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 September 27,
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, Suite 400


Cary, North
Carolina 27513





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








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
November 10, 2008, there were 100 shares of common stock, $0.01 par value,
outstanding.





* The
registrant became subject to the filing requirements of Section 15(d) of the
Securities Exchange Act of 1934 on September 24, 2008.











PLY
GEM HOLDINGS, INC. AND SUBSIDIARIES


FORM
10-Q


QUARTERLY
PERIOD ENDED SEPTEMBER 27, 2008





CONTENTS








PART
I – FINANCIAL INFORMATION


Item
      1.
            Condensed
      Consolidated Financial StatementsCondensed
      Consolidated Statements of Operations –Three months ended September 27, 2008 and September 29,
    2007
            2Condensed
      Consolidated Statements of Operations –Nine months ended September 27, 2008 and September 29,
2007
            3Condensed
      Consolidated Balance Sheets –September 27, 2008 and December 31, 2007
            4Condensed
      Consolidated Statements of Cash Flows –Nine months ended September 27, 2008 and September 29,
2007
            5Notes
      to Condensed Consolidated Financial Statements
            6Item
      2.
            Management’s
      Discussion and Analysis of Financial ConditionAnd Results of Operations
            28Item
      3.
            Quantitative
      and Qualitative Disclosures about Market Risk
            40Item
      4.
            Controls
      and Procedures
            40PART
      II – OTHER INFORMATIONItem
      1A.
            Risk
      Factors
            41Item
      6.
            Exhibits
            41Signatures
            
            42











-1-








PART
I - FINANCIAL INFORMATION





Item
1.                 FINANCIAL
STATEMENTS








PLY
GEM HOLDINGS, INC. AND SUBSIDIARIES


CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS


(UNAUDITED)














For
      the three months endedSeptember
      27,
            
            
            September
      29,2008
            
            
            2007(Amounts
      in thousands)Net
      sales
            
            $
            342,825
            
            
            $
            369,675Costs
      and expenses:Cost
      of products sold
            
            
            275,415
            
            
            
            284,025Selling,
      general and administrative expenses
            
            
            38,980
            
            
            
            40,588Amortization
      of intangible assets
            
            
            4,913
            
            
            
            4,289Goodwill
      impairment
            
            
            200,000
            
            
            
            -Total
      costs and expenses
            
            
            519,308
            
            
            
            328,902Operating
      earnings (loss)
            
            
            (176,483
            )
            
            
            40,773Foreign
      currency gain (loss)
            
            
            (60
            )
            
            
            1,708Interest
      expense
            
            
            (30,300
            )
            
            
            (24,364
            )Interest
      income
            
            
            176
            
            
            
            449Income
      (loss) before provision (benefit) for income taxes
            
            
            (206,667
            )
            
            
            18,566Provision
      (benefit) for income taxes
            
            
            (15,835)
            
            
            
            6,946Net
      income (loss)
            
            $
            (190,832
            )
            
            $
            11,620







See
accompanying notes to condensed consolidated financial statements.





-2-











PLY
GEM HOLDINGS, INC. AND SUBSIDIARIES


CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS


(UNAUDITED)














For
      the nine months endedSeptember
      27,
            
            
            September
      29,2008
            
            
            2007(Amounts
      in thousands)Net
      sales
            
            $
            940,478
            
            
            $
            1,045,644Costs
      and expenses:Cost
      of products sold
            
            
            770,774
            
            
            
            815,005Selling,
      general and administrative expenses
            
            
            124,859
            
            
            
            119,882Amortization
      of intangible assets
            
            
            14,739
            
            
            
            13,225Goodwill
      impairment
            
            
            200,000
            
            
            
            -Total
      costs and expenses
            
            
            1,110,372
            
            
            
            948,112Operating
      earnings (loss)
            
            
            (169,894
            )
            
            
            97,532Foreign
      currency gain (loss)
            
            
            (555
            )
            
            
            3,916Interest
      expense
            
            
            (104,439
            )
            
            
            (75,453
            )Interest
      income
            
            
            486
            
            
            
            1,271Income
      (loss) before provision (benefit) for income taxes
            
            
            (274,402
            )
            
            
            27,266Provision
      (benefit) for income taxes
            
            
            (42,235
            )
            
            
            9,240Net
      income (loss)
            
            $
            (232,167
            )
            
            $
            18,026







See
accompanying notes to condensed consolidated financial statements.





-3-





PLY GEM HOLDINGS,
INC. AND SUBSIDIARIES


CONDENSED
CONSOLIDATED BALANCE SHEETS


(UNAUDITED)





September
      27,
            
            
            December
      31,2008
            
            
            2007(Amounts
      in thousands, exceptshare
      amounts)ASSETSCurrent
      Assets:Cash
      and cash equivalents
            
            $
            20,502
            
            
            $
            65,207Accounts
      receivable, less allowances of $7,280 and $7,320,
    respectively
            
            
            167,741
            
            
            
            111,653Inventories:Raw
      materials
            
            
            59,100
            
            
            
            60,003Work
      in process
            
            
            29,725
            
            
            
            23,071Finished
      goods
            
            
            40,220
            
            
            
            45,208Total
      inventory
            
            
            129,045
            
            
            
            128,282Prepaid
      expenses and other current assets
            
            
            18,879
            
            
            
            16,462Deferred
      income taxes
            
            
            15,947
            
            
            
            12,797Total
      current assets
            
            
            352,114
            
            
            
            334,401Property
      and Equipment, at cost:Land
            
            
            3,734
            
            
            
            4,017Buildings
      and improvements
            
            
            34,659
            
            
            
            37,927Machinery
      and equipment
            
            
            250,268
            
            
            
            240,921Total
      property and equipment
            
            
            288,661
            
            
            
            282,865Less
      accumulated depreciation
            
            
            (113,010
            )
            
            
            (83,869
            )Total
      property and equipment, net
            
            
            175,651
            
            
            
            198,996Other
      Assets:Intangible
      assets, less accumulated amortization of $59,576 and
    $45,081,respectively
            
            
            198,516
            
            
            
            213,257Goodwill
            
            
            634,649
            
            
            
            835,820Other
            
            
            42,667
            
            
            
            43,133Total
      other assets
            
            
            875,832
            
            
            
            1,092,210$
            1,403,597
            
            
            $
            1,625,607LIABILITIES
      AND STOCKHOLDER'S EQUITYCurrent
      Liabilities:Current
      maturities of long-term debt
            
            $
            -
            
            
            $
            6,873Accounts
      payable
            
            
            109,212
            
            
            
            96,256Accrued
      expenses and taxes
            
            
            96,238
            
            
            
            93,416Total
      current liabilities
            
            
            205,450
            
            
            
            196,545Deferred
      income taxes
            
            
            48,714
            
            
            
            91,151Other
      long term liabilities
            
            
            60,440
            
            
            
            67,144Long-term
      debt, less current maturities
            
            
            1,053,955
            
            
            
            1,031,223Commitments
      and contingenciesStockholder'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
            
            
            210,203
            
            
            
            180,667Retained
      earnings (deficit)
            
            
            (182,925
            )
            
            
            49,242Accumulated
      other comprehensive income
            
            
            7,760
            
            
            
            9,635Total
      stockholder's equity
            
            
            35,038
            
            
            
            239,544$
            1,403,597
            
            
            $
            1,625,607





See accompanying notes to condensed consolidated financial
statements.





-4-





PLY
GEM HOLDINGS, INC. AND SUBSIDIARIES


CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS


(UNAUDITED)














For
      the nine months endedSeptember
      27,
            
            
            September
      29,2008
            
            
            2007(Amounts
      in thousands)Net
      cash provided by (used in) operating activities
            
            $
            (58,745
            )
            
            $
            18,928Cash
      flows from investing activities:Capital
      expenditures
            
            
            (13,516
            )
            
            
            (11,974
            )Proceeds
      from sale of assets
            
            
            8,812
            
            
            
            29Acquisitions,
      net of cash acquired
            
            
            -
            
            
            
            (35,097
            )Other
            
            
            (127
            )
            
            
            (228)Net
      cash used in investing activities
            
            
            (4,831
            )
            
            
            (47,270
            )Cash
      flows from financing activities:Proceeds
      from long-term debt
            
            
            693,504
            
            
            
            -Proceeds
      from revolver borrowings
            
            
            80,000
            
            
            
            50,000Payments
      on long-term debt
            
            
            (677,910
            )
            
            
            (4,906
            )Payments
      on revolver borrowings
            
            
            (80,000
            )
            
            
            (30,000
            )Debt
      issuance costs
            
            
            (26,025
            )
            
            
            (2,100
            )Equity
      contributions
            
            
            30,310
            
            
            
            750Equity
      repurchases
            
            
            (793
            )
            
            
            (3,175
            )Net
      cash provided by financing activities
            
            
            19,086
            
            
            
            10,569Impact
      of exchange rate movements on cash
            
            
            (215
            )
            
            
            1,010Net
      decrease in cash and cash equivalents
            
            
            (44,705
            )
            
            
            (16,763
            )Cash
      and cash equivalents at the beginning of the period
            
            
            65,207
            
            
            
            53,274Cash
      and cash equivalents at the end of the period
            
            $
            20,502
            
            
            $
            36,511








See
accompanying notes to condensed consolidated financial statements.





-5-





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. and its subsidiaries (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
management’s opinion, 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 September 27, 2008 are not necessarily indicative of the results that
may be expected for the year ending 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 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 comparable to the prior and subsequent
fiscal quarters.





The
accompanying financial statements include the Company’s consolidated results of
operations and cash flows for the Company for the three and nine month periods
ended September 27, 2008 and September 29, 2007, and the consolidated financial
position for the Company as of September 27, 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 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.





-6-








Reclassifications





Certain
amounts in the prior fiscal year have been reclassified to conform to the
presentation adopted in the current fiscal year, with no effect on net income
(loss) or retained earnings (deficit).





Accounting
Policies and Use of Estimates





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





Inventories





Inventories in the
accompanying consolidated balance sheets are valued at the lower of cost or
market. AtSeptember
27,
2008 and December 31, 2007, approximately $11.8 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 higher
at bothSeptember
27,
2008 and December 31, 2007.  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 sold in the normal course of business.  Accelerating
the disposal process or incorrect estimates of future sales potential may cause
actual results to differ from the estimates at the time such inventory is
disposed or sold.





Debt
Issuance Costs





Debt
issuance costs, composed of facility, agency, and certain legal fees associated
with acquiring new debt financing are amortized over the contractual term of the
related agreement using the effective interest method.  Debt issuance
costs amounted to approximately $33.7 million and $26.6 million as of September
27, 2008 and December 31, 2007, respectively and have been recorded in other
long term assets.





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 amounts
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.  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.  Our Canadian
subsidiary, CWD Windows and Doors, Inc. (“CWD”) files separate Canadian income
tax returns.







-7-










The
Company’s provision for income taxes in interim periods is based on an estimated
annual effective income tax rate derived, in part, from estimated annual pre-tax
results from ordinary operations in accordance with FIN 18, “Accounting for
Income Taxes in Interim Periods—an Interpretation of APB Opinion No. 28.”
The Company did not include the expense associated with the permanent difference
for the goodwill impairment (see Note 3) in the computation of the effective
annual income tax rate for 2008 from estimated pre-tax results from ordinary
operations. For the three months ended September 27, 2008, the permanent
difference for the goodwill impairment increased income tax expense by
approximately $61.6 million due to differences in the Company’s marginal
tax rate of approximately 29.8% and its anticipated effective annual income tax
rate from ordinary operations of approximately 37.8%.  For the nine
months ended September 27, 2008, the Company’s 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, as well as the
permanent difference for the goodwill impairment of approximately $61.6 million
which increased income tax expense due to differences in the Company's
marginal tax rate of approximately 22.4% and its anticipated effective annual
income tax rate from ordinary operations of approximately
37.8%.  Accordingly, the provision for income taxes for the three and
nine months ended September 27, 2008 has been computed by applying the discrete
method in accordance with FIN 18 to account for these items.







Related
Party Transactions




The
Company has entered into two advisory agreements with an affiliate of CI Capital
Partners LLC, formerly known as 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
$0.8 million and $1.1 million for the three month periods ended September 27,
2008 and September 29, 2007, respectively, and approximately $1.6 million and
$2.8 million for the nine month periods ended September 27, 2008 and September
29, 2007, respectively.






Foreign
Currency




CWD
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 CWD.





For the
three month periods ended September 27, 2008 and September 29, 2007, the Company
recorded a loss from foreign currency transactions of approximately $0.1 million
and a gain from foreign currency transactions of approximately $1.7 million,
respectively.  For the nine month periods ended September 27, 2008 and
September 29, 2007, the Company recorded a loss from foreign currency
transactions of approximately $0.6 million and a gain from foreign currency
transactions of approximately $3.9 million, respectively.  As of
September 27, 2008, and December 31, 2007, accumulated other comprehensive
income included a currency translation adjustment of approximately $1.9 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 $12.1 million and $6.4 million at September
27, 2008 and December 31, 2007, respectively.  This customer accounted
for approximately 10.2% of net sales for the nine month period ended September
27, 2008 and for the year ended December 31, 2007.




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.





-8-











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
September 27, 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 Ply Gem Industries' 9% senior subordinated notes due 2012
(the “Senior Subordinated Notes”) was approximately $360.2 million and $360.2
million at September 27, 2008 and December 31, 2007,
respectively.  The fair value of Ply Gem Industries' Senior
Subordinated Notes at September 27, 2008 and December 31, 2007 was estimated to
be approximately $199.9 million and $279.0 million, respectively, based on
available market information.




The
carrying value of Ply Gem Industries' 11.75% senior secured notes due 2013
(the “Senior Secured Notes”) was approximately $693.8 million at September 27,
2008 and the fair value of the notes at September 27, 2008 was estimated to be
approximately $609.0 million, 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 balance sheet 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
stockholder’s 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 the Company's December 31, 2007
financial statements.  Additionally, SFAS No. 158 requires employers
to measure the funded status of a plan as of its year-end balance
sheet.  For the Company's financial statements as of December 31,
2008, we will change the September 30 measurement date for the
Company's plans’ assets and obligations to comply with this requirement. The
Company is currently evaluating the impact of the measurement date
change.





-9-








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 fiscal years 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. 141(R), “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. The impact to the Company from the
adoption of SFAS 141(R) 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.





In May
2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted
Accounting Principles”.  This standard reorganizes the GAAP hierarchy
in order to improve financial reporting by providing a consistent framework for
determining what accounting principles should be used when preparing U.S. GAAP
financial statements.  SFAS 162 shall be effective 60 days after the
SEC’s approval of the Public Company Accounting Oversight Board’s amendments to
Interim Auditing Standard, AU Section 411, “The Meaning of Present Fairly
in Conformity with Generally Accepted Accounting Principles”. Management is
currently evaluating the impact, if any, this new standard may have on our
balance sheet, results of operations, or cash flows.








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.  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 Pacific Windows based upon fair values as of the
purchase date.  The acquired vinyl window business is a leading
manufacturer of premium vinyl windows and patio doors and produces windows for
the residential new construction and remodeling markets. The acquisition
provides the Company with a physical window manufacturing presence on the west
coast.




-10-


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
            
            $
            19,204Inventories
            
            
            9,379Property,
      plant and equipment
            
            
            19,133Trademarks
            
            
            1,200Customer
      relationships
            
            
            1,800Goodwill
            
            
            9,614Other
      assets
            
            
            1,398Current
      liabilities
            
            
            (11,916
            )Other
      liabilities
            
            
            (13,230
            )Purchase
      price, net of cash acquired
            
            $
            36,582





The
Company paid approximately $35.1 million on September 28, 2007 for the
acquisition of Pacific Windows. Transaction costs of approximately $1.5 million
were incurred in the fourth quarter of 2007.




Goodwill
decreased by approximately $201.2 million from December 31, 2007 to September
27, 2008.  A decrease of approximately $200.0 million was due to the
estimated impairment described in Note 3, a decrease of approximately $6.5
million was due to a change in the allocation of the Pacific Windows purchase
price primarily related to accrued warranties and deferred taxes, a decrease of
approximately $1.9 million was due to currency translation changes, and an
increase of approximately $7.2 million was due to a tax adjustment related to
the MW acquisition in 2004.







3.  GOODWILL
IMPAIRMENT





The
Company’s acquisitions are accounted for under the purchase method of accounting
pursuant to SFAS No. 141, “Business Combinations”.  Accordingly, the
purchase price is allocated to the tangible assets and liabilities and
intangible assets acquired, based on their estimated fair values. The excess
purchase price over the fair value is recorded as
goodwill.  Identifiable intangible assets are valued separately and
are amortized over their expected useful life.




SFAS No. 142,“Goodwill and Other
Intangible Assets” requires the Company to test goodwill for impairment on an
annual basis and between annual tests in certain circumstances, and to write
down goodwill and non-amortizable intangible assets when impaired. These
assessments require the Company to estimate the fair market value of its
reporting units. If the Company determines that the fair value of its reporting
units is less than its carrying amount, an impairment charge must be recognized
against earnings for the associated goodwill of the reporting
unit.  The Company has two reporting units- Siding, Fencing, and
Railing and Windows and Doors, and therefore separate valuations are performed
for each of the reporting units.




Goodwill
is evaluated for impairment at least annually during the fourth quarter, or
whenever events or changes in circumstances indicate that the carrying value may
not be recoverable. In addition to other possible indicators, the Company
considers the following factors to be the more significant or likely
to trigger an interim impairment review:




•
            Significant
      under-performance relative to historical or projected future operating
      results;•
            Significant
      changes in the manner of its use of acquired assets or the strategy for
      its overall business;•
            Significant
      negative industry or economic trends; and•
            Significant
      decline in its stock price for a sustained
  period.




During
the quarter ended September 27, 2008, the Company conducted an interim goodwill
impairment test as a result of the depressed residential housing and remodeling
market.





-11-








Goodwill
is evaluated for impairment using the two-step process as prescribed in
SFAS No. 142. The first step is to compare the fair value of the
reporting unit to the carrying value of the reporting unit. If the carrying
value exceeds the fair value, a second step must be followed to calculate
impairment. Otherwise, if the fair value of the reporting unit exceeds the
carrying amount, the goodwill is not considered to be impaired as of the
measurement date. To determine fair value for its reporting units, the Company
uses the fair value of the cash flows that the reporting unit can be expected to
generate in the future. This income valuation method requires management to
project revenues, operating expenses, working capital investment, capital
spending and cash flows for the reporting unit over a multi-year period, as well
as determine the weighted average cost of capital to be used as a discount
rate.  The Company also utilizes the market valuation method to
estimate the fair value of the reporting units by utilizing industry multiples
for current operating earnings.  The second step involves calculating
the fair value of the individual assets and liabilities of the reporting unit
and calculating the implied fair value of the goodwill.







At
September 27, 2008, the Company performed the initial step of its impairment
evaluation by comparing the fair market value of its reporting units, as
determined using a discounted cash flow model and market approach, to its
carrying value. It was determined that Siding, Fencing and Railing's fair value
exceeded its carrying value.  However, the Window and Doors' carrying
amount exceeded the fair value and as a result the Company performed the second
step of its impairment evaluation.   As a result of this
analysis, the Company recorded an estimated goodwill impairment of approximately $200.0
million. Any adjustment to the impairment for finalization of
estimates will be recorded in the subsequent period. This non-cash charge
does not affect the Company’s cash position, liquidity, debt covenants, or have
any impact on future operations. However, t here
is no assurance that: 1) valuation multiples will not decline, 2) discount rates
will not increase, or 3) the earnings, book values or projected earnings and
cash flows of the Company’s reporting units will not decline. The Company will
continue to analyze changes to these assumptions in future periods. The Company
will continue to perform its required annual goodwill impairment test during the
fourth quarter and further declines in the residential housing and remodeling
markets could result in future goodwill impairments.





In
addition to the SFAS No. 142 goodwill impairment, the Company evaluated its
property and equipment and intangible assets for impairment in accordance with
SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived
Assets”.   This analysis was triggered by a decrease in projected
cash flows due to the depressed residential housing and remoldeling
market.  The impairment test results did not indicate that an
impairment existed at September 27, 2008.

















4.  INTANGIBLE
ASSETS





The
table that follows presents the components of intangible assets as of September
27, 2008 and December 31, 2007:





AverageAmortizationPeriod
            
            
            
            
            
            Accumulated
            
            
            Net
      Carrying(in Years)
            
            
            Cost
            
            
            Amortization
            
            
            Value(Amounts
      in thousands)As
      of September 27, 2008Patents
            
            
            14
            
            
            $
            12,770
            
            
            $
            (4,298
            )
            
            $
            8,472Trademarks/Tradenames
            
            
            15
            
            
            
            85,644
            
            
            
            (14,103
            )
            
            
            71,541Customer
      relationships
            
            
            13
            
            
            
            158,158
            
            
            
            (40,750
            )
            
            
            117,408Other
            
            
            4
            
            
            
            1,520
            
            
            
            (425
            )
            
            
            1,095Total
      intangible assets
            
            
            
            
            
            $
            258,092
            
            
            $
            (59,576
            )
            
            $
            198,516As
      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
            
            
            4
            
            
            
            1,520
            
            
            
            (113
            )
            
            
            1,407Total
      intangible assets
            
            
            
            
            
            $
            258,092
            
            
            $
            (44,835
            )
            
            $
            213,257





Amortization
expense for the remainder of 2008 and for fiscal years 2009, 2010, 2011, and
2012 is estimated to be approximately $4.9 million, $19.6 million, $19.5
million, $19.1 million, and $19.1 million, respectively.











-12-





5.  COMPREHENSIVE
INCOME (LOSS)





Comprehensive
income (loss) is comprised of the following:





Three Months Ended
            
            
            Nine Months EndedSeptember
      27,2008
            
            
            September
      29,
              2007
            
            
            September
      27,
              2008
            
            
            September
      29,2007(Amounts
      in thousands)Net
      income (loss)
            
            $
            (190,832
            )
            
            $
            11,620
            
            
            $
            (232,167
            )
            
            $
            18,026Foreign
      currency translation adjustment
            
            
            (1,296
            )
            
            
            2,492
            
            
            
            (1,875
            )
            
            
            5,788Comprehensive
      income (loss)
            
            $
            (192,128
            )
            
            $
            14,112
            
            
            $
            (234,042
            )
            
            $
            23,814














6.  LONG-TERM
DEBT





Long-term
debt in the accompanying consolidated balance sheets at September 27, 2008 and
December 31, 2007 consists of the following:




September 27,
              2008
            
            
            December 31,
              2007(Amounts
      in thousands)Senior
      term loan facility
            
            $
            -
            
            
            $
            677,910Senior
      subordinated notes due 2012, net
              of
      unamortized premium of $156 and $186
            
            
            360,156
            
            
            
            360,186Senior
      secured notes due 2013, net of
              unamortized
      discount of $6,201
            
            
            693,799
            
            
            
            -1,053,955
            
            
            
            1,038,096Less
      current maturities
            
            
            -
            
            
            
            6,873$
            1,053,955
            
            
            $
            1,031,223





11.75% Senior Secured Notes
due 2013





On June
9, 2008, Ply Gem Industries issued $700.0 million of the Senior Secured Notes at
an approximate 1.0% discount, yielding proceeds of approximately $693.5
million.  Ply Gem Industries used the proceeds to repay all of the
outstanding indebtedness under the existing senior secured credit facility of
approximately $676.2 million of term loan borrowings and approximately $15.0
million of revolver borrowings.  The Senior Secured Notes will mature
on June 15, 2013 and bear interest at the rate of 11.75% per
annum.  Interest will be paid semi-annually on June 15 and December 15
of each year commencing on December 15, 2008.





Prior
to April 1, 2011, Ply Gem Industries may redeem up to 35% of the aggregate
principal amount of the Senior Secured Notes with the net cash proceeds from
certain equity offerings at a redemption price equal to 111.75% of the aggregate
principal amount of the Senior Secured Notes, plus accrued and unpaid interest,
if any, provided that at least 65% of the original aggregate principal amount of
the Senior Secured Notes remains outstanding after the redemption.  In
addition, not more than once during any twelve-month period, Ply Gem Industries
may redeem up to $70.0 million of the Senior Secured Notes at a redemption price
equal to 103% of the aggregate amount of the Senior Secured Notes, plus accrued
and unpaid interest, if any.  At any time on or after April 1, 2011,
Ply Gem Industries may redeem the Senior Secured Notes, in whole or in part, at
declining redemption prices set forth in the indenture governing the Senior
Secured Notes, plus, in each case, accrued and unpaid interest, if any, to the
redemption date.





-13-











The
Senior Secured Notes are fully and unconditionally guaranteed on a joint and
several basis by Ply Gem Holdings and all of the domestic subsidiaries of Ply
Gem Industries (the “Guarantors”).  The indenture governing the Senior
Secured Notes contains certain covenants that limit the ability of Ply Gem
Industries and its subsidiaries to incur additional indebtedness, pay dividends
or make other distributions or repurchase or redeem their stock, make loans and
investments, sell assets, incur certain liens, enter into agreements restricting
their ability to pay dividends, enter into transactions with affiliates, and
consolidate, merge or sell Ply Gem Industries’ assets. On November 3, 2008, Ply
Gem Industries completed its exchange offer with respect to the Senior Secured
Notes by exchanging $700.0 million Senior Secured Notes which were registered
under the Securities Act of 1933, as amended (the "Securities Act"), for $700.0
million of the issued and outstanding Senior Secured Notes. Upon completion of
the echange offer, all issued and outstanding Senior Secured Notes were
registerd under the Securities Act.





The
Senior Secured Notes and the related guarantees are secured on a first-priority
lien basis by substantially all of the assets (other than the assets securing
our obligations under our senior secured asset-based revolving credit facility,
or ABL Facility, which consist primarily of accounts receivable and inventory)
of Ply Gem Industries and the Guarantors and on a second-priority lien basis by
the assets that secure the ABL Facility.





In
addition, the Company’s stock ownership in its subsidiaries collateralizes the
Senior Secured Notes to the extent that such equity interests and other
securities can secure the notes without Rule 3-16 of Regulation S-X
under the Securities Act of 1933 requiring separate financial statements of such
subsidiary to be filed with the SEC.  As of September 27, 2008, no
subsidiary's stock has been excluded from the collateral arrangement due to the
Rule 3-16 requirement.








ABL
Facility





Concurrently
with the Senior Secured Notes offering, Ply Gem Industries, the Company and the
subsidiaries of Ply Gem Industries entered into a new senior secured asset-based
revolving credit facility (the “ABL Facility”).  The ABL Facility
provides for revolving credit financing of up to $150.0 million, subject to
borrowing base availability, with a maturity of five years including
sub-facilities for letters of credit, swingline loans, and borrowings in
Canadian dollars and United States dollars by CWD.  However, the ABL
Facility will mature on October 15, 2011 if Ply Gem Industries’ 9% senior
subordinated notes due 2012 are not refinanced by such date.  In
addition, the ABL Facility provides that the revolving commitments may be
increased to $200.0 million, subject to certain terms and
conditions.  The Company did not have any ABL borrowings outstanding
as of September 27, 2008.





As of
September 27, 2008, Ply Gem Industries had $146.1 million of availability under
the ABL Facility, reflecting no borrowings outstanding under the ABL
Facility and approximately $3.9 million of letters of credit issued under the
ABL Facility. Further, approximately $3.2 million of letters of credit have been
issued apart from the ABL facility to secure certain environmental obligations
and this amount does not reduce the availability under the ABL
Facility.





The
interest rates applicable to loans under our ABL Facility 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 ABL Facility
credit agreement.  As of September 27, 2008, the Company’s interest
rate on the ABL facility was 6.8%.





All
obligations under the ABL Facility, and the guarantees of those obligations, are
secured, subject to certain exceptions, by substantially all of the assets of
Ply Gem Industries and the Guarantors, including a first-priority security
interest in personal property consisting of accounts receivable, inventory,
cash, deposit accounts, and certain related assets and proceeds of the foregoing
and a second-priority security interest in, and mortgages on, substantially all
of Ply Gem Industries’ material owned real property and equipment and all assets
that secure the Senior Secured Notes on a first-priority basis.





9.00% Senior Subordinated
Notes due 2012





Concurrently
with the acquisition of Ply Gem Industries on February 12, 2004, Ply Gem
Industries issued $225.0 million aggregate principal amount of its 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 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 and its subsidiaries.  Ply Gem Industries pays interest
semi-annually on February 15 and August 15 of each year.  The Senior
Subordinated Notes contain certain covenants that limit the ability of Ply Gem
Industries and its subsidiaries to incur additional indebtedness, pay dividends
or make other distributions or repurchase or redeem their stock, make loans and
investments, sell assets, incur certain liens, enter into agreements restricting
their ability to pay dividends, enter into transactions with affiliates, and
consolidate, merge or sell Ply Gem Industries’ assets.





-14-








Senior Term Loan
Facility





The
Company’s senior facilities with a syndicate of financial institutions and
institutional lenders provided 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.  On May 23, 2008, the Company entered into an amendment
of the fifth amended and restated credit agreement which consisted of changes to
certain debt covenant ratios.  The amendment also increased the
interest rate on the term loan and extended the maturity of the revolving credit
facility from February 12, 2009 to August 12, 2010.  On May 23, 2008,
Ply Gem received from CI Capital Partners LLC a $30.0 million cash equity
contribution as a condition to the credit facility amendment.  On June
9, 2008, the Company used the proceeds from the Senior Secured Notes to pay off
the existing obligation under the senior term facility.





As a
result of the debt amendment that occurred on May 23, 2008 and the issuance of
Senior Secured Notes on June 9, 2008, the Company evaluated its financing costs
and expensed approximately $27.6 million of fees in the nine month period ended
September 27, 2008 which has been recorded within interest expense on the
Condensed Consolidated Statement of Operations.  The Company deferred
costs of approximately $26.0 million as of September 27, 2008 which have been
recorded within other assets in the Condensed Consolidated Balance Sheets at
September 27, 2008.  For the three and nine month periods ended
September 29, 2007, the Company expensed deferred financing costs of
approximately $0.1 million and $1.1 million, respectively, which has been
recorded within interest expense.





The
following table summarizes the Company’s long-term debt maturities due in each
twelve month period after September 27, 2008:


(Amounts in
thousands)





Twelve month period
      ending:October
      3, 2009
            
            $
            -October
      2, 2010
            
            
            -October
      1, 2011
            
            
            -September
      29, 2012
            
            
            360,156September
      28, 2013 and thereafter
            
            
            693,799$
            1,053,955










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 nine
              months
      ended
              September 27,
              2008
            
            
            For
      the nine
              months
      ended
              September 29, 2007(Amounts
      in thousands)Service
      cost
            
            $
            145
            
            
            $
            236Interest
      cost
            
            
            1,517
            
            
            
            1,471Expected
      return on plan assets
            
            
            (1,651
            )
            
            
            (1,513
            )Net
      periodic expense
            
            $
            11
            
            
            $
            194










-15-





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, 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
stock purchase agreement.  A receivable related to this
indemnification has been recorded in other long-term assets in the approximate
amount of $7.9 million and $8.2 million at September 27, 2008 and December 31,
2007, respectively.  The Company has indemnified third parties in certain
transactions involving dispositions of former subsidiaries.  As of
September 27, 2008 and December 31, 2007, the Company has recorded liabilities
in relation to these indemnifications of approximately $2.9 million and $3.0
million, respectively, in current liabilities and $5.0 million and $5.2 million,
respectively, in long-term liabilities, consisting of the
following:


(Amounts
      in thousands)September 27,
      2008
            
            
            December 31,
              2007Product
      claim liabilities
            
            $
            3,733
            
            
            $
            3,780Multiemployer
      pension plan withdrawal liability
            
            
            3,539
            
            
            
            3,681Other
            
            
            602
            
            
            
            721$
            7,874
            
            
            $
            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 the 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 September 27, 2008 and December 31,
2007, warranty liabilities of approximately $9.5 million and $11.5 million,
respectively, have been recorded in current liabilities and approximately $37.1
million and $38.4 million, respectively, have been recorded in long-term
liabilities.





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


For
      the nine
              months
      ended
              September 27,
      2008
            
            
            For
      the nine
              months
      ended
              September 29,
      2007(Amounts
      in thousands)Balance,
      beginning of period
            
            $
            49,899
            
            
            $
            36,947Warranty
      expense provided during period
            
            
            1,571
            
            
            
            6,266Settlements
      made during period
            
            
            (5,526
            )
            
            
            (5,543
            )Liability
      incurred with Pacific Windows acquisition
            
            
            644
            
            
            
            -Balance,
      end of period
            
            $
            46,588
            
            
            $
            37,670





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 not possible to ascertain the ultimate legal and
financial liability with respect to contingent liabilities, including lawsuits,
and therefore no such estimate has been made.





-16-








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





Accrued
expenses and taxes consist of the following at September 27, 2008 and December
31, 2007:




September 27,
      2008
            
            
            December 31, 2007(Amounts
      in thousands)Insurance
            
            $
            5,819
            
            
            $
            6,566Employee
      compensation and benefits
            
            
            10,893
            
            
            
            19,722Sales
      and marketing
            
            
            23,522
            
            
            
            20,384Product
      warranty
            
            
            9,531
            
            
            
            11,453Short-term
      product claim liability
            
            
            2,321
            
            
            
            2,321Accrued
      freight
            
            
            1,656
            
            
            
            753Interest
            
            
            29,193
            
            
            
            12,426Accrued
      severance
            
            
            -
            
            
            
            1,931Accrued
      deferred compensation
            
            
            1,886
            
            
            
            -Accrued
      taxes
            
            
            3,160
            
            
            
            5,844Other,
      net
            
            
            8,257
            
            
            
            12,016$
            96,238
            
            
            $
            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 $2.0 million and the accrual balance for
Denison severance is zero as of September 27, 2008.




Other
long-term liabilities consist of the following at September 27, 2008 and
December 31, 2007:




September 27,
      2008
            
            
            December 31, 2007(Amounts
      in thousands)Insurance
            
            $
            3,564
            
            
            $
            4,757Pension
      liabilities
            
            
            2,684
            
            
            
            4,056Multiemployer
      pension withdrawal liability
            
            
            3,539
            
            
            
            3,681Product
      warranty
            
            
            37,057
            
            
            
            38,446Long-term
      lease liabilities
            
            
            25
            
            
            
            38Long-term
      product claim liability
            
            
            1,412
            
            
            
            1,459Long-term
      deferred compensation
            
            
            3,291
            
            
            
            4,810Liabilities
      for tax uncertainties
            
            
            7,298
            
            
            
            7,193Other
            
            
            1,570
            
            
            
            2,704$
            60,440
            
            
            $
            67,144



















10.   RESTRUCTURING







In
October 2007, the Company commenced its plan to close the Denison, TX
facility.  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.





In
September 2008, the Company commenced its plan to move certain metal production
from its Valencia, PA facility to its Sidney, OH facility.  The
Valencia facility will remain open on a reduced production schedule, primarily
contract coating for third parties.  Total costs are expected to be
approximately $2.5 million; however there are no Valencia restructuring items
accrued for at September 27, 2008 as severance payments are linked to future
service and no formal contract termination notices have been
issued.  Termination benefits costs are expected to be approximately
$0.8 million and since the employees are required to render service until
termination to receive the termination benefits, no liability has been
recognized at September 27, 2008.  Contract termination costs and
other restructuring costs are expected to be approximately $0.2 million and $1.5
million, respectively.





-17-








The
following table summarizes the Denison restructuring activity for the nine
months ended September 27, 2008:


Accrued
      as of
                
                
                Cash
      payments
                  During 2008
                
                Expensed
                  During 2008
                
                
                Accrued
      as ofDecember 31, 2007
                
                
                
                
                
                September 27, 2008Severance
      costs
                
                $
                1,931
                
                
                $
                (2,040
                )
                $
                109
                
                
                $
                -Contract
      terminations
                
                
                -
                
                
                
                -
                
                
                158
                
                
                
                158Equipment
      removal and other
                
                
                -
                
                
                
                (4,763
                )
                
                4,763
                
                
                
                -$
                1,931
                
                
                $
                (6,803
                )
                $
                5,030
                
                
                $
                158





For the
three months and nine months ended September 27, 2008, the Company incurred
restructuring costs of approximately $0.6 million and $5.0 million,
respectively.  All costs were recorded in selling, general and
administrative expenses in the Siding, Fencing and Railing segment.











11.  STOCK-BASED
COMPENSATION





Stock Option
Plan





A
summary of changes in stock options outstanding as of September 27, 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 September 27, 2008
            
            
            240,194
            
            
            $
            39.11
            
            
            
            7.25





As of
September 27, 2008, no options have vested.  At September 27, 2008,
the Company had approximately $0.1 million of total unrecognized compensation
expense that will be recognized over the weighted average period of 2.25
years.





Other Share-Based
Compensation





Upon
completion of each of the Ply Gem Acquisition, the MW Acquisition and the
acquisition of AWC Holding Company and its subsidiaries (collectively,
“Alenco”), 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 Ply Gem Prime Holdings, Inc.’s common stock shares as
of September 27, 2008 is presented below.





Common
      Stock
              Shares
      Owned by
              ManagementBalance
      at January 1, 2008
            
            
            675,758Shares
      issued
            
            
            2,327Shares
      repurchased
            
            
            (31,440
            )Balance
      at September 27, 2008
            
            
            646,645








-18-








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 (loss) of each segment includes the revenue generated on
transactions involving products within that segment less identifiable
expenses.  Corporate 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. Corporate unallocated
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 ended
            
            
            Nine
      months endedSeptember 27, 2008
            
            
            September 29, 2007
            
            
            September 27, 2008
            
            
            September 29, 2007Net
      SalesSiding,
      Fencing, and Railing
            
            $
            216,446
            
            
            $
            234,218
            
            
            $
            572,756
            
            
            $
            650,704Windows
      and Doors
            
            
            126,379
            
            
            
            135,457
            
            
            
            367,722
            
            
            
            394,940$
            342,825
            
            
            $
            369,675
            
            
            $
            940,478
            
            
            $
            1,045,644Operating
      earnings (loss)Siding,
      Fencing, and Railing
            
            $
            27,146
            
            
            $
            30,499
            
            
            $
            44,952
            
            
            $
            67,207Windows
      and Doors
            
            
            (201,171
            )
            
            
            12,559
            
            
            
            (207,519
            )
            
            
            36,351Corporate
      unallocated
            
            
            (2,458
            )
            
            
            (2,285
            )
            
            
            (7,327
            )
            
            
            (6,026
            )$
            (176,483
            )
            
            $
            40,773
            
            
            $
            (169,894
            )
            
            $
            97,532The
      operating loss for the Windows and Doors segment includes an estimated
      goodwill impairment of approximately $200.0 million.As
      of
            
            
            
            As
      ofSeptember 27, 2008
            
            
            
            December 31, 2007Total
      AssetsSiding,
      Fencing, and Railing
            
            
            
            
            
            
            
            
            
            $
            845,194
            
            
            $
            826,480Windows
      and Doors
            
            
            
            
            
            
            
            
            
            
            502,888
            
            
            
            717,740Corporate
      unallocated
            
            
            
            
            
            
            
            
            
            
            55,515
            
            
            
            81,387$
            1,403,597
            
            
            $
            1,625,607











13.  SUBSEQUENT
EVENTS





During the
fourth quarter, Ply Gem Industries agreed to purchase the assets of
United Stone Veneer, LLC (“USV”) for approximately $3.5 million.  The
acquired business is a manufacturer of stone veneer for use in new and existing
home construction.  USV will be integrated into the Company’s Siding,
Fencing, and Railing segment.  USV’s facilities are located in
Middleburg, PA.  The purchase price will be funded by available cash
from operations.




On
November 7, 2008, Ply Gem Industries entered into retention agreements
with its principal executive officer and principal financial
officer.  These retention agreements provide for, among other things,
a retention bonus and/or severance payments in the event of termination of
employment under certain defined circumstances.  These agreements were
approved by the Company's Board of Directors, and the terms of these
agreements can be found in the individual agreements filed as exhibits to this
Form 10-Q.  We will account for the terms of these agreements during
the fourth quarter.




-19-








14.  GUARANTOR
/ NON-GUARANTOR FINANCIAL INFORMATION





The
Senior Secured Notes and Senior Subordinated Notes were both issued by our
direct subsidiary, Ply Gem Industries, and are fully and unconditionally
guaranteed on a joint and several basis by the Company and certain of Ply Gem
Industries’ 100% owned subsidiaries.  Accordingly, the following
guarantor and non-guarantor information is presented as of September 27, 2008
and for the three and nine month periods ended September 27, 2008 and September
29, 2007.  The non-guarantor information presented represents
CWD, our Canadian subsidiary.


PLY
      GEM HOLDINGS, INC. AND SUBSIDIARIESCONDENSED
      CONSOLIDATING STATEMENT OF OPERATIONSFor
      the three months ended September 27, 2008Guarantor
              
              
              Issuer
              
              
              
              
              
              Non-Ply
      Gem
              
              
              Ply
      Gem
              
              
              Guarantor
              
              
              Guarantor
              
              
              ConsolidatingHoldings, Inc.
              
              
              Industries, Inc.
              
              
              Subsidiaries
              
              
              Subsidiary
              
              
              Adjustments
              
              
              Consolidated(Amounts
      in thousands)Net
      sales
              
              $
              -
              
              
              $
              -
              
              
              $
              319,721
              
              
              $
              23,104
              
              
              $
              -
              
              
              $
              342,825Costs
      and expenses:Cost
      of products sold
              
              
              -
              
              
              
              -
              
              
              
              260,411
              
              
              
              15,004
              
              
              
              -
              
              
              
              275,415Selling,
      general andadministrative
      expenses
              
              
              -
              
              
              
              2,458
              
              
              
              32,865
              
              
              
              3,657
              
              
              
              -
              
              
              
              38,980Intercompany
      administrativecharges
              
              
              -
              
              
              
              -
              
              
              
              3,202
              
              
              
              -
              
              
              
              (3,202
              )
              
              
              -Amortization
      of intangible assets
              
              
              -
              
              
              
              -
              
              
              
              4,913
              
              
              
              -
              
              
              
              -
              
              
              
              4,913Goodwill
      impairment
              
              
              -
              
              
              
              -
              
              
              
              178,107
              
              
              
              21,893
              
              
              
              -
              
              
              
              200,000Total
      costs and expenses
              
              
              -
              
              
              
              2,458
              
              
              
              479,498
              
              
              
              40,554
              
              
              
              (3,202
              )
              
              
              519,308Operating
      loss
              
              
              -
              
              
              
              (2,458
              )
              
              
              (159,777
              )
              
              
              (17,450
              )
              
              
              3,202
              
              
              
              (176,483
              )Foreign
      currency loss
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (60
              )
              
              
              -
              
              
              
              (60
              )Intercompany
      interest
              
              
              -
              
              
              
              30,379
              
              
              
              (29,841
              )
              
              
              (538
              )
              
              
              -
              
              
              
              -Interest
      expense
              
              
              -
              
              
              
              (30,278
              )
              
              
              (29
              )
              
              
              7
              
              
              
              -
              
              
              
              (30,300
              )Interest
      income
              
              
              
              
              
              
              85
              
              
              
              74
              
              
              
              17
              
              
              
              -
              
              
              
              176Intercompany
      administrative income
              
              
              -
              
              
              
              3,202
              
              
              
              -
              
              
              
              -
              
              
              
              (3,202
              )
              
              
              -Income
      (loss) before equity insubsidiaries'
      income (loss)
              
              
              -
              
              
              
              930
              
              
              
              (189,573
              )
              
              
              (18,024
              )
              
              
              -
              
              
              
              (206,667
              )Equity
      in subsidiaries' income (loss)
              
              
              (190,832
              )
              
              
              (191,722
              )
              
              
              -
              
              
              
              -
              
              
              
              382,554
              
              
              
              -Income
      (loss) before income taxprovision
      (benefit)
              
              
              (190,832
              )
              
              
              (190,792
              )
              
              
              (189,573
              )
              
              
              (18,024
              )
              
              
              382,554
              
              
              
              (206,667
              )Provision
      (benefit) for income taxes
              
              
              -
              
              
              
              40
              
              
              
              (11,939
              )
              
              
              (3,936
              )
              
              
              -
              
              
              
              (15,835
              )Net
      loss
              
              $
              (190,832
              )
              
              $
              (190,832
              )
              
              $
              (177,634
              )
              
              $
              (14,088
              )
              
              $
              382,554
              
              
              $
              (190,832
              )Other
      comprehensive loss:Foreign
      currency translation adjustments
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (1,296
              )
              
              
              -
              
              
              
              (1,296
              )Total
      comprehensive loss
              
              $
              (190,832
              )
              
              $
              (190,832
              )
              
              $
              (177,634
              )
              
              $
              (15,384
              )
              
              $
              382,554
              
              
              $
              (192,128
              )







-20-











PLY
      GEM HOLDINGS, INC. AND SUBSIDIARIESCONDENSED
      CONSOLIDATING STATEMENT OF OPERATIONSFor
      the three months ended September 29, 2007Guarantor
            
            
            Issuer
            
            
            
            
            
            Non-Ply
      Gem
            
            
            Ply
      Gem
            
            
            Guarantor
            
            
            Guarantor
            
            
            ConsolidatingHoldings, Inc.
            
            
            Industries, Inc.
            
            
            Subsidiaries
            
            
            Subsidiary
            
            
            Adjustments
            
            
            Consolidated(Amounts
      in thousands)Net
      sales
            
            $
            -
            
            
            $
            -
            
            
            $
            344,410
            
            
            $
            25,265
            
            
            $
            -
            
            
            $
            369,675Costs
      and expenses:Cost
      of products sold
            
            
            -
            
            
            
            -
            
            
            
            267,530
            
            
            
            16,495
            
            
            
            -
            
            
            
            284,025Selling,
      general andadministrative
      expenses
            
            
            -
            
            
            
            2,285
            
            
            
            34,365
            
            
            
            3,938
            
            
            
            -
            
            
            
            40,588Intercompany
      administrativecharges
            
            
            -
            
            
            
            -
            
            
            
            3,444
            
            
            
            -
            
            
            
            (3,444
            )
            
            
            -Amortization
      of intangible assets
            
            
            -
            
            
            
            -
            
            
            
            4,289
            
            
            
            -
            
            
            
            -
            
            
            
            4,289Total
      costs and expenses
            
            
            -
            
            
            
            2,285
            
            
            
            309,628
            
            
            
            20,433
            
            
            
            (3,444
            )
            
            
            328,902Operating
      earnings (loss)
            
            
            -
            
            
            
            (2,285
            )
            
            
            34,782
            
            
            
            4,832
            
            
            
            3,444
            
            
            
            40,773Foreign
      currency gain
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            1,708
            
            
            
            -
            
            
            
            1,708Intercompany
      interest
            
            
            -
            
            
            
            22,510
            
            
            
            (22,413
            )
            
            
            (97
            )
            
            
            -
            
            
            
            -Interest
      expense
            
            
            -
            
            
            
            (23,826
            )
            
            
            -
            
            
            
            (538
            )
            
            
            -
            
            
            
            (24,364
            )Interest
      income
            
            
            -
            
            
            
            372
            
            
            
            28
            
            
            
            49
            
            
            
            -
            
            
            
            449Intercompany
      administrative income
            
            
            -
            
            
            
            3,444
            
            
            
            -
            
            
            
            -
            
            
            
            (3,444
            )
            
            
            -Income
      before equity insubsidiaries'
      income
            
            
            -
            
            
            
            215
            
            
            
            12,397
            
            
            
            5,954
            
            
            
            -
            
            
            
            18,566Equity
      in subsidiaries' income
            
            
            11,620
            
            
            
            11,486
            
            
            
            -
            
            
            
            -
            
            
            
            (23,106
            )
            
            
            -Income
      before income taxprovision
            
            
            11,620
            
            
            
            11,701
            
            
            
            12,397
            
            
            
            5,954
            
            
            
            (23,106
            )
            
            
            18,566Provision
      for income taxes
            
            
            -
            
            
            
            81
            
            
            
            4,900
            
            
            
            1,965
            
            
            
            -
            
            
            
            6,946Net
      income
            
            $
            11,620
            
            
            $
            11,620
            
            
            $
            7,497
            
            
            $
            3,989
            
            
            $
            (23,106
            )
            
            $
            11,620Other
      comprehensive income:Foreign
      currency translation adjustments
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            2,492
            
            
            
            -
            
            
            
            2,492Total
      comprehensive income
            
            $
            11,620
            
            
            $
            11,620
            
            
            $
            7,497
            
            
            $
            6,481
            
            
            $
            (23,106
            )
            
            $
            14,112








-21-




PLY
      GEM HOLDINGS, INC. AND SUBSIDIARIESCONDENSED
      CONSOLIDATING STATEMENT OF OPERATIONSFor
      the nine months ended September 27, 2008Guarantor
              
              
              Issuer
              
              
              
              
              
              Non-Ply
      Gem
              
              
              Ply
      Gem
              
              
              Guarantor
              
              
              Guarantor
              
              
              ConsolidatingHoldings, Inc.
              
              
              Industries, Inc.
              
              
              Subsidiaries
              
              
              Subsidiary
              
              
              Adjustments
              
              
              Consolidated(Amounts
      in thousands)Net
      sales
              
              $
              -
              
              
              $
              -
              
              
              $
              875,775
              
              
              $
              64,703
              
              
              $
              -
              
              
              $
              940,478Costs
      and expenses:Cost
      of products sold
              
              
              -
              
              
              
              -
              
              
              
              727,735
              
              
              
              43,039
              
              
              
              -
              
              
              
              770,774Selling,
      general andadministrative
      expenses
              
              
              -
              
              
              
              7,327
              
              
              
              105,847
              
              
              
              11,685
              
              
              
              -
              
              
              
              124,859Intercompany
      administrativecharges
              
              
              -
              
              
              
              -
              
              
              
              8,765
              
              
              
              -
              
              
              
              (8,765
              )
              
              
              -Amortization
      of intangible assets
              
              
              -
              
              
              
              -
              
              
              
              14,739
              
              
              
              -
              
              
              
              -
              
              
              
              14,739Goodwill
      impairment
              
              
              -
              
              
              
              -
              
              
              
              178,107
              
              
              
              21,893
              
              
              
              -
              
              
              
              200,000Total
      costs and expenses
              
              
              -
              
              
              
              7,327
              
              
              
              1,035,193
              
              
              
              76,617
              
              
              
              (8,765
              )
              
              
              1,110,372Operating
      loss
              
              
              -
              
              
              
              (7,327
              )
              
              
              (159,418
              )
              
              
              (11,914
              )
              
              
              8,765
              
              
              
              (169,894
              )Foreign
      currency loss
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (555
              )
              
              
              -
              
              
              
              (555
              )Intercompany
      interest
              
              
              -
              
              
              
              70,888
              
              
              
              (70,232
              )
              
              
              (656
              )
              
              
              -
              
              
              
              -Interest
      expense
              
              
              -
              
              
              
              (103,790
              )
              
              
              -
              
              
              
              (649
              )
              
              
              -
              
              
              
              (104,439
              )Interest
      income
              
              
              
              
              
              
              332
              
              
              
              80
              
              
              
              74
              
              
              
              
              
              
              
              486Intercompany
      administrative income
              
              
              -
              
              
              
              8,765
              
              
              
              -
              
              
              
              -
              
              
              
              (8,765
              )
              
              
              -Income
      (loss) before equity insubsidiaries'
      income (loss)
              
              
              -
              
              
              
              (31,132
              )
              
              
              (229,570
              )
              
              
              (13,700
              )
              
              
              -
              
              
              
              (274,402
              )Equity
      in subsidiaries' income (loss)
              
              
              (232,167
              )
              
              
              (213,488
              )
              
              
              -
              
              
              
              -
              
              
              
              445,655
              
              
              
              -Income
      (loss) before income taxprovision
      (benefit)
              
              
              (232,167
              )
              
              
              (244,620
              )
              
              
              (229,570
              )
              
              
              (13,700
              )
              
              
              445,655
              
              
              
              (274,402
              )Provision
      (benefit) for income taxes
              
              
              -
              
              
              
              (12,453
              )
              
              
              (27,272
              )
              
              
              (2,510
              )
              
              
              -
              
              
              
              (42,235
              )Net
      loss
              
              $
              (232,167
              )
              
              $
              (232,167
              )
              
              $
              (202,298
              )
              
              $
              (11,190
              )
              
              $
              445,655
              
              
              $
              (232,167
              )Other
      comprehensive loss:Foreign
      currency translation adjustments
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (1,875
              )
              
              
              -
              
              
              
              (1,875
              )Total
      comprehensive loss
              
              $
              (232,167
              )
              
              $
              (232,167
              )
              
              $
              (202,298
              )
              
              $
              (13,065
              )
              
              $
              445,655
              
              
              $
              (234,042
              )







-22-








PLY
      GEM HOLDINGS, INC. AND SUBSIDIARIESCONDENSED
      CONSOLIDATING STATEMENT OF OPERATIONSFor
      the nine months ended September 29, 2007Guarantor
            
            
            Issuer
            
            
            
            
            
            Non-Ply
      Gem
            
            
            Ply
      Gem
            
            
            Guarantor
            
            
            Guarantor
            
            
            ConsolidatingHoldings, Inc.
            
            
            Industries, Inc.
            
            
            Subsidiaries
            
            
            Subsidiary
            
            
            Adjustments
            
            
            Consolidated(Amounts
      in thousands)Net
      sales
            
            $
            -
            
            
            $
            -
            
            
            $
            983,729
            
            
            $
            61,915
            
            
            $
            -
            
            
            $
            1,045,644Costs
      and expenses:Cost
      of products sold
            
            
            -
            
            
            
            -
            
            
            
            773,677
            
            
            
            41,328
            
            
            
            -
            
            
            
            815,005Selling,
      general andadministrative
      expenses
            
            
            -
            
            
            
            6,026
            
            
            
            103,199
            
            
            
            10,657
            
            
            
            -
            
            
            
            119,882Intercompany
      administrativecharges
            
            
            -
            
            
            
            -
            
            
            
            9,841
            
            
            
            -
            
            
            
            (9,841
            )
            
            
            -Amortization
      of intangible assets
            
            
            -
            
            
            
            -
            
            
            
            13,225
            
            
            
            -
            
            
            
            -
            
            
            
            13,225Total
      costs and expenses
            
            
            -
            
            
            
            6,026
            
            
            
            899,942
            
            
            
            51,985
            
            
            
            (9,841
            )
            
            
            948,112Operating
      earnings (loss)
            
            
            -
            
            
            
            (6,026
            )
            
            
            83,787
            
            
            
            9,930
            
            
            
            9,841
            
            
            
            97,532Foreign
      currency gain
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            3,916
            
            
            
            -
            
            
            
            3,916Intercompany
      interest
            
            
            -
            
            
            
            68,708
            
            
            
            (68,414
            )
            
            
            (294
            )
            
            
            -
            
            
            
            -Interest
      expense
            
            
            -
            
            
            
            (73,863
            )
            
            
            (1
            )
            
            
            (1,589
            )
            
            
            -
            
            
            
            (75,453
            )Interest
      income
            
            
            -
            
            
            
            820
            
            
            
            356
            
            
            
            95
            
            
            
            -
            
            
            
            1,271Intercompany
      administrative income
            
            
            -
            
            
            
            9,841
            
            
            
            -
            
            
            
            -
            
            
            
            (9,841
            )
            
            
            -Income
      (loss) before equity insubsidiaries'
      income
            
            
            -
            
            
            
            (520
            )
            
            
            15,728
            
            
            
            12,058
            
            
            
            -
            
            
            
            27,266Equity
      in subsidiaries' income
            
            
            18,026
            
            
            
            18,370
            
            
            
            -
            
            
            
            -
            
            
            
            (36,396
            )
            
            
            -Income
      before income taxprovision
      (benefit)
            
            
            18,026
            
            
            
            17,850
            
            
            
            15,728
            
            
            
            12,058
            
            
            
            (36,396
            )
            
            
            27,266Provision
      (benefit) for income taxes
            
            
            -
            
            
            
            (176
            )
            
            
            5,437
            
            
            
            3,979
            
            
            
            -
            
            
            
            9,240Net
      income
            
            $
            18,026
            
            
            $
            18,026
            
            
            $
            10,291
            
            
            $
            8,079
            
            
            $
            (36,396
            )
            
            $
            18,026Other
      comprehensive income :Foreign
      currency translation adjustments
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            5,788
            
            
            
            -
            
            
            
            5,788Total
      comprehensive income
            
            $
            18,026
            
            
            $
            18,026
            
            
            $
            10,291
            
            
            $
            13,867
            
            
            $
            (36,396
            )
            
            $
            23,814








-23-





PLY
      GEM HOLDINGS, INC. AND SUBSIDIARIESCONDENSED
      CONSOLIDATING BALANCE SHEETAs
      of September 27, 2008Guarantor
              
              
              Issuer
              
              
              
              
              
              Non-Ply
      Gem
              
              
              Ply
      Gem
              
              
              Guarantor
              
              
              Guarantor
              
              
              ConsolidatingHoldings, Inc.
              
              
              Industries, Inc.
              
              
              Subsidiaries
              
              
              Subsidiary
              
              
              Adjustments
              
              
              Consolidated(Amounts
      in thousands)ASSETSCurrent
      Assets:Cash
      and cash equivalents
              
              $
              -
              
              
              $
              8,185
              
              
              $
              8,390
              
              
              $
              3,927
              
              
              $
              -
              
              
              $
              20,502Accounts
      receivable, net
              
              
              -
              
              
              
              -
              
              
              
              155,177
              
              
              
              12,564
              
              
              
              -
              
              
              
              167,741Inventories:Raw
      materials
              
              
              -
              
              
              
              -
              
              
              
              53,958
              
              
              
              5,142
              
              
              
              -
              
              
              
              59,100Work
      in process
              
              
              -
              
              
              
              -
              
              
              
              28,222
              
              
              
              1,503
              
              
              
              -
              
              
              
              29,725Finished
      goods
              
              
              -
              
              
              
              -
              
              
              
              37,199
              
              
              
              3,021
              
              
              
              -
              
              
              
              40,220Total
      inventory
              
              
              -
              
              
              
              -
              
              
              
              119,379
              
              
              
              9,666
              
              
              
              -
              
              
              
              129,045Prepaid
      expenses and othercurrent
      assets
              
              
              -
              
              
              
              4,022
              
              
              
              14,246
              
              
              
              611
              
              
              
              -
              
              
              
              18,879Deferred
      income taxes
              
              
              -
              
              
              
              -
              
              
              
              15,947
              
              
              
              -
              
              
              
              -
              
              
              
              15,947Total
      current assets
              
              
              -
              
              
              
              12,207
              
              
              
              313,139
              
              
              
              26,768
              
              
              
              -
              
              
              
              352,114Property
      and Equipment, at cost:Land
              
              
              -
              
              
              
              -
              
              
              
              3,565
              
              
              
              169
              
              
              
              -
              
              
              
              3,734Buildings
      and improvements
              
              
              -
              
              
              
              -
              
              
              
              33,690
              
              
              
              969
              
              
              
              -
              
              
              
              34,659Machinery
      and equipment
              
              
              -
              
              
              
              1,170
              
              
              
              242,380
              
              
              
              6,718
              
              
              
              -
              
              
              
              250,268Total
      property and equipment, net
              
              
              -
              
              
              
              1,170
              
              
              
              279,635
              
              
              
              7,856
              
              
              
              -
              
              
              
              288,661Less
      accumulated depreciation
              
              
              -
              
              
              
              (222
              )
              
              
              (110,036
              )
              
              
              (2,752
              )
              
              
              -
              
              
              
              (113,010
              )Total
      property and equipment, net
              
              
              -
              
              
              
              948
              
              
              
              169,599
              
              
              
              5,104
              
              
              
              -
              
              
              
              175,651Other
      Assets:Intangible
      assets, net
              
              
              -
              
              
              
              -
              
              
              
              198,516
              
              
              
              -
              
              
              
              -
              
              
              
              198,516Goodwill
              
              
              -
              
              
              
              -
              
              
              
              612,283
              
              
              
              22,366
              
              
              
              -
              
              
              
              634,649Investments
      in subsidiaries
              
              
              35,038
              
              
              
              (29,067
              )
              
              
              -
              
              
              
              -
              
              
              
              (5,971
              )
              
              
              -Intercompany
      notes receivable
              
              
              -
              
              
              
              1,107,260
              
              
              
              -
              
              
              
              -
              
              
              
              (1,107,260
              )
              
              
              -Other
              
              
              -
              
              
              
              42,361
              
              
              
              306
              
              
              
              -
              
              
              
              -
              
              
              
              42,667Total
      other assets
              
              
              35,038
              
              
              
              1,120,554
              
              
              
              811,105
              
              
              
              22,366
              
              
              
              (1,113,231
              )
              
              
              875,832$
              35,038
              
              
              $
              1,133,709
              
              
              $
              1,293,843
              
              
              $
              54,238
              
              
              $
              (1,113,231
              )
              
              $
              1,403,597LIABILITIES
      AND STOCKHOLDER'S EQUITYCurrent
      Liabilities:Current
      maturities of long-term debt
              
              $
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              -Accounts
      payable
              
              
              -
              
              
              
              1,437
              
              
              
              102,179
              
              
              
              5,596
              
              
              
              -
              
              
              
              109,212Accrued
      expenses and taxes
              
              
              -
              
              
              
              34,109
              
              
              
              58,370
              
              
              
              3,759
              
              
              
              -
              
              
              
              96,238Total
      current liabilities
              
              
              -
              
              
              
              35,546
              
              
              
              160,549
              
              
              
              9,355
              
              
              
              -
              
              
              
              205,450Deferred
      income taxes
              
              
              -
              
              
              
              -
              
              
              
              44,392
              
              
              
              4,322
              
              
              
              -
              
              
              
              48,714Intercompany
      notes payable
              
              
              -
              
              
              
              -
              
              
              
              1,089,000
              
              
              
              18,260
              
              
              
              (1,107,260
              )
              
              
              -Other
      long term liabilities
              
              
              -
              
              
              
              9,170
              
              
              
              50,154
              
              
              
              1,116
              
              
              
              -
              
              
              
              60,440Long-term
      debt, less currentmaturities
              
              
              -
              
              
              
              1,053,955
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              1,053,955Commitments
      and contingenciesStockholder's
      Equity:Preferred
      stock
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Common
      stock
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Additional
      paid-in-capital
              
              
              210,203
              
              
              
              210,203
              
              
              
              102,424
              
              
              
              395
              
              
              
              (313,022
              )
              
              
              210,203Retained
      earnings (deficit)
              
              
              (182,925
              )
              
              
              (182,925
              )
              
              
              (152,676
              )
              
              
              13,752
              
              
              
              321,849
              
              
              
              (182,925
              )Accumulated
      othercomprehensive
      income
              
              
              7,760
              
              
              
              7,760
              
              
              
              -
              
              
              
              7,038
              
              
              
              (14,798
              )
              
              
              7,760$
              35,038
              
              
              $
              1,133,709
              
              
              $
              1,293,843
              
              
              $
              54,238
              
              
              $
              (1,113,231
              )
              
              $
              1,403,597




-24-





PLY
      GEM HOLDINGS, INC. AND SUBSIDIARIESCONDENSED
      CONSOLIDATING BALANCE SHEETAs
      of December 31, 2007Guarantor
            
            
            Issuer
            
            
            
            
            
            Non-Ply
      Gem
            
            
            Ply
      Gem
            
            
            Guarantor
            
            
            Guarantor
            
            
            ConsolidatingHoldings, Inc.
            
            
            Industries, Inc.
            
            
            Subsidiaries
            
            
            Subsidiary
            
            
            Adjustments
            
            
            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
            
            
            
            -
            
            
            
            334,401Property
      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
            
            
            
            -
            
            
            
            240,921Total
      property and equipment, net
            
            
            -
            
            
            
            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
            
            
            
            -
            
            
            
            835,820Investments
      in subsidiaries
            
            
            239,544
            
            
            
            115,861
            
            
            
            -
            
            
            
            -
            
            
            
            (355,405
            )
            
            
            -Intercompany
      notes receivable
            
            
            -
            
            
            
            1,088,999
            
            
            
            -
            
            
            
            -
            
            
            
            (1,088,999
            )
            
            
            -Other
            
            
            -
            
            
            
            37,932
            
            
            
            5,201
            
            
            
            -
            
            
            
            -
            
            
            
            43,133Total
      other assets
            
            
            239,544
            
            
            
            1,242,792
            
            
            
            1,008,033
            
            
            
            46,245
            
            
            
            (1,444,404
            )
            
            
            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
      notes 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
            
            
            
            -
            
            
            
            1,031,223Commitments
      and contingenciesStockholder'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
            
            
            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







-25-


PLY
      GEM HOLDINGS, INC. AND SUBSIDIARIESCONSOLIDATING
      STATEMENT OF CASH FLOWSFor
      the nine months ended September 27, 2008Guarantor
              
              
              Issuer
              
              
              
              
              
              Non-Ply
      Gem
              
              
              Ply
      Gem
              
              
              Guarantor
              
              
              Guarantor
              
              
              ConsolidatingHoldings, Inc.
              
              
              Industries, Inc.
              
              
              Subsidiaries
              
              
              Subsidiary
              
              
              Adjustments
              
              
              Consolidated(Amounts
      in thousands)Net
      cash provided by (used in)operating
      activities
              
              $
              -
              
              
              $
              17,587
              
              
              $
              (77,572
              )
              
              $
              1,240
              
              
              $
              -
              
              
              $
              (58,745
              )Cash
      flows from investingactivities:Capital
      expenditures
              
              
              -
              
              
              
              (629
              )
              
              
              (11,908
              )
              
              
              (979
              )
              
              
              -
              
              
              
              (13,516
              )Proceeds
      from sale of assets
              
              
              -
              
              
              
              5,810
              
              
              
              3,002
              
              
              
              -
              
              
              
              -
              
              
              
              8,812Other
              
              
              -
              
              
              
              (127
              )
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (127
              )Net
      cash provided by (used in)investing
      activities
              
              
              -
              
              
              
              5,054
              
              
              
              (8,906
              )
              
              
              (979
              )
              
              
              -
              
              
              
              (4,831
              )Cash
      flows from financingactivities:Proceeds
      from long-term debt
              
              
              -
              
              
              
              693,504
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              693,504Proceeds
      from revolver borrowings
              
              
              -
              
              
              
              80,000
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              80,000Proceeds
      from intercompany
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              -investment
              
              
              -
              
              
              
              (94,752
              )
              
              
              76,492
              
              
              
              18,260
              
              
              
              -
              
              
              
              -Payments
      on long-term debt
              
              
              -
              
              
              
              (657,347
              )
              
              
              -
              
              
              
              (20,563
              )
              
              
              -
              
              
              
              (677,910
              )Payments
      on revolver borrowings
              
              
              -
              
              
              
              (80,000
              )
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (80,000
              )Debt
      issuance costs
              
              
              -
              
              
              
              (26,025
              )
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (26,025
              )Equity
      contributions
              
              
              -
              
              
              
              30,310
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              30,310Equity
      repurchase
              
              
              -
              
              
              
              (793
              )
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (793
              )Net
      cash provided by (used in)financing
      activities
              
              
              -
              
              
              
              (55,103
              )
              
              
              76,492
              
              
              
              (2,303
              )
              
              
              -
              
              
              
              19,086Impact
      of exchange rate movementon
      cash
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (215
              )
              
              
              -
              
              
              
              (215
              )Net
      decrease in cashand
      cash equivalents
              
              
              -
              
              
              
              (32,462
              )
              
              
              (9,986
              )
              
              
              (2,257
              )
              
              
              -
              
              
              
              (44,705
              )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
              
              $
              -
              
              
              $
              8,185
              
              
              $
              8,390
              
              
              $
              3,927
              
              
              $
              -
              
              
              $
              20,502





-26-






PLY
      GEM HOLDINGS, INC. AND SUBSIDIARIESCONSOLIDATING
      STATEMENT OF CASH FLOWSFor
      the nine months ended September 29, 2007Guarantor
              
              
              Issuer
              
              
              
              
              
              Non-Ply
      Gem
              
              
              Ply
      Gem
              
              
              Guarantor
              
              
              Guarantor
              
              
              ConsolidatingHoldings, Inc.
              
              
              Industries, Inc.
              
              
              Subsidiaries
              
              
              Subsidiary
              
              
              Adjustments
              
              
              Consolidated(Amounts
      in thousands)Net
      cash provided by (used in)operating
      activities
              
              $
              -
              
              
              $
              (1,061
              )
              
              $
              16,020
              
              
              $
              3,969
              
              
              $
              -
              
              
              $
              18,928Cash
      flows from investingactivities:Capital
      expenditures
              
              
              -
              
              
              
              (396
              )
              
              
              (10,721
              )
              
              
              (857
              )
              
              
              -
              
              
              
              (11,974
              )Proceeds
      from sale of assets
              
              
              -
              
              
              
              -
              
              
              
              29
              
              
              
              -
              
              
              
              -
              
              
              
              29Acquisitions,
      net of cash acquired
              
              
              -
              
              
              
              (35,097
              )
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (35,097
              )Other
              
              
              -
              
              
              
              (228
              )
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (228
              )Net
      cash used ininvesting
      activities
              
              
              -
              
              
              
              (35,721
              )
              
              
              (10,692
              )
              
              
              (857
              )
              
              
              -
              
              
              
              (47,270
              )Cash
      flows from financingactivities:Proceeds
      from revolver borrowings
              
              
              -
              
              
              
              50,000
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              50,000Proceeds
      from intercompany
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              -investment
              
              
              -
              
              
              
              3,330
              
              
              
              (3,330
              )
              
              
              -
              
              
              
              -
              
              
              
              -Payments
      on long-term debt
              
              
              -
              
              
              
              (4,717
              )
              
              
              -
              
              
              
              (189
              )
              
              
              -
              
              
              
              (4,906
              )Payments
      on revolver borrowings
              
              
              -
              
              
              
              (30,000
              )
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (30,000
              )Debt
      issuance costs
              
              
              -
              
              
              
              (2,100
              )
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (2,100
              )Equity
      contributions
              
              
              -
              
              
              
              750
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              750Equity
      repurchase
              
              
              -
              
              
              
              (3,175
              )
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (3,175
              )Net
      cash provided by (used in)financing
      activities
              
              
              -
              
              
              
              14,088
              
              
              
              (3,330
              )
              
              
              (189
              )
              
              
              -
              
              
              
              10,569Impact
      of exchange rate movementon
      cash
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              1,010
              
              
              
              -
              
              
              
              1,010Net
      increase (decrease) in cashand
      cash equivalents
              
              
              -
              
              
              
              (22,694
              )
              
              
              1,998
              
              
              
              3,933
              
              
              
              -
              
              
              
              (16,763
              )Cash
      and cash equivalents at thebeginning
      of the period
              
              
              -
              
              
              
              35,632
              
              
              
              14,319
              
              
              
              3,323
              
              
              
              -
              
              
              
              53,274Cash
      and cash equivalents at the endof
      the period
              
              $
              -
              
              
              $
              12,938
              
              
              $
              16,317
              
              
              $
              7,256
              
              
              $
              -
              
              
              $
              36,511







-27-








Item 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIALCONDITION 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 and vinyl and aluminum clad 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’ ABL Facility
place restrictions on its ability to pay dividends and otherwise transfer assets
to us.  Further, the terms of the indentures governing Ply Gem
Industries' Senior Subordinated Notes and Senior Secured 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
and railing 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.





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 expenses,” includes all non-product related operating expenses,
including selling, marketing, research and development costs, information
technology and other general and administrative expenses.





Operating earnings
(loss).  Operating earnings (losses) represents net sales less
cost of products sold, SG&A expense and amortization of intangible
assets.  For 2008, this amount includes a goodwill
impairment.





Comparability.   All
periods after the Pacific Windows acquisition in September 2007 include the
results of operations of Pacific Windows.  As a result, the three and
nine month periods ended September 27, 2008 will not be directly comparable to
the three and nine month periods ended September 29, 2007.





-28-








Impact
of weather





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





Critical
Accounting Policies





The
following discussion and analysis of our financial condition and results of
operations are based upon our 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
compared to our assumptions and judgments, the results could be materially
different from our estimates.  Significant judgments and estimates are
used in the Company’s goodwill and intangible asset impairment tests where
different assumptions could produce varying results. Management also believes
that the four areas where different assumptions could result in materially
different reported results are goodwill and intangible asset impairment tests,
accounts receivable related to estimation of allowances for doubtful accounts,
inventories in estimating reserves for obsolete and excess inventory, and
warranty reserves.  Although we believe the likelihood of a material
difference in these areas is low based upon our historical experience, a 10%
change in our allowance for doubtful accounts, inventory reserve estimates, and
warranty reserve at September 27, 2008 would result in an approximate $0.7
million, $1.1 million, and $4.7 million impact on expenses,
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 expenses 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 September 27, 2008 and December 31, 2007 approximately
$11.8 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, or “FIFO”, method of accounting, such inventories would have been
approximately $3.7 million higher at both September 27, 2008 and December 31,
2007.  All other inventories were valued under the FIFO
method.  We record provisions, as appropriate, to writedown 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 actual results to differ from the estimates at
the time such inventory is disposed or sold.





-29-








Asset Impairment.  In
accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of
Long-Lived Assets”, 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 decrease
in projected cash flows due to the depressed residential housing and remoldeling
market was determined to be a triggering event during the third quarter of
2008.  The impairment test results did not indicate that an impairment
existed at September 27, 2008.





Goodwill
Impairment.  In accordance with SFAS No. 142, “Goodwill and
Other Intangible Assets”, 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 flow and 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 potential
impairment.  The depressed residential housing and remodeling market
was determined to be a triggering during the third quarter of
2008.  The test results indicated that an estimated impairment of
approximately $200.0 million existed at September 27, 2008.  This
impairment has been recognized within Windows and Doors' operating earnings
for the three and nine months ended September 27, 2008. There
is no assurance that: 1) valuation multiples will not decline, 2) discount rates
will not increase, or 3) the earnings, book values or projected earnings and
cash flows of the Company’s reporting units will not decline. The Company will
continue to perform its required annual goodwill impairment test during the
fourth quarter and further declines in the residential housing and remodeling
markets could result in future goodwill impairments.





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 utilizes the advice and calculations of
an actuarial consultant when determining the appropriate insurance reserves to
record in our consolidated balance sheets for a substantial portion of our
workers’ compensation and general and product liability losses.  In
certain cases where partial insurance coverage exists, the Company must estimate
the portion of the liability that will be covered by existing insurance
policies.





Income
Taxes.   We account for deferred income taxes using the
asset and liability method in accordance with SFAS No. 109, “Accounting for
Income Taxes,” (SFAS No. 109), which requires that the deferred tax consequences
of temporary differences between the amounts recorded in our consolidated
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, “Accounting for
Uncertainties in Income Taxes” (FIN 48), 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.





-30-








The
Company’s provision for income taxes in interim periods is based on an estimated
annual effective income tax rate derived, in part, from estimated annual pre-tax
results from ordinary operations in accordance with FIN 18, “Accounting for
Income Taxes in Interim Periods—an Interpretation of APB Opinion No. 28.”
The Company did not include the expense associated with the permanent difference
for the goodwill impairment (see Note 3) in the computation of the effective
annual income tax rate for 2008 from estimated pre-tax results from ordinary
operations. For the three months ended September 27, 2008, the permanent
difference for the goodwill impairment increased income tax expense by
approximately $61.6 million due to differences in the Company’s marginal
tax rate of approximately 29.8% and its anticipated effective annual income tax
rate from ordinary operations of approximately 37.8%.  For the nine
months ended September 27, 2008, the Company’s 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 as well as the
permanent difference for the goodwill impairment of approximately $61.6 million
which increased income tax expense due to differences in the Company's
marginal tax rate of approximately 22.4% and its anticipated effective annual
income tax rate from ordinary operations of approximately
37.8%.  Accordingly, the provision for income taxes for the three and
nine months ended September 27, 2008 has been computed by applying the discrete
method in accordance with FIN 18 to account for these items.





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 (loss) by segment
and is derived from the accompanying condensed consolidated statements of
operations included in this report.





(Amounts
in thousands)


Three
      months ended
            
            
            Nine
      months endedSeptember
      27,
            
            
            September
      29,
            
            
            September
      27,
            
            
            September
      29,2008
            
            
            2007
            
            
            2008
            
            
            2007Net
      SalesSiding,
      Fencing and Railing
            
            $
            216,446
            
            
            $
            234,218
            
            
            $
            572,756
            
            
            $
            650,704Windows
      and Doors
            
            
            126,379
            
            
            
            135,457
            
            
            
            367,722
            
            
            
            394,940Operating
      earnings (loss)Siding,
      Fencing and Railing
            
            
            27,146
            
            
            
            30,499
            
            
            
            44,952
            
            
            
            67,207Windows
      and Doors
            
            
            (201,171
            )
            
            
            12,559
            
            
            
            (207,519
            )
            
            
            36,351Unallocated
            
            
            (2,458
            )
            
            
            (2,285
            )
            
            
            (7,327
            )
            
            
            (6,026
            )Foreign
      currency gain (loss)Windows
      and Doors
            
            
            (60
            )
            
            
            1,708
            
            
            
            (555
            )
            
            
            3,916Interest
      expense, netSiding,
      Fencing and Railing
            
            
            43
            
            
            
            20
            
            
            
            72
            
            
            
            95Windows
      and Doors
            
            
            26
            
            
            
            (481
            )
            
            
            (567
            )
            
            
            (1,234
            )Unallocated
            
            
            (30,193
            )
            
            
            (23,454
            )
            
            
            (103,458
            )
            
            
            (73,043
            )Income
      tax expense (benefit)Unallocated
            
            
            (15,835)
            
            
            
            6,946
            
            
            
            (42,235
            )
            
            
            9,240Net
      income (loss)
            
            $
            (190,832
            )
            
            $
            11,620
            
            
            $
            (232,167
            )
            
            $
            18,026







Operating
earnings (loss) for the Windows and Doors segment in the above table includes an
estimated goodwill impairment of approximately $200.0 million for the three and
nine month periods ended September 27, 2008.




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.







-31-





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




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








Siding,
Fencing and Railing Segment








For
      the three months ended(dollars
      in thousands)
            
            September 27, 2008
            
            
            September 29, 2007(unaudited)
            
            
            (unaudited)Statement
      of operations data:Net
      sales
            
            $
            216,446
            
            
            
            100
            %
            
            $
            234,218
            
            
            
            100
            %Cost
      of products sold
            
            
            168,693
            
            
            
            77.9
            %
            
            
            180,413
            
            
            
            77.0
            %Gross
      profit
            
            
            47,753
            
            
            
            22.1
            %
            
            
            53,805
            
            
            
            23.0
            %SG&A
      expense
            
            
            18,470
            
            
            
            8.5
            %
            
            
            21,113
            
            
            
            9.0
            %Amortization
      of intangible assets
            
            
            2,137
            
            
            
            1.0
            %
            
            
            2,193
            
            
            
            0.9
            %Operating
      earnings
            
            $
            27,146
            
            
            
            12.5
            %
            
            $
            30,499
            
            
            
            13.0
            %








Net
Sales





Net
sales for the three months ended September 27, 2008 decreased compared to the
same period in 2007 by approximately $17.8 million, or 7.6%.  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 and overall softness in repair and remodeling
expenditures.  These market conditions negatively impacted the demand
for our products.  According to the National Association of Home
Builders (“NAHB”), third quarter 2008 single family housing starts are estimated
to show a decline of approximately 36.9% from actual levels achieved in the
third 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 October 20, 2008 forecast.  Additionally,
according to the NAHB’s October 2008 forecast, single family housing starts are
expected to decline in 2008 by 38.8% as compared to their full year 2007
estimate.  The decrease in net sales that resulted from industry wide
market demand declines was partially offset by price increases that we
implemented in response to increasing raw materials and freight costs as
discussed below in cost of products sold.





Cost of Products
Sold





Cost of
products sold for the three months ended September 27, 2008 decreased compared
to the same period in 2007 by approximately $11.7 million, or
6.5%.  The decrease in cost of products sold was due to lower sales as
discussed above, but was partially offset by higher raw material costs,
primarily PVC resin and aluminum, as well as higher freight costs driven by
higher oil costs.  Gross profit as a percentage of net sales for the
three months ended September 27, 2008 decreased from the same period in 2007
from 23.0% to 22.1%. The decrease in gross profit as a percentage of sales was
driven by lower unit sales volume. 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 plants in Atlanta, GA and Denison, TX,
which ceased production in April of 2007 and February of 2008,
respectively.  The Company expects to save approximately $5.0 million
and $10.0 million annually from the closure of the Atlanta, GA and the Denison,
TX facilities, respectively.  Although certain raw material and
freight costs increased during the third quarter, their impact on gross profit
as a percentage of net sales was offset by selling price increases.





-32-








Selling, general and
administrative expense





SG&A
expense for the three months ended September 27, 2008 decreased by approximately
$2.6 million, or 12.5%, from the same period in 2007. The decrease in SG&A
expense was primarily due to lower selling costs and other fixed expenses that
have been reduced in light of current market conditions for building
products.











For
      the nine months ended(dollars
      in thousands)
            
            September 27, 2008
            
            
            September 29, 2007(unaudited)
            
            
            
            
            
            (unaudited)Statement
      of operations data:Net
      sales
            
            $
            572,756
            
            
            
            100
            %
            
            $
            650,704
            
            
            
            100
            %Cost
      of products sold
            
            
            463,503
            
            
            
            80.9
            %
            
            
            512,397
            
            
            
            78.7
            %Gross
      profit
            
            
            109,253
            
            
            
            19.1
            %
            
            
            138,307
            
            
            
            21.3
            %SG&A
      expense
            
            
            57,890
            
            
            
            10.1
            %
            
            
            64,169
            
            
            
            9.9
            %Amortization
      of intangible assets
            
            
            6,411
            
            
            
            1.1
            %
            
            
            6,931
            
            
            
            1.1
            %Operating
      earnings
            
            $
            44,952
            
            
            
            7.8
            %
            
            $
            67,207
            
            
            
            10.3
            %











Net
Sales





Net
sales for the nine months ended September 27, 2008 decreased compared to the
same period in 2007 by approximately $77.9 million, or 12.0%.  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 and overall softness in repair and remodeling
expenditures.  These market conditions negatively impacted demand for
our products.  According to the NAHB, third quarter 2008 single
family housing starts are estimated to show a decline of approximately 36.9%
from actual levels achieved in the third 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 October 20, 2008
forecast.  Additionally, according to the NAHB’s October 2008
forecast, single family housing starts are expected to decline in 2008 by 38.8%
as compared to their full year 2007 estimate.  The decrease in net
sales that resulted from industry wide market demand declines was partially
offset by price increases that we implemented in response to increasing raw
materials and freight costs as discussed below in cost of products
sold.





Cost of Products
Sold





Cost of
products sold for the nine months ended September 27, 2008 decreased compared to
the same period in 2007 by approximately $48.9 million, or 9.5%.  The
decrease in cost of products sold was due to lower sales as discussed above, but
was partially offset by higher raw material costs, primarily PVC resin and
aluminum, as well as higher freight costs driven by higher oil
costs.  Gross profit as a percentage of net sales for the nine months
ended September 27, 2008 decreased from the same period in 2007 from 21.3% to
19.1%. The decrease in gross profit as a percentage of sales was driven by lower
unit sales volume and increased raw material and freight costs. We have
implemented selling price increases in response to higher raw material costs and
freight costs, however, our gross profit as a percentage of sales was negatively
impacted by the delay between the time of raw material and freight cost
increases and the price increases that we implemented.  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
plants in Atlanta, GA and Denison, TX, which ceased production in April of 2007
and February of 2008, respectively.  The Company expects to save
approximately $5.0 million and $10.0 million annually from the closure of the
Atlanta, GA and the Denison, TX facilities, respectively.





-33-





Selling, general and
administrative expense





SG&A
expense for the nine months ended September 27, 2008 decreased by approximately
$6.3 million, or 9.8%, from the same period in 2007. The decrease in SG&A
expenses was primarily due to lower selling and marketing costs and other fixed
expenses that have been reduced in light of current market conditions for
building products.











Windows
and Doors Segment








For
      the three months ended(dollars
      in thousands)
            
            September 27, 2008
            
            
            September 29, 2007(unaudited)
            
            
            (unaudited)Statement
      of operations data:Net
      sales
            
            $
            126,379
            
            
            
            100
            %
            
            $
            135,457
            
            
            
            100
            %Cost
      of products sold
            
            
            106,722
            
            
            
            84.4
            %
            
            
            103,612
            
            
            
            76.5
            %Gross
      profit
            
            
            19,657
            
            
            
            15.6
            %
            
            
            31,845
            
            
            
            23.5
            %Goodwill
      impairment
            
            
            200,000
            
            
            
            158.3
            %
            
            
            -
            
            
            
            0.0
            %SG&A
      expense
            
            
            18,052
            
            
            
            14.3
            %
            
            
            17,190
            
            
            
            12.7
            %Amortization
      of intangible assets
            
            
            2,776
            
            
            
            2.2
            %
            
            
            2,096
            
            
            
            1.5
            %Operating
      earnings (loss)
            
            $
            (201,171
            )
            
            
            -159.2
            %
            
            $
            12,559
            
            
            
            9.3
            %Currency
      transaction gain/(loss)
            
            
            (60
            )
            
            
            0.0
            %
            
            
            1,708
            
            
            
            1.3
            %








Net
Sales





Net
sales for the three months ended September 27, 2008 decreased compared to the
same period in 2007 by approximately $9.1 million, or 6.7%. 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, as well as lower
demand for our repair and remodeling windows which declined due to a slowdown in
the remodeling and replacement activity across the U.S.  In addition,
sales in our Canadian window business decreased due to slowing housing demand in
the western Canadian province of Alberta. The decrease in sales was partially
offset by sales from Pacific Windows which was acquired in September 2007 and
price increases that were implemented in response to increasing raw material and
freight costs as discussed below.





Cost of Products
Sold





Cost of
products sold for the three months ended September 27, 2008 increased by
approximately $3.1 million, or 3.0%, over the same period in
2007.  The increase in cost of products sold resulted from Pacific
Windows which was acquired in September 2007, higher raw material costs,
primarily PVC resin and aluminum, as well as higher freight costs driven by
higher oil costs, partially offset by lower sales as discussed
above.  Gross profit as a percentage of net sales for the three months
ended September 27, 2008 decreased from the same period in 2007 from 23.5% to
15.6%.  The decrease in gross profit percentage was driven by lower
unit sales volume, increased raw material and freight costs which were not fully
offset by selling price increases, as well as Pacific Windows sales which
currently carry a lower gross profit margin than the Company’s other window and
door products.





Goodwill
Impairment





As a
result of the depressed residential housing and remodeling markets, the Company
conducted an interim goodwill impairment test during the third quarter of 2008
and incurred an estimated $200.0 million impairment charge to operating
earnings.  This non-cash charge does not affect the Company’s cash
position, liquidity, debt covenants, or have any impact on future
operations.





-34-





Selling, general and
administrative expense





SG&A
expense for the three months ended September 27, 2008 increased by approximately
$0.9 million, or 5.0%, over the same period in 2007, primarily due to the
addition of Pacific Windows and reorganization expenses incurred to integrate
our U.S. window companies into one operating group.  The
reorganization expenses are primarily comprised of fees paid to consultants
assisting with the reorganization and integration of our U.S. window group, as
well as severance cost related to positions that have been
eliminated.  The Company believes that the reorganization of our U.S.
window group will allow us to better serve our customers and markets, while
reducing our operating costs.





Amortization of intangible
assets





Amortization
expense for the three months ended September 27, 2008 increased by $0.7 million
or 32.4% primarily due to the Pacific Windows acquisition.











For
      the nine months ended(dollars
      in thousands)
            
            September 27, 2008
            
            
            September 29, 2007(unaudited)
            
            
            
            
            
            (unaudited)Statement
      of operations data:Net
      sales
            
            $
            367,722
            
            
            
            100
            %
            
            $
            394,940
            
            
            
            100
            %Cost
      of products sold
            
            
            307,271
            
            
            
            83.6
            %
            
            
            302,608
            
            
            
            76.6
            %Gross
      profit
            
            
            60,451
            
            
            
            16.4
            %
            
            
            92,332
            
            
            
            23.4
            %Goodwill
      impairment
            
            
            200,000
            
            
            
            54.4
            %
            
            
            -
            
            
            
            0.0
            %SG&A
      expense
            
            
            59,642
            
            
            
            16.2
            %
            
            
            49,687
            
            
            
            12.6
            %Amortization
      of intangible assets
            
            
            8,328
            
            
            
            2.3
            %
            
            
            6,294
            
            
            
            1.6
            %Operating
      earnings (loss)
            
            $
            (207,519
            )
            
            
            -56.4
            %
            
            $
            36,351
            
            
            
            9.2
            %Currency
      transaction gain/(loss)
            
            
            (555
            )
            
            
            -0.2
            %
            
            
            3,916
            
            
            
            1.0
            %








Net
Sales





Net
sales for the nine months ended September 27, 2008 decreased compared to the
same period in 2007 by approximately $27.2 million, or 6.9%. 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, as well as lower
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 price increases that were implemented in response
to increasing raw material and freight costs as discussed below.





Cost of Products
Sold





Cost of
products sold for the nine months ended September 27, 2008 increased by
approximately $4.7 million, or 1.5%, 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
largely offset by a decrease in cost of products sold driven by the lower sales
levels. Gross profit as a percentage of net sales for the nine months ended
September 27, 2008 decreased from the same period in 2007 from 23.4% to
16.4%.  The decrease in gross profit percentage was driven by lower
unit sales volume, increased raw material and freight costs which were not fully
offset by selling price increases, as well as Pacific Windows which currently
carries a lower gross profit margin than the Company’s other window and door
products.











-35-





Goodwill
Impairment





As a
result of the depressed residential housing and remodeling markets, the Company
conducted an interim goodwill impairment test during the third quarter of 2008
and incurred an estimated $200.0 million impairment charge to operating
earnings.  This non-cash charge does not affect the Company’s cash
position, liquidity, debt covenants, or have any impact on future
operations.





Selling, general and
administrative expense





SG&A
expense for the nine months ended September 27, 2008 increased by approximately
$10.0 million, or 20.0%, over the same period in 2007, primarily due to the
addition of Pacific Windows and reorganization expenses incurred to integrate
our U.S. window companies into one operating group.  The
reorganization expenses are primarily comprised of fees paid to third party
consultants assisting with the reorganization and integration of our U.S. window
group, as well as severance costs related to positions that have been
eliminated.  The Company believes that the reorganization of our U.S.
window group will allow us to better serve our customers and markets, while
reducing our operating costs.





Amortization of intangible
assets





Amortization
expense for the nine months ended September 27, 2008 increased by $2.0 million
or 32.3% primarily due to the Pacific Windows acquisition.

















Unallocated
Operating Earnings, Interest, and Provision for Income Taxes








For
      the three months ended(dollars
      in thousands)
            
            September 27, 2008
            
            
            September 29, 2007(unaudited)
            
            
            (unaudited)Statement
      of operations data:Operating
      loss
            
            $
            (2,458
            )
            
            $
            (2,285
            )Interest
      expense
            
            
            (30,278
            )
            
            
            (23,903
            )Investment
      income
            
            
            85
            
            
            
            449Income
      tax (provision) benefit
            
            
            15,835
            
            
            
            (6,946
            )











Operating
loss Unallocated operating loss for the three months ended September
27, 2008 increased by approximately $0.2 million over the same period in
2007.  The increase was driven by higher salary and travel and
entertainment expenses due to the addition of a corporate marketing
department.





Interest
expense Interest expense for the three months ended September 27,
2008 increased by approximately $6.4 million over the same period in
2007.  The increase was primarily due to additional interest of
approximately $20.1 million on the $700.0 million Senior Secured
Notes issued June 9, 2008, offset by a decrease of approximately $13.5
million due to interest paid in 2007 on the Company’s previous term loan which
was extinguished effective June 9, 2008, and a decrease of approximately $0.2
million primarily due to a decrease in amortization of deferred financing costs.





Income
taxes The income tax (provision) benefit for the three months ended
September 27, 2008 changed by approximately $22.8 million from a tax provision
of approximately $6.9 million in 2007 to a tax benefit of approximately $15.8
million in 2008, primarily as a result of the larger pre-tax loss for the
2008 period versus the 2007 period.  The Company’s effective tax rate
for the quarter was 7.7% resulting primarily from the estimated goodwill
impairment of approximately $200.0 million. The Company's effective tax rate for
the year ending December 31, 2008 is estimated to be 37.8%, excluding the
impairment.








-36-








For
      the nine months ended(dollars
      in thousands)
            
            September 27, 2008
            
            
            September 29, 2007(unaudited)
            
            
            (unaudited)Statement
      of operations data:Operating
      loss
            
            $
            (7,327
            )
            
            $
            (6,026
            )Interest
      expense
            
            
            (103,790
            )
            
            
            (73,863
            )Investment
      income
            
            
            332
            
            
            
            820Income
      tax benefit (provision)
            
            
            42,235
            
            
            
            (9,240
            )








Operating
loss Unallocated operating loss for the nine months ended September
27, 2008 increased by approximately $1.3 million over the same period in
2007.  The increase was driven by higher salary and travel and
entertainment expenses due to the addition of a corporate marketing
department.





Interestexpense    Interest
expense for the nine months ended September 27, 2008 increased by approximately
$29.9 million over the same period in 2007.  The increase was due
to additional interest of approximately $24.7 million on the $700.0 million
Senior Secured Notes issued June 9, 2008 and approximately $27.6
million of interest costs incurred in the second quarter of 2008 related to the
issuance of new debt (approximately $14.0 million deferred financing costs
associated with previous debt, approximately $6.8 million for a prepayment
premium, and approximately $6.8 million of bank amendment fees that was
subsequently retired).  These increases were partially offset by
a decrease of approximately $21.2 million due to interest paid in 2007 on
the Company’s previous term loan which was extinguished effective June 9, 2008,
and a decrease of approximately $1.2 million resulting from the reclassification
of 2007 third-party financing costs from other expense to interest
expense.





Income
taxes   The income tax (provision) benefit for the nine
months ended September 27, 2008 changed by approximately $51.5 million from a
tax provision of approximately $9.2 million in 2007 to a tax benefit of
approximately $42.2 million in 2008, primarily as a result of the larger
pre-tax loss for the 2008 period versus the 2007 period.  The
Company’s effective tax rate for the nine months ended September 27, 2008 was
15.4% resulting primarily from the estimated goodwill impairment of
approximately $200.0 million. The Company's effective tax rate for the year
ending December 31, 2008 is estimated to be 37.8% excluding the
impairment.








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 provided by (used in) operating activities for the first nine months of
2008 and 2007 was approximately $(58.7) million and $18.9 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 of approximately $45.5 million, excluding the estimated goodwill
impairment of approximately $200.0 million and the financing costs of
approximately $27.6 million.  The decrease in net income was offset by
increased depreciation and amortization of approximately $8.0 million.
The remaining decrease was related to changes in our current assets and
liabilities.





Net
cash used in investing activities for the first nine months of 2008 and 2007 was
approximately $4.8 million and $47.3 million, respectively.  Net cash
used in investing activities for the 2008 period consisted of approximately
$13.5 million for capital expenditures, partially offset by approximately $8.8
million provided from the sale of assets.  Net cash used for capital
expenditures was approximately $12.0 million for the 2007 period.  The
2007 outflow resulted primarily from the cash paid for the Pacific Windows
acquisition.





Net
cash provided by financing activities for the first nine months of 2008 and 2007
was approximately $19.1 million and $10.6 million, respectively.  Net
cash provided by financing activities for the first nine months of 2008 included
proceeds from the issuance on June 9, 2008 of $700.0 million of Senior Secured
Notes at an approximate 1.0% discount yielding proceeds of approximately $693.5
million.  The Senior Secured Notes will mature on June 15, 2013 and
bear interest at the rate of 11.75% per annum which will require annual interest
payments of approximately $82.3 million.  We used the proceeds from
the initial issuance of the Senior Secured Notes to repay all of the outstanding
indebtedness at June 9, 2008 under our existing senior secured credit facility,
including the revolver, of approximately $691.2 million.





-37-


Concurrently
with the Senior Secured Notes offering, we entered into a new senior secured
asset-based revolving credit facility (the “ABL Facility”).  The ABL
Facility provides for revolving credit financing of up to $150.0 million,
subject to borrowing base availability, with a maturity of five years including
sub-facilities for letters of credit, swingline loans and borrowings in Canadian
dollars and United States dollars by CWD.  The ABL Facility will,
however, mature on October 15, 2011 if Ply Gem Industries’ 9% Senior
Subordinated Notes due 2012 are not refinanced by such date.  In
addition, the ABL Facility provides that the revolving commitments may be
increased to $200.0 million, subject to certain terms and
conditions.





Net cash provided by financing
activities for the first nine months of 2008 included debt issuance costs of
$26.0 million related to the $700.0 million offering of Senior Secured Notes on
June 9, 2008 and the entry into the ABL Facility.  Also included in
cash provided by financing activities for the first nine months of 2008 was a
$30.0 million cash equity contribution that Ply Gem received from CI Capital
Partners LLC as a condition to Ply Gem’s amendment of its prior credit facility
on May 23, 2008. This amendment
increased the interest rate on the term loan and extended the maturity of the
revolving credit facility from February 12, 2009 to August 12,
2010.  On May 23, 2008 the senior credit facility was amended and
subsequently paid off on June 9, 2008 with the proceeds from the Senior Secured
Notes offering.  This eliminated any potential loan covenant violation
or events of default under the previous debt
instrument.




Due to
current economic conditions and related impacts on the value of the plan
assets, the Company may be required to increase the pension liability
as of December 31, 2008. This would result in a charge to accumulated other
comprehensive income which would lower stockholder's equity. The Company's
pension contribution in 2009 may be increased; however, the amount of the
increase will not be determined until the first quarter of 2009.





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 ABL
facility.  As of September 27, 2008, we had approximately $1,054.0
million of indebtedness and $146.1 million of availability under the ABL
facility.





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 our greatest needs has
historically been experienced during the first six months of the year and we
anticipate borrowing funds under our ABL Facility to support this
requirement.  However, we anticipate the funds generated from
operations and funds available under the ABL Facility will be adequate to
finance our ongoing operational cash flow needs, capital expenditures, debt
service obligations, management incentive expenses, and other fees payable under
other contractual obligations for the foreseeable future.





Contractual
Obligations





In
addition to the items listed in the Contractual Obligations table presented in
the Company’s Annual Report on Form 10-K, the Company has a potential obligation
related to certain tax issues of approximately $6.3 million, including net
interest of approximately $0.3 million.  The timing of the potential
tax payments is unknown.





As
discussed in the liquidity section, Ply Gem Industries issued $700.0 million of
Senior Secured Notes on June 9, 2008 that will mature on June 15,
2013.  Ply Gem Industries used the proceeds to repay all of the
outstanding indebtedness under its existing senior term facilities of
approximately $691.2 million.  Concurrently with the Senior Secured
Notes offering, Ply Gem Industries, the Company, and the subsidiaries of Ply Gem
Industries entered into ABL Facility for financing of up to $150.0 million
which will mature in 2013 or on October 15, 2011 if Ply Gem Industries Senior
Subordinated Notes due 2012 are not refinanced by such date.





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 balance sheet 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
stockholder's 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 its year-end balance sheet.  For our
financial statements as of December 31, 2008, we will change our September 30
measurement date for our plans’ assets and obligations to comply with this
requirement. The Company is currently evaluating the impact of the measurement
date change.


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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 fiscal years 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. 141(R), “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. The impact to the company from the
adoption of SFAS 141(R) 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 SFAS No. 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.





In May
2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted
Accounting Principles”. This standard reorganizes the GAAP hierarchy in order to
improve financial reporting by providing a consistent framework for determining
what accounting principles should be used when preparing U.S. GAAP financial
statements. SFAS 162 shall be effective 60 days after the SEC’s approval of the
Public Company Accounting Oversight Board’s amendments to Interim Auditing
Standard, AU Section 411, “The Meaning of Present Fairly in Conformity with
Generally Accepted Accounting Principles”. Management is currently evaluating
the impact, if any, this new standard may have on our balance sheet, results of
operations, or cash flows.




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 indentures governing the Senior Secured Notes and our Senior
      Subordinated Notes and restrictions under our ABL
  Facility;




·
            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 include those set forth in our
2007 Annual Report on Form 10-K.  We undertake no obligation to update
the forward-looking statements in this filing.






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Item
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK







Our principal interest rate exposure
relates to the loans outstanding under our ABL Facility, which provides for
borrowings of up to $150.0 million, 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.  Assuming the ABL facility is
fully drawn, each quarter point increase or decrease in the interest rate would
change our interest expense by approximately $0.4 million per
year.  In the future, we may enter into interest rate swaps, involving
exchange of floating for fixed rate interest payments, to reduce our exposure to
interest rate volatility.





Our results of operations are affected
by fluctuations in the value of the U.S. dollar as compared to the value of the
Canadian dollar.  For the three months ended September 27, 2008, the
net impact of foreign currency changes to the Company’s results of operations
was a loss of $0.1 million, and for the nine months ended September 27, 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 $1.9 million for the nine months ended September 27,
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
nine months ended September 27, 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 September
27, 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 September
27,2008, that have materially affected, or are reasonably likely
to materially affect, our internal controls over financial
reporting.








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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 have declined 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




*
      10.1
              Retention
      Bonus Award letter to Gary Robinette, dated as of November 7,
      2008*
      10.2
              Amended and
      Restated Retention Agreement with Shawn Poe, dated as of November 7,
      2008*  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*  32.1
              Certification
      by President and Chief Executive Officer pursuant to 18 U.S.C Section
      1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002*
      32.2
              Certification
      by Executive Vice President and Chief Financial Officer pursuant to 18
      U.S.C. Section 1350, as adopted pursuant to Section 906 of the
      Sarbanes-Oxley Act of 2002




*  Filed
herewith.










-41-








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:  November
10, 2008





By
            
            /s/Gary E.
      RobinetteGary E.
      RobinettePresident and
      Chief Executive Officer








Date:  November
10, 2008





By
            
            /s/Shawn K.
      PoeShawn K.
      PoeVice
      President, Chief Financial Officer, Treasurer and
  Secretary











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