UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM
10-Q





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


OF THE
SECURITIES EXCHANGE ACT OF 1934





For
      the quarterly period ended March 29,
2008


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.)




5020
Weston Parkway


Cary,
North Carolina 27513





Registrant's telephone number,
including area code: 919-677-3900





185 Platte Clay Way,
Kearney, Missouri 64060


(Former
Name or Former Address, if Changed Since Last Report)





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





Indicate
by check mark whether registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or a smaller reporting company.  See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.





Large accelerated filer
  [  ]                                                                   Accelerated
filer  [  ]


Non-accelerated filer  [X]
                                                                
Smaller reporting company [  ]


(Do not
check if a smaller reporting company)





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
9, 2008, there were 100 shares of common stock, $0.01 par value,
outstanding.





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





PLY
GEM HOLDINGS, INC. AND SUBSIDIARIES


FORM
10-Q


QUARTERLY
PERIOD ENDED MARCH 29, 2008





CONTENTS




PART I – FINANCIAL
      INFORMATIONItem
      1.
            Condensed
      Consolidated Financial StatementsCondensed
      Consolidated Statements of Operations –
              Three months ended March 29, 2008 and March 31,
2007
            
            1Condensed
      Consolidated Balance Sheets –
              March 29, 2008 and December 31, 2007
            
            2Condensed
      Consolidated Statements of Cash Flows –
              Three
      months ended March 29, 2008 and March 31, 2007
            
            3Notes to
      Condensed Consolidated Financial Statements
            
            4Item
    2.
            Managment's
      Discussion and Analysis of Financial Condition
              And Results of Operation
            
            22Item
    3.
            Quantitative
      and Qualitative Disclosures about Market Risk
            
            32Item
    4.
            Controls and
      Procedures
            
            32PART II – OTHER
      INFORMATIONItem
      1A.
            Risk
      Factors
            
            33Item 6.
            Exhibits
            
            33Signatures
            
            34













PART
I - FINANCIAL INFORMATION





Item
1.                 FINANCIAL
STATEMENTS








PLY
GEM HOLDINGS, INC. AND SUBSIDIARIES


CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS


(UNAUDITED)














For
      the three months endedMarch
      29,
            
            
            March
      31,2008
            
            
            2007(Amounts
      in thousands)Net
      Sales
            
            $
            256,373
            
            
            $
            285,274Costs
      and Expenses:Cost
      of products sold
            
            
            224,266
            
            
            
            238,084Selling,
      general and administrative expense
            
            
            41,477
            
            
            
            37,397Amortization
      of intangible assets
            
            
            4,914
            
            
            
            4,634Total
      Costs and Expenses
            
            
            270,657
            
            
            
            280,115Operating
      earnings (loss)
            
            
            (14,284
            )
            
            
            5,159Foreign
      currency gain (loss)
            
            
            (551
            )
            
            
            216Interest
      expense
            
            
            (23,074
            )
            
            
            (25,266
            )Interest
      income
            
            
            203
            
            
            
            577Income
      (loss) before provision for income taxes
            
            
            (37,706
            )
            
            
            (19,314
            )Provision
      for income taxes
            
            
            (15,864
            )
            
            
            (8,450
            )Net
      loss
            
            $
            (21,842
            )
            
            $
            (10,864
            )




















See
accompanying notes to condensed consolidated financial statements.


-1-


PLY
GEM HOLDINGS, INC. AND SUBSIDIARIES


CONDENSED
CONSOLIDATED BALANCE SHEETS


(UNAUDITED)





March
      29,
            
            
            December
      31,2008
            
            
            2007(Amounts
      in thousands, exceptshare
      amounts)ASSETSCurrent
      Assets:Cash
      and cash equivalents
            
            $
            24,902
            
            
            $
            65,207Accounts
      receivable, less allowances of $7,385 and $7,320,
    respectively
            
            
            134,652
            
            
            
            111,653Inventories:Raw
      materials
            
            
            58,000
            
            
            
            60,003Work
      in process
            
            
            21,929
            
            
            
            23,071Finished
      goods
            
            
            39,473
            
            
            
            45,208Total
      inventory
            
            
            119,402
            
            
            
            128,282Prepaid
      expenses and other current assets
            
            
            19,655
            
            
            
            16,462Deferred
      income taxes
            
            
            11,780
            
            
            
            12,797Total
      current assets
            
            
            310,391
            
            
            
            334,401Property
      and Equipment, at cost:Land
            
            
            4,011
            
            
            
            4,017Buildings
      and improvements
            
            
            38,065
            
            
            
            37,927Machinery
      and equipment
            
            
            244,189
            
            
            
            240,921Total
      property and equipment
            
            
            286,265
            
            
            
            282,865Less
      accumulated depreciation
            
            
            (94,676
            )
            
            
            (83,869
            )Total
      property and equipment, net
            
            
            191,589
            
            
            
            198,996Other
      Assets:Intangible
      assets, less accumulated amortization of $49,748 and
    $45,081,respectively
            
            
            208,344
            
            
            
            213,257Goodwill
            
            
            834,268
            
            
            
            835,820Other
            
            
            38,213
            
            
            
            43,133Total
      other assets
            
            
            1,080,825
            
            
            
            1,092,210$
            1,582,805
            
            
            $
            1,625,607LIABILITIES
      AND STOCKHOLDER'S EQUITYCurrent
      Liabilities:Current
      maturities of long-term debt
            
            $
            23,488
            
            
            $
            6,873Accounts
      payable
            
            
            95,634
            
            
            
            96,256Accrued
      expenses and taxes
            
            
            61,491
            
            
            
            93,416Total
      current liabilities
            
            
            180,613
            
            
            
            196,545Deferred
      income taxes
            
            
            90,613
            
            
            
            91,151Other
      long term liabilities
            
            
            65,628
            
            
            
            67,144Long-term
      debt, less current maturities
            
            
            1,029,546
            
            
            
            1,031,223Stockholder's
      Equity:Preferred
      stock $0.01 par, 100 shares authorized, none issued and
      outstanding
            
            
            -
            
            
            
            -Common
      stock $0.01 par, 100 shares authorized, issued and
    outstanding
            
            
            -
            
            
            
            -Additional
      paid-in-capital
            
            
            180,543
            
            
            
            180,667Retained
      earnings
            
            
            27,400
            
            
            
            49,242Accumulated
      other comprehensive income
            
            
            8,462
            
            
            
            9,635Total
      Stockholder's Equity
            
            
            216,405
            
            
            
            239,544$
            1,582,805
            
            
            $
            1,625,607











See accompanying notes to condensed consolidated financial
statements.


-2-


PLY
GEM HOLDINGS, INC. AND SUBSIDIARIES


CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS


(UNAUDITED)






For
      the three months endedMarch
      29,
            
            
            March
      312008
            
            
            2007(Amounts
      in thousands)Cash
      flows from operating activities:Net
      loss
            
            $
            (21,842
            )
            
            $
            (10,864
            )Adjustments
      to reconcile net incometo
      cash used in operating activities:Depreciation
      and amortization expense
            
            
            16,026
            
            
            
            13,238Non-cash
      interest expense, net
            
            
            1,745
            
            
            
            1,706(Gain)
      loss on foreign currency transactions
            
            
            551
            
            
            
            (216
            )Loss
      on sale of assets
            
            
            323
            
            
            
            16Deferred
      income taxes
            
            
            461
            
            
            
            (3,284
            )Changes
      in operating assets andliabilities,
      net of effects from acquisitions:Accounts
      receivable, net
            
            
            (25,068
            )
            
            
            (3,959
            )Inventories
            
            
            6,477
            
            
            
            (13,824
            )Prepaid
      expenses and other current assets
            
            
            (3,374
            )
            
            
            7,296Accounts
      payable
            
            
            1,045
            
            
            
            1,628Accrued
      expenses and taxes
            
            
            (32,358
            )
            
            
            (36,806
            )Other
            
            
            21
            
            
            
            281Net
      cash used in operating activities
            
            
            (55,993
            )
            
            
            (44,788
            )Cash
      flows from investing activities:Capital
      expenditures
            
            
            (4,681
            )
            
            
            (3,663
            )Proceeds
      from sale of assets
            
            
            5,810
            
            
            
            7Other
            
            
            (15
            )
            
            
            (185
            )Net
      cash provided by (used in) investing activities
            
            
            1,114
            
            
            
            (3,841
            )Cash
      flows from financing activities:Proceeds
      from revolver borrowings
            
            
            15,000
            
            
            
            20,000Payments
      on long-term debt
            
            
            (51
            )
            
            
            (1,468
            )Equity
      repurchases
            
            
            (126
            )
            
            
            (2,175
            )Net
      cash provided by financing activities
            
            
            14,823
            
            
            
            16,357Impact
      of exchange rate movements on cash
            
            
            (249
            )
            
            
            30Net
      decrease in cash and cash equivalents
            
            
            (40,305
            )
            
            
            (32,242
            )Cash
      and cash equivalents at the beginning of the period
            
            
            65,207
            
            
            
            53,274Cash
      and cash equivalents at the end of the period
            
            $
            24,902
            
            
            $
            21,032














See
accompanying notes to condensed consolidated financial statements.


-3-


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 Holdings”, “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 2007 Annual Report on
Form 10-K filed with the Securities and Exchange Commission on March 25,
2008.  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 2007 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, 2008
through March 29, 2008 are not necessarily indicative of the results that may be
expected for the year ended December 31, 2008.





The
condensed consolidated balance sheet at December 31, 2007 has been derived from
the audited consolidated financial statements of Ply Gem Holdings, Inc. at that
date but does not include all of the information and footnotes required by U.S.
generally accepted accounting principles for complete financial
statements.





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





The
accompanying financial statements include the consolidated results of operations
and cash flows for the Company for the three month periods ended March 29, 2008
and March 31, 2007, and consolidated financial position for the Company as of
March 29, 2008 and December 31, 2007.





Ply Gem
is a diversified manufacturer of residential and commercial building products,
which are sold primarily in the United States and Canada, and include a wide
variety of products for the residential and commercial construction, the
do-it-yourself and the professional remodeling and renovation
markets.


The
demand for our products is seasonal, particularly in the Northeast and Midwest
regions of the United States and Western Canada where inclement weather during
the winter months usually reduces the level of building and remodeling activity
in both the home repair and remodeling and new home construction
sectors.  Our sales are usually lower during the first and fourth
quarters.




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




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







Principles
of Consolidation





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







Accounting
Policies and Use of Estimates





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





-4-


Inventories





Inventories in the accompanying
consolidated balance sheets are valued at the lower of cost or market. At March
29, 2008 and December 31, 2007, approximately $11.2 million and $10.9 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 $3.7 million and $3.7
million higher at March 29, 2008 and December 31, 2007,
respectively.  All other inventories were valued under the FIFO
method.The
Company records provisions, as appropriate, to write-down obsolete and excess
inventory to estimated net realizable value.  The process for
evaluating obsolete and excess inventory often requires the Company to make
subjective judgments and estimates concerning future sales levels, quantities
and prices at which such inventory will be able to be sold in the normal course
of business.  Accelerating the disposal process or incorrect estimates
of future sales potential may cause the actual results to differ from the
estimates at the time such inventory is disposed or sold.




Income
taxes





We
account for deferred income taxes using the asset and 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.  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 August 27, 2004 acquisition by the Company
of all of the outstanding shares of capital stock of MWM Holding, Inc. (“MWM
Holding”), in accordance with the Stock Purchase Agreement entered into among
Ply Gem Industries, MWM Holding, and the selling stockholders, dated as of July
23, 2004 (the “MW Acquisition”) and transactions 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.  Subsequent to February 12, 2004, U.S. federal income
tax returns are prepared and filed by Ply Gem Investment Holdings, Inc. on
behalf of itself, Ply Gem Holdings, Inc., Ply Gem Industries, Inc. (“Ply Gem
Industries”) and its subsidiaries.  The existing tax sharing agreement
between Ply Gem Holdings and Ply Gem Investment Holdings, Inc., under which tax
liabilities for each respective party are computed on a stand-alone basis, was
amended during 2006 to include Ply Gem Prime Holdings, Inc.  U.S.
subsidiaries file unitary, combined and separate state income tax
returns.  CWD Windows and Doors, Inc. (“CWD”) files separate Canadian
income tax returns.  The Company’s first quarter 2008 tax benefit
includes approximately $0.7 million tax benefit to correct for recent
legislative changes in Canada that impact the future settlement of deferred
taxes.






Related
Party Transactions




The
Company has entered into two advisory agreements with an affiliate of
Caxton-Iseman Capital, LLC (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 $0.1
million and $0.4 million for the three month periods ended March 29, 2008 and
March 31, 2007, respectively.








Foreign
Currency
  The
Company’s Canadian subsidiary utilizes the Canadian dollar as its functional
currency.  For reporting purposes, the Company translates the assets
and liabilities of its foreign entity at the exchange rates in effect at the end
of the reporting periods.  Net sales and expenses are translated using
average exchange rates in effect during the periods.  Gains and losses
from foreign currency translation are credited or charged to accumulated other
comprehensive income in the accompanying consolidated balance
sheets.  A gain or loss resulting from fluctuations in the exchange
rate may be recognized due to debt, denominated in US dollars, recorded by the
Company’s Canadian subsidiary.
 
 For the
three month periods ending March 29, 2008 and March 31, 2007, the Company
recorded a loss from foreign currency transactions of approximately $0.6 million
and a gain from foreign currency transactions of approximately $0.2 million,
respectively.  As of March 29, 2008, and December 31, 2007 accumulated
other comprehensive income included a currency translation adjustment of
approximately $7.7 million and $8.9 million, respectively.
  Concentration
of Credit Risk
  The
accounts receivable balance related to one customer of our siding, fencing and
railing segment was approximately $13.0 million and $6.4 million at March
29, 2008 and December 31, 2007, respectively.  This customer accounted
for approximately 11.3% of net sales for the three month period ended March 29,
2008 and approximately 10.2% of net sales for the year ended December 31,
2007.
 -5-
  Fair
Value Measurement
  In the
first quarter of 2008, the Company adopted SFAS 157 “Fair Value
Measurements” for financial assets and liabilities. This standard defines fair
value, provides guidance for measuring fair value and requires certain
disclosures. This standard does not require any new fair value measurements, but
rather applies to all other accounting pronouncements that require or permit
fair value measurements. This standard does not apply measurements related to
share-based payments, nor does it apply to measurements related to
inventory.
 
 SFAS 157
discusses valuation techniques, such as the market approach (comparable market
prices), the income approach (present value of future income or cash flows), and
the cost approach (cost to replace the service capacity of an asset or
replacement cost). The statement utilizes a fair value hierarchy that
prioritizes the inputs to valuation techniques used to measure fair value into
three broad levels. The following is a brief description of those three
levels:
 ·
                    Level 1:
      Observable inputs such as quoted prices (unadjusted) in active markets for
      identical assets or
liabilities.
 ·
                    Level 2:
      Inputs other than quoted prices that are observable for the asset or
      liability, either directly or indirectly. These include quoted prices for
      similar assets or liabilities in active markets and quoted prices for
      identical or similar assets or liabilities in markets that are not
      active.
 ·
                    Level 3:
      Observable inputs that reflect the reporting entity’s own
      assumptions.
 As of
March 29, 2008, the Company did not have any financial assets or liabilities
that are affected by the adoption of this standard.
 
 In
accordance with Financial Accounting Standards Board Staff Position No. 157-2,
Effective Date of FASB
Statement No. 157, the Company will delay application of SFAS 157 for
non-financial assets and non-financial liabilities, until January 1,
2009.  Certain non-financial assets and non-financial liabilities
measured at fair value on a recurring basis include reporting units measured at
fair value in the first step of a goodwill impairment test.  Certain
non-financial assets and non-financial liabilities measured at fair value on a
non-recurring basis include non-financial assets and non-financial liabilities
measured at fair value in the second step of a goodwill impairment test, as well
as intangible assets and other non-financial long-lived assets measured at fair
value for impairment assessment.  As permitted under the deferral for
non-financial assets and liabilities, SFAS 157 will be applicable to these fair
value measurements beginning January 1, 2009.
  
 Fair
Value of Financial Instruments
  The
carrying value of the Company’s 9% senior subordinated notes due 2012 (the
“senior subordinated notes”) was approximately $360.2 million and $360.2 million
at March 29, 2008 and December 31, 2007, respectively.  The fair value
of the Company’s senior subordinated notes at March 29, 2008 and December 31,
2007 was estimated to be approximately $261.0 million and $279.0 million,
respectively, based on available market information. The carrying value of the
Company’s other financial instruments approximates their fair
value.


New
Accounting Pronouncements





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





In
February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities”.  SFAS No. 159
permits entities to choose to measure certain financial assets and financial
liabilities at fair value. Unrealized gains and losses on items for which the
fair value option has been elected are reported in earnings. SFAS No. 159
is effective for our fiscal year beginning January 1, 2008, however the Company
did not elect the option to report any of the selected financial assets and
liabilities at fair value.





-6-


In
December 2007, the FASB issued SFAS No. 141R, “Business
Combinations”.  This Statement requires an acquirer to recognize the
assets acquired, the liabilities assumed, and any noncontrolling interest in the
acquiree at the acquisition date be measured at their fair values as of that
date.  An acquirer is required to recognize assets or liabilities
arising from all other contingencies (contractual contingencies) as of the
acquisition date, measured at their acquisition-date fair values, only if it is
more likely than not that they meet the definition of an asset or a liability in
FASB Concepts Statement No. 6, Elements of Financial Statements. Any
acquisition related costs are to be expensed instead of capitalized. The impact
to the company from the adoption of SFAS 141R in 2009 will depend on
acquisitions at the time. The provisions of SFAS No. 141(R) are effective
for the Company’s fiscal year beginning January 1, 2009, and are to be
applied prospectively.





In
December 2007, the FASB issued SFASNo. 160,
“Noncontrolling Interests in Consolidated Financial Statements”. This standard
establishes accounting and reporting standards for ownership interests in
subsidiaries held by parties other than the parent, the amount of consolidated
net income attributable to the parent and to the noncontrolling interest,
changes in a parent’s ownership interest and the valuation of retained
non-controlling equity investments when a subsidiary is deconsolidated. The
Statement also establishes reporting requirements that provide sufficient
disclosures that clearly identify and distinguish between the interests of the
parent and the interests of the non-controlling owners. The provisions of SFAS
No. 160 are effective for the Company’s fiscal year beginning
January 1, 2009, and are to be applied prospectively. The Company is
currently evaluating the impact that the implementation of SFAS No. 160 will
have on its financial statements.








2.  PURCHASE
ACCOUNTING








Pacific Windows
Acquisition





On
September 30, 2007, Ply Gem completed its acquisition of CertainTeed
Corporation’s vinyl window and patio door business through a stock acquisition
(the “Pacific Windows Acquisition”).  On the acquisition date, the
Company changed the name of the acquired business to Ply Gem Pacific Windows
Corporation (“Pacific Windows”). 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 Ply Gem Pacific Windows based
upon fair values as of the date of the purchase.  The acquired vinyl
window business is a leading manufacturer of premium vinyl windows and doors and
produces windows for the residential new construction and remodeling markets.
The acquisition will provide the Company with a presence on the west
coast.





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








(in
      thousands)Other
      current assets, net of cash
            
            $
            10,845Inventories
            
            
            11,244Property,
      plant and equipment
            
            
            19,452Trademarks
            
            
            1,200Customer
      relationships
            
            
            1,800Goodwill
            
            
            15,916Other
      assets
            
            
            1,398Current
      liabilities
            
            
            (11,883
            )Other
      liabilities
            
            
            (13,514
            )Purchase
      price, net of cash acquired
            
            $
            36,458




Based on
appraisals received for the purchased intangible assets, approximately $1.2
million was assigned to trademarks with weighted average lives of 9 years,
approximately $1.8 million was assigned to customer relationships with weighted
average lives of 11 years, and approximately $0.8 million was assigned to
internally developed software with weighted average lives of 3
years.  We have estimated the fair value of our assets and liabilities
and the lives of those assets being amortized or depreciated, as of the
acquisition date, utilizing preliminary information obtained from a third-party
valuation specialist.  Management is continuing to assess the asset
valuations, warranties, and certain other liabilities assumed in the transaction
and tax-related assets and liabilities.  Approximately $15.9 million
of goodwill was assigned to the windows and doors segment as a result of the
Pacific Windows Acquisition.  None of the goodwill is expected to be
deductible for tax purposes.





Goodwill
decreased by approximately $1.6 million from December 31, 2007 to March 29,
2008.  A decrease of approximately $0.2 million was due a change in
the allocation of the Pacific Windows purchase price and a decrease of
approximately $1.4 million was due to currency translation changes.






-7-




3.  INTANGIBLE
ASSETS





The table
that follows presents the components of intangible assets as of March 29, 2008
and December 31, 2007:





AverageAmortizationPeriod
            
            
            
            
            
            Accumulated
            
            
            Net
      Carrying(in Years)
            
            
            Cost
            
            
            Amortization
            
            
            Value(Amounts
      in thousands)As
      of March 29, 2008Patents
            
            
            14
            
            
            $
            12,770
            
            
            $
            (3,826
            )
            
            $
            8,944Trademarks/Tradenames
            
            
            15
            
            
            
            85,644
            
            
            
            (11,152
            )
            
            
            74,492Customer
      relationships
            
            
            13
            
            
            
            158,158
            
            
            
            (34,553
            )
            
            
            123,605Other
            
            
            
            
            
            
            1,520
            
            
            
            (217
            )
            
            
            1,303Total
      intangible assets
            
            
            
            
            
            $
            258,092
            
            
            $
            (49,748
            )
            
            $
            208,344As
      of December 31, 2007Patents
            
            
            14
            
            
            $
            12,770
            
            
            $
            (3,591
            )
            
            $
            9,179Trademarks/Tradenames
            
            
            15
            
            
            
            85,644
            
            
            
            (9,679
            )
            
            $
            75,965Customer
      relationships
            
            
            13
            
            
            
            158,158
            
            
            
            (31,452
            )
            
            $
            126,706Other
            
            
            
            
            
            
            1,520
            
            
            
            (113
            )
            
            $
            1,407Total
      intangible assets
            
            
            
            
            
            $
            258,092
            
            
            $
            (44,835
            )
            
            $
            213,257





Amortization
expense for the three month periods ended March 29, 2008 and March 31, 2007 was
approximately $4.9 million and $4.6 million,
respectively.  Amortization expense for the remainder of 2008 and for
fiscal years 2009, 2010, 2011, and 2012 is estimated to be approximately $14.7
million, $19.6 million, $19.5 million, $19.1 million, and $19.1 million,
respectively.







4.  COMPREHENSIVE INCOME (LOSS)





Comprehensive
income (loss) is comprised of the following:





Three Months EndedMarch 29, 2008
            
            
            March 31, 2007(Amounts
      in thousands)Net
      loss
            
            $
            (21,842
            )
            
            $
            (10,864
            )Foreign
      currency translation adjustment
            
            
            (1,173
            )
            
            
            536Comprehensive
      loss
            
            $
            (23,015
            )
            
            $
            (10,328
            )






-8-





5.   LIQUIDITY
   As
of March 29, 2008, the Company has $24.9 million of cash and cash equivalents
and $55.5 million of availability under its revolving credit
facility.  As of March 29, 2008, the Company had approximately
$1,053.0 million of indebtedness outstanding.
  The
credit facilities and the indenture for the senior subordinated notes impose
certain restrictions on Ply Gem Industries, including restrictions on its
ability to incur indebtedness, pay dividends, make investments, grant liens,
sell assets and engage in certain other activities.  The terms of the
credit facilities and the senior subordinated notes also significantly restrict
the ability of Ply Gem Industries to pay dividends and otherwise distribute
assets to Ply Gem Holdings.  In addition, the credit facilities
require Ply Gem Industries to comply with certain financial
ratios.  The credit facility includes a financial covenant that does
not allow our maximum leverage ratio of Adjusted EBITDA (adjusted for certain
items as allowed by the credit facility) to Net Debt (as defined in the credit
facility) to exceed 6.75 to 1.00 for the period April 5, 2007 through December
31, 2008.  The maximum leverage ratio will decrease to 6.25 to 1:00
for the period January 1, 2009 and thereafter.  Our leverage ratio as
of March 29, 2008 was 5.98 to 1.00.
  In
April 2008, the Company revised its 2008 forecast in response to market wide
increases in raw material prices and fuel costs, as well as continued declines
in both the residential new construction and repair/remodeling
markets.  Under the revised forecast, the Company currently expects to
report significantly lower Adjusted EBITDA as defined in our senior term loan
credit agreement.  As a result of the expected decline in the
Company’s  Adjusted EBITDA, the Company does not expect to comply with
the leverage Ratio required for the fiscal quarters in 2008 following the first
fiscal quarter.
  The
failure to comply with this covenant would cause an event of default under the
credit facilities which would allow the lenders to terminate their commitments
under the credit facilities, and also, subject to certain cure periods, allow
the lenders or the agent bank to accelerate the repayment of amounts outstanding
under the credit facilities.  Also, if the lenders were to accelerate
indebtedness under the credit facilities, and such payment were not made, it
would cause an event of default to occur under the Company’s senior subordinated
notes, which would allow the holders of the senior subordinated notes to
accelerate the maturity of those instruments.  As of March 29,
2008 the Company had $1.053 billion outstanding under the credit facility and
its senior subordinated notes.  Although the debt under these
instruments is currently classified as noncurrent, it will be reclassified as a
current liability upon the occurrence of an event of default condition (i.e.,
the violation of the covenant).  The Company does not have sufficient
funds to repay the debt upon on acceleration of maturity.  Since we
will be unable to repay our debt obligations, we expect our lenders to take
actions to secure their position as creditors and to mitigate their potential
risks.  As discussed below, these conditions will adversely impact the
Company’s liquidity.  To provide relief for the expected default,
management expects to pursue an amendment of its existing credit facilities,
obtain an additional equity infusion or some combination of these
measures.  However, there can be no assurance that the Company will be
able to obtain an amendment to its existing credit facilities or raise
additional equity.  Our expectation of a default creates doubt about
the Company's ability to continue as a going concern.  Our financial
statements do not include any adjustments relating to the recoverability and
classification of assets carrying amounts or the amount of and classification of
liabilities that may result from these uncertainties.
  If
lenders were to terminate their commitment under the revolving credit facility,
our inability to draw on or issue letters of credit under this facility would
affect our working capital, would impact our ability to make capital
improvements and may also impact our ability to acquire inventory and products
because vendors may be unwilling to extend credit to us.  If our debt
is accelerated to be due currently, the funds generated by operations will not
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.
  In
response to these conditions, the Company has recently announced price increases
for certain of its products in an effort to recover a portion of the impacts of
the increases in raw material prices.  However, management cannot be
sure how our customers will accept such price increases and the amount and
timing of the price increases likely will not have significant enough impact on
Adjusted EBITDA to prevent a default in the covenant.  As such, the
Company has entered into discussions with the agent bank under its senior credit
facility in order to seek an amendment to the Leverage Ratio financial covenant
contained in the credit agreement.  The Company can make no assurances
that an amendment to the financial covenant in our credit agreement will be
obtained.
  Indebtedness
under the credit facilities is secured by substantially all of Ply Gem
Industries’ assets, including its real and personal property, inventory,
accounts receivable, intellectual property and other intangibles.  In
addition, borrowings under the credit facilities are guaranteed by Ply Gem
Holdings and secured by its assets (including its equity
interests).  Borrowings under the credit facilities (except for the
$25.0 million tranche under which our Canadian subsidiary, CWD, is the
borrower) are also guaranteed and secured by the equity interests and
substantially all of the assets of our current and future domestic subsidiaries,
subject to exceptions.  The $25.0 million tranche under which CWD is
the borrower is also guaranteed and secured by the equity interests and
substantially all of the assets of CWD’s current and future Canadian
subsidiaries.
   -9-




6.  LONG-TERM
DEBT





The
conditions described in Note 5 may impact our borrowing capacity and terms of
our debt agreements in the following discussion.





Long-term
debt in the accompanying consolidated balance sheets at March 29, 2008 and
December 31, 2007 consists of the following:


March 29, 2008
            
            
            December 31, 2007(Amounts
      in thousands)Senior
      term loan facility
            
            $
            677,860
            
            
            $
            677,910Senior
      revolving credit facility
            
            
            15,000
            
            
            
            -Senior
      subordinated notes
            
            
            360,174
            
            
            
            360,1861,053,034
            
            
            
            1,038,096Less
      current maturities
            
            
            23,488
            
            
            
            6,873$
            1,029,546
            
            
            $
            1,031,223







The
Company’s senior credit facilities with a syndicate of financial institutions
and institutional lenders provide for senior secured financing of up to
approximately $762.1 million, originally consisting of approximately
$687.1 million of term loan facilities maturing in August 2011 and a
$75.0 million revolving loan facility, including a letter of credit
subfacility, maturing in February 2009. The term loan facility was drawn in full
and has two tranches, originally consisting of: 1) an approximate $662.3 million
tranche under which Ply Gem Industries, is the borrower (the “U.S.
Borrower”), and 2) an approximate $24.8 million tranche under which our
Canadian subsidiary, CWD, is the borrower (the “Canadian
Borrower").  As of March 29, 2008 the balances of the two tranches
were approximately $657.3 million and $20.5 million, respectively.





Under the
terms of the credit agreement, the Company will be permitted to use its excess
cash flow and/or a portion of its revolving credit facility to repurchase up to
$40.0 million aggregate principal amount of the Company’s senior subordinated
notes.  Subject to market conditions, its capital needs and other
factors, the Company may from time to time purchase up to $40.0 million
aggregate principal amount of its senior subordinated notes in market
transactions, privately negotiated sales or other transactions.  As of
March 29, 2008 the Company has not purchased any of its senior subordinated
Notes.





As of
March 29, 2008, the Company had $55.5 million of availability under our
revolving credit facility, due to the $15.0 million borrowed under the revolver
and approximately $4.5 million of letters of credit issued under the
facility.





The
interest rates applicable to loans under our senior credit facilities are, at
our option, equal to either a base rate plus an applicable interest margin, or
an adjusted LIBOR rate plus an applicable interest margin, as defined in the
senior credit facility agreement.  Our rate at March 29, 2008 ranged
from 5.9% to 7.6%.





Our
senior credit facilities require scheduled quarterly principal payments on the
term loan facilities of approximately $1.7 million through March 31, 2011, and a
payment of approximately $655.7 million on August 15, 2011, allocated pro rata
between the U.S. term loan and the Canadian term loan.




The
indebtedness of the U.S. Borrower under our senior credit facilities is
guaranteed by the Company, 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 the Company, 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
financial covenants consisting of a maximum leverage ratio test.  Our
covenants also restrict the payment of dividends, with certain exceptions,
without the lenders consent in writing.  The Company is also required
at each year end, commencing December 31, 2008, 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.


The
Company does not currently expect to comply with this financial covenant for
each of the remaining quarters in 2008 based upon revised financial forecasts
for the year.  Failure to meet this covenant will result in a default
condition, at which time the Company’s debt will be currently due and payable,
and the Company would thereby reclassify all of its debt to a current
classification.







-10-


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





Ply Gem Holdings 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 to dividend or distribute cash or property to Ply
Gem Holdings.





The table
that follows is a summary of maturities of all of the Company’s long-term debt
obligations due in each twelve month period after March 29,
2008:  (Amounts in
thousands)





Twelve month period ending:April
      4, 2009
            
            $
            23,488April
      3, 2010
            
            
            6,832April
      2, 2011
            
            
            6,832March
      31, 2012
            
            
            1,015,882March
      30, 2013 and thereafter
            
            
            -$
            1,053,034





As of
March 29, 2008, the Company had $55.5 million of availability under our
revolving credit facility.  Approximately $4.5 million of letters of
credit have been issued under our senior credit facility.  Further,
approximately $3.2 million of letters of credit have been issued apart from the
senior credit facility to secure certain environmental obligations.









7.  PENSION
PLANS





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




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


For
      the three
              months
      ended
              March 29, 2008
            
            
            For
      the three
              months
      ended
              March 31, 2007(Amounts
      in thousands)Service
      cost
            
            $
            48
            
            
            $
            79Interest
      cost
            
            
            506
            
            
            
            490Expected
      return on plan assets
            
            
            (550
            )
            
            
            (504
            )Net
      periodic expense
            
            $
            4
            
            
            $
            65








-11-





8.  COMMITMENTS
AND CONTINGENCIES







In
connection with the Ply Gem Acquisition, in which Ply Gem Industries was
acquired from Nortek, Inc. (“Nortek”) in February 2004, Nortek has agreed to
indemnify the Company for certain liabilities as set forth in the stock purchase
agreement governing the Ply Gem Acquisition.  In the event Nortek is
unable to satisfy amounts due under these indemnifications then the Company
would be liable.  The Company believes that Nortek has the financial
capacity to honor its indemnification obligations and therefore does not
anticipate incurring any losses related to liabilities indemnified by Nortek
under the Purchase Agreement.  A receivable related to this
indemnification has been recorded in other long-term assets in the approximate
amount of $8.0 million. The Company has indemnified third parties in certain
transactions involving dispositions of former subsidiaries.  As of
March 29, 2008 and December 31, 2007, the Company has recorded liabilities in
relation to these indemnifications of approximately $8.0 million and $8.2
million, respectively, consisting of the following:


(Amounts
      in thousands)March 29, 2008
            
            
            December 31, 2007Product
      claim liabilities
            
            $
            3,780
            
            
            $
            3,780Multiemployer
      pension plan withdrawal liability
            
            
            3,634
            
            
            
            3,681Other
            
            
            604
            
            
            
            721$
            8,018
            
            
            $
            8,182





The
Company sells a number of products and offers a number of
warranties.  The specific terms and conditions of these warranties
vary depending on the product sold and country in which the product is
sold.  The Company estimates the costs that may be incurred under
their warranties and records a liability for such costs at the time of sale,
which is recorded in Accrued expenses and Other long-term
liabilities.  Factors that affect the Company’s warranty liabilities
include the number of units sold, historical and anticipated rates of warranty
claims, cost per claim and new product introduction.  The Company
periodically assesses the adequacy of the recorded warranty claims and adjusts
the amounts as necessary.  As of March 29, 2008, warranty liabilities
of approximately $10.8 million have been recorded in current liabilities and
approximately $38.0 million have been recorded in long-term
liabilities.





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


For
      the three
              months
      ended
              March 29, 2008
            
            
            For
      the three
              months
      ended
              March 31, 2007(Amounts
      in thousands)Balance,
      beginning of period
            
            $
            49,899
            
            
            $
            36,947Warranty
      expense provided during period
            
            
            977
            
            
            
            232Settlements
      made during period
            
            
            (2,023
            )
            
            
            (388
            )Balance,
      end of period
            
            $
            48,853
            
            
            $
            36,791








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-




9.  ACCRUED
EXPENSES, TAXES, AND OTHER LONG-TERM LIABILITIES





Accrued
expenses and taxes consist of the following at March 29, 2008 and December 31,
2007:




March 29, 2008
            
            
            December 31, 2007(Amounts
      in thousands)Insurance
            
            $
            6,371
            
            
            $
            6,566Employee
      compensation and benefits
            
            
            10,840
            
            
            
            19,722Sales
      and marketing
            
            
            15,943
            
            
            
            20,384Product
      warranty
            
            
            10,826
            
            
            
            11,453Short-term
      product claim liability
            
            
            2,321
            
            
            
            2,321Accrued
      freight
            
            
            1,727
            
            
            
            753Interest
            
            
            17,058
            
            
            
            12,426Accrued
      severance
            
            
            174
            
            
            
            1,931Accrued
      taxes
            
            
            (13,592
            )
            
            
            5,844Other,
      net
            
            
            9,823
            
            
            
            12,016$
            61,491
            
            
            $
            93,416







The
accrued severance amount in the above table as of December 31, 2007 was a result
of the Denison restructuring (Note 10).  During 2008 cash severance
payments were made for approximately $1.7 million and the accrual balance for
Denison severance is approximately $0.2 million as of March 29,
2008.




Other
long-term liabilities consist of the following at March 29, 2008 and December
31, 2007:




March 29, 2008
            
            
            December 31, 2007(Amounts
      in thousands)Insurance
            
            $
            4,759
            
            
            $
            4,757Pension
      liabilities
            
            
            3,146
            
            
            
            4,056Multiemployer
      pension withdrawal liability
            
            
            3,634
            
            
            
            3,681Product
      warranty
            
            
            38,027
            
            
            
            38,446Long-term
      lease liabilities
            
            
            25
            
            
            
            38Long-term
      product claim liability
            
            
            1,459
            
            
            
            1,459Long-term
      deferred compensation
            
            
            4,930
            
            
            
            4,810Liabilities
      for tax uncertainties
            
            
            8,235
            
            
            
            7,193Other
            
            
            1,413
            
            
            
            2,704$
            65,628
            
            
            $
            67,144







-13-





10.   RESTRUCTURING







In
October 2007, the Company commenced its plan to close the Denison, Texas
facility in 2008.  Management expects that the plant closure will
reduce costs and increase operating efficiency by increasing capacity
utilization, as the production will be absorbed by other
locations.  The Company began to shift production to other facilities
within the company during November 2007, and production ceased at the Denison
facility during February 2008.


Accrued
      as of
              
              
              Cash
      payments
              
              
              Expensed
              
              
              Accrued
      as ofDecember 31, 2007
              
              
              During 2008
              
              
              During 2008
              
              
              March 29, 2008(Amounts
      In thousands)Severance
      costs
              
              $
              1,931
              
              
              $
              (1,757
              )
              
              $
              -
              
              
              $
              174Contract
      terminations
              
              
              -
              
              
              
              (162
              )
              
              
              162
              
              
              
              -


Total
restructuring costs are expected to be approximately $6.0 million.


·
            The
      Company expects to incur approximately $2.1 million in severance costs
      during the restructuring period and has paid approximately $1.7 million
      during the first quarter of 2008 and approximately $0.2 million during
      2007.  As of March 29, 2008 the Company has an accrual balance
      of approximately $0.2 million for severance
  costs.


·
            The
      Company expects to incur approximately $0.4 million of contract
      termination costs during the restructuring period and has incurred and
      expensed approximately $0.2 million during the first quarter of
      2008.  As of March 29, 2008 the Company has not accrued for any
      contract termination costs.


·
            The
      Company expects to incur approximately $3.5 million of other costs,
      primarily related to equipment removal and relocation during 2008, and has
      incurred and expensed approximately $1.6 million during the first quarter
      of 2008.  As of March 29, 2008 the Company has not accrued for
      any other restructuring costs.


All costs
were recorded in SG&A expense in the Siding, Fencing and Railing
segment.






11.  STOCK-BASED
COMPENSATION





Stock Option
Plan





A summary
of changes in stock options outstanding as of March 29, 2008 is presented
below:





Stock Options
            
            
            Weighted-Average
      Exercise
              Price
            
            
            Weighted-Average
      Remaining Contractual Term
      (Years)Balance
      at January 1, 2008
            
            
            248,594
            
            
            $
            38.12
            
            
            
            7.95Granted
            
            
            -
            
            
            
            -
            
            
            
            -Forfeited
      or expired
            
            
            8,400
            
            
            $
            10.00
            
            
            
            -Balance
      at March 29, 2008
            
            
            240,194
            
            
            $
            39.11
            
            
            
            7.49





As of
March 29, 2008, no options have vested.  At March 29, 2008, the
Company had approximately $0.1 million of total unrecognized compensation
expense that will be recognized over the weighted average period of 2.65
years.





Other Share-Based
Compensation





Upon
completion of each of the Ply Gem Acquisition, MW Acquisition and Alenco
Acquisition, certain members of management made a cash contribution to Ply Gem
Prime Holdings, Inc. in exchange for shares of Ply Gem Prime Holdings, Inc.’s
common stock.   During 2007 shares were issued to certain members
of management in exchange for cash.





A summary
of the changes in common stock shares as of March 29, 2008 is presented
below.





Common
      Stock
              Shares
      Owned by
              ManagementBalance
      at January 1, 2008
            
            
            675,758Shares
      issued
            
            
            -Shares
      repurchased
            
            
            (12,690
            )Balance
      at March 29, 2008
            
            
            663,068








-14-


12.  SEGMENT
INFORMATION





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





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





The
operating earnings 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.  (Amounts in thousands)





Three
      months endedMarch 29, 2008
            
            
            March 31, 2007Net
      SalesSiding,
      Fencing, and Railing
            
            $
            147,060
            
            
            $
            169,514Windows
      and Doors
            
            
            109,313
            
            
            
            115,760$
            256,373
            
            
            $
            285,274Operating
      earnings (loss)Siding,
      Fencing, and Railing
            
            $
            (4,186
            )
            
            $
            (455
            )Windows
      and Doors
            
            
            (7,605
            )
            
            
            7,531Unallocated
            
            
            (2,493
            )
            
            
            (1,917
            )$
            (14,284
            )
            
            $
            5,159As
      of
            
            
            As
      ofMarch 29, 2008
            
            
            December 31, 2007Total
      AssetsSiding,
      Fencing, and Railing
            
            $
            829,323
            
            
            $
            826,480Windows
      and Doors
            
            
            700,327
            
            
            
            717,740Unallocated
            
            
            53,155
            
            
            
            81,387$
            1,582,805
            
            
            $
            1,625,607








-15-





13.  GUARANTOR
/ NON-GUARANTOR FINANCIAL INFORMATION





The
senior subordinated notes are issued by our direct subsidiary, Ply Gem
Industries and are fully and unconditionally guaranteed on a joint and several
basis by Ply Gem Holdings and certain of the Company’s 100% owned
subsidiaries.  Accordingly, the following guarantor and non-guarantor
information is presented as of March 29, 2008 and for the three month periods
ended March 29, 2008 and March 31, 2007.  The non-guarantor
information presented represents our Canadian subsidiary.

















PLY
      GEM HOLDINGS, INC. AND SUBSIDIARIESCONDENSED
      CONSOLIDATING STATEMENT OF OPERATIONSFor
      the three months ended March 29, 2008Guarantor
            
            
            Issuer
            
            
            
            
            
            Non-Ply
      Gem
            
            
            Ply
      Gem
            
            
            Guarantor
            
            
            GuarantorHoldings, Inc.
            
            
            Industries, Inc.
            
            
            Subsidiaries
            
            
            Subsidiary
            
            
            Eliminations
            
            
            Consolidated(Amounts
      in thousands)Net
      Sales
            
            $
            -
            
            
            $
            -
            
            
            $
            236,696
            
            
            $
            19,677
            
            
            $
            -
            
            
            $
            256,373Costs
      and Expenses:Cost
      of products sold
            
            
            -
            
            
            
            -
            
            
            
            210,676
            
            
            
            13,590
            
            
            
            -
            
            
            
            224,266Selling,
      general andadministrative
      expense
            
            
            -
            
            
            
            2,493
            
            
            
            35,034
            
            
            
            3,950
            
            
            
            -
            
            
            
            41,477Intercompany
      administrativecharges
            
            
            -
            
            
            
            (2,368
            )
            
            
            2,368
            
            
            
            -
            
            
            
            -
            
            
            
            -Amortization
      of intangible assets
            
            
            -
            
            
            
            -
            
            
            
            4,914
            
            
            
            -
            
            
            
            -
            
            
            
            4,914Total
      Costs and Expenses
            
            
            -
            
            
            
            125
            
            
            
            252,992
            
            
            
            17,540
            
            
            
            -
            
            
            
            270,657Operating
      earnings (loss)
            
            
            -
            
            
            
            (125
            )
            
            
            (16,296
            )
            
            
            2,137
            
            
            
            -
            
            
            
            (14,284
            )Foreign
      currency gain (loss)
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (551
            )
            
            
            -
            
            
            
            (551
            )Intercompany
      interest
            
            
            -
            
            
            
            22,158
            
            
            
            (22,158
            )
            
            
            -
            
            
            
            -
            
            
            
            -Interest
      expense
            
            
            -
            
            
            
            (22,689
            )
            
            
            16
            
            
            
            (401
            )
            
            
            -
            
            
            
            (23,074
            )Interest
      income
            
            
            -
            
            
            
            161
            
            
            
            3
            
            
            
            39
            
            
            
            -
            
            
            
            203Income
      (loss) before equity insubsidiaries'
      income
            
            
            -
            
            
            
            (495
            )
            
            
            (38,435
            )
            
            
            1,224
            
            
            
            -
            
            
            
            (37,706
            )Equity
      in subsidiaries' income
            
            
            (21,842
            )
            
            
            (21,555
            )
            
            
            -
            
            
            
            -
            
            
            
            43,397
            
            
            
            -Income
      (loss) before income taxprovision
      (benefit)
            
            
            (21,842
            )
            
            
            (22,050
            )
            
            
            (38,435
            )
            
            
            1,224
            
            
            
            43,397
            
            
            
            (37,706
            )Provision
      (benefit) for income taxes
            
            
            -
            
            
            
            (208
            )
            
            
            (16,060
            )
            
            
            404
            
            
            
            -
            
            
            
            (15,864
            )Net
      income (loss)
            
            $
            (21,842
            )
            
            $
            (21,842
            )
            
            $
            (22,375
            )
            
            $
            820
            
            
            $
            43,397
            
            
            $
            (21,842
            )Other
      comprehensive income (loss):Foreign
      currency translation adjustments
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (1,173
            )
            
            
            -
            
            
            
            (1,173
            )Total
      comprehensive income (loss)
            
            $
            (21,842
            )
            
            $
            (21,842
            )
            
            $
            (22,375
            )
            
            $
            (353
            )
            
            $
            43,397
            
            
            $
            (23,015
            )











-16-














PLY
      GEM HOLDINGS, INC. AND SUBSIDIARIESCONDENSED
      CONSOLIDATING STATEMENT OF OPERATIONSFor
      the three months ended March 31, 2007Guarantor
            
            
            Issuer
            
            
            
            
            
            Non-Ply
      Gem
            
            
            Ply
      Gem
            
            
            Guarantor
            
            
            GuarantorHoldings, Inc.
            
            
            Industries, Inc.
            
            
            Subsidiaries
            
            
            Subsidiary
            
            
            Eliminations
            
            
            Consolidated(Amounts
      in thousands)Net
      Sales
            
            $
            -
            
            
            $
            -
            
            
            $
            269,192
            
            
            $
            16,082
            
            
            $
            -
            
            
            $
            285,274Costs
      and Expenses:Cost
      of products sold
            
            
            -
            
            
            
            -
            
            
            
            226,762
            
            
            
            11,322
            
            
            
            -
            
            
            
            238,084Selling,
      general andadministrative
      expense
            
            
            -
            
            
            
            1,917
            
            
            
            32,243
            
            
            
            3,237
            
            
            
            -
            
            
            
            37,397Intercompany
      administrativecharges
            
            
            -
            
            
            
            (2,692
            )
            
            
            2,692
            
            
            
            -
            
            
            
            -
            
            
            
            -Amortization
      of intangible assets
            
            
            -
            
            
            
            -
            
            
            
            4,634
            
            
            
            -
            
            
            
            -
            
            
            
            4,634Total
      Costs and Expenses
            
            
            -
            
            
            
            (775
            )
            
            
            266,331
            
            
            
            14,559
            
            
            
            -
            
            
            
            280,115Operating
      earnings
            
            
            -
            
            
            
            775
            
            
            
            2,861
            
            
            
            1,523
            
            
            
            -
            
            
            
            5,159Foreign
      currency gain
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            216
            
            
            
            -
            
            
            
            216Intercompany
      interest
            
            
            -
            
            
            
            23,701
            
            
            
            (23,602
            )
            
            
            (99
            )
            
            
            -
            
            
            
            -Interest
      expense
            
            
            -
            
            
            
            (24,745
            )
            
            
            (1
            )
            
            
            (520
            )
            
            
            -
            
            
            
            (25,266
            )Interest
      income
            
            
            -
            
            
            
            295
            
            
            
            259
            
            
            
            23
            
            
            
            -
            
            
            
            577Income
      (loss) before equity insubsidiaries'
      income
            
            
            -
            
            
            
            26
            
            
            
            (20,483
            )
            
            
            1,143
            
            
            
            -
            
            
            
            (19,314
            )Equity
      in subsidiaries' income
            
            
            (10,864
            )
            
            
            (10,880
            )
            
            
            -
            
            
            
            -
            
            
            
            21,744
            
            
            
            -Income
      (loss) before income taxprovision
      (benefit)
            
            
            (10,864
            )
            
            
            (10,854
            )
            
            
            (20,483
            )
            
            
            1,143
            
            
            
            21,744
            
            
            
            (19,314
            )Provision
      (benefit) for income taxes
            
            
            -
            
            
            
            10
            
            
            
            (8,837
            )
            
            
            377
            
            
            
            -
            
            
            
            (8,450
            )Net
      income (loss)
            
            $
            (10,864
            )
            
            $
            (10,864
            )
            
            $
            (11,646
            )
            
            $
            766
            
            
            $
            21,744
            
            
            $
            (10,864
            )Other
      comprehensive income (loss):Foreign
      currency translation adjustments
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            536
            
            
            
            -
            
            
            
            536Total
      comprehensive income (loss)
            
            $
            (10,864
            )
            
            $
            (10,864
            )
            
            $
            (11,646
            )
            
            $
            1,302
            
            
            $
            21,744
            
            
            $
            (10,328
            )






-17-








PLY
      GEM HOLDINGS, INC. AND SUBSIDIARIESCONDENSED
      CONSOLIDATING BALANCE SHEETAs
      of March 29, 2008Guarantor
            
            
            Issuer
            
            
            
            
            
            Non-Ply
      Gem
            
            
            Ply
      Gem
            
            
            Guarantor
            
            
            GuarantorHoldings, Inc.
            
            
            Industries, Inc.
            
            
            Subsidiaries
            
            
            Subsidiary
            
            
            Eliminations
            
            
            Consolidated(Amounts
      in thousands)ASSETSCurrent
      Assets:Cash
      and cash equivalents
            
            $
            -
            
            
            $
            14,444
            
            
            $
            7,621
            
            
            $
            2,837
            
            
            $
            -
            
            
            $
            24,902Accounts
      receivable, net
            
            
            -
            
            
            
            -
            
            
            
            123,454
            
            
            
            11,198
            
            
            
            -
            
            
            
            134,652Inventories:Raw
      materials
            
            
            -
            
            
            
            -
            
            
            
            53,675
            
            
            
            4,325
            
            
            
            -
            
            
            
            58,000Work
      in process
            
            
            -
            
            
            
            -
            
            
            
            20,948
            
            
            
            981
            
            
            
            -
            
            
            
            21,929Finished
      goods
            
            
            -
            
            
            
            -
            
            
            
            36,738
            
            
            
            2,735
            
            
            
            -
            
            
            
            39,473Total
      inventory
            
            
            -
            
            
            
            -
            
            
            
            111,361
            
            
            
            8,041
            
            
            
            -
            
            
            
            119,402Prepaid
      expenses and othercurrent
      assets
            
            
            -
            
            
            
            3,627
            
            
            
            15,668
            
            
            
            360
            
            
            
            -
            
            
            
            19,655Deferred
      income taxes
            
            
            -
            
            
            
            -
            
            
            
            11,780
            
            
            
            -
            
            
            
            -
            
            
            
            11,780Total
      current assets
            
            
            -
            
            
            
            18,071
            
            
            
            269,884
            
            
            
            22,436
            
            
            
            -
            
            
            
            310,391Investments
      in subsidiaries
            
            
            216,405
            
            
            
            138,090
            
            
            
            -
            
            
            
            -
            
            
            
            (354,495
            )
            
            
            -Property
      and Equipment, at cost:Land
            
            
            -
            
            
            
            -
            
            
            
            3,840
            
            
            
            171
            
            
            
            -
            
            
            
            4,011Buildings
      and improvements
            
            
            -
            
            
            
            106
            
            
            
            37,020
            
            
            
            939
            
            
            
            -
            
            
            
            38,065Machinery
      and equipment
            
            
            -
            
            
            
            149
            
            
            
            238,055
            
            
            
            5,985
            
            
            
            -
            
            
            
            244,189-
            
            
            
            255
            
            
            
            278,915
            
            
            
            7,095
            
            
            
            -
            
            
            
            286,265Less
      accumulated depreciation
            
            
            -
            
            
            
            (136
            )
            
            
            (92,086
            )
            
            
            (2,454
            )
            
            
            -
            
            
            
            (94,676
            )Total
      property and equipment, net
            
            
            -
            
            
            
            119
            
            
            
            186,829
            
            
            
            4,641
            
            
            
            -
            
            
            
            191,589Other
      Assets:Intangible
      assets, net
            
            
            -
            
            
            
            -
            
            
            
            208,344
            
            
            
            -
            
            
            
            -
            
            
            
            208,344Goodwill
            
            
            -
            
            
            
            -
            
            
            
            789,389
            
            
            
            44,879
            
            
            
            -
            
            
            
            834,268Intercompany
      note receivable
            
            
            -
            
            
            
            1,088,999
            
            
            
            -
            
            
            
            -
            
            
            
            (1,088,999
            )
            
            
            -Other
            
            
            -
            
            
            
            36,012
            
            
            
            2,201
            
            
            
            -
            
            
            
            -
            
            
            
            38,213Total
      other assets
            
            
            -
            
            
            
            1,125,011
            
            
            
            999,934
            
            
            
            44,879
            
            
            
            (1,088,999
            )
            
            
            1,080,825$
            216,405
            
            
            $
            1,281,291
            
            
            $
            1,456,647
            
            
            $
            71,956
            
            
            $
            (1,443,494
            )
            
            $
            1,582,805LIABILITIES
      AND STOCKHOLDER'S EQUITYCurrent
      Liabilities:Current
      maturities of long-term debt
            
            $
            -
            
            
            $
            23,279
            
            
            $
            -
            
            
            $
            209
            
            
            $
            -
            
            
            $
            23,488Accounts
      payable
            
            
            -
            
            
            
            520
            
            
            
            90,928
            
            
            
            4,186
            
            
            
            -
            
            
            
            95,634Accrued
      expenses and taxes
            
            
            -
            
            
            
            20,297
            
            
            
            38,512
            
            
            
            2,682
            
            
            
            -
            
            
            
            61,491Total
      current liabilities
            
            
            -
            
            
            
            44,096
            
            
            
            129,440
            
            
            
            7,077
            
            
            
            -
            
            
            
            180,613Deferred
      income taxes
            
            
            -
            
            
            
            -
            
            
            
            86,306
            
            
            
            4,307
            
            
            
            -
            
            
            
            90,613Intercompany
      note payable
            
            
            -
            
            
            
            -
            
            
            
            1,088,999
            
            
            
            -
            
            
            
            (1,088,999
            )
            
            
            -Other
      long term liabilities
            
            
            -
            
            
            
            11,548
            
            
            
            52,951
            
            
            
            1,129
            
            
            
            -
            
            
            
            65,628Long-term
      debt, less currentmaturities
            
            
            -
            
            
            
            1,009,242
            
            
            
            -
            
            
            
            20,304
            
            
            
            -
            
            
            
            1,029,546Stockholder's
      Equity:Preferred
      stock
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -Common
      stock
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -Additional
      paid-in-capital
            
            
            180,543
            
            
            
            180,543
            
            
            
            87,686
            
            
            
            5,637
            
            
            
            (273,866
            )
            
            
            180,543Retained
      earnings
            
            
            27,400
            
            
            
            27,400
            
            
            
            11,265
            
            
            
            25,762
            
            
            
            (64,427
            )
            
            
            27,400Accumulated
      othercomprehensive
      income (loss)
            
            
            8,462
            
            
            
            8,462
            
            
            
            -
            
            
            
            7,740
            
            
            
            (16,202
            )
            
            
            8,462$
            216,405
            
            
            $
            1,281,291
            
            
            $
            1,456,647
            
            
            $
            71,956
            
            
            $
            (1,443,494
            )
            
            $
            1,582,805







-18-







PLY
      GEM HOLDINGS, INC. AND SUBSIDIARIESCONDENSED
      CONSOLIDATING BALANCE SHEETAs
      of December 31, 2007Guarantor
            
            
            Issuer
            
            
            
            
            
            Non-Ply
      Gem
            
            
            Ply
      Gem
            
            
            Guarantor
            
            
            GuarantorHoldings, Inc.
            
            
            Industries, Inc.
            
            
            Subsidiaries
            
            
            Subsidiary
            
            
            Eliminations
            
            
            Consolidated(Amounts
      in thousands)ASSETSCurrent
      Assets:Cash
      and cash equivalents
            
            $
            -
            
            
            $
            40,647
            
            
            $
            18,376
            
            
            $
            6,184
            
            
            $
            -
            
            
            $
            65,207Accounts
      receivable, net
            
            
            -
            
            
            
            -
            
            
            
            100,221
            
            
            
            11,432
            
            
            
            -
            
            
            
            111,653Inventories:Raw
      materials
            
            
            -
            
            
            
            -
            
            
            
            55,506
            
            
            
            4,497
            
            
            
            -
            
            
            
            60,003Work
      in process
            
            
            -
            
            
            
            -
            
            
            
            21,987
            
            
            
            1,084
            
            
            
            -
            
            
            
            23,071Finished
      goods
            
            
            -
            
            
            
            -
            
            
            
            42,296
            
            
            
            2,912
            
            
            
            -
            
            
            
            45,208Total
      inventory
            
            
            -
            
            
            
            -
            
            
            
            119,789
            
            
            
            8,493
            
            
            
            -
            
            
            
            128,282Prepaid
      expenses and othercurrent
      assets
            
            
            -
            
            
            
            3,451
            
            
            
            12,622
            
            
            
            389
            
            
            
            -
            
            
            
            16,462Deferred
      income taxes
            
            
            -
            
            
            
            -
            
            
            
            12,797
            
            
            
            -
            
            
            
            -
            
            
            
            12,797Total
      current assets
            
            
            -
            
            
            
            44,098
            
            
            
            263,805
            
            
            
            26,498
            
            
            
            -
            
            
            
            334,401Investments
      in subsidiaries
            
            
            239,544
            
            
            
            115,861
            
            
            
            -
            
            
            
            -
            
            
            
            (355,405
            )
            
            
            -Property
      and Equipment, at cost:Land
            
            
            -
            
            
            
            -
            
            
            
            3,840
            
            
            
            177
            
            
            
            -
            
            
            
            4,017Buildings
      and improvements
            
            
            -
            
            
            
            106
            
            
            
            36,865
            
            
            
            956
            
            
            
            -
            
            
            
            37,927Machinery
      and equipment
            
            
            -
            
            
            
            49
            
            
            
            234,750
            
            
            
            6,122
            
            
            
            -
            
            
            
            240,921-
            
            
            
            155
            
            
            
            275,455
            
            
            
            7,255
            
            
            
            -
            
            
            
            282,865Less
      accumulated depreciation
            
            
            -
            
            
            
            (126
            )
            
            
            (81,417
            )
            
            
            (2,326
            )
            
            
            -
            
            
            
            (83,869
            )Total
      property and equipment, net
            
            
            -
            
            
            
            29
            
            
            
            194,038
            
            
            
            4,929
            
            
            
            -
            
            
            
            198,996Other
      Assets:Intangible
      assets, net
            
            
            -
            
            
            
            -
            
            
            
            213,257
            
            
            
            -
            
            
            
            -
            
            
            
            213,257Goodwill
            
            
            -
            
            
            
            -
            
            
            
            789,575
            
            
            
            46,245
            
            
            
            -
            
            
            
            835,820Intercompany
      note receivable
            
            
            -
            
            
            
            1,088,999
            
            
            
            -
            
            
            
            -
            
            
            
            (1,088,999
            )
            
            
            -Other
            
            
            -
            
            
            
            37,932
            
            
            
            5,201
            
            
            
            -
            
            
            
            -
            
            
            
            43,133Total
      other assets
            
            
            -
            
            
            
            1,126,931
            
            
            
            1,008,033
            
            
            
            46,245
            
            
            
            (1,088,999
            )
            
            
            1,092,210$
            239,544
            
            
            $
            1,286,919
            
            
            $
            1,465,876
            
            
            $
            77,672
            
            
            $
            (1,444,404
            )
            
            $
            1,625,607LIABILITIES
      AND STOCKHOLDER'S EQUITYCurrent
      Liabilities:Current
      maturities of long-term debt
            
            $
            -
            
            
            $
            6,623
            
            
            $
            -
            
            
            $
            250
            
            
            $
            -
            
            
            $
            6,873Accounts
      payable
            
            
            -
            
            
            
            547
            
            
            
            90,317
            
            
            
            5,392
            
            
            
            -
            
            
            
            96,256Accrued
      expenses and taxes
            
            
            -
            
            
            
            17,787
            
            
            
            68,787
            
            
            
            6,842
            
            
            
            -
            
            
            
            93,416Total
      current liabilities
            
            
            -
            
            
            
            24,957
            
            
            
            159,104
            
            
            
            12,484
            
            
            
            -
            
            
            
            196,545Deferred
      income taxes
            
            
            -
            
            
            
            -
            
            
            
            86,866
            
            
            
            4,285
            
            
            
            -
            
            
            
            91,151Intercompany
      note payable
            
            
            -
            
            
            
            -
            
            
            
            1,088,999
            
            
            
            -
            
            
            
            (1,088,999
            )
            
            
            -Other
      long term liabilities
            
            
            -
            
            
            
            11,508
            
            
            
            54,473
            
            
            
            1,163
            
            
            
            -
            
            
            
            67,144Long-term
      debt, less currentmaturities
            
            
            -
            
            
            
            1,010,910
            
            
            
            -
            
            
            
            20,313
            
            
            
            -
            
            
            
            1,031,223Stockholder's
      Equity:Preferred
      stock
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -Common
      stock
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -Additional
      paid-in-capital
            
            
            180,667
            
            
            
            180,667
            
            
            
            26,812
            
            
            
            5,572
            
            
            
            (213,051
            )
            
            
            180,667Retained
      earnings
            
            
            49,242
            
            
            
            49,242
            
            
            
            49,622
            
            
            
            24,942
            
            
            
            (123,806
            )
            
            
            49,242Accumulated
      othercomprehensive
      income (loss)
            
            
            9,635
            
            
            
            9,635
            
            
            
            -
            
            
            
            8,913
            
            
            
            (18,548
            )
            
            
            9,635$
            239,544
            
            
            $
            1,286,919
            
            
            $
            1,465,876
            
            
            $
            77,672
            
            
            $
            (1,444,404
            )
            
            $
            1,625,607







-19-








PLY
      GEM HOLDINGS, INC. AND SUBSIDIARIESCONSOLIDATING
      STATEMENT OF CASH FLOWSFor
      the three months ended March 29, 2008Guarantor
            
            
            Issuer
            
            
            
            
            
            Non-Ply
      Gem
            
            
            Ply
      Gem
            
            
            Guarantor
            
            
            GuarantorHoldings, Inc.
            
            
            Industries, Inc.
            
            
            Subsidiaries
            
            
            Subsidiary
            
            
            Eliminations
            
            
            Consolidated(Amounts
      in thousands)Cash
      flows from operatingactivities:Net
      income (loss)
            
            $
            (21,842
            )
            
            $
            (21,842
            )
            
            $
            (22,375
            )
            
            $
            820
            
            
            $
            43,397
            
            
            $
            (21,842
            )Adjustments
      to reconcile netincome
      (loss) to cash provided by(used
      in) operating activities:Depreciation
      and amortizationexpense
            
            
            -
            
            
            
            10
            
            
            
            15,816
            
            
            
            200
            
            
            
            -
            
            
            
            16,026Non-cash
      interest expense, net
            
            
            -
            
            
            
            1,745
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            1,745Loss
      on foreign currency transactions
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            551
            
            
            
            -
            
            
            
            551Loss
      on sale of assets
            
            
            -
            
            
            
            -
            
            
            
            323
            
            
            
            -
            
            
            
            -
            
            
            
            323Deferred
      income taxes
            
            
            -
            
            
            
            -
            
            
            
            316
            
            
            
            145
            
            
            
            -
            
            
            
            461Equity
      in subsidiaries' net income
            
            
            21,842
            
            
            
            21,555
            
            
            
            -
            
            
            
            -
            
            
            
            (43,397
            )
            
            
            -Changes
      in operating  Assets andliabilities:Accounts
      receivable, net
            
            
            -
            
            
            
            -
            
            
            
            (24,965
            )
            
            
            (103
            )
            
            
            -
            
            
            
            (25,068
            )Inventories
            
            
            -
            
            
            
            -
            
            
            
            6,280
            
            
            
            197
            
            
            
            -
            
            
            
            6,477Prepaid
      expenses and othercurrent
      assets
            
            
            -
            
            
            
            (175
            )
            
            
            (3,214
            )
            
            
            15
            
            
            
            -
            
            
            
            (3,374
            )Accounts
      payable
            
            
            -
            
            
            
            (27
            )
            
            
            2,100
            
            
            
            (1,028
            )
            
            
            -
            
            
            
            1,045Accrued
      expenses and taxes
            
            
            -
            
            
            
            2,713
            
            
            
            (31,270
            )
            
            
            (3,801
            )
            
            
            -
            
            
            
            (32,358
            )Other
            
            
            -
            
            
            
            (1
            )
            
            
            9
            
            
            
            13
            
            
            
            -
            
            
            
            21Net
      cash provided by (used in)operating
      activities
            
            
            -
            
            
            
            3,978
            
            
            
            (56,980
            )
            
            
            (2,991
            )
            
            
            -
            
            
            
            (55,993
            )Cash
      flows from investingactivities:Capital
      expenditures
            
            
            -
            
            
            
            (100
            )
            
            
            (4,525
            )
            
            
            (56
            )
            
            
            -
            
            
            
            (4,681
            )Proceeds
      from sale of assets
            
            
            -
            
            
            
            5,810
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            5,810Acquisitions,
      net of cash acquired
            
            
            -
            
            
            
            (15
            )
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (15
            )Net
      cash provided by (used in)investing
      activities
            
            
            -
            
            
            
            5,695
            
            
            
            (4,525
            )
            
            
            (56
            )
            
            
            -
            
            
            
            1,114Cash
      flows from financingactivities:Proceeds
      from revolver borrowings
            
            
            -
            
            
            
            15,000
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            15,000Proceeds
      from intercompany
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            -investment
            
            
            -
            
            
            
            (50,750
            )
            
            
            50,750
            
            
            
            -
            
            
            
            -
            
            
            
            -Payments
      on long-term debt
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (51
            )
            
            
            -
            
            
            
            (51
            )Equity
      repurchase
            
            
            -
            
            
            
            (126
            )
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (126
            )Net
      cash provided by (used in)financing
      activities
            
            
            -
            
            
            
            (35,876
            )
            
            
            50,750
            
            
            
            (51
            )
            
            
            -
            
            
            
            14,823Impact
      of exchange rate movementon
      cash
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (249
            )
            
            
            -
            
            
            
            (249
            )Net
      decrease in cashand
      cash equivalents
            
            
            -
            
            
            
            (26,203
            )
            
            
            (10,755
            )
            
            
            (3,347
            )
            
            
            -
            
            
            
            (40,305
            )Cash
      and cash equivalents at thebeginning
      of the period
            
            
            -
            
            
            
            40,647
            
            
            
            18,376
            
            
            
            6,184
            
            
            
            -
            
            
            
            65,207Cash
      and cash equivalents at the endof
      the period
            
            $
            -
            
            
            $
            14,444
            
            
            $
            7,621
            
            
            $
            2,837
            
            
            $
            -
            
            
            $
            24,902





-20-








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





-21-




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





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





Overview





We are a
leading manufacturer of residential exterior building products in North
America.  We offer a comprehensive product line of vinyl siding and
skirting, vinyl windows and doors, aluminum windows, and vinyl and composite
fencing and railing 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
and railing, and (ii) windows and doors.





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





PVC resin
and aluminum are major components in the production of our siding, fencing,
railing and decking products and changes in PVC resin and aluminum prices have a
direct impact on our cost of products sold.  Historically, we have
been able to pass on the price increases to our customers.  The
results of operations for individual quarters can be negatively impacted by a
delay between the time of raw material cost increases and price increases that
we implement in our products, or conversely can be positively impacted by a
delay between the time of a raw material price decrease and competitive pricing
moves that we implement accordingly.





In April
2008, the Company revised its 2008 forecast in response to market wide increases
in raw material prices and fuel costs, as well as continued declines in both the
residential new construction and repair/remodeling markets.  Under the
revised forecast, the Company currently expects that it will not comply with its
debt covenant requirements for the fiscal quarters in 2008 following the first
fiscal quarter.  Upon non-compliance with the debt covenant
requirements, our debt would become currently due and payable.  For
further details and discussion of an event of default and the related impact on
the Company’s liquidity, please refer to our discussion in “Liquidity and Capital
Resources” below.





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.   All
periods after the Pacific Windows Acquisition in September 2007 include the
results of operations of Pacific Windows.  As a result, the three
month period ending March 29, 2008 will not be directly comparable to the three
month period ending March 31, 2007.





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.






-22-




Critical
Accounting Policies





The
following discussion and analysis of our financial condition and results of
operations are based upon our consolidated financial statements, which have been
prepared in accordance with U.S. generally accepted accounting
principles.  Certain of our accounting policies require the
application of judgments in selecting the appropriate assumptions for
calculating financial estimates.  By their nature, these judgments are
subject to an inherent degree of uncertainty.  We periodically
evaluate the judgments and estimates used for our critical accounting policies
to ensure that such judgments and estimates are reasonable for our interim and
year-end reporting requirements.  These judgments and estimates are
based upon our historical experience, current trends and information available
from other sources, as appropriate.  If different conditions result
than those assumptions used in our judgments, the results could be materially
different from our estimates.  Significant judgements and estimates
are used in the Company's goodwill and intangible asset impairment tests where
different assumptions could produce varying results. Management believes that
the two areas where different assumptions could result in materially different
reported results are accounts receivable related to estimation of allowances for
doubtful accounts and inventories in estimating reserves for obsolete and excess
inventory.  Although we believe the likelihood of a material
difference in either of these two areas is very low based upon our historical
experience, a 10% change in our allowance for doubtful accounts and our
inventory reserve estimates at March 29, 2008 would result in a $0.7 million and
$0.9 million impact upon SG&A expense and cost of products sold,
respectively. Additionally, we have included in the discussion that follows our
estimation methodology for both accounts receivable and
inventories.  While all significant policies are important to our
combined and consolidated financial statements, some of these policies may be
viewed as being critical.  Our critical accounting policies
include:





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





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





Inventories.  Inventories
in the accompanying consolidated balance sheets are valued at the lower of cost
or market.  At March 29, 2008, and December 31, 2007 approximately
$11.2 million and $10.9 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 $3.7 million and $3.7 million higher at March 29, 2008 and
December 31, 2007, respectively.  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, if a triggering event occurs, we would 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 asset group
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.  A drop
in projected cash flows due to price increases for raw materials and
market wide declines in the housing industry was determined to be a triggering
event for an impairment test during the first quarter of 2008.  The
test results did not indicate that an impairment existed at March 29,
2008.




Goodwill
Impairment.  In accordance with SFAS No. 142, we perform an
annual test for goodwill impairment.  We assess goodwill 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.  To evaluate goodwill for
impairment, the company estimates the fair value of reporting units considering
such factors as discounted cash flows and EBITDA valuation multiples for
comparable publicly traded companies.  A significant reduction in
projected sales and earnings, which would lead to a reduction in future cash
flows could indicate a potential impairment.  A drop in
projected cash flows due to price increases for raw materials and
market wide declines in the housing industry was determined to be a triggering
event for an impairment test during the first quarter of 2008.  The
test results did not indicate that an impairment existed at March 29,
2008.




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 a third-party actuarial consultant (AON Global Risk Consulting)
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.


-23-


Income
Taxes.   We account for deferred income taxes using the
liability method in accordance with SFAS No. 109 “Accounting for Income Taxes,”
or “SFAS No. 109,” which requires that the deferred tax consequences of
temporary differences between the amounts recorded in our financial statements
and the amount included in our federal and state income tax returns be
recognized in the balance sheet.  Effective January 1, 2007, the
Company adopted FASB Interpretation No. 48, (FIN 48), “Accounting for Uncertainties in
Income Taxes”, an interpretation of SFAS No. 109.  FIN 48
interprets and clarifies SFAS No. 109 regarding the required accounting of and
establishes specific disclosures for uncertain tax positions taken or expected
to be taken within an entity’s income tax returns and recognized in an entity’s
financial statements.  FIN 48 prescribes the minimum financial
statement recognition threshold for tax benefits generated by deductions,
non-filing of tax returns or other tax positions taken or expected to be taken
in an entity’s tax returns. The amount recorded in our financial statements
reflects estimates of final amounts due to timing of completion and filing of
actual income tax returns.  Estimates are required with respect to,
among other things, the appropriate state income tax rates to use in the various
states that we and our subsidiaries are required to file, the potential
utilization of operating and capital loss carry-forwards for both federal and
state income tax purposes and valuation allowances required, if any, for tax
assets that may not be realized in the future.  We establish reserves
when, despite our belief that our tax return positions are fully supportable,
certain positions could be challenged, and the positions may not be fully
sustained.  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 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, 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.


(Amounts
in thousands)


Three
      months endedMarch
      29,
            
            
            March
      31,2008
            
            
            2007Net
      SalesSiding,
      Fencing and Railing
            
            $
            147,060
            
            
            $
            169,514Windows
      and Doors
            
            
            109,313
            
            
            
            115,760Operating
      earnings (loss)Siding,
      Fencing and Railing
            
            
            (4,186
            )
            
            
            (455
            )Windows
      and Doors
            
            
            (7,605
            )
            
            
            7,531Unallocated
            
            
            (2,493
            )
            
            
            (1,917
            )Foreign
      currency gain (loss)Windows
      and Doors
            
            
            (551
            )
            
            
            216Interest
      expense, netSiding,
      Fencing and Railing
            
            
            16
            
            
            
            (26
            )Windows
      and Doors
            
            
            (359
            )
            
            
            265Unallocated
            
            
            (22,528
            )
            
            
            (24,928
            )Income
      tax expense (benefit)Unallocated
            
            
            (15,864
            )
            
            
            (8,450
            )Net
      loss
            
            $
            (21,842
            )
            
            $
            (10,864
            )









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




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




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





-24-







Siding,
Fencing and Railing Segment





For
      the three months ended(dollars
      in thousands)
            
            March 29, 2008
            
            
            March 31, 2007(unaudited)
            
            
            (unaudited)Statement
      of operations data:Net
      Sales
            
            
            147,060
            
            
            
            100
            %
            
            
            169,514
            
            
            
            100
            %Cost
      of products sold
            
            
            130,538
            
            
            
            88.8
            %
            
            
            147,585
            
            
            
            87.1
            %Gross
      Profit
            
            
            16,522
            
            
            
            11.2
            %
            
            
            21,929
            
            
            
            12.9
            %SG&A
      expense
            
            
            18,571
            
            
            
            12.6
            %
            
            
            19,852
            
            
            
            11.7
            %Amortization
      of intangible assets
            
            
            2,137
            
            
            
            1.5
            %
            
            
            2,532
            
            
            
            1.5
            %Operating
      earnings (loss)
            
            
            (4,186
            )
            
            
            -2.8
            %
            
            
            (455
            )
            
            
            -0.3
            %





Net
Sales





Net sales
for the three months ended March 29, 2008 decreased compared to the same period
in 2007 by approximately $22.5 million, or 13%.  The decrease in net sales
was driven by industry wide market declines resulting from lower single family
housing starts which negatively impacted the new construction sector of the
market and overall softness in repair and remodeling expenditures which
negatively impacted demand for our products. According to the National
Association of Home Builders (“NAHB”), first quarter 2008 single family housing
starts are estimated to show a decline of approximately 43.8% from actual levels
achieved in the first quarter of 2007.  The new construction sector of
the market is expected to continue to be negatively impacted during the balance
of 2008 according to the NAHB’s March 24, 2008
forecast.  Additionally, according to the NAHB’s March 2008 forecast,
single family housing starts are expected to decline in 2008 by 33.7% as
compared to their full year estimate for 2007.





Cost of Products
Sold





Cost of
products sold for the three months ended March 29, 2008 decreased over the same
period in 2007 by approximately $17.0 million, or 12%.  The decrease
in cost of products sold was primarily due to lower sales as discussed above,
but was partially offset by higher PVC resin cost, which is our largest raw
material component.  The increase in PVC resin cost was partially
offset by cost savings that the Company is realizing from its acquisition of AHE
that were not yet fully realized during the three months ended March 31,
2007.  Additionally, in light of current market conditions for
building products, the Company has adjusted the size of its workforce and
reduced its fixed overhead structure, including reductions in certain fixed
expenses related to the vinyl siding plant in Atlanta, GA, which ceased
production in April of 2007.  In addition, the Company closed its
Denison TX plant in February of 2008.  The Company expects to save
approximately $5.0 million and $10.0 million from the closure of the Atlanta, GA
and the Denison, TX facilities, respectively.





Selling, general and
administrative expense





SG&A
expense for the three months ended March 29, 2008 decreased by approximately
$1.3 million, or 7%, from the same period in 2007. The decrease in SG&A
expenses was primarily due to lower marketing costs and other fixed expenses
that have been reduced in light of current market conditions for building
products.








-25-





Windows
and Doors Segment





For
      the three months ended(dollars
      in thousands)
            
            March 29, 2008
            
            
            March 31, 2007(unaudited)
            
            
            (unaudited)Statement
      of operations data:Net
      Sales
            
            
            109,313
            
            
            
            100
            %
            
            
            115,760
            
            
            
            100
            %Cost
      of products sold
            
            
            93,728
            
            
            
            85.7
            %
            
            
            90,499
            
            
            
            78.2
            %Gross
      Profit
            
            
            15,585
            
            
            
            14.3
            %
            
            
            25,261
            
            
            
            21.8
            %SG&A
      expense
            
            
            20,413
            
            
            
            18.7
            %
            
            
            15,628
            
            
            
            13.5
            %Amortization
      of intangible assets
            
            
            2,777
            
            
            
            2.5
            %
            
            
            2,102
            
            
            
            1.8
            %Operating
      earnings (loss)
            
            
            (7,605
            )
            
            
            -7.0
            %
            
            
            7,531
            
            
            
            6.5
            %Currency
      transaction gain/(loss)
            
            
            (551
            )
            
            
            -0.5
            %
            
            
            216
            
            
            
            0.2
            %








Net
Sales





Net sales
for the three months ended March 29, 2008 decreased compared to the same period
in 2007 by approximately $6.4 million, or 6%. The decrease was due to lower
sales of our new construction window products which were negatively impacted by
market wide decreased demand that resulted from reductions in single family
housing starts as discussed above and demand for our repair and remodeling
windows which declined due to a slowdown in the remodeling and replacement
activity across the U.S.  The decrease in sales was partially offset
by the sales from Pacific Windows which was acquired in September 2007 and
increased sales in our Canadian window business.





Cost of Products
Sold





Cost of
products sold for the three months ended March 29, 2008 increased by
approximately $3.2 million, or 4%, over the same period in 2007.  The
increase in costs of products sold was attributable to Pacific Windows, which
was acquired in the fourth quarter of 2007, but was partially offset by a
decrease in cost of products sold driven by the lower level of sales. Cost of
products sold as a percentage of net sales increased for the three months ended
March 29, 2008 as compared over the same period in 2007 due to Pacific Windows
which currently caries a lower gross profit margin than the Company’s other
window and door products as a result of higher fixed cost in relationship to the
level of sales contributed from the three Pacific Window plants.  In
addition, cost of products sold in our Canadian window business increased as a
result of increased sales.





Selling, general and
administrative expense





SG&A
expense for the three months ended March 29, 2008 increased by approximately
$4.8 million, or 31%, over the same period in 2007, primarily due to the
addition of Pacific Windows.





Amortization of intangible
assets





Amortization
expense for the three months ended March 29, 2008 increased by $0.7 million
primarily due to the acquisition of Pacific Windows.





-26-




Unallocated
Operating Earnings, Interest, and Provision for Income Taxes





For
      the three months ended(dollars
      in thousands)
            
            March 29, 2008
            
            March 31, 2007(unaudited)
            
            (unaudited)Statement
      of operations data:Operating
      earnings (loss)
            
            
            (2,493
            )
            
            
            (1,917
            )Interest
      expense
            
            
            (23,074
            )
            
            
            (25,266
            )Investment
      income
            
            
            203
            
            
            
            577Income
      tax provision (benefit)
            
            
            (15,864
            )
            
            
            (8,450
            )








Operating
earnings (loss)    Unallocated operating loss for the
three months ended March 29, 2008 increased by approximately $0.6 million over
the same period in 2007.  The increase was driven by higher
professional fees, partially due to the addition of a corporate marketing
department.





Interest
expense    Interest expense for the three months
ended March 29, 2008 decreased by approximately $2.2 million over the same
period in 2007 due to lower interest rates.





Income
taxes    The income tax provision for the three
months ended March 29, 2008 increased by approximately $7.4 million over the
same period in 2007, primarily as a result of the larger pre-tax loss for the
2008 period versus the 2007 period.  The benefit for the first quarter
of 2008 included approximately $0.7 million of adjustments to correct for recent
legislative changes in Canada that impact the future settlement of deferred
taxes.  Excluding these adjustments, our effective tax rate for the
quarter was 40.28%, which is consistent with our expectations for the full
fiscal year.







-27-


Liquidity
and Capital Resources





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





Net cash
used in operating activities for the first three months of 2008 and 2007 was
approximately $56.0 million and $44.8 million, respectively.  The
increase in net cash used in operating activities for the 2008 period compared
to the 2007 period was primarily driven by a higher net loss.





Net cash
provided by (used in) investing activities for the first three months of 2008
and 2007 was approximately $1.1 million and ($3.7) million,
respectively.  Net cash provided by investing activities for the 2008
period consisted of approximately $5.8 million from the sale of assets,
partially offset by capital expenditures of approximately $4.7
million.  Net cash used for capital expenditures was approximately
$3.7 million for the 2007 period.





Net cash
provided by financing activities for the first three months of 2008 and 2007 was
approximately $14.8 million and $16.4 million, respectively.





We intend
to fund our ongoing capital and working capital requirements, including our
internal growth, through a combination of cash flows from operations and, if
necessary, from borrowings under the revolving credit portion of our credit
facilities.  As of March 29, 2008, we had approximately $1,053.0
million of indebtedness and $55.5 million of availability under the revolving
credit facility.  The Company’s senior credit facilities with a
syndicate of financial institutions and institutional lenders provided for
senior secured financing of up to $762.1 million, consisting of
$687.1 million of term loan facilities maturing in August 2011 and a
$75.0 million revolving loan facility, including a letter of credit
subfacility, maturing in February 2009.  The term loan facility was
drawn in full in and has two tranches, originally consisting of: 1) a
$662.3 million tranche under which Ply Gem Industries is the borrower,
and 2) a $24.8 million tranche under which our Canadian subsidiary, CWD, is
the borrower.  As of March 29, 2008 the balances of the two tranches
were approximately $657.3 million and $20.5 million, respectively.





The
borrowings under the revolving portion of the credit facilities will be
available until its maturity or until a default condition occurs to fund our
working capital requirements, capital expenditures and other general corporate
needs.  The revolving portion of the credit facilities matures in
February 2009 and has no scheduled amortization or commitment
reductions.  The term loan portion of the credit facilities matures in
August 2011 and has quarterly scheduled amortizations of approximately $1.7
million and a final payment of $655.7 million on the maturity
date.  However, as discussed below, our liquidity may be adversely
affected if we are unable to maintain compliance with the restrictive debt
covenants during 2008 since such an event would cause our debt to be in
default.





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




Under the
terms of our credit facilities, we are permitted to use the excess cash flow
and/or a portion of the revolving credit portion of the credit facilities to
repurchase up to $40.0 million aggregate principal amount of the senior
subordinated notes.  Subject to market conditions, our capital needs
and other factors, we may from time to time purchase up to $40.0 million
aggregate principal amount of the 9% senior subordinated notes in market
transactions, privately negotiated sales or other transactions.  As of
March 29, 2008, we had not purchased any of our senior subordinated
notes.





The
credit facilities and the indenture for the senior subordinated notes impose
certain restrictions on Ply Gem Industries, including restrictions on its
ability to incur indebtedness, pay dividends, make investments, grant liens,
sell assets and engage in certain other activities.  The terms of the
credit facilities and the senior subordinated notes also significantly restrict
the ability of Ply Gem Industries to pay dividends and otherwise distribute
assets to Ply Gem Holdings.  In addition, the credit facilities
require Ply Gem Industries to comply with certain financial
ratios.  The credit facility includes a financial covenant that does
not allow our maximum leverage ratio of Adjusted EBITDA (adjusted for certain
items as allowed by the credit facility) to Net Debt (as defined in the credit
facility) to exceed 6.75 to 1.00 for the period April 5, 2007 through December
31, 2008.  The maximum leverage ratio will decrease to 6.25 to 1:00
for the period January 1, 2009 and thereafter.  Our leverage ratio as
of March 29, 2008 was 5.98 to 1.00.





In April
2008, the Company revised its 2008 forecast in response to market wide increases
in raw material prices and fuel costs, as well as continued declines in both the
residential new construction and repair/remodeling markets.  Under the
revised forecast, the Company currently expects to report significantly lower
Adjusted EBITDA as defined in our senior term loan credit
agreement.  As a result of the expected decline in the Company’s
Adjusted EBITDA, the Company does not expect to comply with the Leverage Ratio
required for the fiscal quarters in 2008 following the first fiscal
quarter.


-28-


The
failure to comply with this covenant would cause an event of default under the
credit facilities which would allow the lenders to terminate their commitments
under the credit facilities, and also, subject to certain cure periods, allow
the lenders or the agent bank to accelerate the repayment of amounts outstanding
under the credit facilities.  Also, if the lenders were to accelerate
indebtedness under the credit facilities, and such payment were not made, it
would cause an event of default to occur under the Company’s Senior Subordinated
Notes, which would allow the holders of the Senior Subordinated Notes to
accelerate the maturity of those instruments.  As of March 29,
2008 the Company had $1.053 billion outstanding under the credit facility and
its Senior Subordinated Notes.  Although the debt under these
instruments is currently classified as noncurrent, it will be reclassified as a
current liability upon the occurrence of an event of default condition (i.e.,
the violation of the covenant).  The Company does not have sufficient
funds to repay the debt upon on acceleration of maturity.  Since we
will be unable to repay our debt obligations, we expect our lenders to take
actions to secure their position as creditors and to mitigate their potential
risks.  As discussed below, these conditions will adversely impact the
Company’s liquidity.  To provide relief for the expected default,
management expects to pursue an amendment of its existing credit facilities,
obtain an additional equity infusion or some combination of these
measures.  However, there can be no assurance that the Company will be
able to obtain an amendment to its existing credit facilities or raise
additional equity.  Our expectation of a default creates doubt about
the Company's ability to continue as a going concern.  Our financial
statements do not include any adjustments relating to the recoverability and
classification of assets carrying amounts or the amount of and classification of
liabilities that may result from these uncertainties.




If
lenders were to terminate their commitment under the revolving credit facility,
our inability to draw on or issue letters of credit under this facility would
affect our working capital, would impact our ability to make capital
improvements and may also impact our ability to acquire inventory and products
because vendors may be unwilling to extend credit to us.  If our debt
is accelerated to be due currently, the funds generated by operations will not
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.




In
response to these conditions, the Company has recently announced price increases
for certain of its products in an effort to recover a portion of the impacts of
the increases in raw material prices.  However, management cannot be
sure how our customers will accept such price increases and the amount and
timing of the price increases likely will not have significant enough impact on
Adjusted EBITDA to prevent a default in the covenant.  As such, the
Company has entered into discussions with the agent bank under its senior credit
facility in order to seek an amendment to the Leverage Ratio financial covenant
contained in the credit agreement.  The Company can make no assurances
that an amendment to the financial covenant in our credit agreement will be
obtained.





Indebtedness
under the credit facilities is secured by substantially all of Ply Gem
Industries’ assets, including its real and personal property, inventory,
accounts receivable, intellectual property and other intangibles.  In
addition, borrowings under the credit facilities are guaranteed by Ply Gem
Holdings and secured by its assets (including its equity
interests).  Borrowings under the credit facilities (except for the
$25.0 million tranche under which our Canadian subsidiary, CWD, is the
borrower) are also guaranteed and secured by the equity interests and
substantially all of the assets of our current and future domestic subsidiaries,
subject to exceptions.  The $25.0 million tranche under which CWD is
the borrower is also guaranteed and secured by the equity interests and
substantially all of the assets of CWD’s current and future Canadian
subsidiaries.





Because
of the inherent seasonality in our business and the resulting working capital
requirements, our liquidity position within a given year will
fluctuate.  The seasonal effect that creates greatest capital needs is
experienced during the first six months of the year and we anticipate the need
to borrow funds under the revolving portion of our Credit Facility to support
this requirement.  If we are unsuccessful in negotiating an amendment
to our senior credit facility and were to default on our senior credit facility,
the funds generated by operations may not 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.







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Contractual
Obligations





In
addition to the items listed in the Contractual Obligations table presented in
the Company’s 10K Report,  the Company has a potential obligation
related to certain tax issues of approximately $7.2 million.  The
timing of the potential tax payments is unknown.





Inflation;
Seasonality





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





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





Recent
Accounting Pronouncements





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





In
February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities”.  SFAS No. 159
permits entities to choose to measure certain financial assets and financial
liabilities at fair value. Unrealized gains and losses on items for which the
fair value option has been elected are reported in earnings. SFAS No. 159
is effective for our fiscal year beginning January 1, 2008, however the Company
did not elect the option to report any of the selected financial assets and
liabilities at fair value.





In
December 2007, the FASB issued SFAS No. 141R, “Business
Combinations”.  This Statement requires an acquirer to recognize the
assets acquired, the liabilities assumed, and any noncontrolling interest in the
acquiree at the acquisition date be measured at their fair values as of that
date.  An acquirer is required to recognize assets or liabilities
arising from all other contingencies (contractual contingencies) as of the
acquisition date, measured at their acquisition-date fair values, only if it is
more likely than not that they meet the definition of an asset or a liability in
FASB Concepts Statement No. 6, Elements of Financial Statements. Any
acquisition related costs are to be expensed instead of capitalized. The impact
to the company from the adoption of SFAS 141R in 2009 will depend on
acquisitions at the time. The provisions of SFAS No. 141(R) are effective
for the Company’s fiscal year beginning January 1, 2009, and are to be
applied prospectively.





In
December 2007, the FASB issued SFASNo. 160,
“Noncontrolling Interests in Consolidated Financial Statements”. This standard
establishes accounting and reporting standards for ownership interests in
subsidiaries held by parties other than the parent, the amount of consolidated
net income attributable to the parent and to the noncontrolling interest,
changes in a parent’s ownership interest and the valuation of retained
non-controlling equity investments when a subsidiary is deconsolidated. The
Statement also establishes reporting requirements that provide sufficient
disclosures that clearly identify and distinguish between the interests of the
parent and the interests of the non-controlling owners. The provisions of SFAS
No. 160 are effective for the Company’s fiscal year beginning
January 1, 2009, and are to be applied prospectively. The Company is
currently evaluating the impact that the implementation of SFAS No. 160 will
have on its financial statements.




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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 2007 Annual Report on Form
10-K.  We undertake no obligation to update the forward-looking
statements in this filing.




-31-







Item 3. QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK







Our principal interest rate exposure
relates to the term loans outstanding under our new senior credit
facilities.  We have approximately $677.9 million of term loans
outstanding, bearing interest at a variable rate, based on an adjusted LIBOR
rate plus an applicable interest margin or the base rate plus an applicable
interest margin.  Each quarter point increase or decrease in the
interest rate on the term loans would change our interest expense by
approximately $1.7 million per year.  We also have a revolving credit
facility which provides for borrowings of up to $75.0 million, which will also
bear interest at variable rates in the same manner as the term loan
facilities.  Assuming the revolving credit facility is fully drawn,
each quarter point increase or decrease in the applicable interest rate would
change our interest expense by approximately $0.2 million per
year.  In the future we may enter into interest rate swaps, involving
exchange of floating for fixed rate interest payments, to reduce our exposure to
interest rate volatility.





Our results of operations are affected
by fluctuations in the value of the U.S. dollar as compared to the value of the
Canadian dollar.  For the three month period ended March 29, 2008, the
net impact of foreign currency changes to the Company’s results of operations
was a loss of $0.6 million.  The impact of foreign currency changes
related to translation resulted in an decrease in stockholders’ equity of
approximately $1.2 million for the three months ended March 29,
2008.  The revenue or expense reported by us as a result of currency
fluctuations will be greater in times of U.S. dollar devaluation and less in
times of U.S. dollar appreciation. We generally do not enter into derivative
financial instruments to manage foreign currency exposure.  For the
three months ended March 29, 2008, we did not have any outstanding foreign
currency hedging contracts.










Item
4.     CONTROLS AND PROCEDURES





We
carried out an evaluation, under the supervision and with the participation of
our management, including our Chief Executive Officer and Chief Financial
Officer, of the effectiveness of our disclosure controls and procedures, as
defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934.
Based on that evaluation, our Chief Executive Officer and Chief Financial
Officer have concluded that our disclosure controls and procedures as of March
29, 2008 were effective to ensure that information required to be disclosed by
us in reports that we file or submit under the Securities Exchange Act of 1934
is recorded, processed, summarized and reported within the time periods
specified in Securities and Exchange Commission’s rules and forms. There have
been no changes in our internal controls over financial reporting during the
three-month period ended March 29, 2008, that have materially affected, or are
reasonably likely to materially affect, our internal controls over financial
reporting.








-32-




PART
II - OTHER INFORMATION








Item
1A.     RISK FACTORS





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





Our
performance is dependent to a significant extent upon the levels of home repair
and remodeling and new home construction spending, all of which are affected by
such factors as interest rates, inflation, consumer confidence, unemployment,
and the availability of consumer credit.  Current market forecasts
indicate that single family housing starts for the new construction market and
home repair and remodeling expenditures will decline in 2008 as compared to the
levels for 2007.  If these market forecasts are correct, our net sales
and net income may be adversely affected.





Increases
in key raw material and fuel costs could cause our cost of products sold to
increase and net income to decrease.





Our cost
of products sold may be significantly impacted by market prices for our primary
raw materials which are PVC resin and aluminum.  Current market
forecasts indicate that market prices for these raw materials will increase in
2008 as compared to market levels in 2007.  In addition, increases in
fuel cost can negatively impact our cost to deliver our products to our
customers and thus increase our cost of products sold.  Fuel costs are
currently forecasted to increase over levels in 2007.  If these market
forecasts are correct, and we are unable to increase the selling price of our
products to our customers, net income may be adversely affected.











Item
6.                                EXHIBITS





(a)                 Exhibits








Exhibit
No.                                                                  Description of
Exhibit





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







*  Filed
herewith.






-33-






SIGNATURES





Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.










PLY GEM HOLDINGS,
      INC
                (Registrant)Date:
      May 9, 2008
              By:
              /s/ Gary
      E. RobinetteName:
      Gary E. RobinetteTitle:
      President and Chief Executive Officer


Date:
      May 9, 2008
              By:
              /s/ Shawn
      K. PoeName:
      Shawn K. PoeTitle:
      Vice President, Chief Financial OfficerTreasurer and Secretary







-34-