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
      April 1, 2006


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 13or 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 11, 2006,
      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****APRIL 1, 2006**




CONTENTS






**PART
      I – FINANCIAL
      INFORMATION**




Item
            1.            
                Condensed Consolidated Financial
                Statements





Condensed
                Consolidated Statements of Operations –


Three
                months
                ended April 1, 2006 and April 2,
                2005                                          2




Condensed Consolidated Balance Sheets –


April
                1, 2006 and December 31,
                2005                                                                3




Condensed Consolidated Statements of Cash Flows –


Three
                months ended April 1, 2006 and April 2,
                2005                                            4




Notes
                to
                Condensed Consolidated Financial
                Statements                          5




Item
            2.           
                Management’s Discussion and Analysis of Financial
                Condition


And
      Results of
      Operations                                                                                   23




Item
            3.           
                Quantitative and Qualitative Disclosures about Market
                Risk                                               32




Item
            4.           
                Controls and
                Procedures                                                                                                32






PART
      II – OTHER
      INFORMATION




Item
            6.           
                Exhibits                                                                                                                        33




Signatures
            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**April
                  1,
              
              April
                  2,2006
              
              2005(Amounts
                  in thousands)Net
                  Sales
              
              $
              216,311
              
              $
              171,735Costs
                  and Expenses:Cost
                  of products sold
              
              
              173,048
              
              
              137,766Selling,
                  general and administrative expense
              
              
              26,481
              
              
              23,042Amortization
                  of intangible assets
              
              
              2,553
              
              
              2,440Total
                  Costs and Expenses
              
              
              202,082
              
              
              163,248Operating
                  earnings
              
              
              14,229
              
              
              8,487Foreign
                  currency loss
              
              
              (71
              )
              
              (304
              )Interest
                  expense
              
              
              (15,326
              )
              
              (14,602
              )Investment
                  income
              
              
              156
              
              
              79Other
                  expense
              
              
              (2,056
              )
              
              -Loss
                  before income taxes andcumulative
                  effect of accounting change
              
              
              (3,068
              )
              
              (6,340
              )Provision
                  for income taxes
              
              
              (1,238
              )
              
              (2,485
              )Loss
                  before cumulative effectof
                  accounting change
              
              
              (1,830
              )
              
              (3,855
              )Cumulative
                  effect of accounting change,net
                  of income tax benefit of $57
              
              
              (86
              )
              
              -Net
                  loss
              
              $
              (1,916
              )
              $
              (3,855
              )







See
      accompanying notes to condensed consolidated financial statements.




2


**PLY
      GEM HOLDINGS, INC. AND SUBSIDIARIESCONDENSED
      CONSOLIDATED BALANCE SHEETS**


(UNAUDITED)


April
                  1,
              
              December
                  31,2006
              
              2005(Amounts
                  in thousands, exceptshare
                  amounts)**ASSETS****Current
                  Assets:**Cash
                  and cash equivalents
              
              $
              17,918
              
              $
              22,173Accounts
                  receivable, less allowances of $8,610 and $8,320, respectively
              
              
              101,513
              
              
              70,357Inventories:Raw
                  materials
              
              
              40,475
              
              
              31,415Work
                  in process
              
              
              7,128
              
              
              5,080Finished
                  goods
              
              
              23,154
              
              
              18,723Total
                  inventory
              
              
              70,757
              
              
              55,218Prepaid
                  expenses and other current assets
              
              
              15,106
              
              
              9,427Deferred
                  income taxes
              
              
              14,951
              
              
              13,330Total
                  current assets
              
              
              220,245
              
              
              170,505**Property
                  and Equipment, at cost:**Land
              
              
              2,130
              
              
              2,020Buildings
                  and improvements
              
              
              17,208
              
              
              15,568Machinery
                  and equipment
              
              
              133,734
              
              
              119,225Total
                  property and equipment
              
              
              153,072
              
              
              136,813Less
                  accumulated depreciation
              
              
              (35,449
              )
              
              (27,085
              )Total
                  property and equipment, net
              
              
              117,623
              
              
              109,728**Other
                  Assets:**Goodwill
              
              
              678,325
              
              
              578,992Intangible
                  assets, less accumulated amortization of $18,059 and $15,506,respectively
              
              
              168,051
              
              
              152,894Other
              
              
              37,836
              
              
              37,879Total
                  other assets
              
              
              884,212
              
              
              769,765$
              1,222,080
              
              $
              1,049,998**LIABILITIES
                  AND STOCKHOLDERS' EQUITY****Current
                  Liabilities:**Current
                  maturities of long-term debt
              
              $
              4,000
              
              $
              1,692Accounts
                  payable
              
              
              64,905
              
              
              42,342Accrued
                  expenses and taxes
              
              
              62,847
              
              
              64,019Total
                  current liabilities
              
              
              131,752
              
              
              108,053Deferred
                  income taxes
              
              
              64,575
              
              
              58,184Other
                  long term liabilities
              
              
              35,280
              
              
              32,471Long-term
                  debt, less current maturities
              
              
              769,458
              
              
              635,776**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
              
              
              183,221
              
              
              175,461Retained
                  earnings
              
              
              35,991
              
              
              37,907Accumulated
                  other comprehensive income
              
              
              1,803
              
              
              2,146Total
                  Stockholders' Equity
              
              
              221,015
              
              
              215,514$
              1,222,080
              
              $
              1,049,998




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**April
                  1,
              
              April
                  2,2006
              
              2005(Amounts
                  in thousands)**Cash
                  flows from operating activities:**Net
                  loss
              
              $
              (1,916
              )
              $
              (3,855
              )**Adjustments
                  to reconcile net loss to****cash
                  provided by operating activities:**Depreciation
                  and amortization expense
              
              
              7,000
              
              
              6,618Fair
                  value premium on purchased inventory
              
              
              304
              
              
              -Non-cash
                  interest expense, net
              
              
              1,307
              
              
              1,188Loss
                  on foreign currency transactions
              
              
              71
              
              
              304Gain
                  on sale of asset
              
              
              (22
              )
              
              -Other
                  non-cash items
              
              
              1,094
              
              
              -Deferred
                  income taxes
              
              
              (1,794
              )
              
              10**Changes
                  in operating assets and****liabilities,
                  net of effects from acquisitions:**Accounts
                  receivable, net
              
              
              (20,949
              )
              
              (6,548
              )Inventories
              
              
              (8,557
              )
              
              (8,837
              )Prepaid
                  expenses and other current assets
              
              
              (750
              )
              
              (2,147
              )Accounts
                  payable
              
              
              16,427
              
              
              13,113Accrued
                  expenses and taxes
              
              
              (7,179
              )
              
              (20,369
              )Other
              
              
              (192
              )
              
              164**Net
                  cash used in operating activities**
              
              
              (15,156
              )
              
              (20,359
              )**Cash
                  flows from investing activities:**Capital
                  expenditures
              
              
              (3,970
              )
              
              (2,526
              )Proceeds
                  from sale of building
              
              
              497
              
              
              -Acquisition
                  of business, net of cash acquired
              
              
              (121,088
              )
              
              -Other
              
              
              -
              
              
              -**Net
                  cash used in investing activities**
              
              
              (124,561
              )
              
              (2,526
              )**Cash
                  flows from financing activities:**Proceeds
                  from long-term debt
              
              
              122,808
              
              
              -Proceeds
                  from revolving credit facility
              
              
              15,000
              
              
              35,500Payments
                  on revolving credit facility
              
              
              (1,808
              )
              
              (909
              )Debt
                  issuance costs
              
              
              (2,249
              )
              
              -Equity
                  contribution, net
              
              
              1,725
              
              
              -**Net
                  cash provided by financing activities**
              
              
              135,476
              
              
              34,591Impact
                  of exchange rate movements on cash
              
              
              (14
              )
              
              (19
              )Net
                  increase (decrease) in cash andcash
                  equivalents
              
              
              (4,255
              )
              
              11,687Cash
                  and cash equivalents at thebeginning
                  of the period
              
              
              22,173
              
              
              6,794Cash
                  and cash equivalents at theend
                  of the period
              
              $
              17,918
              
              $
              18,481




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 2005 Annual Report on
      Form 10-K filed with the Securities and Exchange Commission on March 27,
      2006.  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 2005 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, 2006 through April 1, 2006 are not necessarily
      indicative of the results that may be expected for the year ended December
      31,
      2006.




The
      condensed consolidated balance sheet at December
      31, 2005 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.




On
      February 24, 2006, Ply Gem completed the purchase
      of AWC Holding Company (“AWC”, and together with its subsidiaries, “Alenco”)
      (the “Alenco Acquisition”) in accordance with a securities purchase agreement
      entered into among Ply Gem, all of the direct and indirect stockholders, warrant
      holders and stock option holders of AWC and FNL Management Corp., an Ohio
      corporation, as their representative (the “Securities Purchase
      Agreement”).  Pursuant to the Securities Purchase Agreement, Ply Gem
      purchased all of the issued and outstanding shares of common stock, warrants
      to
      purchase shares of common stock and options to purchase common stock of AWC
      (other than certain shares of common stock of AWC held by certain members of
      the
      senior management of Alenco (the “Rollover Shares”) that were contributed
      separately to Ply Gem Prime Holdings, Inc., the new parent company of Ply Gem
      Investment Holdings, Inc., in exchange for shares of capital stock of Ply Gem
      Prime Holdings, Inc.).  Immediately following the completion of the Alenco
      Acquisition, AWC became a wholly owned subsidiary of Ply Gem.




On
      February 24, 2006 in connection with the Alenco
      Acquisition, a new holding company, Ply Gem Prime Holdings, Inc., was formed
      pursuant to a merger involving Ply Gem Investment Holdings, Inc.  As a
      result, Ply Gem Prime Holdings, Inc. became the sole shareholder of Ply Gem
      Investment Holdings, Inc., each outstanding share of capital stock of Ply Gem
      Investment Holdings, Inc. was converted into a share of a corresponding class
      of
      shares of the capital stock of Ply Gem Prime Holdings, Inc. and Ply Gem Prime
      Holdings, Inc. assumed Ply Gem Investment Holdings, Inc.’s obligations under the
      Ply Gem Investment Holdings 2004 Stock Option Plan and the Ply Gem Investment
      Holdings Phantom Stock Plan.  In connection therewith, each outstanding
      stock option and phantom unit of Ply Gem Investment Holdings, Inc. was converted
      on a 1:1 basis into a stock option and phantom unit of Ply Gem Prime Holdings,
      Inc.




The
      accompanying financial statements include the
      consolidated results of operations for the Company for the three month periods
      ended April 1, 2006 and April 2, 2005, and consolidated financial position
      for
      the Company as of April 1, 2006 and December 31, 2005.  The accompanying
      financial statements include the results of operations of Alenco for the period
      after the acquisition date of February 24, 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.




5


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 and unemployment.




**Principles
      of Consolidation and
      Combination**




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.




**Accounting
      Policies and Use of
      Estimates**




The
      preparation of
      these consolidated and combined 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 April 1, 2006 and December 31, 2005, approximately $11.8 million
      and
      $9.8 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 $2.8 million
      higher at April 1, 2006 and at December 31, 2005.  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.




**Related
      Party
      Transactions**


The
 Company
      has
      entered into two advisory agreements with an affiliate of Caxton-Iseman Capital
      or related parties, or 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 $0.3 million for the
      three
      month periods ended April 1, 2006 and April 2, 2005, respectively.  All of
      the payments made under the General Advisory Agreement have been expensed as
      incurred.


In
      connection with the
      Alenco Acquisition, pursuant to the General Advisory Agreement, in March 2006
      the Company paid the Caxton-Iseman Party a transaction fee equal to 2% of the
      purchase price of AWC Holding Company ($2.4 million).




6


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 April 1, 2006 and
      April 2, 2005, the Company recorded a loss from foreign currency transactions
      of
      approximately $0.1 million and $0.3 million, respectively.  As of April 1,
      2006, and December 31, 2005 accumulated other comprehensive income included
      a
      currency translation adjustment of approximately $3.3 million and $3.6 million,
      respectively.


Concentration
      of Credit Risk


The
      accounts receivable
      balance related to one customer of our siding, fencing, railing and decking
      segment was approximately $20.1 million and $6.3 million at April 1, 2006 and
      December 31, 2005, respectively.  This customer accounted for approximately
      21.5% of net sales for the three month period ended April 1, 2006 and
      approximately 18.9% of net sales for the year ended December 31,
      2005.




Fair
      Value of Financial Instruments


The
      carrying value of the Company’s senior
      subordinated notes at April 1, 2006 and December 31, 2005 was approximately
      $360.3. The fair value of the Company’s senior subordinated notes at April 1,
      2006 and December 31, 2005 was estimated to be approximately $334.8 million
      and
      $319.5 million, respectively, based on available market information. The
      carrying value of the Company’s other financial instruments approximates their
      fair value.










































7








2. PURCHASE
      ACCOUNTING






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 to the new home
      construction market in the fast-growing Southern regions of the United
      States.  The addition of Alenco will expand the Company’s geographical
      reach into the southern regions and completes our window products offering
      with
      aluminum.




The
      purchase price was
      preliminarily allocated to the assets and liabilities based on their estimated
      fair values.




*(in
                  thousands)*Other
                  current assets, net of cash
              
              $
              16,607Inventories
              
              
              7,312Property,
                  plant and equipment
              
              
              8,901Customer
                  relationships
              
              
              17,710Goodwill
              
              
              99,508Other
                  assets
              
              
              198Current
                  liabilities
              
              
              (11,875
              )Other
                  liabilities
              
              
              (11,238
              )Purchase
                  price, net of cash acquired
              
              $
              127,123




We
      have estimated the fair value of our assets and
      liabilities and the lives of those assets being amortized or depreciated, as
      of
      the Alenco Acquisition date, utilizing information available at the time our
      consolidated financial statements were prepared.  The company has hired a
      third-party valuation specialist to establish the fair value of Alenco’s
      property, plant and equipment and the fair value of the identifiable intangible
      assets.  At the date of this filing, the valuation was not yet
      complete.  As a result of the final valuations, values assigned to
      property, plant and equipment, identifiable intangible assets, and goodwill
      could change. Management is also assessing certain liabilities assumed in the
      transaction and tax-related assets and liabilities.




Expenses
      of approximately $2.1 million were
      recognized as ‘other expense’ during the first quarter of 2006 for third-party
      charges associated with business combination financing
      costs.




Unaudited
      pro forma
      results of operations for the three month periods ended April 1, 2006 and April
      2, 2005, as if the purchase had occurred at the beginning of the periods is
      as
      follows:








Three
                  months Ended
                April
                  1, 2006
              
              Three
                  months Ended
                April
                  2, 2005(Amounts
                  in thousands)Net
                  sales
              
              $
              237,574
              
              $
              201,767Net
                  loss
              
              
              (961
              )
              
              (3,024
              )




















8






3. **INTANGIBLE ASSETS AND
      GOODWILL**




The
      table that follows presents the
      components of intangible assets as of April 1, 2006 and December 31,
      2005:




Average
                Amortization
                Period
                (in
                  Years)
              
              Cost
              
              Accumulated
                Amortization
              
              Net
                  Carrying
                Value*(Amounts
                  in thousands)***As
                  of April 1, 2006:**Patents
              
              13
              $
              12,000
              
              $
              (1,964
              )
              $
              10,036Trademarks/Tradenames
              
              15
              
              25,900
              
              
              (3,734
              )
              
              22,166Customer
                  relationships
              
              14
              
              115,710
              
              
              (12,361
              )
              
              103,349Total
                  intangible assets
              
              
              $
              153,610
              
              $
              (18,059
              )
              $
              135,551Intangible
                  with indefinite lives:Trademarks
              
              
              $
              32,500
              
              $
              --
              
              $
              32,500**As
                  of December 31, 2005:**Patents
              
              13
              $
              12,000
              
              $
              (1,738
              )
              $
              10,262Trademarks/Tradenames
              
              15
              
              25,900
              
              
              (3,301
              )
              
              22,599Customer
                  relationships
              
              14
              
              98,000
              
              
              (10,467
              )
              
              87,533Total
                  intangible assets
              
              
              $
              135,900
              
              $
              (15,506
              )
              $
              120,394Intangible
                  with indefinite lives:Trademarks
              
              
              $
              32,500
              
              $
              --
              
              $
              32,500






Amortization
      expense
      for the three month periods ended April 1, 2006 and April 2, 2005  was
      approximately $2.6 million and $2.4 million, respectively.  Amortization
      expense for the remainder of 2006, and for the five succeeding fiscal years
      is
      estimated to be approximately $8.6 million, $11.1 million, $11.1 million, $11.1
      million, $11.1 million, and $10.9 million, respectively.  These estimates
      are subject to refinement as the purchase price allocation for the Alenco
      Acquisition is completed which could impact the value of, and/or
 amortization period of, intangible assets.




Goodwill
      increased by approximately $99.5 million for
      the Alenco Acquisition, offset by a decrease of approximately $0.2 million
      due
      to currency translation changes.










4. **COMPREHENSIVE
      LOSS**




Comprehensive
      loss is comprised of the
      following:







**Three
                  Months Ended**April
                  1, 2006
              
              April
                  2, 2005*(Amounts
                  in thousands)*Net
                  loss
              
              $
              (1,916
              )
              $
              (3,855
              )Foreign
                  currency translation adjustment
              
              
              (343
              )
              
              (150
              )Comprehensive
                  loss
              
              $
              (2,259
              )
              $
              (4,005
              )








9




5. **LONG-TERM
      DEBT**




Long-term
      debt in the
      accompanying consolidated balance sheets at April 1, 2006 and December 31,
      2005
      consists of the following:




April
                1,
                2006
            
            December
                31,
                2005(Amounts
                in
                thousands)Senior
                term loan facility
            
            $
            400,000
            
            $
            277,192Senior
                revolving credit facility
            
            
            13,192
            
            
            -Senior
                subordinated notes
            
            
            360,266
            
            
            360,276773,458
            
            
            637,468Less
                current maturities
            
            
            4,000
            
            
            1,692$
            769,458
            
            $
            635,776




The
      Company’s senior credit facility with a syndicate
      of financial institutions and institutional lenders provides for senior secured
      financing of up to $470.0 million, consisting of $400.0 million of
      term loan facilities maturing in August 2011 and a $70.0 million revolving
      loan facility, including a letter of credit subfacility, maturing in February
      2009. The term loan facility is drawn in full in and has two tranches,
      consisting of: 1) a $375.0 million tranche under which Ply Gem
      Industries, Inc. is the borrower, and 2) a $25.0 million tranche under
      which our Canadian subsidiary, CWD Windows and Doors, Inc., is the
      borrower.


During
      the first quarter of 2006 the Company borrowed
      $15.0 million under the revolving credit facility and repaid approximately
      $1.8
      million.  As of April 1, 2006, the Company had $54.4 million of
      availability under our revolving credit 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 April 1, 2006 ranged from 7.2% to 7.3%.


Our
      senior credit facilities require scheduled
      quarterly principal payments on the term loan facilities of approximately $1.0
      million each quarter through March 2011 and a payment of $380.0 million on
      the
      maturity date, allocated pro rata between the two tranches.


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 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.


Ply
      Gem Industries, Inc. has issued $360.0 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.




10


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.




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 April 1, 2006:  (Amounts in
      thousands)




2006
            $
            4,0002007
            
            4,0002008
            
            17,1922009
            
            4,0002010
            
            4,000Thereafter
            
            740,266$
            773,458




At
      April 1, 2006,
      approximately $2.4 million of letters of credit have been issued under our
      senior credit facility.  Further, approximately $3.2 million of letters of
      credit were 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
                April
                  1, 2006
              
              For
                  the three
                months
                  ended
                April
                  2, 2005*(Amounts
                  in thousands)*Service
                  cost
              
              $
              82
              
              $
              84Interest
                  cost
              
              
              469
              
              
              480Expected
                  return on plan assets
              
              
              (458
              )
              
              (413
              )Net
                  periodic expense
              
              $
              93
              
              $
              151








7. **COMMITMENTS AND
      CONTINGENCIES**




Nortek,
      the former
      parent of Ply Gem Industries, Inc., has agreed to indemnify the Company for
      certain liabilities.  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.  A receivable related to this
      indemnification has been recorded in other long-term assets in the approximate
      amount of $9.0 million as of April 1, 2006.




11


The
      Company has
      indemnified third parties in certain transactions involving dispositions of
      former subsidiaries.  As of April 1, 2006 and December 31, 2005, the
      Company has recorded liabilities included in Accrued expenses and Other long
      term liabilities in relation to these indemnifications of approximately $9.0
      million and $9.1 million, respectively, consisting of the
      following:


(Amounts
                  in thousands)**April
                  1, 2006**
              
              **December
                  31, 2005**Product
                  claim liabilities
              
              $
              3,797
              
              $
              3,801Long-term
                  lease liabilities
              
              
              212
              
              
              231Multiemployer
                  pension plan withdrawal liability
              
              
              3,986
              
              
              4,028Other
              
              
              1,051
              
              
              1,054$
              9,046
              
              $
              9,114


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 April 1, 2006, warranty liabilities of
      approximately $4.9 million have been recorded in current liabilities and
      approximately $7.5 million have been recorded in long term
      liabilities.






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


For
                  the three
                months
                  ended
                April
                  1, 2006
              
              For
                  the three months ended
                April
                  2, 2005*(Amounts
                  in thousands)***Balance,
                  beginning of period**
              
              $
              10,790
              
              $
              11,095Warranty
                  expense provided during period
              
              
              544
              
              
              552Settlements
                  made during period
              
              
              (402
              )
              
              (704
              )Liability
                  assumed with Alenco Acquisition
              
              
              1,461
              
              
              -**Balance,
                  end of period**
              
              $
              12,393
              
              $
              10,943








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.









12






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




Accrued
      expenses and
      taxes consist of the following at April 1, 2006 and December 31,
      2005:


April
                1,
                2006
            
            December
                31,
                2005(Amounts
                in
                thousands)Insurance
            
            $
            6,179
            
            $
            4,660Employee
                compensation and benefits
            
            
            12,553
            
            
            11,727Sales
                and
                marketing
            
            
            11,857
            
            
            16,061Product
                warranty
            
            
            4,881
            
            
            4,331Short-term
                product claim liability
            
            
            2,321
            
            
            2,321Interest
            
            
            7,205
            
            
            16,576Other,
                net
            
            
            17,851
            
            
            8,343$
            62,847
            
            $
            64,019




Other
      long-term
      liabilities consist of the following at April 1, 2006 and December 31,
      2005:


April
                1,
                2006
            
            December
                31,
                2005(Amounts
                in
                thousands)Insurance
            
            $
            3,448
            
            $
            1,731Pension
                liabilities
            
            
            14,537
            
            
            14,974Product
                warranty
            
            
            7,502
            
            
            6,459Long-term
                product
                claim liability
            
            
            1,476
            
            
            1,480Contingent
                tax
                liability
            
            
            6,646
            
            
            6,646Other
            
            
            1,671
            
            
            1,181$
            35,280
            
            $
            32,471








9.  
STOCK-BASED
      COMPENSATION




Stock
      Option
      Plan




On
      February 12, 2004, Ply Gem Investment Holdings,
      Inc.’s Board of Directors adopted the Ply Gem Investment Holdings, Inc. 2004
      Stock Option Plan (the “Plan”) allowing for grants of options to purchase up to
      148,050 shares of Ply Gem Investment Holdings, Inc.’s common stock under
      nonqualified stock options or incentive stock options and on November 30, 2004,
      increased the grants allowed under the plan up to 184,065 shares. On February
      24, 2006 in connection with the Alenco Acquisition, a new holding company,
      Ply
      Gem Prime Holdings, Inc., was formed pursuant to a merger involving Ply Gem
      Investment Holdings, Inc.  As a result, Ply Gem Prime Holdings, Inc. became
      the sole shareholder of Ply Gem Investment Holdings, Inc., each outstanding
      share of capital stock of Ply Gem Investment Holdings, Inc. was converted into
      a
      share of a corresponding class of shares of the capital stock of Ply Gem Prime
      Holdings, Inc. and Ply Gem Prime Holdings, Inc. assumed Ply Gem Investment
      Holdings, Inc.’s obligations under the Ply Gem Investment Holdings 2004 Stock
      Option Plan and the Ply Gem Investment Holdings Phantom Stock Plan.  In
      connection therewith, each outstanding stock option and phantom unit of Ply
      Gem
      Investment Holdings, Inc. was converted on a 1:1 basis into a stock option
      and
      phantom unit of Ply Gem Prime Holdings, Inc.   Employees, directors
      and consultants of Ply Gem Prime Holdings, Inc. or any of its majority-owned
      subsidiaries are eligible for options, as specified in the Plan.  Ply Gem
      Prime Holdings, Inc.’s Board of Directors may, among other things, select
      recipients of options grants, determine whether options will be nonqualified
      or
      incentive stock options, set the number of shares that may be purchased pursuant
      to option exercise, and determine other terms and conditions of options. The
      exercise price of an option must be at least the estimated fair market value
      of
      a share of common stock as of the grant date.  Options generally vest over
      five years from the date of grant, unless specified otherwise in any individual
      option agreement.  Generally, options will expire on the tenth anniversary
      of the grant date or in connection with termination of
      employment.  The Board of Directors has the discretion to accelerate
      the vesting and exercisability of outstanding options.




13




Effective
      January 1,
      2006 the Company adopted the fair value recognition provisions of Financial
      Accounting Standards Board (FASB) Statement of Financial Accounting Standards
      (SFAS) No. 123(R), “Share-Based Payments.”   The Company has elected
      the modified prospective transition method as permitted by SFAS No. 123(R)
      and,
      accordingly, prior periods have not been restated to reflect the impact of
      SFAS
      No. 123(R).  In accordance with SFAS No. 123(R), the Company considers
      these options to be liability-classified awards based on the fact that the
      employee has the ability to put shares back to the company in certain
      circumstances, thus avoiding exposure to the risk and rewards of ownership
      for a
      reasonable period of time.




As
      a result of adopting
      SFAS No. 123(R), Loss before income taxes and cumulative effect of accounting
      change was increased by approximately $0.01 million and  a cumulative
      effect of accounting change for approximately $0.09 million (net of a tax
      benefit of approximately $0.6 million) was recognized.  The implementation
      of SFAS No. 123(R) did not have any impact on Cash flows during the first
      quarter of 2006.




The
      fair value of each
      option is estimated on the date of grant and updated each reporting period
      using
      the Black-Scholes option pricing method.  The assumptions used in the model
      are outlined in the following table:




As
                of
              April
                1,
                2006
            
            As
                of
              January
                1,
                2006Weighted
                average fair value
            $
            2.81
            
            $
            3.47Weighted
                average
                assumptions used:Expected
                volatility
            
            30
            %
            
            30
            %Expected
                term (in
                years)
            
            5
            
            
            5Risk-free
                interest
                rate
            
            4.73
            %
            
            4.35
            %Expected
                dividend
                yield
            
            0
            %
            
            0
            %




Due
      to the fact that
      Ply Gem Prime Holding Inc.’s shares are not publicly traded, a third-party
      valuation specialist was retained to assist in the determination of the fair
      value of the shares, which was determined to be $10.00 per share and $9.00
      per
      share at December 31, 2005 and April 1, 2006, respectively.  The Company
      estimated its expected volatility through the review of several market
      indicators, including peer companies.




Before
      adopting FASB
      123(R), the Company accounted for employee options in accordance with APB
      25.  No stock-based employee compensation cost was reflected in the
      Statement of Operations, as all options granted under the plan had an exercise
      price at least equal to the fair value of the underlying common stock on the
      date of grant.  For the three month period ended April 2, 2005, the Company
      presented pro forma net loss of approximately $3.9 million, as if the Company
      had applied the fair value recognition provisions of SFAS No.
      123.




A
      summary of changes in
      stock options outstanding during the quarter ended April 1, 2006 is presented
      below:




Stock
                Options
            
            Weighted-            
                Average        
                     
                 ExercisePrice
            
            Weighted-Average
                Remaining Contractual
              Term
                (Years)Balance
                at
                January 1, 2006
            
            
            134,594
            
            $
            10.00
            
            
            8.47Granted
            
            
            5,000
            
            $
            10.00
            
            
            -Forfeited
                or
                expired
            
            
            (5,900)
            
            $
            10.00
            
            
            -Balance
                at April
                1, 2006
            
            
            133,694
            
            $
            10.00
            
            
            8.27




As
      of April 1, 2006, no
      options have vested.  At April 1, 2006, the Company had approximately $0.2
      million of total unrecognized compensation expense that will be recognized
      over
      the weighted average period of 3.27 years.  Due to the fact that the
      options are liability-classified awards, the unrecognized compensation expense
      will  vary each quarter as the value of the options
      change.




14




Other
      Share-Based
      compensation




Upon
      completion of the
      acquisition of Ply Gem Industries, Inc. (the “Ply Gem Acquisition”) and MWM
      Holding, Inc. (the “MW Acquisition”), certain members of management contributed
      their investments in predecessor companies in exchange for Ply Gem Prime
      Holdings, Inc.’s phantom common stock units.  The phantom stock units are
      governed by the Ply Gem Prime Holdings, Inc. Phantom Stock Plan (the “Plan”)
      with each participant’s interest in the plan being recorded in a bookkeeping
      account, and these accounts are deemed invested in Ply Gem Prime Holdings,
      Inc.’s stock.  No stock was initially issued under the Plan, but upon
      liquidation and payment of a participant’s account under the Plan, the value of
      the account generally may be paid to the participant either in shares of Ply
      Gem
      Prime Holdings, Inc.’s stock having a fair value equal to the account balance or
      in cash, at the discretion of Ply Gem Prime Holdings, Inc.  Certain terms
      of the Plan are governed by Ply Gem Prime Holdings, Inc.’s Stockholders’
Agreement which gives the participant put rights in certain circumstances which
      allow the participant to put the stock back to the Company at a price that
      is
      determined using predefined formulas contained within the Stockholders’
Agreement and the Plan.  The Stockholders’ Agreement and the Plan contain
      two separate put right price formulas that are used to determine the
      participants account balance.  The determination of which put right price
      formula will be applicable to each of the participants phantom common stock
      award is based upon reaching certain vesting requirements which are defined
      in
      the Stockholders’ Agreement.  The phantom common awards generally vest in
      the second put right price formula at a rate of 20% per year of service, but
      may
      vest earlier if certain events occur.  As such, the Company has accounted
      for these awards of phantom common shares under the modified transition method
      of SFAS No. 123(R) as liability-classified awards.




At
      December 31, 2005
      and April 1, 2006 these awards are not recorded as a liability on the balance
      sheet, due to the fact that the repurchase price under the put right formula
      is
      less than $0.




A
      summary of changes in
      phantom common stock units outstanding during the quarter ended April 1, 2006
      is
      presented below:




Phantom
                Common
              Stock
                UnitsBalance
                at
                January 1, 2006
            
            
            179,915Granted
            
            
            -Repurchased
            
            
            (13,590)Balance
                at April
                1, 2006
            
            
            166,325




Upon
      completion of the
      Ply Gem, MW and Alenco Acquisitions, 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.  Management’s shares of common stock
      are governed by the Ply Gem Prime Holdings, Inc. Stockholders’ Agreement which
      gives the management participants put rights in certain circumstances which
      allow the participants to put the stock back to the Company at a price that
      is
      determined using defined formulas contained within the Stockholders’
Agreement.  The Stockholders’ Agreement contains two separate put right
      price formulas that are used to determine the participant’s account
      balance.  The determination of which put right price formula will be
      applicable to each of the participants common stock shares is based upon
      reaching certain vesting requirements which are defined in the Stockholders’
Agreement.  The common shares generally vest in the second put right price
      formula at a rate of 20% per year of service, but may vest earlier if certain
      events occur.  As such, the Company has accounted for these awards of
      common shares under the modified transition method of SFAS No. 123(R) as
      liability-classified awards.




At
      December 31, 2005
      and April 1, 2006 these awards are not recorded as a liability on the balance
      sheet, due to the fact that the repurchase price under the put right formula
      is
      less than $0.




Common
                Stock
              SharesBalance
                at
                January 1, 2006
            
            
            426,904Shares
                issued
            
            
            219,450Shares
                repurchased
            
            
            (28,710)Balance
                at April
                1, 2006
            
            
            617,644






15


**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) vinyl
      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.


**For
                  the three months ended**April
                  1, 2006
              
              April
                  2, 2005Net
                  salesSiding,
                  Fencing, Railing and Decking
              
              $
              100,554
              
              $
              78,848Windows
                  and Doors
              
              
              115,757
              
              
              92,887$
              216,311
              
              $
              171,735Operating
                  earnings (loss)Siding,
                  Fencing, Railing and Decking
              
              $
              9,391
              
              $
              3,487Windows
                  and Doors
              
              
              6,223
              
              
              5,828Unallocated
              
              
              (1,385
              )
              
              (828
              )$
              14,229
              
              $
              8,487




As
                  of
              
              As
                  ofApril
                  1, 2006
              
              December
                  31, 2005Total
                  assetsSiding,
                  Fencing, Railing and Decking
              
              $
              486,187
              
              $
              468,679Windows
                  and Doors
              
              
              686,861
              
              
              534,828Unallocated
              
              
              49,032
              
              
              46,491$
              1,222,080
              
              $
              1,049,998











**11. 
SUBSEQUENT
      EVENT**




On
      April 24, 2006, the Company announced that it
      would close its Sarver, Pennsylvania facility within 60 days.  The Company
      expects that the plant closure will reduce costs and increase operating
      efficiency by increasing capacity utilization, as most of the production will
      be
      absorbed by other locations.  The closure costs will not be known until the
      Company has finalized the details of its closure plan.  The Sarver facility
      primarily produced new construction windows.




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 April 1, 2006 and for the three month periods ended April 1, 2006 and
      April 2, 2005.  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 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
              )











17


**PLY
                  GEM HOLDINGS, INC. AND SUBSIDIARIES****CONDENSED
                  CONSOLIDATING STATEMENT OF OPERATIONS****For
                  the three months ended April 2, 2005**Guarantor
              
              Issuer
              
              
              
              Non-Ply
                  Gem
              
              Ply
                  Gem
              
              Guarantor
              
              GuarantorHoldings,
                  Inc.
              
              Industries,
                  Inc.
              
              Subsidiaries
              
              Subsidiary
              
              Eliminations
              
              Consolidated(Amounts
                  in thousands)Net
                  Sales
              
              $
              -
              
              $
              -
              
              $
              161,136
              
              $
              10,599
              
              $
              -
              
              $
              171,735Costs
                  and Expenses:Cost
                  of products sold
              
              
              -
              
              
              -
              
              
              130,050
              
              
              7,716
              
              
              -
              
              
              137,766Selling,
                  general andadministrative
                  expense
              
              
              -
              
              
              1,294
              
              
              19,393
              
              
              2,355
              
              
              -
              
              
              23,042Intercompany
                  administrativecharges
              
              
              -
              
              
              (6,448
              )
              
              6,448
              
              
              -
              
              
              -
              
              
              -Amortization
                  of intangible assets
              
              
              -
              
              
              -
              
              
              2,440
              
              
              -
              
              
              -
              
              
              2,440Total
                  Costs and Expenses
              
              
              -
              
              
              (5,154
              )
              
              158,331
              
              
              10,071
              
              
              -
              
              
              163,248Operating
                  earnings
              
              
              -
              
              
              5,154
              
              
              2,805
              
              
              528
              
              
              -
              
              
              8,487Foreign
                  currency loss
              
              
              -
              
              
              -
              
              
              -
              
              
              (304
              )
              
              -
              
              
              (304
              )Interest
                  expense
              
              
              -
              
              
              (13,181
              )
              
              (859
              )
              
              (562
              )
              
              -
              
              
              (14,602
              )Investment
                  income
              
              
              -
              
              
              25
              
              
              51
              
              
              3
              
              
              -
              
              
              79Income
                  (loss) before equity insubsidiaries'
                  income
              
              
              -
              
              
              (8,002
              )
              
              1,997
              
              
              (335
              )
              
              -
              
              
              (6,340
              )Equity
                  in subsidiaries' income
              
              
              (3,855
              )
              
              946
              
              
              -
              
              
              -
              
              
              2,909
              
              
              -Income
                  (loss) before provision (benefit)for
                  income taxes
              
              
              (3,855
              )
              
              (7,056
              )
              
              1,997
              
              
              (335
              )
              
              2,909
              
              
              (6,340
              )Provision
                  (benefit) for income taxes
              
              
              -
              
              
              (3,201
              )
              
              840
              
              
              (124
              )
              
              -
              
              
              (2,485
              )Net
                  income (loss)
              
              $
              (3,855
              )
              $
              (3,855
              )
              $
              1,157
              
              $
              (211
              )
              $
              2,909
              
              $
              (3,855
              )








18


**PLY
                GEM HOLDINGS, INC. AND SUBSIDIARIES****CONDENSED
                CONSOLIDATING BALANCE SHEET****As
                of April 1, 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
            
            $
            -
            
            $
            8,754
            
            $
            5,190
            
            $
            3,974
            
            $
            -
            
            $
            17,918Accounts
                receivable, net
            
            
            -
            
            
            -
            
            
            95,024
            
            
            6,489
            
            
            -
            
            
            101,513Inventories:Raw
                materials
            
            
            -
            
            
            -
            
            
            37,099
            
            
            3,376
            
            
            -
            
            
            40,475Work
                in process
            
            
            -
            
            
            -
            
            
            6,056
            
            
            1,072
            
            
            -
            
            
            7,128Finished
                goods
            
            
            -
            
            
            -
            
            
            21,025
            
            
            2,129
            
            
            -
            
            
            23,154Total
                inventory
            
            
            -
            
            
            -
            
            
            64,180
            
            
            6,577
            
            
            -
            
            
            70,757Prepaid
                expenses and othercurrent
                assets
            
            
            -
            
            
            3,219
            
            
            11,458
            
            
            429
            
            
            -
            
            
            15,106Deferred
                income taxes
            
            
            -
            
            
            -
            
            
            14,951
            
            
            -
            
            
            -
            
            
            14,951Total
                current assets
            
            
            -
            
            
            11,973
            
            
            190,803
            
            
            17,469
            
            
            -
            
            
            220,245Investments
                in subsidiaries
            
            
            221,015
            
            
            177,638
            
            
            -
            
            
            -
            
            
            (398,653
            )
            
            -**Property
                and Equipment, at cost:**Land
            
            
            -
            
            
            -
            
            
            1,980
            
            
            150
            
            
            -
            
            
            2,130Buildings
                and improvements
            
            
            -
            
            
            106
            
            
            16,457
            
            
            645
            
            
            -
            
            
            17,208Machinery
                and equipment
            
            
            -
            
            
            49
            
            
            130,397
            
            
            3,288
            
            
            -
            
            
            133,734-
            
            
            
            
            
            155
            
            
            148,834
            
            
            4,083
            
            
            -
            
            
            153,072Less
                accumulated depreciation
            
            
            -
            
            
            (54
            )
            
            (34,415
            )
            
            (980
            )
            
            -
            
            
            (35,449
            )Total
                property and equipment,net
            
            
            -
            
            
            101
            
            
            114,419
            
            
            3,103
            
            
            -
            
            
            117,623**Other
                Assets:**Goodwill
            
            
            -
            
            
            -
            
            
            638,073
            
            
            40,252
            
            
            -
            
            
            678,325Intangible
                assets, net
            
            
            -
            
            
            -
            
            
            168,051
            
            
            -
            
            
            -
            
            
            168,051Intercompany
                note receivable
            
            
            -
            
            
            771,345
            
            
            -
            
            
            -
            
            
            (771,345
            )
            
            -Other
            
            
            -
            
            
            37,543
            
            
            293
            
            
            -
            
            
            -
            
            
            37,836Total
                other assets
            
            
            -
            
            
            808,888
            
            
            806,417
            
            
            40,252
            
            
            (771,345
            )
            
            884,212$
            221,015
            
            $
            998,600
            
            $
            1,111,639
            
            $
            60,824
            
            $
            (1,169,998
            )
            $
            1,222,080**LIABILITIES
                AND STOCKHOLDER'S EQUITY****Current
                Liabilities:**Current
                maturities of long-termdebt
            
            $
            -
            
            $
            3,750
            
            $
            -
            
            $
            250
            
            $
            -
            
            $
            4,000Accounts
                payable
            
            
            -
            
            
            490
            
            
            60,803
            
            
            3,612
            
            
            -
            
            
            64,905Accrued
                expenses and taxes
            
            
            -
            
            
            15,901
            
            
            46,094
            
            
            852
            
            
            -
            
            
            62,847Total
                current liabilities
            
            
            -
            
            
            20,141
            
            
            106,897
            
            
            4,714
            
            
            -
            
            
            131,752Deferred
                income taxes
            
            
            -
            
            
            -
            
            
            62,469
            
            
            2,106
            
            
            -
            
            
            64,575Intercompany
                note payable
            
            
            -
            
            
            -
            
            
            761,999
            
            
            9,346
            
            
            (771,345
            )
            
            -Other
                long term liabilities
            
            
            -
            
            
            12,737
            
            
            21,595
            
            
            948
            
            
            -
            
            
            35,280Long-term
                debt, less currentmaturities
            
            
            -
            
            
            744,707
            
            
            -
            
            
            24,751
            
            
            -
            
            
            769,458**Stockholder's
                Equity:**Preferred
                stock
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -Common
                stock
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -Additional
                paid-in-capital
            
            
            183,221
            
            
            183,221
            
            
            117,252
            
            
            6,047
            
            
            (306,520
            )
            
            183,221Retained
                earnings
            
            
            35,991
            
            
            35,991
            
            
            42,884
            
            
            9,653
            
            
            (88,528
            )
            
            35,991Accumulated
                othercomprehensive
                income (loss)
            
            
            1,803
            
            
            1,803
            
            
            (1,457
            )
            
            3,259
            
            
            (3,605
            )
            
            1,803$
            221,015
            
            $
            998,600
            
            $
            1,111,639
            
            $
            60,824
            
            $
            (1,169,998
            )
            $
            1,222,080






19


**PLY
                  GEM HOLDINGS, INC. AND SUBSIDIARIES****CONDENSED
                  CONSOLIDATING BALANCE SHEET****As
                  of December 31, 2005**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
              
              $
              -
              
              $
              9,501
              
              $
              9,130
              
              $
              3,542
              
              $
              -
              
              $
              22,173Accounts
                  receivable, net
              
              
              -
              
              
              -
              
              
              63,714
              
              
              6,643
              
              
              -
              
              
              70,357Inventories:Raw
                  materials
              
              
              -
              
              
              -
              
              
              27,821
              
              
              3,594
              
              
              -
              
              
              31,415Work
                  in process
              
              
              -
              
              
              -
              
              
              4,249
              
              
              831
              
              
              -
              
              
              5,080Finished
                  goods
              
              
              -
              
              
              -
              
              
              16,891
              
              
              1,832
              
              
              -
              
              
              18,723Total
                  inventory
              
              
              -
              
              
              -
              
              
              48,961
              
              
              6,257
              
              
              -
              
              
              55,218Prepaid
                  expenses and othercurrent
                  assets
              
              
              -
              
              
              1,372
              
              
              7,699
              
              
              356
              
              
              -
              
              
              9,427Deferred
                  income taxes
              
              
              -
              
              
              -
              
              
              13,330
              
              
              -
              
              
              -
              
              
              13,330Total
                  current assets
              
              
              -
              
              
              10,873
              
              
              142,834
              
              
              16,798
              
              
              -
              
              
              170,505Investments
                  in subsidiaries
              
              
              215,514
              
              
              164,946
              
              
              -
              
              
              -
              
              
              (380,460
              )
              
              -**Property
                  and Equipment, at cost:**Land
              
              
              -
              
              
              -
              
              
              1,870
              
              
              150
              
              
              -
              
              
              2,020Buildings
                  and improvements
              
              
              -
              
              
              106
              
              
              14,815
              
              
              647
              
              
              -
              
              
              15,568Machinery
                  and equipment
              
              
              -
              
              
              49
              
              
              115,932
              
              
              3,244
              
              
              -
              
              
              119,225-
              
              
              
              
              
              155
              
              
              132,617
              
              
              4,041
              
              
              -
              
              
              136,813Less
                  accumulated depreciation
              
              
              -
              
              
              (44
              )
              
              (26,192
              )
              
              (849
              )
              
              -
              
              
              (27,085
              )Total
                  property and equipment,net
              
              
              -
              
              
              111
              
              
              106,425
              
              
              3,192
              
              
              -
              
              
              109,728**Other
                  Assets:**Goodwill
              
              
              -
              
              
              -
              
              
              538,588
              
              
              40,404
              
              
              -
              
              
              578,992Intangible
                  assets, net
              
              
              -
              
              
              -
              
              
              152,894
              
              
              -
              
              
              -
              
              
              152,894Intercompany
                  note receivable
              
              
              -
              
              
              650,346
              
              
              -
              
              
              -
              
              
              (650,346
              )
              
              -Other
              
              
              -
              
              
              37,774
              
              
              105
              
              
              -
              
              
              -
              
              
              37,879Total
                  other assets
              
              
              -
              
              
              688,120
              
              
              691,587
              
              
              40,404
              
              
              (650,346
              )
              
              769,765$
              215,514
              
              $
              864,050
              
              $
              940,846
              
              $
              60,394
              
              $
              (1,030,806
              )
              $
              1,049,998**LIABILITIES
                  AND STOCKHOLDER'S EQUITY****Current
                  Liabilities:**Current
                  maturities of long-termdebt
              
              $
              -
              
              $
              1,443
              
              $
              -
              
              $
              249
              
              $
              -
              
              $
              1,692Accounts
                  payable
              
              
              -
              
              
              149
              
              
              38,825
              
              
              3,368
              
              
              -
              
              
              42,342Accrued
                  expenses and taxes
              
              
              -
              
              
              21,477
              
              
              39,667
              
              
              2,875
              
              
              -
              
              
              64,019Total
                  current liabilities
              
              
              -
              
              
              23,069
              
              
              78,492
              
              
              6,492
              
              
              -
              
              
              108,053Deferred
                  income taxes
              
              
              -
              
              
              -
              
              
              56,947
              
              
              1,237
              
              
              -
              
              
              58,184Intercompany
                  note payable
              
              
              -
              
              
              -
              
              
              641,000
              
              
              9,346
              
              
              (650,346
              )
              
              -Other
                  long term liabilities
              
              
              -
              
              
              12,855
              
              
              18,664
              
              
              952
              
              
              -
              
              
              32,471Long-term
                  debt, less currentmaturities
              
              
              -
              
              
              611,512
              
              
              -
              
              
              24,264
              
              
              -
              
              
              635,776**Stockholder's
                  Equity:**Preferred
                  stock
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Common
                  stock
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Additional
                  paid-in-capital
              
              
              175,461
              
              
              175,461
              
              
              103,161
              
              
              5,637
              
              
              (284,259
              )
              
              175,461Intercompany
                  dividends
              
              
              -
              
              
              1,100
              
              
              -
              
              
              (1,100
              )
              
              -
              
              
              -Retained
                  earnings
              
              
              37,907
              
              
              37,907
              
              
              44,039
              
              
              9,964
              
              
              (91,910
              )
              
              37,907Accumulated
                  othercomprehensive
                  income (loss)
              
              
              2,146
              
              
              2,146
              
              
              (1,457
              )
              
              3,602
              
              
              (4,291
              )
              
              2,146$
              215,514
              
              $
              864,050
              
              $
              940,846
              
              $
              60,394
              
              $
              (1,030,806
              )
              $
              1,049,998







20


**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
              
              
              -
              
              
              7,000Write-off
                  of 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 used in 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 provided by****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






21


**PLY
                  GEM HOLDINGS, INC. AND SUBSIDIARIES****CONSOLIDATING
                  STATEMENT OF CASH FLOWS****For
                  the three months ended April 2, 2005**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
              
              $
              (3,855
              )
              $
              (3,855
              )
              $
              3,892
              
              $
              255
              
              $
              (292
              )
              $
              (3,855
              )**Adjustments
                  to reconcile net****income
                  (loss) to cash provided by****(used
                  in) operating activities:**Depreciation
                  and amortizationexpense
              
              
              -
              
              
              5
              
              
              6,503
              
              
              110
              
              
              -
              
              
              6,618Non-cash
                  interest expense, net
              
              
              -
              
              
              1,188
              
              
              -
              
              
              -
              
              
              -
              
              
              1,188Loss
                  on foreign currency transactions
              
              
              -
              
              
              -
              
              
              -
              
              
              304
              
              
              -
              
              
              304Deferred
                  income taxes
              
              
              -
              
              
              -
              
              
              49
              
              
              (39
              )
              
              -
              
              
              10Equity
                  in subsidiaries' net income
              
              
              3,855
              
              
              (4,147
              )
              
              -
              
              
              -
              
              
              292
              
              
              -**Changes
                  in operating Assets and****liabilities:**Accounts
                  receivable, net
              
              
              -
              
              
              -
              
              
              (6,281
              )
              
              (267
              )
              
              -
              
              
              (6,548
              )Inventories
              
              
              -
              
              
              -
              
              
              (8,609
              )
              
              (228
              )
              
              -
              
              
              (8,837
              )Prepaid
                  expenses and othercurrent
                  assets
              
              
              -
              
              
              (2,767
              )
              
              795
              
              
              (175
              )
              
              -
              
              
              (2,147
              )Accounts
                  payable
              
              
              -
              
              
              -
              
              
              12,400
              
              
              713
              
              
              -
              
              
              13,113Accrued
                  expenses and taxes
              
              
              -
              
              
              (8,048
              )
              
              (8,944
              )
              
              (3,377
              )
              
              -
              
              
              (20,369
              )Other
              
              
              -
              
              
              (8,038
              )
              
              7,937
              
              
              265
              
              
              -
              
              
              164**Net
                  cash provided by (used in)****operating
                  activities**
              
              
              -
              
              
              (25,662
              )
              
              7,742
              
              
              (2,439
              )
              
              -
              
              
              (20,359
              )**Cash
                  flows used in investing****activities:**Capital
                  expenditures
              
              
              -
              
              
              (6
              )
              
              (2,475
              )
              
              (45
              )
              
              -
              
              
              (2,526
              )**Net
                  cash provided by (used in)****investing
                  activities**
              
              
              -
              
              
              (6
              )
              
              (2,475
              )
              
              (45
              )
              
              -
              
              
              (2,526
              )**Cash
                  flows provided by (used in)****financing
                  activities:**Proceeds
                  from revolving credit facility
              
              
              -
              
              
              35,500
              
              
              -
              
              
              -
              
              
              -
              
              
              35,500Proceeds
                  from intercompanyinvestment
              
              
              -
              
              
              (2,400
              )
              
              -
              
              
              2,400
              
              
              -
              
              
              -Payments
                  on long-term debt
              
              
              -
              
              
              (771
              )
              
              (63
              )
              
              (75
              )
              
              -
              
              
              (909
              )**Net
                  cash provided by (used in)****financing
                  activities**
              
              
              -
              
              
              32,329
              
              
              (63
              )
              
              2,325
              
              
              -
              
              
              34,591Impact
                  of exchange rate movementon
                  cash
              
              
              -
              
              
              -
              
              
              -
              
              
              (19
              )
              
              -
              
              
              (19
              )Net
                  increase (decrease) in cashand
                  cash equivalents
              
              
              -
              
              
              6,661
              
              
              5,204
              
              
              (178
              )
              
              -
              
              
              11,687Cash
                  and cash equivalents at thebeginning
                  of the period
              
              
              -
              
              
              1,923
              
              
              3,483
              
              
              1,388
              
              
              -
              
              
              6,794Cash
                  and cash equivalents at the endof
                  the period
              
              $
              -
              
              $
              8,584
              
              $
              8,687
              
              $
              1,210
              
              $
              -
              
              $
              18,481









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 and Combined 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, 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.





On
      February 24, 2006, Ply Gem completed the purchase
      of AWC Holding Company (“AWC”, and together with its subsidiaries, “Alenco”)
      (the “Alenco Acquisition”) in accordance with a securities purchase agreement
      entered into among Ply Gem, all of the direct and indirect stockholders, warrant
      holders and stock option holders of AWC and FNL Management Corp., an Ohio
      corporation, as their representative (the “Securities Purchase
      Agreement”).  Pursuant to the Securities Purchase Agreement, Ply Gem
      purchased all of the issued and outstanding shares of common stock, warrants
      to
      purchase shares of common stock and options to purchase common stock of AWC
      (other than certain shares of common stock of AWC held by certain members of
      the
      senior management of Alenco (the “Rollover Shares”) that were contributed
      separately to Ply Gem Prime Holdings, Inc., the new parent company of Ply Gem
      Investment Holdings, Inc., in exchange for shares of capital stock of Ply Gem
      Prime Holdings, Inc.).  Immediately following the completion of the Alenco
      Acquisition, AWC became a wholly owned subsidiary of Ply Gem.




On
      February 24, 2006 in connection with the Alenco
      Acquisition a new holding company, Ply Gem Prime Holdings, Inc., was formed
      pursuant to a merger involving Ply Gem Investment Holdings, Inc.  As a
      result, Ply Gem Prime Holdings, Inc. became the sole shareholder of Ply Gem
      Investment Holdings, Inc., each outstanding share of capital stock of Ply Gem
      Investment Holdings, Inc. was converted into a share of a corresponding class
      of
      shares of the capital stock of Ply Gem Prime Holdings, Inc. and Ply Gem Prime
      Holdings, Inc. assumed Ply Gem Investment Holdings, Inc.’s obligations under the
      Ply Gem Investment Holdings 2004 Stock Option Plan and the Ply Gem Investment
      Holdings Phantom Stock Plan.  In connection therewith, each outstanding
      stock option and phantom unit of Ply Gem Investment Holdings, Inc. was converted
      on a 1:1 basis into a stock option and phantom unit of Ply Gem Prime Holdings,
      Inc.




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.






23


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 2005 period.




**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.




**Critical
      Accounting
      Policies**




The
      following discussion and analysis of our
      financial condition and results of operations are based upon our combined and
      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 April 1, 2006 would result in a $0.9 million and $0.7 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:






24


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 and
      combined balance sheets are valued at the lower of cost or market.  At
      April 1, 2006, and December 31, 2005, approximately $11.8 million and $9.8
      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 $2.8
      million higher at April 1, 2006 and December 31, 2005.  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.




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 April 1, 2006 or December 31,
      2005.




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
      to
      arrive at the net expected liability to the Company.






25


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.  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.




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**April
                  1, 2006
              
              April
                  2, 2005**Net
                  Sales**Siding,
                  Fencing, Railing and Decking
              
              $
              100,554
              
              $
              78,848Windows
                  and Doors
              
              
              115,757
              
              
              92,887**Operating
                  earnings**Siding,
                  Fencing, Railing and Decking
              
              
              9,391
              
              
              3,487Windows
                  and Doors
              
              
              6,223
              
              
              5,828Unallocated
              
              
              (1,385
              )
              
              (828
              )**Foreign
                  currency loss**Windows
                  and Doors
              
              
              (71
              )
              
              (304
              )**Interest
                  expense, net**Siding,
                  Fencing, Railing and Decking
              
              
              (42
              )
              
              400Windows
                  and Doors
              
              
              399
              
              
              733Unallocated
              
              
              14,813
              
              
              13,390**Other
                  expense**Unallocated
              
              
              (2,056
              )
              
              -**Income
                  tax expense**Unallocated
              
              
              (1,238
              )
              
              (2,485
              )**Net
                  loss before cumulative effect****of
                  accounting change**
              
              
              (1,830
              )
              
              (3,855
              )**Cumulative
                  effect of accounting change**
              
              
              (86
              )
              
              -**Net
                  loss**
              
              $
              (1,916
              )
              $
              (3,855
              )




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.




26


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)
              
              April
                  1, 2006
              
              April
                  2, 2005(unaudited)
              
              
              
              (unaudited)**Statement
                  of operations data:**Net
                  Sales
              
              $
              100,554
              
              
              100.0
              %
              $
              78,848
              
              
              100.0
              %Cost
                  of products sold
              
              
              81,537
              
              
              81.1
              %
              
              66,219
              
              
              84.0
              %Gross
                  Profit
              
              
              19,017
              
              
              18.9
              %
              
              12,629
              
              
              16.0
              %S,G&A
                  expense
              
              
              8,821
              
              
              8.8
              %
              
              8,337
              
              
              10.6
              %Amortization
                  of intangible assets
              
              
              805
              
              
              0.8
              %
              
              805
              
              
              0.8
              %Operating
                  earnings
              
              $
              9,391
              
              
              9.3
              %
              $
              3,487
              
              
              4.4
              %






Net
      Sales




Net
      sales for the three months ended April 1, 2006
      increased compared to the same period in 2005 by approximately $21.7 million,
      or
      28%.  The increase in net sales was driven by an increased unit volume
      sold, as well as higher selling prices that were increased in response to
      industry wide increases in raw material and freight costs.  The increase in
      units sold was driven by growth with new vinyl siding customers that were
      obtained during 2005.  As a result, the Company believes that our unit
      volume of vinyl siding sales outperformed the industry during the first three
      months of 2006 and that our market share of the vinyl siding industry increased
      for the first three months of 2006 as compared to the first three months of
      2005.




Cost
      of Products
      Sold




Cost
      of products sold for the three months ended
      April 1, 2006 increased over the same period in 2005 by approximately $15.3
      million, or 23%.  The increase in cost of products sold was primarily due
      to market wide increases in raw material costs, specifically PVC resin and
      aluminum, and higher freight expense related to carrier fuel costs and increased
      sales volume.  The market wide increase in raw material and freight costs
      were fully offset by selling price increases and material strategic sourcing
      and
      other cost savings initiatives that management implemented during the past
      twelve months.




Selling,
      general and administrative
      expense




SG&A
      expense for the three months ended April 1,
      2006 increased by approximately $0.5 million, or 6%, from the same period in
      2005. The increase in SG&A expenses was driven by higher selling and
      marketing expenses related to the increase in net sales.




Windows
      and Doors
      Segment




**For
                  the three months ended**(dollars
                  in thousands)
              
              April
                  1, 2006
              
              April
                  2, 2005(unaudited)
              
              
              
              (unaudited)Statement
                  of operations data:Net
                  Sales
              
              $
              115,757
              
              
              100.0
              %
              $
              92,887
              
              
              100.0
              %Cost
                  of products sold
              
              
              91,511
              
              
              79.1
              %
              
              71,547
              
              
              77.0
              %Gross
                  Profit
              
              
              24,246
              
              
              20.9
              %
              
              21,340
              
              
              23.0
              %S,G&A
                  expense
              
              
              16,275
              
              
              14.1
              %
              
              13,878
              
              
              14.9
              %Amortization
                  of intangible assets
              
              
              1,748
              
              
              1.5
              %
              
              1,635
              
              
              1.8
              %Operating
                  earnings
              
              $
              6,223
              
              
              5.4
              %
              $
              5,828
              
              
              6.3
              %Currency
                  transaction loss
              
              
              (71
              )
              
              -0.1
              %
              
              (304
              )
              
              -0.3
              %






27


Net
      Sales




Net
      sales for the three months ended April 1, 2006
      increased over the same period in 2005 by approximately $22.9 million, or 25%.
      The increase in net sales was primarily driven by sales of Alenco, which
      contributed approximately $13.9 million to our net sales during the first
      quarter of 2006.  Excluding the $13.9 million contribution to first quarter
      net sales from Alenco, first quarter net sales increased by $9.0 million which
      was driven by increased demand for our new construction window and door products
      in both the U.S. and Canada, but was partially offset by lower demand for our
      repair and remodeling window products.  Also contributing to the increase
      in net sales were higher selling prices that were increased in response to
      industry wide increases in raw material and freight costs.




Cost
      of Products
      Sold




Cost
      of products sold for the three months ended
      April 1, 2006 increased by approximately $20.0 million, or 25%, over the same
      period in 2005.  The increase in cost of products sold was primarily driven
      by higher sales volume which includes the additional sales volume from
      Alenco.  Market wide increases in raw material and freight costs were fully
      offset by price increases and material cost synergies and savings in our new
      construction window and door products.  In our repair and remodeling window
      and door products, raw material costs exceeded prior year costs primarily due
      to
      increases in PVC lineal costs during our transition from external sourcing
      to
      producing lineals within our MW lineal production facility.  This
      transition will continue through the remainder of 2006.




Selling,
      general and administrative
      expense




SG&A
      expense for the three months ended April 1,
      2006 increased by approximately $2.4 million, or 17%, over the same period
      in
      2005.  The increase in SG&A expense was due to the addition of Alenco
      operations.




Amortization
      of intangible
      assets




Amortization
      expense for the three months ended April
      1, 2006 increased by approximately $0.1 million, due to the addition of Alenco
      operations during March 2006.  Amortization expense will potentially
      change, pending the results of the appraisal of Alenco’s intangible
      assets,




Unallocated
      Operating Earnings,
      Interest, and Provision for Income Taxes


**For
                  the Three Months Ended**(dollars
                  in thousands)
              
              April
                  1, 2006
              
              April
                  2, 2005(unaudited)
              
              (unaudited)Statement
                  of operations data:Operating
                  earnings
              
              
              (1,385
              )
              
              (828
              )Interest
                  expense
              
              
              (15,326
              )
              
              (14,602
              )Investment
                  income
              
              
              156
              
              
              79Other
                  expense
              
              
              (2,056
              )
              
              -Income
                  tax provision
              
              
              (1,238
              )
              
              (2,485
              )Cumulative
                  effect of accounting change
              
              
              (86
              )
              
              -






Interest
      expense   Interest
      expense for the three months ended April 1, 2006 increased by approximately
      $0.7
      million over the same period in 2005 as a result of increased borrowings due
      to
      the Alenco Acquisition in February 2006 and higher interest rates on our
      variable rate debt.




Other
      expense   Expenses of
      approximately $2.1 million were recognized as ‘other expense’ during the first
      quarter of 2006 for third-party charges associated with business combination
      financing costs.




Income
      taxes   The income tax
      benefit for the three months ended April 1, 2006 decreased approximately $1.2
      million over the same period in 2005, primarily as a result of the smaller
      pre-tax loss for the 2006 period versus the 2005 period.






28




**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 facility.




Net
      cash used in operating activities for the first
      three months of 2006 and 2005 was approximately $15.2 million and $20.4 million,
      respectively.  The decrease in net cash used in operating activities for
      the 2006 period compared to the 2005 periods was primarily driven by the smaller
      net loss incurred in the first quarter of 2006.


Net
      cash used in investing activities
      for the first three months of 2006 and 2005 was approximately $124.6 and $2.5
      million, respectively.  The increased cash used in investing activities
      during the 2006 periods was driven by the cash used to fund the Alenco
      Acquisition.




Net
      cash provided by financing activities for the
      first three months of 2006 and 2005 was approximately $135.5 million and $34.6
      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, which includes our
      senior term loan facilities and $1.7 million of equity
      contribution.




Our
      capital expenditures for the first three months
      of 2006 and 2005 were approximately $4.0 million and $2.5 million, respectively.




In
      connection with the
      Alenco Acquisition, on February 24, 2006, the Company entered into an amendment
      to its credit facility.  Under the terms of the amended agreement, the
      Company borrowed $375.0 million in U.S. term loans to refinance $252.7 million
      of outstanding U.S. Term loans, repay approximately $1.8 million in revolving
      credit loans and fund the Alenco Acquisition, which was completed on February
      24, 2006.  Additionally, under the terms of the amended agreement, the
      Company’s Canadian borrower borrowed $25.0 million to refinance approximately
      $24.5 million of outstanding Canadian term loans.




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 senior credit facilities.  As of April 1,
      2006, we had $773.5 million of indebtedness and $54.4 million of availability
      under our revolving credit facility. The Company’s senior credit facility with a
      syndicate of financial institutions and institutional lenders provides for
      senior secured financing of up to $470.0 million, consisting of
      $400.0 million of term loan facilities maturing in August 2011 and a
      $70.0 million revolving loan facility, including a letter of credit
      subfacility, maturing in February 2009. The term loan facilities are drawn
      in
      full and have two tranches, consisting of: i) a $375.0 million tranche
      under which Ply Gem Industries, Inc. is the borrower, ii) a
      $25.0 million tranche under which our Canadian subsidiary, CWD Windows and
      Doors, Inc., is the borrower.  Ply Gem Industries, Inc. issued $360.0
      million aggregate principal amount of its 9% senior subordinated notes due
      2012
      (the “Senior Subordinated Notes”), which are guaranteed by Ply Gem Holdings Inc.
      and the domestic subsidiaries of Ply Gem Industries, Inc.


During
      the first quarter of 2006, we borrowed $15.0
      million under the revolving credit facility to fund our seasonal working capital
      requirements and first quarter capital expenditures.  Approximately $1.8
      million was repaid during February 2006.


The
      borrowings under the revolving credit facility
      will be available until its maturity to fund our working capital requirements,
      capital expenditures and other general corporate needs.  The revolving
      credit facility will mature in February 2009 and has no scheduled amortization
      or commitment reductions.  The term loan facilities will mature in August
      2011 and have quarterly scheduled amortizations of $1.0 million and a final
      payment of $380.0 on the maturity date.






29


On
      July 25, 2005, we
      entered into an amendment to the credit facility.  Under the terms of the
      amended agreement, we are permitted to use the excess cash flow and/or a portion
      of the revolving credit facility to repurchase up to $25.0 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 $25.0 million aggregate principal amount of the 9% Senior
      Subordinated Notes in market transactions, privately negotiated sales or other
      transactions.  As of April 1, 2006, we had not yet purchased any of our
      Senior Subordinated Notes.




The
      senior 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 senior 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 senior credit facilities require Ply Gem
      Industries, Inc. to comply with certain financial ratios.  Indebtedness
      under the senior 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, our U.S. senior credit facilities are guaranteed by Ply Gem Holdings,
      Inc. and secured by its assets (including its equity interests), as well as
      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.




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 our existing revolving credit facility
      to support this requirement.  However, we anticipate that the funds
      generated by operations and funds available under our new senior credit
      facilities 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.






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**




No
      recent
      pronouncements are expected to have material impact to the
      Company.




30


**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 2005 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 R****ISK**




Our principal interest rate exposure relates to the term loans outstanding
      under
      our new senior credit facilities.  We have approximately $400.0 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 $1.0 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
      or
      fixed rate interest payments, to reduce our exposure to interest rate
      volatility.


Our term loan facility has two tranches.  Outstanding balances consist of a
      $375.0 million tranche under which Ply Gem Industries, Inc. is the borrower,
      and
      a $25.0 million tranche under which our Canadian subsidiary is the
      borrower.


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 April 1, 2006, the net impact of foreign currency changes to the
      Company’s results of operations was a loss of $0.1 million.  The impact of
      foreign currency changes related to translation resulted in an decrease in
      stockholder’s equity of approximately $0.3 million for the three months ended
      April 1, 2006.  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 April 1, 2006, 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 April 1, 2006 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 April 1, 2006, that have materially affected, or are
      reasonably likely to materially affect, our internal controls over financial
      reporting.








32




PART
      II ‐ OTHER INFORMATION








Item
      6.            
EXHIBITS




(a) 
      Exhibits




The
      exhibits listed
      below are filed as part of Form 10-Q for quarter ended April 1,
      2006.




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
      11,
      2006





By:      
      /s/ Lee D.
      Meyer


Lee
      D. Meyer


President
      and Chief Executive
      Officer






Date: 
May
      11,
      2006




By:   
         /s/ Shawn K.
      Poe


Shawn
      K. Poe


Vice President, Chief Financial Officer,


Treasurer
      and
      Secretary




34