The following discussion of our financial condition and results of operations should be read in conjunction with the Management's Discussion and Analysis of Financial Condition and Results of Operations and the consolidated financial statements and notes thereto for the year ended December 29, 2007 included in our most recent annual report on Form 10-K.

Special Note Regarding Forward-Looking Statements

This document includes forward-looking statements regarding, among other things, our financial condition and business strategy. Forward-looking statements provide our current expectations and projections about future events. Forward-looking statements include statements about our expectations, beliefs, plans, objectives, intentions, assumptions, and other statements that are not historical facts. As a result, all statements other than statements of historical facts included in this discussion and analysis and located elsewhere in this document regarding the prospects of our industry and our prospects, plans, financial position, and business strategy may constitute forward-looking statements within the meaning of Section 21E of the Exchange Act. In addition, forward-looking statements generally can be identified by the use of forward-looking terminology such as "may," "could," "expect," "intend," "estimate," "anticipate," "plan," "foresee," "believe," or "continue," or the negatives of these terms or variations of them or similar terminology, but the absence of these words does not necessarily mean that a statement is not forward-looking.

Forward-looking statements are subject to known and unknown risks and uncertainties and are based on potentially inaccurate assumptions that could cause actual results to differ materially from those expected or implied by the forward-looking statements. Although we believe that the expectations reflected in these forward-looking statements are reasonable, we can give no assurance that these expectations will occur as predicted. All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements included in this document. These forward-looking statements speak only as of the date of this report. We undertake no obligation to publicly revise any forward-looking statement to reflect circumstances or events after the date of this report or to reflect the occurrence of unanticipated events, except as may be required by applicable securities laws.

Risks associated with our business, an investment in our securities, and with achieving the forward-looking statements contained in this report or in our news releases, Web sites, public filings, investor and analyst conferences or elsewhere, include, but are not limited to, the risk factors described below. Any of the risk factors described below could cause our actual results to differ materially from expectations and could have a material adverse effect on our business, financial condition or results of operations. We may not succeed in addressing these challenges and risks.

Current Operating Conditions and Outlook

In the third quarter of 2008, new housing permits in Florida decreased 43% compared to the third quarter of 2007 and were down 10% from the second quarter of 2008. Also in the third quarter of 2008, the availability of credit decreased significantly as the mortgage crisis widened. In response to the deterioration in the housing market, we have taken a number of steps to enhance profitability and conserve capital. As discussed in "Other Developments - Restructurings" below, we adjusted our operating cost structure to more closely align with current demand. In addition, we decreased our capital spending in 2007 and have further restricted capital spending in the first nine months of 2008. However, we also view this market downturn as an opportunity to gain market share from our competitors. For instance, we have introduced new incentive programs offered to both our distributors and end users. We also increased marketing and sales efforts in areas outside of our dominant markets, including northern Florida, the Gulf Coast and the Carolinas and other southeastern states resulting in some incremental sales outside of Florida compared to last year. Finally, we introduced new products and expanded product lines to broaden our product offering. As a result of these actions, we continue to outperform the underlying market. However, gross margins have declined to 31.8% in the first nine months of 2008 from 34.1% in the first nine months of 2007 due, mainly, to the impact of the loss of operating leverage against fixed costs.

While the homebuilding industry is in a down cycle, we still believe the long-term outlook for the housing industry is positive due to growth in the underlying demographics. At this point, it appears as though the housing market has not hit bottom. Despite these unfavorable operating conditions, we still believe that, in the long-term, we can grow organically by gaining market share and outperforming our underlying markets. However, we believe difficult market conditions affecting our business will continue and the recent downturn in the economy as a result if the mortgage crisis may have a further negative effect on our operating results and year-over-year comparisons.

Economic conditions have recently deteriorated significantly in the United States, and the housing industry, most notably the Company's primary market of Florida, is in a period of prolonged deterioration. These conditions may persist and remain depressed for the foreseeable future. Economic conditions have been negatively impacted by slowing growth and the mortgage crisis ultimately causing liquidity and credit concerns. Continuing adverse economic conditions in our markets could likely negatively impact our business, which could result in reduced demand for our products, increased price competition, increased risk in the collectibility of cash from our customers potentially resulting in increased reserves for doubtful accounts and write-offs of accounts receivable, and higher operating costs. If economic conditions deteriorate further, we may experience adverse impacts on our business, operating results and financial condition.

Other Developments

Restructurings

On October 25, 2007, we announced a restructuring of the Company as a result of an in-depth analysis of the Company's target markets, internal structure, projected run-rate, and efficiency. The restructuring resulted in a decrease in the Company's workforce of approximately 150 employees and included employees at both its Venice, Florida and Salisbury, North Carolina locations. The restructuring was undertaken in an effort to streamline operations as well as improve processes to drive new product development and sales. As a result of the restructuring, the Company recorded a restructuring charge of $2.4 million in the fourth quarter of 2007. The charge related primarily to employee separation costs.

On March 4, 2008, we announced a second restructuring of the Company as a result of continued analysis of the Company's target markets, internal structure, projected run-rate, and efficiency. The restructuring resulted in a decrease in the Company's workforce of approximately 300 employees and included employees at both its Venice, Florida and Salisbury, North Carolina locations. As a result of the restructuring, the Company recorded a restructuring charge of $1.8 million in the first quarter of 2008. The charge related primarily to employee separation costs.

Selected Financial Data


In the following table, we show financial data derived from our unaudited
statements of operations as a percentage of total revenues for the periods
indicated.

                                            Third Quarter Ended                       Nine Months Ended
                                    September 27,         September 29,       September 27,        September 29,
                                        2008                  2007                2008                 2007

Net sales                                    100.0 %               100.0 %             100.0 %              100.0 %
Cost of sales                                 70.2 %                68.3 %              68.2 %               65.9 %
   Gross margin                               29.8 %                31.7 %              31.8 %               34.1 %
Goodwill and intangible
impairment charges                             2.9 %                 0.0 %              55.3 %                0.0 %
Asset impairment charge                        0.0 %                 0.0 %               0.0 %                0.4 %
Selling, general and
administrative expenses                       26.6 %                25.4 %              27.7 %               26.3 %
   Income (loss) from operations               0.3 %                 6.3 %             (51.2 %)               7.4 %
Interest expense, net                          4.1 %                 3.8 %               4.2 %                3.9 %
Other expense (income), net                    0.0 %                 0.3 %               0.0 %                0.2 %
   (Loss) income before income
taxes                                         (3.8 %)                2.2 %             (55.4 %)               3.3 %
Income tax (benefit) expense                  (0.9 %)                0.8 %              (8.2 %)               1.2 %
   Net (loss) income                          (2.9 %)                1.4 %             (47.2 %)               2.1 %

RESULTS OF OPERATIONS FOR QUARTER ENDED SEPTEMBER 27, 2008 AND SEPTEMBER 29,
2007

Net sales

Net sales decreased nearly $17.8 million, or 24.6%, in the third quarter of 2008, compared to the 2007 third quarter. Net sales for the third quarter of 2008 were $54.3 million, compared with net sales of $72.1 million for the third quarter of 2007. The following table shows net sales classified by major product category (sales in thousands):

                                                  Quarter Ended
                              September 27, 2008                 September 29, 2007
                           Sales           % of sales         Sales           % of sales       % change
Product category:
   WinGuard Windows
and Doors               $      37.7               69.4 %   $      50.0               69.3 %         (24.6 %)
   Other Window and
Door Products                  16.6               30.6 %          22.1               30.7 %         (24.9 %)

   Total net sales      $      54.3              100.0 %   $      72.1              100.0 %         (24.6 %)

Net sales of WinGuard branded products were $37.7 million for the third quarter of 2008, a decrease of $12.3 million, or 24.6%, from $50.0 million in net sales for the 2007 third quarter. Demand for WinGuard branded products is driven by, among other things, increased enforcement of strict building codes mandating the use of impact-resistant products, increased consumer and homebuilder awareness of the advantages provided by impact-resistant windows and doors over "active" forms of hurricane protection, and our successful marketing efforts. The decrease in sales of our WinGuard branded products was driven mainly by the decline in new home construction but also to some extent by the lack of storm activity during the two most recent hurricane seasons in the coastal markets of Florida served by the Company.

Net sales of Other Window and Door Products were $16.6 million for the third quarter of 2008, a decrease of $5.5 million, or 24.9%, from $22.1 million in net sales for the 2007 third quarter. The decrease was mainly due to the decline in new housing. New housing demand has traditionally impacted sales of our Other Window and Door Products more than our WinGuard Window and Door Products.

Gross margin

Gross margin was $16.2 million for the third quarter of 2008, a decrease of $6.7 million, or 29.2%, from $22.9 million for the third quarter of 2007. This decrease was largely due to lower sales volumes of all of our products, most significantly of our WinGuard branded windows and doors, sales of which decreased 24.6% compared to the prior year quarter, and the resulting loss of operating leverage against fixed costs.

Impairment Charges

The Company believes that the weakness in the housing market has resulted in the prolonged decline in its market capitalization as compared to its book value. The Company considers the relationship between its market capitalization and its book value, among other things, when reviewing for indicators of impairment. During the second quarter of 2008, the Company concluded that the weakness in the housing sector is likely to persist longer than previously anticipated by the Company based on its review of, among other things, sequential quarter housing starts in the second quarter of 2008 compared to the first quarter of 2008, recent turmoil surrounding the nation's largest mortgage lenders and the potential negative impact on the availability of mortgage financing and housing start forecasts published by national home builder associations which extended the expected recovery in the new home construction market further out in 2009.

As a result of these impairment indicators, during the second quarter of 2008 the Company updated the first step of its goodwill impairment test and determined that its carrying value exceeded its fair value, indicating that goodwill was impaired. Having determined that goodwill was impaired, we then began performing the second step of the goodwill impairment test which involves calculating the implied fair value of our goodwill by allocating the fair value of the Company to all of our assets and liabilities other than goodwill (including both recognized and unrecognized intangible assets) and comparing it to the carrying amount of goodwill. The Company recorded an estimated $92.0 million goodwill impairment in the second quarter of 2008 as, at the date of the filing of the Company's Quarterly Report on Form 10-Q for the quarter ended June 28, 2008, the Company had not completed the allocation of fair value in the second step. During the third quarter of 2008, the Company completed the second step of the goodwill impairment test and, as a result, recorded an additional $1.3 million goodwill impairment charge resulting in goodwill impairment charges totaling $93.3 million in the nine months ended September 27, 2008.

During the second quarter of 2008, also as a result of the impairment indicators described above, the Company evaluated its intangible assets with indefinite lives for impairment and compared the estimated fair value of its trademarks to their carrying value and preliminarily determined that there was no impairment. During the third quarter of 2008, as part of finalizing its goodwill impairment test discussed above, the Company made certain changes to its projections that affected the previous estimate of fair value and, when compared to the carrying value of indefinite lived intangibles, resulted in a $0.3 million impairment charge in the third quarter of 2008.

Selling, general and administrative expenses

Selling, general and administrative expenses were $14.5 million for the third quarter of 2008, a decrease of $3.8 million, from $18.3 million for the 2007 third quarter. This decrease was mainly due to a $2.5 million decrease in personnel related costs as the result of the cost saving actions initiated by the Company in the fourth quarter of 2007 and first quarter of 2008 as well as a decrease in commissions, a $1.0 million decrease in marketing costs primarily due to a lower level of advertising and a $0.4 million decrease in warranty and service costs. These cost savings were partially offset by a $0.5 million increase in fuel costs. The remaining decrease is due primarily to an overall lower level of spending due to cost saving initiatives and lower volume. As a percentage of sales, selling, general and administrative expenses increased during the third quarter of 2008 to 26.6% compared to 25.4% for the third quarter of 2007, mainly due to the decrease in sales volume.

Interest expense, net

Interest expense, net was $2.2 million in the third quarter of 2008, a decrease of almost $0.6 million, or 19.3%, from $2.8 million for the third quarter of 2007. The decrease was due to a decrease in average debt level in the third quarter of 2008 compared to the third quarter of 2007, partially offset by lower interest income due to lower average level of cash in banks in the 2008 third quarter compared to the 2007 third quarter. Included in interest expense in the third quarters of 2008 and 2007 are $0.2 million and $0.1 million, respectively, of deferred financing costs written-off related to the prepayments of debt in each period.

Other expenses (income), net

There were other expenses of less than $0.1 million for the third quarter of 2008 compared to other expenses of $0.2 million for the 2007 third quarter. The amounts in the third quarter of 2008 relate to portions of aluminum hedges designated as over-hedges and in the third quarter of 2007 to ineffective interest rate and aluminum hedges.

Income tax (benefit) expense

We had an effective tax rate of 23.6% for the quarter ended September 27, 2008 and an effective tax rate of 34.6% for the quarter ended September 29, 2007. Excluding the deferred tax benefits totaling $0.3 million related to the $1.6 million of impairment charges recorded in the third quarter of 2008, we would have had an effective tax rate of 36.5% for the third quarter of 2008.

RESULTS OF OPERATIONS FOR FIRST NINE MONTHS ENDED SEPTEMBER 27, 2008 AND
SEPTEMBER 29, 2007

Net sales

Net sales decreased $54.8 million, or 24.5%, in the first nine months of 2008, compared to the 2007 first nine months. Net sales for the first nine months of 2008 were $169.3 million, compared with net sales of $224.1 million for the first nine months of 2007. The following table shows net sales classified by major product category (sales in thousands):

                                               Nine Months Ended
                             September 27, 2008                September 29, 2007
                           Sales          % of sales         Sales          % of sales       % change
Product category:
   WinGuard Windows
and Doors               $     118.2              69.8 %   $     152.6              68.1 %         (22.5 %)
   Other Window and
Door Products                  51.1              30.2 %          71.5              31.9 %         (28.5 %)

   Total net sales      $     169.3             100.0 %   $     224.1             100.0 %         (24.5 %)

Net sales of WinGuard branded products were $118.2 million for the first nine months of 2008, a decrease of $34.4 million, or 22.5%, from $152.6 million in net sales for the 2007 first nine months. Demand for WinGuard branded products is driven by, among other things, increased enforcement of strict building codes mandating the use of impact-resistant products, increased consumer and homebuilder awareness of the advantages provided by impact-resistant windows and doors over "active" forms of hurricane protection, and our successful marketing efforts. The decrease in sales of our WinGuard branded products was driven mainly by the decline in new housing but, also, to some extent by the lack of storm activity during the two most recent hurricane seasons in the coastal markets of Florida served by the Company.

Net sales of Other Window and Door Products was $51.1 million for the first nine months of 2008, a decrease of $20.4 million, or 28.5%, from $71.5 million in net sales for the 2007 first nine months. The decrease was mainly due to the decline in new housing. New housing demand has traditionally impacted sales of our Other Window and Door Products more than our WinGuard Window and Door Products.

Restructuring Charge

On March 4, 2008 we announced a second restructuring of the Company as a result of continued analysis of the Company's target markets, internal structure, projected run-rate, and efficiency. As a result of the restructuring, the Company recorded a restructuring charge of $1.8 million in the first quarter of 2008 of which $1.1 million is included in cost of goods sold and $0.7 million is included in selling, general and administrative expenses. The charge related primarily to employee separation costs.

Gross margin

Gross margin was $53.8 million for the first nine months of 2008, a decrease of $22.5 million, or 29.5%, from $76.3 million for the first nine months of 2007. This decrease was largely due to lower sales volumes of all of our products, most significantly of our WinGuard branded windows and doors, sales of which decreased 22.5% compared to the prior year first nine months, and the resulting loss of operating leverage against fixed costs. Cost of goods sold in the first nine months of 2008 also includes a $1.1 million charge related to the restructuring actions taken in the 2008 first quarter.

Impairment Charges

See "Results of Operations for the Quarter Ended September 27, 2008 and September 27, 2007 - Impairment Charges." During the third quarter of 2008, as part of finalizing its goodwill impairment test discussed above, the Company made certain changes to its projections that affected the previous estimate of fair value and, when compared to the carrying value of indefinite lived intangibles, resulted in a $0.3 million impairment charge in the third quarter of 2008.

Asset Impairment Charge

We own a 225,000 square foot facility in Lexington, North Carolina which was vacant and being marketed for sale as a result of the completion of our move to our larger Salisbury facility. In the second quarter of 2007, we recorded an impairment charge of $0.8 million to reduce the carrying value of the assets comprising the Lexington facility to their then estimated fair market value. In December 2007, we reclassified the real estate as held and used when we made the decision to utilize the facility to produce a special-order product to be used in large-scale commercial projects. At that time, we resumed depreciation of the assets that comprise the Lexington real estate.

Selling, general and administrative expenses

Selling, general and administrative expenses were $46.9 million for the first nine months of 2008, a decrease of $12.1 million, from $59.0 million for the 2007 first nine months. This decrease was mainly due to a $5.4 million decrease in personnel related costs as the result of the cost saving actions initiated by the Company in the fourth quarter of 2007 and first quarter of 2008 as well as decreases in commissions and incentive compensation, a $3.0 million decrease in marketing costs primarily due to a lower level of advertising, a $1.5 million decrease in warranty and service costs, a $0.6 million decrease in stock-based compensation expense and a $0.5 million decrease in Sarbanes-Oxley compliance costs. These decreases were partially offset by a $1.3 million increase in fuel costs and $0.7 million in restructuring costs included in selling general and administrative expenses in the first quarter of 2008. The remaining decrease is due primarily to an overall lower level of spending due to cost saving initiatives and lower volume. As a percentage of sales, selling, general and administrative expenses increased during the first nine months of 2008 to 27.7% compared to 26.3% for the first nine months of 2007, mainly due to the restructuring charge and the decrease in volume.

Interest expense, net

Interest expense, net was $7.2 million in the first nine months of 2008, a decrease of $1.5 million, or 17.8% from $8.7 million for the first nine months of 2007. The decrease was due to a decrease in average debt level in the first nine months of 2008 compared to the first nine months of 2007 as well as lower amortization of deferred financing costs, partially offset by lower interest income due to lower average level of cash in banks in the 2008 first nine months compared to the 2007 first nine months. Included in interest expense in the first nine months of 2008 and 2007 are $0.3 million and $0.4 million, respectively, of deferred financing costs written-off related to the prepayments of debt in each period.

Other expenses (income), net

There was other income of less than $0.1 million for the first nine months of 2008 compared to other expenses of $0.4 million for the 2007 first nine months. The amounts in the first nine months of 2008 relate to the effects of aluminum hedges, both those that are ineffective and those that are effective overhedges, and in the first nine months of 2007 to the effect of ineffective interest rate and aluminum hedges.

Income tax (benefit) expense

We had an effective tax rate of 14.7% for the first nine months of 2008 and an effective tax rate of 36.3% for the first nine months of 2007. Excluding the deferred tax benefits totaling $13.8 million related to the $93.6 million of impairment charges recorded in the first nine months of 2008 and a $0.1 million valuation allowance recorded against the deferred tax assets for North Carolina state tax credits, we would have had an effective tax rate of 36.4% for the first nine months of 2008.

Liquidity and Capital Resources

Our principal source of liquidity is cash flow generated by operations, supplemented by borrowings under our credit facilities. This cash generating capability provides us with financial flexibility in meeting operating and investing needs. Our primary capital requirements are to fund working capital needs, meet required debt payments, including debt service payments on our credit facilities, and fund capital expenditures.

Consolidated Cash Flows

Operating activities. Cash provided by operating activities was $12.9 million in the first nine months of 2008 compared to $22.5 million in the first nine months of 2007. In the first nine months of 2008, we had net cash collections from customers totaling $171.4 million and other cash collections of $3.2 million, primarily from scrap aluminum sales. In the first nine months of 2008, we disbursed $97.0 million in cash related to payments of accounts payable, primarily to our vendors, and $60.5 million in cash to employees and for other payroll-related expenses. We also received a $2.8 million federal tax refund and used $6.6 million in cash to pay debt service costs. In the first nine months of 2007, we had net cash collections from customers totaling $229.9 million and other cash collections of $3.7 million, primarily from scrap aluminum sales. In the first nine months of 2007, we disbursed $124.6 million in cash related to payments of accounts payable, primarily to our vendors, and $76.6 million in cash to employees and for other payroll-related expenses. We also used $9.3 million in cash to pay debt service costs. Days sales outstanding (DSO), which we calculate as accounts receivable divided by recent average daily sales, was . . .