**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**





FORM
      10-Q





[X] QUARTERLY
      REPORT PURSUANT TO SECTION 13 or 15(d)


OF
      THE
      SECURITIES EXCHANGE ACT OF 1934





For
      the
      quarterly period ended March 31, 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: 333-114041





**PLY
      GEM HOLDINGS, INC.**


(Exact
      name of registrant as specified in its charter)





Delaware
            
            3089
            
            20-0645710(State
                or other jurisdiction of incorporation or organization)
            
            (Primary
                Standard Industrial Classification Code Number)
            
            (I.R.S.
                Employer Identification No.)





185
      Platte Clay Way


Kearney,
      Missouri 64060





Registrant's
      telephone number, including area code: 800-800-2244





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





Indicate
      by check mark whether 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.


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
      ]





As
      of May
      14, 2007, there were 100 shares of common stock, $0.01 par value,
      outstanding.





***** The
      registrant is not required to file this Quarterly Report on Form 10-Q pursuant
      to Section 13 or 15(d) of the Securities Exchange Act of 1934. The filing is
      required, however, pursuant to the terms of the indenture governing Ply Gem
      Industries, Inc.’s 9% senior subordinated notes due 2012.





**PLY
      GEM HOLDINGS, INC. AND SUBSIDIARIES**


**FORM
      10-Q**


**QUARTERLY
      PERIOD ENDED MARCH 31, 2007**





**CONTENTS**








**PART
      I - FINANCIAL INFORMATION**






Item
                  1.
              Condensed
                  Consolidated Financial StatementsCondensed
                  Consolidated Statements of Operations –Three
                  months ended March 31, 2007 and April 1, 2006
              
              
              
              2Condensed
                  Consolidated Balance Sheets –March
                  31, 2007 and December 31, 2006
              
              
              
              3Condensed
                  Consolidated Statements of Cash Flows –Three
                  months ended March 31, 2007 and April 1, 2006
              
              
              
              4Notes
                  to Condensed Consolidated Financial Statements
              
              
              
              5Item
                  2.
              Management’s
                  Discussion and Analysis of Financial ConditionAnd
                  Results of Operations
              
              
              
              23Item
                  3.
              Quantitative
                  and Qualitative Disclosures about Market Risk
              
              
              
              32Item
                  4.
              Controls
                  and Procedures
              
              
              
              32
 **PART
        II – OTHER INFORMATION**
 Item
                  1A.
              Risk
                  Factors
              
              
              
              33Item
                  6.
              Exhibits
              
              
              
              33Signatures
              
              
              
              
              34





1





**PART
      I - FINANCIAL INFORMATION**





**Item
      1.**  **FINANCIAL
      STATEMENTS**








**PLY
      GEM HOLDINGS, INC. AND SUBSIDIARIES**


**CONDENSED
      CONSOLIDATED STATEMENTS OF OPERATIONS**


**(UNAUDITED)**








**For
                the three months ended****March
                31,**
            
            **April
                1,****2007**
            
            **2006**(Amounts
                in thousands)Net
                Sales
            
            $
            285,274
            
            $
            216,311Costs
                and Expenses:Cost
                of products sold
            
            
            238,084
            
            
            173,048Selling,
                general and administrative expense
            
            
            37,397
            
            
            26,481Amortization
                of intangible assets
            
            
            4,634
            
            
            2,553Total
                Costs and Expenses
            
            
            280,115
            
            
            202,082Operating
                earnings
            
            
            5,159
            
            
            14,229Foreign
                currency gain (loss)
            
            
            216
            
            
            (71
            )Interest
                expense
            
            
            (25,266
            )
            
            (15,326
            )Investment
                income
            
            
            577
            
            
            156Other
                expense
            
            
            -
            
            
            (2,056
            )Loss
                before income taxes andcumulative
                effect of accounting change
            
            
            (19,314
            )
            
            (3,068
            )Provision
                (benefit) for income taxes
            
            
            (8,450
            )
            
            (1,238
            )Loss
                before cumulative effectof
                accounting change
            
            
            (10,864
            )
            
            (1,830
            )Cumulative
                effect of accounting change,net
                of income tax benefit of $57
            
            
            -
            
            
            (86
            )Net
                loss
            
            $
            (10,864
            )
            $
            (1,916
            )
















See
      accompanying notes to condensed consolidated financial
      statements.


2


**PLY
      GEM HOLDINGS, INC. AND SUBSIDIARIES**


**CONDENSED** **** **CONSOLIDATED
      BALANCE SHEETS**


**(UNAUDITED)**








March
                31,
            
            December
                31,2007
            
            2006(Amounts
                in thousands, exceptshare
                amounts)**ASSETS****Current
                Assets:**Cash
                and cash equivalents
            
            $
            21,032
            
            $
            53,274Accounts
                receivable, less allowances of $5,644 and $6,802, respectively
            
            
            135,826
            
            
            130,795Inventories:Raw
                materials
            
            
            66,143
            
            
            50,936Work
                in process
            
            
            23,844
            
            
            25,339Finished
                goods
            
            
            52,396
            
            
            51,881Total
                inventory
            
            
            142,383
            
            
            128,156Prepaid
                expenses and other current assets
            
            
            21,114
            
            
            20,873Deferred
                income taxes
            
            
            16,470
            
            
            18,770Total
                current assets
            
            
            336,825
            
            
            351,868**Property
                and Equipment, at cost:**Land
            
            
            3,992
            
            
            3,990Buildings
                and improvements
            
            
            35,197
            
            
            34,889Machinery
                and equipment
            
            
            218,906
            
            
            215,555Total
                property and equipment
            
            
            258,095
            
            
            254,434Less
                accumulated depreciation
            
            
            (56,188
            )
            
            (47,597
            )Total
                property and equipment, net
            
            
            201,907
            
            
            206,837**Other
                Assets:**Goodwill
            
            
            811,824
            
            
            811,285Intangible
                assets, less accumulated amortization of $32,084 and $27,450,respectively
            
            
            225,121
            
            
            232,833Other
            
            
            44,842
            
            
            46,898Total
                other assets
            
            
            1,081,787
            
            
            1,091,016$
            1,620,519
            
            $
            1,649,721**LIABILITIES
                AND STOCKHOLDERS' EQUITY****Current
                Liabilities:**Current
                maturities of long-term debt
            
            $
            5,870
            
            $
            5,870Accounts
                payable
            
            
            97,242
            
            
            95,568Accrued
                expenses and taxes
            
            
            82,830
            
            
            113,527Total
                current liabilities
            
            
            185,942
            
            
            214,965Deferred
                income taxes
            
            
            100,972
            
            
            107,854Other
                long term liabilities
            
            
            55,747
            
            
            56,292Long-term
                debt, less current maturities
            
            
            1,061,415
            
            
            1,042,894**Stockholders'
                Equity:**Preferred
                stock $0.01 par, 100 shares authorized, none issued and
                outstanding
            
            
            -
            
            
            -Common
                stock $0.01 par, 100 shares authorized, issued and
                outstanding
            
            
            -
            
            
            -Additional
                paid-in-capital
            
            
            180,847
            
            
            181,792Retained
                earnings
            
            
            32,764
            
            
            43,628Accumulated
                other comprehensive income
            
            
            2,832
            
            
            2,296Total
                stockholders' equity
            
            
            216,443
            
            
            227,716$
            1,620,519
            
            $
            1,649,721











See
      accompanying notes to condensed consolidated financial
      statements.


3


**PLY
      GEM HOLDINGS, INC. AND SUBSIDIARIES**


**CONDENSED** **** **CONSOLIDATED
      STATEMENTS OF CASH FLOWS**


**(UNAUDITED)**




**For
                the three months ended****March
                31,**
            
            **April
                1,****2007**
            
            **2006**(Amounts
                in thousands)**Cash
                flows from operating activities:**Net
                loss
            
            $
            (10,864
            )
            $
            (1,916
            )**Adjustments
                to reconcile net income to****cash
                provided by operating activities:**Depreciation
                and amortization expense
            
            
            13,238
            
            
            7,000Fair
                value premium on purchased inventory
            
            
            -
            
            
            304Non-cash
                interest expense, net
            
            
            1,706
            
            
            1,307(Gain)
                loss on foreign currency transactions
            
            
            (216
            )
            
            71(Gain)
                loss on sale of asset
            
            
            16
            
            
            (22
            )Other
                non-cash items
            
            
            -
            
            
            1,094Deferred
                income taxes
            
            
            (3,284
            )
            
            (1,794
            )**Changes
                in operating assets and****liabilities,
                net of effects from acquisitions:**Accounts
                receivable, net
            
            
            (3,959
            )
            
            (20,949
            )Inventories
            
            
            (13,824
            )
            
            (8,557
            )Prepaid
                expenses and other current assets
            
            
            7,296
            
            
            (750
            )Accounts
                payable
            
            
            1,628
            
            
            16,427Accrued
                expenses and taxes
            
            
            (36,806
            )
            
            (7,179
            )Other
            
            
            281
            
            
            (192
            )**Net
                cash used in operating activities**
            
            
            (44,788
            )
            
            (15,156
            )**Cash
                flows from investing activities:**Capital
                expenditures
            
            
            (3,663
            )
            
            (3,970
            )Proceeds
                from sale of building
            
            
            7
            
            
            497Acquisition
                of business, net of cash acquired
            
            
            (185
            )
            
            (121,088
            )**Net
                cash used in investing activities**
            
            
            (3,841
            )
            
            (124,561
            )**Cash
                flows from financing activities:**Proceeds
                from long-term debt
            
            
            -
            
            
            122,808Proceeds
                from revolver borrowings
            
            
            20,000
            
            
            15,000Payments
                on long-term debt
            
            
            (1,468
            )
            
            -Payments
                on revolver borrowings
            
            
            -
            
            
            (1,808
            )Debt
                issuance costs
            
            
            -
            
            
            (2,249
            )Equity
                contribution (distribution)
            
            
            (2,175
            )
            
            1,725**Net
                cash provided by financing activities**
            
            
            16,357
            
            
            135,476Impact
                of exchange rate movements on cash
            
            
            30
            
            
            (14
            )Net
                increase in cash and cash equivalents
            
            
            (32,242
            )
            
            (4,255
            )Cash
                and cash equivalents at the beginning of the period
            
            
            53,274
            
            
            22,173Cash
                and cash equivalents at the end of the period
            
            $
            21,032
            
            $
            17,918







See
      accompanying notes to condensed consolidated financial
      statements.


4


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**(UNAUDITED)**







**1.**
            **SUMMARY
                OF SIGNIFICANT ACCOUNTING
                POLICIES**





**Basis
      of Presentation**





The
      accompanying unaudited condensed consolidated financial statements of Ply Gem
      Holdings, Inc. (referred to herein as “Ply Gem”, the “Company”, “we”, “us”, or
“our”) have been prepared in accordance with U.S. generally accepted accounting
      principles as described in the consolidated financial statements and related
      notes included in our 2006 Annual Report on Form 10-K filed with the Securities
      and Exchange Commission on March 23, 2007. These statements do not include
      all
      of the information and footnotes required by U.S. generally accepted accounting
      principles and should be read in conjunction with our 2006 Annual Report on
      Form
      10-K. In the opinion of management, all adjustments (consisting of normal
      recurring accruals) considered necessary for a fair presentation have been
      included. Operating results for the period from January 1, 2007 through March
      31, 2007 are not necessarily indicative of the results that may be expected
      for
      the year ended December 31, 2007.





The
      condensed consolidated balance sheet at December 31, 2006 has been derived
      from
      the audited consolidated financial statements of Ply Gem Holdings, Inc. at
      that
      date but does not include all of the information and footnotes required by
      U.S.
      generally accepted accounting principles for complete financial statements.





The
      Company’s fiscal quarters are based on periods ending on the last Saturday of
      the last week in the quarter. Therefore the financial results of certain fiscal
      quarters will not be exactly comparable to the prior and subsequent fiscal
      quarters.





The
      accompanying financial statements include the consolidated results of operations
      for the Company for the three month period ended March 31, 2007 and April 1,
      2006, and consolidated financial position for the Company as of
      March
      31, 2007 and December 31, 2006.





Ply
      Gem
      is a diversified manufacturer of residential and commercial building products,
      which are sold primarily in the United States and Canada, and include a wide
      variety of products for the residential and commercial construction, the
      do-it-yourself and the professional remodeling and renovation markets. The
      demand for our products is seasonal, particularly in the Northeast and Midwest
      regions of the United States and Western Canada where inclement weather during
      the winter months usually reduces the level of building and remodeling activity
      in both the home repair and remodeling and new home construction sectors. Our
      sales are usually lower during the first and fourth quarters.




Since
      our
      building products are intended for exterior use, our sales and operating
      earnings tend to be lower during periods of inclement weather. Weather
      conditions in the first quarter of each calendar year historically result in
      that quarter producing significantly less sales revenue than in any other period
      of the year. As a result, we have historically had lower profits or losses
      in
      the first quarter, and reduced profits in the fourth quarter of each calendar
      year due to the weather. Our results of operations for individual quarters
      in
      the future may be impacted by adverse weather conditions. Since a portion of
      our
      manufacturing overhead and operating expenses are relatively fixed throughout
      the year, operating income and net earnings tend to be lower in quarters with
      lower sales levels. In addition, the demand for cash to fund our working capital
      is greater from late in the fourth quarter through the first
      quarter.




Our
      performance is dependent to a significant extent upon the levels of home repair
      and remodeling and new home construction spending, all of which are affected
      by
      such factors as interest rates, inflation, consumer confidence, unemployment,
      and availability of consumer credit.







**Principles
      of Consolidation**





The
      consolidated financial statements include the accounts of Ply Gem Holdings,
      Inc.
      and its subsidiaries, all of which are wholly owned. All intercompany accounts
      and transactions have been eliminated.








5





**Accounting
      Policies and Use of Estimates**





The
      preparation of these consolidated financial statements in conformity with
      generally accepted accounting principles in the United States involves estimates
      and assumptions that affect the reported amounts of assets and liabilities
      and
      disclosure of contingent assets and liabilities as of the date of the financial
      statements and the reported amounts of income and expense during the reporting
      periods. Certain of the Company’s accounting policies require the application of
      judgment in selecting the appropriate assumptions for calculating financial
      estimates. By their nature, these judgments are subject to an inherent degree
      of
      uncertainty. The Company periodically evaluates the judgments and estimates
      used
      in their critical accounting policies to ensure that such judgments and
      estimates are reasonable for their interim and year-end reporting requirements.
      These judgments are based on the Company’s historical experience, current trends
      and information available from other sources, as appropriate. If different
      conditions result from those assumptions used in the Company’s judgments, the
      results could be materially different from the Company’s estimates.





**Inventories**





Inventories
      in the accompanying consolidated balance sheets are valued at the lower of
      cost
      or market. At March 31, 2007 and December 31, 2006, approximately $14.6 million
      and $9.6 million of total inventories, respectively, were valued on the last-in,
      first-out method (“LIFO”). Under the first-in, first-out method (“FIFO”) of
      accounting, such inventories would have been approximately $4.7 million higher
      at each of March 31, 2007 and December 31, 2006. All other inventories were
      valued under the FIFO method. The
      Company records provisions, as appropriate, to write-down obsolete and excess
      inventory to estimated net realizable value. The process for evaluating obsolete
      and excess inventory often requires the Company to make subjective judgments
      and
      estimates concerning future sales levels, quantities and prices at which such
      inventory will be able to be sold in the normal course of business. Accelerating
      the disposal process or incorrect estimates of future sales potential may cause
      the actual results to differ from the estimates at the time such inventory
      is
      disposed or sold .





**Income
      taxes**




On
        January 1, 2007, the Company adopted the Financial Accounting Standards
        Board (FASB) Interpretation No. 48 (FIN 48), “Accounting for Uncertainty in
        Income Taxes,” an interpretation of the Statement of Financial Accounting
        Standards (SFAS) No. 109, “Accounting for Income Taxes”. This
        interpretation clarifies how companies calculate and disclose uncertain tax
        positions. The effect of adopting this interpretation did not impact any
        previously recorded amounts for unrecognized tax benefits.
 
 As
        of
        January 1, 2007, the Company had approximately $0.1 million of accrued
        interest recorded related to uncertain tax positions. The Company has elected
        to
        treat interest and penalties on uncertain tax positions as income tax expense
        in
        its consolidated statement of earnings. No accrual for tax penalties was
        recorded upon adoption of FIN 48.
 
 The
        total
        amount of unrecognized tax benefits was approximately $6.8 million as of
        January 1, 2007. Of this amount, approximately $0.1 million, if recognized,
        would have an impact on the Company’s effective tax rate. The Company currently
        has no ongoing income tax examinations with the Internal Revenue Service
        or
        other tax authorities. The Company’s federal and state income tax filings for
        the years 2004 and 2005 remain subject to examination by taxing authorities.
        Additionally, the Company has net operating loss carry-forwards from years
        1999
        through 2003 that could be subject to examination.
  **Related
      Party Transactions**




The
      Company has entered into two advisory agreements with an affiliate of
      Caxton-Iseman Capital or related parties, (the “Caxton-Iseman Party”), which we
      refer to as the “Debt Financing Advisory Agreement” and the “General Advisory
      Agreement”. Under the General Advisory Agreement, the Company expensed
      management fees to the Caxton-Iseman Party of approximately $0.4 million and
      $0.4 million for the three month periods ended March 31, 2007 and April 1,
      2006,
      respectively.






**Foreign
      Currency**




The
      Company’s Canadian subsidiary utilizes the Canadian dollar as its functional
      currency. For reporting purposes, the Company translates the assets and
      liabilities of its foreign entity at the exchange rates in effect at the end
      of
      the reporting periods. Net sales and expenses are translated using average
      exchange rates in effect during the periods. Gains and losses from foreign
      currency translation are credited or charged to accumulated other comprehensive
      income in the accompanying consolidated balance sheets. A gain or loss resulting
      from fluctuations in the exchange rate may be recognized due to debt,
      denominated in US dollars, recorded by the Company’s Canadian subsidiary.





For
      the
      three month periods ending March 31, 2007 and April 1, 2006, the Company
      recorded a gain from foreign currency transactions of approximately $0.2 million
      and a loss from foreign currency transactions of approximately $0.1 million,
      respectively. As of March 31, 2007, and December 31, 2006 accumulated other
      comprehensive income included a currency translation adjustment of approximately
      $3.8 million and $3.3 million, respectively.








6




**Concentration
      of Credit Risk**




T he
      accounts receivable balance related to one customer of our siding, fencing,
      railing and decking segment was approximately $12.7 million and $11.1 million
      at
      March 31, 2007 and December 31, 2006, respectively. This customer accounted
      for
      approximately 10.8% of net sales for the three month period ended March 31,
      2007
      and approximately 16.5% of net sales for the year ended December 31,
      2006.




**Fair
      Value of Financial Instruments**




The
      carrying value of the Company’s senior subordinated notes was approximately
      $360.2 million and $360.2 million at March 31, 3007 and December 31, 2006,
      respectively. The fair value of the Company’s senior subordinated notes at March
      31, 2007 and December 31, 2006 was estimated to be approximately $312.3 million
      and $306.0 million, respectively, based on available market information. The
      carrying value of the Company’s other financial instruments approximates their
      fair value.







**New
      Accounting Pronouncements**





In
      September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements”. SFAS
      No. 157 defines fair value, establishes a framework for measuring fair value
      in
      generally accepted accounting principles, and expands disclosures about fair
      value measurements. This statement addresses how to calculate fair value
      measurements required or permitted under other accounting pronouncements.
      Accordingly, this statement does not require any new fair value measurements.
      However, for some entities, the application of this statement will change
      current practice. SFAS No. 157 is effective for the Company beginning January
      1,
      2008. The Company is currently evaluating the impact of this
      standard.





In
      September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for
      Defined Benefit Pension and Other Postretirement Plans an amendment of FASB
      Statements No. 87, 88, 106, and 132(R)”. This standard requires employers
      to recognize the underfunded or overfunded status of each pension and
      postretirement benefit plan as an asset or liability in its statement of
      financial position and to recognize changes in the funded status in the year
      in
      which the changes occur through accumulated other comprehensive income, which
      is
      a component of stockholders’ equity. SFAS No. 158 does not change the amount of
      actuarially determined expense that is recorded in the consolidated statement
      of
      income. The new reporting requirements and related new footnote disclosure
      rules
      of SFAS No. 158 are effective for our December 31, 2007 financial statements.
      Additionally, SFAS No. 158 requires employers to measure the funded status
      of a
      plan as of the date of its year-end statement of financial position. For our
      financial statements as of December 31, 2008 we will change our September 30
      measurement date for our plans’ assets and obligations to comply with this
      requirement. The Company is currently evaluating the impact that the
      implementation of SFAS No. 158 will have on its financial
      statements.





In
      February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
      Financial Assets and Financial Liabilities”. SFAS No. 159 permits entities
      to choose to measure many financial assets and financial liabilities at fair
      value. Unrealized gains and losses on items for which the fair value option
      has
      been elected are reported in earnings. SFAS No. 159 is effective for our
      fiscal year beginning January 1, 2008. The Company is currently evaluating
      the
      impact of this standard.
















7










**2.**
            **PURCHASE
                ACCOUNTING**





**Alenco
      Acquisition**





On
      February 24, 2006, Ply Gem completed the Alenco Acquisition. The Company
      accounted for the transaction as a purchase in accordance with the provisions
      of
      SFAS No. 141, which results in a new valuation for the assets and liabilities
      of
      Alenco based upon fair values as of the date of the purchase. Alenco is a
      leading regional manufacturer of aluminum and vinyl windows and doors for the
      new home construction market in the fast-growing Southern regions of the United
      States. The addition of Alenco expanded the Company’s geographical reach into
      the southern regions and expands our window products offering with
      aluminum.





The
      purchase price, including approximately $6.0 million of value attributed to
      Ply
      Gem Prime Holdings, Inc. common stock issued to replace AWC Holding Company
      employee’s forfeited AWC Holding Company stock, was allocated to the assets and
      liabilities based on their fair values. The following is the allocation of
      the
      purchase price.





*(in
                thousands)*Other
                current assets, net of cash
            
            $
            17,324Inventories
            
            
            7,312Property,
                plant and equipment
            
            
            10,580Trademarks
            
            
            7,000Customer
                relationships
            
            
            21,950Goodwill
            
            
            90,116Other
                assets
            
            
            198Current
                liabilities
            
            
            (11,929
            )Other
                liabilities
            
            
            (15,762
            )Purchase
                price, net of cash acquired
            
            $
            126,789





Based
      on
      appraisals received for the purchased intangible assets, $7.0 million was
      assigned to Trademarks and Tradenames with weighted average lives of 15 years,
      and approximately $22.0 million was assigned to customer relationships with
      weighted average lives of 15 years. As a result of this transaction, debt issue
      costs in the amount of approximately $3.6 million were incurred, of which
      approximately $2.2 were deferred and approximately $1.4 million were expensed
      as
      third-party financing costs. Approximately $90.1 million of goodwill was
      assigned to the windows and doors segment as a result of the Alenco Acquisition.
      None of the goodwill is expected to be deductible for tax purposes.





**AHE
      Acquisition**





On
      October 31, 2006, Ply Gem completed the AHE Acquisition. The Company accounted
      for the transaction as a purchase in accordance with the provisions of SFAS
      No.
      141, which results in a new valuation for the assets and liabilities of AHE
      based upon fair values as of the date of the purchase. AHE is a leading
      manufacturer of vinyl siding, aluminum siding, injection molded shutters and
      vinyl, aluminum and injection molded accessories. The addition of AHE to Ply
      Gem’s portfolio will enable the Company to capitalize on attractive market
      opportunities and provide the Company with a strong sustainable platform to
      fully serve all channels of the vinyl siding market.





The
      purchase price was allocated to the assets and liabilities based on their fair
      values. The following is a preliminary allocation of the purchase
      price.





*(in
                thousands)*Other
                current assets, net of cash
            
            $
            82,245Inventories
            
            
            79,045Property,
                plant and equipment
            
            
            94,013Trademarks
            
            
            23,950Patents
            
            
            770Customer
                relationships
            
            
            35,560Goodwill
            
            
            144,369Other
                assets
            
            
            6,634Current
                liabilities
            
            
            (114,625
            )Other
                liabilities
            
            
            (56,143
            )Purchase
                price, net of cash acquired
            
            $
            295,818






8





Based
      on
      preliminary appraisals received for the purchased intangible assets,
      approximately $24.0 million was assigned to Trademarks and Tradenames with
      weighted average lives of 15 years, approximately $0.8 million was assigned
      to
      Patents with weighted average lives of 20 years, and approximately $35.6 million
      was assigned to customer relationships with weighted average lives of 10 years.
      Included in Other current assets and Other assets are receivables for the
      reimbursement of the tax impact of the conversion of the inventory method from
      LIFO to FIFO. As a result of this transaction, debt issue costs in the amount
      of
      approximately $9.3 million were incurred, of which approximately $7.3 million
      were deferred and approximately $2.0 million were expensed as third-party
      financing costs. We have estimated the fair value of our assets and liabilities
      and the lives of those assets being amortized or depreciated, as of the AHE
      Acquisition date, utilizing preliminary information obtained from a third-party
      valuation specialist. Management is continuing to assess the asset valuations
      and certain liabilities assumed in the transaction and tax-related assets and
      liabilities. Approximately $144.4 million of goodwill was assigned to the
      siding, fencing, railing and decking segment as a result of the AHE Acquisition.
      None of the goodwill is expected to be deductible for tax purposes.





Goodwill
      increased by approximately $0.5 million from December 31, 2006 to March 31,
      2007. An increase of approximately $0.1 million was due additional costs related
      to the AHE Acquisition and an increase of approximately $0.4 million was due
      to
      currency translation changes.





Unaudited
      pro forma results of operations for the three months ended April 1, 2006, as
      if
      all acquisitions had occurred at the beginning of each
      of the respective periods is as follows: *(in
      thousands)*





For
                the threeMonths
                endedApril
                1, 2006(Unaudited)Net
                Sales
            
            $
            370,500Net
                loss
            
            $
            (2,761)











**3.**
            **INTANGIBLE
                ASSETS**





The
      table
      that follows presents the components of intangible assets as of March 31, 2007
      and December 31, 2006:









AverageAmortizationPeriod
              
              
              
              Accumulated
              
              Net
                  Carrying(in
                  Years)
              
              Cost
              
              Amortization
              
              Value(Amounts
                in thousands)**As
                  of March 31, 2007:**Patents
              
              
              14
              
              $
              12,770
              
              $
              (2,885
              )
              $
              9,885Trademarks/Tradenames
              
              
              15
              
              
              56,096
              
              
              (6,594
              )
              
              49,502Customer
                  relationships/Other
              
              
              13
              
              
              155,839
              
              
              (22,605
              )
              
              133,234Total
                  intangible assets
              
              
              
              
              $
              224,705
              
              $
              (32,084
              )
              $
              192,621Intangible
                  with indefinite lives:Trademarks
              
              
              
              
              $
              32,500
              
              $
              --
              
              $
              32,500**As
                  of December 31, 2006:**Patents
              
              
              13
              
              $
              12,770
              
              $
              (2,648
              )
              $
              10,122Trademarks/Tradenames
              
              
              15
              
              
              32,145
              
              
              (5,394
              )
              
              26,751Customer
                  relationships
              
              
              14
              
              
              155,538
              
              
              (19,408
              )
              
              136,130Total
                  intangible assets
              
              
              
              
              $
              200,453
              
              $
              (27,450
              )
              $
              173,003Intangible
                  with indefinite lives:Trademarks
              
              
              
              
              $
              59,830
              
              $
              --
              
              $
              59,830


9


Amortization
      expense for the three month periods ended March 31, 2007 and April 1, 2006
      was
      approximately $4.6 million and $2.6 million, respectively. Amortization expense
      for the remainder of 2007 and for fiscal years 2008, 2009, 2010, and 2011 is
      estimated to be approximately $12.2 million, $16.9 million, $16.9 million,
      $16.9
      million, and $16.6 million, respectively.





During
      the quarter ended March 31, 2007 the Company reevaluated the preliminary
      appraisals for purchased intangible assets referred to in Note 2, and determined
      that approximately $27.3 million of AHE Trademarks previously treated as
      indefinite lived assets should have useful lives of 15 years with a value of
      approximately $24.0 million. As such, those assets were reclassified in the
      above table as of March 31, 2007.














**4.**
            **COMPREHENSIVE
                INCOME (LOSS)**





Comprehensive
      income (loss) is comprised of the following:




**Three
                Months Ended**March
                31, 2007
            
            April
                1, 2006*(Amounts
                in thousands)*Net
                loss
            
            $
            (10,864
            )
            $
            (1,916
            )Foreign
                currency translation adjustment
            
            
            536
            
            
            (343
            )Comprehensive
                loss
            
            $
            (10,328
            )
            $
            (2,259
            )























**5.**
            **LONG-TERM
                DEBT**





On
      April
      5, 2007 the Company entered into the fifth amendment to its credit facility.
      Please refer to Note 12 for further details on the amended credit agreement.
      The
      following information pertains to the credit facility in effect as of March
      31,
      2007.





Long-term
      debt in the accompanying consolidated balance sheets at March 31, 2007 and
      December 31, 2006 consists of the following:





March
                31, 2007
            
            December
                31, 2006*(Amounts
                in thousands)*Senior
                term loan facility
            
            $
            687,065
            
            $
            688,533Senior
                revolving credit facility
            
            
            20,000
            
            
            -Senior
                subordinated notes
            
            
            360,220
            
            
            360,2311,067,285
            
            
            1,048,764Less
                current maturities
            
            
            5,870
            
            
            5,870$
            1,061,415
            
            $
            1,042,894







On
      March
      31, 2007, the Company’s senior credit facility with a syndicate of financial
      institutions and institutional lenders provided for senior secured financing
      of
      up to $690.0 million, consisting of $585.0 million of 1 st Lien
      term loan facilities maturing in August 2011 and $105.0 million of 2 nd Lien
      term loan facilities maturing in November 2011. The credit facility also
      included a $70.0 million revolving loan facility, including a letter of
      credit subfacility, maturing in February 2009. The 1 st Lien
      term loan facility was drawn in full in and had two tranches, originally
      consisting of: 1) a $560.1 million tranche under which Ply Gem
      Industries, Inc. is the borrower, and 2) a $24.9 million tranche under
      which our Canadian subsidiary, CWD Windows and Doors, Inc., is the borrower.
      As
      of March 31, 2007 the balances of the two tranches were approximately $557.3
      million and $24.8 million, respectively.





10


Under
      the
      terms of the credit agreement, the Company will be permitted to use its excess
      cash flow and/or a portion of its revolving credit facility to repurchase up
      to
      $40.0 million aggregate principal amount of the Company’s 9% senior subordinated
      notes due 2012. Subject to market conditions, its capital needs and other
      factors, the Company may from time to time purchase up to $40.0 million
      aggregate principal amount of its 9% senior subordinated notes due 2012 in
      market transactions, privately negotiated sales or other transactions. As of
      March 31, 2007 the Company has not purchased any of its Senior Subordinated
      Notes.





During
      the first quarter of 2007 the Company borrowed $20.0 million under the revolving
      credit facility. During the first quarter of 2006 the Company borrowed $15.0
      million under the revolving credit facility and repaid the entire amount during
      the second quarter of 2006. As of March 31, 2007, we had $46.7 million of
      availability under our revolving credit facility, due to the $20.0 million
      borrowed under the revolver and approximately $3.3 million of letters of credit
      issued under the facility .





The
      interest rates applicable to loans under our senior credit facilities are,
      at
      our option, equal to either a base rate plus an applicable interest margin,
      or
      an adjusted LIBOR rate plus an applicable interest margin, as defined in the
      senior credit facility agreement. Our rates at March 31, 2007 ranged from 8.4%
      to 11.1%.





Our
      senior credit facilities (prior to the fifth amendment) required scheduled
      quarterly principal payments on the term loan facilities of approximately $1.5
      million through March 31, 2011, and a payment of approximately $558.6 million
      on
      August 15, 2011, allocated pro rata
      between the U.S. term loan and the Canadian term loan. The balance of $105.0
      million on the Second Lien loan was to be paid in November 2011.





The
      indebtedness of the U.S. borrower (Ply Gem Industries, Inc.) under our senior
      credit facilities is guaranteed by Ply Gem Holdings, Inc., and all of our
      existing and future direct and indirect subsidiaries, subject to exceptions
      for
      foreign subsidiary guarantees of the U.S. borrower’s obligations to the extent
      such guarantees are prohibited by applicable law or would result in materially
      adverse tax consequences and other exceptions. The indebtedness of the Canadian
      borrower under our senior credit facilities is guaranteed by Ply Gem
      Holdings, Inc., the U.S. borrower and all of the Canadian borrower’s future
      direct and indirect subsidiaries and is effectively guaranteed by all
      subsidiaries guaranteeing the U.S. borrower’s obligations under our senior
      credit facilities. All indebtedness under our senior credit facilities is
      secured, subject to certain exceptions, by a perfected first priority pledge
      of
      all of our equity interests and those of our direct and indirect subsidiaries,
      and, subject to certain exceptions, perfected first priority security interests
      in, and mortgages on, all tangible and intangible assets; provided that all
      tangible and intangible assets of the Canadian borrower and its subsidiaries
      are
      pledged to secure debt only of the Canadian borrower.





Our
      senior credit facilities require that we comply on a quarterly basis with
      certain financial covenants, including a minimum interest coverage ratio test,
      a
      maximum leverage ratio test and a maximum capital expenditures level. Our
      covenants also restrict the payment of dividends, with certain exceptions,
      without the lenders consent in writing. The Company is also required at
      each
      year end, commencing December 31, 2007, to
      calculate and submit within 90 days a payment of excess cash, as defined in
      the
      Company’s credit agreement. This payment will reduce the outstanding balance on
      the Company’s term loans.





Concurrently
      with the Ply Gem Acquisition, on February 12, 2004 Ply Gem Industries, Inc.
      issued $225.0 million aggregate principal amount of our 9% senior subordinated
      notes due 2012, which are guaranteed by Ply Gem Holdings Inc. and the domestic
      subsidiaries of Ply Gem Industries, Inc. Subsequently, in August of 2004 in
      connection with the MW Acquisition, Ply Gem Industries, Inc. issued an
      additional $135.0 million of our 9% senior subordinated notes due 2012, which
      are guaranteed by Ply Gem Holdings Inc. and the domestic subsidiaries of Ply
      Gem
      Industries, Inc., including MWM Holding, Inc. and its subsidiaries.





Ply
      Gem
      Holdings, Inc. is a holding company and has no operations. Under the terms
      of
      the indenture governing the senior subordinated notes, there are restrictions
      on
      the ability of Ply Gem Industries, Inc. to dividend or distribute cash or
      property to Ply Gem Holdings, Inc.





11


The
      table
      that follows is a summary of maturities of all of the Company’s long-term debt
      obligations due in each twelve month period after March 31, 2007: *(Amounts
      in thousands)*








**Twelve
                month period ending:**March
                29, 2008
            
            $
            5,870April
                4, 2009
            
            
            25,870April
                3, 2010
            
            
            5,870April
                2, 2011
            
            
            5,870March
                31, 2012
            
            
            1,023,805Thereafter
            
            
            -$
            1,067,285





As
      of
      March 31, 2007, the Company had $46.7 million of availability under our
      revolving credit facility. Approximately $3.3 million of letters of credit
      have
      been issued under our senior credit facility. Further, approximately $3.2
      million of letters of credit have been issued apart from the senior credit
      facility to secure certain environmental obligations.






















**6.**
            **PENSION
                PLANS**





The
      Company has two separate pension plans, the Ply Gem Group Pension Plan (the
“Ply
      Gem Plan”) and the MW Manufacturers, Inc. Retirement Plan (the “MW Plan”).




The
      Company’s net periodic expense for the combined pension plans for the periods
      indicated consists of the following components:






For
                the three
              months
                ended
              March
                31, 2007
            
            For
                the three
              months
                ended
              April
                1, 2006*(Amounts
                in thousands)*Service
                cost
            
            $
            79
            
            $
            82Interest
                cost
            
            
            490
            
            
            469Expected
                return on plan assets
            
            
            (504
            )
            
            (458
            )Net
                periodic expense
            
            $
            65
            
            $
            93























**7.**
            **COMMITMENTS
                AND CONTINGENCIES**







In
      connection with the Ply Gem Acquisition (Ply
      Gem
      Industries, Inc. was acquired from Nortek in February 2004),Nortek has
      agreed to indemnify the Company for certain liabilities as set forth in the
      Purchase Agreement. In the event Nortek is unable to satisfy amounts due under
      these indemnifications then the Company would be liable. The Company believes
      that Nortek has the financial capacity to honor its indemnification obligations
      and therefore does not anticipate incurring any losses related to liabilities
      indemnified by Nortek under the Purchase Agreement. A receivable related to
      this
      indemnification has been recorded in other long-term assets in the approximate
      amount of $8.5 million. The Company has indemnified third parties in certain
      transactions involving dispositions of former subsidiaries. As of March 31,
      2007
      and December 31, 2006, the Company has recorded liabilities in relation to
      these
      indemnifications of approximately $8.5 million and $8.9 million, respectively,
      consisting of the following:





12


(Amounts
                  in thousands)March
                    31, 2007
              
              December
                    31, 2006Product
                  claim liabilities
              $
              3,795
              
              $
              3,795Long-term
                  lease liabilities
              
              188
              
              
              186Multiemployer
                  pension plan withdrawal liability
              
              3,815
              
              
              3,860Other
              
              747
              
              
              1,033$
              8,545
              
              $
              8,874




The
      Company sells a number of products and offers a number of warranties. The
      specific terms and conditions of these warranties vary depending on the product
      sold and country in which the product is sold. The Company estimates the costs
      that may be incurred under their warranties and records a liability for such
      costs at the time of sale, which is recorded in Accrued expenses and Other
      long
      term liabilities. Factors that affect the Company’s warranty liabilities include
      the number of units sold, historical and anticipated rates of warranty claims,
      cost per claim and new product introduction. The Company periodically assesses
      the adequacy of the recorded warranty claims and adjusts the amounts as
      necessary. As of March 31, 2007, warranty liabilities of approximately $12.2
      million have been recorded in current liabilities and approximately $24.6
      million have been recorded in long term liabilities.





Changes
      in the Company’s warranty liabilities are as follows:








For
                the three
              months
                ended
              March
                31, 2007
            
            For
                the three months ended
              April
                1, 2006*(Amounts
                in thousands)***Balance,
                beginning of period**
            
            $
            36,947
            
            $
            10,790Warranty
                expense provided during period
            
            
            232
            
            
            544Settlements
                made during period
            
            
            (388
            )
            
            (402
            )Liability
                assumed with Alenco Acquisition
            
            
            0
            
            
            1,461**Balance,
                end of period**
            
            $
            36,791
            
            $
            12,393
















The
      Company is subject to other contingencies, including legal proceedings and
      claims arising out of its businesses that cover a wide range of matters,
      including, among others, environmental matters, contract and employment claims,
      product liability, warranty and modification, adjustment or replacement of
      component parts of units sold, which may include product recalls. Product
      liability, environmental and other legal proceedings also include matters with
      respect to businesses previously owned. The Company has used various substances
      in their products and manufacturing operations, which have been or may be deemed
      to be hazardous or dangerous, and the extent of its potential liability, if
      any,
      under environmental, product liability and workers’ compensation statutes,
      rules, regulations and case law is unclear. Further, due to the lack of adequate
      information and the potential impact of present regulations and any future
      regulations, there are certain circumstances in which no range of potential
      exposure may be reasonably estimated.  It
      is
      impossible to ascertain the ultimate legal and financial liability with respect
      to contingent liabilities, including lawsuits, and therefore no such estimate
      has been made.











13














**8.**
            **ACCRUED
                EXPENSES, TAXES, AND OTHER LONG-TERM
                LIABILITIES**





Accrued
      expenses and taxes consist of the following at March 31, 2007 and December
      31,
      2006:




March
                31, 2007
            
            December
                31, 2006*(Amounts
                in thousands)*Insurance
            
            $
            9,183
            
            $
            8,551Employee
                compensation and benefits
            
            
            12,191
            
            
            23,701Sales
                and marketing
            
            
            18,945
            
            
            30,833Product
                warranty
            
            
            12,204
            
            
            12,310Short-term
                product claim liability
            
            
            2,321
            
            
            2,321Accrued
                Freight
            
            
            4,076
            
            
            3,959Interest
            
            
            4,710
            
            
            12,789Accrued
                Severance
            
            
            2,337
            
            
            3,808Accrued
                taxes
            
            
            4,148
            
            
            2,650Other,
                net
            
            
            12,715
            
            
            12,605$
            82,830
            
            $
            113,527







The
      accrued severance amounts in the above table are a result of the purchase of
      AHE
      in the fourth quarter of 2006. During the first quarter of 2007 cash severance
      payments were paid out for approximately $1.5 million which reduced the accrual
      balance. No adjustments have been made to the accrual and no severance costs
      have been expensed.









Other
      long-term liabilities consist of the following at March 31, 2007 and December
      31, 2006:




March
                31, 2007
            
            December
                31, 2006*(Amounts
                in thousands)*Insurance
            
            $
            3,932
            
            $
            4,097Pension
                liabilities
            
            
            11,490
            
            
            11,909Product
                warranty
            
            
            24,587
            
            
            24,637Long-term
                lease liabilities
            
            
            188
            
            
            186Long-term
                product claim liability
            
            
            1,474
            
            
            1,474Long-term
                deferred compensation
            
            
            4,472
            
            
            4,363Contingent
                tax liability
            
            
            6,788
            
            
            6,788Other
            
            
            2,816
            
            
            2,838$
            55,747
            
            $
            56,292








**9.**  **STOCK-BASED
      COMPENSATION**





*Stock
      Option Plan*





A
      summary
      of changes in stock options outstanding as of March 31, 2007 is presented
      below:


Stock
                Options
            
            Weighted-Average
                Exercise
              Price
            
            Weighted-Average
                Remaining ContractualTerm
                (Years)Balance
                at January 1, 2007
            
            
            146,194
            
            $
            10.00
            
            
            7.88Granted
            
            
            -
            
            $
            10.00
            
            
            -Forfeited
                or expired
            
            
            -
            
            $
            10.00
            
            
            -Balance
                at March 31, 2007
            
            
            146,194
            
            $
            10.00
            
            
            7.63







14


As
      of
      March 31, 2007, no options have vested. At March 31, 2007, the Company had
      approximately $0.1 million of total unrecognized compensation expense that
      will
      be recognized over the weighted average period of 2.63 years.





*Other
      Share-Based compensation*




Upon
      completion of each of the Ply Gem Acquisition, MW Acquisition and Alenco
      Acquisition, certain members of management made a cash contribution to Ply
      Gem
      Prime Holdings, Inc. in exchange for shares of Ply Gem Prime Holdings, Inc.’s
      common stock.





A
      summary
      of the changes in common stock shares as of March 31, 2007 is presented
      below.





Common
                Stock
              Shares
                Owned by
              ManagementBalance
                at January 1, 2007
            765,008Shares
                issued
            -Shares
                repurchased
            (73,500)Balance
                at March 31, 2007
            691,508
















**10.
      SEGMENT INFORMATION**





Statement
      of Financial Accounting Standards No. 131, “ *Disclosures
      about Segments of an Enterprise and Related Information* ”
(SFAS
      131) requires companies to report certain information about operating segments
      in their financial statements and established standards for related disclosures
      about products and services, geographic areas and major customers. SFAS 131
      defines operating segments as components of an enterprise about which separate
      financial information is available that is evaluated regularly by management
      in
      deciding how to allocate resources and in assessing performance. Operating
      segments meeting certain aggregation criteria may be combined into one
      reportable segment for disclosure purposes. Comparative information for prior
      years is presented to conform to our current organizational structure.





The
      Company has two reportable segments: 1) siding, fencing, railing, and decking
      and 2) windows and doors.





The
      income before provision for income taxes of each segment includes the revenue
      generated on transactions involving products within that segment less
      identifiable expenses. Unallocated income and expenses include items which
      are
      not directly attributed to or allocated to either of our reporting segments.
      Such items include interest, legal costs, corporate payroll, and unallocated
      finance and accounting expenses. Unallocated corporate assets include deferred
      financing costs, cash and certain non-operating receivables.





Following
      is a summary of the Company’s segment information.


**Three
                months ended**March
                31, 2007
            
            April
                1, 2006**Net
                Sales**Siding,
                Fencing, Railing and Decking
            
            $
            169,514
            
            $
            100,554Windows
                and Doors
            
            
            115,760
            
            
            115,757$
            285,274
            
            $
            216,311**Operating
                earnings**Siding,
                Fencing, Railing and Decking
            
            $
            (455
            )
            $
            9,391Windows
                and Doors
            
            
            7,531
            
            
            6,223Unallocated
            
            
            (1,917
            )
            
            (1,385
            )$
            5,159
            
            $
            14,229**As
                of**
            
            
            **As
                of****March
                31, 2007**
            
            
            **December
                31, 2006****Total
                Assets**Siding,
                Fencing, Railing and Decking
            
            $
            881,963
            
            $
            885,423Windows
                and Doors
            
            
            672,680
            
            
            664,808Unallocated
            
            
            65,876
            
            
            99,490$
            1,620,519
            
            $
            1,649,721








15





**11.
      SUBSEQUENT EVENTS**




On
      April
      5, 2007 Ply Gem Industries, Inc. the Company entered into the Fifth Amended
      and
      Restated Credit Agreement (the “Amended Credit Facility”) among Ply Gem, as the
      U.S. borrower, CWD Windows and Doors, Inc. (the “Canadian Borrower”), Ply Gem
      Holdings, Inc. (“Holdings”), the subsidiary guarantors party thereto, the
      lenders party thereto, UBS Securities LLC and Deutsche Bank Securities, Inc.,
      as
      joint lead arrangers and bookrunners and UBS AG, Stamford Branch, as
      administrative agent.


Pursuant
        to the Amended Credit Facility, on April 5, 2007, Ply Gem borrowed (i)
        approximately $557.3 million of term loans (the “U.S. Term Loans”) to replace
        the current outstanding approximate $557.3 million of term loans and (ii)
        an
        additional $105.0 million of term loans (the “Additional U.S. Term Loans”, and
        together with the U.S. Term Loans, the “Term Loans”) to repay the second lien
        term loan facility outstanding under Ply Gem’s Second Lien Amended and Restated
        Credit Agreement. Ply Gem also amended the terms of its Canadian Term Loans
        outstanding under the Amended Credit Facility. The Amended Credit Facility
        provides Ply Gem with a $70.0 million revolving facility (the “Revolving
        Facility”) to replace the revolving commitment under the Existing Credit
        Facility along with an additional $5.0 million revolving facility (the
“Additional Revolving Facility”, together with the Revolving Facility, the
“Revolving Facilities”), resulting in a total Revolving Facility of $75.0
        million.


The
      term
      loans provided under the Credit Agreement will mature on August 15, 2011, and
      will amortize in an amount equal to 1% per annum of the initial principal amount
      outstanding, payable in equal quarterly installments beginning on June 30,
      2007
      and ending on March 31, 2011, with the balance payable on August 15, 2011.
      The
      Credit Agreement contains affirmative, negative and financial covenants
      customary for such financings. The Credit Agreement requires Ply Gem to maintain
      a maximum total leverage ratio of 6.75 to 1.0 until December 31, 2008;
      thereafter, the maximum total leverage ratio that Ply Gem is permitted to have
      declines over time, from 6.75 to 1.0 to 6.25 to 1.0. Certain mandatory
      prepayments under the Credit Facilities will be required upon the occurrence
      of
      certain events, including the incurrence of certain additional indebtedness
      and
      the sale of certain assets.




16


**12.
      GUARANTOR / NON-GUARANTOR FINANCIAL INFORMATION**





The
      senior subordinated notes due in 2012 are secured by full and unconditional
      guarantees on a joint and several basis from certain of the Company’s 100% owned
      subsidiaries. Accordingly, the following guarantor and non-guarantor information
      is presented as of March 31, 2007 and for the three month periods ended March
      31, 2007 and April 1, 2006. The non-guarantor information presented represents
      our Canadian subsidiary.








**PLY
                GEM HOLDINGS, INC. AND SUBSIDIARIES****CONDENSED
                CONSOLIDATING STATEMENT OF OPERATIONS****For
                the three months ended March 31, 2007**Guarantor
            
            Issuer
            
            
            
            Non-Ply
                Gem
            
            Ply
                Gem
            
            Guarantor
            
            GuarantorHoldings,
                Inc.
            
            Industries,
                Inc.
            
            Subsidiaries
            
            Subsidiary
            
            Eliminations
            
            Consolidated(Amounts
                in thousands)Net
                Sales
            
            $
            -
            
            $
            -
            
            $
            269,192
            
            $
            16,082
            
            $
            -
            
            $
            285,274Costs
                and Expenses:Cost
                of products sold
            
            
            -
            
            
            -
            
            
            226,762
            
            
            11,322
            
            
            -
            
            
            238,084Selling,
                general andadministrative
                expense
            
            
            -
            
            
            1,917
            
            
            32,243
            
            
            3,237
            
            
            -
            
            
            37,397Intercompany
                administrativecharges
            
            
            -
            
            
            (2,692
            )
            
            2,692
            
            
            -
            
            
            -
            
            
            -Amortization
                of intangible assets
            
            
            -
            
            
            -
            
            
            4,634
            
            
            -
            
            
            -
            
            
            4,634Total
                Costs and Expenses
            
            
            -
            
            
            (775
            )
            
            266,331
            
            
            14,559
            
            
            -
            
            
            280,115Operating
                earnings
            
            
            -
            
            
            775
            
            
            2,861
            
            
            1,523
            
            
            -
            
            
            5,159Foreign
                currency gain
            
            
            -
            
            
            -
            
            
            -
            
            
            216
            
            
            -
            
            
            216Intercompany
                interest
            
            
            -
            
            
            23,701
            
            
            (23,602
            )
            
            (99
            )
            
            -
            
            
            -Interest
                expense
            
            
            -
            
            
            (24,745
            )
            
            (1
            )
            
            (520
            )
            
            -
            
            
            (25,266
            )Investment
                income
            
            
            -
            
            
            295
            
            
            259
            
            
            23
            
            
            -
            
            
            577Income
                (loss) before equity insubsidiaries'
                income (loss)
            
            
            -
            
            
            26
            
            
            (20,483
            )
            
            1,143
            
            
            -
            
            
            (19,314
            )Equity
                in subsidiaries' income (loss)
            
            
            (10,864
            )
            
            (10,880
            )
            
            -
            
            
            -
            
            
            21,744
            
            
            -Income
                (loss) before income taxesprovision
                (benefit)
            
            
            (10,864
            )
            
            (10,854
            )
            
            (20,483
            )
            
            1,143
            
            
            21,744
            
            
            (19,314
            )Provision
                (benefit) for income taxes
            
            
            -
            
            
            10
            
            
            (8,837
            )
            
            377
            
            
            -
            
            
            (8,450
            )Net
                income (loss)
            
            $
            (10,864
            )
            $
            (10,864
            )
            $
            (11,646
            )
            $
            766
            
            $
            21,744
            
            $
            (10,864
            )











17








**PLY
                GEM HOLDINGS, INC. AND SUBSIDIARIES****CONDENSED
                CONSOLIDATING STATEMENT OF OPERATIONS****For
                the three months ended April 1, 2006**Guarantor
            
            Issuer
            
            
            
            Non-Ply
                Gem
            
            Ply
                Gem
            
            Guarantor
            
            GuarantorHoldings,
                Inc.
            
            Industries,
                Inc.
            
            Subsidiaries
            
            Subsidiary
            
            Eliminations
            
            Consolidated(Amounts
                in thousands)Net
                Sales
            
            $
            -
            
            $
            -
            
            $
            202,700
            
            $
            13,611
            
            $
            -
            
            $
            216,311Costs
                and Expenses:Cost
                of products sold
            
            
            -
            
            
            -
            
            
            163,362
            
            
            9,686
            
            
            -
            
            
            173,048Selling,
                general andadministrative
                expense
            
            
            -
            
            
            1,393
            
            
            22,258
            
            
            2,830
            
            
            -
            
            
            26,481Intercompany
                administrativecharges
            
            
            -
            
            
            (2,024
            )
            
            2,024
            
            
            -
            
            
            -
            
            
            -Amortization
                of intangible assets
            
            
            -
            
            
            -
            
            
            2,553
            
            
            -
            
            
            -
            
            
            2,553Total
                Costs and Expenses
            
            
            -
            
            
            (631
            )
            
            190,197
            
            
            12,516
            
            
            -
            
            
            202,082Operating
                earnings
            
            
            -
            
            
            631
            
            
            12,503
            
            
            1,095
            
            
            -
            
            
            14,229Foreign
                currency loss
            
            
            -
            
            
            -
            
            
            -
            
            
            (71
            )
            
            -
            
            
            (71
            )Intercompany
                interest
            
            
            -
            
            
            14,266
            
            
            (14,056
            )
            
            (210
            )
            
            -
            
            
            -Interest
                expense
            
            
            -
            
            
            (14,931
            )
            
            42
            
            
            (437
            )
            
            -
            
            
            (15,326
            )Investment
                income
            
            
            -
            
            
            76
            
            
            59
            
            
            21
            
            
            -
            
            
            156Other
                expense
            
            
            -
            
            
            (2,056
            )
            
            -
            
            
            -
            
            
            -
            
            
            (2,056
            )Income
                (loss) before equity insubsidiaries'
                income
            
            
            -
            
            
            (2,014
            )
            
            (1,452
            )
            
            398
            
            
            -
            
            
            (3,068
            )Equity
                in subsidiaries' income
            
            
            (1,916
            )
            
            (622
            )
            
            -
            
            
            -
            
            
            2,538
            
            
            -Income
                (loss) before income taxesand
                cumulative effect of accounting change
            
            
            (1,916
            )
            
            (2,636
            )
            
            (1,452
            )
            
            398
            
            
            2,538
            
            
            (3,068
            )Provision
                (benefit) for income taxes
            
            
            -
            
            
            (806
            )
            
            (297
            )
            
            (135
            )
            
            -
            
            
            (1,238
            )Income
                (loss) before cumulativeeffect
                of accounting change
            
            
            (1,916
            )
            
            (1,830
            )
            
            (1,155
            )
            
            533
            
            
            2,538
            
            
            (1,830
            )Cumulative
                effect of accounting change
            
            
            -
            
            
            (86
            )
            
            -
            
            
            -
            
            
            -
            
            
            (86
            )Net
                income (loss)
            
            $
            (1,916
            )
            $
            (1,916
            )
            $
            (1,155
            )
            $
            533
            
            $
            2,538
            
            $
            (1,916
            )














18


**PLY
                GEM HOLDINGS, INC. AND SUBSIDIARIES****CONDENSED
                CONSOLIDATING BALANCE SHEET****As
                of March 31, 2007**Guarantor
            
            Issuer
            
            
            
            Non-Ply
                Gem
            
            Ply
                Gem
            
            Guarantor
            
            GuarantorHoldings,
                Inc.
            
            Industries,
                Inc.
            
            Subsidiaries
            
            Subsidiary
            
            Eliminations
            
            Consolidated(Amounts
                in thousands)**ASSETS****Current
                Assets:**Cash
                and cash equivalents
            
            $
            -
            
            $
            8,506
            
            $
            9,413
            
            $
            3,113
            
            $
            -
            
            $
            21,032Accounts
                receivable, net
            
            
            -
            
            
            -
            
            
            127,277
            
            
            8,549
            
            
            -
            
            
            135,826Inventories:Raw
                materials
            
            
            -
            
            
            -
            
            
            62,104
            
            
            4,039
            
            
            -
            
            
            66,143Work
                in process
            
            
            -
            
            
            -
            
            
            22,845
            
            
            999
            
            
            -
            
            
            23,844Finished
                goods
            
            
            -
            
            
            -
            
            
            49,057
            
            
            3,339
            
            
            -
            
            
            52,396Total
                inventory
            
            
            -
            
            
            -
            
            
            134,006
            
            
            8,377
            
            
            -
            
            
            142,383Prepaid
                expenses and othercurrent
                assets
            
            
            -
            
            
            3,804
            
            
            16,968
            
            
            342
            
            
            -
            
            
            21,114Deferred
                income taxes
            
            
            -
            
            
            -
            
            
            16,470
            
            
            -
            
            
            -
            
            
            16,470Total
                current assets
            
            
            -
            
            
            12,310
            
            
            304,134
            
            
            20,381
            
            
            -
            
            
            336,825Investments
                in subsidiaries
            
            
            216,443
            
            
            166,306
            
            
            -
            
            
            -
            
            
            (382,749
            )
            
            -**Property
                and Equipment, at cost:**Land
            
            
            -
            
            
            -
            
            
            3,840
            
            
            152
            
            
            -
            
            
            3,992Buildings
                and improvements
            
            
            -
            
            
            106
            
            
            34,353
            
            
            738
            
            
            -
            
            
            35,197Machinery
                and equipment
            
            
            -
            
            
            49
            
            
            214,153
            
            
            4,704
            
            
            -
            
            
            218,906-
            
            
            
            
            
            155
            
            
            252,346
            
            
            5,594
            
            
            -
            
            
            258,095Less
                accumulated depreciation
            
            
            -
            
            
            (95
            )
            
            (54,574
            )
            
            (1,519
            )
            
            -
            
            
            (56,188
            )Total
                property and equipment,net
            
            
            -
            
            
            60
            
            
            197,772
            
            
            4,075
            
            
            -
            
            
            201,907**Other
                Assets:**Goodwill
            
            
            -
            
            
            -
            
            
            771,089
            
            
            40,735
            
            
            -
            
            
            811,824Intangible
                assets, net
            
            
            -
            
            
            -
            
            
            225,121
            
            
            -
            
            
            -
            
            
            225,121Intercompany
                note receivable
            
            
            -
            
            
            1,058,346
            
            
            -
            
            
            -
            
            
            (1,058,346
            )
            
            -Other
            
            
            -
            
            
            44,616
            
            
            226
            
            
            -
            
            
            -
            
            
            44,842Total
                other assets
            
            
            -
            
            
            1,102,962
            
            
            996,436
            
            
            40,735
            
            
            (1,058,346
            )
            
            1,081,787$
            216,443
            
            $
            1,281,638
            
            $
            1,498,342
            
            $
            65,191
            
            $
            (1,441,095
            )
            $
            1,620,519**LIABILITIES
                AND STOCKHOLDER'S EQUITY****Current
                Liabilities:**Current
                maturities of long-termdebt
            
            $
            -
            
            $
            5,620
            
            $
            -
            
            $
            250
            
            $
            -
            
            $
            5,870Accounts
                payable
            
            
            -
            
            
            364
            
            
            91,651
            
            
            5,227
            
            
            -
            
            
            97,242Accrued
                expenses and taxes
            
            
            -
            
            
            8,734
            
            
            71,025
            
            
            3,071
            
            
            -
            
            
            82,830Total
                current liabilities
            
            
            -
            
            
            14,718
            
            
            162,676
            
            
            8,548
            
            
            -
            
            
            185,942Deferred
                income taxes
            
            
            -
            
            
            -
            
            
            98,748
            
            
            2,224
            
            
            -
            
            
            100,972Intercompany
                note payable
            
            
            -
            
            
            -
            
            
            1,054,000
            
            
            4,346
            
            
            (1,058,346
            )
            
            -Other
                long term liabilities
            
            
            -
            
            
            13,562
            
            
            41,243
            
            
            942
            
            
            -
            
            
            55,747Long-term
                debt, less currentmaturities
            
            
            -
            
            
            1,036,915
            
            
            -
            
            
            24,500
            
            
            -
            
            
            1,061,415**Stockholder's
                Equity:**Preferred
                stock
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -Common
                stock
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -Additional
                paid-in-capital
            
            
            180,847
            
            
            180,847
            
            
            103,670
            
            
            6,715
            
            
            (291,232
            )
            
            180,847Retained
                earnings
            
            
            32,764
            
            
            32,764
            
            
            38,005
            
            
            14,661
            
            
            (85,430
            )
            
            32,764Accumulated
                othercomprehensive
                income (loss)
            
            
            2,832
            
            
            2,832
            
            
            -
            
            
            3,255
            
            
            (6,087
            )
            
            2,832$
            216,443
            
            $
            1,281,638
            
            $
            1,498,342
            
            $
            65,191
            
            $
            (1,441,095
            )
            $
            1,620,519








19





**PLY
                GEM HOLDINGS, INC. AND SUBSIDIARIES****CONDENSED
                CONSOLIDATING BALANCE SHEET****As
                of December 31, 2006**Guarantor
            
            Issuer
            
            
            
            Non-Ply
                Gem
            
            Ply
                Gem
            
            Guarantor
            
            GuarantorHoldings,
                Inc.
            
            Industries,
                Inc.
            
            Subsidiaries
            
            Subsidiary
            
            Eliminations
            
            Consolidated(Amounts
                in thousands)**ASSETS****Current
                Assets:**Cash
                and cash equivalents
            
            $
            -
            
            $
            36,532
            
            $
            13,419
            
            $
            3,323
            
            $
            -
            
            $
            53,274Accounts
                receivable, net
            
            
            -
            
            
            -
            
            
            122,051
            
            
            8,744
            
            
            -
            
            
            130,795Inventories:Raw
                materials
            
            
            -
            
            
            -
            
            
            46,465
            
            
            4,471
            
            
            -
            
            
            50,936Work
                in process
            
            
            -
            
            
            -
            
            
            24,400
            
            
            939
            
            
            -
            
            
            25,339Finished
                goods
            
            
            -
            
            
            -
            
            
            49,832
            
            
            2,049
            
            
            -
            
            
            51,881Total
                inventory
            
            
            -
            
            
            -
            
            
            120,697
            
            
            7,459
            
            
            -
            
            
            128,156Prepaid
                expenses and othercurrent
                assets
            
            
            -
            
            
            11,157
            
            
            9,291
            
            
            425
            
            
            -
            
            
            20,873Deferred
                income taxes
            
            
            -
            
            
            -
            
            
            18,770
            
            
            -
            
            
            -
            
            
            18,770Total
                current assets
            
            
            -
            
            
            47,689
            
            
            284,228
            
            
            19,951
            
            
            -
            
            
            351,868Investments
                in subsidiaries
            
            
            227,716
            
            
            139,930
            
            
            -
            
            
            -
            
            
            (367,646
            )
            
            -**Property
                and Equipment, at cost:**Land
            
            
            -
            
            
            -
            
            
            3,840
            
            
            150
            
            
            -
            
            
            3,990Buildings
                and improvements
            
            
            -
            
            
            106
            
            
            34,062
            
            
            721
            
            
            -
            
            
            34,889Machinery
                and equipment
            
            
            -
            
            
            49
            
            
            211,115
            
            
            4,391
            
            
            -
            
            
            215,555-
            
            
            
            
            
            155
            
            
            249,017
            
            
            5,262
            
            
            -
            
            
            254,434Less
                accumulated depreciation
            
            
            -
            
            
            (85
            )
            
            (46,153
            )
            
            (1,359
            )
            
            -
            
            
            (47,597
            )Total
                property and equipment, net
            
            
            -
            
            
            70
            
            
            202,864
            
            
            3,903
            
            
            -
            
            
            206,837**Other
                Assets:**Goodwill
            
            
            -
            
            
            -
            
            
            770,940
            
            
            40,345
            
            
            -
            
            
            811,285Intangible
                assets, net
            
            
            -
            
            
            -
            
            
            232,833
            
            
            -
            
            
            -
            
            
            232,833Intercompany
                note receivable
            
            
            -
            
            
            1,058,346
            
            
            -
            
            
            -
            
            
            (1,058,346
            )
            
            -Other
            
            
            -
            
            
            40,358
            
            
            6,540
            
            
            -
            
            
            -
            
            
            46,898Total
                other assets
            
            
            -
            
            
            1,098,704
            
            
            1,010,313
            
            
            40,345
            
            
            (1,058,346
            )
            
            1,091,016$
            227,716
            
            $
            1,286,393
            
            $
            1,497,405
            
            $
            64,199
            
            $
            (1,425,992
            )
            $
            1,649,721**LIABILITIES
                AND STOCKHOLDER'S EQUITY****Current
                Liabilities:**Current
                maturities of long-term debt
            
            $
            -
            
            $
            5,620
            
            $
            -
            
            $
            250
            
            $
            -
            
            $
            5,870Accounts
                payable
            
            
            -
            
            
            484
            
            
            90,356
            
            
            4,728
            
            
            -
            
            
            95,568Accrued
                expenses and taxes
            
            
            -
            
            
            19,545
            
            
            90,319
            
            
            3,663
            
            
            -
            
            
            113,527Total
                current liabilities
            
            
            -
            
            
            25,649
            
            
            180,675
            
            
            8,641
            
            
            -
            
            
            214,965Deferred
                income taxes
            
            
            -
            
            
            -
            
            
            105,729
            
            
            2,125
            
            
            -
            
            
            107,854Intercompany
                note payable
            
            
            -
            
            
            -
            
            
            1,054,000
            
            
            4,346
            
            
            (1,058,346
            )
            
            -Other
                long term liabilities
            
            
            -
            
            
            14,697
            
            
            40,661
            
            
            934
            
            
            -
            
            
            56,292Long-term
                debt, less currentmaturities
            
            
            -
            
            
            1,018,331
            
            
            -
            
            
            24,563
            
            
            -
            
            
            1,042,894**Stockholder's
                Equity:**Preferred
                stock
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -Common
                stock
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -Additional
                paid-in-capital
            
            
            181,792
            
            
            181,792
            
            
            66,689
            
            
            6,440
            
            
            (254,921
            )
            
            181,792Retained
                earnings
            
            
            43,
                628
            
            
            43,628
            
            
            49,651
            
            
            13,895
            
            
            (107,174
            )
            
            43,628Accumulated
                othercomprehensive
                income (loss)
            
            
            2,296
            
            
            2,296
            
            
            -
            
            
            3,255
            
            
            (5,551
            )
            
            2,296$
            227,716
            
            $
            1,286,393
            
            $
            1,497,405
            
            $
            64,199
            
            $
            (1,425,992
            )
            $
            1,649,721








20


**PLY
                GEM HOLDINGS, INC. AND SUBSIDIARIES****CONSOLIDATING
                STATEMENT OF CASH FLOWS****For
                the three months ended March 31, 2007**Guarantor
            
            Issuer
            
            
            
            Non-Ply
                Gem
            
            Ply
                Gem
            
            Guarantor
            
            GuarantorHoldings,
                Inc.
            
            Industries,
                Inc.
            
            Subsidiaries
            
            Subsidiary
            
            Eliminations
            
            Consolidated(Amounts
                in thousands)**Cash
                flows from operating activities:**Net
                income (loss)
            
            $
            (10,864
            )
            $
            (10,864
            )
            $
            (11,646
            )
            $
            766
            
            $
            21,744
            
            $
            (10,864
            )**Adjustments
                to reconcile net****income
                to cash provided by****operating
                activities:**Depreciation
                and amortizationexpense
            
            
            -
            
            
            10
            
            
            13,075
            
            
            153
            
            
            -
            
            
            13,238Non-cash
                interest expense, net
            
            
            -
            
            
            1,706
            
            
            -
            
            
            -
            
            
            -
            
            
            1,706Gain
                on foreign currency transactions
            
            
            -
            
            
            -
            
            
            -
            
            
            (216
            )
            
            -
            
            
            (216
            )Loss
                on sale of asset
            
            
            -
            
            
            -
            
            
            16
            
            
            -
            
            
            -
            
            
            16Deferred
                income taxes
            
            
            -
            
            
            -
            
            
            (3,363
            )
            
            79
            
            
            -
            
            
            (3,284
            )Equity
                in subsidiaries' net income
            
            
            10,864
            
            
            10,880
            
            
            -
            
            
            -
            
            
            (21,744
            )
            
            -**Changes
                in operating assets and****liabilities:**Accounts
                receivable, net
            
            
            -
            
            
            -
            
            
            (4,233
            )
            
            274
            
            
            -
            
            
            (3,959
            )Inventories
            
            
            -
            
            
            -
            
            
            (12,982
            )
            
            (842
            )
            
            -
            
            
            (13,824
            )Prepaid
                expenses and othercurrent
                assets
            
            
            -
            
            
            (3,895
            )
            
            11,066
            
            
            125
            
            
            -
            
            
            7,296Accounts
                payable
            
            
            -
            
            
            -
            
            
            1,186
            
            
            442
            
            
            -
            
            
            1,628Accrued
                expenses and taxes
            
            
            -
            
            
            (10,771
            )
            
            (25,414
            )
            
            (621
            )
            
            -
            
            
            (36,806
            )Other
            
            
            -
            
            
            -
            
            
            321
            
            
            (40
            )
            
            -
            
            
            281**Net
                cash provided by (used in)****operating
                activities**
            
            
            -
            
            
            (12,934
            )
            
            (31,974
            )
            
            120
            
            
            -
            
            
            (44,788
            )**Cash
                flows from investing activities:**Capital
                expenditures
            
            
            -
            
            
            -
            
            
            (3,366
            )
            
            (297
            )
            
            -
            
            
            (3,663
            )Proceeds
                from sale of building
            
            
            -
            
            
            -
            
            
            7
            
            
            -
            
            
            -
            
            
            7Acquisitions,
                net of cash acquired
            
            
            -
            
            
            (185
            )
            
            -
            
            
            -
            
            
            -
            
            
            (185
            )Other
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -**Net
                cash used in investing****activities**
            
            
            -
            
            
            (185
            )
            
            (3,359
            )
            
            (297
            )
            
            -
            
            
            (3,841
            )**Cash
                flows from financing activities:**Proceeds
                from long-term debt
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -Proceeds
                from revolver borrowings
            
            
            -
            
            
            20,000
            
            
            -
            
            
            -
            
            
            -
            
            
            20,000Proceeds
                from intercompanyinvestment,
                net
            
            
            -
            
            
            (31,327
            )
            
            31,327
            
            
            -
            
            
            -
            
            
            -Payments
                on long-term debt
            
            
            -
            
            
            (1,405
            )
            
            -
            
            
            (63
            )
            
            -
            
            
            (1,468
            )Payment
                on revolver borrowings
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -Debt
                issuance costs
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -Equity
                contribution (distribution)
            
            
            -
            
            
            (2,175
            )
            
            -
            
            
            -
            
            
            -
            
            
            (2,175
            )**Net
                cash provided by (used in)****financing
                activities**
            
            
            -
            
            
            (14,907
            )
            
            31,327
            
            
            (63
            )
            
            -
            
            
            16,357Impact
                of exchange rate movementon
                cash
            
            
            -
            
            
            -
            
            
            -
            
            
            30
            
            
            -
            
            
            30Net
                increase (decrease) in cashand
                cash equivalents
            
            
            -
            
            
            (28,026
            )
            
            (4,006
            )
            
            (210
            )
            
            -
            
            
            (32,242
            )Cash
                and cash equivalents at thebeginning
                of the period
            
            
            -
            
            
            36,532
            
            
            13,419
            
            
            3,323
            
            
            -
            
            
            53,274Cash
                and cash equivalents at the endof
                the period
            
            $
            -
            
            $
            8,506
            
            $
            9,413
            
            $
            3,113
            
            $
            -
            
            $
            21,032








21


**PLY
                GEM HOLDINGS, INC. AND SUBSIDIARIES****CONSOLIDATING
                STATEMENT OF CASH FLOWS****For
                the three months ended April 1, 2006**Guarantor
            
            Issuer
            
            
            
            Non-Ply
                Gem
            
            Ply
                Gem
            
            Guarantor
            
            GuarantorHoldings,
                Inc.
            
            Industries,
                Inc.
            
            Subsidiaries
            
            Subsidiary
            
            Eliminations
            
            Consolidated(Amounts
                in thousands)**Cash
                flows from operating****activities:**Net
                income
            
            $
            (1,916
            )
            $
            (1,916
            )
            $
            (1,155
            )
            $
            533
            
            $
            2,538
            
            $
            (1,916
            )**Adjustments
                to reconcile net****income
                (loss) to cash provided by****(used
                in) operating activities:**Depreciation
                and amortizationexpense
            
            
            -
            
            
            10
            
            
            6,853
            
            
            137
            
            
            -
            
            
            7,000Fair
                value premium on purchased inventory
            
            
            -
            
            
            -
            
            
            304
            
            
            -
            
            
            -
            
            
            304Non-cash
                interest expense, net
            
            
            -
            
            
            1,307
            
            
            -
            
            
            -
            
            
            -
            
            
            1,307Loss
                on foreign currency transactions
            
            
            -
            
            
            -
            
            
            -
            
            
            71
            
            
            -
            
            
            71Gain
                on sale of asset
            
            
            -
            
            
            -
            
            
            (22
            )
            
            -
            
            
            -
            
            
            (22
            )Other
                non-cash items
            
            
            -
            
            
            1,094
            
            
            -
            
            
            -
            
            
            -
            
            
            1,094Deferred
                income taxes
            
            
            -
            
            
            -
            
            
            (2,667
            )
            
            873
            
            
            -
            
            
            (1,794
            )Equity
                in subsidiaries' net income
            
            
            1,916
            
            
            622
            
            
            -
            
            
            -
            
            
            (2,538
            )
            
            -**Changes
                in operating Assets and****liabilities:**Accounts
                receivable, net
            
            
            -
            
            
            -
            
            
            (21,073
            )
            
            124
            
            
            -
            
            
            (20,949
            )Inventories
            
            
            -
            
            
            -
            
            
            (8,211
            )
            
            (346
            )
            
            -
            
            
            (8,557
            )Prepaid
                expenses and othercurrent
                assets
            
            
            -
            
            
            (2,255
            )
            
            1,582
            
            
            (77
            )
            
            -
            
            
            (750
            )Accounts
                payable
            
            
            -
            
            
            341
            
            
            15,823
            
            
            263
            
            
            -
            
            
            16,427Accrued
                expenses and taxes
            
            
            -
            
            
            (5,694
            )
            
            (109
            )
            
            (1,376
            )
            
            -
            
            
            (7,179
            )Other
            
            
            -
            
            
            -
            
            
            (6
            )
            
            (186
            )
            
            -
            
            
            (192
            )**Net
                cash provided by (used in)****operating
                activities**
            
            
            -
            
            
            (6,491
            )
            
            (8,681
            )
            
            16
            
            
            -
            
            
            (15,156
            )**Cash
                flows from investing****activities:**Capital
                expenditures
            
            
            -
            
            
            -
            
            
            (3,912
            )
            
            (58
            )
            
            -
            
            
            (3,970
            )Proceeds
                from sale of building
            
            
            -
            
            
            -
            
            
            497
            
            
            -
            
            
            -
            
            
            497Acquisitions,
                net of cash acquired
            
            
            -
            
            
            (121,088
            )
            
            -
            
            
            -
            
            
            -
            
            
            (121,088
            )**Net
                cash used in investing****activities**
            
            
            -
            
            
            (121,088
            )
            
            (3,415
            )
            
            (58
            )
            
            -
            
            
            (124,561
            )**Cash
                flows from****financing
                activities:**Proceeds
                from long-term debt
            
            
            -
            
            
            122,320
            
            
            -
            
            
            488
            
            
            -
            
            
            122,808Proceeds
                from revolving credit facility
            
            
            -
            
            
            15,000
            
            
            -
            
            
            -
            
            
            -
            
            
            15,000Proceeds
                from intercompanyinvestment
            
            
            -
            
            
            (8,156
            )
            
            8,156
            
            
            -
            
            
            -
            
            
            -Payments
                on revolving credit facility
            
            
            -
            
            
            (1,808
            )
            
            -
            
            
            -
            
            
            -
            
            
            (1,808
            )Debt
                issuance costs
            
            
            -
            
            
            (2,249
            )
            
            -
            
            
            -
            
            
            -
            
            
            (2,249
            )Equity
                contribution, net
            
            
            -
            
            
            1,725
            
            
            -
            
            
            -
            
            
            -
            
            
            1,725**Net
                cash provided by****financing
                activities**
            
            
            -
            
            
            126,832
            
            
            8,156
            
            
            488
            
            
            -
            
            
            135,476Impact
                of exchange rate movementon
                cash
            
            
            -
            
            
            -
            
            
            -
            
            
            (14
            )
            
            -
            
            
            (14
            )Net
                increase (decrease) in cashand
                cash equivalents
            
            
            -
            
            
            (747
            )
            
            (3,940
            )
            
            432
            
            
            -
            
            
            (4,255
            )Cash
                and cash equivalents at thebeginning
                of the period
            
            
            -
            
            
            9,501
            
            
            9,130
            
            
            3,542
            
            
            -
            
            
            22,173Cash
                and cash equivalents at the endof
                the period
            
            $
            -
            
            $
            8,754
            
            $
            5,190
            
            $
            3,974
            
            $
            -
            
            $
            17,918




22




**Item
      2.****MANAGEMENT'S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS**





The
      information contained in this discussion and in the unaudited Condensed
      Consolidated Financial Statements and Accompanying Notes presented in this
      Form
      10-Q should be read in conjunction with information set forth in Ply Gem
      Holdings, Inc.’s Annual Report on Form 10-K. Certain statements in this
“Management’s Discussion and Analysis of Financial Condition and Results of
      Operations” are “forward-looking statements.” See “Special Note Regarding
      Forward-Looking Statements.” As used in this Quarterly Report on Form 10-Q, the
“Company”, “we”, “us”, and “our” refer to Ply Gem Holdings, Inc. and its
      subsidiaries, except where the context otherwise requires or as otherwise
      indicated.





***General***





We
      are a
      leading manufacturer of residential exterior building products in North America.
      We offer a comprehensive product line of vinyl siding and skirting, vinyl
      windows and doors ,
      aluminum windows ,
      and
      vinyl and composite fencing, railing and decking that serves both the home
      repair and remodeling and new home construction sectors in all 50 states and
      Western Canada. We also manufacture vinyl and aluminum soffit and siding
      accessories, aluminum trim coil, wood windows and steel and fiberglass doors,
      enabling us to bundle complementary and color-matched products and accessories
      with our core vinyl products. We have two reportable segments: (i) siding,
      fencing, railing and decking, and (ii) windows and doors.




We
      are a
      holding company with no operations or assets of our own other than the capital
      stock of our subsidiaries. The terms of Ply Gem Industries’ credit facility
      place restrictions on its ability to pay dividends and otherwise transfer assets
      to us. Further, the terms of the indenture governing Ply Gem Industries' 9%
      senior subordinated notes due 2012 place restrictions on the ability of Ply
      Gem
      Industries and our other subsidiaries to pay dividends and otherwise transfer
      assets to us.





***Financial
      statement presentation***





*Net
      Sales.* Net
      sales represent the selling price of our products plus certain shipping charges
      less applicable provisions for discounts and allowances. Allowances include
      cash
      discounts, volume rebates and gross returns among others.





*Cost
      of products sold.* Cost of
      products sold includes direct material and manufacturing costs, manufacturing
      depreciation, third-party and in-house delivery costs and product warranty
      expense.





*Selling,
      general and administrative expense.* Selling,
      general and administrative expense, or “SG&A expense,” includes all
      non-product related operating expenses, including selling, marketing, research
      and development costs, information technology and other general and
      administrative expenses.





*Operating
      earnings.* Operating earnings represents net sales less cost of products sold, SG&A
      expense and amortization of intangible assets.





*Comparability.* The data
      presented for the period ended April 1, 2006 includes the addition of Alenco
      for
      the period February 25, 2006 through April 1, 2006. As a result, the 2006 period
      will not be directly comparable to the 2007 period. In addition, because of
      the
      AHE Acquisition during the fourth quarter of 2006, 2007 and future periods
      will
      not be comparable to the periods in 2006 prior to the AHE
      Acquisition.





***Impact
      of commodity pricing***





Our
      principal raw materials, PVC resin and aluminum, have historically been subject
      to rapid price changes. We have in the past been able to substantially pass
      on
      significant cost increases through price increases to our customers. Our results
      of operations for individual quarters can and have been impacted by a delay
      between the time of PVC resin and aluminum cost increases and decreases and
      related price changes that we implement in our products.




***Impact
      of weather***





Since
      our
      building products are intended for exterior use, our sales and operating
      earnings tend to be lower during periods of inclement weather. Weather
      conditions in the first quarter of each calendar year historically result in
      that quarter producing significantly less sales revenue than in any other period
      of the year. As a result, we have historically had lower profits or losses
      in
      the first quarter, and reduced profits in the fourth quarter of each calendar
      year due to the weather. Our results of operations for individual quarters
      in
      the future may be impacted by adverse weather conditions.





23


***Critical
      Accounting Policies***





The
      following discussion and analysis of our financial condition and results of
      operations are based upon our consolidated financial statements, which have
      been
      prepared in accordance with U.S. generally accepted accounting principles.
      Certain of our accounting policies require the application of judgments in
      selecting the appropriate assumptions for calculating financial estimates.
      By
      their nature, these judgments are subject to an inherent degree of uncertainty.
      We periodically evaluate the judgments and estimates used for our critical
      accounting policies to ensure that such judgments and estimates are reasonable
      for our interim and year-end reporting requirements. These judgments and
      estimates are based upon our historical experience, current trends and
      information available from other sources, as appropriate. If different
      conditions result than those assumptions used in our judgments, the results
      could be materially different from our estimates. Management believes that
      the
      two areas where different assumptions could result in materially different
      reported results are accounts receivable related to estimation of allowances
      for
      doubtful accounts and inventories in estimating reserves for obsolete and excess
      inventory. Although we believe the likelihood of a material difference in either
      of these two areas is very low based upon our historical experience, a 10%
      change in our allowance for doubtful accounts and our inventory reserve
      estimates at March 31, 2007 would result in a $0.6 million and $1.0 million
      impact upon SG&A expense and cost of products sold, respectively.
      Additionally, we have included in the discussion that follows our estimation
      methodology for both accounts receivable and inventories. While all significant
      policies are important to our combined and consolidated financial statements,
      some of these policies may be viewed as being critical. Our critical accounting
      policies include:





*Revenue
      Recognition.* We
      recognize sales based upon shipment of products to our customers net of
      applicable provisions for discounts and allowances. Generally, the customer
      takes title upon shipment and assumes the risks and rewards of ownership of
      the
      product. For certain products, our customers take title upon delivery, at which
      time revenue is then recognized. Revenue includes selling price of the product
      and all shipping costs paid by the customer. Revenue is reduced at the time
      of
      sale for estimated sales returns and all applicable allowances and discounts
      based on historical experience. We also provide for estimates of warranty,
      bad
      debts, shipping costs and certain sales-related customer programs at the time of
      sale. Shipping and warranty costs are included in cost of products sold. Bad
      debt expense and sales-related marketing programs are included in selling,
      general and administrative expense. We believe that our procedures for
      estimating such amounts are reasonable and historically have not resulted in
      material adjustments in subsequent periods when the estimates are reconciled
      to
      the actual amounts.





*Accounts
      Receivable.* We
      maintain an allowance for doubtful accounts for estimated losses from the
      inability of our customers to make required payments, which is provided for
      in
      bad debt expense. We determine the adequacy of this allowance by regularly
      reviewing our accounts receivable aging and evaluating individual customers’
receivables, considering customers’ financial condition, credit history and
      other current economic conditions. If a customer’s financial condition were to
      deteriorate which might impact its ability to make payment, then additional
      allowances may be required.





*Inventories.* Inventories in the accompanying consolidated balance sheets are valued at the
      lower of cost or market. At March 31, 2007, and December 31, 2006 approximately
      $14.6 million and $9.6 million of total inventories, respectively ,
      were
      valued on the last-in, first-out method, or “LIFO.” Under the first-in,
      first-out method, or “FIFO,” of accounting, such inventories would have been approximately
      $4.7 million higher at each of March 31, 2007 and December 31, 2006. All
      other
      inventories were valued under the FIFO method. We record provisions, as
      appropriate, to write-down obsolete and excess inventory to estimated net
      realizable value. The process for evaluating obsolete and excess inventory
      often
      requires subjective judgments and estimates concerning future sales levels,
      quantities and prices at which such inventory will be sold in the normal course
      of business. Accelerating the disposal process or incorrect estimates of future
      sales potential may cause the actual results to differ from the estimates at
      the
      time such inventory is disposed or sold.





*Asset
      Impairment.* In
      accordance with SFAS No. 144, we evaluate the realizability of certain
      long-lived assets, which primarily consist of property and equipment and
      purchased intangible assets subject to amortization, based on expectations
      of
      non-discounted future cash flows for each subsidiary having a material amount
      of
      long-lived assets. If circumstances indicate a potential impairment, and if
      the
      sum of the expected non-discounted future cash flow is less than the carrying
      amount of all assets including SFAS No. 144 long-lived assets, we would
      recognize an impairment loss.





24


*Goodwill
      and Indefinite Lived Intangibles Impairment* .
      In
      accordance with SFAS No. 142, we perform annual tests for goodwill and
      indefinite lived intangibles impairment. We assess goodwill and indefinite
      lived
      intangibles which are not subject to amortization for impairment during the
      fourth quarter of each year and also at any other date when events or changes
      in
      circumstances indicate that the carrying value of these assets may exceed their
      fair value. Based upon our most recent analysis and the fact that no adverse
      events have been identified, we believe that no impairment of goodwill or
      indefinite lived intangibles existed at March 31, 2007 or December 31,
      2006.





*Insurance
      Liabilities.* We
      record insurance liabilities and related expenses for health, workers’
compensation, product and general liability losses and other insurance expenses
      in accordance with either the contractual terms of their policies or, if
      self-insured, the total liabilities that are estimable and probable as of the
      reporting date. Insurance liabilities are recorded as current liabilities to
      the
      extent they are expected to be paid in the succeeding year with the remaining
      requirements classified as long-term liabilities. The accounting for
      self-insured plans requires that significant judgments and estimates be made
      both with respect to the future liabilities to be paid for known claims and
      incurred but not reported claims as of the reporting date. The Company relies
      on
      historical trends when determining the appropriate health insurance reserves
      to
      record in our consolidated balance sheets. The Company relies heavily on the
      advice and calculations of third-party actuarial consultants when determining
      the appropriate insurance reserves to record in our consolidated balance sheets
      for a substantial portion of our workers’ compensation and general and product
      liability losses. In certain cases where partial insurance coverage exists,
      the
      Company must estimate the portion of the liability that will be covered by
      existing insurance policies.


*Income
      Taxes.* We
      account for deferred income taxes using the liability method in accordance
      with
      SFAS No. 109 “ *Accounting
      for Income Taxes,* ”
or
      “SFAS No. 109,” which requires that the deferred tax consequences of temporary
      differences between the amounts recorded in our financial statements and the
      amount included in our federal and state income tax returns be recognized in
      the
      balance sheet. Effective January 1, 2007, the Company adopted FASB
      Interpretation No. 48, (FIN 48), *“Accounting
      for Uncertainties in Income Taxes”* ,
      an
      interpretation of SFAS No. 109. FIN 48 interprets and clarifies SFAS No. 109
      regarding the required accounting of and establishes specific disclosures for
      uncertain tax positions taken or expected to be taken within an entity’s income
      tax returns and recognized in an entity’s financial statements. FIN 48
      prescribes the minimum financial statement recognition threshold for tax
      benefits generated by deductions, non-filing of tax returns or other tax
      positions taken or expected to be taken in an entities tax returns. The amount
      recorded in our financial statements reflects estimates of final amounts due
      to
      timing of completion and filing of actual income tax returns. Estimates are
      required with respect to, among other things, the appropriate state income
      tax
      rates to use in the various states that we and our subsidiaries are required
      to
      file, the potential utilization of operating and capital loss carry-forwards
      for
      both federal and state income tax purposes and valuation allowances required,
      if
      any, for tax assets that may not be realized in the future. We establish
      reserves when, despite our belief that our tax return positions are fully
      supportable, certain positions could be challenged, and the positions may not
      be
      fully sustained. During 2005, the Company established reserves relating to
      net
      operating losses acquired in the MW Acquisition and transaction costs associated
      with the Ply Gem and MW Acquisitions. If the benefits for which a reserve has
      been provided are subsequently recognized, they will reduce goodwill resulting
      from the application of the purchase method of accounting for these
      transactions. We have executed a tax sharing agreement with Ply Gem Holdings,
      Inc. and Ply Gem Investment Holdings, Inc. pursuant to which tax liabilities
      for
      each respective party are computed on a stand-alone basis. Our U.S. subsidiaries
      file unitary, combined and separate state income tax returns. CWD Windows and
      Doors files separate Canadian income tax returns.




*Purchase
      accounting.* Business
      acquisitions are accounted for using the purchase method of accounting. The
      cost
      of the acquired company is allocated to identifiable tangible and intangible
      assets based on estimated fair value generally determined by third party
      valuation specialists, with the excess allocated to goodwill.







25







***Results
      of Operations***





The
      following table summarizes net sales and operating earnings by segment and
      is
      derived from the accompanying condensed consolidated statements of operations
      included in this report.









**Three
                months ended**March
                31,
            
            April
                1,2007
            
            2006**Net
                Sales**Siding,
                Fencing, Railing and Decking
            
            $
            169,514
            
            $
            100,554Windows
                and Doors
            
            
            115,760
            
            
            115,757**Operating
                earnings**Siding,
                Fencing, Railing and Decking
            
            
            (455
            )
            
            9,391Windows
                and Doors
            
            
            7,531
            
            
            6,223Unallocated
            
            
            (1,917
            )
            
            (1,385
            )**Foreign
                currency gain (loss)**Windows
                and Doors
            
            
            216
            
            
            (71
            )**Interest
                expense, net**Siding,
                Fencing, Railing and Decking
            
            
            (26
            )
            
            (42
            )Windows
                and Doors
            
            
            265
            
            
            399Unallocated
            
            
            (24,928
            )
            
            14,813**Other
                expense**Unallocated
            
            
            -
            
            
            (2,056
            )**Income
                tax expense**Unallocated
            
            
            (8,450
            )
            
            (1,238
            )**Net
                loss before cumulative effect****of
                accounting change**
            
            
            (10,864
            )
            
            (1,830
            )**Cumulative
                effect of accounting change**
            
            
            -
            
            
            (86
            )**Net
                income**
            
            $
            (10,864
            )
            $
            (1,916
            )







In
      view
      of the seasonality of our business, it must be emphasized that the results
      of
      operations for the periods presented are not necessarily indicative of the
      results for a full fiscal year.




The
      following tables set forth our results of operations based on the amounts and
      the percentage relationship of the items listed to net sales for the periods
      indicated. However, our results of operations set forth in the tables below
      may
      not necessarily be representative of our future operating results.




This
      review of performance is organized by business segment, reflecting the way
      we
      manage our business. Each business group leader is responsible for operating
      results down to operating earnings. We use operating earnings as a performance
      measure as it captures the income and expenses within the management control
      of
      our business leaders. Corporate management is responsible for making all
      financing decisions. Therefore, each segment discussion focuses on the factors
      affecting operating earnings, while interest expense and income taxes and
      certain other unallocated expenses are separately discussed at the corporate
      level.











**Siding,
      Fencing, Railing and Decking Segment**





**For
                the three months ended**(dollars
                in thousands)
            **March
                31, 2007**
            
            
            **April
                1, 2006**(unaudited)
            
            
            
            
            (unaudited)**Statement
                of operations data:**Net
                Sales
            $
            169,514
            
            100.0
            %
            
            $
            100,554
            
            100.0
            %Cost
                of products sold
            
            147,585
            
            87.1
            %
            
            
            81,537
            
            81.1
            %Gross
                Profit
            
            21,929
            
            12.9
            %
            
            
            19,017
            
            18.9
            %S,G&A
                expense
            
            19,852
            
            11.7
            %
            
            
            8,821
            
            8.8
            %Amortization
                of intangible assets
            
            2,532
            
            1.57
            %
            
            
            805
            
            0.8
            %Operating
                earnings
            $
            (455
            )
            -0.3
            %
            
            $
            9,391
            
            9.3
            %





26


*Net
      Sales*





Net
      sales
      for the three months ended March 31, 2007 increased compared to the same period
      in 2006 by approximately $69.0 million, or 69%. The
      increase in net sales was driven by AHE’s sales of approximately $95.7 million
      partially offset by industry wide market declines resulting from lower single
      family housing starts which negatively impacted the new construction sector
      of
      the market. According to the National Association of Home Builders (“NAHB”),
      first quarter 2007 single family housing starts are estimated to show a decline
      of approximately 32.6% from actual levels achieved in the first quarter of
      2006.
      Additionally, the new construction sector of the market is expected to continue
      to be negatively impacted during the balance of 2007, as single family housing
      starts are projected to remain below levels achieved in 2006 according to the
      NAHB’s April 18, 2007 forecast. The Company believes that its reduced sales
      (exclusive of AHE) of vinyl siding products were comparable with those seen
      in
      the vinyl siding industry for the three month period ended March 31,
      2007.





*C* *ost
      of Products Sold*





Cost
      of
      products sold for
      the
      three months ended March 31, 2007 increased over the same period in 2006 by
      approximately $66.0 million, or 81%. The increase in cost of products sold
      was
      primarily due to the addition of AHE. The increase in cost of products sold
      as a
      percentage of sales was also due to the addition of AHE which has a mix of
      products sold that carry lower gross profit margins than in Ply Gem’s other
      Siding, Fencing, Railing and Decking businesses. The market wide increases
      that
      occurred in the cost of aluminum raw materials were offset by price increases
      and cost savings initiatives that were implemented during the 4 th quarter
      of 2006, as well as, material cost reductions in PVC resin.








*Selling,
      general and administrative expense*





SG&A
      expense for the
      three
      months ended March 31, 2007 increased
      by approximately $11.0 million, or 125%, from the same period in 2006. The
      increase in SG&A expenses was due to the addition of approximately $10.8
      million from AHE.





*Amortization
      of intangible assets*





Amortization
      expense for the three months ended March 31, 2007 increased by approximately
      $1.7 million due to the addition of AHE operations.





























**Windows
      and Doors Segment**





**For
                the three months ended**(dollars
                in thousands)
            
            **March
                31, 2007**
            
            **April
                1, 2006**(unaudited)
            
            
            (unaudited)**Statement
                of operations data:**Net
                Sales
            
            $
            115,760
            
            100.0
            %
            $
            115,757
            
            100.0
            %Cost
                of products sold
            
            
            90,499
            
            78.2
            %
            
            91,511
            
            79.1
            %Gross
                Profit
            
            
            25,261
            
            21.8
            %
            
            24,246
            
            20.9
            %S,G&A
                expense
            
            
            15,628
            
            13.5
            %
            
            16,275
            
            14.14
            %Amortization
                of intangible assets
            
            
            2,102
            
            1.8
            %
            
            1,748
            
            1.5
            %Operating
                earnings
            
            $
            7,531
            
            6.5
            %
            $
            6,223
            
            5.4
            %Currency
                transaction gain/(loss)
            
            
            216
            
            0.2
            %
            
            (71
            )
            -0.1
            %








27


*Net
      Sales*





Net
      sales
      for the three months ended March 31, 2007 did not substantially change from
      the
      same period in 2006. However, Alenco contributed sales of approximately $30.7
      million for the three months of sales in 2007 as compared to $13.9 million
      for
      one month of sales in the period ended April 1, 2006, due the acquisition of
      Alenco at the end of February 2006. The increase in sales due to Alenco was
      offset by lower sales of our new construction window products which were
      negatively impacted by market wide decreased demand that resulted from
      reductions in single family housing starts as discussed above. In addition,
      demand for our repair and remodeling windows declined due in part to the
      discontinuation of an unprofitable mechanical window product line that was
      produced at our Sarver, PA facility which was closed in June 2006.








*Cost
      of Products Sold*





Cost
      of
      products sold for
      the
      three months ended March 31, 2007 decreased
      by approximately $1.0 million, or 1%, over the same period in 2006. The
      decrease in cost of products sold was driven by cost savings initiatives
      implemented by management and improved operating performance in our repair
      and
      remodeling window business.





*Selling,
      general and administrative expense*





SG&A
      expense for the
      three
      months ended March 31, 2007 de creased
      by approximately $0.6 million, or 4%, over the same period in 2006. The
      decrease in SG&A expense was driven by a reduction to the 2007 net expense
      due to approximately $1.2 million of cash received from an accounts receivable
      that had been fully reserve in periods prior to 2006. Other decreases in
      SG&A expense were primarily in our repair and remodeling widow business, and
      were largely attributable to higher than normal professional fees that were
      incurred in the first three months of 2006.   The
      decreases were partially offset by higher SG&A expenses due to the addition
      of Alenco for a portion of the first quarter in 2006 as compared to the entire
      quarter in 2007.





*Amortization
      of intangible assets*





Amortization
      expense for the three months ended March 31, 2007 increased by approximately
      $0.4 million due to the addition of Alenco operations during the first quarter
      of 2006.





























**Unallocated
      Operating Earnings, Interest, and Provision for Income Taxes**





**For
                the three months ended**(dollars
                in thousands)
            
            March
                31, 2007
            
            April
                1, 2006(unaudited)
            
            (unaudited)**Statement
                of operations data:**Operating
                earnings (loss)
            
            $
            (1,917
            )
            $
            (1,385
            )Interest
                expense
            
            
            (25,266
            )
            
            (15,326
            )Investment
                income
            
            
            577
            
            
            156Other
                expense
            
            
            -
            
            
            (2,056
            )Income
                tax provision (benefit)
            
            
            (8,450
            )
            
            (1,238
            )Cummulative
                effect of accounting change
            
            
            -
            
            
            (86
            )








*Operating
      earnings (loss)* Unallocated operating loss for the three months ended March 31, 2007 increased
      by approximately $0.5 million over the same period in 2006. The increase was
      driven by a slightly larger corporate staff and an increase in professional
      fees.





28


*Interest
      expense* Interest
      expense for the three months ended March 31, 2007 increased by approximately
      $9.9 million over the same period in 2006 as a result of increased borrowings
      due to the Alenco Acquisition in February 2006, the AHE Acquisition in October
      2006, and higher interest rates on our variable rate debt.


*Income
        taxes* The
        income tax benefit for the three months ended March 31, 2007 increased
        approximately $7.2 million over the same period in 2006, primarily as a result
        of the larger pre-tax loss for the 2007 period versus the 2006 period. The
        benefit for the quarter included approximately $1.0 million of adjustments
        to
        our prior year estimated tax provision. The adjustments primarily relate
        to
        differences in tax amounts originally recorded for income taxes and amounts
        owed
        based on the ultimately filed tax returns. Excluding these adjustments, our
        effective tax rate for the quarter was 38.7%, consistent with our expectations
        for the full fiscal year.


**Liquidity
      and Capital Resources**





Our
      primary cash needs are for working capital, capital expenditures and debt
      service. We have historically financed these cash requirements through
      internally generated cash flow and funds borrowed under our credit
      facilities.





Net
      cash
      used in operating activities for the first three months of 2007 and 2006 was
      approximately $44.8 million and $15.2 million, respectively. The increase in
      net
      cash used in operating activities for the 2007 period compared to the 2006
      period was primarily driven by a higher net loss in 2007 as compared to the
      same
      period in 2006,  a
      reduction to our accrued tax liabilities, and a decrease in other accrued
      liabilities that resulted from increased payouts for management incentive
      compensation and customer rebates.





Net
      cash
      used in investing activities for the first thee months of 2007 and 2006 was
      approximately $3.8 million and $124.6 million, respectively. The decrease in
      cash used in investing activities during the 2007 period was driven by the
      cash
      used to fund the Alenco Acquisition during the first quarter of 2006. Our
      capital expenditures for the first three months of 2007 and 2006 were
      approximately $3.7 million and $4.0 million, respectively.





Net
      cash
      provided by financing activities for the first three months of 2007 and 2006
      was
      approximately $16.4 million and $135.5 million, respectively. The cash provided
      by financing activities for the 2006 period was driven by the cash provided
      from
      our new capital structure that resulted from the consummation of the Alenco
      Acquisition.





We
      intend
      to fund our ongoing capital and working capital requirements, including our
      internal growth, through a combination of cash flows from operations and, if
      necessary, from borrowings under the revolving credit portion of our credit
      facility. As of March 31, 2007, we had approximately $1,067.3 million of
      indebtedness and $46.7 million of availability under the revolving credit
      facility.





On
      March
      31, 2007, the Company’s senior credit facility with a syndicate of financial
      institutions and institutional lenders provided for senior secured financing
      of
      up to $690.0 million, consisting of $585.0 million of 1 st Lien
      term loan facilities maturing in August 2011 and $105.0 million of 2 nd Lien
      term loan facilities maturing in November 2011. The credit facility also
      included a $70.0 million revolving loan facility, including a letter of
      credit subfacility, maturing in February 2009. The 1 st Lien
      term loan facility was drawn in full in and had two tranches, originally
      consisting of: 1) a $560.1 million tranche under which Ply Gem
      Industries, Inc. is the borrower, and 2) a $24.9 million tranche under
      which our Canadian subsidiary, CWD Windows and Doors, Inc., is the borrower.
      As
      of March 31, 2007 the balances of the two tranches were approximately $557.3
      million and $24.8 million, respectively.


The
        borrowings under the revolving portion of the First Lien Credit Facilities
        will
        be available until its maturity to fund our working capital requirements,
        capital expenditures and other general corporate needs. The revolving portion
        of
        the credit facility matures in February 2009 and has no scheduled amortization
        or commitment reductions. The term loan portion of the credit facilities
        matures
        in August 2011 and has quarterly scheduled amortizations of approximately
        $1.5
        million and a final payment of $558.6 million on the maturity date. The balance
        of $105.0 million on the Second Lien loan was to be paid in November
        2011.
 
 On
        April
        5, 2007 Ply Gem Industries, Inc. entered into the Fifth Amended and Restated
        Credit Agreement (the “Amended Credit Facility”) among Ply Gem, as the U.S.
        borrower, CWD Windows and Doors, Inc. (the “Canadian Borrower”), Ply Gem
        Holdings, Inc. (“Holdings”), the subsidiary guarantors party thereto, the
        lenders party thereto, UBS Securities LLC and Deutsche Bank Securities, Inc.,
        as
        joint lead arrangers and bookrunners and UBS AG, Stamford Branch, as
        administrative agent.
  Pursuant
        to the Amended Credit Facility, on April 5, 2007, Ply Gem borrowed (i)
        approximately $557.3 million of term loans (the “U.S. Term Loans”) to replace
        the current outstanding approximate $557.3 million of term loans and (ii)
        an
        additional $105.0 million of term loans (the “Additional U.S. Term Loans”, and
        together with the U.S. Term Loans, the “Term Loans”) to repay the second lien
        term loan facility outstanding under Ply Gem’s Second Lien Amended and Restated
        Credit Agreement. Ply Gem also amended the terms of its Canadian Term Loans
        outstanding under the Amended Credit Facility. The Amended Credit Facility
        provides Ply Gem with a $70.0 million revolving facility (the “Revolving
        Facility”) to replace the revolving commitment under the Existing Credit
        Facility along with an additional $5.0 million revolving facility (the
“Additional Revolving Facility”, together with the Revolving Facility, the
“Revolving Facilities”), resulting in a total Revolving Facility of $75.0
        million.
  The
        term
        loans provided under the Credit Agreement will mature on August 15, 2011,
        and
        will amortize in an amount equal to 1% per annum of the initial principal
        amount
        outstanding, payable in equal quarterly installments beginning on June 30,
        2007
        and ending on March 31, 2011, with the balance payable on August 15, 2011.
        The
        Credit Agreement contains affirmative, negative and financial covenants
        customary for such financings. The Credit Agreement requires Ply Gem to maintain
        a maximum total leverage ratio of 6.75 to 1.0 until December 31, 2008;
        thereafter, the maximum total leverage ratio that Ply Gem is permitted to
        have
        declines over time, from 6.75 to 1.0 to 6.25 to 1.0. Certain mandatory
        prepayments under the Credit Facilities will be required upon the occurrence
        of
        certain events, including the incurrence of certain additional indebtedness
        and
        the sale of certain assets.


Under
      the
      terms of our credit facilities, we are permitted to use the excess cash flow
      and/or a portion of the revolving credit portion of the credit facilities to
      repurchase up to $40.0 million aggregate principal amount of the Senior
      Subordinated Notes. Subject to market conditions, our capital needs and other
      factors, we may from time to time purchase up to $40.0 million aggregate
      principal amount of the 9% Senior Subordinated Notes in market transactions,
      privately negotiated sales or other transactions. As of March 31, 2007, we
      had
      not yet purchased any of our Senior Subordinated Notes.





29


The
      credit facilities and the indenture for the Senior Subordinated Notes impose
      certain restrictions on Ply Gem Industries, Inc., including restrictions on
      its
      ability to incur indebtedness, pay dividends, make investments, grant liens,
      sell assets and engage in certain other activities. The terms of the credit
      facilities and the Senior Subordinated Notes also significantly restrict the
      ability of Ply Gem Industries, Inc. to pay dividends and otherwise distribute
      assets to Ply Gem Holdings, Inc. In addition, the credit facilities require
      Ply
      Gem Industries, Inc. to maintain a maximum total leverage ratio. 
Indebtedness under the credit facilities is secured by substantially all of
      Ply
      Gem Industries Inc.’s assets, including its real and personal property,
      inventory, accounts receivable, intellectual property and other intangibles.
      In
      addition, borrowings under the credit facilities are guaranteed by Ply Gem
      Holdings, Inc. and secured by its assets (including its equity interests).
      Borrowings under the credit facilities (except for the $24.8 million
      tranche under which our Canadian subsidiary, CWD Windows and Doors, Inc., is
      the
      borrower) are also guaranteed and secured by the equity interests and
      substantially all of the assets of our current and, if any, future domestic
      subsidiaries, subject to exceptions. The $24.8 million tranche under which
      CWD
      Windows and Doors, Inc. is the borrower is also guaranteed and secured by the
      equity interests and substantially all of the assets of CWD Windows and Doors,
      Inc.’s current and future (if any) Canadian subsidiaries.





Because
      of the inherent seasonality in our business and the resulting working capital
      requirements, our liquidity position within a given year will fluctuate. The
      seasonal effect that creates greatest capital needs is experienced during the
      first six months of the year and we anticipate the need to borrow funds under
      the revolving portion of our First Lien Credit Facilities to support this
      requirement. However, we anticipate that the funds generated by operations
      and
      funds available under our credit facility will be adequate to finance our
      ongoing operational cash flow needs, capital expenditures (as described above),
      debt service obligations, management incentive expenses, fees payable under
      the
      General Advisory Agreement with a Caxton-Iseman party, dated February 12, 2004
      (the “General Advisory Agreement”), and other contractual obligations for the
      foreseeable future.








**Contractual
      Obligations**





In
      addition to the items listed in the Contractual Obligations table presented
      in
      the Company’s 10K Report, the Company has a potential obligation related to
      certain tax issues of approximately $6.8 million. The timing of the potential
      tax payments is unknown.





**Inflation;
      Seasonality**





Our
      performance is dependent to a significant extent upon the levels of home repair
      and remodeling and new home construction spending, all of which are affected
      by
      such factors as interest rates, inflation, consumer confidence and
      unemployment.





The
      demand for our products is seasonal, particularly in the Northeast and Midwest
      regions of the United States and Western Canada where inclement weather during
      the winter months usually reduces the level of building and remodeling activity
      in both the home repair and remodeling and new home construction sectors. Our
      sales are usually lower during the first and fourth quarters. Since a portion
      of
      our manufacturing overhead and operating expenses are relatively fixed
      throughout the year, operating income and net earnings tend to be lower in
      quarters with lower sales levels. In addition, the demand for cash to fund
      our
      working capital is greater from late in the fourth quarter through the first
      quarter.








**Recent
      Accounting Pronouncements**




In
      September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements”. SFAS
      No. 157 defines fair value, establishes a framework for measuring fair value
      in
      generally accepted accounting principles, and expands disclosures about fair
      value measurements. This statement addresses how to calculate fair value
      measurements required or permitted under other accounting pronouncements.
      Accordingly, this statement does not require any new fair value measurements.
      However, for some entities, the application of this statement will change
      current practice. SFAS No. 157 is effective for the Company beginning January
      1,
      2008. The Company is currently evaluating the impact of this
      standard.





30


In
      September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for
      Defined Benefit Pension and Other Postretirement Plans an amendment of FASB
      Statements No. 87, 88, 106, and 132(R)”. This standard requires employers
      to recognize the underfunded or overfunded status of a defined benefit
      postretirement plan as an asset or liability in its statement of financial
      position and to recognize changes in the funded status in the year in which
      the
      changes occur through accumulated other comprehensive income, which is a
      component of stockholders’ equity. SFAS No. 158 does not change the amount of
      actuarially determined expense that is recorded in the consolidated statement
      of
      income. The new reporting requirements and related new footnote disclosure
      rules
      of SFAS No. 158 are effective for our December 31, 2007 financial statements.
      Additionally, SFAS No. 158 requires employers to measure the funded status
      of a
      plan as of the date of its year-end statement of financial position. For our
      financial statements as of December 31, 2008 we will change our September 30
      measurement date for our plans’ assets and obligations to comply with this
      requirement. The Company is currently evaluating the impact that the
      implementation of SFAS No. 158 will have on its financial
      statements.





In
      February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
      Financial Assets and Financial Liabilities”. SFAS No. 159 permits entities
      to choose to measure many financial assets and financial liabilities at fair
      value. Unrealized gains and losses on items for which the fair value option
      has
      been elected are reported in earnings. SFAS No. 159 is effective for our
      fiscal year beginning January 1, 2008. The Company is currently evaluating
      the
      impact of this standard.



















**Special
      Note Regarding Forward-Looking Statements**






This
      Quarterly Report on Form 10-Q contains “forward-looking statements” within the
      meaning of Section 27A of the Securities Act of 1933, as amended, and
      Section 21E of the Securities Exchange Act of 1934, as amended. We based these
      forward-looking statements on our current expectations and projections about
      future events. Our actual results could differ materially from those discussed
      in, or implied by, these forward-looking statements. Forward-looking statements
      are identified by words such as “believe,” “anticipate,” “expect,” “intend,”
“plan,” “will,” “may” and other similar expressions. In addition, any statements
      that refer to expectations, projections or other characterizations of future
      events or circumstances are forward-looking statements. The following factors
      could cause our actual results to differ materially from those implied by the
      forward-looking statements in this Quarterly Report:






·
            our
                high degree of leverage and significant debt service obligations;




·
            restrictions
                under the indenture governing the notes and our senior credit
                facilities;




·
            the
                competitive nature of our industry;




·
            changes
                in interest rates, and general economic, home repair and remodeling
                and
                new home construction market
                conditions;




·
            changes
                in the price and availability of raw materials;
                and




·
            changes
                in our relationships with our significant
                customers.






Other
      factors that could cause actual results to differ from those implied by the
      forward-looking statements contained in this Quarterly Report are set forth
      in
      our 2006 Annual Report on Form 10-K. We undertake no obligation to update the
      forward-looking statements in this filing.







31





**Item
      3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
      MARKET RISK**







Our
      principal interest rate exposure relates to the term loans outstanding under
      our
      new senior credit facilities. We have approximately $687.1 million of term
      loans
      outstanding, bearing interest at a variable rate, based on an adjusted LIBOR
      rate plus an applicable interest margin or the base rate plus an applicable
      interest margin. Each quarter point increase or decrease in the interest rate
      on
      the term loans would change our interest expense by approximately $1.7 million
      per year. We also have a revolving credit facility which provides for borrowings
      of up to $70.0 million, which will also bear interest at variable rates in
      the
      same manner as the term loan facilities. Assuming the new revolving credit
      facility is fully drawn, each quarter point increase or decrease in the
      applicable interest rate would change our interest expense by approximately
      $0.2
      million per year. In the future we may enter into interest rate swaps, involving
      exchange of floating for fixed rate interest payments, to reduce our exposure
      to
      interest rate volatility.





Our
      results of operations are affected by fluctuations in the value of the U.S.
      dollar as compared to the value of the Canadian dollar. For the three months
      ended March 31, 2007, the net impact of foreign currency changes to the
      Company’s results of operations was a gain of $0.2 million. The impact of
      foreign currency changes related to translation resulted in an increase in
      stockholder’s equity of approximately $0.5 million for the three months ended
      March 31, 2007. The revenue or expense reported by us as a result of currency
      fluctuations will be greater in times of U.S. dollar devaluation and less in
      times of U.S. dollar appreciation. We generally do not enter into derivative
      financial instruments to manage foreign currency exposure. For the three months
      ended March 31, 2007, we did not have any significant outstanding foreign
      currency hedging contracts.




















**Item
      4.     CONTROLS AND PROCEDURES**




We
      carried out an evaluation, under the supervision and with the participation
      of
      our management, including our Chief Executive Officer and Chief Financial
      Officer, of the effectiveness of our disclosure controls and procedures, as
      defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of
      1934.
      Based on that evaluation, our Chief Executive Officer and Chief Financial
      Officer have concluded that our disclosure controls and procedures as of March
      31, 2007 were effective to ensure that information required to be disclosed
      by
      us in reports that we file or submit under the Securities Exchange Act of 1934
      is recorded, processed, summarized and reported within the time periods
      specified in Securities and Exchange Commission’s rules and forms. There
      have been no changes in our internal controls over financial reporting during
      the three-month period ended March 31, 2007, that have materially affected,
      or
      are reasonably likely to materially affect, our internal controls over financial
      reporting.















32







**PART
      II - OTHER INFORMATION**








**Item
      1A.  RISK
      FACTORS**





***Downturns
      in the home repair and remodeling and new home construction sectors or the
      economy could lower the demand for, and pricing of, our products, which in
      turn
      could cause our net sales and net income to decrease.***





Our
      performance is dependent to a significant extent upon the levels of home repair
      and remodeling and new home construction spending, all of which are affected
      by
      such factors as interest rates, inflation, consumer confidence, unemployment,
      and the availability of consumer credit. Current market forecasts indicate
      that
      single family housing starts for the new construction market will decline in
      2007 as compared to 2006. If these market forecasts are correct, our net sales
      and net income may be adversely affected.











**Item
      6.**   **EXHIBITS**





***(a)***  ***Exhibits***








Exhibit
      No.  Description
      of Exhibit





*
                31.1
            Certification
                by President and Chief Executive Officer pursuant to Rule 13a-14(a)
                of the
                Securities Exchange Act of 1934**
                31.2
            Certification
                by Vice President and Chief Financial Officer pursuant to Rule 13a-14(a)
                of the Securities Exchange Act of 1934*







*
      Filed
      herewith.







33





**SIGNATURES**





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.





PLY
      GEM
      HOLDINGS, INC.


(Registrant)








Date:
      May
      14, 2007




By:
      /s/ Gary E. Robinette


Gary
      E.
      Robinette


President
      and Chief Executive Officer








Date: May
      14,
      2007





By: /s/
      Shawn K. Poe


Shawn
      K.
      Poe


Vice
      President, Chief Financial Officer,


Treasurer
      and Secretary





34