form10q_may9.htm

10-Q 1 form10q_may9.htm MAY 9, 2008 10-Q FORM form10q_may9.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 29, 2008

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

OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____________ to _____________.

Commission File Number: 333-114041

PLY GEM HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

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

5020 Weston Parkway

Cary, North Carolina 27513

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

185 Platte Clay Way, Kearney, Missouri 64060

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

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

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

Large accelerated filer [ ] Accelerated filer [ ]

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

(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X ]

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

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

PLY GEM HOLDINGS, INC. AND SUBSIDIARIES

FORM 10-Q

QUARTERLY PERIOD ENDED MARCH 29, 2008

CONTENTS

PART I – FINANCIAL INFORMATION

Item 1.	Condensed Consolidated Financial Statements

	Condensed Consolidated Statements of Operations – Three months ended March 29, 2008 and March 31, 2007	1

	Condensed Consolidated Balance Sheets – March 29, 2008 and December 31, 2007	2

	Condensed Consolidated Statements of Cash Flows – Three months ended March 29, 2008 and March 31, 2007	3

	Notes to Condensed Consolidated Financial Statements	4

Item 2.	Managment's Discussion and Analysis of Financial Condition And Results of Operation	22

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	32

Item 4.	Controls and Procedures	32

PART II – OTHER INFORMATION

Item 1A.	Risk Factors	33

Item 6.	Exhibits	33

	Signatures	34

PART I - FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

PLY GEM HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

	For the three months ended
	March 29,			March 31,
	2008			2007
	(Amounts in thousands)


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

See accompanying notes to condensed consolidated financial statements.

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PLY GEM HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

	March 29,			December 31,
	2008			2007
	(Amounts in thousands, except
	share amounts)
ASSETS
Current Assets:
Cash and cash equivalents	$	24,902		$	65,207
Accounts receivable, less allowances of $7,385 and $7,320, respectively		134,652			111,653
Inventories:
Raw materials		58,000			60,003
Work in process		21,929			23,071
Finished goods		39,473			45,208
Total inventory		119,402			128,282
Prepaid expenses and other current assets		19,655			16,462
Deferred income taxes		11,780			12,797
Total current assets		310,391			334,401
Property and Equipment, at cost:
Land		4,011			4,017
Buildings and improvements		38,065			37,927
Machinery and equipment		244,189			240,921
Total property and equipment		286,265			282,865
Less accumulated depreciation		(94,676	)		(83,869	)
Total property and equipment, net		191,589			198,996
Other Assets:
Intangible assets, less accumulated amortization of $49,748 and $45,081,
respectively		208,344			213,257
Goodwill		834,268			835,820
Other		38,213			43,133
Total other assets		1,080,825			1,092,210
	$	1,582,805		$	1,625,607

LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities:
Current maturities of long-term debt	$	23,488		$	6,873
Accounts payable		95,634			96,256
Accrued expenses and taxes		61,491			93,416
Total current liabilities		180,613			196,545
Deferred income taxes		90,613			91,151
Other long term liabilities		65,628			67,144
Long-term debt, less current maturities		1,029,546			1,031,223
Stockholder's Equity:
Preferred stock $0.01 par, 100 shares authorized, none issued and outstanding		-			-
Common stock $0.01 par, 100 shares authorized, issued and outstanding		-			-
Additional paid-in-capital		180,543			180,667
Retained earnings		27,400			49,242
Accumulated other comprehensive income		8,462			9,635
Total Stockholder's Equity		216,405			239,544
	$	1,582,805		$	1,625,607

See accompanying notes to condensed consolidated financial statements.

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PLY GEM HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	For the three months ended
	March 29,			March 31
	2008			2007
	(Amounts in thousands)
Cash flows from operating activities:
Net loss	$	(21,842	)	$	(10,864	)
Adjustments to reconcile net income
to cash used in operating activities:
Depreciation and amortization expense		16,026			13,238
Non-cash interest expense, net		1,745			1,706
(Gain) loss on foreign currency transactions		551			(216	)
Loss on sale of assets		323			16
Deferred income taxes		461			(3,284	)
Changes in operating assets and
liabilities, net of effects from acquisitions:
Accounts receivable, net		(25,068	)		(3,959	)
Inventories		6,477			(13,824	)
Prepaid expenses and other current assets		(3,374	)		7,296
Accounts payable		1,045			1,628
Accrued expenses and taxes		(32,358	)		(36,806	)
Other		21			281
Net cash used in operating activities		(55,993	)		(44,788	)
Cash flows from investing activities:
Capital expenditures		(4,681	)		(3,663	)
Proceeds from sale of assets		5,810			7
Other		(15	)		(185	)
Net cash provided by (used in) investing activities		1,114			(3,841	)
Cash flows from financing activities:
Proceeds from revolver borrowings		15,000			20,000
Payments on long-term debt		(51	)		(1,468	)
Equity repurchases		(126	)		(2,175	)
Net cash provided by financing activities		14,823			16,357
Impact of exchange rate movements on cash		(249	)		30
Net decrease in cash and cash equivalents		(40,305	)		(32,242	)
Cash and cash equivalents at the beginning of the period		65,207			53,274
Cash and cash equivalents at the end of the period	$	24,902		$	21,032

See accompanying notes to condensed consolidated financial statements.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of Ply Gem Holdings, Inc. (referred to herein as “Ply Gem Holdings”, “Ply Gem”, the “Company”, “we”, “us”, or “our”) have been prepared in accordance with U.S. generally accepted accounting principles as described in the consolidated financial statements and related notes included in our 2007 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 25, 2008. These statements do not include all of the information and footnotes required by U.S. generally accepted accounting principles and should be read in conjunction with our 2007 Annual Report on Form 10-K. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the period from January 1, 2008 through March 29, 2008 are not necessarily indicative of the results that may be expected for the year ended December 31, 2008.

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

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

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

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

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

Principles of Consolidation

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

Accounting Policies and Use of Estimates

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

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Inventories

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

Income taxes

We account for deferred income taxes using the asset and liability method in accordance with SFAS No. 109, “Accounting for Income Taxes,” or “SFAS No. 109,” which requires that the deferred tax consequences of temporary differences between the amounts recorded in our financial statements and the amount included in our federal and state income tax returns be recognized in the balance sheet. Estimates are required with respect to, among other things, the appropriate state income tax rates to use in the various states that we and our subsidiaries are required to file, the potential utilization of operating and capital loss carry-forwards for both federal and state income tax purposes and valuation allowances required, if any, for tax assets that may not be realized in the future. We establish reserves when, despite our belief that our tax return positions are fully supportable, certain positions could be challenged, and the positions may not be fully sustained. During 2005, the Company established reserves relating to net operating losses acquired in the August 27, 2004 acquisition by the Company of all of the outstanding shares of capital stock of MWM Holding, Inc. (“MWM Holding”), in accordance with the Stock Purchase Agreement entered into among Ply Gem Industries, MWM Holding, and the selling stockholders, dated as of July 23, 2004 (the “MW Acquisition”) and transactions costs associated with the Ply Gem and MW Acquisitions. If the benefits for which a reserve has been provided are subsequently recognized, they will reduce goodwill resulting from the application of the purchase method of accounting for these transactions. Subsequent to February 12, 2004, U.S. federal income tax returns are prepared and filed by Ply Gem Investment Holdings, Inc. on behalf of itself, Ply Gem Holdings, Inc., Ply Gem Industries, Inc. (“Ply Gem Industries”) and its subsidiaries. The existing tax sharing agreement between Ply Gem Holdings and Ply Gem Investment Holdings, Inc., under which tax liabilities for each respective party are computed on a stand-alone basis, was amended during 2006 to include Ply Gem Prime Holdings, Inc. U.S. subsidiaries file unitary, combined and separate state income tax returns. CWD Windows and Doors, Inc. (“CWD”) files separate Canadian income tax returns. The Company’s first quarter 2008 tax benefit includes approximately $0.7 million tax benefit to correct for recent legislative changes in Canada that impact the future settlement of deferred taxes.

Related Party Transactions

The Company has entered into two advisory agreements with an affiliate of Caxton-Iseman Capital, LLC (the “Caxton-Iseman Party”), which we refer to as the “Debt Financing Advisory Agreement” and the “General Advisory Agreement”. Under the General Advisory Agreement, the Company expensed management fees to the Caxton-Iseman Party of approximately $0.1 million and $0.4 million for the three month periods ended March 29, 2008 and March 31, 2007, respectively.

Foreign Currency

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

For the three month periods ending March 29, 2008 and March 31, 2007, the Company recorded a loss from foreign currency transactions of approximately $0.6 million and a gain from foreign currency transactions of approximately $0.2 million, respectively. As of March 29, 2008, and December 31, 2007 accumulated other comprehensive income included a currency translation adjustment of approximately $7.7 million and $8.9 million, respectively.

Concentration of Credit Risk

The accounts receivable balance related to one customer of our siding, fencing and railing segment was approximately $13.0 million and $6.4 million at March 29, 2008 and December 31, 2007, respectively. This customer accounted for approximately 11.3% of net sales for the three month period ended March 29, 2008 and approximately 10.2% of net sales for the year ended December 31, 2007.

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Fair Value Measurement

In the first quarter of 2008, the Company adopted SFAS 157 “Fair Value Measurements” for financial assets and liabilities. This standard defines fair value, provides guidance for measuring fair value and requires certain disclosures. This standard does not require any new fair value measurements, but rather applies to all other accounting pronouncements that require or permit fair value measurements. This standard does not apply measurements related to share-based payments, nor does it apply to measurements related to inventory.

SFAS 157 discusses valuation techniques, such as the market approach (comparable market prices), the income approach (present value of future income or cash flows), and the cost approach (cost to replace the service capacity of an asset or replacement cost). The statement utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels:

·	Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.

·	Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

·	Level 3: Observable inputs that reflect the reporting entity’s own assumptions.

As of March 29, 2008, the Company did not have any financial assets or liabilities that are affected by the adoption of this standard.

In accordance with Financial Accounting Standards Board Staff Position No. 157-2, Effective Date of FASB Statement No. 157, the Company will delay application of SFAS 157 for non-financial assets and non-financial liabilities, until January 1, 2009. Certain non-financial assets and non-financial liabilities measured at fair value on a recurring basis include reporting units measured at fair value in the first step of a goodwill impairment test. Certain non-financial assets and non-financial liabilities measured at fair value on a non-recurring basis include non-financial assets and non-financial liabilities measured at fair value in the second step of a goodwill impairment test, as well as intangible assets and other non-financial long-lived assets measured at fair value for impairment assessment. As permitted under the deferral for non-financial assets and liabilities, SFAS 157 will be applicable to these fair value measurements beginning January 1, 2009.

Fair Value of Financial Instruments

The carrying value of the Company’s 9% senior subordinated notes due 2012 (the “senior subordinated notes”) was approximately $360.2 million and $360.2 million at March 29, 2008 and December 31, 2007, respectively. The fair value of the Company’s senior subordinated notes at March 29, 2008 and December 31, 2007 was estimated to be approximately $261.0 million and $279.0 million, respectively, based on available market information. The carrying value of the Company’s other financial instruments approximates their fair value.

New Accounting Pronouncements

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

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

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

In December 2007, the FASB issued 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.

2. PURCHASE ACCOUNTING

Pacific Windows Acquisition

On September 30, 2007, Ply Gem completed its acquisition of CertainTeed Corporation’s vinyl window and patio door business through a stock acquisition (the “Pacific Windows Acquisition”). On the acquisition date, the Company changed the name of the acquired business to Ply Gem Pacific Windows Corporation (“Pacific Windows”). The Company accounted for the transaction as a purchase in accordance with the provisions of SFAS No. 141, which results in a new valuation for the assets and liabilities of Ply Gem Pacific Windows based upon fair values as of the date of the purchase. The acquired vinyl window business is a leading manufacturer of premium vinyl windows and doors and produces windows for the residential new construction and remodeling markets. The acquisition will provide the Company with a presence on the west coast.

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

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

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

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

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3. INTANGIBLE ASSETS

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

	Average
	Amortization
	Period				Accumulated			Net Carrying
	(in Years)		Cost		Amortization			Value
			(Amounts in thousands)
As of March 29, 2008
Patents		14	$	12,770	$	(3,826	)	$	8,944
Trademarks/Tradenames		15		85,644		(11,152	)		74,492
Customer relationships		13		158,158		(34,553	)		123,605
Other				1,520		(217	)		1,303
Total intangible assets			$	258,092	$	(49,748	)	$	208,344

As of December 31, 2007
Patents		14	$	12,770	$	(3,591	)	$	9,179
Trademarks/Tradenames		15		85,644		(9,679	)	$	75,965
Customer relationships		13		158,158		(31,452	)	$	126,706
Other				1,520		(113	)	$	1,407
Total intangible assets			$	258,092	$	(44,835	)	$	213,257

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

4. COMPREHENSIVE INCOME (LOSS)

Comprehensive income (loss) is comprised of the following:

	Three Months Ended
	March 29, 2008			March 31, 2007
	(Amounts in thousands)

Net loss	$	(21,842	)	$	(10,864	)
Foreign currency translation adjustment		(1,173	)		536

Comprehensive loss	$	(23,015	)	$	(10,328	)

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5. LIQUIDITY

As of March 29, 2008, the Company has $24.9 million of cash and cash equivalents and $55.5 million of availability under its revolving credit facility. As of March 29, 2008, the Company had approximately $1,053.0 million of indebtedness outstanding.

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

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

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

If lenders were to terminate their commitment under the revolving credit facility, our inability to draw on or issue letters of credit under this facility would affect our working capital, would impact our ability to make capital improvements and may also impact our ability to acquire inventory and products because vendors may be unwilling to extend credit to us. If our debt is accelerated to be due currently, the funds generated by operations will not be adequate to finance our ongoing operational cash flow needs, capital expenditures (as described above), debt service obligations, management incentive expenses, fees payable under the General Advisory Agreement with a Caxton-Iseman party, dated February 12, 2004 (the “General Advisory Agreement”), and other contractual obligations for the foreseeable future.

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

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

-9-

6. LONG-TERM DEBT

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

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

	March 29, 2008		December 31, 2007
	(Amounts in thousands)

Senior term loan facility	$	677,860	$	677,910
Senior revolving credit facility		15,000		-
Senior subordinated notes		360,174		360,186
		1,053,034		1,038,096
Less current maturities		23,488		6,873
	$	1,029,546	$	1,031,223

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

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

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

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

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

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

Our senior credit facilities require that we comply on a quarterly basis with financial covenants consisting of a maximum leverage ratio test. Our covenants also restrict the payment of dividends, with certain exceptions, without the lenders consent in writing. The Company is also required at each year end, commencing December 31, 2008, to calculate and submit within 90 days a payment of excess cash, as defined in the Company’s credit agreement. This payment will reduce the outstanding balance on the Company’s term loans.

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

-10-

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

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

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

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

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

7. PENSION PLANS

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

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

	For the three months ended March 29, 2008			For the three months ended March 31, 2007
	(Amounts in thousands)

Service cost	$	48		$	79
Interest cost		506			490
Expected return on plan assets		(550	)		(504	)
Net periodic expense	$	4		$	65

-11-

8. COMMITMENTS AND CONTINGENCIES

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

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

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

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

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

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

-12-

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

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

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

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

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

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

-13-

10. RESTRUCTURING

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

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

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

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

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

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

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

11. STOCK-BASED COMPENSATION

Stock Option Plan

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

	Stock Options		Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term (Years)

Balance at January 1, 2008		248,594	$	38.12		7.95
Granted		-		-		-
Forfeited or expired		8,400	$	10.00		-
Balance at March 29, 2008		240,194	$	39.11		7.49

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

Other Share-Based Compensation

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

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

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

-14-

12. SEGMENT INFORMATION

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

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

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

Following is a summary of the Company’s segment information. (Amounts in thousands)

	Three months ended
	March 29, 2008			March 31, 2007
Net Sales
Siding, Fencing, and Railing	$	147,060		$	169,514
Windows and Doors		109,313			115,760
	$	256,373		$	285,274
Operating earnings (loss)
Siding, Fencing, and Railing	$	(4,186	)	$	(455	)
Windows and Doors		(7,605	)		7,531
Unallocated		(2,493	)		(1,917	)
	$	(14,284	)	$	5,159


	As of			As of
	March 29, 2008			December 31, 2007
Total Assets
Siding, Fencing, and Railing	$	829,323		$	826,480
Windows and Doors		700,327			717,740
Unallocated		53,155			81,387
	$	1,582,805		$	1,625,607

-15-

13. GUARANTOR / NON-GUARANTOR FINANCIAL INFORMATION

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

PLY GEM HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the three months ended March 29, 2008

	Guarantor			Issuer						Non-
	Ply Gem			Ply Gem			Guarantor			Guarantor
	Holdings, Inc.			Industries, Inc.			Subsidiaries			Subsidiary			Eliminations		Consolidated
	(Amounts in thousands)

Net Sales	$	-		$	-		$	236,696		$	19,677		$	-	$	256,373
Costs and Expenses:
Cost of products sold		-			-			210,676			13,590			-		224,266
Selling, general and
administrative expense		-			2,493			35,034			3,950			-		41,477
Intercompany administrative
charges		-			(2,368	)		2,368			-			-		-
Amortization of intangible assets		-			-			4,914			-			-		4,914
Total Costs and Expenses		-			125			252,992			17,540			-		270,657
Operating earnings (loss)		-			(125	)		(16,296	)		2,137			-		(14,284	)
Foreign currency gain (loss)		-			-			-			(551	)		-		(551	)
Intercompany interest		-			22,158			(22,158	)		-			-		-
Interest expense		-			(22,689	)		16			(401	)		-		(23,074	)
Interest income		-			161			3			39			-		203
Income (loss) before equity in
subsidiaries' income		-			(495	)		(38,435	)		1,224			-		(37,706	)
Equity in subsidiaries' income		(21,842	)		(21,555	)		-			-			43,397		-
Income (loss) before income tax
provision (benefit)		(21,842	)		(22,050	)		(38,435	)		1,224			43,397		(37,706	)
Provision (benefit) for income taxes		-			(208	)		(16,060	)		404			-		(15,864	)
Net income (loss)	$	(21,842	)	$	(21,842	)	$	(22,375	)	$	820		$	43,397	$	(21,842	)

Other comprehensive income (loss):
Foreign currency translation adjustments		-			-			-			(1,173	)		-		(1,173	)
Total comprehensive income (loss)	$	(21,842	)	$	(21,842	)	$	(22,375	)	$	(353	)	$	43,397	$	(23,015	)

-16-

PLY GEM HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the three months ended March 31, 2007

	Guarantor			Issuer						Non-
	Ply Gem			Ply Gem			Guarantor			Guarantor
	Holdings, Inc.			Industries, Inc.			Subsidiaries			Subsidiary			Eliminations		Consolidated
	(Amounts in thousands)

Net Sales	$	-		$	-		$	269,192		$	16,082		$	-	$	285,274
Costs and Expenses:
Cost of products sold		-			-			226,762			11,322			-		238,084
Selling, general and
administrative expense		-			1,917			32,243			3,237			-		37,397
Intercompany administrative
charges		-			(2,692	)		2,692			-			-		-
Amortization of intangible assets		-			-			4,634			-			-		4,634
Total Costs and Expenses		-			(775	)		266,331			14,559			-		280,115
Operating earnings		-			775			2,861			1,523			-		5,159
Foreign currency gain		-			-			-			216			-		216
Intercompany interest		-			23,701			(23,602	)		(99	)		-		-
Interest expense		-			(24,745	)		(1	)		(520	)		-		(25,266	)
Interest income		-			295			259			23			-		577
Income (loss) before equity in
subsidiaries' income		-			26			(20,483	)		1,143			-		(19,314	)
Equity in subsidiaries' income		(10,864	)		(10,880	)		-			-			21,744		-
Income (loss) before income tax
provision (benefit)		(10,864	)		(10,854	)		(20,483	)		1,143			21,744		(19,314	)
Provision (benefit) for income taxes		-			10			(8,837	)		377			-		(8,450	)
Net income (loss)	$	(10,864	)	$	(10,864	)	$	(11,646	)	$	766		$	21,744	$	(10,864	)

Other comprehensive income (loss):
Foreign currency translation adjustments		-			-			-			536			-		536
Total comprehensive income (loss)	$	(10,864	)	$	(10,864	)	$	(11,646	)	$	1,302		$	21,744	$	(10,328	)

-17-

PLY GEM HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEET
As of March 29, 2008

	Guarantor		Issuer						Non-
	Ply Gem		Ply Gem			Guarantor			Guarantor
	Holdings, Inc.		Industries, Inc.			Subsidiaries			Subsidiary			Eliminations			Consolidated
	(Amounts in thousands)
ASSETS
Current Assets:
Cash and cash equivalents	$	-	$	14,444		$	7,621		$	2,837		$	-		$	24,902
Accounts receivable, net		-		-			123,454			11,198			-			134,652
Inventories:
Raw materials		-		-			53,675			4,325			-			58,000
Work in process		-		-			20,948			981			-			21,929
Finished goods		-		-			36,738			2,735			-			39,473
Total inventory		-		-			111,361			8,041			-			119,402
Prepaid expenses and other
current assets		-		3,627			15,668			360			-			19,655
Deferred income taxes		-		-			11,780			-			-			11,780
Total current assets		-		18,071			269,884			22,436			-			310,391
Investments in subsidiaries		216,405		138,090			-			-			(354,495	)		-
Property and Equipment, at cost:
Land		-		-			3,840			171			-			4,011
Buildings and improvements		-		106			37,020			939			-			38,065
Machinery and equipment		-		149			238,055			5,985			-			244,189
		-		255			278,915			7,095			-			286,265
Less accumulated depreciation		-		(136	)		(92,086	)		(2,454	)		-			(94,676	)
Total property and equipment, net		-		119			186,829			4,641			-			191,589
Other Assets:
Intangible assets, net		-		-			208,344			-			-			208,344
Goodwill		-		-			789,389			44,879			-			834,268
Intercompany note receivable		-		1,088,999			-			-			(1,088,999	)		-
Other		-		36,012			2,201			-			-			38,213
Total other assets		-		1,125,011			999,934			44,879			(1,088,999	)		1,080,825
	$	216,405	$	1,281,291		$	1,456,647		$	71,956		$	(1,443,494	)	$	1,582,805

LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities:
Current maturities of long-term debt	$	-	$	23,279		$	-		$	209		$	-		$	23,488
Accounts payable		-		520			90,928			4,186			-			95,634
Accrued expenses and taxes		-		20,297			38,512			2,682			-			61,491
Total current liabilities		-		44,096			129,440			7,077			-			180,613
Deferred income taxes		-		-			86,306			4,307			-			90,613
Intercompany note payable		-		-			1,088,999			-			(1,088,999	)		-
Other long term liabilities		-		11,548			52,951			1,129			-			65,628
Long-term debt, less current
maturities		-		1,009,242			-			20,304			-			1,029,546
Stockholder's Equity:
Preferred stock		-		-			-			-			-			-
Common stock		-		-			-			-			-			-
Additional paid-in-capital		180,543		180,543			87,686			5,637			(273,866	)		180,543
Retained earnings		27,400		27,400			11,265			25,762			(64,427	)		27,400
Accumulated other
comprehensive income (loss)		8,462		8,462			-			7,740			(16,202	)		8,462
	$	216,405	$	1,281,291		$	1,456,647		$	71,956		$	(1,443,494	)	$	1,582,805

-18-

PLY GEM HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEET
As of December 31, 2007

	Guarantor		Issuer						Non-
	Ply Gem		Ply Gem			Guarantor			Guarantor
	Holdings, Inc.		Industries, Inc.			Subsidiaries			Subsidiary			Eliminations			Consolidated
	(Amounts in thousands)
ASSETS
Current Assets:
Cash and cash equivalents	$	-	$	40,647		$	18,376		$	6,184		$	-		$	65,207
Accounts receivable, net		-		-			100,221			11,432			-			111,653
Inventories:
Raw materials		-		-			55,506			4,497			-			60,003
Work in process		-		-			21,987			1,084			-			23,071
Finished goods		-		-			42,296			2,912			-			45,208
Total inventory		-		-			119,789			8,493			-			128,282
Prepaid expenses and other
current assets		-		3,451			12,622			389			-			16,462
Deferred income taxes		-		-			12,797			-			-			12,797
Total current assets		-		44,098			263,805			26,498			-			334,401
Investments in subsidiaries		239,544		115,861			-			-			(355,405	)		-
Property and Equipment, at cost:
Land		-		-			3,840			177			-			4,017
Buildings and improvements		-		106			36,865			956			-			37,927
Machinery and equipment		-		49			234,750			6,122			-			240,921
		-		155			275,455			7,255			-			282,865
Less accumulated depreciation		-		(126	)		(81,417	)		(2,326	)		-			(83,869	)
Total property and equipment, net		-		29			194,038			4,929			-			198,996
Other Assets:
Intangible assets, net		-		-			213,257			-			-			213,257
Goodwill		-		-			789,575			46,245			-			835,820
Intercompany note receivable		-		1,088,999			-			-			(1,088,999	)		-
Other		-		37,932			5,201			-			-			43,133
Total other assets		-		1,126,931			1,008,033			46,245			(1,088,999	)		1,092,210
	$	239,544	$	1,286,919		$	1,465,876		$	77,672		$	(1,444,404	)	$	1,625,607

LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities:
Current maturities of long-term debt	$	-	$	6,623		$	-		$	250		$	-		$	6,873
Accounts payable		-		547			90,317			5,392			-			96,256
Accrued expenses and taxes		-		17,787			68,787			6,842			-			93,416
Total current liabilities		-		24,957			159,104			12,484			-			196,545
Deferred income taxes		-		-			86,866			4,285			-			91,151
Intercompany note payable		-		-			1,088,999			-			(1,088,999	)		-
Other long term liabilities		-		11,508			54,473			1,163			-			67,144
Long-term debt, less current
maturities		-		1,010,910			-			20,313			-			1,031,223
Stockholder's Equity:
Preferred stock		-		-			-			-			-			-
Common stock		-		-			-			-			-			-
Additional paid-in-capital		180,667		180,667			26,812			5,572			(213,051	)		180,667
Retained earnings		49,242		49,242			49,622			24,942			(123,806	)		49,242
Accumulated other
comprehensive income (loss)		9,635		9,635			-			8,913			(18,548	)		9,635
	$	239,544	$	1,286,919		$	1,465,876		$	77,672		$	(1,444,404	)	$	1,625,607

-19-

PLY GEM HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF CASH FLOWS
For the three months ended March 29, 2008

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

-20-

PLY GEM HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF CASH FLOWS
For the three months ended March 31, 2007


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

-21-

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

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

Overview

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

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

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

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

Financial statement presentation

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

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

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

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

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

Impact of weather

-22-

Critical Accounting Policies

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

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

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

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

Asset Impairment. In accordance with SFAS No. 144, if a triggering event occurs, we would evaluate the realizability of certain long-lived assets, which primarily consist of property and equipment and purchased intangible assets subject to amortization, based on expectations of non-discounted future cash flows for each asset group having a material amount of long-lived assets. If circumstances indicate a potential impairment, and if the sum of the expected non-discounted future cash flow is less than the carrying amount of all assets including SFAS No. 144 long-lived assets, we would recognize an impairment loss. A drop in projected cash flows due to price increases for raw materials and market wide declines in the housing industry was determined to be a triggering event for an impairment test during the first quarter of 2008. The test results did not indicate that an impairment existed at March 29, 2008.

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

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

-23-

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

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

Results of Operations

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

(Amounts in thousands)

	Three months ended
	March 29,			March 31,
	2008			2007

Net Sales
Siding, Fencing and Railing	$	147,060		$	169,514
Windows and Doors		109,313			115,760
Operating earnings (loss)
Siding, Fencing and Railing		(4,186	)		(455	)
Windows and Doors		(7,605	)		7,531
Unallocated		(2,493	)		(1,917	)
Foreign currency gain (loss)
Windows and Doors		(551	)		216
Interest expense, net
Siding, Fencing and Railing		16			(26	)
Windows and Doors		(359	)		265
Unallocated		(22,528	)		(24,928	)
Income tax expense (benefit)
Unallocated		(15,864	)		(8,450	)

Net loss	$	(21,842	)	$	(10,864	)

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

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

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

-24-

Siding, Fencing and Railing Segment

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

Net Sales

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

Cost of Products Sold

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

Selling, general and administrative expense

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

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Windows and Doors Segment

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

Net Sales

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

Cost of Products Sold

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

Selling, general and administrative expense

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

Amortization of intangible assets

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

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Unallocated Operating Earnings, Interest, and Provision for Income Taxes

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

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

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

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

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Liquidity and Capital Resources

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

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

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

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

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

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

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

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

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

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

Because of the inherent seasonality in our business and the resulting working capital requirements, our liquidity position within a given year will fluctuate. The seasonal effect that creates greatest capital needs is experienced during the first six months of the year and we anticipate the need to borrow funds under the revolving portion of our Credit Facility to support this requirement. If we are unsuccessful in negotiating an amendment to our senior credit facility and were to default on our senior credit facility, the funds generated by operations may not be adequate to finance our ongoing operational cash flow needs, capital expenditures (as described above), debt service obligations, management incentive expenses, fees payable under the General Advisory Agreement with a Caxton-Iseman party, dated February 12, 2004 (the “General Advisory Agreement”), and other contractual obligations for the foreseeable future.

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Contractual Obligations

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

Inflation; Seasonality

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

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Special Note Regarding Forward-Looking Statements

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

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

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

·	the competitive nature of our industry;

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

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

·	changes in our relationships with our significant customers.

Other factors that could cause actual results to differ from those implied by the forward-looking statements contained in this Quarterly Report are set forth in our 2007 Annual Report on Form 10-K. We undertake no obligation to update the forward-looking statements in this filing.

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Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

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

Item 4. CONTROLS AND PROCEDURES

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

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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 will decline in 2008 as compared to the levels for 2007. If these market forecasts are correct, our net sales and net income may be adversely affected.

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

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

Item 6. EXHIBITS

(a) Exhibits

Exhibit No. Description of Exhibit


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

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

* Filed herewith.

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SIGNATURES

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

	PLY GEM HOLDINGS, INC (Registrant)

Date: May 9, 2008	By:	/s/ Gary E. Robinette
		Name: Gary E. Robinette
		Title: President and Chief Executive Officer



Date: May 9, 2008	By:	/s/ Shawn K. Poe
		Name: Shawn K. Poe
		Title: Vice President, Chief Financial Officer
		Treasurer and Secretary

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