Crown Holdings (CCK)	$10,637	1.28	27.1	80.0	-5.5	2.7
Silgan Holdings (SLGN)	$3,570	0.47	67.1	5.4	12.1	1.9