UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C.  20549

                                    FORM 10-K
(Mark One)

[X]  Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange
     Act of 1934 for the fiscal year ended December 31, 1997 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:  0-20829

                           DIAMOND HOME SERVICES, INC.
             (Exact name of registrant as specified in its charter)

          Delaware                              36-3886872
   (State or other jurisdiction of             (I.R.S. Employer
   incorporation or organization)              Identification No.)

            222 Church Street
           Woodstock, Illinois                      60098
      (Address of principal executive offices)    (Zip Code)

Registrant's telephone number, including area code:   (815) 334-1414

Securities registered pursuant to Section 12(b) of the Act:  None

Securities registered pursuant to Section 12(g) of the Act:

                          Common Stock, $.001 par value
                                (Title of Class)

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 if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (Section 229.405 of this chapter) is not contained herein, and
will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K.    / /

The registrant estimates that the aggregate market value of the registrant's
Common Stock held by non-affiliates on March 3, 1998 (based upon an estimate
that 56.4% of the shares are so owned by non-affiliates and upon the average of
the closing bid and asked prices for the Common Stock on the Nasdaq National
Market on that date) was approximately $28,800,000.  Determination of stock
ownership by non-affiliates was made solely for the purpose of responding to
this requirement and registrant is not bound by this determination for any other
purpose.

As of March 3, 1998, 8,507,375 shares of the registrant's Common Stock were
outstanding.

The following documents are incorporated into this Form 10-K by reference:
     Proxy Statement for Annual Meeting of Stockholders to be held on May 14,
     1998 (Part III).


                                     PART I


ITEM 1.  BUSINESS

GENERAL

     The Company is one of the country's leading marketers and contractors of
installed home improvement products, including roofing, gutters, doors and
fencing. Through its subsidiary, Diamond Exteriors, Inc. ("Exteriors"), the
Company markets its home improvement products and services directly to consumers
primarily under the "Sears" name pursuant to a three-year non-exclusive license
agreement with Sears, Roebuck and Co. ("Sears") which expires December 31, 1998.
Sears has been in business for over 100 years and is a nationally recognized
name in the installed home improvement industry. The Company is one of the
largest, if not the largest, third-party licensees of Sears home improvement
products and services. The Company currently markets its products directly to
residential customers in 44 states through a combination of national and local
advertising and its sales associates. The Company has approximately 70 sales
offices located in major cities across the U.S.  The Company installs its
products through a network of qualified independent installers and purchases its
products through local and regional independent distributors.  Through its
finance subsidiary, Marquise Financial Services, Inc. ("Marquise"), the Company
provides financing to consumers of installed home improvement products and
services.  Marquise also buys pools of secured consumer receivables.

     The Company was incorporated in May 1993 to participate in the
consolidation of the installed home improvement industry. Since commencement of
the Company's operations in June 1993, the Company's net sales have increased to
approximately $161.1 million for the year ended December 31, 1997.

PRODUCTS

     The following table sets forth the net sales and percentage of total net
sales for each of the Company's major product lines.

<TABLE>
<CAPTION>

                                                                        Years Ended December 31

                                          1995                            1996                           1997

                                  Net Sales   Percent of        Net Sales   Percent of         Net Sales   Percent of
                                                Total                         Total                          Total
                                                                                   (Dollars in Thousands)

 <S>                                  <C>          <C>           <C>            <C>            <C>           <C>

 Roofing and Gutters. . .             $87,060      69.7%          $102,818      65.5%          $102,228         63.5%

 Fencing. . . . . . . . . . .          17,933      14.4             26,324      16.7             26,766          16.6

 Garage, Entry and                     19,855      15.9             23,717      15.1             29,154          18.1
   Security Doors, and
 Other

 Fee and Finance Income                     -        -               4,209       2.7              2,961           1.8


      Total. . . . . . . . . .       $124,848    100.0%           $157,068     100.0%                          100.0%
                                                                                           $161,109


</TABLE>

     The Company purchases all of its products directly from independent
distributors and/or manufacturers. All products sold by the Company under the
license agreement must be pre-approved by Sears.

     Set forth below is a brief description of the products offered by the
Company:

 Roofing and Gutters.  The Company sells and installs most types of roofing
products, including asphalt, fiberglass, laminate, and 3-tab shingles, clay and
concrete tile and metal. The Company also sells and installs a premium shingle
which is manufactured by Globe Building Materials, Inc. ("Globe"), the Company's
largest stockholder.  The Company does not sell, install or tear-off asbestos
roofing. The Company installs all types of residential roofs from flat roofs to
roofs with pitched complex structures.  The average price for a roof installed
by the Company is approximately $4,800.  The Company also sells and installs
aluminum and steel gutters. The average price of installed gutters is
approximately $1,350.  The Company repairs roofs as a Sears authorized
contractor and provides warranty service on Sears's behalf for exterior home
products sold, furnished and installed by Sears prior to Sears's exit in
December 1992 from the selling, furnishing and installing of roofing products.
Pursuant to the Sears license agreement, the Company also sells and installs
soffit/fascia and siding for dormers and gable ends and repairs chimneys in
connection with its roofing installations.

     The Company, on a limited test basis, also sells and installs, under the
"Diamond Exteriors" name, most types of light commercial roofing products, which
are similar to residential roofing products, including a wide variety of
shingles and various types of low slope roll roofing products. The average price
for a light commercial roof installation is approximately $15,000. Typically, a
light commercial roofing installation involves roofs of less than 13,000 square
feet, such as fast food restaurants, convenience stores and small, single-unit
buildings. The light commercial roofing products and services are not marketed
or sold pursuant to the Sears license agreement.

 Fencing.  The Company sells and installs a variety of fencing products
including galvanized, steel and aluminized chain link fences, vinyl and powder
coated steel fabric fences with matching color frameworks, wood fences in a
variety of styles, and PVC fences. The Company also sells a chain link fence
which features an extra-strong ribbed design and rust protection. The average
price of an installed fence is approximately $2,500. (See "Recent Developments"
below.)

 Garage Doors.  The Company sells and installs a complete line of wood and steel
garage doors. The average price of an installed garage door, including
custom-made garage doors, is approximately $1,400.  The Company sells a
proprietary, high quality insulated and non-insulated steel garage door.  In
connection with the sales of garage doors, the Company also sells and installs
the Sears Craftsman brand garage door openers.  In certain limited markets, the
Company repairs garage doors as a Sears authorized contractor.

 Entry and Security Doors.  The Company sells and installs exterior entry doors
and security storm doors. The Company offers a variety of pre-finished
energy-efficient steel, wood and fiberglass entry doors in a wide assortment of
colors and styles. The average price of an installed entry door is approximately
$1,600. The Company also offers steel-frame security storm doors which provide
energy efficiency and security. The average price for a fully installed security
storm door is approximately $1,100. In addition, the Company sells patio and
storm doors.

 Fee and Finance Income.  In 1997, the Company generated fee and finance income
from two sources.  Credit participation fee income, primarily from Sears and its
affiliates on installed sales financed by Sears and its affiliates, totalled
approximately $1.9 million in 1997.  Finance interest income on receivables
financed by Marquise totalled approximately $1.1 million in 1997.

 Other.  The Company sells and installs skylights, insulation and a complete
line of exterior home improvement products for mobile homes, such as siding,
windows, doors and roofing. In 1997 the Company terminated its testing of a
heating, ventilation, and air conditioning ("HVAC") sales and installation
business and liquidated the assets of its wholly-owned subsidiary Solitaire
Heating and Cooling, Inc., which provided cleaning, repair and replacement
products and services to the HVAC market.


NATIONAL MARKETING AND SALES LEAD GENERATION

     The Company's principal marketing activities are conducted by participation
in Sears's national preprints. In 1995, 1996, and 1997, approximately 44%, 39%,
and 59%, respectively, of the Company's marketing expense was related to Sears
preprints. Prior to the beginning of each year, the Company is required to
commit to the amount of advertising space that it intends to purchase from Sears
for the upcoming year. The Company believes that Sears national advertising
campaigns enable the Company to cost-effectively market its products. In
addition, the Company advertises in the yellow pages, in local newspapers, and,
to a lesser extent, on radio and television. To improve the efficiency of its
promotional activities, the Company monitors responses with internally developed
computer software to determine which groups of homeowners produce the highest
percentages of scheduled appointments and sales and to compile information such
as the average sale price per sales lead for each type of advertising media. The
Company's analysis of this information provides the basis for the ongoing
refinement of its advertising program.

     The Company's advertisements with Sears display a toll free number for a
potential customer to call. Currently, all calls from potential customers
responding to Sears advertisements, representing approximately 40% of the total
calls received by the Company, go through a Sears call center which is operated
24 hours a day. Calls relating to the Company's products are transferred to HI,
Inc. ("HI"), a call center staffed 24 hours a day and an affiliate of Mr. Clegg,
Chairman of the Board, Chief Executive Officer and President of the Company.  HI
(which does business under the name "KanTel") verifies the products the customer
is interested in, schedules an appointment (except in the case of repairs) and
transmits the sales lead, via facsimile or computer, to the appropriate sales
office.  The local sales office schedules appointments for repairs.

SALES

     Potential customers who contact the Company are scheduled for an in-home
presentation from a sales associate, generally within two to five days of the
initial contact. Appointment schedules are transmitted by facsimile or computer
from the call center to the various sales offices two to three times per day.
Each sales associate typically has two to three appointments each day and is
required to report the results of each appointment on a daily basis. Such data
provide the basis for the computer-generated management information upon which
the Company evaluates each sales associate's performance in such areas as sales
as percentage of appointments, cancellation rate, average dollar amount of
sales, job profitability and amount of commissions earned.

     Upon being assigned a qualified sales lead, one of the Company's sales
associates will make an in-home presentation explaining the Company's products
and services to the potential customer with the assistance of brochures, product
samples, and videos. During the in-home presentation, the sales associate will
also determine the specifications of the home improvement project and provide a
written price estimate for the work to be performed. The Company follows a
policy of requiring no money down from customers with approved credit, with
payment to be made only upon completion of the job and the receipt of a written
statement from the customer confirming satisfaction.

     The Company employs an incentive-based compensation program coupled with
employee benefit programs, including health insurance coverage, for its sales
associates. Sales associates receive a percentage of the revenue generated by a
sale, with the percentage varying depending upon the type and gross profit of
product sold. In addition, in the event of improper estimating or other errors
which lead to a reduced gross profit on an installation, the sales associate's
commission is reduced by a portion of the reduced gross profit. Sales managers
are paid a minimum base salary, with incentives based on both monthly sales and
the profits for their sales offices.  The Company is testing alternative forms
of compensation for sales associates.

     The Company places great importance on recruiting skilled, professional and
motivated sales associates. The attraction and retention of qualified sales
associates is critical to the Company's goal of continued sales growth. The
Company attracts sales associates by general advertising and referrals. The
Company believes it is reducing the incidence of sales associate turnover.

     The Company currently has approximately 70 sales offices.  The manager of
each sales office reports to a district manager.  Each sales office is typically
staffed with a sales manager, an installation manager and a customer service
project coordinator. The sales manager is responsible for assigning sales leads
to the sales associates.  The sales manager is responsible for recruiting and
training sales associates and monitoring performance, including closing ratio
performance with a view to assuring maximum productivity for each lead. The
installation manager is responsible for scheduling and retaining independent
installers for particular jobs and recruiting and certifying independent
installers. The customer service project coordinator manages the job through
completion and deals with matters related to customer satisfaction.

INDEPENDENT INSTALLERS

     The Company retains independent installers to perform all of its
installations. Prior to retention, the Company generally pre-screens each
contractor's background and works to ensure that the contractor meets the
Company's quality and safety standards. Each of the Company's sales offices
generally enters into annual arrangements with multiple independent installers
setting forth the compensation structure for the independent installer for a
specified  type and scope of installation. Independent installers engaged by the
Company employ their own workers and are required to maintain their own
vehicles, equipment, insurance and licenses. The Company's policy requires that
its independent installers satisfy the Company's workers' compensation, general
liability and automotive insurance requirements. In certain circumstances,
independent installers have not carried or renewed their  workers' compensation
and general liability insurance. To the extent that independent installers do
not carry the required insurance, the Company could incur ultimate liability for
any injury or damage claims. The Company has implemented a captive insurance
program to address this situation. The Company has approximately 1600
independent installers (i.e., independent installers who have worked in the past
sixty days for the Company). Many independent installers operate multiple
installation crews. Each independent installer provides the Company with a one
to two year warranty for its work which, in the case of roofing, is
significantly shorter in duration than the labor warranty provided by the
Company to its roofing customers.

CUSTOMER FINANCING

     The average sales price charged by the Company for its products and
services ranges between approximately $1,100 and $4,800. During fiscal 1997,
approximately 88% of the Company's sales were financed, and, of the sales which
were financed, approximately 85% were financed through Sears and third party
finance companies, including Sears affiliates.  A sales associate is generally
able to determine credit availability for a customer by calling one of the
Company's finance resources during the in-home presentation. In the Company's
credit arrangements with its third-party finance companies, the finance
companies assume all credit risk and the Company receives, upon completion of
the installation, the full or negotiated (in the case of non-prime credit)
contract price. Because the Company's target market is a homeowner living in a
single family home, its potential customers generally have a good credit rating.
However, in the past the credit approval rate of Sears and its affiliates for
the Company's customers has varied from time to time based on a variety of
factors. The continued availability of affordable financing for potential
customers is necessary for the Company to continue to sell its products.

     In November 1995, Marquise, the Company's finance subsidiary, commenced
operations to provide an additional financing alternative for purchasers of the
Company's products. The Company's customers had the option of financing their
purchase through Sears, Marquise, or any other approved third-party financing
source.  Unlike financing through third-party finance companies, the Company
bears the credit risk on all financing provided by Marquise.

     During the first year of its operation, Marquise only provided unsecured
financing.  During the fourth quarter of 1996, Marquise ceased providing
unsecured financing and introduced a new finance product - a fixed rate, fixed-
term, retail installment product secured by non-commercial real estate -
available to all creditworthy customers that cannot obtain unsecured financing.
If the customer applies for this type of secured financing through Marquise, it
typically takes approximately one business day to determine if a conditional
approval will be provided and approximately two weeks to complete the processing
of loan documents and to get the loan documents signed.  The Company may resume
the provision of unsecured financing in 1998.  At December 31, 1997, Marquise
had approximately $8.8 million in net consumer finance receivables, including
approximately $5.6 million in fixed rate, secured loans.  At December 31, 1997,
Marquise had reserved approximately $600,000 for uncollectible finance
receivables.

WARRANTY

     The Company provides each customer with a warranty on product and labor.
Depending on the type of product installed, the product and labor warranties
provided by the Company to the customer vary generally from two to 10 years. In
addition, the manufacturer provides a warranty to the customer on the product.
Generally, the product warranty provided by manufacturers is commensurate as to
scope and is typically longer as to duration than the warranty that the Company
provides to its customers. However, certain manufacturers' product warranties
often provide a declining amount of coverage over time, while the Company's
warranty coverage does not decline during the warranty period. In the case of
roofing, the labor warranty that the Company receives from its independent
installers (generally one to two years) is significantly shorter in duration
than that provided by the Company to its customers. In all cases, the Company is
primarily liable to the customer to fulfill all warranty obligations, regardless
of whether a manufacturer or independent installer performs its warranty
obligations. In addition, pursuant to the license agreement with Sears (i) Sears
has the right to settle, at the Company's expense and without the Company's
consent, any customer complaints, (ii) the Company has agreed to and supports
Sears policy of "Satisfaction Guaranteed or Your Money Back" as it relates to
customer complaints and adjustments and (iii) the Company's customers are
third-party beneficiaries of the product and labor warranty given by the Company
to Sears with respect to each installation. The Company attempts to limit its
potential warranty exposure by pre-screening and certifying independent
installers, by emphasizing workmanship and customer service, by using quality,
warranted products produced by nationally known manufacturers, by inspecting a
portion of all installations and by requiring installers to indemnify the
Company for claims of defective installation (which indemnity is secured by a
cash collateral account deposited by each installer).

     To secure the performance of the independent installers under their
warranties, the Company requires most independent installers to deposit with the
Company between 1% and 2% of the payment such independent installers receive for
each completed installation, up to an aggregate maximum agreed-upon amount,
which amount is held in reserve by the Company. These retentions are used to
secure performance by an independent installer of any labor warranty claims.
Although the amounts retained may not be sufficient to cover all labor warranty
costs, the Company believes that such retentions provide sufficient incentive to
the independent installer to perform the installation or needed repair in
accordance with the Company's high quality standards. The Company accrues a
reserve for warranty claims, which ranges from 1.5% to 2% of net sales.

PURCHASING

     The Company purchases roofing materials, gutters, doors, fencing and
related products primarily from a variety of local, regional, and national
independent distributors and/or manufacturers. Each independent distributor
provides a variety of services to the Company, including the maintenance of
adequate inventories to support the Company's prompt need for materials, the
delivery of requisite materials to each job site, and the provision of extended
payment terms for the products purchased. Some manufacturers also back the
Company's warranty under specified circumstances.  Through the use of
independent distributors, the Company avoids the costs associated with
maintaining an inventory, with operating distribution centers, and with
delivering materials to job sites. In many cases, the payment terms extended by
the Company's suppliers permit the Company to collect payment for an
installation prior to payment by the Company of the associated product costs.
The independent distributors benefit from their relationships with the Company
due to the consistent volume of purchases by the Company and the resultant
increased inventory turnover and the limited credit risk posed by the Company.

     In 1995, 1996, and 1997, approximately 20%, 23%, and 24%, respectively, of
the Company's roofing material purchases were supplied by ABC Supply Co., Inc.,
an independent distributor having facilities in multiple locations.  The Company
believes that other distribution companies would be able to offer comparable
services and pricing to the Company. Approximately 16%, 8%, and 8% in dollar
volume of all roofing products purchased by the Company during 1995, 1996, and
1997, respectively, were manufactured by Globe, the Company's largest
stockholder.

SEARS LICENSE AGREEMENT

     Currently, the Company conducts primarily all of its direct marketing and
installation activities under a license agreement between Exteriors and Sears.
Exteriors entered into a three-year license agreement with Sears effective
January 1, 1996. The license agreement authorizes the Company to sell, furnish
and install roofing, gutters, doors, fences, and certain other products under
the "Sears" name as a Sears authorized contractor to residential customers in 44
states. During the term of the license agreement, Exteriors may not sell,
furnish or install similar products to consumers under any other retailer's name
without Sears's consent. The license agreement expires December 31, 1998 but,
under certain circumstances, may be extended for a wind down period of up to six
months. After the first two years of its term, the license agreement may be
terminated prior to expiration by either party without cause so long as such
party has provided 12-months' written notice prior to the termination date. The
license agreement also provides for immediate termination by Sears for various
reasons, including failure to comply with any material provision of the license
agreement; allegations that the approved products infringe a third party's
patent, trademark or copyright or that they are being sold in violation of law;
Exteriors's failure to have merchantable, conforming products ready for delivery
and installation at the time specified; or receipt by Sears, in its opinion, of
an excessive number of complaints regarding Exteriors and Exteriors's failure to
timely provide Sears with adequate assurances, as determined by Sears, that
issues involving such complaints have been resolved to Sears's satisfaction. In
addition, Sears has the right, at any time, upon 12 months' notice to Exteriors
to discontinue Exteriors's right to sell, furnish and install certain products
in certain markets under the "Sears" name if the sales volume or if scores
relative to the Sears "Quality Every Day!" standards or "Service Quality Index,"
as defined in the license agreement, for such products or services fall below
the standards contained in the license agreement.

     The license agreement is not exclusive by its terms; however, historically,
Sears has not licensed the same home improvement products to multiple licensees
within the same market. The Company believes Sears does not grant licenses to
more than one licensee in a market because Sears wishes to avoid confusion among
the customers with respect to pricing and other factors; provided, however,
there can be no assurance that Sears will continue to limit its licenses. The
license agreement may not be assigned by Exteriors to a third party other than
an affiliate without Sears's consent.

     The license agreement provides for Exteriors to pay Sears a license fee
based on Exteriors's gross sales for products licensed under the license
agreement. The license fee is a fixed percentage of such sales for certain
products.  The license agreement provides for an additional fee of 1% of gross
sales for each sale made pursuant to a customer referral from a Sears retail
store associate.

     The license agreement imposes quality standards which must be maintained by
Exteriors as to the products and the services it offers. Prior to any new
product introduction, each product sold under the license agreement with Sears
must be approved by Sears. In addition, all marketing materials employing the
"Sears" name are subject to the prior approval of Sears. The license agreement
grants Sears certain rights regarding customer information generated by
Exteriors during the term of the license agreement, as well as regarding
telephone numbers used by Exteriors in connection with its operations under the
license agreement and limits the rights of Exteriors in such customer
information or goodwill.  Exteriors cannot use such information other than in
connection with the license agreement. The license agreement also provides Sears
the right to settle, at Exteriors's expense and without Exteriors's consent, any
customer complaints. The Company is not aware of any material claims made
against Sears by customers of Exteriors which Exteriors has not directly
resolved or is in the process of resolving with the customer, but no assurances
can be given that Sears will not do so in the future with respect
to the Company's customers. The Company has agreed to and supports Sears's
policy of "Satisfaction Guaranteed or Your Money Back." The license agreement
also provides that the customers are third-party beneficiaries of the one-year
product and labor warranty from the Company to Sears with respect to each
installation.

     The license agreement provides for the payment of a credit participation
fee as long as Sears is given a right of first refusal with respect to a minimum
of 75% of the total dollar volume of applications for credit received by the
Company in connection with sales made pursuant to the license agreement. If
Sears declines any credit application, such application is referred to the
Company and the Company, at its discretion, can provide credit to the applicant
or seek a third party to provide credit. Beginning in 1996, the Company received
from Sears and its affiliates a participation fee equal to approximately 1.6% of
sales financed through Sears and its affiliates. The participation fees are
payable by Sears and its affiliates over a ten-year period, with 71% of the
total participation fee to be paid in the first three years following each
installation financed through Sears and its affiliates. The Company's right to
receive the participation fee is subject to termination under certain
circumstances.

     The Company believes that it has a good relationship with Sears and that it
is one of Sears's largest third-party home improvement product licensees
measured by number of installations, gross sales, license fees paid to Sears and
the number of sales offices and markets served. In 1995, 1996, and 1997, the
Company incurred license fees to Sears in the aggregate amount of approximately
$13.0 million, $16.4 million, and $16.9 million, respectively. In addition,
Sears and its affiliates have financed in excess of $450 million of the
Company's sales since the Company's inception. In the event that Sears were to
terminate or fail to renew the license agreement, the Company believes that,
through its established sales and installation system, its products and services
could be marketed, installed and financed by the Company independently or under
the name of an alternative retail licensor. However, termination of the license
agreement or certain rights thereunder, the failure of Sears to renew the
license agreement with the Company on its current terms, an increase in the
rates of the license fee paid by the Company to Sears, the addition of other
Sears licensees marketing the Company's products in the Company's markets,
Sears's exercise of its right to discontinue the Company's license in any market
or for any product or a decline in Sears's reputation or an increase in adverse
publicity about Sears could have a material adverse effect on net sales and
profitability of the Company.  The Company is not owned or controlled by, or
under common control with, Sears.  Neither Sears nor any of its affiliates
assumes any responsibility with respect to the accuracy of any information set
forth herein.

SEASONALITY AND BACKLOG

     The Company's results of operations may fluctuate from year to year or
quarter to quarter due to a variety of factors.  The Company expects lower
levels of sales and profitability during the period from mid-November through
mid-March, impacting the first and fourth quarter of each fiscal year.  The
Company believes that this seasonality is caused by winter weather in certain of
the Company's markets located in the northeastern and north central U.S. and by
rainy weather, each of which limits the Company's ability to install exterior
home improvement products.  Backlog, defined as jobs sold but not installed,
decreased approximately $3.9 million, from approximately $14.8 million at
December 31, 1996, to approximately $10.9 million at December 31, 1997.

COMPETITION

     The industry in which the Company competes is large, fragmented and
competitive. The Company believes that it is one of the largest companies in the
U.S. engaged in the sale and installation of exterior home improvement products.
The Company competes for sales with numerous local and regional home improvement
installers and independent installers in each of its markets, some of which also
serve as independent installers for the Company. The Company also competes
against major retailers and manufacturers which may license and/or market and
arrange for the installation of products similar to the Company's, including
Home Depot, Inc., Builders Square, and GAF.  To date, none of the retailer- or
manufacturer-sponsored programs has provided significant competition to the
Company. However, there can be no assurance that this absence of competition
will continue. Certain of these competitors are significantly larger and have
greater financial resources than the Company. In addition, these major retailers
or manufacturers each has a nationwide chain of retail stores or access to
outlets, which provides them the opportunity to offer products and services
similar to the Company's directly to their customers. The Company competes on
the basis of price, Sears name recognition and reputation, customer service
reputation, workmanship and the ability of the Company and the manufacturer to
fulfill their warranty obligations. Because the Company's focus is on providing
additional value to its customers through warranty protection, insurance
coverage, proprietary products and superior customer service, the Company
typically offers and sells its products and services at prices that may be
significantly higher than those of most of its competitors.

GOVERNMENT REGULATIONS

     The Company's business and the activities of its independent installers are
subject to various federal, state and local laws, regulations and ordinances
relating to, among other things, in-home sales, consumer financing, advertising,
the licensing of home improvement independent installers, OSHA standards,
environmental laws and regulations relating to the disposal of demolition debris
and other solid wastes, and building and zoning regulations.  In certain
jurisdictions, the Company or one of its employees is required to be licensed as
a contractor. In addition, certain jurisdictions require the Company or the
independent installer to obtain a building permit for each installation. The
Company is also subject to certain federal, state and local laws and regulations
which, among other things, regulate the Company's advertising, warranties and
disclosures to customers.  Compliance with federal, state and local provisions
that have been enacted or adopted regulating the discharge of materials into the
environment, or otherwise relating to the protection of the environment, is not
expected to have a material effect upon the capital expenditures, earnings and
competitive position of the Company and its subsidiaries.

     Marquise's operations are subject to supervision by state authorities
(typically state banking, consumer credit or insurance authorities) that
generally require that the Company be licensed to conduct its business and that
impose examination, reporting, and other regulatory requirements.  In many
states, issuance of licenses is dependent upon a finding of public convenience,
and of financial responsibility, character and fitness of the applicant.
Licenses are revocable for cause.

     In addition, the financing activities of the Company and its subsidiaries
are subject to the Federal Consumer Credit Protection Act ("FCCPA"), which is
comprised of various federal statutes governing the consumer finance industry.
Included within the FCCPA are, among other federal statutes, the Truth in
Lending Act, the Fair Credit Reporting Act, the Equal Credit Opportunity Act and
the Fair Debt Collection Practices Act. The Truth in Lending Act requires a
written statement showing the annual percentage rate of finance charges and
requires that other information be presented to debtors when consumer credit
contracts are executed. The Fair Credit Reporting Act requires certain
disclosures to applicants for credit concerning information that is used as a
basis for denial of credit. The Equal Credit Opportunity Act prohibits
discrimination against applicants with respect to any aspect of a credit
transaction on the basis of sex, marital status, race, color, religion, national
origin, age, derivation of income from a public assistance program, or the good
faith exercise of a right under the FCCPA. In addition, the Fair Debt
Collections Practices Act proscribes various debt collection practices which it
deems unfair, harassing or deceptive.  Moreover, certain states may require
Exteriors or Marquise to make additional disclosures to consumers (such as
identifying installers and suppliers) and to take other actions (such as giving
waiting periods that exceed federal requirements) when consumer credit contracts
are executed.

     Marquise is subject to state usury laws. In certain states and under
certain circumstances, state law has been preempted by federal law, although for
a period of time individual states were permitted to enact legislation
superseding federal law. To be eligible for the federal preemption, the credit
application must comply with certain consumer protection provisions. A few
states have elected to override federal law, but have established maximum rates
that either fluctuate with changes in prevailing rates or are high enough so
that, to date, no state's maximum interest rate has precluded Marquise from
continuing to offer financing in that state.

EMPLOYEES AND INDEPENDENT INSTALLERS

     At December 31, 1997, the Company employed approximately 1,200 persons,
including approximately 650 sales associates and approximately 200 part-time
employees.  In addition, the Company has relationships (i.e., independent
installers who have performed an installation for the Company in the last sixty
days) with approximately 1,600 independent installers which perform installation
services.  Many of the Company's independent installers operate multiple
installation crews.  The Company considers its relations with its employees and
independent installers to be satisfactory.

RECENT DEVELOPMENTS

     On March 6, 1998, the Company announced an agreement to acquire all the
stock of Reeves Southeastern Corporation ("Reeves") for approximately $42
million in cash and notes.  Reeves is a national manufacturer and distributor of
fencing and perimeter security products.  The consummation of the transaction is
subject to various closing conditions.

EXECUTIVE OFFICERS AND OTHER KEY EMPLOYEES OF THE REGISTRANT

     As of March 16, 1998, the executive officers and other key employees of the
Company were as follows:

   NAME            AGE          POSITION

EXECUTIVE OFFICERS:

C. Stephen Clegg      47  Chairman of the Board, Chief Executive Officer and
                          President
Jerome E. Cooper      57  Vice President - Installations
James M. Gillespie    58  Vice President - Business Development and a Director
Ronald D. Greene      43  Vice President - National Sales
Eugene J. O'Hern, Jr. 54  Controller
Richard G. Reece      49  Vice President, Chief Financial Officer and Treasurer
Joseph U. Schorer     44  Vice President, General Counsel and Secretary

OTHER KEY EMPLOYEES:

Stuart M. Davidson     35   Vice President - MIS
Thomas A. Jackson      43   Vice President - Exteriors
David T. Jones         48   Vice President - Exteriors
Marvin Lerman          55   Vice President - Purchasing
Ian F. Ostergaard      49   Vice President - Human Resources
Ann Crowley Patterson  38   Vice President
S. Austin Sawyer       64   President - Marquise
Kenneth H. Smith       55   Vice President - Marketing
R.Q. Whitmire          48   Vice President - Exteriors

     MR. C. STEPHEN CLEGG has been a director of the Company since September
1993 and has served as the Company's Chairman of the Board and Chief Executive
Officer since February 1996 and President since April 1996.  From April 1989 to
the present, Mr. Clegg has served as Chairman of the Board, Chief Executive
Officer and controlling stockholder of Globe, a manufacturer of home building
products, including roofing shingles and related roofing products. Globe is the
Company's largest stockholder. Mr. Clegg has served as the Chairman of the Board
and Chief Executive Officer of Mid-West Spring Manufacturing Company, a company
which manufactures specialty springs, wire forms and metal stamping products
("Mid-West Spring"), and its predecessors since April 1993 and has served as a
director since 1991. Since April 1994, Mr. Clegg has also served as the Chairman
of the Board, Chief Executive Officer and controlling stockholder of Catalog
Holdings, Inc. ("Catalog"). Catalog is the parent company of HI, which receives
fees from the Company for providing call center services, for processing sales
leads, and for other services.  HI owns a majority of the common stock of The
Handy Craftsmen, Inc. ("Handy Craftsmen").  Mr. Clegg is also a controlling
shareholder of Alexander & Walsh, Inc., which provides advertising and other
marketing services to the Company.  Mr. Clegg is president of Clegg Industries,
Inc., a private investment firm which he founded in September 1988.  Mr. Clegg
devotes and intends to devote a majority of his time to the Company.  Prior to
founding Clegg Industries, Inc., he was a managing director of AEA Investors,
Inc., a private investment firm.  Mr. Clegg is currently a director of two other
public companies, Birmingham Steel Corporation, a steel production company, and
Ravens Metal Products, Inc., a manufacturer of aluminum products.

     MR. JEROME E. COOPER has been Vice President - Installations for the
Company since February 1997.  From April 1996 until February 1997, he was Vice
President - Central Region of the Company. He was President - Central Region of
the Company from May 1995 to April 1996 and was Central Region Manager from
February 1994 to May 1995.  Prior to joining the Company, Mr. Cooper held
various retail management positions with Sears from 1963 to 1991 and was
regional business manager of installed home improvements at Sears from 1991 to
May 1993.

     MR. JAMES M. ("MILT") GILLESPIE has been a director of the Company since
May 1995 and in January 1997, he was appointed Vice President - Business
Development for the Company.  From April 1996 until January 1997, Mr. Gillespie
was Vice President - Southeastern Region of the Company.  He was President -
Southeastern Region of the Company from May 1995 to April 1996, had been
Southeastern Region Manager from February 1994 to May 1995 and was a director of
the Company from September 1993 to September 1994. Prior to joining the Company,
Mr. Gillespie held various retail management positions with Sears from 1962 to
1989 and was a regional business manager of installed home improvements at Sears
from 1989 to May 1993.

     MR. RONALD D. GREENE, Vice President - National Sales, joined the Company
in January 1998.  From 1990 until he joined the Company, Mr. Greene was
Executive Vice President of Sales for American Magnetite, Inc., a privately held
corporation and Sears licensee in the installed home improvement industry.
Prior to 1990, Mr. Greene was an officer of Amre, Inc., a marketer and installer
in the home improvement industry.

     MR. EUGENE J. O'HERN, JR., has been controller of the Company since July
1996. From July 1993 through June 1996, Mr. O'Hern was the controller at Briskin
Manufacturing Company, a manufacturer of automobile and industrial components.
From January 1991 through June 1993, Mr. O'Hern was director of finance for the
Cinch Connector Division of L.C.S., Inc., a manufacturer and distributor of
electrical connectors.

     MR. RICHARD G. REECE has served as Vice President, Chief Financial Officer
and Treasurer of the Company since April 1996. He was assistant treasurer of the
Company from August 1994 to April 1996 and a director from May 1995 to April
1996.  Mr. Reece was Vice President and Chief Financial Officer of Globe from
August 1994 to June 1996. From November 1990 to the present, Mr. Reece has been
the sole officer, director and stockholder of Paradigm 2000 Inc., a consulting
firm which he founded. From June 1986 to December 1990, Mr. Reece was Executive
Vice President and Chief Operating Officer of American Health Companies, Inc.
which is the parent corporation of Diet Center, Inc. Prior to joining American
Health Companies, Inc., Mr. Reece was a partner with Ernst & Young LLP, an
international public accounting firm.

     MR. JOSEPH U. SCHORER has served as Vice President, General Counsel and
Secretary of the Company and its subsidiaries, of Globe, of Mid-West Spring and
of Catalog since March 1997.  Mr. Schorer devotes and intends to devote a
majority of his time to the Company.  From January 1985 until he joined the
Company, Mr. Schorer was a partner in the Chicago, Illinois office of Mayer,
Brown & Platt, an international corporate law firm.

     MR. STUART M. DAVIDSON joined the Company in November 1996 as Vice
President - MIS.  Prior to joining the Company, he was employed for twelve years
at HarperCollins Publishers in various information technology positions.  For
the last three years at HarperCollins Publishers, Mr. Davidson was Director of
Information Systems with Scott Foresman, the educational publishing division of
HarperCollins.

     MR. THOMAS A. JACKSON has been Regional Vice President of the East Region
of the Company since January 1998.  From January 1997 until January 1998 Mr.
Jackson served as a Region Vice President of Sales and Installation for the
Company and, from May 1993 until January 1997, Mr. Jackson was the Vice
President of Sales of the eastern region of the Company.  Prior to joining the
Company, from 1976 until 1989, Mr. Jackson held various retail management
positions with Sears and, from 1989 until May 1993, he was the regional product
manager responsible for buying and marketing installed home improvements for
Sears.

     MR. DAVID T. ("TIM") JONES has been Regional Vice President of the
Southeast Region of the Company since January 1998.  Mr. Jones joined the
Company in May 1993 as Vice President - Field Operation for the southeast
region.  Prior to joining the Company, Mr. Jones held various retail management
positions with Sears from 1971 until 1989 and served as a regional manager of
the installed home improvements division of Sears from 1989 until May 1993.

     MR. MARVIN LERMAN has been Vice President - Purchasing of the Company since
its formation in May 1993.  Prior to joining the Company, Mr. Lerman held
various management positions at Sears from 1963 to May 1993.

     MR. IAN F. OSTERGAARD, Vice President - Human Resources, joined the Company
in December, 1997.  From January, 1981, until he joined the Company, Mr.
Ostergaard was employed by Citibank, FSB of Illinois.  He held several positions
at Citibank, FSB, the last one being Senior Vice President - Human Resources,
from April, 1992, until December, 1997.

     MS. ANN CROWLEY PATTERSON has served as Vice President of the Company since
April 1996.  From 1993 until March 1997, Ms. Patterson also served as the Vice
President, General Counsel and Secretary of the Company, Globe, and Mid-West
Spring and as the Vice President and Secretary of Catalog.  Ms. Patterson was
associated with Jones, Day, Reavis & Pogue in New York, New York and Chicago,
Illinois from February 1989 to November 1993.

     MR. S. AUSTIN SAWYER has been President of Marquise since March 1996. He
has been the President of Cornerstone Financial Corporation, a commercial
lending corporation, since May 1995. Mr. Sawyer was a Senior Vice President of
Bank of Northern Illinois from February 1993 to February 1995, and was Vice
President of the Lending Services Division of Sears Consumer Financial
Corporation from 1990 to January 1993. From 1980 through 1989, Mr. Sawyer was
the President and a director of C&S Family Credit Inc., a division of Citizens &
Southern Corporation in Atlanta, Georgia.

     MR. KENNETH H. SMITH joined the Company as Vice President - Marketing in
February 1997.  Prior to joining the Company, Mr. Smith served for eighteen
years in various marketing, product development, and quality/customer support
positions at S.C. Johnson & Sons, Inc., a global marketer of various home and
commercial packaged goods products.

     MR. R.Q. WHITMIRE has served as Regional Vice President of Sales and
Installations for the central region of the Company from May 1995 until January
1998.  In January 1998 he became Regional Vice President of the West Region of
the Company, which combined the former central and west regions of the Company.
From 1993 until May 1995 he served in various management positions in the
Company.  Prior to joining the Company in 1993, Mr. Whitmire was employed with
Sears for 23 years at various retail management positions.  His last position
with Sears was district sales manager for Home Improvements from 1988 through
1993.


ITEM 2.  PROPERTIES

     The Company's principal executive and administrative office is currently
located in approximately 23,000 square feet of office and warehouse space in
Woodstock, Illinois pursuant to a lease agreement which expires December 31,
2001.  As of December 31, 1997, the Company leased approximately 70
sales/installation offices. These offices occupy between 200 and 3,000 square
feet (with an average of approximately 1,600 square feet) and typically have
lease terms ranging from one to three years.


ITEM 3.  LEGAL PROCEEDINGS

     International Equity Capital Growth Fund, L.P. ("IECGF") owns approximately
24% of the common stock (on a fully diluted basis) of Globe. In October 1994,
IECGF indicated to Mr. Clegg that it desired liquidity and wanted to sell its
interest in Globe. Discussions took place among various Globe representatives
and representatives of IECGF regarding such a transaction, but IECGF has
demanded a price which Globe has been unwilling and unable to meet. Globe is
aware of negotiations and solicitations which IECGF has had with parties
unrelated to Globe in attempts to sell its position.  No transaction has
occurred. In light of this, representatives of IECGF have taken a variety of
actions which, in the opinion of certain members of Globe management, have been
detrimental to Globe and are intended to strengthen the negotiating position of
IECGF. In a meeting in April 1996, counsel for IECGF, in the course of
negotiations regarding the possible purchase of IECGF's interest, threatened to
file litigation if Globe did not arrange to purchase the IECGF position. This
threat of litigation did not include any indication of the nature of the claims
that would be asserted by IECGF.

     On May 14, 1996, IECGF filed a purported derivative action on behalf of
Globe and the Company against Mr. Clegg and Jacob Pollock, a director of both
Globe and the Company, in the Court of Chancery of the State of Delaware (the
"Delaware Suit"). The complaint, as amended, alleges, among other things, that
Mr. Clegg breached his fiduciary duty to the Company by causing Catalog (in lieu
of the Company) to acquire Handy Craftsmen. The complaint also challenges as
excessive a $150,000 payment to Catalog for the purchase of warrants, sales
leads and call center services. No other specific transactions relating to the
Company's affairs are challenged in the complaint.  The complaint also makes
allegations against Mr. Clegg and Mr. Pollock which include breach of fiduciary
duty as a result of alleged conflicts of interest related to certain
transactions which have been consummated at Globe.

     The Company believes that the allegations respecting the Company in the
Delaware Suit are without merit. Mr. Clegg and Mr. Pollock strongly deny the
breaches alleged in the Delaware Suit.


ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     None.


                                     PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
         MATTERS.

     Except as set forth below, the information required by this Item is set
forth in the excerpts from the registrant's Annual Report to Stockholders for
the fiscal year ended December 31, 1997, under the caption "Corporate Data,"
which information is included in Exhibit 13.1 and hereby incorporated herein by
reference.

     Other than a special, one-time dividend of approximately $8.6 million paid
to the Company's pre-initial public offering stockholders in June 1996, the
Company has not declared or paid any cash dividends on its Common Stock since
its formation.  The Company does not expect to declare cash dividends and
anticipates, for the foreseeable future, that earnings and cash resources will
be used to finance the growth and development of its businesses.  In addition,
the Company's bank lines of credit place limitations, under certain conditions,
on the payment of cash dividends.


ITEM 6.  SELECTED FINANCIAL DATA.

     The information required by this Item is set forth in excerpts from
registrant's Annual Report to Stockholders for the fiscal year ended December
31, 1997, under the caption "Selected Financial Data," which information is
included in Exhibit 13.1 and incorporated herein by reference.


ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS.

     The information required by this Item is set forth in excerpts from
registrant's Annual Report to Stockholders for the fiscal year ended December
31, 1997, under the caption "Management's Discussion and Analysis of Financial
Condition and Results of Operations," which information is included in Exhibit
13.1 and incorporated herein by reference.

                ------------------------------------------------

                INFORMATION REGARDING FORWARD-LOOKING STATEMENTS

     Certain statements contained herein which are not of a historical nature,
including without limitation, statements addressing the beliefs, plans,
objectives, estimates or expectations of the Company or future results or events
constitute "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995.  Such forward-looking statements
involve known and unknown risks, including, but not limited to, general economic
and business conditions, matters related to the Sears license, warranty
exposure, the Company's reliance on sales associates and on the availability of
qualified independent installers, and conditions in the home improvement
industry.  There can be no assurance that actual results, performance or
achievements of the Company will not differ materially from any future results,
performance or achievements expressed or implied by such forward-looking
statements.  The Company undertakes no obligation to update publicly any
forward-looking statement whether as a result of new information, future events
or otherwise.

     In addition to the risks and uncertainties of ordinary business operations,
the forward-looking statements of the Company contained in this Annual Report on
Form 10-K are subject to the following risks and uncertainties:

Limited Operating History

     The Company was incorporated in May 1993 by a group consisting primarily of
a group of former Sears home improvement managers and Globe, and commenced
operations on June 1, 1993, when it entered into a license agreement with Sears.
Accordingly, the Company's operating history is brief and may not serve as an
accurate indicator of the Company's future performance.  Since its inception,
the Company has experienced substantial growth in revenue, and in 1997 the
Company's operating income decreased from 1996 levels.  There can be no
assurance that the Company's revenue growth and profitability will be sustained.


Dependence on Sears License

     Substantially all of the Company's revenues are derived from sales of
products and services under a license agreement between Exteriors and Sears.
The license agreement is not exclusive by its terms; however, historically,
Sears has not licensed the same home improvement products to multiple licensees
within the same market.  Notwithstanding the foregoing, there can be no
assurance that Sears will not license the same home improvement products to
other licensees within the Company's markets.  As it has done in the past, the
Company expects to negotiate and revise its license agreement on terms that meet
the Company's three fundamental principles in dealing with Sears:  (1) top-line
growth, (2) quality, and (3) licensee profitability.  Although in the past Sears
has either renewed or extended the license agreement with the Company, there can
be no assurance that the license agreement will be renewed or extended upon the
license's scheduled expiration on December 31, 1998.  Termination of the license
agreement or certain rights thereunder, the failure of Sears to renew the
license agreement with the Company on its current terms, an increase in the
rates of the license fee paid by the Company to Sears, the addition of other
Sears licensees marketing the Company's products in the Company's markets,
Sears's exercise of its right to discontinue the Company's license in any market
or for any product or a decline in Sears's reputation could have a material
adverse effect on the net sales and profitability of the Company.  In addition,
in the event the license agreement is terminated or expires, the Company would
need to find alternative methods to market its products.  There can be no
assurance that the alternative methods would be as cost-effective as advertising
with Sears and, to the extent such methods are not as cost-effective, the
Company's net sales and profitability could be adversely affected.  (See also
"Sears License Agreement" under Item 1.)

Warranty Exposure

     The Company provides each customer with a warranty on product and labor.
Certain manufacturers' product warranties often provide a declining amount of
coverage over time, while the Company's warranty coverage does not decline
during the warranty period.  The labor warranty that the Company receives from
its independent roofing installers (generally one to two years) is significantly
shorter in duration than that provided by the Company to its roofing customers.
Due to the Company's limited operating history and the length of the warranties
provided by the Company, there can be no assurance that the warranty reserve is
adequate. In all cases, the Company is liable to the customer to fulfill all
warranty obligations, regardless of whether a manufacturer or independent
installer performs its warranty obligations.  In addition, pursuant to the
license agreement with Sears (i) Sears has the right to settle, at the Company's
expense and without the Company's consent, any customer complaints, (ii) the
Company has agreed to and supports Sears policy of "Satisfaction Guaranteed or
Your Money Back" as it relates to customer complaints and adjustments and (iii)
the Company's customers are third party beneficiaries of the product and labor
warranty given by the Company to Sears with respect to each installation.  To
the extent the amount of money spent to reimburse Sears for customer complaint
settlements or to satisfy customers under the "Satisfaction Guaranteed or Your
Money Back" policy, together with any warranty claims settled by the Company
materially exceeds the warranty reserve or if certain manufacturers or a
significant number of independent installers are unable to fulfill their
warranty obligations, the Company's results of operations could be materially
adversely affected.  (See also "Warranty" under Item 1).

Reliance on Sales Associates

     The Company's success depends upon its ability to identify, develop and
retain qualified employees, particularly sales associates.  As a result, the
Company devotes significant resources to the training and development of its
sales associates.  There can be no assurance that the Company will continue to
be able to identify, develop and retain qualified sales associates.

     To the extent that the Company does not successfully hire and retain
qualified sales associates or they are unable to achieve anticipated performance
levels, the Company's ability to penetrate existing and new markets and,
therefore, the Company's sales growth could be significantly delayed or
adversely affected.

     The Company has experienced significant turnover with respect to its sales
associates in the past, because, among other reasons, the Company's sales
associates work on a commission-only basis and, in certain regions of the
country, the business is seasonal.  In 1997, approximately 39% of the sales
associates generated approximately 65% of net installed sales.  Increased
turnover and/or loss of productive sales associates has a direct impact on
net sales and profitability.  The turnover of sales associates results in
increased recruitment and training costs and a lower than desired conversion
rate of sales leads to sales.  To the extent that the turnover rate of sales
associates continues or increases, or the Company loses a significant number
of its most productive sales associates, the net sales and profitability of
the Company could be adversely affected.  (See also "Sales" under Item 1).

Dependence on Availability of Qualified Independent Installers

     The Company's success depends upon its ability to continue to hire
independent installers possessing the technical skills, experience and financial
stability necessary to meet the Company's quality standards and to satisfy the
Company's insurance requirements.  Because the Company provides up to a 10-year
warranty for labor on certain products, hiring qualified independent installers
who will perform the work in accordance with the Company's specifications and
predetermined quality standards is extremely important.  Most of the Company's
independent installers also compete directly with the Company and the Company,
to a lesser extent, competes with other home improvement companies for the
services of independent installers.  The Company only retains an independent
installer at the time an installation is sold.  As a result, no independent
installer is obligated to work for the Company until the independent installer
accepts an assignment.  In the past, the Company has periodically had difficulty
retaining a sufficient number of qualified independent installers, especially
after periods of extreme weather in specific geographic areas due to increased
demand.  There can be no assurance that qualified independent installers will
continue to be available to, or choose to work for, the Company in sufficient
numbers to satisfy the Company's installation requirements.  The Company's
policy requires that its independent installers satisfy the Company's workers'
compensation, general liability and automotive insurance requirements. In
certain circumstances, independent installers have not carried or renewed their
workers' compensation and general liability insurance.  To the extent that
independent installers do not carry the required insurance, the Company could
incur ultimate liability for any injury or damage claims.  (See also
"Independent Installers" under Item 1.)

Interest Rate and Inflation Sensitivity

     The ability to finance purchases on an affordable basis, of which the
interest rate charged is a significant component, is an important part of a
customer's decision to purchase the Company's products.  As interest rates
increase, customers often pay higher monthly payments which may make the
Company's products less affordable, and, as a result, the Company's net sales
and profitability may decrease.

Dependence on Availability of Third Party Credit

     During 1997, approximately 88% of the Company's sales were financed, and,
of the sales which were financed, approximately 85% were financed through Sears
and third party finance companies, including Sears affiliates.  Since the
Company's inception, the credit approval rate of Sears and its affiliates for
the Company's customers has varied from time to time based on a variety of
factors.  To the extent its customers are unable to obtain financing through
Sears and its affiliates or other third party finance companies, the Company's
results of operations could be adversely affected.

     Many of the Company's customers who finance their purchases through
Marquise may be higher credit risks than the Company's other customers due to
various factors, including, among other things, their employment status and
previous credit history, the absence or limited extent of their prior credit
history or their limited financial resources.  Consistent with the Company's
strategy, many customers who finance their purchases through Marquise have not
met and may not meet the credit underwriting criteria of third party finance
companies.  Consequently, providing financing to these customers will likely
involve a higher incidence of default and increased delinquency rates and will
involve greater servicing costs.  The Company currently bears the credit risk on
the purchases financed through Marquise, unlike purchases financed through third
party finance companies, such as Sears affiliates.  Marquise currently maintains
a bad debt reserve for expected losses.  Due to Marquise's limited operating
history and the Company's limited experience in consumer financing, there can be
no assurance that the bad debt reserve is adequate.  To the extent that losses
materially exceed the bad debt reserve, the Company's results of operations
could be materially adversely affected.  There can be no assurance that the
credit performance of its customers will be at the expected level, that
Marquise's systems and controls will be adequate, that losses will be consistent
with the expected bad debt experience or that the financing Marquise has
obtained will be sufficient to support its expanded operations.  (See also
"Customer Financing" under Item 1.)

Dependence on Key Personnel

     The Company is currently dependent upon the ability and experience of its
executive officers and there can be no assurance that the Company will be able
to retain all of such officers.  The loss of a group of executives within a
short period of time could have a material adverse effect on the Company's
operations.  Certain of the Company's executive officers also hold executive
positions and have responsibilities with Globe, certain of its affiliates and
other companies and expect to continue in these positions.  Mr. Clegg, the
Company's Chairman of the Board, Chief Executive Officer and President,
currently devotes and intends to devote a majority of his time to the management
of the Company.  The Company does not have employment agreements with its
executive officers.  The Company does not maintain key-man life insurance on any
of its officers or key personnel.

Highly Competitive Market

     The industry in which the Company competes is large, fragmented and
competitive.  The Company competes for sales with numerous local home
improvement installers and independent contractors in each of its markets, some
of which also serve as independent installers for the Company.  The Company also
competes against major retailers or manufacturers which market and install
products similar to the Company's.  The Company expects that the market for its
products and services will expand and, therefore, competition will increase in
the future.  There can be no assurance that the Company will remain competitive
or that the Company will be able to maintain its current profitability.  (See
also "Competition" under Item 1.)

Seasonality; Quarterly Fluctuations

     The Company's results of operations may fluctuate from year to year or
quarter to quarter due to a variety of factors.  The Company expects lower
levels of sales and profitability during the period from mid-November through
mid-March, impacting the first and fourth quarter of each fiscal year.  In
addition, the demand for the Company's products and the Company's results of
operations may be affected by the severity of the weather.  (See also
"Seasonality and Backlog" under Item 1.)

Compliance with Government Regulations

     The Company's business and the activities of its independent installers are
subject to various federal, state and local laws, regulations and ordinances
relating to, among other things, in-home sales, consumer financing, advertising,
the licensing of home improvement independent contractors, OSHA standards,
environmental laws and regulations relating to the disposal of demolition debris
and other solid wastes, and building and zoning regulations.  In certain
jurisdictions, the Company or one of its employees is required to be licensed as
a contractor.  In addition, certain jurisdictions require the Company or the
independent installer to obtain a building permit for each installation.  In
addition, such laws and regulations, may, among other things, regulate the
Company's advertising, warranties and disclosures to customers.  Building codes,
licensing requirements and safety laws vary from state to state and, in certain
circumstances, limit the availability and supply of independent installers and
impose additional costs on the Company in complying with such laws.  Although
the Company believes that it has been and is currently in compliance in all
material respects with such laws and regulations, there can be no assurance
that in the future the Company's results of operations will not be materially
adversely affected by existing or new laws or regulations applicable to the
Company's business.

     Marquise is subject to numerous federal and state consumer protection laws
and regulations which may vary from jurisdiction to jurisdiction and which,
among other things, require the Company to:  (i) obtain and maintain certain
licenses and qualifications; (ii) limit the interest rates, fees and other
charges the Company is allowed to charge; and (iii) limit or prescribe certain
other terms of the Company's credit applications and contracts.  Moreover,
individual states may require Exteriors or Marquise to make certain
disclosures to consumers when consumer credit contracts are executed.  Although
the Company believes that Marquise has been and is currently in compliance in
all material respects with such laws and regulations, there can be no assurance
that in the future a change in existing laws or regulations or the creation of
new laws and regulations applicable to Marquise's business will not have an
adverse effect on the Company's ability to provide customer financing of its
products or on the profitability of such activities.  (See also "Government
Regulations" under Item 1.)

Reeves Southeastern Corporation

     On March 6, 1998, the Company announced an agreement to acquire all the
stock of Reeves for approximately $42 million in cash and notes.  Reeves is a
national manufacturer and distributor of fencing and perimeter security
products.  The tentative structure of the acquisition contemplates a purchase
price of approximately $34 million in cash and short-term notes in addition to
long-term notes of indeterminable value of up to $8 million.  Consummation of
the transaction is subject to a variety of closing conditions.  Management
anticipates the acquisition to close by the end of April 1998.  The failure to
integrate Reeves's operations successfully might have a material adverse effect
on the Company's performance.

Year 2000

     The Year 2000 date change issue is believed to affect virtually all
companies and organizations.  If not corrected, many long term applications
could fail or create erroneous results by or at Year 2000.  The Company is
undertaking an investigation to determine if the Company's computer systems, the
Company's products, and the computer systems of Sears and the Company's vendors,
installers, and creditors (as they relate to the Company) are Year 2000
compliant.  The failure of any of the foregoing matters to be Year 2000
compliant might materially adversely affect the Company.  (See also
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" set forth in excerpts from registrant's Annual Report to
Stockholders for the fiscal year ended December 31, 1997, included in Exhibit
13.1 and incorporated herein by reference.)

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     The information required by this Item is set forth in excerpts from
registrant's Annual Report to Stockholders for the fiscal year ended December
31, 1997, under the captions "Consolidated Balance Sheets," "Consolidated
Statements of Operations," "Consolidated Statements of Changes in Common
Stockholders' Equity," "Consolidated Statements of Cash Flows" and "Notes to
Consolidated Financial Statements," which information is included in Exhibit
13.1 and incorporated herein by reference.


ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE.

         None.


                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

     a.   Directors of the Company

          The information required by this Item is set forth in registrant's
          Proxy Statement for the Annual Meeting of Stockholders to be held on
          May 14, 1998, under the captions "Election of Directors" and "Section
          16(a) Beneficial Ownership Reporting Compliance," which information is
          hereby incorporated herein by reference.

     b.   Executive officers of the Company

          Reference is made to "Executive Officers and Other Key Employees of
          the Registrant" in Part I.


ITEM 11.  EXECUTIVE COMPENSATION

     The information required by this Item is set forth in registrant's Proxy
Statement for the Annual Meeting of Stockholders to be held on May 14, 1998,
under the captions "Executive Compensation," "Compensation Committee Report on
Executive Compensation," "Compensation Committee Interlocks and Insider
Participation," and "Board of Directors," which information is hereby
incorporated herein by reference.


ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The information required by this Item is set forth in registrant's Proxy
Statement for the Annual Meeting of Stockholders to be held on May 14, 1998,
under the caption "Securities Beneficially Owned by Principal Stockholders and
Management," which information is hereby incorporated herein by reference.


ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The information required by this Item is set forth in registrant's Proxy
Statement for the Annual Meeting of Stockholders to be held on May 14, 1998,
under the caption "Certain Transactions," which information is hereby
incorporated herein by reference.


                                     PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

     (a)  (1)  Financial Statements

               The following financial statements of Diamond Home Services, Inc.
               are included in Part II, Item 8:

               (i)  Consolidated Balance Sheets - as of December 31, 1997 and
                    1996;
               (ii) Consolidated Statements of Operations - years ended December
                    31, 1997, 1996, and 1995;
               (iii)     Consolidated Statements of Changes in Common
                    Stockholders' Equity - years ended December 31, 1997, 1996,
                    and 1995;
                    (iv) Consolidated Statements of Cash Flows - years ended
                    December 31, 1997, 1996, and 1995;
               (v)  Notes to Consolidated Financial Statements; and
               (vi) Report of Independent Auditors from Ernst & Young LLP.

          (2)  Financial Statement Schedules

               No schedules related to this Item to which reference is made in
               applicable regulations of the Securities and Exchange Commission
               are required or are applicable, and therefore all such schedules
               are omitted.

          (3)  Exhibits

               Exhibits required by Item 601 of Regulation S-K are listed in the
               Exhibit Index hereto, which information is hereby incorporated by
               reference.

     (b)  Reports on Form 8-K

          There were no reports on Form 8-K filed for the three months ended
          December 31, 1997.

     (c)  Exhibits

          The exhibits filed as part of this Annual Report on Form 10-K are as
          specified in Item 14(a)(3) herein.

     (d)  Financial Statement Schedules

          The financial statement schedules filed as part of this Annual Report
          on Form 10-K are as specified in Item 14(a)(2) herein.




                                   SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) 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 on March 30, 1998.

                                   DIAMOND HOME SERVICES, INC.


                                   By    /s/ Stephen Clegg
                                        C. Stephen Clegg, Chairman of the Board,
                                        President and Chief Executive Officer


     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant as of March 30, 1998, in the capacities indicated:

          SIGNATURE                             TITLE



      /s/ Stephen Clegg            Chairman of the Board, Chief Executive
       C. Stephen Clegg            Officer, President and Director
                                   (Principal Executive Officer)


     /s/ Richard G. Reece          Vice President, Chief Financial Officer and
       Richard G. Reece            Treasurer (Principal Financial Officer)


  /s/ Eugene J. O'Hern, Jr.        Controller (Principal Accounting Officer)
    Eugene J. O'Hern, Jr.


    /s/ James F. Bere Jr.
      James F. Bere Jr.            Director


    /s/ James M. Gillespie
      James M. Gillespie           Director


     /s/ William Griffin
       William Griffin             Director


      /s/ Jacob Pollock
        Jacob Pollock              Director


    /s/ George A. Stinson
      George A. Stinson            Director



                                  EXHIBIT INDEX

EXHIBIT
NUMBER                             DESCRIPTION                             PAGE


 3.1      Amended and Restated Certificate of Incorporation of Diamond Home
          Services, Inc. (2)
 3.2      Amended and Restated By-Laws of Diamond Home Services, Inc. (2)
10.1      Registration Rights Agreement between Diamond Home Services, Inc. and
          Globe Building Materials, Inc. (1)
10.1(a)   Amendment to Registration Rights Agreement between Diamond Home
          Service Inc. and Globe Building Materials, Inc. (1)
10.2      Form of Indemnity Agreement between Diamond Home Services, Inc. and
          its directors and certain officers. (1)
10.3      License Agreement between Sears, Roebuck and Co. and Diamond
          Exteriors, Inc., dated January 1, 1996. (1)
10.3(a)   Amendment Agreement between Sears, Roebuck & Co. and Diamond
          Exteriors, Inc., dated July 1, 1996. (2)
10.4      Lease between Diamond Home Services, Inc. and Haldun Square Partners
          dated May 3, 1995. (1)
10.5*     Form of Agreement between Diamond Home Services, Inc. and each of the
          following managers of Diamond Home Services, Inc.: Frank Cianciosi,
          Jerome Cooper, James M. Gillespie, Rodger Ibach, Marvin Lerman and
          Ronald Schurter. (1)
10.6*     Form of Agreement between Diamond Home Services, Inc. and certain of
          its managers. (1)
10.7*     Diamond Home Services, Inc. Incentive Stock Option Plan. (1)
10.8*     Diamond Home Services, Inc. 1996 Nonemployee Director Stock Option
          Plan. (1)
10.9      Credit Agreement between American National Bank and Trust Company of
          Chicago and Diamond Home Services, Inc. (1)
10.9(a)   First Waiver and Consent to Loan and Security Agreement between
          Diamond Home Services, Inc. and American National Bank and Trust
          Company of Chicago. (1)
10.9(b)   First Amendment, Waiver and Consent to Loan and Security Agreement
          between Diamond Home Services, Inc. and American National Bank and
          Trust Company of Chicago. (1)
10.9(c)   Assignment, Delegation and Assumption Agreement among Diamond Home
          Services, Inc. Diamond Exteriors, Inc. and American National Bank of
          Trust Company of Chicago. (1)
10.9(d)   Second Amendment and Consent to Loan and Security Agreement between
          Diamond Exteriors, Inc. and American National Bank and Trust Company
          of Chicago. (1)
10.9(e)   Subordination Agreement among Diamond Home Services, Inc., Diamond
          Exteriors, Inc. and American National Bank and Trust Company of
          Chicago. (1)
10.9(f)   Third Amendment and Release to Loan and Security Agreement between
          Diamond Exteriors, Inc. and American National Bank and Trust Company
          of Chicago. (3)
10.9(g)   Fourth Amendment and Waiver to Loan and Security Agreement between
          Diamond Exteriors, Inc. and American National Bank and Trust Company
          of Chicago (filed herewith).
10.9(h)   Guaranty between Diamond Home Services, Inc. and American National
          Bank and Trust Company of Chicago (filed herewith).
10.9(i)   Amendment to Guaranty between Diamond Home Services, Inc. and American
          National Bank and Trust Company of Chicago (filed herewith).
10.9(j)   Fifth Amendment and Waiver to Loan and Security Agreement between
          Diamond Exteriors, Inc. and American National Bank and Trust Company
          of Chicago (filed herewith).
10.10*    Settlement Agreement between Diamond Home Services, Inc. and Frank
          Cianciosi (filed herewith).
10.11     License Agreement between Globe Building Materials, Inc. and Diamond
          Home Services, Inc. (1)
13.1      Excerpts from 1997 Annual Report to Stockholders (filed herewith).
21.2      Subsidiaries of Diamond Home Services, Inc. (filed herewith).
23.1      Consent of Ernst & Young LLP (filed herewith).
27        Financial Data Schedule (filed herewith).


*    Denotes each management contract or compensatory plan or arrangement
     required to be filed as an exhibit to this report.
(1)  Incorporated herein by reference to the exhibit of equivalent number to the
     Company's Registration Statement on Form S-1, as amended, Registration No.
     333-3822.
(2)  Incorporated herein by reference to the exhibit of equivalent number to the
     Company's Registration Statement on Form S-1, as amended, Registration No.
     333-10973.
(3)  Incorporated herein by reference to the exhibit of equivalent number to the
     Company's Annual Report on Form 10-K for the fiscal year ended December 31,
     1996.