<PAGE>
 
                      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 30, 1996 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 1-4087
                       ------

                           PLY GEM INDUSTRIES, INC.
-------------------------------------------------------------------------------
            (Exact name of registrant as specified in its charter)
                                        
Delaware                                        11-1727150
-------------------------------------------------------------------------------
(State or other jurisdiction of                 (I.R.S. Employer
incorporation or organization)                  Identification No.)

777 Third Avenue, New York, New York                    10017        
-------------------------------------------------------------------------------
(Address of principal executive offices)           (Zip code)

Registrant's telephone number, including area code 212-832-1550
                                                   ----------------------------

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

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:


            Class                           Outstanding at November 1, 1996    
--------------------------------------      -------------------------------
Common stock, par value $.25 per share             14,000,597  Shares
<PAGE>
 
                   PLY GEM INDUSTRIES, INC. AND SUBSIDIARIES
                     CONSOLIDATED CONDENSED BALANCE SHEETS
                                (In Thousands)

<TABLE>
<CAPTION>
                                         
ASSETS                                   September 30,   December 31,
------                                       1996            1995
                                         ------------    ------------
                                          (Unaudited)                  
<S>                                       <C>            <C> 
Cash and cash equivalents                 $  4,586       $  8,107  
Accounts receivable, net of allowance                              
  of $4,190; $4,511 in 1995                 51,016         33,020  
Inventories                                 94,887         96,228  
Prepaid and deferred income taxes            8,656         15,714  
Other current assets                         9,467          9,194  
                                          --------       --------  
     Total current assets                  168,612        162,263  
                                                                   
Property, plant and equipment - at cost                            
  net of accumulated depreciation and                              
  amortization of $60,397; $51,573 in       
   1995                                     87,274         81,832  
Patents and trademarks, net of                                     
 accumulated amortization of $9,836; 
 $8,971 in 1995                             14,503         15,334  
Other intangible assets - net               14,786         15,507  
Cost in excess of net assets acquired -     
 net                                        21,984         23,081  
Other assets                                21,616         26,973  
                                          --------       --------  
     Total assets                         $328,775       $324,990  
                                          ========       ========  
                                                                   
LIABILITIES AND STOCKHOLDERS' EQUITY                               
------------------------------------                               
Accounts payable and accrued expenses     $ 68,468       $ 52,645  
Accrued restructuring                        1,182          4,480  
Current maturities of long-term debt      
 and capital leases                            574            458  
                                          --------       --------  
     Total current liabilities              70,224         57,583              

Long-term debt                              87,329         93,135  
Capital leases                               7,466          7,106  
Other liabilities                           19,526         22,681  
                                                                   
Stockholders' equity:                                              
  Preferred stock, $.01 par value;                                 
    authorized 5,000,000 shares; none                              
     issued                                      -              -  
  Common stock, $.25 par value;                                    
   authorized                              
    60,000,000 shares; issued                                      
     17,623,885;                                                   
    17,463,072 in 1995                       4,406          4,366
  Additional paid-in capital               148,652        148,618  
  Retained earnings                         60,393         53,246  
  Unrealized appreciation in marketable       
   securities                                  238              -   
  Less: Treasury stock-at cost                                     
    (3,625,288 shares; 3,015,311 in         
     1995)                                  63,494         55,676       
            Unamortized restricted        
             stock and note receivable       5,965          6,069  
                                          --------       --------  
            Total stockholders' equity     144,230        144,485  
                                          --------       --------  
     Total liabilities and                $328,775       $324,990  
      stockholders' equity                ========       ========  
</TABLE>

       See accompanying notes to the consolidated financial statements.

                                       2
<PAGE>
 
                   PLY GEM INDUSTRIES, INC. AND SUBSIDIARIES
                 CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
                                  (Unaudited)
                     (In Thousands Except per Share Data)

<TABLE>
<CAPTION>
                                                  Quarter Ended
                                          ------------------------------
                                          September 30,   September 30,
                                               1996            1995
                                          --------------  --------------
<S>                                       <C>             <C>
Net sales                                      $230,143        $210,973
Cost of goods sold                              180,720         173,529
                                               --------        --------
     Gross profit                                49,423          37,444
Selling, general and administrative          
 expenses                                        34,103          30,738
                                               --------        -------- 

     Income from operations                      15,320           6,706
Interest expense                                 (1,729)         (1,822)
Other income (expense), net                        (667)           (519)
                                               --------        --------
     Income before income taxes                  12,924           4,365
Income taxes                                      6,009           2,089
                                               --------        --------
     Net income                                $  6,915        $  2,276
                                               ========        ========
Earnings per share:
     Primary                                   $    .45        $    .16
     Fully diluted                                  .45             .16
 
Weighted average number of shares
 outstanding:
     Primary                                     16,347          14,458
     Fully diluted                               16,347          14,458
Cash dividends per share                       $    .03        $    .03
</TABLE>

         See accompanying notes to consolidated financial statements.

                                       3
<PAGE>
 
                  PLY GEM INDUSTRIES, INC., AND SUBSIDIARIES
                CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
                                  (Unaudited)
                     (In Thousands Except per Share Data)

<TABLE>
<CAPTION>
                                                   Nine Months
                                                      Ended
                                        -------------------------------
                                          September 30,   September 30,
                                               1996            1995
                                          --------------  --------------
<S>                                       <C>             <C>
Net sales                                      $584,240        $577,172
Cost of goods sold                              471,609         480,717
                                               --------        --------
     Gross profit                               112,631          96,455 
Selling, general and administrative           
 expenses                                        90,091          88,491  
                                               --------        -------- 
     Income from operations                      22,540           7,964
Interest expense                                 (5,486)         (5,070)
Other income (expense), net                      (1,324)         (1,505)
                                               --------        --------
Income before income taxes                       15,730           1,389
Income taxes                                      7,296             750
                                               --------        --------
     Net income                                $  8,434        $    639
                                               ========        ========
Earnings per share:
     Primary                                   $    .58        $    .04
     Fully diluted                                  .58             .04
 
Weighted average number of shares
 outstanding:
     Primary                                     16,315          14,448
     Fully diluted                               16,315          14,448
Cash dividends per share                       $    .09        $    .09
 
</TABLE>

         See accompanying notes to consolidated financial statements.

                                       4
<PAGE>
 
                   PLY GEM INDUSTRIES, INC. AND SUBSIDIARIES
                CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
                                  (Unaudited)
                                (In Thousands)

<TABLE>
<CAPTION>
                                                            Nine Months Ended            
                                                ------------------------------------------
                                                   September 30,         September 30,   
                                                        1996                  1995       
                                                --------------------  --------------------
<S>                                             <C>        <C>        <C>        <C>     
CASH FLOWS FROM OPERATING ACTIVITIES                                                     
------------------------------------                                                     
Net income                                                 $  8,434              $    639 
Adjustments to reconcile net income      
 to net cash provided by (used in)
 operating activities:
   Depreciation and amortization                $ 11,311              $ 10,454           
   Provision for doubtful accounts                 1,796                 1,143           
   Changes in assets and liabilities:                                                    
     Accounts receivable                         (19,792)              (11,300)          
     Inventories                                   1,341                 1,788           
     Prepaid and deferred income taxes             7,058                 1,248           
     Prepaid expenses and other current                                                  
      assets                                         (35)               (1,456)          
     Accounts payable and accrued                                                        
      expenses                                    15,823                (1,738)          
     Restructuring                                (5,142)               (8,386)          
     Other                                         4,046     16,406     (1,803)   (10,050)
                                                --------   --------   --------   -------- 
 
     Net cash from (used in) operating                 
      activities                                             24,840                (9,411)
                                                           --------              -------- 
CASH FLOWS FROM INVESTING ACTIVITIES
------------------------------------
  Additions to property, plant and equipment                (14,466)              (23,256) 
  Other                                                         362                   951 
                                                           --------              -------- 
  Net cash used in investing activities                     (14,104)              (22,305)
                                                           --------              -------- 
                                                                                          
CASH FLOWS FROM FINANCING ACTIVITIES                                                      
------------------------------------                                                      
  Purchase of treasury shares                                (8,818)               (2,190)
  Net increase (decrease) in revolving                                                    
   note borrowings with  original                                                         
  maturity of  90 days or less                               (5,450)               22,361  
  Cash dividends                                             (1,287)               (1,309)
  Other                                                       1,298                 1,233 
                                                           --------              -------- 
  Net cash provided (used) in financing                                                   
   activities                                               (14,257)               20,095 
                                                           --------              -------- 
  Net decrease in cash and cash                                                           
   equivalents                                               (3,521)              (11,621) 
  Cash and cash equivalents at                                                            
   beginning of period                                        8,107                14,403 
                                                           --------              -------- 
  Cash and cash equivalents at end of                                                     
   period                                                  $  4,586              $  2,782
                                                           ========              ========  
</TABLE> 

         See accompanying notes to consolidated financial statements.

                                       5
<PAGE>
                   PLY GEM INDUSTRIES, INC. AND SUBSIDIARIES
                              INC. AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)

NOTE 1 - The accompanying financial statements have been prepared without audit,
pursuant to the rules and regulations of the Securities and Exchange Commission.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations.  Certain
prior year items have been reclassified to conform to the 1996 presentation.

     These statements include all adjustments, consisting only of normal
recurring accruals, considered necessary for a fair presentation of financial
position, results of operations and cash flows of the Company.  The financial
statements included herein should be read in conjunction with the financial
statements and notes thereto included in the latest annual report on Form 10-K.

     In 1996 the Company changed its interim fiscal reporting periods to conform
to calendar presentation.  The change has no material effect on the interim
comparisons.

NOTE 2 - During 1994, the Company recorded a charge of approximately $29.1
million related to a restructuring program.  The status of the components of the
restructuring provision at the end of the period was:

<TABLE>
<CAPTION>
 
                                                     (In Thousands)

                                           Balance at              Balance at
                                          December 31,    1996    September 30,
                                              1995      Activity      1996
                                          ------------  --------  -------------
<S>                                       <C>           <C>       <C>
Consolidation and closure of
 facilities, including                         
  severance and related costs                   $7,779    $4,777       $ 3,002
 
Other, including lease termination
 expenses and  costs to execute   
  the restructuring program                        235       150            85
                                                ------   -------       -------
                                                   
                                                $8,014    $4,927         3,087 *
                                                ======    ======       =======
</TABLE>

     *The following amounts are included in the consolidated balance sheet at
September 30, 1996 under the captions: "accrued restructuring" ($1.2 million),
"other liabilities" ($1.2 million), "property, plant and equipment" (reduction
of $ .2 million), "inventories" (reduction of $ .4 million), and "accounts
receivable" (reduction of $.1 million).

NOTE 3 -The major classes of inventories were as follows:

<TABLE>
<CAPTION>
 
                              (In Thousands)

                   September 30, 1996  December 31, 1995
                   ------------------  -----------------
<S>                <C>                        <C>
Finished goods                $52,797            $54,530
Work in process                12,403             12,508
Raw materials                  29,687             29,190
                              -------            -------
                              $94,887            $96,228
                              =======            =======
</TABLE>

                                       6
<PAGE>
 
                   PLY GEM INDUSTRIES, INC. AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)

NOTE 4 - Earnings per share of common stock are computed by dividing net income
by the weighted average number of common shares outstanding for the periods.
The dilutive effect of stock options has been excluded from the calculations in
1995 as their effect would be anti-dilutive.  Earnings per share for the three
and nine months ended September 30, 1996 are calculated using the modified
treasury stock method, which limits the assumed purchase of treasury shares to
20% of the outstanding common shares.

NOTE 5 - Supplemental cash flow information for the nine month periods are as
follows:

<TABLE>
<CAPTION>
 
                                 (In Thousands)
                     September 30, 1996  September 30, 1995
                     ------------------  ------------------
<S>                  <C>                 <C>
Interest paid              $5,302               $4,632
Income taxes paid             665                  797
</TABLE>

NOTE 6 - The accumulated amortization of cost in excess of net assets acquired
and other intangible assets are $21,766,000 at September 30, 1996 and
$19,917,000 at December 31, 1995.

NOTE 7 - The Company's loan agreements with its banks require the Company to
maintain a specified leverage ratio, fixed charge ratio and tangible net worth
levels and maintain certain financial ratios, among its provisions.  Under the
most restrictive of these covenants, at September 30, 1996 approximately
$1,500,000 of retained earnings was available for the payment of dividends in
1996.

NOTE 8- Hoover Treated Wood Products, Inc. ("Hoover"), a wholly-owned subsidiary
of the Company, is a defendant in a number of lawsuits alleging damage caused by
alleged defects in certain pressure treated interior wood products.  Hoover has
not manufactured or sold these products since August, 1988. The number of
lawsuits pending has declined significantly from earlier periods.  Most of the
suits have been resolved by dismissal or settlement with settlements being paid
out of insurance proceeds or other third party recoveries.  Hoover and the
Company are vigorously defending those suits which remain pending and defense
and indemnity costs are being paid out of insurance proceeds and proceeds from a
settlement by Hoover with suppliers of material used in the production of
interior treated wood.

     Hoover and the Company have engaged in coverage litigation with their
insurers and have settled their coverage claims with a majority of the insurers.
The Company believes that the remaining coverage disputes will be resolved on a
satisfactory basis and a substantial amount of additional coverage will be
available to Hoover.  In reaching this belief, it has analyzed Hoover's
insurance coverage and the status of the coverage litigation, considered its
history of settlements with primary and excess insurers and consulted with
counsel.

     Hoover has recorded a receivable at September 30, 1996 (included in other
assets) for approximately $9.7 million for the estimated proceeds and recoveries
related to insurance matters discussed above and recorded an accrual for the
same amount (included in other liabilities) for its estimated cost to resolve
those matters not presently covered by existing settlements with insurance
carriers and suppliers.

                                       7
<PAGE>
 
                   PLY GEM INDUSTRIES, INC. AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)



Note 8 - (Continued)
--------------------

     In evaluating the effect of the lawsuits, a number of factors have been
considered, including:  the litigation history, the significant decline in the
number of cases, the availability of various legal defenses and the likely
availability of proceeds from additional insurance.  Based on its evaluation,
the Company believes that the ultimate resolution of the lawsuits and the
insurance claims will not have a material effect upon the financial position of
the Company.

                                       8
<PAGE>
 
                   PLY GEM INDUSTRIES, INC. AND SUBSIDIARIES
                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS
               QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 1996



     When used  in this discussion, the words "believes", "anticipates",
"expects" and similar expressions are intended to identify forward-looking
statements.  Such statements are subject to certain risks and uncertainties
which could cause actual results to differ materially from those projected.
Readers are cautioned not to place undue reliance on these forward-looking
statements which speak only as of the date hereof.  The Company undertakes no
obligation to republish revised forward-looking statements to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events.  Readers are also urged to carefully review and consider
the various disclosures made by the Company, in this report, as well as the
Company's periodic reports on Forms 10-K, 10-Q and 8-K filed with the Securities
and Exchange Commission.

Results of Operations
---------------------

     The Company reported significantly better operating results for the third
quarter of 1996 when compared with the third quarter of 1995.  On a net sales
increase of approximately 9%, net income tripled to $6.9 million up from $2.3
million for the same quarter a year ago.  Operating income increased almost two
and one-half times to $15.3 million from $6.7 million for the quarterly
comparison periods.  Similar gains were experienced for the nine month
comparison periods.  The primary reasons for the improvements are discussed
below.

     Net sales for the third quarter of 1996, which were the highest in the
Company's history, totaled $230.1 million, an increase of about 9% over the same
period in 1995. Third quarter sales growth was driven primarily by the Company's
Windows, Doors and Siding and Specialty Woods businesses which experienced
double digit growth for the quarter. Approximately 80% of the consolidated sales
growth was attributed to unit volume increases and the remainder to increases in
average selling prices. For the nine months ended September 30, 1996, net sales
were $584.2 million, as compared with $577.2 million for the corresponding
period in 1995.

     Gross profit, expressed as a percentage of sales, was 21.5% in the third
quarter of 1996 compared with 17.7% for the same period in 1995.  Gross profit
dollars increased approximately $12 million or 32% for the comparison period.
Gross profit for the nine months of 1996 was 19.3%, as compared with 16.7% in
1995. The significant improvement was primarily attributable to lower raw
material costs, particularly PVC resin and glass, improved manufacturing
efficiencies and process improvements.

     Selling, general and administrative expenses, as a percentage of sales, for
the third quarter and first nine months of 1996 were essentially flat compared
to the 1995 comparison periods.

                                       9
<PAGE>
 
                   PLY GEM INDUSTRIES, INC. AND SUBSIDIARIES
                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS
               QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 1996



Results of Operations - (Continued)
-----------------------------------

     The Company's effective tax rate in the third quarter of 1996 was 46.5%,
which compares with 47.9% in the third quarter of 1995.  The effective tax rate
for first nine months of 1996 and 1995 was 46.4% and 54.0% respectively.  The
lower effective tax rates for the comparison periods are due primarily to the
lower proportion of non-deductible amortization to income before taxes.

Liquidity and Capital Resources
-------------------------------

     The Company generated $24.8 million in cash from operations during the
first nine months of 1996 compared to usage of $9.4 million in the corresponding
1995 period.  The significant improvement is due to improved operating results
and improved management of working capital.

     Significant investing activities in the first nine months of 1996 include
capital expenditures of $14.5 million, compared to $23.3 million for the
corresponding 1995 period, primarily incurred by the Company's Windows, Doors
and Siding subsidiaries.  Significant first nine months of 1996 financing
activities related to the net decrease in revolving credit borrowings of $5.5
million and purchase of treasury shares of $8.8 million.

     The Company's current ratio of 2.4 to 1 at September 30, 1996 was
substantially the same as it was at the end of 1995.

     The Company has a revolving credit facility with a syndicate of eleven
banks which provides financing through February 1999.  Availability under this
facility was approximately $67 million at September 30, 1996.

     The Company anticipates that internally generated funds from operations,
existing cash balances and the Company's existing credit facility should be
sufficient to satisfy its cash requirements for the next operating cycle.

                                       10
<PAGE>
 
                   PLY GEM INDUSTRIES, INC. AND SUBSIDIARIES
                               September 30, 1996
                          PART II - OTHER INFORMATION


All items are inapplicable except:

Item 1.  Legal Proceedings.

       See Note 8 to the consolidated financial statements.

 
Item 5.  Other information

On August 2, 1995, the Company engaged the investment banking firm Bear, Stearns
& Co. Inc. to explore strategic alternatives for the  intent of maximizing
shareholders value, including the possible sale of the Company.  On July 16,
1996 the Company announced the conclusion of the Bear, Stearns & Co. Inc.
engagement with respect to the aforesaid.

Item 6.    Exhibits and Reports on Form 8-K.

     (a)   Exhibits: Exhibit 11 - Schedule of computation of net income per
           share

                     Exhibit 27 - Financial Data Schedule

     (b)   Reports - No reports on Form 8-K were filed during the quarter ended
September 30, 1996.

                                      11
<PAGE>
 
                   PLY GEM INDUSTRIES, INC. AND SUBSIDIARIES

                                   FORM 10-Q

                              September 30, 1996


                              S I G N A T U R E S



     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 Industries, Inc.
                                    ------------------------
                                    (Registrant)



Date:  November 13, 1996            /s/ Herbert P. Dooskin
       -------------------          ------------------------
                                    Executive Vice President
                                    Principal Financial Officer

                                       12