UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)ý

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934For The Quarterly Period Ended April 5, 2009ORo

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934


Commission File Number 33-81808

BUILDING MATERIALS CORPORATION OF AMERICA(Exact name of registrant as specified in its charter)

Delaware(State or Other Jurisdiction of Incorporation or
Organization)

22-3276290(IRS Employer Identification No.)1361 Alps Road, Wayne, New Jersey(Address of Principal Executive Offices)

07470(Zip Code)


(973) 628-3000(Registrant's telephone number, including area code)

None(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)

See
Table of Additional Registrants Below.

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 ý    NO o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted
and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit and post such files). Yes o    No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See
definition of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o

Accelerated filer oNon-accelerated filer ý(Do not check if a smaller reporting company)

Smaller reporting company o


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

As of May 20, 2009, 1,015,010 shares of Class A Common Stock, $.001 par value of the registrant were outstanding. There is no trading market for the common stock
of the registrant. As of May 20, 2009, the additional registrant had the number of shares outstanding which is shown on the table below. There is no trading market for the common stock of the
additional registrant. As of May 20, 2009, no shares of the registrant or the additional registrant were held by non-affiliates.



---





ADDITIONAL REGISTRANTS

Exact name of registrant as
specified in its charter

State or other
jurisdiction of
incorporation or
organization

No. of Shares
Outstanding

Commission
File No./I.R.S.
Employer
Identification No.

Address, including
zip code and
telephone number,
including area code,
of registrant's principal
executive officesBuilding Materials
Manufacturing Corporation


Delaware


10


333-69749-01/
22-3626208


1361 Alps Road
Wayne, NJ 07470
(973) 628-3000


2

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Part IFINANCIAL INFORMATION    Item 1FINANCIAL STATEMENTS

BUILDING MATERIALS CORPORATION OF AMERICA        CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)        (Dollars in Thousands)

First Quarter EndedApril 5,
2009

March 30,
2008Net sales

$
660,820

$
570,276Costs and expenses:Cost of products sold


429,424


424,915Selling, general and administrative


101,656


105,809Amortization of intangible assets


2,847


2,846Restructuring and other expenses


11,351


20,825Other expense, net


1,213


1,008Total costs and expenses, net


546,491


555,403Income before interest expense and income taxes


114,329


14,873Interest expense


(34,512
)

(39,865
)Income (loss) before income taxes


79,817


(24,992
)Income tax (expense) benefit


(27,840
)

9,947Net income (loss)

$
51,977

$
(15,045
)


The
accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

3

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BUILDING MATERIALS CORPORATION OF AMERICA        CONSOLIDATED BALANCE SHEETS        (Dollars in thousands, except per share amounts)

April 5,
2009
(Unaudited)

December 31,
2008ASSETSCurrent Assets:Cash and cash equivalents

$
25,071

$
37,037Accounts receivable, trade, net


450,814


199,233Accounts receivable, other


8,668


10,897Inventories, net


286,246


348,449Deferred income tax assets


51,794


39,324Other current assets


13,899


17,072Total Current Assets


836,492


652,012Property, plant and equipment, net


646,037


655,269Goodwill


653,804


653,644Intangible assets, net


193,403


196,250Income tax receivable from parent corporation





8,400Other noncurrent assets


113,698


114,739Total Assets

$
2,443,434

$
2,280,314LIABILITIES AND STOCKHOLDERS' DEFICITCurrent Liabilities:Current maturities of long-term debt

$
20,799

$
20,596Accounts payable


112,691


156,030Payable to related parties


36,015


21,153Loans payable to parent corporation


52,840


52,840Accrued liabilities


163,088


134,341Product warranty claims


16,200


16,200Total Current Liabilities


401,633


401,160Long-term debt


1,758,062


1,658,169Product warranty claims


31,751


28,765Deferred income tax liabilities


91,598


73,103Other liabilities


198,250


198,973Commitments and ContingenciesNote 13Stockholders' Deficit:Series A Cumulative Redeemable Convertible Preferred Stock, $.01 par value per share; 400,000 shares authorized; no shares issued





Class A Common Stock, $.001 par value per share; 1,300,000 shares authorized; 1,015,010 shares issued and outstanding


1


1Class B Common Stock, $.001 par value per share; 100,000 shares authorized; no shares issued





Loans receivable from parent corporation


(56,368
)

(56,348
)Retained earnings


69,346


27,372Accumulated other comprehensive loss


(50,839
)

(50,881
)Total Stockholders' Deficit


(37,860
)

(79,856
)Total Liabilities and Stockholders' Deficit

$
2,443,434

$
2,280,314


The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

4

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BUILDING MATERIALS CORPORATION OF AMERICA        CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)        (Dollars in thousands)

First Quarter EndedApril 5,
2009

March 30,
2008Cash and cash equivalents, beginning of period

$
37,037

$
6,324Cash used in operating activities:Net income (loss)


51,977


(15,045
)Adjustments to reconcile net income (loss) to net cash used in operating activities:Depreciation


17,971


17,841Amortization of intangible and other assets


3,944


3,763Restructuring and other expenses


12,145


28,024Deferred income taxes


5,999


(11,253
)Noncash interest charges


2,218


2,252Increase in working capital items


(210,201
)

(158,227
)Increase in product warranty claims


2,986


1,591Increase in other assets


(1,829
)

(4,138
)Increase (decrease) in other liabilities


(75
)

584Increase in net payable to related parties/parent corporations


23,501


5,168Other, net


(454
)

(746
)Net cash used in operating activities


(91,818
)

(130,186
)Cash used in investing activities:Capital expenditures


(9,962
)

(9,234
)Net cash used in investing activities


(9,962
)

(9,234
)Cash provided by financing activities:Proceeds from issuance of long-term debt


233,000


266,000Repayments of long-term debt


(129,507
)

(110,009
)Principal repayments of capital leases


(3,456
)

(1,551
)Distribution to parent corporation


(3
)

Dividends to parent corporation


(10,000
)

Loan to parent corporation


(20
)

(38
)Financing fees and expenses


(200
)

(562
)Net cash provided by financing activities


89,814


153,840Net change in cash and cash equivalents


(11,966
)

14,420Cash and cash equivalents, end of period

$
25,071

$
20,744The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.(Continued on the following page)


5

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BUILDING MATERIALS CORPORATION OF AMERICA

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Continued)

(Dollars in thousands)

First Quarter EndedApril 5,
2009

March 30,
2008Supplemental Cash Flow Information:Effect on cash from changes in working capital items:Increase in accounts receivable trade and accounts receivable other

$
(249,352
)
$
(181,730
)Decrease in inventories, net


61,188


27,917(Increase) decrease in other current assets


3,173


(5,747
)Increase (decrease) in accounts payable


(43,339
)

31,605Increase (decrease) in accrued liabilities


26,940


(4,945
)Payments for restructuring and other expenses


(8,811
)

(25,327
)Net effect on cash from increase in working capital items

$
(210,201
)
$
(158,227
)Cash paid during the period for:Interest (net of amount capitalized of $114 and
$68 in 2009 and 2008, respectively)

$
36,635

$
42,718Income taxes

$
192

$
45


The
accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

6

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BUILDING MATERIALS CORPORATION OF AMERICA        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 1. Formation of the Company

Building Materials Corporation of America ("BMCA" or the "Company") was formed on January 31, 1994 and is a wholly-owned subsidiary of BMCA Holdings Corporation ("BHC"), which is
a wholly-owned subsidiary of G-I Holdings Inc. ("G-I Holdings"). G-I Holdings is a wholly-owned subsidiary of G Holdings Inc. During the first quarter
of 2007, BMCA acquired ElkCorp ("Elk"), a Dallas, Texas-based manufacturer of roofing products and building materials, resulting in Elk becoming an indirect wholly-owned subsidiary of BMCA.

The
consolidated financial statements of the Company reflect, in the opinion of management, all adjustments necessary to present fairly the financial position of the Company at
April 5, 2009, and the results of its operations and its cash flows for the first quarter ended April 5, 2009 and March 30, 2008, respectively. All adjustments are of a normal
recurring nature, except for the restructuring and other expenses recorded in the Company's statement of operations for the first quarter ended April 5, 2009 and March 30, 2008,
respectively. See Note 3. Net sales of roofing products and specialty building products and accessories are generally seasonal in nature. Accordingly, the results of operations and cash flows
in the respective quarterly ended periods will vary depending on the time of the year. These financial statements should be read in conjunction with the annual audited financial statements and notes
thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2008, which was filed with the Securities and Exchange Commission (the
"SEC") on March 31, 2009 (the "2008 Form 10-K").

Note 2. New Accounting Pronouncements

In December 2007, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 141 (revised in 2007) "Business Combinations"
("SFAS No. 141R"), which provides revised guidance on how an acquiring company should recognize and measure the identifiable assets acquired, liabilities assumed, any noncontrolling interests,
and goodwill acquired in a business combination. SFAS No. 141R also expands the required disclosures related to the nature and financial statement effects of business combinations and became
effective on a prospective basis for business combinations completed in fiscal years beginning after December 15, 2008. The Company adopted the provisions of SFAS No. 141R during its
first quarter beginning January 1, 2009, and the adoption did not have any impact on the Company's consolidated financial statements.

In
April 2009, the FASB issued FASB Staff Position ("FSP") FAS No. 141(R)-1, "Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That
Arise from Contingencies" ("FSP FAS No. 141(R)-1"). FSP FAS No. 141(R)-1 requires that assets acquired and liabilities assumed in a business combination that
arise from contingencies be recognized at fair value if fair value can be reasonably estimated. If fair value cannot be reasonably estimated, the assets or liabilities would generally be recognized in
accordance with SFAS No. 5, "Accounting for Contingencies" ("SFAS No. 5") and FASB Interpretation No. 14, "Reasonable Estimation of the Amount of a Loss". Furthermore, the FASB
removed the subsequent accounting guidance for assets and liabilities arising from contingencies from SFAS No. 141(R). FSP FAS No. 141(R)-1 also eliminates the requirement to
disclose an estimate of the range of possible outcomes of recognized contingencies at the acquisition date. For unrecognized contingencies, the FASB requires that entities include only the disclosure
required by SFAS No. 5. The Company will adopt FSP FAS No. 141(R)-1 during its second quarter ending July 5, 2009, and its effect on the Company's results of operation
or financial position in future periods will depend on the nature and significance of any future business combination.

7

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BUILDING MATERIALS CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

Note 2. New Accounting Pronouncements (Continued)

In
December 2007, the FASB issued SFAS No. 160, "Noncontrolling Interests in Consolidated Financial Statements" ("SFAS No. 160"), which establishes requirements for
ownership interests in subsidiaries held by parties other than the Company (minority interests) to be clearly identified and disclosed in the consolidated statement of financial position within
equity, but separate from the parent's equity. Any changes in the parent's ownership interests are required to be accounted for in a consistent manner as equity transactions and any noncontrolling
equity investments in deconsolidated subsidiaries must be measured initially at fair value. SFAS No. 160 became effective on a prospective basis for fiscal years beginning after
December 15, 2008; however, the presentation and disclosure requirements must be retrospectively applied to comparative financial statements. The Company adopted the provisions of SFAS
No. 160 in its first quarter beginning January 1, 2009, and the adoption did not have any impact on its consolidated financial statements because the Company does not have any
noncontrolling interests.

In
March 2008, the FASB issued SFAS No. 161, "Disclosures about Derivative Instruments and Hedging Activities" ("SFAS No. 161"), which amends SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities" ("SFAS No. 133"), and is intended to improve financial reporting related to derivative instruments and hedging activities by
requiring enhanced disclosures to enable investors to better understand their effects on an entity's financial position, financial performance, and cash flows. The provisions of SFAS No. 161
became effective on a prospective basis for fiscal years beginning on or after November 15, 2008. The Company adopted the disclosure provisions of SFAS No. 161 during its first quarter
beginning January 1, 2009. Since SFAS No. 161 requires only disclosures, there was no impact on the Company's consolidated financial statements; however, refer to Note 7 for the
required disclosures.

In
April 2008, the FASB issued FSP FAS No. 142-3, "Determination of the Useful Life of Intangible Assets" ("FSP FAS No. 142-3"), which amends the
factors an entity should consider in developing renewal or extension assumptions used in determining the useful life of recognized intangible assets under SFAS No. 142, "Goodwill and Other
Intangible Assets". This new guidance applies prospectively to intangible assets that are acquired individually or with a group of other assets in business combinations and asset acquisitions. FSP FAS
No. 142-3 became effective for financial statements issued for fiscal years and interim periods beginning after December 15, 2008. The Company adopted the provisions of FSP
FAS No. 142-3 during its first quarter beginning January 1, 2009, and the adoption did not have any impact on its consolidated financial statements.

In
May 2008, the FASB issued SFAS No. 162, "The Hierarchy of Generally Accepted Accounting Principles" ("SFAS No. 162"), which identifies the sources of accounting
principles and the framework for selecting principles to be used in the preparation and presentation of financial statements in accordance with United States generally accepted accounting principles.
SFAS No. 162 will be effective 60 days after the SEC approves the Public Company Accounting Oversight Board's amendments to Interim Audit Standards Section 411, "The Meaning of
Present Fairly in Conformity With Generally Accepted Accounting Principles". The Company will adopt the provisions and evaluate the impact of SFAS No. 162 upon its effective date.

In
December 2008, the FASB issued FSP FAS No. 132(R)-1, "Employers' Disclosures about Postretirement Benefit Plan Assets" ("FSP FAS No. 132(R)-1"),
which provides additional guidance on an employers' disclosures about plan assets of a defined benefit pension or other post retirement plan. FSP FAS No. 132(R)-1 is effective for
financial statements issued for fiscal years ending after

8

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BUILDING MATERIALS CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

Note 2. New Accounting Pronouncements (Continued)

December 15,
2009. The Company will adopt the provisions of FSP FAS No. 132(R)-1 for its fiscal year beginning January 1, 2010, which will improve the disclosures in
the financial statements related to the assets held by its defined pension and postretirement plans.

In
April 2009, the FASB issued FSP FAS No. 157-4, "Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased
and Identifying Transactions That Are Not Orderly" ("FSP FAS No. 157-4"). According to the guidance, if an entity determines that the level of activity for an asset or liability has
significantly decreased and that a transaction is not orderly, further analysis of the transaction or quoted prices is required, and a significant adjustment to the transaction or quoted prices may be
deemed necessary to estimate the fair value in accordance with SFAS No. 157, "Fair Value Measurements" ("SFAS No. 157"). FSP FAS No. 157-4 is effective on a
prospective basis for interim and annual periods ending after June 15, 2009 with early adoption permitted for periods ending after March 15, 2009. The Company will adopt the provisions
of FSP FAS No. 157-4 for its second quarter ending July 5, 2009 and is currently evaluating the impact the provisions will have on its consolidated financial statements.

In
April 2009, the FASB issued FSP FAS No. 107-1 and Accounting Principles Board 28-1 "Interim Disclosures about Fair Value of Financial Instruments" ("FSP
FAS No. 107-1"). FSP FAS No. 107-1 amends SFAS No. 107 "Disclosures about Fair Value of Financial Instruments" by requiring an entity to provide
disclosures about fair value measurements of financial instruments in interim financial information. FSP FAS No. 107-1 is effective on a prospective basis for interim and annual
periods ending after June 15, 2009 with early adoption permitted for periods ending after March 15, 2009. The Company will adopt the required disclosure provisions in its second quarter
ending July 5, 2009. Since FSP FAS No. 107-1 only requires additional disclosures, there will be no impact on the Company's consolidated financial statements.

Note 3. Restructuring and Other Expenses

The Company initiated a restructuring plan (the "2007 Restructuring Plan"), which it formulated in connection with the Company's acquisition of Elk. The 2007 Restructuring Plan was
created to eliminate cost redundancies recognized due to the acquisition of Elk and to reduce the Company's current cost structure. The 2007 Restructuring Plan has been fully implemented as of
December 31, 2008. The Company accounts for its restructuring activities in accordance with SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities", SFAS
No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" and Emerging Issues Task Force No. 96-9 "Classification of Inventory Markdowns and Other
Costs Associated with Restructuring".

2008 Restructuring and Other Expenses

In connection with the acquisition of Elk, the Company identified $64.1 million of restructuring and other expenses in its
fiscal year ended December 31, 2008, which included $14.2 million of plant closing expenses, $3.3 million in employee severance payments and $46.6 million in
integration-related expenses. Integration-related expenses primarily consisted of $26.9 million of inventory write-downs, $6.1 million of restructuring-related sales discounts and
$13.6 million of other integration expenses.

The
Company recorded $73.2 million of the identified restructuring and other expenses in its statement of operations during its fiscal year ended December 31, 2008, of
which $6.1 million was

9

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BUILDING MATERIALS CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

Note 3. Restructuring and Other Expenses (Continued)

reflected
as a reduction in net sales due to restructuring-related sales discounts, $26.9 million was charged to cost of products sold and $40.2 million was charged to restructuring and
other expenses.

Three-Months Ended April 5, 2009 Restructuring and Other Expenses

In February 2009, the Company announced the temporary shutdown of two manufacturing facilities, one in Shafter, California and the
other in Nashville, Tennessee. As a result of these actions and other charges related to the acquisition of Elk, the Company identified an additional $12.1 million of restructuring and other
expenses in its first quarter ended April 5, 2009, which included $9.8 million of plant closing expenses, $0.9 million in employee severance payments and $1.4 million in
integration-related expenses. Integration-related expenses primarily consisted of $0.8 million of inventory write-downs and $0.6 million of other integration expenses.

The
Company recorded $12.2 million of the identified restructuring and other expenses in its statement of operations in the three-month period ended April 5, 2009, of which
$0.8 million was charged to cost of products sold and $11.4 million was charged to restructuring and other expenses. The Company expects to incur the remaining $1.7 million of
identified integration and other expenses and make the remaining cash payments related to its accrual when they are required.

The
table below details the Company's restructuring and other expense accruals and charges made against the accrual during its first quarter ended April 5, 2009:

Restructuring and Other Expenses

Plant
Closing
Expenses

Employee
Severance
Payments

Integration
Expenses

Total(Thousands)Beginning balance, as of December 31, 2008

$
3,452

$


$
5,205

$
8,657Current period costs, net


9,764


868


1,513


12,145Cash payments


(6,592
)

(868
)

(1,351
)

(8,811
)Amount charged to property, plant and equipment for asset write-down


(561
)




(188
)

(749
)Amount charged to write-off inventory








(729
)

(729
)Non-cash items








(84
)

(84
)Ending balance, as of April 5, 2009

$
6,063

$


$
4,366

$
10,429


10

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BUILDING MATERIALS CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

Note 4. Comprehensive Income (Loss)

The table below reconciles the Company's net income (loss) to comprehensive income (loss) for the first quarter ended April 5, 2009 and March 30, 2008, respectively:

April 5,
2009

March 30,
2008(Thousands)Net income (loss)

$
51,977

$
(15,045
)Other comprehensive income (loss), net of tax:Derivative fair value adjustment-interest rate swaps, net of tax of $46 and $11,895 at April 5, 2009 and March 30, 2008,
respectively


(75
)

(19,406
)Derivative fair value adjustment-treasury locks, net of tax of ($72) and ($72) at April 5, 2009 and March 30, 2008,
respectively


117


117Comprehensive income (loss)

$
52,019

$
(34,334
)


Note 5. Inventories

Inventories consist of the following as of April 5, 2009 and December 31, 2008, respectively:

April 5,
2009

December 31,
2008(Thousands)Finished goods

$
216,532

$
271,373Work-in process


36,134


41,225Raw materials and supplies


94,610


94,381Total


347,276


406,979Less LIFO reserve


(61,030
)

(58,530
)Inventories, net

$
286,246

$
348,449


11

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BUILDING MATERIALS CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

Note 6. Long-Term Debt

Long-term debt consists of the following at April 5, 2009 and December 31, 2008:

April 5,
2009

December 31,
2008(Thousands)73/4% Senior Notes due 2014

$
250,478

$
250,500Borrowings under the Senior Secured Revolving Credit Facility


183,000


76,000Term Loan


953,281


955,670Junior Lien Term Loan


325,000


325,000Obligations under capital leases


52,500


55,956Industrial development revenue bond


2,820


2,820Chester Loan


4,311


5,126Other notes payable


7,471


7,693Total


1,778,861


1,678,765Less current maturities


(20,799
)

(20,596
)Long-term debt less current maturities

$
1,758,062

$
1,658,169


As
of April 5, 2009, the Company had total outstanding consolidated indebtedness of $1,831.7 million, which included $52.8 million of demand loans to its parent
corporation and $20.8 million that matures prior to the end of the first quarter of 2010. The Company anticipates funding these obligations principally from its cash and cash equivalents on
hand, cash flow from operations and/or borrowings under its $600.0 million Senior Secured Revolving Credit Facility (the "Senior Secured Revolving Credit Facility").

As
of April 5, 2009, the Company was in compliance with all covenants under the Senior Secured Revolving Credit Facility, the $975.0 million Term Loan Facility (the "Term
Loan"), the $325.0 million Junior Lien Term Loan Facility (the "Junior Lien Term Loan" and collectively with the Senior Secured Revolving Credit Facility and the Term Loan the "Senior Secured
Credit Facilities") and the indenture governing its 73/4% Senior Notes due 2014 (the "Senior Notes"). As of April 5, 2009, the net book value of the collateral securing the
Senior Secured Revolving Credit Facility Collateral (as defined in the Senior Secured Revolving Credit Facility) and the Term Loan Collateral (as defined in the Term Loan) was $850.5 and
$1,649.2 million, respectively.

At
April 5, 2009, the Company had outstanding letters of credit of approximately $43.8 million, which included approximately $10.6 million of standby letters of
credit related to certain obligations of G-I Holdings.

Note 7. Derivative and Hedging Transactions



The Company is exposed to the impact of variable interest rate fluctuations on certain of its debt financings; however, the Company
limits its variable interest rate exposure through the use of derivative instruments, which reduce the risk of interest rate fluctuations related to the Company's debt. As a result of the use of
derivative instruments, the Company has exposure to the risk that its counterparties to derivative contracts will fail to meet their contractual obligations. In order to mitigate its

12

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BUILDING MATERIALS CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

Note 7. Derivative and Hedging Transactions (Continued)

counterparty
credit risk, the Company enters into derivative contracts with selected major financial institutions. The Company's policies and procedures for mitigating counterparty credit risk on
derivative transactions include reviewing and establishing limits for credit exposure with each financial institution and a continuous assessment of the creditworthiness of each counterparty. The
right of set-off that exists under certain of these derivative contracts enables the Company, subject to each derivative contract, to net amounts due to and from the counterparty reducing
the maximum loss from credit risk in the event of counterparty default.



In March 2007, the Company entered into forward-starting interest rate swap agreements ("swaps") with an effective date of
April 23, 2007 and a maturity date of April 23, 2012. These swaps were initiated in order to hedge the variable interest rate risk associated with the Company's Term Loan, and they are
structured that the Company receives interest based on the three-month Eurodollar rate ("LIBOR") and pay interest on a fixed rate basis. In October 2007, the Company entered into additional interest
rate swaps related to its Term Loan with an effective date of October 23, 2007 and a maturity date of October 23, 2012 under similar terms.

The
Company accounts for its swaps in accordance with SFAS No. 133, and as such its swaps are treated as cash flow hedges. The Company values its interest rate swap agreements
based on SFAS No. 157 Level 2 inputs from model-derived valuations whose significant inputs are quoted LIBOR contracts, Eurodollar futures and on-the-run swap
markets. SFAS No. 157 requires that the valuation of derivative assets and liabilities must take into account the parties' nonperformance risk. The Company discounted the value of its
derivative liabilities based on the credit spread for its debt as determined by the market trading price. See Note 8, Fair Value Measurements. As of April 5, 2009, the Company estimates
that during the next twelve months ending March 2010, approximately $19.0 million will be reclassified from accumulated other comprehensive income/loss ("OCI") and recognized as interest
expense in its statement of operations, subject to changes in the LIBOR rate. This estimated amount will be approximately offset by lower interest expense associated
with the Company's Term Loan. Additional future amounts may be reclassified from OCI to interest expense if any portion of the Company's swaps are determined to be ineffective. As of April 5,
2009, the Company does not anticipate that any amount recorded in OCI related to its swaps will be reclassified during its next twelve months due to ineffectiveness.



In July 2007, the Company entered into treasury lock agreements ("treasury locks") with a maturity date of July 31, 2012, as
additional hedging instruments related to its Term Loan. On October 30, 2007, the Company settled its open treasury lock hedging positions, which resulted in a pre-tax fair value
loss and cash settlement of approximately $4.9 million, which is being amortized into its statement of operations over the life of the Term Loan pursuant to the requirements of SFAS
No. 133. The Company amortized $0.2 and $0.2 million of the loss related to its treasury locks into interest expense in its statement of operations during its first quarter ended
April 5, 2009 and March 30, 2008, respectively, and will amortize $0.8 million annually through July 2012.

13

---



BUILDING MATERIALS CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

Note 7. Derivative and Hedging Transactions (Continued)

The
following table sets forth the classification and fair values of the Company's derivative instruments at April 5, 2009:

FAIR VALUE OF DERIVATIVE INSTRUMENTS  (Millions)

Description

Balance Sheet Classification

Fair ValueDerivatives designated as hedging instruments under SFAS No. 133:Fixed-income interest rate swap agreements

Other non-current liabilities

$
70.6


The
amount included in OCI, net of tax, related to the Company's derivative liability at April 5, 2009 and December 31, 2008 was $43.8 and $43.7 million,
respectively.

The
following table sets forth the effect of the Company's derivative instruments on financial performance for the first quarter ended April 5, 2009:

Description

Amount of
Gain or (Loss)
Recognized
in OCI on
Derivative
(Effective
Portion)

Location of
Gain or (Loss)
Reclassified
from OCI Into
Income
(Effective
Portion)

Amount of
Gain or (Loss)
Reclassified
from
Accumulated
OCI Into
Income
(Effective
Portion)

Location of
Gain or (Loss)
Recognized
in Income on
Derivative
(Ineffective
Portion)

Amount of
Gain or (Loss)
Recognized
in Income on
Derivative
(Ineffective
Portion)(Millions)Derivatives in SFAS No. 133 Cash Flow Hedging Relationships:Fixed-income interest rate swap agreements

$
(0.1
)
Interest Expense

$
(7.2
)
$


$
Treasury lock contracts




Interest Expense


(0.2
)







As
of April 5, 2009, the Company did not have any derivatives not designated as hedging instruments according to SFAS No. 133.

On
April 23, 2009, the Company exercised its option under the Term Loan to elect one-month LIBOR as the interest period under its LIBOR advances instead of the
three-month interest period currently used for such advances. The change in election to the one-month LIBOR interest rate period resulted in a certain amount of ineffectiveness in the
Company's current swap hedging agreements. During its second quarter ending July 5, 2009, the Company will begin to amortize the remaining amount of unrealized losses associated with these swap
hedging agreements recorded in OCI at April 5, 2009, as a component of interest expense on a straight-line basis over the initial life of the swap agreements.

14

---



BUILDING MATERIALS CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

Note 8. Fair Value Measurements

The following table sets forth information regarding the Company's financial instruments that are measured at fair value as of April 5, 2009, consistent with the fair value
hierarchy provision of SFAS No. 157:

Total
Measured at
Fair Value

Quoted
Market
Prices
In Active
Markets
for
Identical
Assets/
Liabilities
(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)(Millions)Liabilities:Fixed-income interest rate swap agreements

$
70.6

$


$
70.6

$
Total liabilities

$
70.6

$


$
70.6

$



During
the quarter ended April 5, 2009, the Company adopted FSP FAS No. 157-2, "Partial Deferral to the Effective Date of Statement 157," which deferred the
application of SFAS No. 157 for certain non-financial assets and non-financial liabilities. Upon adoption, the Company did not have any non-financial assets
or liabilities that were recognized or measured at fair value on a recurring basis, therefore there was no impact on the Company's results of operations.

Note 9. Warranty Claims

The Company provides certain limited warranties covering most of its residential roofing products for periods generally ranging from 20 to 50 years, although certain product lines
provide for a lifetime
limited warranty. The Company also offers certain limited warranties of varying duration covering most of its commercial roofing products. Most of the Company's specialty building products and
accessories carry limited warranties for periods generally ranging from 5 to 20 years, with lifetime limited warranties on certain products.

The
accrual for product warranty claims consists of the following for the first quarter ended April 5, 2009 and March 30, 2008, respectively:

April 5,
2009

March 30,
2008(Thousands)Beginning Balance

$
44,965

$
44,724Charged to cost of products sold


7,507


4,765Payments/deductions


(4,521
)

(3,174
)Ending Balance

$
47,951

$
46,315


The
Company offers extended warranty contracts on sales of its commercial roofing products. The life of these commercial warranties range from 10 to 25 years. In addition, the
Company offers enhanced warranties on certain of its residential roofing products. These enhanced warranties are the "Golden Pledge" and "Peace of Mind" warranty programs.
All revenue for the sale of these

15

---



BUILDING MATERIALS CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

Note 9. Warranty Claims (Continued)

warranty
programs is deferred and amortized on a straight-line basis over the average life of these warranty programs, which is in accordance with the accounting prescribed by FASB
Technical Bulletin No. 90-1 "Accounting for Separately Priced Extended Warranty and Product Maintenance Contracts". Incremental direct costs associated with the acquisition of the
extended warranty contracts are capitalized and amortized on a straight-line basis over the average life of these warranty programs. Current costs of services performed related to claims
paid under these warranty programs are expensed as incurred. The analysis of these warranty programs as of April 5, 2009 indicated that deferred revenue is in excess of deferred costs and
accordingly, no loss was recognized. However, if the total expected costs of providing services under these warranty programs exceed deferred revenues less deferred costs, then a loss would be
recognized.

At
April 5, 2009 and March 30, 2008, the Company had deferred revenue of $78.2 and $71.5 million, of which $10.9 and $8.6 million is included in other current
liabilities and $67.3 and $62.9 million is included in other liabilities, respectively. At April 5, 2009 and March 30, 2008, the Company also had deferred costs of $54.0 and
$49.1 million, of which $7.2 and $5.5 million is included in other current assets and $46.8 and $43.6 million is included in other assets, respectively.

Note 10. Benefit Plans

Defined Benefit Plans

The Company provides a noncontributory defined benefit retirement plan for certain hourly and salaried employees (the "Retirement
Plan"). Benefits under this plan are based on stated amounts for each year of service. The Company's funding policy is consistent with the minimum funding requirements of the Employee Retirement
Income Security Act of 1974.

The
Company's net periodic pension cost for the Retirement Plan included the following components for the first quarter ended April 5, 2009 and March 30, 2008,
respectively:

April 5,
2009

March 30,
2008(Thousands)Service cost

$
351

$
430Interest cost


642


611Expected return on plan assets


(792
)

(792
)Amortization of unrecognized prior service cost


2


3Amortization of net losses from earlier periods


180


105Net periodic pension cost

$
383

$
357


As
of April 5, 2009, the Company expected to make pension contributions of $4.2 million to the Retirement Plan in 2009, which is consistent with its expectations as of
December 31, 2008. The Company made a Retirement Plan contribution of $0.3 million during the first quarter ended April 5, 2009.

Postretirement Medical and Life Insurance

The Company generally does not provide postretirement medical and life insurance benefits, although it subsidizes such benefits for
certain employees and retirees. Such subsidies were reduced or

16

---



BUILDING MATERIALS CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

Note 10. Benefit Plans (Continued)

ended
as of January 1, 1997. Effective March 1, 2005, the Company amended the plan eliminating postretirement medical benefits affecting all current and future retirees.

Net
periodic postretirement benefit included the following components for the first quarter ended April 5, 2009 and March 30, 2008, respectively:

April 5,
2009

March 30,
2008(Thousands)Service cost

$
2

$
3Interest cost


27


29Amortization of unrecognized prior service cost


(143
)

(143
)Amortization of net gains from earlier periods


(52
)

(56
)Net periodic postretirement benefit

$
(166
)
$
(167
)


As
of April 5, 2009, the Company expected to make aggregate benefit claim payments of approximately $0.2 million during 2009, which are related to postretirement life
insurance expenses. This is consistent with the Company's expectations as of December 31, 2008.

Note 11. 2001 Long-Term Incentive Plan

Incentive units granted under the 2001 Long-Term Incentive Plan (the "2001 LTIP") are valued at Book Value (as defined in the 2001 LTIP) or the value of such incentive units
specified at the date of grant. Increases or decreases in the Book Value of those incentive units result in a change in the measure of compensation for the award. Compensation expense for the
Company's incentive units was $7.0 and $0.4 million for the first quarter ended April 5, 2009 and March 30, 2008, respectively.

The
following is a summary of activity for incentive units related to the 2001 LTIP:

First Quarter
April 5,
2009

Year-to-Date
December 31,
2008Incentive Units outstanding, beginning of period


90,468


99,120Granted


725


17,375Exercised


(4,325
)

(18,686
)Forfeited


(1,875
)

(7,341
)Incentive Units outstanding, end of period


84,993


90,468Vested Units outstanding, end of period


39,030


33,702


The
initial value of each of the 725 incentive units granted on January 1, 2009 was $706.88. The initial value of each of the 17,000 incentive units granted on January 1,
2008 was $592.01 and the 375 incentive units granted on October 1, 2008 was $687.97.

Note 12. Related Party Transactions

The Company makes loans to, and borrows from, its parent corporations from time to time at prevailing market interest rates. At April 5, 2009 and March 30, 2008, BMCA
Holdings Corporation

17

---



BUILDING MATERIALS CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

Note 12. Related Party Transactions (Continued)

owed
the Company $56.4 and $56.3 million, including interest of $1.1 and $1.0 million, respectively, and the Company owed BMCA Holdings Corporation $52.8 and $52.8 million,
respectively, with no unpaid interest. Interest income on the Company's loans to BMCA Holdings Corporation amounted to $0.6 and $1.0 million during the first quarter ended April 5, 2009
and March 30, 2008, respectively. Interest
expense on the Company's loans from BMCA Holdings Corporation amounted to $0.6 and $1.0 million during the first quarter ended April 5, 2009 and March 30, 2008, respectively.
Loans payable to/receivable from its parent corporations are due on demand and provide each party with the right of offset of its related obligation to the other party and are subject to limitations
as outlined in the Senior Secured Credit Facilities and the Senior Notes. Under the terms of the Senior Secured Revolving Credit Facility and the indenture governing the Company's Senior Notes at
April 5, 2009, the Company could repay demand loans to its parent corporation amounting to $52.8 million, subject to certain conditions.

The
Company has a management agreement (the "Management Agreement") with ISP Management Company, Inc., a subsidiary of International Specialty Products Inc. (which,
together with its subsidiaries, is referred to as "ISP"), an affiliate, to provide the Company with certain management services. Based on services provided to the Company in 2009 under the Management
Agreement, the aggregate amount payable to ISP Management Company, Inc. under the Management Agreement for 2009, inclusive of the services provided to G-I Holdings, is not yet
available; however, after adjusting for inflationary factors, it is currently estimated to be similar to the $7.3 million paid in 2008. The Company does not expect any changes to the Management
Agreement to have a material impact on the Company's results of operations.

The
Company and its subsidiaries purchased a substantial portion of their headlap roofing granules, colored roofing granules and algae-resistant granules, on a purchase order basis, from
ISP Minerals Inc. ("ISP Minerals"), an affiliate of BMCA and of ISP. The amount of mineral products purchased each year on this basis is based on current demand and is not subject to minimum
purchase requirements. For the first quarter ended April 5, 2009 and March 30, 2008, the Company and its subsidiaries purchased $11.5 and $7.2 million, respectively, of roofing
granules under this arrangement.

In
addition to the granules products purchased by the Company, under the above purchase order basis, the balance of its granules requirements are purchased under a contract expiring in
2013. The amount of mineral products purchased each year under the contract is based on current demand and is not subject to minimum purchase requirements. Under the contract, for the first quarter
ended April 5, 2009 and March 30, 2008, the Company purchased $18.2 and $19.1 million of roofing granules, respectively.

In
February 2009 and March 2009, after giving effect to the most restrictive of the aforementioned debt covenant restrictions, the Company declared and paid cash dividends of $5.0 and
$5.0 million, respectively, to its parent corporation.

Included
in noncurrent assets as a tax receivable from parent corporation on the Company's consolidated balance sheets is $0.0 and $8.4 million at April 5, 2009 and
December 31, 2008, respectively, representing amounts paid in excess of amounts due to G-I Holdings with respect to 2006 under the Tax Sharing Agreement. The Company utilized the
remaining receivable balance at December 31, 2008 during its first quarter ended April 5, 2009. These amounts are included in the net payable to related parties/parent corporations in
the consolidated statements of cash flows.

18

---



BUILDING MATERIALS CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

Note 13. Contingencies

In connection with its formation, the Company contractually assumed and agreed to pay the first $204.4 million of liabilities of its indirect parent, G-I Holdings, for
asbestos-related bodily injury claims relating to the inhalation of asbestos fiber contained in products sold by G-I Holdings or its predecessors ("Asbestos Claims"). As of
March 30, 1997, the Company paid all of its assumed liabilities for Asbestos Claims. G-I Holdings has agreed to indemnify the Company against any other existing or future Asbestos
Claims if asserted against the Company. In January 2001, G-I Holdings filed a voluntary petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code due to Asbestos
Claims. Most Asbestos Claims do not specify the amount of damages sought, and the value of the Asbestos Claims asserted against G-I Holdings is a contested issue in that bankruptcy, which
remains pending.

Claimants
in the G-I Holdings' bankruptcy, including judgment creditors, might seek to satisfy their claims by asking the Bankruptcy Court to require the sale of
G-I Holdings' assets, including its holdings of BMCA Holdings Corporation's common stock and its indirect holdings of the Company's common stock. Such action could result in a change of
control of the Company. In addition, those creditors may attempt to assert Asbestos Claims against the Company. (Approximately 1,900 Asbestos Claims were filed against the Company prior to
February 2, 2001.) The Company believes that it will not sustain any liability in connection with these or any other Asbestos Claims. On February 2, 2001, the United States Bankruptcy
Court for the District of New Jersey issued a temporary restraining order enjoining any existing or future claimant from bringing or prosecuting an Asbestos Claim against the Company. By oral opinion
on June 22, 2001, and written order entered February 22, 2002, the Bankruptcy Court converted the temporary restraints into a preliminary injunction prohibiting the bringing or
prosecution of any such Asbestos Claims against the Company.

On
February 7, 2001, G-I Holdings filed an action in the United States Bankruptcy Court for the District of New Jersey seeking a declaratory judgment that BMCA has no
successor liability for Asbestos Claims against G-I Holdings and that it is not the alter ego of G-I Holdings (the "BMCA Action"). One of the parties to this matter, the
Official Committee of Asbestos Claimants (the "creditors' committee"), subsequently filed a counterclaim against the Company seeking a declaration that BMCA has successor liability for Asbestos Claims
against G-I Holdings and that it is the alter ego of G-I Holdings. On May 13, 2003, the United States District Court for the District of New Jersey overseeing the
G-I Holdings' Bankruptcy Court withdrew the reference of the BMCA Action from the Bankruptcy Court. By order dated May 30, 2008, the District Court dismissed the BMCA Action without
ruling on the merits of BMCA's position that it has no successor liability for Asbestos Claims. The District Court ruled that a Federal court declaratory judgment action was not the proper vehicle for
resolving this issue. The District Court's ruling did not affect the preliminary injunction enjoining the prosecution of Asbestos Claims against BMCA, and the Company believes that it does not have
liability for Asbestos Claims. Nevertheless, it is not possible to predict the outcome of any subsequent litigation regarding the continuation of the preliminary injunction and/or prosecution of
Asbestos Claims against the Company.

19

---



BUILDING MATERIALS CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

Note 13. Contingencies (Continued)

On or about February 8, 2001, the creditors' committee filed a complaint in the United States Bankruptcy Court, District of New Jersey against G-I Holdings and the
Company. The complaint requests substantive consolidation of BMCA with G-I Holdings or an order directing G-I Holdings to cause BMCA to file for bankruptcy protection. The
plaintiffs also filed for interim relief absent the granting of their requested relief described above. On March 21, 2001, the Bankruptcy Court denied plaintiffs' application for interim
relief. In November 2002, the creditors' committee, joined in by the legal representative of present and future holders of asbestos-related claims, filed a motion for appointment of a trustee in the
G-I Holdings' bankruptcy. In December 2002, the Bankruptcy Court denied the motion. The creditors' committee appealed the ruling to the United States District Court, which denied the
appeal on June 27, 2003. The
creditors' committee appealed the denial to the Third Circuit Court of Appeals, which denied the appeal on September 24, 2004. The creditors' committee filed a petition with the Third Circuit
Court of Appeals for a rehearing of its denial of the creditors' committee's appeal, which was denied by the Court of Appeals on October 26, 2004.

On
July 7, 2004, the Bankruptcy Court entered an order authorizing the creditors' committee to commence an adversary proceeding against the Company and others challenging, as a
fraudulent conveyance, certain transactions entered into in connection with the Company's formation in 1994, in which G-I Holdings caused to be transferred to the Company all of its
roofing business and assets and in which the Company assumed certain liabilities relating to those assets, including a specified amount of liabilities for Asbestos Claims (the "1994 transaction"). The
Bankruptcy Court also permitted the creditors' committee to pursue a claim against holders of the Company's bank and bond debt outstanding in 2000, seeking recovery from them, based on the creditors'
committee's theory that the 1994 transaction was a fraudulent conveyance. On July 20, 2004, the creditors' committee appealed certain aspects of the Bankruptcy Court's order (and a
June 8, 2004 decision upon which the order was based). G-I Holdings, the holders of the Company's bank and bond debt and BMCA cross-appealed. The District Court entered an order on
June 21, 2006 affirming in part and vacating in part the Bankruptcy Court's July 7, 2004 order. Among other things, the District Court vacated that aspect of the Bankruptcy Court's order
authorizing the creditors' committee to pursue avoidance claims against the Company and the holders of the Company's bank and bond debt as of 2000. This issue has been remanded to the Bankruptcy Court
for further proceedings consistent with the District Court's opinion. By order dated August 22, 2008, the Bankruptcy Court stayed this authorization proceeding and other adversary proceedings
effective upon the filing of a Joint Plan of Reorganization by G-I Holdings, the creditors' committee and the legal representative of present and future holders of asbestos-related claims.
The Company believes the creditors' committee's avoidance claims are without merit and, in the event the stay is terminated, the Bankruptcy Court should not permit the creditors' committee to pursue
such claims against the Company and the holders of its bank and bond debt as of 2000.

The
Company has been advised by G-I Holdings that on August 12, 2008, G-I Holdings reached an agreement with the creditors' committee and the legal
representative of present and future holders of asbestos-related claims to jointly file a plan of reorganization with the Bankruptcy Court that will provide for settlement of Asbestos Claims
and all related litigation. The agreement is subject to a number of contingencies, but if the contingencies are met and the reorganization plan is confirmed, all of the actions described above will be
resolved. If the bankruptcy is not resolved, the Company and G-I Holdings intend to vigorously defend all litigations related thereto. A Joint Plan of Reorganization of G-I
Holdings was filed with the Bankruptcy Court on August 21, 2008, and a First Amended Joint Plan of Reorganization of G-I Holdings was filed with the Bankruptcy Court on
October 30, 2008.

20

---



BUILDING MATERIALS CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

Note 13. Contingencies (Continued)

G-I Holdings
filed a Second Amended Joint Plan of Reorganization of G-I Holdings with the Bankruptcy Court on December 3, 2008.

If
the reorganization plan is not confirmed and the Company is not successful in defending against one or more of the claims, it may be forced to file for bankruptcy protection and/or
contribute all or a substantial portion of its assets to satisfy the claims of G-I Holdings' creditors. Either of these events, or the substantive consolidation of G-I Holdings
and the Company, would weaken its operations and cause it to divert a material amount of its cash flow to satisfy the Asbestos Claims of G-I Holdings and may render it unable to pay
interest or principal on its Senior Secured Credit Facilities and Senior Notes.



On September 15, 1997, G-I Holdings received a notice from the Internal Revenue Service (the "IRS") of a deficiency
in the amount of $84.4 million (after taking into account the use of net operating losses and foreign tax credits otherwise available for use in later years) in connection with the formation in
1990 of Rhône-Poulenc Surfactants and Specialties, L.P. (the "surfactants partnership"), a partnership in which G-I Holdings held an interest. On September 21,
2001, the IRS filed a proof of claim with respect to such deficiency against G-I Holdings in the G-I Holdings' bankruptcy. If such proof of claim is sustained for years in
which the Company was part of the G-I Holdings tax group, the Company and/or certain of the Company's subsidiaries together with G-I Holdings and several current and former
subsidiaries of G-I Holdings could be severally liable for those taxes and interest. G-I Holdings has filed an objection to the proof of claim, which is the subject of an
adversary proceeding pending in the United States District Court for the District of New Jersey. By opinion and order dated September 8, 2006, the District Court ruled on the parties'
respective motions for Partial Summary Judgment, granting the government summary judgment on the issue of "adequate disclosure" for statute of limitation purposes and denying G-I Holdings
summary judgment on its other statute of limitations defense (finding material issues of fact that must be tried). If the IRS were to prevail for the years in which the Company and/or certain of its
subsidiaries were not part of the G-I Holdings tax group, the Company nevertheless could be liable for approximately $40.0 million in taxes plus interest, although this calculation
is subject to uncertainty depending upon various factors including G-I Holdings' ability to satisfy its tax liabilities and the application of tax credits and deductions. In an opinion
dated June 8, 2007, the District Court decided that G-I Holdings cannot avail itself of the "binding contract" transitional relief with respect to the 1999 distribution of U.S.
Treasury Bonds to G-I Holdings. The Company believes that it will not be required to pay any incremental income tax to the Federal government with respect to this matter and that its
ultimate disposition will not have a material adverse effect on its business, financial position or results of operations.

For
a further discussion with respect to the history of the foregoing litigation, and asbestos-related matters, see Notes 8, 9, 12, and 18 to the consolidated financial statements
contained in the Company's 2008 Form 10-K.



The Company, together with other companies, is a party to a variety of proceedings and lawsuits involving environmental matters under
the U.S. Comprehensive Environmental Response Compensation and Liability Act, and similar state laws, in which recovery is sought for the cost of

21

---



BUILDING MATERIALS CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

Note 13. Contingencies (Continued)

cleanup
of contaminated sites or remedial obligations are imposed, a number of which are in the early stages or have been dormant for protracted periods. Most of these environmental claims do not seek
to recover an amount of specific damages. At most sites, the Company anticipates that liability will be apportioned among the companies found to be responsible for the presence of hazardous substances
at the site.

While
the Company cannot predict whether adverse decisions or events can occur in the future, the Company believes that the ultimate disposition of such matters will not have a material
adverse effect on the liquidity, results of operations, cash flows or financial position of the Company.



In the ordinary course of business, the Company has several supply agreements that include minimum annual purchase requirements. In the
event these purchase requirements are not met, the Company may be required to make payments under these supply agreements. There have been no material changes to these contracts in the first quarter
of 2009.

Note 14. Guarantor Financial Information

At April 5, 2009, all of the Company's subsidiaries, each of which is wholly-owned by the Company, are guarantors under the Company's Senior Secured Credit Facilities and the
indenture governing the Senior Notes. These guarantees are full, unconditional and joint and several. In 2007, BMCA Acquisition Inc., the direct parent of Elk, and Elk, as a result of its
merger with BMCA Acquisition Sub, became co-obligors on the Senior Secured Credit Facilities.

Presented
below is condensed consolidating financial information for the Company, the co-obligor subsidiary and the guarantor subsidiaries. This financial information should
be read in conjunction with the consolidated financial statements and other notes related thereto. Separate financial statements for the Company and the guarantor subsidiaries are not included herein,
because the guarantees are full, unconditional and joint and several.

22

---





BUILDING MATERIALS CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

Note 14. Guarantor Financial Information (Continued)

Condensed Consolidating Statement of Operations  First Quarter Ended April 5, 2009  (Thousands)  (Unaudited)

Parent
Company

Co-Obligor
Subsidiary

Guarantor
Subsidiaries

Eliminations

ConsolidatedNet sales

$
638,550

$
5,518

$
16,752

$


$
660,820Intercompany net sales





134,321


963,528


(1,097,849
)

Total net sales


638,550


139,839


980,280


(1,097,849
)

660,820Costs and expenses:Cost of products sold


565,254


136,658


825,361


(1,097,849
)

429,424Selling, general and administrative


57,328


5,476


38,852





101,656Amortization of intangible assets





2,847








2,847Restructuring and other expenses





800


10,551





11,351Other expense, net


696


8


509





1,213Total costs and expenses, net


623,278


145,789


875,273


(1,097,849
)

546,491Income (loss) before equity in earnings of subsidiaries, interest expense and income taxes


15,272


(5,950
)

105,007





114,329Equity in earnings of subsidiaries


52,595








(52,595
)

Interest expense


(16,223
)

(7,988
)

(10,301
)




(34,512
)Income (loss) before income taxes


51,644


(13,938
)

94,706


(52,595
)

79,817Income tax (expense) benefit


333


4,861


(33,034
)




(27,840
)Net income (loss)

$
51,977

$
(9,077
)
$
61,672

$
(52,595
)
$
51,977


23

---



BUILDING MATERIALS CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

Note 14. Guarantor Financial Information (Continued)

Condensed Consolidating Statement of Operations  First Quarter Ended March 30, 2008  (Thousands)  (Unaudited)

Parent
Company

Co-Obligor
Subsidiary

Guarantor
Subsidiaries

Eliminations

ConsolidatedNet sales

$
545,952

$
10,140

$
14,184

$


$
570,276Intercompany net sales





151,167


866,794


(1,017,961
)

Total net sales


545,952


161,307


880,978


(1,017,961
)

570,276Costs and expenses:Cost of products sold


473,850


158,827


810,199


(1,017,961
)

424,915Selling, general and administrative


58,723


7,676


39,410





105,809Amortization of intangible assets





2,846








2,846Restructuring and other expenses





1,582


19,243





20,825Other expense, net


619


60


329





1,008Total costs and expenses, net


533,192


170,991


869,181


(1,017,961
)

555,403Income (loss) before equity in earnings of subsidiaries, interest expense and income taxes


12,760


(9,684
)

11,797





14,873Equity in earnings of subsidiaries


(7,709
)







7,709


Interest expense


(24,946
)

(4,056
)

(10,863
)




(39,865
)Income (loss) before income taxes


(19,895
)

(13,740
)

934


7,709


(24,992
)Income tax (expense) benefit


4,850


5,469


(372
)




9,947Net income (loss)

$
(15,045
)
$
(8,271
)
$
562

$
7,709

$
(15,045
)


24

---





BUILDING MATERIALS CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

Note 14. Guarantor Financial Information (Continued)

Condensed Consolidating Balance Sheet  April 5, 2009  (Thousands)  (Unaudited)

Parent
Company

Co-Obligor
Subsidiary

Guarantor
Subsidiaries

Eliminations

ConsolidatedASSETSCurrent Assets:Cash and cash equivalents

$
24,737

$
123

$
211

$


$
25,071Accounts receivable, trade, net


434,411


4,977


11,426





450,814Accounts receivable, other


2,965


174


5,529





8,668Inventories, net





72,157


214,089





286,246Deferred income tax assets


51,794











51,794Other current assets


7,663


1,309


4,927





13,899Total Current Assets


521,570


78,740


236,182





836,492Investment in subsidiaries


1,679,943








(1,679,943
)

Intercompany loans including accrued interest


1,731,490


(973,502
)

(757,988
)




Due from/(to) subsidiaries, net


(1,964,909
)

789,722


1,175,187





Property, plant and equipment, net





270,788


375,249





646,037Goodwill


59,323


589,010


5,471





653,804Intangible assets, net





193,403








193,403Other noncurrent assets


82,359


7,378


23,961





113,698Total Assets

$
2,109,776

$
955,539

$
1,058,062

$
(1,679,943
)
$
2,443,434LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)Current Liabilities:Current maturities of long-term debt

$
9,533

$
676

$
10,590

$


$
20,799Accounts payable





20,981


91,710





112,691Payable to related parties


12,219





23,796





36,015Loans payable to parent corporation


52,840











52,840Accrued liabilities


66,228


10,316


86,544





163,088Product warranty claims


12,600


3,600








16,200Total Current Liabilities


153,420


35,573


212,640





401,633Long-term debt less current maturities


1,702,226


3,478


52,358





1,758,062Product warranty claims


30,844


807


100





31,751Deferred income tax liabilities


91,598











91,598Other liabilities


169,548


8,205


20,497





198,250Total Liabilities


2,147,636


48,063


285,595





2,481,294Total Stockholders' Equity (Deficit)


(37,860
)

907,476


772,467


(1,679,943
)

(37,860
)Total Liabilities and Stockholders' Equity (Deficit)

$
2,109,776

$
955,539

$
1,058,062

$
(1,679,943
)
$
2,443,434


25

---



BUILDING MATERIALS CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

Note 14. Guarantor Financial Information (Continued)

Condensed Consolidating Balance Sheet  December 31, 2008  (Thousands)

Parent
Company

Co-Obligor
Subsidiary

Guarantor
Subsidiaries

Eliminations

ConsolidatedASSETSCurrent Assets:Cash and cash equivalents

$
36,722

$
65

$
250

$


$
37,037Accounts receivable, trade, net


189,245


1,491


8,497





199,233Accounts receivable, other


2,298


727


7,872





10,897Inventories, net





90,999


257,450





348,449Deferred income tax assets


39,324











39,324Other current assets


7,894


1,329


7,849





17,072Total Current Assets


275,483


94,611


281,918





652,012Investment in subsidiaries


1,627,346








(1,627,346
)

Intercompany loans including accrued interest


1,587,885


(867,963
)

(719,922
)




Due from/to subsidiaries, net


(1,723,842
)

670,948


1,052,894





Property, plant and equipment, net





274,194


381,075





655,269Goodwill


59,323


588,850


5,471





653,644Intangible assets, net





196,250








196,250Income tax receivable from parent corporation


8,400











8,400Other noncurrent assets


82,842


7,487


24,410





114,739Total Assets

$
1,917,437

$
964,377

$
1,025,846

$
(1,627,346
)
$
2,280,314LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)Current Liabilities:Current maturities of long-term debt

$
9,557

$
676

$
10,363

$


$
20,596Accounts payable





18,400


137,630





156,030Payable to related parties


1,225





19,928





21,153Loans payable to parent corporation


52,840











52,840Accrued liabilities


52,508


12,953


68,880





134,341Product warranty claims


12,600


3,600








16,200Total Current Liabilities


128,730


35,629


236,801





401,160Long-term debt less current maturities


1,597,614


3,647


56,908





1,658,169Product warranty claims


28,358


307


100





28,765Deferred income tax liabilities


73,103











73,103Other liabilities


169,488


8,242


21,243





198,973Total Liabilities


1,997,293


47,825


315,052





2,360,170Total Stockholders' Equity (Deficit)


(79,856
)

916,552


710,794


(1,627,346
)

(79,856
)Total Liabilities and Stockholders' Equity (Deficit)

$
1,917,437

$
964,377

$
1,025,846

$
(1,627,346
)
$
2,280,314


26

---





BUILDING MATERIALS CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

Note 14. Guarantor Financial Information (Continued)

Condensed Consolidating Statement of Cash Flows  First Quarter Ended April 5, 2009  (Thousands)  (Unaudited)

Parent
Company

Co-Obligor
Subsidiary

Guarantor
Subsidiaries

ConsolidatedCash and cash equivalents, beginning of period

$
36,722

$
65

$
250

$
37,037Cash provided by (used in) operating activities:Net income (loss)


(618
)

(9,077
)

61,672


51,977Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:Depreciation





7,066


10,905


17,971Amortization of intangible and other assets





2,846


1,098


3,944Restructuring and other expenses





1,186


10,959


12,145Deferred income taxes


5,999








5,999Noncash interest charges


1,744


275


199


2,218(Increase) decrease in working capital items


(231,882
)

14,556


7,125


(210,201
)Increase in product warranty claims


2,486


500





2,986(Increase) decrease in other assets


(1,133
)

33


(729
)

(1,829
)Increase (decrease) in other liabilities


(62
)

(37
)

24


(75
)Increase (decrease) in net payable to related parties/parent corporations


117,095


(13,235
)

(80,359
)

23,501Other, net


(2
)

232


(684
)

(454
)Net cash provided by (used in) operating activities


(106,373
)

4,345


10,210


(91,818
)Cash used in investing activities:Capital expenditures





(4,118
)

(5,844
)

(9,962
)Net cash used in investing activities





(4,118
)

(5,844
)

(9,962
)Cash provided by (used in) financing activities:Proceeds from issuance of long-term debt


233,000








233,000Repayments of long-term debt


(128,389
)

(169
)

(949
)

(129,507
)Principal repayments of capital leases








(3,456
)

(3,456
)Distribution to parent corporation


(3
)







(3
)Dividends to parent corporation


(10,000
)







(10,000
)Loan to parent corporation


(20
)







(20
)Financing fees and expenses


(200
)







(200
)Net cash provided by (used in) financing activities


94,388


(169
)

(4,405
)

89,814Net change in cash and cash equivalents


(11,985
)

58


(39
)

(11,966
)Cash and cash equivalents, end of period

$
24,737

$
123

$
211

$
25,071


27

---



BUILDING MATERIALS CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

Note 14. Guarantor Financial Information (Continued)

Condensed Consolidating Statement of Cash Flows  First Quarter Ended March 30, 2008  (Thousands)  (Unaudited)

Parent
Company

Co-Obligor
Subsidiary

Guarantor
Subsidiaries

ConsolidatedCash and cash equivalents, beginning of period

$


$
1,936

$
4,388

$
6,324Cash provided by (used in) operating activities:Net income (loss)


(7,336
)

(8,271
)

562


(15,045
)Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:Depreciation





6,973


10,868


17,841Amortization of intangible and other assets





2,846


917


3,763Restructuring and other expenses


1,088


1,582


25,354


28,024Deferred income taxes


(11,253
)







(11,253
)Noncash interest charges


1,794


353


105


2,252(Increase) decrease in working capital items


(182,901
)

24,157


517


(158,227
)Increase in product warranty claims


1,111


480





1,591(Increase) decrease in other assets


(2,007
)

38


(2,169
)

(4,138
)Increase in other liabilities


522


15


47


584Increase (decrease) in net payable to related parties/parent corporations


63,021


(26,864
)

(30,989
)

5,168Other, net





(2
)

(744
)

(746
)Net cash provided by (used in) operating activities


(135,961
)

1,307


4,468


(130,186
)Cash used in investing activities:Capital expenditures





(2,914
)

(6,320
)

(9,234
)Net cash used in investing activities





(2,914
)

(6,320
)

(9,234
)Cash provided by (used in) financing activities:Proceeds from issuance of long-term debt


266,000








266,000Repayments of long-term debt


(109,075
)

(178
)

(756
)

(110,009
)Principal repayments of capital leases








(1,551
)

(1,551
)Loan to parent corporation


(38
)







(38
)Financing fees and expenses


(562
)







(562
)Net cash provided by (used in) financing activities


156,325


(178
)

(2,307
)

153,840Net change in cash and cash equivalents


20,364


(1,785
)

(4,159
)

14,420Cash and cash equivalents, end of period

$
20,364

$
151

$
229

$
20,744


28

---





BUILDING MATERIALS CORPORATION OF AMERICA        Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND  RESULTS OF OPERATIONS

We are a leading national manufacturer and marketer of a broad line of asphalt and polymer-based roofing products and accessories for the residential and
commercial roofing markets. During the first quarter of 2007, Building Materials Corporation of America, which we refer to as BMCA, acquired ElkCorp, which we refer to as Elk, a Dallas, Texas-based
manufacturer of roofing products and building materials, resulting in Elk becoming an indirect wholly-owned subsidiary of BMCA.

We
believe the Elk acquisition has strategically positioned us for growth in the roofing industry and building products market and has allowed us to build on our market leadership
position and create comprehensive market-leading product offerings. Our principal lines of residential roofing shingles are the Timberline® series, the Sovereign® series,
Designer Lifetime Shingles and Specialty Shingles. The Timberline series includes the Timberline Prestique® 30 High Definition®, Timberline Natural Shadow,
Timberline Prestique 40, Timberline Prestique Lifetime and Timberline Prestique Grande® shingles. Our designer lifetime shingles include the Slateline®, Grand
Slate, Grand Sequoia®, Grand Canyon, Country Mansion®, Capstone®, and Camelot® shingles. We sell specialty roofing products
under the TruSlate product line, which offers a patented genuine slate roofing system. We supply the major components necessary to install a complete roofing system from underlayments to
attic ventilation products and accessories, under our Roof System Solution. We have improved our sales mix of residential roofing products by increasing our emphasis on laminated shingles and
accessory products (the Timberline series, designer lifetime shingles and TruSlate), which are generally sold at higher prices and more attractive profit margins than our standard strip shingle
products (the Sovereign series). Unless otherwise indicated by the context, "we," "us," and "our" refer to Building Materials Corporation of America and its consolidated subsidiaries.

Critical Accounting Policies

There have been no significant changes to our Critical Accounting Policies during the first quarter ended April 5, 2009. For a
further discussion on our Critical Accounting Policies, reference is made to Management's Discussion and Analysis of Financial Condition and Results of Operations, "Critical Accounting Policies" in
our annual report on Form 10-K for the fiscal year ended December 31, 2008, which was filed with the Securities and Exchange Commission on March 31, 2009, which we
refer to as the 2008 Form 10-K.

Results of Operations

Roofing products sales is our dominant business, typically accounting for approximately 95% of our consolidated net sales. The main
drivers of our roofing business include: the nation's aging housing stock; existing home sales; new home construction; larger new homes; home ownership rates; and extreme weather and energy concerns.
Our roofing business is also affected by raw material costs, including asphalt and other petroleum-based raw materials, as well as energy, and transportation and distribution costs.



We recorded net income of $52.0 million in the first quarter of 2009 compared to a net loss of $15.0 million in the first
quarter of 2008. Our reported net income in the first quarter of 2009 included $7.9 million after-tax ($12.2 million pre-tax) restructuring and other expenses, of
which $0.5 million after-tax ($0.8 million pre-tax) was included in cost of products sold. Our reported net loss in the first quarter of 2008 included
$16.9 million of after-tax ($28.0 million pre-tax) restructuring and other expenses, of which $0.7 million after-tax ($1.1 million
pre-tax) was included as a reduction in net sales

29

---



BUILDING MATERIALS CORPORATION OF AMERICA

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

and
$3.7 million after-tax ($6.1 million pre-tax) was included in cost of products sold. Included in restructuring and other expenses for the first quarter of
2008 and 2009 are plant closing expenses related to the closure of several manufacturing facilities, integration-related costs and the write-down of selected inventories. Excluding
restructuring and other expenses, first quarter of 2009 net income was $59.9 million compared to first quarter of 2008 net income of $1.9 million. The increase in reported net income for
the first quarter of 2009 was primarily attributable to higher income before interest expense and income taxes and lower interest expense.

Net
sales for the first quarter of 2009 were $660.8 million compared to first quarter of 2008 net sales of $570.3 million, which included $1.1 million of
restructuring-related sales discounts. The increase in first quarter of 2009 net sales was primarily due to higher average selling prices for residential and commercial roofing products, partially
offset by lower unit volumes of residential and commercial roofing products.

Income
before interest expense and income taxes in the first quarter of 2009 was $114.3 million compared to income before interest expense and income taxes of $14.9 million
in the first quarter of 2008. Our reported income before interest expense and income taxes in the first quarter of 2009 included $12.2 million of restructuring and other expenses, of which
$0.8 million was included in cost of products sold. Our reported income before interest expense and income taxes for the first quarter of 2008 included $28.0 million of restructuring and
other expenses, of which $1.1 million was included as a reduction in net sales and $6.1 million was included in cost of products sold. Excluding these items, first quarter of 2009 income
before interest expense and income taxes was $126.5 million compared to first quarter of 2008 income before interest expense and income taxes of $42.9 million. The increase was primarily
due to higher average selling prices of residential and commercial roofing products, lower manufacturing costs resulting from improved efficiencies and lower transportation costs. These benefits were
partially offset by lower unit volumes of residential and commercial roofing products.

Interest
expense in the first quarter of 2009 decreased to $34.5 million compared to $39.9 million in the first quarter of 2008. The decrease in the first quarter of 2009
interest expense was primarily due to lower average borrowings and a lower average interest rate.

Business Segment Information

Net Sales.Net sales of roofing products increased to $635.0 million for the first quarter of 2009, compared with
$537.6 million for the first quarter of 2008, which included $1.1 million of restructuring-related sales discounts. The increase in first quarter of 2009 net sales was primarily due to
higher average selling prices of residential and commercial roofing products, partially offset by lower unit volumes of residential and commercial roofing products. Net sales of specialty building
products and accessories decreased to $25.8 million for the first quarter of 2009 compared with $32.7 million for the first quarter of 2008 due to softer new construction and remodeling
demand.

Gross Margin.Our gross margin was $231.4 million or 35.0% of net sales for the first quarter of 2009 compared with
$145.4 million or 25.5% of net sales for the first quarter of 2008. Included in our gross margin for the first quarter of 2009 were $0.8 million of restructuring and other expenses,
which was included in cost of products sold. Included in our gross margin for the first quarter of 2008 were $7.2 million of restructuring and other expenses, of which $1.1 million was
included as a reduction in net sales and $6.1 million was included in cost of products sold. The increase in our gross margin is primarily due to higher average selling prices of residential
and commercial roofing products, as well as

30

---



BUILDING MATERIALS CORPORATION OF AMERICA

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

lower
manufacturing costs resulting from improved efficiencies, partially offset by lower unit volumes of residential and commercial roofing products.

Liquidity and Financial Condition



Sales of roofing products and specialty building products and accessories in the northern regions of the United States generally
decline in the late fall and winter months due to cold weather. In addition, extreme weather conditions can result in higher customer demand during our peak operating season depending on the extent
and severity of the damage from these extreme weather conditions. Due to the seasonal demands of our business, together with extreme weather conditions, we generally have negative cash flows from
operations during the first six months of our fiscal year. Our negative cash flows from operations are primarily driven by our cash invested in both accounts receivable and inventories to meet these
seasonal operating demands. Generally, in the third and fourth quarters of our fiscal year, our cash flows from operations become positive for each quarter, as our investment in inventories and
accounts receivable no longer continues to increase, as is customary in the first six months of our fiscal year. Our seasonal working capital needs, together with our debt service obligations, capital
expenditure requirements and other contracted arrangements, adversely impact our liquidity during this period. We rely on our cash and cash equivalents on hand and our $600.0 million Senior
Secured Revolving Credit Facility due February 2012, which we refer to as our Senior Secured Revolving Credit Facility (see Long-Term Debt), to support our overall cash flow requirements
during these periods. We expect to continue to rely on our cash and cash equivalents on hand and external financings to maintain operations over the short and long-term and to continue to
have access to the financing markets, subject to the then prevailing market terms and conditions.

Net
cash outflow from operating and investing activities was $101.8 million during the first quarter of 2009, including $91.8 million of cash used in operations and the
reinvestment of $10.0 million for capital programs.

Cash
invested in additional working capital totaled $210.2 million during the first quarter of 2009, reflecting an increase in total accounts receivable of $249.4 million,
due to the seasonality of our business, a $61.2 million decrease in inventories primarily due to controlled inventory management due to the current worldwide economic conditions, a
$3.2 million decrease in other current assets, a $16.4 million decrease in accounts payable and accrued liabilities and an increase of $8.8 million in payments for restructuring
and other expenses. The net cash used in operating activities also included a $23.5 million net increase in the payable to related parties/parent corporations, primarily due to a net
$20.1 million increase in Federal income taxes payable, pursuant to our Tax Sharing Agreement with our parent corporation and a $3.4 million increase in amounts due under our
long-term granule supply agreement with an affiliated company. In addition, net cash used in operating activities included $12.2 million in restructuring and other expenses (see
Restructuring and Other Expenses below).

Net
cash provided by financing activities totaled $89.8 million during the first quarter of 2009, including $233.0 million of aggregate proceeds from the issuance of
long-term debt, related to first quarter of 2009 cumulative borrowings under our Senior Secured Revolving Credit Facility. Financing activities also included $129.5 million in
aggregate repayments of long-term debt, of which $126.0 million related to first quarter of 2009 cumulative repayments under our Senior Secured Revolving Credit Facility and
$2.4 million related to our $975.0 million Term Loan Facility, which we refer to as the Term Loan. In addition, financing activities included aggregate principal payments of

31

---



BUILDING MATERIALS CORPORATION OF AMERICA

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

$3.5 million
on our capital leases, $10.0 million of cash dividends paid to our parent corporation, and $0.2 million in financing fees and expenses primarily related to prior debt
refinancings.



We initiated a restructuring plan, which we refer to as the 2007 Restructuring Plan, which we formulated in connection with the
acquisition of Elk. The 2007 Restructuring Plan was created to eliminate cost redundancies recognized due to the acquisition of Elk and to reduce our current cost structure. The 2007 Restructuring
Plan has been fully implemented as of December 31, 2008. We account for our restructuring activities in accordance with SFAS No. 146, "Accounting for Costs Associated with Exit or
Disposal Activities", SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" and Emerging Issues Task Force No. 96-9 "Classification of
Inventory Markdowns and Other Costs Associated with Restructuring".

2008 Restructuring and Other Expenses

In connection with the acquisition of Elk, we identified $64.1 million of restructuring and other expenses in our fiscal year
ended December 31, 2008, which included $14.2 million of plant closing expenses, $3.3 million in employee severance payments and $46.6 million in integration-related
expenses. Integration-related expenses primarily consisted of $26.9 million of inventory write-downs, $6.1 million of restructuring-related sales discounts and $13.6 million of
other integration expenses.

We
recorded $73.2 million of the identified restructuring and other expenses in our statement of operations during our fiscal year ended December 31, 2008, of which
$6.1 million was reflected as a reduction in net sales due to restructuring-related sales discounts, $26.9 million was charged to cost of products sold and $40.2 million was
charged to restructuring and other expenses.

Three-Months Ended April 5, 2009 Restructuring and Other Expenses

In February 2009, we announced the temporary shutdown of two manufacturing facilities, one in Shafter, California and the other in
Nashville, Tennessee. As a result of these actions and other charges related to the acquisition of Elk, we identified an additional $12.1 million of restructuring and other expenses in our
first quarter ended April 5, 2009, which included $9.8 million of plant closing expenses, $0.9 million in employee severance payments and $1.4 million in
integration-related expenses. Integration-related expenses primarily consisted of $0.8 million of inventory write-downs and $0.6 million of other integration expenses.

We
recorded $12.2 million of the identified restructuring and other expenses in our statement of operations in the three-month period ended April 5, 2009, of which
$0.8 million was charged to cost of products sold and $11.4 million was charged to restructuring and other expenses. We expect to incur the remaining $1.7 million of identified
integration and other expenses and make the remaining cash payments related to our accrual when they are required.

32

---





BUILDING MATERIALS CORPORATION OF AMERICA

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

The table below details our restructuring and other expense accruals and charges made against the accrual during our first quarter ended April 5, 2009:

Restructuring and Other Expenses

Plant
Closing
Expenses

Employee
Severance
Payments

Integration
Expenses

Total(Thousands)Beginning balance, as of December 31, 2008

$
3,452

$


$
5,205

$
8,657Current period costs, net


9,764


868


1,513


12,145Cash payments


(6,592
)

(868
)

(1,351
)

(8,811
)Amount charged to property, plant and equipment for asset write-down


(561
)




(188
)

(749
)Amount charged to write-off inventory








(729
)

(729
)Non-cash items








(84
)

(84
)Ending balance, as of April 5, 2009

$
6,063

$


$
4,366

$
10,429




Long-term debt consists of the following at April 5, 2009 and December 31, 2008:

April 5,
2009

December 31,
2008(Thousands)73/4% Senior Notes due 2014

$
250,478

$
250,500Borrowings under the Senior Secured Revolving Credit Facility


183,000


76,000Term Loan


953,281


955,670Junior Lien Term Loan


325,000


325,000Obligations under capital leases


52,500


55,956Industrial development revenue bond


2,820


2,820Chester Loan


4,311


5,126Other notes payable


7,471


7,693Total


1,778,861


1,678,765Less current maturities


(20,799
)

(20,596
)Long-term debt less current maturities

$
1,758,062

$
1,658,169


As
of April 5, 2009, we had total outstanding consolidated indebtedness of $1,831.7 million, which included $52.8 million of demand loans to our parent corporation
and $20.8 million that matures prior to the end of the first quarter of 2010. We anticipate funding these obligations principally from our cash and cash equivalents on hand, cash flow from
operations and/or borrowings under our Senior Secured Revolving Credit Facility.

As
of April 5, 2009, we were in compliance with all covenants under the Senior Secured Revolving Credit Facility, the Term Loan, the $325.0 million Junior Lien Term Loan
Facility, which we refer to as the Junior Lien Term Loan, and collectively with the Senior Secured Revolving Credit Facility and the Term Loan we refer to as the Senior Secured Credit Facilities; and
the indenture governing our 73/4% Senior Notes due 2014, which we refer to as the Senior Notes. As of April 5, 2009, the net book value of the collateral securing the Senior
Secured Revolving Credit Facility Collateral (as defined in the

33

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BUILDING MATERIALS CORPORATION OF AMERICA

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

Senior
Secured Revolving Credit Facility) and the Term Loan Collateral (as defined in the Term Loan) was $850.5 and $1,649.2 million, respectively.

At
April 5, 2009, we had outstanding letters of credit of approximately $43.8 million, which included approximately $10.6 million of standby letters of credit
related to certain obligations of G-I Holdings.



Hedging Strategy

We were exposed to the impact of variable interest rate fluctuations on certain of our debt financings; however, we limit our variable
interest rate exposure through the use of derivative instruments, which reduce the risk of interest rate fluctuations related to our debt. As a result of the use of derivative instruments, we have
exposure to the risk that our counterparties to derivative contracts will fail to meet their contractual obligations. In order to mitigate our counterparty credit risk, we enter into derivative
contracts with selected major financial institutions. Our policies and procedures for mitigating counterparty credit risk on derivative transactions include reviewing and establishing limits for
credit exposure with each financial institution and a continuous assessment of the creditworthiness of each counterparty. The right of set-off that exists under certain of these derivative
contracts enables us, subject to each derivative contract, to net amounts due to and from the counterparty reducing the maximum loss from credit risk in the event of counterparty default.

Interest Rate Swap Agreements

In March 2007, we entered into forward-starting interest rate swap agreements, which we refer to as swaps, with an effective date of
April 23, 2007 and a maturity date of April 23, 2012. These swaps were initiated in order to hedge the variable interest rate risk associated with our Term Loan, and they are structured
that we receive interest based on the three-month LIBOR and pay interest on a fixed rate basis. In October 2007, we entered into additional interest rate swaps related to our Term Loan with an
effective date of October 23, 2007 and a maturity date of October 23, 2012 under similar terms.

We
account for our swaps in accordance with "Accounting for Derivative Instruments and Hedging Activities", which we refer to as SFAS No. 133, and as such our swaps are treated as
cash flow hedges. We value our interest rate swap agreements based on SFAS No. 157 "Fair Value Measurements", which we refer to as SFAS No. 157, Level 2 inputs from model-derived
valuations whose significant inputs are quoted LIBOR contracts, Eurodollar futures and on-the-run swap markets. SFAS No. 157 requires that the valuation of derivative
assets and liabilities must take into account the parties' nonperformance risk. We discounted the value of our derivative liabilities based on the credit spread for our debt as determined by the
market trading price. See Fair Value Measurements. As of April 5, 2009, we estimate that during the next twelve months ending March 2010, approximately $19.0 million will be reclassified
from accumulated other comprehensive income/loss, which we refer to as OCI, and recognized as interest expense in our statement of operations, subject to changes in the LIBOR rate. This estimated
amount will be approximately offset by lower interest expense associated with our Term Loan. Additional future amounts may be reclassified from OCI to interest expense if any portion of our swaps are
determined to be ineffective. As of April 5, 2009, we do not anticipate that any amount recorded in OCI related to our swaps will be reclassified during the next twelve months due to
ineffectiveness.

34

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BUILDING MATERIALS CORPORATION OF AMERICA

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

Treasury Lock Agreements

In July 2007, we entered into treasury lock agreements, which we refer to as treasury locks, with a maturity date of July 31,
2012, as additional hedging instruments related to our Term Loan. On October 30, 2007, we settled our open treasury lock hedging positions, which resulted in a pre-tax fair value
loss and cash settlement of approximately $4.9 million, which is being amortized into our statement of operations over the life of the Term Loan pursuant to the requirements of SFAS
No. 133. We amortized $0.2 and $0.2 million of the loss related to our treasury locks into interest expense in our statement of operations during our first quarter ended April 5,
2009 and March 30, 2008, respectively, and will amortize $0.8 million annually through July 2012.

The
following table sets forth the classification and fair values of our derivative instruments at April 5, 2009:

FAIR VALUE OF DERIVATIVE INSTRUMENTS  (Millions)

Description

Balance Sheet Classification

Fair ValueDerivatives designated as hedging instruments under SFAS No. 133:Fixed-income interest rate swap agreements

Other non-current liabilities

$
70.6


The
amount included in OCI, net of tax, related to our derivative liability at April 5, 2009 and December 31, 2008 was $43.8 and $43.7 million, respectively.

The
following table sets forth the effect of our derivative instruments on financial performance for the first quarter ended April 5, 2009:

Description

Amount of
Gain or (Loss)
Recognized
in OCI on
Derivative
(Effective
Portion)

Location of
Gain or (Loss)
Reclassified
from OCI Into
Income
(Effective
Portion)

Amount of
Gain or (Loss)
Reclassified
from
Accumulated
OCI Into
Income
(Effective
Portion)

Location of
Gain or (Loss)
Recognized
in Income on
Derivative
(Ineffective
Portion)

Amount of
Gain or (Loss)
Recognized
in Income on
Derivative
(Ineffective
Portion)(Millions)Derivatives in SFAS No. 133 Cash Flow Hedging Relationships:Fixed-income interest rate swap agreements

$
(0.1
)
Interest Expense

$
(7.2
)
$


$
Treasury lock contracts




Interest Expense


(0.2
)







As
of April 5, 2009, we did not have any derivatives not designated as hedging instruments according to SFAS No. 133.

On
April 23, 2009, we exercised our option under the Term Loan to elect one-month LIBOR as the interest period under its LIBOR advances instead of the three-month
interest period currently used

35

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BUILDING MATERIALS CORPORATION OF AMERICA

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

for
such advances. The change in election to the one-month LIBOR interest rate period resulted in a certain amount of ineffectiveness in our current swap hedging agreements. During our
second quarter ending July 5, 2009, we will begin to amortize the remaining amount of unrealized losses associated with our swap hedging agreements recorded in OCI at April 5, 2009, as a
component of interest expense on a straight-line basis over the initial life of the swap agreements.



The following table sets forth information regarding our financial instruments that are measured at fair value as of April 5,
2009, consistent with the fair value hierarchy provision of SFAS No. 157:

Total
Measured at
Fair Value

Quoted
Market
Prices
In Active
Markets for
Identical
Assets/
Liabilities
(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)(Millions)Liabilities:Fixed-income interest rate swap agreements

$
70.6

$


$
70.6

$
Total liabilities

$
70.6

$


$
70.6

$



During
the quarter ended April 5, 2009, we adopted FSP FAS No. 157-2, "Partial Deferral to the Effective Date of Statement 157," which deferred the application
of SFAS No. 157 for certain non-financial assets and non-financial liabilities. Upon adoption, we did not have any non-financial assets or liabilities that
were recognized or measured at fair value on a recurring basis, therefore there was no impact on our results of operations.



We make loans to, and borrow from, our parent corporations from time to time at prevailing market interest rates. At April 5,
2009 and March 30, 2008, BMCA Holdings Corporation owed us $56.4 and $56.3 million, including interest of $1.1 and $1.0 million, respectively, and we owed BMCA Holdings
Corporation $52.8 and $52.8 million, respectively, with no unpaid interest. Interest income on our loans to BMCA Holdings Corporation amounted to $0.6 and $1.0 million during the first
quarter ended April 5, 2009 and March 30, 2008, respectively. Interest expense on our loans from BMCA Holdings Corporation amounted to $0.6 and $1.0 million during the first
quarter ended April 5, 2009 and March 30, 2008, respectively. Loans payable to/receivable from our parent corporations are due on demand and provide each party with the right of offset
of its related obligation to the other party and are subject to limitations as outlined in the Senior Secured Credit Facilities and the Senior Notes. Under the terms of the Senior Secured Revolving
Credit Facility and the indenture governing our Senior Notes at April 5, 2009, we could repay demand loans to our parent corporation amounting to $52.8 million, subject to certain
conditions.

We
have a management agreement, which we refer to as the Management Agreement, with ISP Management Company, Inc., a subsidiary of International Specialty Products Inc.,
which, together with its subsidiaries, is referred to as ISP, an affiliate, to provide us with certain management services. Based on services provided to us in 2009 under the Management Agreement, the
aggregate amount payable

36

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BUILDING MATERIALS CORPORATION OF AMERICA

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

to
ISP Management Company, Inc. under the Management Agreement for 2009, inclusive of the services provided to G-I Holdings, is not yet available; however, after adjusting for
inflationary factors, it is currently estimated to be similar to the $7.3 million paid in 2008. We do not expect any changes to the Management Agreement to have a material impact on our results
of operations.

We
and our subsidiaries purchased a substantial portion of our headlap roofing granules, colored roofing granules and algae-resistant granules, on a purchase order basis, from ISP
Minerals Inc., which we refer to as ISP Minerals, an affiliate of BMCA and of ISP. The amount of mineral products purchased each year on this basis is based on current demand and is not subject
to minimum purchase requirements. For the first quarter ended April 5, 2009 and March 30, 2008, we and our subsidiaries purchased $11.5 and $7.2 million, respectively, of roofing
granules under this arrangement.

In
addition to the granules products we purchased, under the above purchase order basis, the balance of our granules requirements are purchased under a contract expiring in 2013. The
amount of mineral products purchased each year under the contract is based on current demand and is not subject to minimum purchase requirements. Under the contract, for the first quarter ended
April 5, 2009 and March 30, 2008, we purchased $18.2 and $19.1 million of roofing granules, respectively.

In
February 2009 and March 2009, after giving effect to the most restrictive of the aforementioned debt covenant restrictions, we declared and paid cash dividends of $5.0 and
$5.0 million, respectively, to our parent corporation.

Included
in noncurrent assets as a tax receivable from parent corporation on our consolidated balance sheets is $0.0 and $8.4 million at April 5, 2009 and
December 31, 2008, respectively, representing amounts paid in excess of amounts due to G-I Holdings with respect to 2006 under the Tax Sharing Agreement. We utilized the remaining
receivable balance at December 31, 2008 during our first quarter ended April 5, 2009. These amounts are included in the net payable to related parties/parent corporations in our
consolidated statements of cash flows.



See Note 13 to Consolidated Financial Statements for information regarding contingencies.



We do not believe that inflation has had a material effect on our results of operations during the first quarter of 2009. However, we
cannot assure you that our business will not be affected by inflation in the future, or by increases in the cost of energy and asphalt purchases used in our manufacturing process principally due to
fluctuating oil prices.

The
prices of energy and crude oil continued to decline during the first quarter of 2009, including the price of asphalt and other petroleum-based raw materials. The decline was
primarily due to, in our opinion, the current worldwide economic conditions, which has resulted in weaker demand. The decline in crude oil prices in the first quarter of 2009 caused a moderate decline
in asphalt and other petroleum-based raw materials. Due to the strength of our manufacturing operations, which allows us to use many types of asphalt, together with our ability to secure alternative
sources of supply, we do not anticipate that any potential disruption in the supply of asphalt will have a material impact on future net sales, although no assurances can be provided in that regard.
We will attempt to pass on future cost increases from suppliers as needed; however, no assurances can be provided that these price increases will be accepted in the marketplace.

37

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BUILDING MATERIALS CORPORATION OF AMERICA

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



There have been no significant changes to our contractual obligations during the first quarter ended April 5, 2009. For a
further discussion on our contractual obligations related to minimum purchase obligations reference is made to Management's Discussion and Analysis
of Financial Condition and Results of Operations "Contractual Obligations" in our 2008 Form 10-K.



In December 2007, the Financial Accounting Standards Board, which we refer to as FASB, issued SFAS No. 141 (revised in 2007)
"Business Combinations", which we refer to as SFAS No. 141R, which provides revised guidance on how an acquiring company should recognize and measure the identifiable assets acquired,
liabilities assumed, any noncontrolling interests, and goodwill acquired in a business combination. SFAS No. 141R also expands the required disclosures related to the nature and financial
statement effects of business combinations and became effective on a prospective basis for business combinations completed in fiscal years beginning after December 15, 2008. We adopted the
provisions of SFAS No. 141R during our first quarter beginning January 1, 2009, and the adoption did not have any impact on our consolidated financial statements.

In
April 2009, the FASB issued FASB Staff Position, which we refer to as FSP, FAS No. 141(R)-1, "Accounting for Assets Acquired and Liabilities Assumed in a Business
Combination That Arise from Contingencies", which we refer to as FSP FAS No. 141(R)-1. FSP FAS No. 141(R)-1 requires that assets acquired and liabilities assumed
in a business combination that arise from contingencies be recognized at fair value if fair value can be reasonably estimated. If fair value cannot be reasonably estimated, the assets or liabilities
would generally be recognized in accordance with SFAS No. 5, "Accounting for Contingencies", which we refer to as SFAS No. 5, and FASB Interpretation No. 14, "Reasonable
Estimation of the Amount of a Loss". Furthermore, the FASB removed the subsequent accounting guidance for assets and liabilities arising from contingencies from SFAS No. 141(R). FSP FAS
No. 141(R)-1 also eliminates the requirement to disclose an estimate of the range of possible outcomes of recognized contingencies at the acquisition date. For unrecognized
contingencies, the FASB requires that entities include only the disclosure required by SFAS No. 5. We will adopt FSP FAS No. 141(R)-1 during our second quarter ending
July 5, 2009, and its effect on our results of operation or financial position in future periods will depend on the nature and significance of any future business combination.

In
December 2007, the FASB issued SFAS No. 160, "Noncontrolling Interests in Consolidated Financial Statements", which we refer to as SFAS No. 160. SFAS No. 160
establishes requirements for ownership interests in subsidiaries held by parties other than us (minority interests) to be clearly identified and disclosed in the consolidated statement of financial
position within equity, but separate from the parent's equity. Any changes in the parent's ownership interests are required to be accounted for in a consistent manner as equity transactions and any
noncontrolling equity investments in deconsolidated subsidiaries must be measured initially at fair value. SFAS No. 160 became effective on a prospective basis for fiscal years beginning after
December 15, 2008; however, the presentation and disclosure requirements must be retrospectively applied to comparative financial statements. We adopted the provisions of SFAS No. 160 in
our first quarter beginning January 1, 2009, and the adoption did not have any impact on our consolidated financial statements because we do not have any noncontrolling interests.

38

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BUILDING MATERIALS CORPORATION OF AMERICA

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

In
March 2008, the FASB issued SFAS No. 161, "Disclosures about Derivative Instruments and Hedging Activities", which we refer to as SFAS No. 161. SFAS No. 161
amends SFAS No. 133 and is intended to improve financial reporting related to derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better
understand their effects on an entity's financial position, financial performance, and cash flows. The provisions of SFAS No. 161 became effective on a prospective basis for fiscal years
beginning on or after November 15, 2008. We adopted the disclosure provisions of SFAS No. 161 during our first quarter of fiscal year beginning January 1, 2009. Since SFAS
No. 161 requires only disclosures, there was no impact on our consolidated financial statements. See Derivative and Hedging Transactions for the required disclosures.

In
April 2008, the FASB issued FSP FAS No. 142-3, "Determination of the Useful Life of Intangible Assets", which we refer to as FSP FAS No. 142-3,
which amends the factors an entity should consider in developing renewal or extension assumptions used in determining the useful life of recognized intangible assets under SFAS No. 142,
"Goodwill and Other Intangible Assets". This new guidance applies prospectively to intangible assets that are acquired individually or with a group of other assets in business combinations and asset
acquisitions. FSP FAS No. 142-3 became effective for financial statements issued for fiscal years and interim periods beginning after December 15, 2008. We adopted the
provisions of FSP FAS No. 142-3 during our first quarter beginning January 1, 2009, and the adoption did not have any impact on our consolidated financial statements.

In
May 2008, the FASB issued SFAS No. 162, "The Hierarchy of Generally Accepted Accounting Principles", which we refer to as SFAS No. 162, which identifies the sources of
accounting principles and the framework for selecting principles to be used in the preparation and presentation of financial statements in accordance with United States generally accepted accounting
principles. SFAS No. 162 will be effective 60 days after the SEC approves the Public Company Accounting Oversight Board's amendments to Interim Audit Standards Section 411, "The
Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles". We will adopt the provisions and evaluate the impact of SFAS No. 162 upon its effective date.

In
December 2008, the FASB issued FSP FAS No. 132(R)-1, "Employers' Disclosures about Postretirement Benefit Plan Assets", which we refer to as FSP FAS
No. 132(R)-1, which provides additional guidance on an employers' disclosures about plan assets of a defined benefit pension or other post retirement plan. FSP FAS
No. 132(R)-1 is effective for financial statements issued for fiscal years ending after December 15, 2009. We will adopt the provisions of FSP FAS
No. 132(R)-1 for our fiscal year beginning January 1, 2010, which will improve the disclosures in the financial statements related to the assets held by our defined pension
and postretirement plans.

In
April 2009, the FASB issued FSP FAS No. 157-4, "Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased
and Identifying Transactions That Are Not Orderly", which we refer to as FSP FAS No. 157-4. According to the guidance, if an entity determines that the level of activity for an
asset or liability has significantly decreased and that a transaction is not orderly, further analysis of the transaction or quoted prices is required, and a significant adjustment to the transaction
or quoted prices may be deemed necessary to estimate the fair value in accordance with SFAS No. 157, "Fair Value Measurements", which we refer to as SFAS No. 157. FSP FAS
No. 157-4 is effective on a prospective basis for interim and annual periods ending after June 15, 2009 with early adoption permitted for periods ending after
March 15, 2009. We will adopt the provisions of FSP FAS No. 157-4 for our second quarter ending July 5, 2009 and are currently evaluating the impact the provisions
will have on our consolidated financial statements.

39

---



BUILDING MATERIALS CORPORATION OF AMERICA

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

In
April 2009, the FASB issued FSP FAS No. 107-1 and Accounting Principles Board 28-1 "Interim Disclosures about Fair Value of Financial Instruments",
which we refer to as FSP FAS No. 107-1. FSP FAS No. 107-1 amends SFAS No. 107 "Disclosures about Fair Value of Financial Instruments" by requiring an
entity to provide disclosures about fair value measurements of financial instruments in interim financial information. FSP FAS No. 107-1 is effective on a prospective basis for
interim and annual periods ending after June 15, 2009 with early adoption permitted for periods ending after March 15, 2009. We will adopt the required disclosure provisions in our
second quarter ending July 5, 2009. Since FSP FAS No. 107-1 only requires additional disclosures, there will be no impact on our consolidated financial statements.

*
* *

Forward-looking Statements

This quarterly report on Form 10-Q contains both historical and forward-looking statements. All statements other
than statements of historical fact are, or may be deemed to be, 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. These forward-looking statements are only predictions and generally can be identified by use of statements that include phrases such as "believe," "expect,"
"anticipate," "intend," "plan," "foresee" or other similar words or phrases. Similarly, statements that describe our objectives, plans or goals also are forward-looking
statements. Our operations are subject to certain risks and uncertainties that could cause actual results to differ materially from those contemplated by the relevant forward-looking statements. The
forward-looking statements included herein are made only as of the date of this quarterly report on Form 10-Q and we undertake no obligation to publicly update any forward-looking
statements to reflect subsequent events or circumstances. We cannot assure you that projected results or events will be achieved.

40

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BUILDING MATERIALS CORPORATION OF AMERICA        Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Reference is made to Management's Discussion and Analysis of Financial Condition and Results of Operations in the 2008 Form 10-K for a
discussion of "Market-Sensitive Instruments and Risk Management." There were no material changes in such information as of April 5, 2009. See Note 7 to the Consolidated Financial
Statements.

Item 4T. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures:    Our management, under the supervision and with the participation of the Chief Executive Officer and
Chief
Financial Officer, conducted an evaluation of the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under
the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the end of the period covered by this report. Based on this evaluation, the Chief Executive Officer and Chief Financial
Officer have concluded that, as of the end of such period, our disclosure controls and procedures are effective in recording, processing, summarizing and reporting, on a timely basis, information
required to be disclosed by us in the reports filed, furnished or submitted under the Exchange Act. Our Chief Executive Officer and Chief Financial Officer also concluded that our disclosure controls
and procedures are effective to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management,
including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosures.

Changes in Internal Control over Financial Reporting:    There were no significant changes in our internal control over financial reporting
(as such
term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) identified in management's evaluation during the first quarter of fiscal year 2009 that have
materially affected or are reasonably likely to materially affect our internal control over financial reporting.

41

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BUILDING MATERIALS CORPORATION OF AMERICA        PART II        OTHER INFORMATION

Item 1.    Legal Proceedings

There were no material changes to the legal proceedings identified in the Annual Report on Form 10-K for the year
ended December 31, 2008. See Note 13 to the consolidated financial statements in Part I.

Item 5.    Other Information

On May 18, 2009, the Company entered into an Amendment to the Employment Agreement of Mr. Richard A. Nowak pursuant to
which Mr. Nowak's term of employment is extended through December 31, 2010. The foregoing description is qualified in its entirety by the Amendment to Employment Agreement for
Mr. Nowak, as filed herewith as Exhibit 10.1.

Item 6.    Exhibits

Exhibit
Number

Description10.1

Amendment to Employment Agreement, dated May 18, 2009, between Richard A. Nowak and GAF Materials Corporation.31.1

Rule 13a-14(a)/Rule 15d-14(a) Certification of the Chief Executive Officer.31.2

Rule 13a-14(a)/Rule 15d-14(a) Certification of the Chief Financial Officer.32.1

Section 1350 Certification of Chief Executive Officer and Chief Financial Officer.


42

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SIGNATURES

Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, each registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

BUILDING MATERIALS CORPORATION OF AMERICABUILDING MATERIALS MANUFACTURING CORPORATION


DATE:    May 20, 2009

BY:

/s/ JOHN F. REBELE John F. Rebele
Senior Vice President,
Chief Financial Officer and
Chief Administrative Officer
(Principal Financial Officer)DATE:    May 20, 2009

BY:

/s/ JAMES T. ESPOSITO James T. Esposito
Vice President and Controller
(Principal Accounting Officer)


43

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