SECURITIES AND EXCHANGE
COMMISSIONWashington, D. C. 20549

FORM 10-Q

Quarterly Report
Pursuant to Section 13 or 15(d)of the Securities
Exchange Act of 1934

For the Quarter Ended
March 31, 2003

Commission File No.
1-3660

Owens Corning

One Owens Corning
Parkway

Toledo, Ohio 43659

Area Code (419) 248-8000

A Delaware Corporation

I.R.S. Employer Identification No. 34-4323452

Indicate by check mark whether the
Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period
that the Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

Yes / X /      No /   /

Indicate by check mark whether the
Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Yes /   /       No / X /

Shares
of common stock, par value $.10 per share, outstanding at March 31, 2003

55,269,113

#  2 

# PART IITEM 1.    
FINANCIAL STATEMENTS

# OWENS CORNING AND
SUBSIDIARIESCONSOLIDATED STATEMENT
OF INCOME (LOSS)(unaudited)

|                                                                                                                   | Quarter Ended March 31, | 
|------------------------------------------------------------------------------------------------------------------ | ----------------------- | 
|
|
|
|NET SALES                                                                                                          |                         | 
|COST OF SALES                                                                                                      |                         | 
|                                                                                                                   |                         | 
|Gross margin                                                                                                       |                         | 
|                                                                                                                   |                         | 
|OPERATING EXPENSES                                                                                                 |                         | 
|Marketing and administrative expenses                                                                              |                         | 
|Science and technology expenses                                                                                    |                         | 
|Restructure costs (Note 4)                                                                                         |                         | 
|Chapter 11 related reorganization items (Note 1)                                                                   |                         | 
|Other (Note 4)                                                                                                     |                         | 
|                                                                                                                   |                         | 
|Total operating expenses                                                                                           |                         | 
|                                                                                                                   |                         | 
|INCOME FROM OPERATIONS                                                                                             |                         | 
|                                                                                                                   |                         | 
|Cost of borrowed funds                                                                                             |                         | 
|                                                                                                                   |                         | 
|INCOME (LOSS) BEFORE INCOME TAX EXPENSE                                                                            |                         | 
|                                                                                                                   |                         | 
|Income tax expense                                                                                                 |                         | 
|                                                                                                                   |                         | 
|INCOME (LOSS) BEFORE MINORITY INTEREST AND                                                                         |                         | 
|EQUITY IN NET LOSS OF AFFILIATES                                                                                   |                         | 
|                                                                                                                   |                         | 
|Minority interest                                                                                                  |                         | 
|Equity in net loss of affiliates                                                                                   |                         | 
|                                                                                                                   |                         | 
|NET LOSS BEFORE CUMULATIVE EFFECT                                                                                  |                         | 
|OF CHANGE IN ACCOUNTING PRINCIPLE                                                                                  |                         | 
|                                                                                                                   |                         | 
|Cumulative effect of change in accounting principle, net of tax                                                    |                         | 
|(Note 10)                                                                                                          |                         | 
|                                                                                                                   |                         | 
|NET LOSS                                                                                                           |                         | 
|                                                                                                                   |                         | 
|NET LOSS PER COMMON SHARE (Note 7)                                                                                 |                         | 
|Basic net loss per share                                                                                           |                         | 
|                                                                                                                   |                         | 
|Diluted net loss per share                                                                                         |                         | 
|                                                                                                                   |                         | 
|Weighted average number of common shares outstanding  and common equivalent shares during the period (in millions) |                         | 
|Basic                                                                                                              |                         | 
|                                                                                                                   |                         | 
|Diluted                                                                                                            |                         | 
|                                                                                                                   |                         | 

The accompanying notes are an integral part of this statement.

#  3 

# OWENS CORNING AND
SUBSIDIARIESCONSOLIDATED BALANCE
SHEET(unaudited)

|                                                          | March 31, |  | December 31,
|--------------------------------------------------------- | --------- |  | ------------
|
|
|CURRENT                                                   |           |  |             
|Cash and cash equivalents (Note 1)                        |           |  | $           
|Receivables                                               |           |  |             
|Inventories (Note 5)                                      |           |  |             
|Other current assets                                      |           |  |             
|                                                          |           |  |             
|Total current                                             |           |  |             
|                                                          |           |  |             
|OTHER                                                     |           | 
|Restricted cash - asbestos and insurance related (Note 8) |           |  |             
|Restricted cash, securities, and other - Fibreboard       |           | 
|(Notes 8 and 9)                                           |           |  |             
|Deferred income taxes                                     |           |  |             
|Goodwill (Note 10)                                        |           |  |             
|Investments in affiliates                                 |           |  |             
|Other noncurrent assets                                   |           |  |             
|                                                          |           |  |             
|Total other                                               |           |  |             
|                                                          |           |  |             
|PLANT AND EQUIPMENT, at cost                              |           | 
|Land                                                      |           |  |             
|Buildings and leasehold improvements                      |           |  |             
|Machinery and equipment                                   |           |  |             
|Construction in progress                                  |           |  |             
|                                                          |           |  |             
|                                                          |           |  |             
|Less - accumulated depreciation                           |           |  |             
|                                                          |           |  |             
|Net plant and equipment                                   |           |  |             
|                                                          |           |  |             
|TOTAL ASSETS                                              |           |  | $           
|                                                          |           |  |             

The accompanying notes are an integral part of this statement.

#  4 

# OWENS CORNING AND
SUBSIDIARIESCONSOLIDATED BALANCE
SHEET (continued)(unaudited)

|                                           | March 31, |  | December 31,
|------------------------------------------ | --------- |  | ------------
|
|
|CURRENT                                    |           |  |             
|Accounts payable and accrued liabilities   |           |  | $           
|Short-term debt                            |           |  |             
|Long-term debt - current portion           |           |  |             
|                                           |           |  |             
|Total current                              |           |  |             
|                                           |           |  |             
|LONG-TERM DEBT                             |           |  |             
|                                           |           |  |             
|OTHER                                      |           | 
|Other employee benefits liability          |           |  |             
|Pension plan liability                     |           |  |             
|Other                                      |           |  |             
|                                           |           |  |             
|                                           |           |  |             
|Total other                                |           |  |             
|                                           |           |  |             
|LIABILITIES SUBJECT TO COMPROMISE          |           | 
|(Notes 1 and 8)                            |           |  |             
|                                           |           |  |             
|COMMITMENTS AND CONTINGENCIES              |           | 
|(Notes 1, 8 and 9)                         |           | 
|                                          
|COMPANY OBLIGATED SECURITIES OF ENTITIES   |           | 
|HOLDING SOLELY PARENT DEBENTURES -         |           | 
|SUBJECT TO COMPROMISE                      |           |  |             
|                                           |           |  |             
|                                           |           |  |             
|MINORITY INTEREST                          |           |  |             
|                                           |           |  |             
|STOCKHOLDERS EQUITY                       |           | 
|Common stock                               |           |  |             
|Additional paid in capital                 |           |  |             
|Deficit                                    |           |  |             
|Accumulated other comprehensive loss       |           |  |             
|Other                                      |           |  |             
|                                           |           |  |             
|                                           |           |  |             
|Total stockholders equity                 |           |  |             
|                                           |           |  |             
|                                           |           |  |             
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY |           |  | $           
|                                           |           |  |             

The accompanying notes are an integral part of this statement.

#  5 

# OWENS CORNING AND
SUBSIDIARIESCONSOLIDATED STATEMENT
OF CASH FLOWS(unaudited)

|                                                                      | Quarter Ended March 31, | 
|--------------------------------------------------------------------- | ----------------------- | 
|
|
|                                                                      |                         | 
|NET CASH FLOW FROM OPERATIONS                                         |                         | 
|                                                                      |                         | 
|Net loss                                                              |                         | 
|                                                                     
|Reconciliation of net cash provided by operating activities           |                         | 
|Noncash items:                                                        |                         | 
|Provision for depreciation and amortization                           |                         | 
|Provision for impairment of fixed assets (Note 4)                     |                         | 
|Credit for deferred income taxes                                      |                         | 
|Cumulative effect of accounting change (Note 10)                      |                         | 
|Other                                                                 |                         | 
|Increase in receivables                                               |                         | 
|Increase in inventories                                               |                         | 
|Decrease in accounts payable and accrued liabilities                  |                         | 
|Decrease in restricted cash - asbestos and insurance related (Note 8) |                         | 
|Increase in restricted cash, securities, and other - Fibreboard       |                         | 
|(Notes 8 and 9)                                                       |                         | 
|Change in liabilities subject to compromise (Note 1)                  |                         | 
|Other                                                                 |                         | 
|                                                                      |                         | 
|Net cash flow from operations                                         |                         | 
|                                                                      |                         | 
|NET CASH FLOW FROM INVESTING                                          |                         | 
|                                                                      |                         | 
|Additions to plant and equipment                                      |                         | 
|Proceeds from the sale of affiliate or business                       |                         | 
|Other                                                                 |                         | 
|                                                                      |                         | 
|Net cash flow from investing                                          |                         | 
|                                                                      |                         | 
|NET CASH FLOW FROM FINANCING                                          |                         | 
|                                                                      |                         | 
|Other additions to long-term debt                                     |                         | 
|Other reductions to long-term debt                                    |                         | 
|Net increase in short-term debt                                       |                         | 
|Other                                                                 |                         | 
|                                                                      |                         | 
|Net cash flow from financing                                          |                         | 
|                                                                      |                         | 
|Effect of exchange rate changes on cash                               |                         | 
|                                                                      |                         | 
|                                                                      |                         | 
|Net decrease in cash and cash equivalents                             |                         | 
|                                                                      |                         | 
|Cash and cash equivalents at beginning of period                      |                         | 
|                                                                      |                         | 
|Cash and cash equivalents at end of period                            |                         | 
|                                                                      |                         | 

The accompanying notes are an integral part of this statement.

#  6 

# OWENS CORNING AND
SUBSIDIARIESNOTES TO CONSOLIDATED
FINANCIAL STATEMENTS(unaudited)

1.    
          VOLUNTARY PETITION FOR RELIEF UNDER CHAPTER 11

On October 5, 2000
(the Petition Date), Owens Corning and the 17 United States subsidiaries
listed below (collectively, the Debtors) filed voluntary petitions for relief
(the Filing) under Chapter 11 of the United States Bankruptcy Code (the Bankruptcy
Code) in the United States Bankruptcy Court for the District of Delaware (the USBC).
The Debtors are currently operating their businesses as debtors-in-possession in
accordance with provisions of the Bankruptcy Code. The Chapter 11 cases of the Debtors
(collectively, the Chapter 11 Cases) are being jointly administered under
Case No. 00-3837 (JKF). The Chapter 11 Cases do not include other United States
subsidiaries of Owens Corning or any of its foreign subsidiaries (collectively, the Non-Debtor
Subsidiaries). As described more fully below under the heading The Plan of
Reorganization, Owens Corning may cause certain of such Non-Debtor Subsidiaries
that issued guarantees with respect to Owens Cornings pre-petition bank credit
facility to file petitions for relief under Chapter 11 of the Bankruptcy Code under
certain circumstances. The subsidiary Debtors that filed Chapter 11 petitions for relief
are:

| |  |                                    
| |  | -----------------------------------
| |  | CDC Corporation                    
| |  | Engineered Yarns America, Inc.     
| |  | Falcon Foam Corporation            
| |  | Integrex                           
| |  | Fibreboard Corporation             
| |  | Exterior Systems, Inc.             
| |  | Integrex Ventures LLC              
| |  | Integrex Professional Services LLC 
| |  | Integrex Supply Chain Solutions LLC

The Debtors filed for relief under Chapter 11 to address the growing demands on Owens Cornings cash flow resulting
from its multi-billion dollar asbestos liability. This liability is discussed in greater
detail in Note 8 to the Consolidated Financial Statements.

In late 2001, the
asbestos-related Chapter 11 cases pending in the District of Delaware (the Chapter 11
Cases of Owens Corning and the cases of Armstrong World Industries, Inc., W.R. Grace & Co.,
Federal-Mogul Global, Inc., and USG Corporation) were ordered transferred to the United
States District Court for the District of Delaware (the District Court)
before Judge Alfred M. Wolin to facilitate development and implementation of a
coordinated plan for management (the Administrative Consolidation). The
District Court has entered an order referring the Chapter 11 Cases back to the USBC,
where they were previously pending, subject to its ongoing right to withdraw such
referral with respect to any proceedings or issues (the applicable court from time to
time responsible for any particular aspect of the Chapter 11 Cases being hereinafter
referred to as the Bankruptcy Court). Owens Corning is unable to predict what
impact the Administrative Consolidation will have on the timing, outcome or other aspects
of the Chapter 11 Cases.

On January 17, 2003,
the Debtors, together with the Official Committee of Asbestos Claimants and the Legal
Representative for the class of future asbestos claimants, filed a proposed joint plan of
reorganization in the USBC. On March 28, 2003, the same proponents filed a proposed
amended joint plan of reorganization (the Plan) in the USBC. Certain terms,
conditions and provisions of the Plan are discussed below. The Plan is subject to
confirmation by the Bankruptcy Court.

#  7 

# OWENS CORNING AND
SUBSIDIARIESNOTES TO CONSOLIDATED
FINANCIAL STATEMENTS(unaudited)

1.    
          VOLUNTARY PETITION FOR RELIEF UNDER CHAPTER 11 (continued)

Consequence of Filing

As a consequence of
the Filing, all pending litigation against the Debtors is stayed automatically by section
362 of the Bankruptcy Code and, absent further order of the Bankruptcy Court, no party
may take any action to recover on pre-petition claims against the Debtors. In addition,
pursuant to section 365 of the Bankruptcy Code, the Debtors may reject or assume
pre-petition executory contracts and unexpired leases, and other parties to contracts or
leases that are rejected may assert rejection damages claims as permitted by the
Bankruptcy Code.

Two creditors committees,
one representing asbestos claimants and the other representing unsecured creditors, have
been appointed as official committees in the Chapter 11 Cases. In addition, the
Bankruptcy Court has appointed James J. McMonagle as Legal Representative for the class
of future asbestos personal injury claimants against one or more of the Debtors. The two
committees and the Legal Representative have the right to be heard on all matters that
come before the Bankruptcy Court. Owens Corning expects that the two committees and the
Legal Representative will play important roles in the Chapter 11 Cases and the
negotiation of the terms of any plan or plans of reorganization. As noted above, the
Debtors filed their Plan together with the Official Committee of Asbestos Claimants and
the Legal Representative for the class of future asbestos claimants.

Owens Corning
anticipates that substantially all liabilities of the Debtors as of the date of the
Filing will be resolved under one or more Chapter 11 plans of reorganization to be
proposed and voted on in the Chapter 11 Cases in accordance with the provisions of the
Bankruptcy Code. Although the Debtors intend to seek confirmation of the Plan, there can
be no assurance that the Plan will not be amended prior to confirmation, nor can there be
any assurance that such Plan will be confirmed by the Bankruptcy Court and consummated.
Owens Corning is unable to predict what impact the Administrative Consolidation will have
on the timing of the confirmation of a plan or plans of reorganization or its effect, if
any, on the terms thereof.

The Plan of Reorganization

Owens Corning
believes that it is likely that the terms, conditions and provisions of the Plan will be
the subject of continuing negotiations or litigation to resolve differences among the
creditor constituencies as to their treatment. Accordingly, Owens Corning is unable to
predict at this time what the treatment of creditors and equity holders of the respective
Debtors will ultimately be under any plan or plans of reorganization finally confirmed.
The current Plan provides for partial payment of all unsecured creditors claims, in
the form of distributions of new common stock and notes of the reorganized company, and
cash. Additional distributions from potential insurance and other third-party claims may
also be paid to certain classes of unsecured creditors, but it is expected that all
classes of pre-petition unsecured creditors will be impaired. Therefore, the Plan also
provides that the existing common stock of Owens Corning will be cancelled, and that
current shareholders will receive no distribution or other consideration in exchange for
their shares. It is impossible to predict at this time the terms and provisions of any
plan or plans of reorganization that may ultimately be confirmed, when a plan or plans of
reorganization will be confirmed, or the treatment of creditors thereunder.

#  8 

# OWENS CORNING AND
SUBSIDIARIESNOTES TO CONSOLIDATED
FINANCIAL STATEMENTS(unaudited)

1.    
          VOLUNTARY PETITION FOR RELIEF UNDER CHAPTER 11 (continued)

The Plan is premised
upon the substantive consolidation of the Debtors (but not the Fibreboard Settlement
Trust) for the purposes of voting, determining which claims and interests will be
entitled to vote to accept or reject the Plan, confirmation of the Plan, and the
resultant discharge of and cancellation of claims and interests and distribution of
assets, interests and other property under the Plan. For these purposes, the Plan would
treat all assets and liabilities of each Debtor (excluding the Fibreboard Settlement
Trust) as though they were merged into one consolidated estate with the assets and
liabilities of the other Debtors. Substantive consolidation under the Plan will not
result in the merger of or the transfer or commingling of any assets of any of the
Debtors or Non-Debtor Subsidiaries. In that regard, Owens Corning intends to implement a
restructuring plan which would reorganize Owens Corning and its subsidiaries consistent with the
Companys major business lines and direction. The planning for the restructuring is in a
preliminary stage.  Certain creditor constituencies have asserted that substantive
consolidation is not appropriate and are challenging that approach in the Plan
confirmation hearings described below.

The percentage
recovery and value of the payments made under the Plan to each class of creditors will
depend upon a number of factors. Those factors include the value of the shares of new
common stock and notes to be issued by the Company, the amount of cash available for
distribution, the resolution of certain inter-creditor issues, and the ultimate aggregate
asbestos liability.

The Plan provides
two alternative frameworks for creditor recoveries. One such alternative, which would
apply in the event that the Plan were approved by the major creditor constituencies,
would assume an aggregate liability for current and future asbestos personal injury
claims against Owens Corning and Fibreboard of $16 billion, and a preferred recovery to
holders of bank claims of $400 million, in addition to pro rata recovery on the balance
of their claims. Under the other alternative, in the context of a non-consensual
framework, such aggregate asbestos liabilities would be determined by the Bankruptcy
Court as part of the confirmation hearing on the Plan. Hearings concerning confirmation
of the Plan began on April 8, 2003. Any disagreements raised by creditors with the terms
of the Plan, including with respect to the appropriateness of substantive consolidation,
will be handled through litigation as part of the confirmation process. Owens Corning is
unable to predict the outcome of such litigation.

Under either Plan
alternative, a majority of the newly issued common stock, together with notes, and cash,
as well as the assets of the existing Fibreboard Settlement Trust (see Note 9 to the
Consolidated Financial Statements), will fund a new trust created under the Plan intended
to qualify under Section 524(g) of the Bankruptcy Code. The Section 524(g) trust will
assume all obligations of Owens Corning, Fibreboard, and their respective subsidiaries
and affiliates, for current and future asbestos personal injury claims and demands, and
will, through Owens Corning and Fibreboard sub-accounts, make payments to claimants in
accordance with trust distribution procedures to be agreed upon. In addition, the Plan
provides for an injunction by the Bankruptcy Court pursuant to Section 524(g) of the
Bankruptcy Code that will enjoin actions against the reorganized Debtors for the purpose
of, directly or indirectly, collecting, recovering or receiving payment of, on, or with
respect to any claims resulting from asbestos-containing products allegedly manufactured,
sold or installed by Owens Corning or Fibreboard, which claims will be paid in whole or
in part by the Section 524(g) trust. Similar plans of reorganization have been confirmed
in the Chapter 11 cases of other companies involved in asbestos-related litigation.
Section 524(g) of the Bankruptcy Code provides that, if certain specified conditions are
satisfied, a court may issue a supplemental permanent injunction barring the assertion of
asbestos-related claims or demands against the reorganized company and channeling those
claims to an independent trust.

#  9 

# OWENS CORNING AND
SUBSIDIARIESNOTES TO CONSOLIDATED
FINANCIAL STATEMENTS(unaudited)

1.    
          VOLUNTARY PETITION FOR RELIEF UNDER CHAPTER 11 (continued)

Among other things,
the Plan provides that (1) except as otherwise provided in the Plan, no distributions
will be made under the Plan on account of inter-company claims among any of the Debtors,
and (2) all guarantees of the Debtors of the obligations of any other Debtor will be
deemed eliminated. Since, as described above, it is likely that the Plan will be the
subject of continuing negotiations or litigation, Owens Corning is unable to predict at
this time what the treatment of such matters, and other inter-company and intra-company
arrangements, transactions and relationships that were entered into prior to the Petition
Date, will ultimately be under any plan or plans of reorganization finally confirmed.
Such matters and other arrangements, transactions and relationships may be challenged by
various parties in the Chapter 11 Cases and payments and other obligations in respect
thereof may be restricted or modified by order of, or subject to review and approval by,
the Bankruptcy Court. The outcome of such challenges and other actions, if any, may have
an impact on the treatment of various claims under the plan or plans ultimately confirmed
and on the respective assets, liabilities and results of operations of Owens Corning and
its subsidiaries. For example, Owens Corning is unable to predict at this time what the
treatment will ultimately be under any such plan or plans with respect to (1) the
guarantees issued by certain of Owens Cornings U.S. subsidiaries, including
Owens-Corning Fiberglas Technology Inc. (OCFT) and IPM Inc., a Non-Debtor
Subsidiary that holds Owens Cornings ownership interest in a majority of Owens
Cornings foreign subsidiaries (IPM), with respect to Owens Cornings
$1.8 billion pre-petition bank credit facility (the Pre-Petition Credit Facility,
which is in default) or (2) OCFTs license agreements with Owens Corning and
Exterior Systems, Inc., an indirect wholly-owned subsidiary of Owens Corning (Exterior),
pursuant to which OCFT licenses intellectual property to Owens Corning and Exterior. In
the event that (1) the major creditor constituencies do not approve the Plan and (2) no
other acceptable alternative agreement is reached to release such entities from their
guaranty obligations, Owens Corning expects to cause IPM as well as Vytec Corporation and
Owens-Corning Fiberglas Sweden Inc., two other Non-Debtor Subsidiaries that have issued
guarantees in connection with the Pre-Petition Credit Facility, to file for relief under
Chapter 11 of the Bankruptcy Code, and to join in the proposal of the Plan, and will also
seek to cause those Non-Debtor Subsidiaries to be substantively consolidated with the
current Debtors for the purposes set forth in the Plan.

The Bankruptcy Court
may confirm a plan of reorganization only upon making certain findings required by the
Bankruptcy Code, and a plan may be confirmed over the dissent of non-accepting creditors
and equity security holders if certain requirements of the Bankruptcy Code are met. The
payment rights and other entitlements of pre-petition creditors and Owens Cornings
shareholders may be substantially altered by any plan or plans of reorganization
confirmed in the Chapter 11 Cases, and the pre-petition creditors of some Debtors may be
treated differently than those of other Debtors.

Pursuant to the
Bankruptcy Code, schedules have been filed by the Debtors with the Bankruptcy Court
setting forth the assets and liabilities of the Debtors as of the date of the Filing.
Differences between amounts recorded by the Debtors and claims filed by creditors will be
investigated and resolved as part of the proceedings in the Chapter 11 Cases.

#  10 

# OWENS CORNING AND
SUBSIDIARIESNOTES TO CONSOLIDATED
FINANCIAL STATEMENTS(unaudited)

1.    
          VOLUNTARY PETITION FOR RELIEF UNDER CHAPTER 11 (continued)

Bar Dates for Filing Claims

GENERAL BAR DATE

In connection with
the Chapter 11 Cases, the Bankruptcy Court set April 15, 2002 as the last date by which
holders of certain pre-petition claims against the Debtors must file their claims (the
General Bar Date). The General Bar Date does not apply to asbestos-related
personal injury claims and asbestos-related wrongful death claims (other than claims for
contribution, indemnity, reimbursement, or subrogation). Any holder of a claim that was
required to file a claim by the General Bar Date and did not do so will be barred from
asserting such claim against any of the Debtors and will not participate in any
distribution in any of the Chapter 11 Cases on account of such claim.

Approximately 24,000
proofs of claim (including late-filed claims), totaling approximately $16.1 billion,
alleging a right to payment from a Debtor were filed with the Bankruptcy Court in
response to the General Bar Date. Owens Corning is investigating these claims to
determine their validity. The Bankruptcy Court will ultimately determine liability
amounts that will be allowed for these claims in the Chapter 11 Cases.

In its initial
review of the filed claims, Owens Corning has identified approximately 15,000 claims,
totaling approximately $8.4 billion, which it believes should be disallowed by the
Bankruptcy Court, primarily because they appear to be duplicate claims or claims that are
not related to the indicated Debtor (the Objectionable Claims). Owens Corning
has filed omnibus objections to certain of these Objectionable Claims and likely will
file additional objections. While the Bankruptcy Court will ultimately determine
liability amounts, if any, that will be allowed as part of the Chapter 11 Cases, Owens
Corning believes that all or substantially all of these Objectionable Claims will be
disallowed.

In addition to the
Objectionable Claims described above, at March 31, 2003, the remaining filed proofs of
claim included approximately 9,000 claims, totaling approximately $7.7 billion, as
follows:

|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|- | Approximately 2,900 claims, totaling approximately $1.4 billion, associated with
asbestos-related contribution, indemnity, reimbursement, or subrogation claims. Owens
Corning will address all asbestos-related personal injury and wrongful death claims in the
future as part of the Chapter 11 Cases. Please see Note 8 to the Consolidated Financial
Statements for additional information concerning asbestos-related liabilities.                                                                
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|- | Approximately 600 claims, totaling approximately $0.7 billion, alleging asbestos-related
property damage. Most of these claims were submitted with insufficient documentation to
assess their validity. Owens Corning expects to vigorously defend any asserted
asbestos-related property damage claims in the Bankruptcy Court. Based upon its historic
experience in respect of asbestos-related property damage claims, Owens Corning does not
anticipate significant liability from any such claims.

#  11 

# OWENS CORNING AND
SUBSIDIARIESNOTES TO CONSOLIDATED
FINANCIAL STATEMENTS(unaudited)

1.    
          VOLUNTARY PETITION FOR RELIEF UNDER CHAPTER 11 (continued)

|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|- | Approximately 5,500 claims, totaling approximately $5.6 billion, alleging rights to
payment for financing, environmental, trade debt and other matters (the General
Claims). The Company has previously recorded approximately $3.7 billion in
liabilities for these claims. Based upon the claims information submitted, the General
Claims with the largest variance from the recorded amounts are: claims by the United
States Department of Treasury, totaling approximately $530 million, in connection with
taxes (see discussion under the heading Tax Claim in Note 8 to the
Consolidated Financial Statements); a contingent claim for approximately $458 million by
the Pension Benefit Guaranty Corporation, as described more fully under the heading
PBGC Claim in Note 8 to the Consolidated Financial Statements; claims for
contract rejections, totaling approximately $310 million, of which approximately $250
million are protective claims covering contracts which have not been rejected by the
Debtors as of March 31, 2003; a $275 million class action claim involving alleged problems
with a specialty roofing product, which claim Owens Corning does not believe is
meritorious based upon its historic experience with servicing its warranty program for
such product; and environmental claims, totaling approximately $244 million.
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

Owens Corning has
recorded liability amounts for those claims that can be reasonably estimated and which it
believes are probable of being allowed by the Bankruptcy Court. At this time, it is
impossible to reasonably estimate the value of all the claims that will ultimately be
allowed by the Bankruptcy Court, due to the uncertainties of the Chapter 11 process, the
in-progress state of Owens Cornings investigation of submitted claims, and the lack
of documentation submitted in support of many claims. Owens Corning continues to evaluate
claims filed in the Chapter 11 Cases and will make such adjustments as may be
appropriate. Any such adjustments could be material to the Companys consolidated
financial position and results of operations in any given period. For a discussion of
liability amounts in respect of asbestos personal injury claims, see Note 8 to the
Consolidated Financial Statements.

ASBESTOS BAR DATE

A bar date for
filing proofs of claim against the Debtors with respect to asbestos-related personal
injury claims and asbestos-related wrongful death claims (other than claims for
contribution, indemnity, reimbursement, or subrogation) has not been set. On April 11,
2003, the Official Committee of Unsecured Creditors filed a motion seeking establishment
of a bar date for such asbestos-related claims. On April 25, 2003, the District Court
entered an order withdrawing the reference of the Chapter 11 Cases to the USBC with
respect to such motion, and staying all proceedings on such motion pending further order
of the District Court.

As indicated above,
the General Bar Date does not apply to asbestos-related personal injury claims and
asbestos-related wrongful death claims (other than claims for contribution, indemnity,
reimbursement, or subrogation). Despite this, approximately 2,900 proofs of claim (in
addition to claims described above under General Bar Date), totaling
approximately $2.2 billion, with respect to asbestos-related personal injury or wrongful
death were filed with the Bankruptcy Court in response to the General Bar Date. Of these
claims, Owens Corning has identified approximately 1,100, totaling approximately $0.5
billion, as Objectionable Claims. Of the remaining claims, Owens Corning believes that a
substantial majority represent claimants that had previously asserted asbestos-related
claims against the Company.

As noted above,
under the Plan all asbestos-related personal injury and wrongful death claims will be
channeled to the Section 524(g) trust, subject to approval by the Bankruptcy Court.
Please see Note 8 to the Consolidated Financial Statements for additional information
concerning asbestos-related liabilities.

#  12 

# OWENS CORNING AND
SUBSIDIARIESNOTES TO CONSOLIDATED
FINANCIAL STATEMENTS(unaudited)

1.    
          VOLUNTARY PETITION FOR RELIEF UNDER CHAPTER 11 (continued)

Avoidance Actions

Under the Bankruptcy
Code, October 4, 2002 was the deadline by which the Debtors, on behalf of the bankruptcy
estates, could bring adversary actions seeking the return of potentially avoidable
transfers made by the Debtors to certain parties within a prescribed period prior to the
commencement of the Chapter 11 proceedings. As part of their review of potentially
avoidable transactions, the Debtors (1) negotiated tolling agreements with some of the
recipients of the preferential transfers in order to toll the time period in which to
bring an avoidance action; (2) determined not to prosecute certain of those potential
avoidance actions that were not the subject of tolling agreements; and (3) instituted,
prior to the October 4, 2002 deadline, a total of 19 adversarial actions, including 3
preference actions, 1 turnover action, and 15 avoidance actions, as described further
below. All such actions were commenced in the USBC.

Among the parties
who were identified by the Debtors as having received potentially avoidable transfers
were (a) 12 present and former officers that received certain pre-petition incentive
payments exceeding a threshold in the aggregate per officer; (b) one director that
received a pre-petition pension payment; and (c) a joint venture affiliate of the Company
that received approximately $3.8 million in the one-year period prior to the commencement
of the Chapter 11 proceedings.

The Debtors have
executed tolling agreements with all 12 present and former officers, the director and the
affiliate of the Company, as well as with certain other parties identified as having
received potentially avoidable transfers.

The additional
actions were commenced against various other defendants seeking, among other things, (a)
avoidance of certain guarantees and certain preferential payments made in connection with
Owens Cornings Pre-Petition Credit Facility; (b) the return of up to approximately
$515 million paid by the Company to shareholders of Fibreboard in connection with the
Companys purchase of Fibreboard in 1997 (the FBD Shareholder Action);
(c) the return of up to approximately $61.8 million paid by the Company to shareholders
in dividends in the period 1996 through 2000 (the Dividend Action); and (d)
the return of approximately $133 million paid by the Company to Bank of America Corp. in
connection with Owens Cornings purchase of Fibreboard in 1997. Both the FBD
Shareholder Action and the Dividend Action are defendant class actions. Certain present
or former officers or directors of the Company may be members of either or both defendant
classes.

Separately, and at
the request of the Debtors Official Creditors Committee and the direction of
the Bankruptcy Court, the Debtors either obtained tolling agreements from, or filed
actions against, approximately 115 law firms that entered into NSP or non-NSP agreements
(see Note 8) with the Debtors on behalf of claimants asserting asbestos-related personal
injury or wrongful death claims. Lawsuits were brought against the 11 law firms that did
not sign tolling agreements, seeking two forms of relief: (a) first, a declaratory
judgment as to whether payments made, or obligations incurred, under NSP and non-NSP
agreements were in exchange for reasonably equivalent value; and (b) second, in the event
reasonably equivalent value was not received, the recovery or avoidance of payments made
and obligations incurred under the relevant NSP and non-NSP agreements pursuant to
applicable state and federal fraudulent conveyance law. The Official Creditors Committee
was named as a defendant in such lawsuits, solely with respect to the declaratory relief
sought.

#  13 

# OWENS CORNING AND
SUBSIDIARIESNOTES TO CONSOLIDATED
FINANCIAL STATEMENTS(unaudited)

1.    
          VOLUNTARY PETITION FOR RELIEF UNDER CHAPTER 11 (continued)

By motion filed on
or about October 16, 2002, the Debtors sought an order of the Bankruptcy Court staying
all of the foregoing litigation pending its disposition in a plan of reorganization.
Pursuant to orders of the Bankruptcy Court, all of the foregoing litigation, other than
the action relating to the avoidance of certain guarantees and certain preferential
payments made in connection with Owens Cornings Pre-Petition Credit Facility, has
been stayed until February 2, 2004, subject to the right of any defendant to move to
modify/terminate the stay. The Debtors action relating to the avoidance of certain
guarantees and certain preferential payments made in connection with Owens Cornings
Pre-Petition Credit Facility is scheduled for trial before the District Court commencing
in June 2003.

Certain Post-petition
Matters

The Debtors have
received approval from the Bankruptcy Court to pay or otherwise honor certain of their
pre-petition obligations, including employee wages, salaries, benefits and other employee
obligations, pre-petition claims of critical vendors, and certain other pre-petition
claims including certain customer program and warranty claims.

As a result of the
Filing, contractual interest expense has not been accrued or recorded on pre-petition
debt of the Debtors since the Petition Date. From the Petition Date through March 31,
2003, contractual interest expense not accrued or recorded on pre-petition debt totaled
$394 million, of which $32 million relates to the first quarter of 2003 and $36 million
relates to the first quarter of 2002.

At March 31, 2003,
the Company had $701 million of cash and cash equivalents (of which approximately $2
million was subject to administrative freeze pending the resolution of certain alleged
set-off rights by certain pre-petition lenders).

In connection with
the Filing, the Debtors obtained a $500 million debtor-in-possession credit facility from
a group of lenders led by Bank of America, N.A. (the DIP Financing), which
was originally scheduled to expire November 15, 2002. Effective October 31, 2002, the DIP
Financing was amended to, among other things, reduce the maximum available credit amount
to $250 million and extend the scheduled expiration to November 15, 2004. There were no
borrowings outstanding under the DIP Financing at March 31, 2003; however, approximately
$64 million of the availability under this credit facility was utilized as a result of
the issuance of standby letters of credit and similar uses.

As a consequence of
the Filing and the impact of certain provisions of the Companys DIP Financing and
in a cash management order entered by the Bankruptcy Court, the Company and its
subsidiaries are now subject to certain restrictions, including on their ability to pay
dividends and to transfer cash and other assets to each other and to their affiliates.

The Company
believes, based on information presently available to it, that its cash and cash
equivalents, cash available from operations, and the DIP Financing will provide
sufficient liquidity to allow it to continue as a going concern for the foreseeable
future. However, the ability of the Company to continue as a going concern (including its
ability to meet post-petition obligations of the Debtors and to meet obligations of the
Non-Debtor Subsidiaries) and the appropriateness of using the going concern basis for its
financial statements are dependent upon, among other things, (i) the Companys
ability to comply with the terms of the DIP Financing and any cash management order
entered by the Bankruptcy Court from time to time in connection with the Chapter 11
Cases, (ii) the ability of the Company to maintain

#  14 

# OWENS CORNING AND
SUBSIDIARIESNOTES TO CONSOLIDATED
FINANCIAL STATEMENTS(unaudited)

1.    
          VOLUNTARY PETITION FOR RELIEF UNDER CHAPTER 11 (continued)

adequate cash on
hand, (iii) the ability of the Company to generate cash from operations, (iv) the ability
of the Non-Debtor Subsidiaries to obtain necessary financing, (v) confirmation of a plan
or plans of reorganization under the Bankruptcy Code, and (vi) the Companys ability
to maintain profitability following such confirmation.

Financial Statement
Presentation

The Companys
Consolidated Financial Statements have been prepared in accordance with AICPA Statement
of Position 90-7 (SOP 90-7), Financial Reporting by Entities in
Reorganization Under the Bankruptcy Code, and on a going concern basis, which
contemplates continuity of operations, realization of assets and liquidation of
liabilities in the ordinary course of business. However, as a result of the Filing, such
realization of assets and liquidation of liabilities are subject to uncertainty. While
operating as debtors-in-possession under the protection of Chapter 11 of the Bankruptcy
Code, and subject to Bankruptcy Court approval or otherwise as permitted in the ordinary
course of business, the Debtors, or some of them, may sell or otherwise dispose of assets
and liquidate or settle liabilities for amounts other than those reflected in the
Consolidated Financial Statements. Further, a plan of reorganization could materially
change the amounts and classifications reported in the consolidated historical financial
statements.

Substantially all of
the Companys pre-petition debt is now in default due to the Filing. As described
below, the accompanying Consolidated Financial Statements present the Debtors pre-petition
debt under the caption Liabilities Subject to Compromise. This includes debt
under the Pre-Petition Credit Facility and approximately $1.4 billion of other
outstanding debt. As required by SOP 90-7, at the Petition Date the Company recorded the
Debtorspre-petition debt instruments at the allowed amount, as defined by SOP 90-7.

As reflected in the
Consolidated Financial Statements, Liabilities Subject to Compromise refer to
Debtorsliabilities incurred prior to the commencement of the Chapter 11 Cases. The
amounts of the various liabilities that are subject to compromise are set forth below
following the debtor-in-possession financial statements. These amounts represent Owens
Cornings estimate of known or potential pre-petition claims to be resolved in
connection with the Chapter 11 Cases. Such claims remain subject to future adjustments.
Adjustments may result from (1) negotiations; (2) actions of the Bankruptcy Court; (3)
further developments with respect to disputed claims; (4) rejection of executory
contracts and unexpired leases; (5) the determination as to the value of any collateral
securing claims; (6) proofs of claim; or (7) other events. Payment terms for these
amounts will be established in connection with the Chapter 11 Cases.

In this respect, the
Companys Consolidated Financial Statements, and the condensed financial statements
presented below, reflect charges to income of $1.381 billion for Owens Corning and $975
million for Fibreboard during the quarterly period ended September 30, 2002, in
connection with asbestos-related liabilities. Please see Note 8 to the Consolidated
Financial Statements.

Debtor-In-Possession
Financial Statements

The condensed
financial statements of the Debtors are presented below. These statements reflect the
financial position and results of operations of the combined Debtor entities, including
certain amounts and activities between Debtors and non-debtor entities of Owens Corning
that are eliminated in the Consolidated Financial Statements.

#  15 

# OWENS CORNING AND
SUBSIDIARIESNOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (continued)(unaudited)

1.    
          VOLUNTARY PETITION FOR RELIEF UNDER CHAPTER 11 (continued)

# OWENS CORNING AND
SUBSIDIARIESDEBTOR-IN-POSSESSION
STATEMENT OF INCOME (LOSS)

|                                                                 | Quarter Ended March 31, | 
|---------------------------------------------------------------- | ----------------------- | 
|
|
|
|NET SALES                                                        |                         | 
|COST OF SALES                                                    |                         | 
|                                                                 |                         | 
|Gross margin                                                     |                         | 
|                                                                 |                         | 
|OPERATING EXPENSES                                               |                         | 
|Marketing and administrative expenses                            |                         | 
|Science and technology expenses                                  |                         | 
|Restructure costs                                                |                         | 
|Chapter 11 related reorganization items                          |                         | 
|Other (Including interest income from non-Debtors of $14 million |                         | 
|in 2003 and 2002)                                                |                         | 
|                                                                 |                         | 
|Total operating expenses                                         |                         | 
|                                                                 |                         | 
|LOSS FROM OPERATIONS                                             |                         | 
|                                                                 |                         | 
|Cost of borrowed funds                                           |                         | 
|                                                                 |                         | 
|LOSS BEFORE INCOME TAX BENEFIT                                   |                         | 
|                                                                 |                         | 
|Income tax benefit                                               |                         | 
|                                                                 |                         | 
|LOSS BEFORE MINORITY INTEREST AND EQUITY                         |                         | 
|IN NET LOSS OF AFFILIATES                                        |                         | 
|                                                                 |                         | 
|Equity in net loss of affiliates                                 |                         | 
|                                                                 |                         | 
|NET LOSS BEFORE CUMULATIVE EFFECT                                |                         | 
|OF CHANGE IN ACCOUNTING PRINCIPLE                                |                         | 
|                                                                 |                         | 
|Cumulative effect of change in accounting principle, net of tax  |                         | 
|                                                                 |                         | 
|NET LOSS                                                         |                         | 
|                                                                 |                         | 

#  16 

# OWENS CORNING AND
SUBSIDIARIESNOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (continued)(unaudited)

1.    
          VOLUNTARY PETITION FOR RELIEF UNDER CHAPTER 11 (continued)

# OWENS CORNING AND
SUBSIDIARIESDEBTOR-IN-POSSESSION
BALANCE SHEET

|                                                    | March 31, | December 31,
|--------------------------------------------------- | --------- | ------------
|
|
|CURRENT                                             |           |             
|Cash and cash equivalents                           |           |             
|Receivables                                         |           |             
|Receivables - non-Debtors                           |           |             
|Inventories                                         |           |             
|Other current assets                                |           |             
|                                                    |           |             
|Total current                                       |           |             
|                                                    |           |             
|OTHER                                               |           |             
|Restricted cash - asbestos and insurance related    |           |             
|Restricted cash, securities, and other - Fibreboard |           |             
|Deferred income taxes                               |           |             
|Goodwill                                            |           |             
|Investments in affiliates                           |           |             
|Investments in non-debtor subsidiaries              |           |             
|Other noncurrent assets                             |           |             
|                                                    |           |             
|Total other                                         |           |             
|                                                    |           |             
|PLANT AND EQUIPMENT, at cost                        |           |             
|Land                                                |           |             
|Buildings and leasehold improvements                |           |             
|Machinery and equipment                             |           |             
|Construction in progress                            |           |             
|                                                    |           |             
|                                                    |           |             
|Less - accumulated depreciation                     |           |             
|                                                    |           |             
|                                                    |           |             
|Net plant and equipment                             |           |             
|                                                    |           |             
|                                                    |           |             
|TOTAL ASSETS                                        |           |             
|                                                    |           |             

#  17 

# OWENS CORNING AND
SUBSIDIARIESNOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (continued)(unaudited)

1.    
          VOLUNTARY PETITION FOR RELIEF UNDER CHAPTER 11 (continued)

# OWENS CORNING AND
SUBSIDIARIESDEBTOR-IN-POSSESSION
BALANCE SHEET (continued)

|                                                       | March 31, | December 31,
|------------------------------------------------------ | --------- | ------------
|
|
|
|CURRENT                                                |           |             
|Accounts payable and accrued liabilities               |           |             
|Accounts payable and accrued liabilities - non-Debtors |           |             
|                                                       |           |             
|Total current                                          |           |             
|                                                       |           |             
|OTHER                                                  |           |             
|Other employee benefits liability                      |           |             
|Pension plan liability                                 |           |             
|Other                                                  |           |             
|                                                       |           |             
|Total other                                            |           |             
|                                                       |           |             
|                                                       |           |             
|LIABILITIES SUBJECT TO COMPROMISE                      |           |             
|                                                       |           |             
|STOCKHOLDERS EQUITY                                   |           |             
|Common stock                                           |           |             
|Additional paid in capital                             |           |             
|Deficit                                                |           |             
|Accumulated other comprehensive loss                   |           |             
|Other                                                  |           |             
|                                                       |           |             
|Total stockholders equity                             |           |             
|                                                       |           |             
|                                                       |           |             
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY             |           |             
|                                                       |           |             

#  18 

# OWENS CORNING AND
SUBSIDIARIESNOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (continued)(unaudited)

1.    
          VOLUNTARY PETITION FOR RELIEF UNDER CHAPTER 11 (continued)

# OWENS CORNING AND
SUBSIDIARIESDEBTOR-IN-POSSESSION
STATEMENT OF CASH FLOWS

|                                                                | Quarter Ended March 31, | 
|--------------------------------------------------------------- | ----------------------- | 
|
|
|
|NET CASH FLOW FROM OPERATIONS                                   |                         | 
|                                                                |                         | 
|Net loss                                                        |                         | 
|                                                               
|Reconciliation of net cash provided by operating activities     |                         | 
|Noncash items:                                                  |                         | 
|Provision for depreciation and amortization                     |                         | 
|Provision for impairment of fixed assets                        |                         | 
|Credit for deferred income taxes                                |                         | 
|Cumulative effect of accounting change                          |                         | 
|Other                                                           |                         | 
|Increase in receivables                                         |                         | 
|Increase in inventories                                         |                         | 
|Decrease in accounts payable and accrued liabilities            |                         | 
|Decrease in restricted cash - asbestos and insurance related    |                         | 
|Increase in restricted cash, securities, and other - Fibreboard |                         | 
|Change in liabilities subject to compromise                     |                         | 
|Other                                                           |                         | 
|                                                                |                         | 
|Net cash flow from operations                                   |                         | 
|                                                                |                         | 
|                                                                |                         | 
|NET CASH FLOW FROM INVESTING                                    |                         | 
|                                                                |                         | 
|Additions to plant and equipment                                |                         | 
|Proceeds from the sale of affiliate or business                 |                         | 
|Other                                                           |                         | 
|                                                                |                         | 
|Net cash flow from investing                                    |                         | 
|                                                                |                         | 
|                                                                |                         | 
|NET CASH FLOW FROM FINANCING                                    |                         | 
|                                                                |                         | 
|Other                                                           |                         | 
|                                                                |                         | 
|                                                                |                         | 
|Net decrease in cash and cash equivalents                       |                         | 
|                                                                |                         | 
|Cash and cash equivalents at beginning of period                |                         | 
|                                                                |                         | 
|                                                                |                         | 
|Cash and cash equivalents at end of period                      |                         | 
|                                                                |                         | 

#  19 

# OWENS CORNING AND
SUBSIDIARIESNOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (continued)(unaudited)

1.    
          VOLUNTARY PETITION FOR RELIEF UNDER CHAPTER 11 (continued)

The amounts subject
to compromise in the Consolidated and Debtor-in-Possession Balance Sheets consist of the
following items:

|                                                       | March 31, | December 31, | March 31,
|------------------------------------------------------ | --------- | ------------ | ---------
|
|
|
|Accounts payable                                       |           |              | $        
|Accrued interest payable                               |           |              |          
|Accrued liabilities                                    |           |              |          
|Debt                                                   |           |              |          
|Income taxes payable                                   |           |              |          
|Reserve for asbestos litigation claims - Owens Corning |           |              |          
|Reserve for asbestos-related claims - Fibreboard       |           |              |          
|                                                       |           |              |          
|                                                       |           |              |          
|Total consolidated                                     |           |              |          
|                                                       |           |              |          
|                                                       |           |              |          
|Payables to non-Debtors                                |           |              |          
|                                                       |           |              |          
|                                                       |           |              |          
|Total Debtor                                           |           |              | $        
|                                                       |           |              |          

The amounts for Chapter 11 related reorganization items in the Consolidated and  Debtor-in-Possession  Statements of Income
(Loss) consist of the following:

|                                    | Quarter Ended March 31, | 
|----------------------------------- | ----------------------- | 
|
|
|
|Professional fees                   |                         | 
|Payroll and compensation            |                         | 
|Settlement of Asian credit facility |                         | 
|Interest income                     |                         | 
|Other, net                          |                         | 
|                                    |                         | 
|                                    |                         | 
|Total                               |                         | 
|                                    |                         | 

#  20 

# OWENS CORNING AND
SUBSIDIARIESNOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (continued)(unaudited)

2.    
          SEGMENT DATA

During 2003, the
Company realigned its internal operating segments. Following this realignment, the
Company reviewed its segments in accordance with SFAS No. 131 and concluded that the
aggregation of its operating segments into two reportable segments is still appropriate;
however, certain components within the segments have changed. Net sales and income from
operations have been restated for all periods presented to reflect this change.

The Company has reported financial and descriptive information about each of the Companys
two reportable segments below on a basis that is used internally for evaluating segment
performance and deciding how to allocate resources to those segments.

|                                             | Quarter Ended March 31, | 
|-------------------------------------------- | ----------------------- | 
|
|
|
|Reportable Segments                          |                         | 
|                                             |                         | 
|Building Materials Systems                   |                         | 
|United States                                |                         | 
|Europe                                       |                         | 
|Canada and other                             |                         | 
|                                             |                         | 
|                                             |                         | 
|Total Building Materials Systems             |                         | 
|                                             |                         | 
|                                             |                         | 
|Composite Solutions                          |                         | 
|United States                                |                         | 
|Europe                                       |                         | 
|Canada and other                             |                         | 
|                                             |                         | 
|                                             |                         | 
|Total Composite Solutions                    |                         | 
|                                             |                         | 
|                                             |                         | 
|Total reportable segments                    |                         | 
|                                             |                         | 
|                                             |                         | 
|External Customer Sales by Geographic Region |                         | 
|                                             |                         | 
|United States                                |                         | 
|Europe                                       |                         | 
|Canada and other                             |                         | 
|                                             |                         | 
|                                             |                         | 
|Net sales                                    |                         | 
|                                             |                         | 

#  21 

# OWENS CORNING AND
SUBSIDIARIESNOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (continued)(unaudited)

2.    
          SEGMENT DATA (continued)

|                                                     | Quarter Ended March 31, | 
|---------------------------------------------------- | ----------------------- | 
|
|
|
|Reportable Segments                                  |                         | 
|                                                     |                         | 
|Building Materials Systems                           |                         | 
|United States                                        |                         | 
|Europe                                               |                         | 
|Canada and other                                     |                         | 
|                                                     |                         | 
|                                                     |                         | 
|Total Building Materials Systems                     |                         | 
|                                                     |                         | 
|                                                     |                         | 
|Composite Solutions                                  |                         | 
|United States                                        |                         | 
|Europe                                               |                         | 
|Canada and other                                     |                         | 
|                                                     |                         | 
|                                                     |                         | 
|Total Composite Solutions                            |                         | 
|                                                     |                         | 
|                                                     |                         | 
|Total reportable segments                            |                         | 
|                                                     |                         | 
|                                                     |                         | 
|Geographic Regions                                   |                         | 
|                                                     |                         | 
|United States                                        |                         | 
|Europe                                               |                         | 
|Canada and other                                     |                         | 
|                                                     |                         | 
|                                                     |                         | 
|Total reportable segments                            |                         | 
|                                                     |                         | 
|                                                     |                         | 
|Reconciliation to Consolidated Income (Loss) Before  |                         | 
|Income Tax Expense                                   |                         | 
|                                                     |                         | 
|Restructuring and other charges (Note 4)             |                         | 
|Chapter 11 related reorganization items (Note 1)     |                         | 
|General corporate expense                            |                         | 
|Cost of borrowed funds                               |                         | 
|                                                     |                         | 
|                                                     |                         | 
|Consolidated income (loss) before income tax expense |                         | 
|                                                     |                         | 

#  22 

# OWENS CORNING AND
SUBSIDIARIESNOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (continued)(unaudited)

3.    
          GENERAL

The financial
statements included in this Report are condensed and unaudited, pursuant to certain rules
and regulations of the Securities and Exchange Commission, but include, in the opinion of
the Company, adjustments necessary for a fair statement of the results for the periods
indicated, which, however, are not necessarily indicative of results which may be
expected for the full year.

In connection with
the condensed financial statements and notes included in this Report, reference is made
to the financial statements and notes thereto contained in the Companys 2002 annual
report on Form 10-K, as filed with the Securities and Exchange Commission.

4.    
RESTRUCTURING OF OPERATIONS AND OTHER CHARGES

First Quarter 2003

In the first quarter
of 2003, the Company recorded approximately $30 million in pretax charges comprised of a
$2 million pretax charge to restructure costs (classified as a separate component of
operating expenses in the Consolidated Statement of Income (Loss)) and a charge of $28
million to cost of sales. The $2 million restructure charge represents additional
non-cash asset write-downs of previously closed non-strategic facilities to fair value.

The $28 million
charge to cost of sales represents the additional write-down of two groups of assets in
the Building Materials segment to net realizable value. The Company is in the process of
selling these assets and accordingly a valuation of the future cash flows of the assets
was revised during the first quarter of 2003 using assumptions consistent with current
market conditions. The Companys ultimate decisions and actions regarding these
assets require approval by the Bankruptcy Court.

2002

As a result of a
comprehensive strategic review and actions taken, the Company recorded approximately $166
million in pretax charges during 2002, comprised of a $61 million pretax restructure
charge and $105 million of pretax other charges. The Company recorded $113 million in the
fourth quarter of 2002, $44 million in the third quarter, $(3) million in the second
quarter, and $12 million in the first quarter.

The $61 million
restructure charge includes $17 million of severance costs associated with the
elimination of 830 positions due to plant closures in the U.S. and U.K. and $18 million
of severance costs associated with the elimination of 349 other positions, primarily
impacting administrative personnel. As of March 31, 2003, all but 14 of these positions
were actually eliminated. As of March 31, 2003, approximately $28 million has been paid
and charged against the reserve. The remaining $26 million restructure charge represents
the cost of closure of non-strategic facilities, comprised of $24 million in non-cash
asset write-downs to fair value and $2 million of other exit cost liabilities. As of
March 31, 2003, approximately $1 million has been paid and charged against the reserve
for exit cost liabilities.

The $105 million in
other pretax charges was recorded as a $110 million charge to cost of sales and a credit
of $5 million to other operating expenses. The $110 million charge to cost of sales
includes: (1) charges of $66 million to write-down assets to net realizable value based
on valuations of the future cash flows of the assets using assumptions consistent with
current market conditions, $28 million in the Composite Solutions segment, primarily as
the result of a plant closure, and $38 million in the Building Materials segment,
primarily as the result of plans to sell certain facilities; (2) a $19 million charge for

#  23 

# OWENS CORNING AND
SUBSIDIARIESNOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (continued)(unaudited)

4.    
          RESTRUCTURING OF OPERATIONS AND OTHER CHARGES (continued)

inventory made
obsolete by changes in the Companys manufacturing and marketing processes; (3) a
charge of $6 million associated with the Companys previously announced plan to
realign its Newark, OH manufacturing facility; and (4) $19 million of other restructure
charges.

Status of Liability for Restructuring Programs

In 2000, we
implemented the first phase of a strategic restructuring program, which continued
throughout 2001, 2002, and the first quarter of 2003. The following table summarizes the
status of the liabilities from these restructuring programs, including cumulative
spending and adjustments and the remaining balance as of March 31, 2003:

|                             |  | Facility and |  
|---------------------------- |  | ------------ | -
|
|
|
|
|Charges to expense           |  |              | $
|Payments                     |  |              |  
|                             |  |              |  
|Balance at December 31, 2000 |  |              |  
|                             |  |              |  
|Charges to expense           |  |              |  
|Payments                     |  |              |  
|                             |  |              |  
|December 31, 2001            |  |              |  
|                             |  |              |  
|Charges to expense           |  |              |  
|Payments                     |  |              |  
|                             |  |              |  
|Balance at December 31, 2002 |  |              |  
|                             |  |              |  
|Payments                     |  |              |  
|                             |  |              |  
|Balance at March 31, 2003    |  |              | $
|                             |  |              |  

During 1997 and
1998, the Company implemented a restructuring program related to closing manufacturing
locations and reducing overhead. As of March 31, 2003, approximately $15 million in
reserves remain and are primarily related to ongoing personnel severance costs.

Long-Lived Asset
Accounting

The Company
continually evaluates whether events and circumstances have occurred that indicate that
the carrying amount of certain long-lived assets is recoverable. When factors indicate
that a long-lived asset should be evaluated for possible impairment, the Company uses an
estimate of the expected undiscounted cash flows to be generated by the asset to
determine whether the carrying amount is recoverable or if impairment exists. When it is
determined that an impairment exists, the Company uses the fair market value of the
asset, usually measured by the discounted cash flows to be generated by the asset, to
determine the amount of the impairment to be recorded in the financial statements.

#  24 

# OWENS CORNING AND
SUBSIDIARIESNOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (continued)(unaudited)

5.    
          INVENTORIES

Inventories are summarized as
follows:

|                         | March 31, | December 31,
|------------------------ | --------- | ------------
|
|
|
|Finished goods           |           |             
|Materials and supplies   |           |             
|                         |           |             
|FIFO inventory           |           |             
|Excess of FIFO over LIFO |           |             
|                         |           |             
|Total inventories        |           |             
|                         |           |             

Approximately $205
million and approximately $150 million of total inventories were valued using the LIFO
method at March 31, 2003 and December 31, 2002, respectively.

6.    
COMPREHENSIVE INCOME

The Companys
comprehensive income for the quarters ended March 31, 2003 and 2002 was income of $7
million and a loss of $439 million, respectively. The Companys other comprehensive
income includes: (1) net income; (2) currency translation adjustments; (3) minimum
pension liability adjustments; and (4) deferred gains and losses on certain hedging
transactions to record at fair value.

7.    
EARNINGS PER SHARE

For the quarters
ended March 31, 2003 and 2002, net losses of $1 million and $447 million, respectively,
were used for both basic and diluted earnings per share. For the same periods, 55,103
thousand shares and 55,087 thousand shares, respectively, were used for weighted average
number of shares outstanding for both basic and diluted earnings per share.

For the quarter
ended March 31, 2003, the number of shares used in the calculation of diluted earnings
per share did not include approximately 122 thousand common equivalent shares of
non-vested restricted stock, 24 thousand common equivalent shares of deferred awards and
4,566 thousand common equivalent shares from assumed conversion of preferred securities
due to their anti-dilutive effect. For the quarter ended March 31, 2002, the number of
shares used in the calculation of diluted earnings per share did not include
approximately 238 thousand common equivalent shares of non-vested restricted stock, 26
thousand common equivalent shares of deferred awards and 4,566 thousand common equivalent
shares from assumed conversion of preferred securities due to their anti-dilutive effect.

#  25 

# OWENS CORNING AND
SUBSIDIARIESNOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (continued)(unaudited)

8.    
          CONTINGENT LIABILITIES AND OTHER MATTERS

Asbestos Liabilities

ITEM A. - OWENS CORNING
(EXCLUDING FIBREBOARD)

Numerous claims have
been asserted against Owens Corning alleging personal injuries arising from inhalation of
asbestos fibers. Virtually all of these claims arise out of Owens Cornings
manufacture, distribution, sale or installation of an asbestos-containing calcium
silicate, high temperature insulation product, the manufacture and distribution of which
was discontinued in 1972. Owens Corning received approximately 18,000 asbestos personal
injury claims during 2000, approximately 32,000 such claims during 1999 and approximately
69,000 such claims during 1998. Owens Corning cautions that it has limited information
about many of such claims, and the actual numbers of claims asserted remain subject to
adjustment.

Prior to October 5,
2000, when the Debtors, including Fibreboard (see Item B below), filed voluntary
petitions for relief under Chapter 11 of the United States Bankruptcy Code, the vast
majority of asserted asbestos personal injury claims were in the process of being
resolved through the National Settlement Program described below. As a result of the
Filing, all pre-petition asbestos claims and pending litigation against the Debtors,
including without limitation claims arising under the National Settlement Program, were
automatically stayed (see Note 1). Owens Corning expects that all pending and future
asbestos claims against Owens Corning and Fibreboard will be resolved pursuant to a plan
or plans of reorganization. Owens Corning is unable to determine at this time whether
asbestos-related claims asserted against Fibreboard will be treated in the same manner as
those asserted against Owens Corning in any such plan or plans ultimately confirmed.

As more fully
discussed in Note 1 and under the heading Reserve  below, the Debtors,
together with the Official Committee of Asbestos Claimants and the Legal Representative
for the class of future asbestos claimants, filed on March 28, 2003 a proposed amended
joint plan of reorganization for the Debtors, that provides for two alternative
frameworks for creditor recoveries. Ultimately, as described more fully under the heading
Reserve below, it is anticipated that Owens Cornings total liability for
asbestos claims will be determined after a lengthy period of negotiations and, if
necessary, by the Bankruptcy Court, taking into account numerous factors not present in
the Companys pre-petition environment. Such factors include the claims of competing
creditor groups as to the appropriate treatment of their allowed claims in the plan or
plans of reorganization, the size of the total asbestos liability, the total number of
present asbestos claims allowed, the total amount of future asbestos claims allowed, and
the impact of the Administrative Consolidation.

National Settlement
Program Claims

Beginning in late
1998, Owens Corning implemented a National Settlement Program (NSP) to
resolve personal injury asbestos claims through settlement agreements with individual
plaintiffs law firms. The NSP was intended to better manage the asbestos
liabilities of Owens Corning and Fibreboard (see Item B below), and to help Owens Corning
better predict the timing and amount of indemnity payments for both pending and future
asbestos claims.

#  26 

# OWENS CORNING AND
SUBSIDIARIESNOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (continued)(unaudited)

8.    
          CONTINGENT LIABILITIES AND OTHER MATTERS (continued)

The number of law
firms participating in the NSP expanded from approximately 50 when the NSP was
established to approximately 120 as of the Petition Date. Each of these participating law
firms agreed to a long-term settlement agreement which varied by firm (NSP Agreement)
extending through at least 2008 which provided for the resolution of their existing
asbestos claims, including unfiled claims pending with the participating law firm at the
time it entered into an NSP Agreement (Initial Claims). The NSP agreements
also established procedures and fixed payments for resolving without litigation claims
against either Owens Corning or Fibreboard, or both, arising after a participating firm
entered into an NSP Agreement (Future Claims).

Settlement amounts
for both Initial Claims and Future Claims were negotiated with each firm participating in
the NSP, and each firm was to communicate with its respective clients to obtain authority
to settle individual claims. Payments to individual claimants were to vary based on a
number of factors, including the type and severity of disease, age and occupation. All
such payments were subject to delivery of satisfactory evidence of a qualifying medical
condition and exposure to Owens Cornings and/or Fibreboards products,
delivery of customary releases by each claimant, and other conditions. Certain claimants
settling non-malignancy claims with Owens Corning and/or Fibreboard were entitled to an
agreed pre-determined amount of additional compensation if they later developed a more
severe asbestos-related medical condition.

As to Future Claims,
each participating NSP firm agreed (consistent with applicable legal requirements) to
recommend to its future clients, based on appropriately exercised professional judgment,
to resolve their asbestos personal injury claims against Owens Corning and/or Fibreboard
through an administrative processing arrangement, rather than litigation. In the case of
Future Claims involving non-malignancy, claimants were required to present medical
evidence of functional impairment, as well as the product exposure criteria and other
requirements set forth above, to be entitled to compensation.

As of the Petition
Date, the NSP covered approximately 239,000 Initial Claims against Owens Corning,
approximately 150,000 of which had satisfied all conditions to final settlement,
including receipt of executed releases, or other resolution (the Final NSP
Settlements) at an average cost per claim of approximately $9,300. As of the
Petition Date, approximately 89,000 of such Final NSP Settlements had been paid in full
or otherwise resolved, and approximately 61,000 were unpaid in whole or in part. As of
such date, the remaining balance payable under NSP Agreements in connection with these
unpaid Final NSP Settlements was approximately $510 million. Through the Petition Date,
Owens Corning had received approximately 6,000 Future Claims under the NSP.

At this time, Owens
Corning is unable to predict the manner in which the NSP Agreements and the resolution of
claims thereunder will ultimately be treated under the terms of any plan or plans of
reorganization.

Non-NSP Claims

As of the Petition
Date, approximately 29,000 asbestos personal injury claims were pending against Owens
Corning outside the NSP. This compares to approximately 25,000 such claims pending on
December 31, 1999. The information needed for a critical evaluation of pending claims,
including the nature and severity of disease and definitive identifying information
concerning claimants, typically becomes available only through the discovery process or
as a result of settlement negotiations, which often occur years after particular claims
are filed. As a result, Owens Corning has limited information about many of such claims.

#  27 

# OWENS CORNING AND
SUBSIDIARIESNOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (continued)(unaudited)

8.    
          CONTINGENT LIABILITIES AND OTHER MATTERS (continued)

Owens Corning
resolved (by settlement or otherwise) approximately 10,000 asbestos personal injury
claims outside the NSP during 1998, 5,000 such claims during 1999 and 3,000 such claims
during 2000 prior to the Petition Date. The average cost of resolution was approximately
$35,900 per claim for claims resolved during 1998, $34,600 per claim for claims resolved
during 1999, and $44,800 per claim for claims resolved during 2000 prior to the Petition
Date. Generally, these claims were settled as they were scheduled for trial, and they
typically involved more serious injuries and diseases. Accordingly, Owens Corning does
not believe that such average costs of resolution are representative of the value of the
non-NSP claims then pending against the Company.

At this time, Owens
Corning is unable to predict the manner in which non-NSP claims will ultimately be
treated under the terms of any plan or plans of reorganization.

Asbestos-Related Payments

As a result of the
Filing, Owens Corning has not made any asbestos-related payments since the Petition Date
except for approximately $20 million paid on its behalf by third parties pursuant to
appeal bonds issued prior to the Petition Date. During 1999 and 2000 (prior to the
Petition Date), Owens Corning (excluding Fibreboard) made asbestos-related payments
falling within four major categories: (1) Settlements in respect of verdicts incurred or
claims resolved prior to the implementation of the NSP (Pre-NSP Settlements);
(2) NSP settlements; (3) Non-NSP settlements covering cases not resolved by the NSP; and
(4) Defense, claims processing and administrative expenses, as follows:

|                                                       |  | 2000 (through
|------------------------------------------------------ |  | -------------
|
|
|
|Pre-NSP Settlements                                    |  |              
|NSP Settlements                                        |  |              
|Non-NSP Settlements                                    |  |              
|Defense, Claims Processing and Administrative Expenses |  |              
|                                                       |  |              
|                                                       |  |              
|                                                       |  |              

All amounts
discussed above are before tax and application of insurance recoveries.

Prior to the
Petition Date, Owens Corning deposited certain amounts in escrow accounts to facilitate
claims processing under the NSP (Administrative Deposits). Amounts deposited
into escrow in Administrative Deposits during a reporting period are included in the
payments shown for NSP Settlements during the period. At March 31, 2003, approximately
$106 million of Administrative Deposits previously made by Owens Corning had not been
finally distributed to claimants (Undistributed Administrative Deposits) and,
accordingly, are reflected in Owens Cornings consolidated balance sheet as
restricted assets (under the caption Restricted cash - asbestos and insurance
related) and have not been subtracted from Owens Cornings reserve for
asbestos personal injury claims (discussed below).

#  28 

# OWENS CORNING AND
SUBSIDIARIESNOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (continued)(unaudited)

8.    
          CONTINGENT LIABILITIES AND OTHER MATTERS (continued)

At this time, Owens
Corning is unable to predict what the treatment of funds held in Undistributed
Administrative Deposits will ultimately be under the terms of any plan or plans of
reorganization. However, in 2001, the holder of approximately $49 million of
Undistributed Administrative Deposits for Owens Corning (and approximately $28 million of
similar Undistributed Administrative Deposits for Fibreboard) filed a motion with the
Bankruptcy Court requesting an order authorizing distribution of the deposits it holds (Subject
Deposits) to the escrow beneficiaries. As the result of hearings held on June 20
and July 22, 2002, the Bankruptcy Court has ruled that escrow beneficiaries that had
received both written notice of approval for payment and an initial payment from the
Subject Deposits prior to the Petition Date would be entitled to receive their remaining
payments (plus post-judgment interest after June 20, 2002) from the principal of the
Subject Deposits, with the balance of the Subject Deposits, if any, plus any other
investment proceeds to be returned to Owens Corning (or Fibreboard, as appropriate) as
contributor of the deposits. The Official Committee of Unsecured Creditors and the Legal
Representative for the class of future asbestos claimants have each filed a notice of
appeal from the order.

Reserve

Owens Corning
estimates a reserve in accordance with generally accepted accounting principles to
reflect asbestos-related liabilities that have been asserted or are probable of
assertion, in which liabilities are probable and reasonably estimable. This reserve was
established initially through a charge to income in 1991, with additional charges to
income of $1.1 billion in 1996, $1.4 billion in 1998, $1.0 billion in 2000 and $1.4
billion in the third quarter of 2002.

As of March 31,
2003, a reserve of approximately $3.6 billion in respect of Owens Cornings
asbestos-related liabilities was one of the items included in Owens Cornings
consolidated balance sheet under the category Liabilities Subject to Compromise.
For periods prior to the Petition Date, these liabilities were reflected as current or
other liabilities (depending on the period in which payment was expected) under the
category Reserve for asbestos litigation claims.

As Owens Corning has
discussed in previous public filings, any estimate of its liabilities for pending and
expected future asbestos claims is subject to considerable uncertainty because such
liabilities are influenced by numerous variables that are inherently difficult to
predict. As discussed further below, such uncertainties significantly increased as a
result of the Chapter 11 Cases. Prior to the Petition Date, such variables included,
among others, the cost of resolving pending non-NSP claims; the disease mix and severity
of disease of pending NSP claims; the number, severity of disease, and jurisdiction of
claims filed in the future (especially the number of mesothelioma claims); how many
future claimants were covered by an NSP Agreement; the extent, if any, to which
individual claimants exercised a right to opt out of an NSP Agreement and/or engage
counsel not participating in the NSP; the extent, if any, to which counsel not bound by
an NSP Agreement undertook the representation of asbestos personal injury plaintiffs
against Owens Corning; the extent, if any, to which Owens Corning exercised its right to
terminate one or more of the NSP Agreements due to excessive opt-outs or for other
reasons; and Owens Cornings success in controlling the costs of resolving future
non-NSP claims.

As one example of
the difficulties inherent in estimating future asbestos claims, Owens Corning notes that
the Manville Personal Injury Settlement Trust, a trust established to settle asbestos
claims against Johns Manville Corporation, announced in June 2001 that it was reducing
its initial settlement distributions by fifty percent on the basis of the continued
record pace of asbestos claim filings and the prediction of its consultants that the
trust might receive 1.5 to 2.5 million additional claims.

#  29 

# OWENS CORNING AND
SUBSIDIARIESNOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (continued)(unaudited)

8.    
          CONTINGENT LIABILITIES AND OTHER MATTERS (continued)

The Chapter 11 Cases
have significantly increased the inherent difficulties and uncertainties involved in
estimating the number and cost of resolution of present and future asbestos-related
claims against Owens Corning and will likely have the effect of increasing the number and
ultimate cost of resolution of such claims substantially. In particular, the status of
the NSP Agreements and the ultimate treatment of pending and future claims thereunder
will depend on the outcome of negotiations among the various constituencies in the
Chapter 11 Cases and determinations by the Bankruptcy Court as to the issues involved,
none of which can be predicted at this time. The uncertainties associated with the status
of the NSP Agreements and the treatment of claims thereunder include the following:

|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|- | It is possible that one or more constituencies in the Chapter 11 Cases may seek to set
aside the NSP Agreements on various grounds. In any event, it is highly uncertain how any
plan or plans of reorganization will ultimately treat the various types of NSP claims,
including without limitation claims with no evidence of significant medical impairment, or
whether such unimpaired claims will be treated as allowed claims thereunder.                                                                                                                                                                                                                                        
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|- | The settlement values for specified categories of disease set forth in the NSP Agreements
were established by arms-length negotiations with the participating law firms in
circumstances very different from those prevailing in the Chapter 11 Cases. The settlement
values available to individual claimants under the arrangements to be included in any plan
or plans of reorganization may vary substantially from those contemplated by the NSP
Agreements. Because Owens Cornings estimate of liabilities in respect of non-NSP
claims assumed payment of settlement values similar to those contained in the NSP
Agreements, such estimate is subject to similar uncertainty.

Additional
uncertainties raised by the Chapter 11 Cases include the following:

|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|- | The impact, if any, the Administrative Consolidation will have on the timing, outcome or
other aspects of the Chapter 11 Cases.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|- | It is uncertain what claim submission process will be prescribed by the Bankruptcy Court
for pre-petition asbestos claims against Owens Corning or Fibreboard and what effects such
process may have, including on the number of such claims. Moreover, the Filing, including
the significant publicity associated with the Chapter 11 Cases and notices required by the
Bankruptcy Code that must be given to creditors and other parties in interest, has
significantly increased the inherent difficulties and uncertainties involved in estimating
the number and cost of resolution of not only pre-petition claims but also additional
claims that may be asserted in the course of the Chapter 11 Cases.
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|- | Owens Corning anticipates that the number and estimated aggregate value of allowed future
claims will ultimately be determined either as a result of negotiations involving the
Legal Representative for the class of future asbestos claimants and the other interested
constituencies or, if necessary, by the Bankruptcy Court. It is not possible to predict
the outcome of such negotiations, or Bankruptcy Court determination, at this time.                                                                                                                                                                                                                                                            

#  30 

# OWENS CORNING AND
SUBSIDIARIESNOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (continued)(unaudited)

8.    
          CONTINGENT LIABILITIES AND OTHER MATTERS (continued)

In connection with
the negotiation of a plan or plans of reorganization, a number of interested
constituencies, including the representatives of the pre-petition and future asbestos
claimants and other pre-petition creditors, have developed or will develop analyses of
liability for both pre-petition and future asbestos claims. Owens Corning and Fibreboard
will also utilize their own analyses in the negotiation process. Such analyses by the
Debtors and other interested constituencies will also be required in connection with the
establishment, as part of the plan of reorganization, of a Section 524(g) trust for the
benefit of asbestos claimants. Based on facts currently known to it, including positions
that have been articulated by various interested constituencies, Owens Corning believes
that the estimates included in most or all such analyses will vary substantially from the
amounts of Owens Cornings and Fibreboards respective asbestos reserves in
prior periods, and will also vary substantially from one another, for a number of
reasons.

First, such analyses
will not involve the same type of estimation process required in connection with the
preparation of financial statements under generally accepted accounting principles. In
general, such accounting principles require accruals with respect to contingent
liabilities (including asbestos liabilities) only to the extent that such liabilities are
both probable and reasonably estimable. With respect to such liabilities that are
probable as to which a reasonable estimate can be made only in terms of a range (with no
point within the range determined to be more probable than any other point in such
range), such accounting principles require only the accrual of the amount representing
the low point in such range.

In contrast,
analyses prepared by interested constituencies in asbestos-related bankruptcy cases
customarily cover potential liabilities over a 50-year period (at the end of which it is
anticipated that potential asbestos claimants would in any event have died as a result of
other non-asbestos-related causes). Owens Corning believes that any such analyses, and
any assumptions utilized in the preparation of such analyses, are inherently speculative
for a number of reasons, including the variables and uncertainties described in this
Note. Moreover, because such analyses are prepared solely for use in the negotiation of a
plan of reorganization, they naturally reflect the respective interests of the different
constituencies putting them forward. Certain constituencies, for example, may have an
interest in presenting an analysis that estimates such liability at the highest level
that can arguably be justified; others may have an interest in estimating such liability
at the lowest possible level; while others may have an interest in estimating such
liability at a point between the two extremes, in an effort to achieve consensus in the
negotiation of the plan of reorganization. In addition, interested constituencies in
Owens Cornings bankruptcy proceedings may also take into account the implications
of any such analyses prepared for use in Owens Cornings bankruptcy proceedings on
their position in one or more of the other asbestos-related bankruptcy cases pending in
the District of Delaware or elsewhere.

None of the creditor
constituencies has yet made available to Owens Corning a report of any such analysis of
liability for pre-petition or future asbestos claims. However, based upon its recent
discussions and negotiations with representatives of the creditor constituencies, Owens
Corning believes that some of these creditor analyses associated with the resolution of
Owens Cornings and Fibreboards asbestos-related liabilities in the context of
the Chapter 11 proceedings will be well in excess of Owens Cornings and Fibreboards
current asbestos-related reserves. For example, the Official Committee of Asbestos
Claimants and the Legal Representative for the class of future asbestos claimants have
taken the position that the aggregate amount of pre-petition and future asbestos claims
for Owens Corning and Fibreboard, on a combined net present value basis, is in excess of
$16 billion. In addition, in October 2002, Owens Corning and Fibreboard completed their
own analyses of liability for purposes of facilitating plan discussions, which, as to
future asbestos claims, were prepared by an outside consultant experienced in estimating
asbestos-related claims in asbestos-related bankruptcies. These analyses indicate net
present

#  31 

# OWENS CORNING AND
SUBSIDIARIESNOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (continued)(unaudited)

8.    
          CONTINGENT LIABILITIES AND OTHER MATTERS (continued)

values for
pre-petition and future asbestos claims of Owens Corning and Fibreboard combined of
approximately $5.874 billion, if NSP settlement values are assumed, and $8.547 billion,
if 5-year historical settlement values for Owens Corning and Fibreboard, respectively,
are used. Based upon these analyses and the information derived from Owens Cornings
discussions and negotiations with the various creditor constituencies concerning their
relative positions on the terms of an acceptable plan of reorganization, Owens Corning
decided, in connection with its financial statements for the third quarter of 2002, to
increase its and Fibreboards aggregate asbestos-related reserve to the lower of the
two net present value numbers indicated by Owens Cornings and Fibreboards
analyses. Consequently, Owens Corning increased its reserves for the period ended
September 30, 2002, through charges to income of $1.381 billion for Owens Corning
asbestos-related liabilities and $975 million for Fibreboard asbestos-related
liabilities, for an aggregate charge of $2.356 billion. In addition, since the reserve
for Fibreboard asbestos-related liabilities exceeds the funds held in the Fibreboard
Settlement Trust, the residual amount payable to charity under the terms of the Trust
(see Note 9) was reduced to zero as of September 30, 2002.

As noted above and
in Note 1, the Debtors, together with the Official Committee of Asbestos Claimants and
the Legal Representative for the class of future asbestos claimants, filed on March 28,
2003 a proposed amended joint plan of reorganization for the Debtors, that provides two
alternative frameworks for creditor recoveries. One such alternative, that would apply in
the event that the Plan were approved by the major creditor constituencies, would assume
an aggregate liability for current and future asbestos personal injury claims against
Owens Corning and Fibreboard of $16 billion (on a net present value basis), composed of
$10.7 billion for Owens Corning and $5.3 billion for Fibreboard. Under the other
alternative, such liabilities would be determined by the Bankruptcy Court as part of the
confirmation hearing on the Plan. Although Owens Corning believes that estimates in the
amounts reflected in the first alternative are supportable, it is currently anticipated
that the number and estimated aggregate value of current and future asbestos personal
injury claims will ultimately be determined as a result of negotiations involving the
Official Committee of Asbestos Claimants, the Legal Representative of the class of future
asbestos claimants and other interested constituencies or, if necessary, by the
Bankruptcy Court. It is not possible to predict the outcome of such negotiations at this
time. The Companys bank and bond creditor groups, for example, have continued to assert
that such aggregate liability approximates the amount of Owens Cornings
existing reserves. Ultimately, Owens Cornings (and Fibreboards) total
liability for asbestos claims will be finally determined after a lengthy period of
negotiations and, if necessary, by the Bankruptcy Court, taking into account numerous
factors not present in the Companys pre-petition environment. Such factors include
the claims of competing creditor groups as to the appropriate treatment of their allowed
claims in the plan or plans of reorganization, the size of the total asbestos liability,
the total number of present asbestos claims allowed, the total amount of future asbestos
claims allowed, and the impact of the Administrative Consolidation.

At March 31, 2003,
the approximate balances of the components of Owens Cornings asbestos-related
reserve were:

|                                         | Balance
|---------------------------------------- | -------
|
|
|Unpaid Final Settlements (NSP and other) |        
|Other Pending and Future Claims          |        

#  32 

# OWENS CORNING AND
SUBSIDIARIESNOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (continued)(unaudited)

8.    
          CONTINGENT LIABILITIES AND OTHER MATTERS (continued)

In connection with
this asbestos reserve, Owens Corning notes that:

|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|- | The Unpaid Final Settlements component represented the remaining estimated
cost for all asbestos personal injury claims pending against Owens Corning which were
subject to final settlement agreements for which releases from claimants were obtained,
and under which all other conditions to settlement had been satisfied, as of the Petition
Date.                                                                                                                                                                                                                    
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|- | The Other Pending and Future Claims component represented the estimated cost
of resolving, through the Chapter 11 process, (i) asbestos personal injury claims pending
against Owens Corning which were subject to resolution under NSP Agreements but for which
releases were not obtained from claimants prior to the Petition Date; (ii) all other
asbestos personal injury claims pending against Owens Corning which were not subject to
any settlement agreement; and (iii) future asbestos personal injury claims against Owens
Corning made after the Petition Date.

Owens Corning
believes that its reserve for asbestos claims represents at least a minimum in a range of
possible outcomes of the plan negotiation process as to the amount of its total liability
for asbestos-related claims against it as determined through the Chapter 11 process.
Given the nature of the Chapter 11 proceedings, described above, Owens Corning cautions
that the total asbestos-related liability ultimately established in the Chapter 11
proceedings may be either higher or lower than the Companys reserve. Owens Corning
notes that it expects an ongoing high level of negotiations and information exchanges
with the various creditor constituencies and other parties for the duration of the
Chapter 11 proceedings. Owens Corning will continue to review its asbestos reserve on a
periodic basis and make such adjustments as may be appropriate. However, it is possible
that Owens Corning will not be in a position to conclude that a further revision to the
reserve is appropriate until additional significant developments occur during the course
of the Chapter 11 Cases, including resolution by negotiation or the Bankruptcy Court of
its total liability for asbestos claims. Any such revision could, however, be material to
the Companys consolidated financial position and results of operations in any given
period.

ITEM B. - FIBREBOARD
(EXCLUDING OWENS CORNING)

Prior to 1972,
Fibreboard manufactured asbestos containing products, including insulation products.
Fibreboard has since been named as defendant in many thousands of personal injury claims
for injuries allegedly caused by asbestos exposure. Fibreboard received approximately
22,000 asbestos personal injury claims during 2000. Prior to the Petition Date, the vast
majority of Fibreboard asbestos personal injury claims were in the process of being
resolved through the NSP, as described below. As a result of the Filing, all pre-petition
asbestos claims and pending litigation against the Debtors were automatically stayed (see
Note 1). Owens Corning expects that all pending and future asbestos claims against Owens
Corning and Fibreboard will be resolved pursuant to a plan or plans of reorganization.
Owens Corning is unable to determine at this time whether asbestos-related claims
asserted against Fibreboard will be treated in the same manner as those asserted against
Owens Corning in any such plan or plans ultimately confirmed.

#  33 

# OWENS CORNING AND
SUBSIDIARIESNOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (continued)(unaudited)

8.    
          CONTINGENT LIABILITIES AND OTHER MATTERS (continued)

As discussed in Item
A above, the Debtors (including Fibreboard), together with the Official Committee of
Asbestos Claimants and the Legal Representative for the class of future asbestos
claimants, filed on March 28, 2003 a proposed amended joint plan of reorganization for
the Debtors (including Fibreboard) that provides two alternative frameworks for creditor
recoveries. One such alternative, that would apply in the event that the Plan were
approved by the major creditor constituencies, would assume an aggregate liability for
current and future asbestos personal injury claims against Owens Corning and Fibreboard
of $16 billion (on a net present value basis), composed of $10.7 billion for Owens
Corning and $5.3 billion for Fibreboard. Under the other alternative, such liabilities
would be determined by the Bankruptcy Court as part of the confirmation hearing on the
Plan. Although Owens Corning believes that estimates in the amounts reflected in the
first alternative are supportable, it is currently anticipated that the number and
estimated aggregate value of current and future asbestos personal injury claims will
ultimately be determined as a result of negotiations involving the Official Committee of
Asbestos Claimants, the Legal Representative of the class of future asbestos claimants
and other interested constituencies or, if necessary, by the Bankruptcy Court. It is not
possible to predict the outcome of such negotiations at this time. The Companys bank
and bond creditor groups, for example, have continued to assert that such aggregate liability
approximates the amount of Owens Cornings existing reserves.
Ultimately, Owens Cornings (and Fibreboards) total liability for asbestos
claims will be finally determined after a lengthy period of negotiations and, if
necessary, by the Bankruptcy Court, taking into account numerous factors not present in
the Companys pre-petition environment. Such factors include the claims of competing
creditor groups as to the appropriate treatment of their allowed claims in the plan or
plans of reorganization, the size of the total asbestos liability, the total number of
present asbestos claims allowed, the total amount of future asbestos claims allowed, and
the impact of the Administrative Consolidation.

National Settlement
Program Claims

Fibreboard is a
participant in the NSP and is a party to the NSP Agreements discussed in Item A. The NSP
Agreements became effective as to Fibreboard in the fourth quarter of 1999, when the
Insurance Settlement (discussed below) became effective. The NSP Agreements settled
asbestos personal injury claims that had been filed against Fibreboard by participating
plaintiffs law firms and claims that could have been filed against Fibreboard by
such firms following the lifting, in the third quarter of 1999, of an injunction which
had barred the filing of asbestos personal injury claims against Fibreboard.

As of the Petition
Date, the NSP covered approximately 206,000 Initial Claims against Fibreboard,
approximately 118,000 of which had satisfied all conditions to final settlement,
including receipt of executed releases, or other resolution as Final NSP Settlements at
an average cost per claim of approximately $7,400. As of the Petition Date, approximately
62,000 of such Final NSP Settlements had been paid in full or otherwise resolved and
approximately 56,000 were unpaid in whole or in part. As of such date, the remaining
balance payable under NSP Agreements in connection with these unpaid Final NSP
Settlements was approximately $330 million. The NSP Agreements also provided for the
resolution of Future Claims against Fibreboard through the administrative processing
arrangement described in Item A. Through the Petition Date, Fibreboard had received
approximately 6,000 Future Claims under the NSP.

At this time, Owens
Corning is unable to predict the manner in which the NSP Agreements and the resolution of
Fibreboard claims thereunder will ultimately be treated under the terms of any plan or
plans of reorganization.

#  34 

# OWENS CORNING AND
SUBSIDIARIESNOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (continued)(unaudited)

8.    
          CONTINGENT LIABILITIES AND OTHER MATTERS (continued)

Non-NSP Claims

As of the Petition
Date, approximately 9,000 asbestos personal injury claims were pending against Fibreboard
outside the NSP. This compares to approximately 1,000 such claims pending on December 31,
1999. Fibreboard resolved (by settlement or otherwise) approximately 2,000 asbestos
personal injury claims outside the NSP during 2000 prior to the Petition Date at an
average cost of resolution of approximately $45,000 per claim. Generally, these claims
were settled as they were scheduled for trial, and they typically involved more serious
injuries and diseases. Accordingly, Owens Corning does not believe that such average
costs of resolution are representative of the value of the non-NSP claims then pending
against Fibreboard.

At this time, Owens
Corning is unable to predict the manner in which Fibreboard non-NSP claims will
ultimately be treated under the terms of any plan or plans of reorganization.

Insurance Settlement

In 1993, Fibreboard
and two of its insurers, Continental Casualty Company (Continental) and
Pacific Indemnity Company (Pacific), entered into the Insurance Settlement.
The Insurance Settlement became effective in the fourth quarter of 1999.

Since 1993,
Continental and Pacific paid, either directly or through an escrow account funded by
them, for substantially all settlements of asbestos claims reached prior to the
initiation of the NSP. Under the Insurance Settlement, Continental and Pacific provided
$1.873 billion during the fourth quarter of 1999 to fund costs of resolving pending and
future Fibreboard asbestos-related liabilities, whether under the NSP, in the tort
system, or otherwise.

As of March 31,
2003, the Insurance Settlement funds were held in and invested by the Fibreboard
Settlement Trust. As of that date, $1.245 billion was held in the Fibreboard Settlement
Trust and $127 million was held in Undistributed Administrative Deposits in respect of
Fibreboard claims. On an ongoing basis, the funds held in the Fibreboard Settlement Trust
will be subject to investment earnings/losses and will be reduced if and as applied to
satisfy asbestos-related liabilities. Under the terms of the Fibreboard Settlement Trust,
any of such assets that ultimately are not used to fund Fibreboards
asbestos-related liabilities must be distributed to charity. However, since the reserve
for Fibreboard asbestos-related liabilities exceeds the funds held in the Fibreboard
Settlement Trust, the residual amount payable to charity under the terms of the Trust
(see Note 9) was reduced to zero as of September 30, 2002.

Funds held in the
Fibreboard Settlement Trust and Fibreboards Undistributed Administrative Deposits
are reflected on Owens Cornings consolidated balance sheet as restricted assets. At
March 31, 2003, these assets were reflected as non-current assets, under the category
Restricted cash, securities and other - Fibreboard. See Note 9 for
additional information concerning the Fibreboard Settlement Trust.

At this time, Owens
Corning is unable to predict what the treatment of funds held in the Fibreboard
Settlement Trust and in Undistributed Administrative Deposits in respect of Fibreboard
claims (see Item A) will ultimately be under the terms of any plan or plans of
reorganization.

#  35 

# OWENS CORNING AND
SUBSIDIARIESNOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (continued)(unaudited)

8.    
          CONTINGENT LIABILITIES AND OTHER MATTERS (continued)

Asbestos-Related Payments

As a result of the
Filing, Fibreboard has not made any asbestos-related payments since the Petition Date.
During 2000 (prior to the Petition Date), gross payments for asbestos-related claims
against Fibreboard, all of which were paid/reimbursed by the Fibreboard Settlement Trust,
fell within four major categories, as follows:

|                                                       | 2000 (through October 4, 2000)
|------------------------------------------------------ | ------------------------------
|
|
|Pre-NSP Settlements                                    |                               
|NSP Settlements                                        |                               
|Non-NSP Settlements                                    |                               
|Defense, Claims Processing and Administrative Expenses |                               
|                                                       |                               
|                                                       |                               
|                                                       |                               

The payments for NSP
Settlements include Administrative Deposits during the reporting period in respect of
Fibreboard claims.

Reserve

Owens Corning
estimates a reserve for Fibreboard in accordance with generally accepted accounting
principles to reflect asbestos-related liabilities. As described in Item A above, this
reserve was increased in the third quarter of 2002 through a charge to income of $975
million. As of March 31, 2003, a reserve of approximately $2.3 billion in respect of
these asbestos-related liabilities was one of the items included in Owens Cornings
consolidated balance sheet under the category Liabilities Subject to Compromise.
For periods prior to the Petition Date, they were reflected as current or other
liabilities (depending on the period in which payment was expected) under the category
Asbestos-related liabilities - Fibreboard.

As noted in Item A
above as to Owens Corning, the estimate of Fibreboards liabilities for pending and
expected future asbestos claims is subject to considerable uncertainty because such
liabilities are influenced by numerous variables that are inherently difficult to
predict, and such uncertainties significantly increased as a result of the Filing,
including those set forth in Item A above. In addition, as noted above, the Debtors filed
on March 28, 2003 a proposed amended joint plan of reorganization for the Debtors
(including Fibreboard) that provided for two alternative frameworks for creditor
recoveries. One such alternative, in the context of a consensual framework, specified an
aggregate liability for current and future asbestos personal injury claims against Owens
Corning and Fibreboard of $16 billion (on a net present value basis) composed of $10.7
billion for Owens Corning and $5.3 billion for Fibreboard. Under the other alternative,
such liabilities would be determined by the Bankruptcy Court as part of the confirmation
hearing on the proposed plan. Although Owens Corning believes that estimates in the
amounts reflected in the first alternative are supportable, it is currently anticipated
that the number and estimated aggregate value of current and future asbestos personal
injury claims will ultimately be determined as a result of negotiations involving the
Official Committee of Asbestos Claimants, the Legal Representative of the class of future
asbestos claimants and other interested constituencies or, if necessary, by the
Bankruptcy Court. It is not possible to predict the outcome of such negotiations at this
time. The Companys bank and bond creditor groups, for example, have continued to assert
that such aggregate liability approximates the amount of Owens Cornings
existing reserves. Ultimately, Fibreboards (and Owens Cornings) total
liability for asbestos claims will be finally determined after a

#  36 

# OWENS CORNING AND
SUBSIDIARIESNOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (continued)(unaudited)

8.    
          CONTINGENT LIABILITIES AND OTHER MATTERS (continued)

lengthy period of
negotiations and, if necessary, by the Bankruptcy Court, taking into account numerous
factors not present in the Companys pre-petition environment. In light of the
above, at this time Owens Corning is unable to predict what the treatment of funds held
in the Fibreboard Settlement Trust and in Undistributed Administrative Deposits in
respect of Fibreboard claims will be under the terms of any plan or plans of
reorganization ultimately confirmed.

At March 31, 2003,
the approximate balances of the components of the Fibreboard asbestos-related reserve
were:

|                                         | Balance
|---------------------------------------- | -------
|
|
|Unpaid Final Settlements (NSP and other) |        
|Other Pending and Future Claims          |        

In connection with
this asbestos reserve, Owens Corning notes that:

|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|- | The Unpaid Final Settlements component represented the remaining estimated
cost for all asbestos personal injury claims pending against Fibreboard which were subject
to final settlement agreements for which releases from claimants were obtained, and under
which all other conditions to settlement had been satisfied, as of the Petition Date.                                                                                                                                                                                                              
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|- | The Other Pending and Future Claims component represented the estimated cost
of resolving, through the Chapter 11 process, (i) asbestos personal injury claims pending
against Fibreboard which were subject to resolution under NSP Agreements but for which
releases were not obtained from claimants prior to the Petition Date; (ii) all other
asbestos personal injury claims pending against Fibreboard which were not subject to any
settlement agreement; and (iii) future asbestos personal injury claims against Fibreboard
made after the Petition Date.

Owens Corning
believes that Fibreboards reserve for asbestos claims represents at least a minimum
in a range of possible outcomes of the plan negotiation process as to the amount of
Fibreboards total liability for asbestos-related claims against it as determined
through the Chapter 11 process. Given the nature of the Chapter 11 proceedings, described
above, Owens Corning cautions that the total asbestos-related liability ultimately
established in the Chapter 11 proceedings may be either higher or lower than Fibreboards
reserve. Owens Corning notes that it expects an ongoing high level of negotiations and
information exchanges with the various creditor constituencies and other parties for the
duration of the Chapter 11 proceedings. Owens Corning will continue to review Fibreboards
asbestos reserve on a periodic basis and make such adjustments as may be appropriate.
However, it is possible that Owens Corning will not be in a position to conclude that a
further revision to the reserve is appropriate until significant additional developments
occur during the course of the Chapter 11 Cases, including resolution by negotiation or
the Bankruptcy Court of Fibreboards total liability for asbestos claims. Any such
revision could, however, be material to the Companys consolidated financial
position and results of operations in any given period.

#  37 

# OWENS CORNING AND
SUBSIDIARIESNOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (continued)(unaudited)

8.    
          CONTINGENT LIABILITIES AND OTHER MATTERS (continued)

ITEM C. - OTHER ASBESTOS-RELATED
MATTERS

Other Asbestos-Related
Litigation

As previously
reported, the Company believes that it has spent significant amounts to resolve claims of
asbestos claimants whose injuries were caused or exacerbated by cigarette smoking. Owens
Corning and Fibreboard are pursuing litigation against tobacco companies (discussed
below) to obtain payment of monetary damages (including punitive damages) for payments
made by Owens Corning and Fibreboard to asbestos claimants who developed smoking-related
diseases. There can be no assurance that any such litigation will go to trial or be
successful.

In October 1998, the
Circuit Court for Jefferson County, Mississippi granted leave to file an amended
complaint in an existing action to add claims by Owens Corning against seven tobacco
companies and several other tobacco industry defendants. On June 17, 2001, the Jefferson
court entered an order dismissing Owens Cornings case in response to the defendants motion
for summary judgment on the basis that Owens Cornings injuries were indirect and
thus too remote under Mississippi law to allow recovery. The Company has appealed such
dismissal to the Supreme Court of Mississippi.

In addition to the
Mississippi lawsuit, a lawsuit brought in December 1997 by Owens Corning and Fibreboard
is pending in the Superior Court for Alameda County, California against the same tobacco
companies. In August 2001, the defendants filed motions to dismiss Owens Cornings
and Fibreboards claims on the basis of the decision in the Mississippi lawsuit as
well as California law. As the result of a hearing on these motions on November 20, 2001,
the California court denied the motion to dismiss Fibreboards claims on the basis
of the decision in the Mississippi lawsuit and otherwise stayed the proceeding pending
the outcome of the Mississippi suit.

Insurance

As of March 31,
2003, Owens Cornings financial statements reflect $4 million in unexhausted
insurance coverage (net of deductibles and self-insured retentions) under its liability
insurance policies applicable to asbestos personal injury claims. This amount represented
unconfirmed potential non-products coverage with excess level insurance carriers, as to
which Owens Corning had estimated its probable recoveries.

Owens Corning also
has other unconfirmed potential non-products coverage with excess level carriers. Owens
Corning is actively pursuing non-products insurance recoveries under these policies. In
October, 2001, Owens Corning filed a lawsuit in Lucas County, Ohio, against ten excess
level carriers for declaratory relief and damages for failure to make payments under its
non-products insurance coverage. The amount and timing of recoveries from excess level
policies will depend on the outcome of litigation or other proceedings, possible
settlements of those proceedings, or other negotiations.

As previously
reported, late in the second quarter of 2001, Owens Corning entered into a settlement
agreement with one of its excess insurance carriers, resolving a dispute concerning
coverage from such insurer for non-products asbestos-related personal injury claims. As a
result, during the third quarter of 2001, the carrier funded $55 million into an escrow
account to be released in conjunction with implementation of an approved plan of
reorganization. The escrowed funds plus earnings are reflected on Owens Cornings
consolidated balance sheet as restricted assets, under the category Restricted cash - asbestos and insurance related.

#  38 

# OWENS CORNING AND
SUBSIDIARIESNOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (continued)(unaudited)

8.    
          CONTINGENT LIABILITIES AND OTHER MATTERS (continued)

Other Matters

SECURITIES LITIGATION

On or about April
30, 2001, certain of the Companys current and former directors and officers, as
well as certain underwriters, were named as defendants in a lawsuit captioned John
Hancock Life Insurance Company, et al. v. Goldman, Sachs & Co., et al. in the United
States District Court for the District of Massachusetts. An amended complaint was filed
by the plaintiffs on or about July 5, 2001. Owens Corning is not named in the lawsuit.
The suit purports to be a securities class action on behalf of purchasers of certain
unsecured debt securities of Owens Corning in offerings occurring on or about April 30,
1998 and July 23, 1998. The complaint alleges that the registration statements pursuant
to which the offerings were made contained untrue and misleading statements of material
fact and omitted to state material facts which were required to be stated therein and
which were necessary to make the statements therein not misleading, in violation of
sections 11, 12(a)(2) and 15 of the Securities Act of 1933. The amended complaint seeks
an unspecified amount of damages or, where appropriate, rescission of the plaintiffs purchases.
The defendants filed a motion to dismiss the action on November 20, 2001. A hearing was
held on this motion on April 11, 2002, and the Court issued a decision denying the motion
on August 26, 2002. The Company believes that the claim is without merit. The named
defendants in this proceeding have each filed contingent indemnification claims with
respect to this litigation against Owens Corning pursuant to the General Bar Date process
described below.

On or about January
27, 2003, certain of the Companys current and former directors and officers were
named as defendants in a lawsuit captioned Robert Greenburg, et al. v. Glen Hiner, et al.
in the United States District Court for the Northern District of Ohio, Western Division.
Owens Corning is not named in the lawsuit. The suit purports to be a class action for
securities fraud under sections 10(b) and 20(a) of the Securities Exchange Act of 1934,
on behalf of a class comprised of persons who purchased stock of Owens Corning during the
period from September 20, 1999, through October 5, 2000. The complaint seeks an
unspecified amount of damages and/or, where appropriate, rescission. Subsequent to
January 27, 2003, three substantially similar actions, with named plaintiffs Nicholas
Radosevich, Howard E. Leppla, and William Benanchietti, respectively, were filed against
the same defendants in the same court. The Company believes that these claims are without
merit. The named defendants in these proceedings have each filed contingent
indemnification claims with respect to this litigation against Owens Corning pursuant to
the General Bar Date process described below.

GENERAL BAR DATE CLAIMS

In connection with
the Chapter 11 Cases, the Bankruptcy Court set April 15, 2002 as the last date by which
holders of certain pre-petition claims against the Debtors must file their claims (the
General Bar Date). The General Bar Date does not apply to asbestos-related
personal injury claims and asbestos-related wrongful death claims (other than claims for
contribution, indemnity, reimbursement, or subrogation). Approximately 24,000 proofs of
claim (including the claims described below under the headings PBGC Claim and
Tax Claim), totaling approximately $16.1 billion, alleging a right to payment
from a Debtor were filed with the Bankruptcy Court in response to the General Bar Date.
For further information concerning these claims, please see Note 1, under the heading
General Bar Date.

#  39 

# OWENS CORNING AND
SUBSIDIARIESNOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (continued)(unaudited)

8.    
          CONTINGENT LIABILITIES AND OTHER MATTERS (continued)

PBGC CLAIM

In connection with
the General Bar Date described above, the Pension Benefit Guaranty Corporation (PBGC),
an agency of the United States, has filed a claim, in the amount of approximately $458
million, in connection with statutory liability for unfunded benefit liabilities of the
Owens Corning Merged Retirement Plan (the Pension Plan). The claim states
that it is contingent upon termination of the Pension Plan. Since Owens Corning does not
anticipate that the Debtors plan or plans of reorganization will provide for
termination of the Pension Plan, it believes that this claim ultimately will become moot.

TAX CLAIM

Owens Cornings
federal income tax returns typically are audited by the Internal Revenue Service (IRS)
in multi-year audit cycles. The audit for the years 1992-1995 was completed in late 2000.
Due to the Filing, the IRS also accelerated and completed the audit for the years ended
1996-1999 by March of 2001. As the result of these audits and unresolved issues from
prior audit cycles, the IRS is asserting claims for approximately $390 million in income
taxes plus interest of approximately $175 million.

Pending audit of
Owens Cornings federal income tax return for the year 2000, the IRS has also filed
a protective claim in the amount of approximately $50 million, covering a tax refund
received by Owens Corning for such year, plus interest.

As described in Note
1, under the heading General Bar Date, the United States Department of
Treasury has filed proofs of claim, totaling approximately $530 million, in connection
with these tax claims.

In accordance with
generally accepted accounting principles, Owens Corning maintains tax reserves to cover
audit issues. While Owens Corning believes that the existing reserves are appropriate in
light of the audit issues involved, its defenses, its prior experience in resolving audit
issues, and its ability to realize certain challenged deductions in subsequent tax
returns if the IRS were successful, there can be no assurance that such reserves will be
sufficient. Owens Corning will continue to review its tax reserves on a periodic basis
and make such adjustments as may be appropriate. Any such revision could be material to
the Companys consolidated financial position and results of operations in any given
period.

AVOIDANCE ACTIONS

Under the Bankruptcy
Code, October 4, 2002 was the deadline by which the Debtors, on behalf of the bankruptcy
estates, could bring adversary actions seeking the return of potentially avoidable
transfers made by the Debtors to certain parties within a prescribed period prior to the
commencement of the Chapter 11 proceedings. As part of their review of potentially
avoidable transactions, the Debtors (1) negotiated tolling agreements with some of the
recipients of the preferential transfers in order to toll the time period in which to
bring an avoidance action; (2) determined not to prosecute certain of those potential
avoidance actions that were not the subject of tolling agreements; and (3) instituted,
prior to the October 4, 2002 deadline, a total of 19 adversarial actions, including 3
preference actions, 1 turnover action, and 15 avoidance actions, as described further
below. All such actions were commenced in the USBC.

#  40 

# OWENS CORNING AND
SUBSIDIARIESNOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (continued)(unaudited)

8.    
          CONTINGENT LIABILITIES AND OTHER MATTERS (continued)

Among the parties
who were identified by the Debtors as having received potentially avoidable transfers
were (a) 12 present and former officers that received certain pre-petition incentive
payments exceeding a threshold in the aggregate per officer; (b) one director that
received a pre-petition pension payment; and (c) a joint venture affiliate of the Company
that received approximately $3.8 million in the one-year period prior to the commencement
of the Chapter 11 proceedings.

The Debtors have
executed tolling agreements with all 12 present and former officers, the director and the
affiliate of the Company, as well as with certain other parties identified as having
received potentially avoidable transfers.

The additional
actions were commenced against various other defendants seeking, among other things, (a)
avoidance of certain guarantees and certain preferential payments made in connection with
Owens Cornings Pre-Petition Credit Facility; (b) the return of up to approximately
$515 million paid by the Company to shareholders of Fibreboard in connection with the
Companys purchase of Fibreboard in 1997 (the FBD Shareholder Action);
(c) the return of up to approximately $61.8 million paid by the Company to shareholders
in dividends in the period 1996 through 2000 (the Dividend Action); and (d)
the return of approximately $133 million paid by the Company to Bank of America Corp. in
connection with Owens Cornings purchase of Fibreboard in 1997. Both the FBD
Shareholder Action and the Dividend Action are defendant class actions. Certain present
or former officers or directors of the Company may be members of either or both defendant
classes.

Separately, and at
the request of the Debtors Official Creditors Committee and the direction of
the Bankruptcy Court, the Debtors either obtained tolling agreements from, or filed
actions against, approximately 115 law firms that entered into NSP or non-NSP agreements
with the Debtors on behalf of claimants asserting asbestos-related personal injury or
wrongful death claims. Lawsuits were brought against the 11 law firms that did not sign
tolling agreements, seeking two forms of relief: (a) first, a declaratory judgment as to
whether payments made, or obligations incurred, under NSP and non-NSP agreements were in
exchange for reasonably equivalent value; and (b) second, in the event reasonably
equivalent value was not received, the recovery or avoidance of payments made and
obligations incurred under the relevant NSP and non-NSP agreements pursuant to applicable
state and federal fraudulent conveyance law. The Official Creditors Committee was
named as a defendant in such lawsuits, solely with respect to the declaratory relief
sought.

By motion filed on
or about October 16, 2002, the Debtors sought an order of the Bankruptcy Court staying
all of the foregoing litigation pending its disposition in a plan of reorganization.
Pursuant to orders of the Bankruptcy Court, all of the foregoing litigation, other than
the action relating to the avoidance of certain guarantees and certain preferential
payments made in connection with Owens Cornings Pre-Petition Credit Facility, has
been stayed until February 2, 2004, subject to the right of any defendant to move to
modify/terminate the stay. The Debtors action relating to the avoidance of certain
guarantees and certain preferential payments made in connection with Owens Cornings
Pre-Petition Credit Facility is scheduled for trial before the District Court commencing
in June 2003.

#  41 

# OWENS CORNING AND
SUBSIDIARIESNOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (continued)(unaudited)

9.    
FIBREBOARD SETTLEMENT TRUST

Under the Insurance
Settlement described in Note 8, two of Fibreboards insurers provided $1.873 billion
during the fourth quarter of 1999 to fund the costs of resolving pending and future
Fibreboard asbestos-related liabilities. As of March 31, 2003, the Insurance Settlement
funds were held in and invested by the Fibreboard Settlement Trust (the Trust).
On an ongoing basis, the funds held in the Trust will be subject to investment
earnings/losses and will be reduced if and as applied to satisfy Fibreboard
asbestos-related liabilities. Under the terms of the Trust, any Trust assets that
ultimately are not used to fund Fibreboards asbestos-related liabilities must be
distributed to charity. Based on currently available information, Owens Corning does not
believe that any such assets will remain for distribution at the conclusion of the
Chapter 11 cases.

The Trust is a
qualified settlement fund for federal income tax purposes, and is taxed separately from
Owens Corning on its net taxable income, after deduction for related administrative
expenses.

At this time, Owens
Corning is unable to predict what the treatment of the Fibreboard Settlement Trust will
ultimately be under the terms of any plan or plans of reorganization.

General Accounting
Treatment

The assets of the
Trust are comprised of cash and marketable securities (collectively, the Trust
Assets) and, with Fibreboards Undistributed Administrative Deposits, are
reflected on Owens Cornings consolidated balance sheet as restricted assets. At
March 31, 2003, these assets were reflected as non-current assets, under the category
Restricted cash, securities and other - Fibreboard. Owens Corning
estimates a reserve for Fibreboard in accordance with generally accepted accounting
principles to reflect asbestos-related liabilities (see Note 8, Part B). As of March 31,
2003, these liabilities were one of the items included in Owens Cornings
consolidated balance sheet under the category Liabilities Subject to Compromise.
For periods prior to the Petition Date, they were reflected as current or other
liabilities (depending on the period in which payment was expected) under the category
Asbestos-related liabilities - Fibreboard. At March 31, 2003, the
Consolidated Financial Statements reflect Fibreboards reserve for asbestos
litigation claims at $2.310 billion.

For accounting
purposes, the Trust Assets are classified from time to time as trading securities,
available for sale, or held to maturity and are reported in the
Consolidated Financial Statements in accordance with Statement of Financial Accounting
Standards No. 115, Accounting for Certain Investments in Debt and Equity Securities.
Accordingly, marketable securities classified as trading securities and available for
sale are recorded at fair market value and marketable securities designated as held to
maturity are recorded at amortized cost. At March 31, 2003 and 2002, substantially all
marketable securities were classified as trading securities.

Through the third
quarter of 2002, any unrealized increase/decrease in fair market value was reflected as a
change in the carrying amount of the asset on the Consolidated Balance Sheet as well as
other income/expense on the Consolidated Statement of Income (Loss). Subsequent to the
third quarter of 2002, any unrealized increase/decrease in fair market value is reflected
as an increase/decrease in the carrying amount of such assets on the Consolidated Balance
Sheet as well as a decrease/increase in Chapter 11 related reorganization items on the
Consolidated Statement of Income (Loss).

#  42 

# OWENS CORNING AND
SUBSIDIARIESNOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (continued)(unaudited)

Through the third
quarter of 2002, any earnings and realized gains/losses on the Trust Assets were
reflected as an increase/decrease in the carrying amount of such assets on the
Consolidated Balance Sheet as well as other income/expense on the Consolidated Statement
of Income (Loss). Subsequent to the third quarter of 2002, any earnings and realized
gains/losses are reflected as an increase/decrease in the carrying amount of such assets
on the Consolidated Balance Sheet as well as a decrease/increase in Chapter 11 related
reorganization items on the Consolidated Statement of Income (Loss). Cost for purposes of
computing realized gains/losses is determined using the specific identification method.

Through the third
quarter of 2002, the residual obligation to charity, included in liabilities subject to
compromise on the Consolidated Balance Sheet, increased/decreased, with the related
decrease/increase to other expense/income on the Consolidated Statement of Income (Loss).
As of September 30, 2002, the residual obligation to charity was reclassified to
Fibreboards reserve for asbestos litigation claims as the liability exceeded the
Trust Assets, thus no amounts were recorded to the residual obligation to charity
subsequent to that date.

Results for the Periods Ended March
31, 2003 and 2002

During the first
quarters of 2003 and 2002, Trust Assets generated interest/dividend earnings of
approximately $14 million and $13 million, respectively. The $14 million generated in the
first quarter of 2003 was recorded in Chapter 11 related reorganization items in the
Consolidated Statement of Income (Loss). The $13 million generated during the first
quarter of 2002 was recorded as an increase in the carrying amount of the assets on Owens
Cornings Consolidated Balance Sheet and as other income on the Consolidated
Statement of Income (Loss). The income generated in the first quarter of 2002 was offset
by an equal charge to other expense, which represented an increase in the residual
liability to charity.

At March 31, 2003
and 2002, the fair market value adjustment for those securities designated as trading
securities resulted in an unrealized loss of approximately $5 million and $9 million,
respectively, recorded as a decrease in the carrying amount of the assets on the
Consolidated Balance Sheet. The $5 million loss generated during 2003 was recorded as
Chapter 11 related reorganization items on the Consolidated Statement of Income (Loss).
The $9 million loss generated during 2002 was reflected as other expense on the
Consolidated Statement of Income (Loss). The loss generated in the first quarter of 2002
was offset by an equal charge to other income, which represented a decrease in the
residual obligation to charity.

As a result of the
Filing, there were no payments for asbestos litigation claims from the Trust during the
first quarter of 2003 or 2002. However, approximately $1 million was paid during the
first quarter of 2002 for taxes related to earnings of the Trust. This payment was funded
by existing cash in the Trust or proceeds from the sale of securities. The sale of
securities resulted in a realized loss of approximately $1 million during each of the
first quarters of 2003 and 2002. Realized gains or losses from the sale of securities are
reflected on the Companys financial statements in the same manner as actual returns
on Trust Assets, described above.

At March 31, 2003,
the fair value of Trust Assets and Administrative Deposits was $1.372 billion, which was
comprised of Trust Assets of $1.245 billion of marketable securities and Administrative
Deposits of $127 million.

 43 

OWENS CORNING AND
SUBSIDIARIESNOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (continued)(unaudited)

9.    
FIBREBOARD SETTLEMENT TRUST (continued)

The table below
summarizes Trust and Administrative Deposits activity for the three months ended March
31, 2003:

|                                                                   |   | Interest | Unrealized | Realized |    |  
|------------------------------------------------------------------ | - | -------- | ---------- | -------- | -- | -
|
|
|
|
|Assets                                                             |   |          |            |          |    |  
|Trust Assets:                                                      |   |         
|Marketable securities - trading                                    |   |          | $          | 1,238    |    | $
|                                                                  
|Administrative Deposits                                            |   |          |            | 127      |    |  
|                                                                   |   |          |            |          |    |  
|Total assets                                                       |   |          | $          | 1,365    |    | $
|                                                                   |   |          |            |          |    |  
|Liabilities                                                        |   |         
|Accounts payable                                                   |   |          | $          | 18       |    | $
|Asbestos litigation claims                                         |   |          |            | 2,310    |    |  
|                                                                   |   |          |            |          |    |  
|Total Trust liabilities                                            |   |          |            | 2,328    |    |  
|                                                                  
|Liabilities in excess of assets                                    |   |          |            | (963     | )  |  
|                                                                   |   |          |            |          |    |  
|Total Trust liabilities net of     liabilities in excess of assets | $ | 1,365    |            | $        | 14 |  
|                                                                   |   |          |            |          |    |  

#  44 

# OWENS CORNING AND
SUBSIDIARIESNOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (continued)(unaudited)

10.    
GOODWILL AND OTHER INTANGIBLES

Effective January 1,
2002, the Company adopted Statement of Financial Accounting Standards No. 142, Goodwill
and Other Intangible Assets (SFAS No. 142), to account for goodwill and other
intangibles. SFAS No. 142 requires an annual review for impairment using a fair value
methodology.

The Company applied
SFAS No. 142 beginning in the first quarter of 2002, which required the Company to cease
amortizing goodwill and indefinite-lived intangibles. The Company has no indefinite-lived
intangibles, separately identified. In addition, the Company tested goodwill for
impairment using the two-step process prescribed in SFAS No. 142. Based on this analysis
the January 1, 2002 carrying value of the goodwill in these reporting units exceeded
their implied fair value by $491 million, resulting in a non-cash charge of $491 million
($441 million net of tax). This charge was determined during the second quarter of 2002
and, as required by SFAS No. 142, was recorded as a cumulative effect of a change in
accounting principle in the first quarter of 2002.

To maintain a
consistent basis for measurement of performance, the Company reclassified previously
reported segment information related to goodwill and total assets to correspond to the
earnings measurements by which the businesses are evaluated. Accordingly, approximately
$15 million of goodwill as of January 1, 2002, was reclassified to the Building Materials
Systems segment from the Composite Solutions segment.

The changes in
goodwill by segment during each of the quarters ended March 31, 2003 and 2002, were as
follows:

|                           |  | Quarter Ended March 31, 2003 |  
|-------------------------- |  | ---------------------------- | -
|
|
|
|
|
|Composite Solutions        |  |                              | $
|Building Materials Systems |  |                              |  
|                           |  |                              |  
|Total                      |  |                              | $
|                           |  |                              |  

|                           |  | Quarter Ended March 31, 2002 |   |     | 
|-------------------------- |  | ---------------------------- | - | --- | 
|
|
|
|
|
|Composite Solutions        |  |                              | $ | 33  | 
|Building Materials Systems |  |                              |   | 577 | 
|                           |  |                              |   |     | 
|Total                      |  |                              | $ | 610 | 
|                           |  |                              |   |     | 

#  45 

# OWENS CORNING AND
SUBSIDIARIESNOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (continued)(unaudited)

10.    
GOODWILL AND OTHER INTANGIBLES (continued)

Substantially all of
the Companys acquired other intangible assets are subject to amortization. Other
intangible asset amortization expense was approximately $1 million in the first quarter
of 2003 and 2002. The Company estimates that amortization of intangibles will be
approximately $3 million for each of the next five years. The components of other
intangible assets are as follows:

|                  |  | March 31, 2003 | 
|----------------- |  | -------------- | 
|
|
|
|
|
|Contract-based    |  |                | 
|Technology-based  |  |                | 
|Marketing-related |  |                | 
|                  |  |                | 
|                  |  |                | 
|                  |  |                | 

11.    
STOCK COMPENSATION

In December 2002,
the Financial Accounting Standards Board issued Statement of Financial Accounting
Standards No. 148 Accounting for Stock-Based Compensation - Transition and
Disclosure - an amendment of FASB Statement No. 123 (SFAS No. 148).
Effective December 31, 2002, the Company adopted the amendments to Statement of Financial
Accounting Standards No. 123, Accounting for Stock-Based Compensation (SFAS
No. 123) provided in paragraphs 2(a)-2(e) of this Statement. Effective January 1,
2003, the Company adopted the amendment to SFAS No. 123 provided in paragraph 2(f) of
this Statement, and the amendment to Opinion 28 provided in paragraph 3. The effect of
adoption was not material to the Company.

The Company applies
SFAS No. 123 and SFAS No. 148 for disclosures of its stock based compensation plans.
The Company applies Accounting Principles Board Opinion No. 25 and related
Interpretations for expense recognition as permitted by SFAS No. 123 and SFAS No. 148.  The
expense recorded in the first quarters of 2003 and 2002 was not material.

#  46 

# OWENS CORNING AND
SUBSIDIARIESNOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (continued)(unaudited)

11.    
STOCK COMPENSATION (continued)

Had compensation
cost for the Companys stock-based compensation plans been determined based on the
fair value at the grant dates for awards under those plans consistent with the method
described in SFAS No. 123, the Companys net loss and net loss per share would have
been adjusted to the pro forma amounts indicated below:

|                                        | Quarter Ended March 31, | 
|--------------------------------------- | ----------------------- | 
|
|
|
|
|Net loss, as reported                   |                         | 
|Less - total stock-based employee       |                         | 
|compensation expense determined under   |                         | 
|fair value based method for all awards, |                         | 
|net of related tax effects              |                         | 
|                                        |                         | 
|Pro forma net loss                      |                         | 
|                                        |                         | 
|Basic net loss per share                |                         | 
|As reported                             |                         | 
|Pro forma                               |                         | 
|                                        |                         | 
|Diluted net loss per share              |                         | 
|As reported                             |                         | 
|Pro forma                               |                         | 

12.    
OTHER ACCOUNTING PRONOUNCEMENTS

Effective January 1,
2003, the Company adopted Statement of Financial Accounting Standards No. 143, Accounting
for Asset Retirement Obligations. This statement requires that the fair value of a
liability for an asset retirement obligation be recognized in the period in which it is
incurred if a reasonable estimate of fair value can be made. The effect of adoption was
not material to the Company, and the prospective effects of adoption are not expected to
be material to the Company.

Effective January 1,
2003, the Company adopted Statement of Financial Accounting Standards No. 145, Rescission
of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections as of April 2002". This Statement (1) rescinds FASB Statement No. 4,
Reporting Gains and Losses from Extinguishment of Debt, FASB Statement No.
64, Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements, and
FASB Statement No. 44, Accounting for Intangible Assets of Motor Carriers,
(2) amends FASB Statement No. 13, Accounting for Leases, to eliminate an
inconsistency between the required accounting for sale-leaseback transactions and the
required accounting for certain lease modifications that have economic effects that are
similar to sale-leaseback transactions, and (3) amends other existing authoritative
pronouncements to make various technical corrections, clarify meanings, or describe their
applicability under changed conditions. The effect of adoption was not material to the
Company.

#  47 

# OWENS CORNING AND
SUBSIDIARIESNOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (continued)(unaudited)

12.    
OTHER ACCOUNTING PRONOUNCEMENTS (continued)

Effective January 1,
2003, the Company adopted Statement of Financial Accounting Standards No. 146, Accounting
for Costs Associated with Exit or Disposal Activities. This Statement addresses
financial accounting and reporting for costs associated with exit or disposal activities
and nullifies Emerging Issues Task Force (EITF) Issue No. 94-3, Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity
(including Certain Costs Incurred in a Restructuring)". This Statement requires that
a liability for a cost associated with an exit or disposal activity be recognized and
measured initially at fair value only when the liability is incurred. The effect of
adoption was not material to the Company, however, prospectively the timing of related
future charges may be different than those recorded in prior periods.

In December 2002,
the Financial Accounting Standards Board issued Financial Accounting Standards Board
Interpretation No. 45, Guarantor ́s Accounting and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of Indebtedness of Others - an
interpretation of FASB Statements No. 5, 57, and 107 and rescission of FASB
Interpretation No. 34". This Interpretation clarifies disclosures that are required
to be made for certain guarantees at the time the guarantees are issued. It also
clarifies that a guarantor is required to recognize, at the inception of a guarantee, a
liability for the fair value of the obligation undertaken in issuing the guarantee.
Effective December 31, 2002, the Company adopted the disclosure requirements in this
Interpretation, including those relating to warranty obligations. Effective January 1,
2003, the Company adopted the initial recognition and initial measurement provisions of
this Interpretation on a prospective basis for guarantees issued or modified after
December 31, 2002. The effect of adoption was not material to the Company, and the
prospective effects of adoption are not expected to be material to the Company.

In January 2003, the
Financial Accounting Standards Board issued Interpretation No. 46, Consolidation of
Variable Interest Entities - an interpretation of ARB No. 51". Effective July
1, 2003, the Company will adopt the provisions of this interpretation which requires the
primary beneficiary in a variable interest entity to consolidate the entity, even if the
primary beneficiary does not have a majority voting interest, for variable interest
entities existing prior to January 31, 2003. Effective January 31, 2003, the Company
adopted the consolidation requirements of this Interpretation for any variable interest
entity created on or after that date. Effective December 31, 2002, the Company adopted
the requirements of this interpretation for entities to disclose information regarding
guarantees or exposures to loss relating to any variable interest entity existing prior
to January 31, 2003 in financial statements issued after January 31, 2003. The effect of
adoption was not material to the Company, and the prospective effects of adoption are not
expected to be material to the Company.

 48 

ITEM 2.     MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
                   CONDITION AND RESULTS OF OPERATIONS

(All per share
information discussed below is on a diluted basis.)

CAUTIONARY STATEMENT
CONCERNING FORWARD-LOOKING STATEMENTS

Managements
Discussion and Analysis of Financial Condition and Results of Operations contains
forward-looking statements within the meaning of Section 27A of the Securities Act of
1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.
These forward-looking statements are subject to risks and uncertainties that could cause
actual results to differ materially from those projected in the statements. Some of the
important factors that may influence possible differences are continued competitive
factors and pricing pressures, availability and cost of energy and materials,
construction activity, interest rate movements, issues involving implementation of new
business systems, achievement of expected cost reductions, developments in and the
outcome of the Chapter 11 proceedings described below, and general economic and political
conditions.

VOLUNTARY PETITION FOR
RELIEF UNDER CHAPTER 11

On October 5, 2000
(the Petition Date), Owens Corning and the 17 United States subsidiaries
listed below (collectively, the Debtors) filed voluntary petitions for relief
(the Filing) under Chapter 11 of the United States Bankruptcy Code (the Bankruptcy
Code) in the United States Bankruptcy Court for the District of Delaware (the USBC).
The Debtors are currently operating their businesses as debtors-in-possession in
accordance with provisions of the Bankruptcy Code. The Chapter 11 cases of the Debtors
(collectively, the Chapter 11 Cases) are being jointly administered under
Case No. 00-3837 (JKF). The Chapter 11 Cases do not include other United States
subsidiaries of Owens Corning or any of its foreign subsidiaries (collectively, the Non-Debtor
Subsidiaries). As described more fully below under the heading The Plan of
Reorganization, Owens Corning may cause certain of such Non-Debtor Subsidiaries
that issued guarantees with respect to Owens Cornings pre-petition bank credit
facility to file petitions for relief under Chapter 11 of the Bankruptcy Code under
certain circumstances. The subsidiary Debtors that filed Chapter 11 petitions for relief
are:

| |                                     |                                        
| | ----------------------------------- | ---------------------------------------
| | CDC Corporation                     | Integrex Testing Systems LLC           
| | Engineered Yarns America, Inc.      | HOMExperts LLC                         
| | Falcon Foam Corporation             | Jefferson Holdings, Inc.               
| | Integrex                            | Owens-Corning Fiberglas Technology Inc.
| | Fibreboard Corporation              | Owens Corning HT, Inc.                 
| | Exterior Systems, Inc.              | Owens-Corning Overseas Holdings, Inc.  
| | Integrex Ventures LLC               | Owens Corning Remodeling Systems, LLC  
| | Integrex Professional Services LLC  | Soltech, Inc.                          
| | Integrex Supply Chain Solutions LLC |                                        

The Debtors filed
for relief under Chapter 11 to address the growing demands on Owens Cornings cash
flow resulting from its multi-billion dollar asbestos liability. This liability is
discussed in greater detail in Note 8 to the Consolidated Financial Statements.

#  49 

ITEM 2.     MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
                   CONDITION AND RESULTS OF OPERATIONS (continued)

In late 2001, the
asbestos-related Chapter 11 cases pending in the District of Delaware (the Chapter 11
Cases of Owens Corning and the cases of Armstrong World Industries, Inc., W.R. Grace & Co.,
Federal-Mogul Global, Inc., and USG Corporation) were ordered transferred to the United
States District Court for the District of Delaware (the District Court)
before Judge Alfred M. Wolin to facilitate development and implementation of a
coordinated plan for management (the Administrative Consolidation). The
District Court has entered an order referring the Chapter 11 Cases back to the USBC,
where they were previously pending, subject to its ongoing right to withdraw such
referral with respect to any proceedings or issues (the applicable court from time to
time responsible for any particular aspect of the Chapter 11 Cases being hereinafter
referred to as the Bankruptcy Court). Owens Corning is unable to predict what
impact the Administrative Consolidation will have on the timing, outcome or other aspects
of the Chapter 11 Cases.

On January 17, 2003,
the Debtors, together with the Official Committee of Asbestos Claimants and the Legal
Representative for the class of future asbestos claimants, filed a proposed joint plan of
reorganization in the USBC. On March 28, 2003, the same proponents filed a proposed
amended joint plan of reorganization (the Plan) in the USBC. Certain terms,
conditions and provisions of the Plan are discussed below. The Plan is subject to
confirmation by the Bankruptcy Court.

Consequence of Filing

As a consequence of
the Filing, all pending litigation against the Debtors is stayed automatically by section
362 of the Bankruptcy Code and, absent further order of the Bankruptcy Court, no party
may take any action to recover on pre-petition claims against the Debtors. In addition,
pursuant to section 365 of the Bankruptcy Code, the Debtors may reject or assume
pre-petition executory contracts and unexpired leases, and other parties to contracts or
leases that are rejected may assert rejection damages claims as permitted by the
Bankruptcy Code.

Two creditors committees,
one representing asbestos claimants and the other representing unsecured creditors, have
been appointed as official committees in the Chapter 11 Cases. In addition, the
Bankruptcy Court has appointed James J. McMonagle as Legal Representative for the class
of future asbestos personal injury claimants against one or more of the Debtors. The two
committees and the Legal Representative have the right to be heard on all matters that
come before the Bankruptcy Court. Owens Corning expects that the two committees and the
Legal Representative will play important roles in the Chapter 11 Cases and the
negotiation of the terms of any plan or plans of reorganization. As noted above, the
Debtors filed their Plan together with the Official Committee of Asbestos Claimants and
the Legal Representative for the class of future asbestos claimants.

Owens Corning
anticipates that substantially all liabilities of the Debtors as of the date of the
Filing will be resolved under one or more Chapter 11 plans of reorganization to be
proposed and voted on in the Chapter 11 Cases in accordance with the provisions of the
Bankruptcy Code. Although the Debtors intend to seek confirmation of the Plan, there can
be no assurance that the Plan will not be amended prior to confirmation, nor can there be
any assurance that such Plan will be confirmed by the Bankruptcy Court and consummated.
Owens Corning is unable to predict what impact the Administrative Consolidation will have
on the timing of the confirmation of a plan or plans of reorganization or its effect, if
any, on the terms thereof.

#  50 

ITEM 2.      MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
                    CONDITION AND RESULTS OF OPERATIONS (continued)

The Plan of Reorganization

Owens Corning
believes that it is likely that the terms, conditions and provisions of the Plan will be
the subject of continuing negotiations or litigation to resolve differences among the
creditor constituencies as to their treatment. Accordingly, Owens Corning is unable to
predict at this time what the treatment of creditors and equity holders of the respective
Debtors will ultimately be under any plan or plans of reorganization finally confirmed.
The current Plan provides for partial payment of all unsecured creditors claims, in
the form of distributions of new common stock and notes of the reorganized company, and
cash. Additional distributions from potential insurance and other third-party claims may
also be paid to certain classes of unsecured creditors, but it is expected that all
classes of pre-petition unsecured creditors will be impaired. Therefore, the Plan also
provides that the existing common stock of Owens Corning will be cancelled, and that
current shareholders will receive no distribution or other consideration in exchange for
their shares. It is impossible to predict at this time the terms and provisions of any
plan or plans of reorganization that may ultimately be confirmed, when a plan or plans of
reorganization will be confirmed, or the treatment of creditors thereunder.

The Plan is premised
upon the substantive consolidation of the Debtors (but not the Fibreboard Settlement
Trust) for the purposes of voting, determining which claims and interests will be
entitled to vote to accept or reject the Plan, confirmation of the Plan, and the
resultant discharge of and cancellation of claims and interests and distribution of
assets, interests and other property under the Plan. For these purposes, the Plan would
treat all assets and liabilities of each Debtor (excluding the Fibreboard Settlement
Trust) as though they were merged into one consolidated estate with the assets and
liabilities of the other Debtors. Substantive consolidation under the Plan will
not result in the merger of or the transfer or commingling of any assets of any of the
Debtors or Non-Debtor Subsidiaries. In that regard, Owens Corning intends to implement a
restructuring plan which would reorganize Owens Corning and its subsidiaries consistent
with the Companys major business lines and direction. The planning for the
restructuring is in a preliminary stage. Certain creditor constituencies have asserted that
substantive consolidation is not appropriate and are challenging that approach in the
Plan confirmation hearings described below.

The percentage
recovery and value of the payments made under the Plan to each class of creditors will
depend upon a number of factors. Those factors include the value of the shares of new
common stock and notes to be issued by the Company, the amount of cash available for
distribution, the resolution of certain inter-creditor issues, and the ultimate aggregate
asbestos liability.

The Plan provides
two alternative frameworks for creditor recoveries. One such alternative, which would
apply in the event that the Plan were approved by the major creditor constituencies,
would assume an aggregate liability for current and future asbestos personal injury
claims against Owens Corning and Fibreboard of $16 billion, and a preferred recovery to
holders of bank claims of $400 million, in addition to pro rata recovery on the balance
of their claims. Under the other alternative, in the context of a non-consensual
framework, such aggregate asbestos liabilities would be determined by the Bankruptcy
Court as part of the confirmation hearing on the Plan. Hearings concerning confirmation
of the Plan began on April 8, 2003. Any disagreements raised by creditors with the terms
of the Plan, including with respect to the appropriateness of substantive consolidation,
will be handled through litigation as part of the confirmation process. Owens Corning is
unable to predict the outcome of such litigation.

#  51 

ITEM 2.      MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
                    CONDITION AND RESULTS OF OPERATIONS (continued)

Under either Plan
alternative, a majority of the newly issued common stock, together with notes, and cash,
as well as the assets of the existing Fibreboard Settlement Trust (see Note 9 to the
Consolidated Financial Statements), will fund a new trust created under the Plan intended
to qualify under Section 524(g) of the Bankruptcy Code. The Section 524(g) trust will
assume all obligations of Owens Corning, Fibreboard, and their respective subsidiaries
and affiliates, for current and future asbestos personal injury claims and demands, and
will, through Owens Corning and Fibreboard sub-accounts, make payments to claimants in
accordance with trust distribution procedures to be agreed upon. In addition, the Plan
provides for an injunction by the Bankruptcy Court pursuant to Section 524(g) of the
Bankruptcy Code that will enjoin actions against the reorganized Debtors for the purpose
of, directly or indirectly, collecting, recovering or receiving payment of, on, or with
respect to any claims resulting from asbestos-containing products allegedly manufactured,
sold or installed by Owens Corning or Fibreboard, which claims will be paid in whole or
in part by the Section 524(g) trust. Similar plans of reorganization have been confirmed
in the Chapter 11 cases of other companies involved in asbestos-related litigation.
Section 524(g) of the Bankruptcy Code provides that, if certain specified conditions are
satisfied, a court may issue a supplemental permanent injunction barring the assertion of
asbestos-related claims or demands against the reorganized company and channeling those
claims to an independent trust.

Among other things,
the Plan provides that (1) except as otherwise provided in the Plan, no distributions
will be made under the Plan on account of inter-company claims among any of the Debtors,
and (2) all guarantees of the Debtors of the obligations of any other Debtor will be
deemed eliminated. Since, as described above, it is likely that the Plan will be the
subject of continuing negotiations or litigation, Owens Corning is unable to predict at
this time what the treatment of such matters, and other inter- company and intra-company
arrangements, transactions and relationships that were entered into prior to the Petition
Date, will ultimately be under any plan or plans of reorganization finally confirmed.
Such matters and other arrangements, transactions and relationships may be challenged by
various parties in the Chapter 11 Cases and payments and other obligations in respect
thereof may be restricted or modified by order of, or subject to review and approval by,
the Bankruptcy Court. The outcome of such challenges and other actions, if any, may have
an impact on the treatment of various claims under the plan or plans ultimately confirmed
and on the respective assets, liabilities and results of operations of Owens Corning and
its subsidiaries. For example, Owens Corning is unable to predict at this time what the
treatment will ultimately be under any such plan or plans with respect to (1) the
guarantees issued by certain of Owens Cornings U.S. subsidiaries, including
Owens-Corning Fiberglas Technology Inc. (OCFT) and IPM Inc., a Non-Debtor
Subsidiary that holds Owens Cornings ownership interest in a majority of Owens
Cornings foreign subsidiaries (IPM), with respect to Owens Cornings
$1.8 billion pre-petition bank credit facility (the Pre-Petition Credit Facility,
which is in default) or (2) OCFTs license agreements with Owens Corning and
Exterior Systems, Inc., an indirect wholly-owned subsidiary of Owens Corning (Exterior),
pursuant to which OCFT licenses intellectual property to Owens Corning and Exterior. In
the event that (1) the major creditor constituencies do not approve the Plan and (2) no
other acceptable alternative agreement is reached to release such entities from their
guaranty obligations, Owens Corning expects to cause IPM as well as Vytec Corporation and
Owens-Corning Fiberglas Sweden Inc., two other Non-Debtor Subsidiaries that have issued
guarantees in connection with the Pre-Petition Credit Facility, to file for relief under
Chapter 11 of the Bankruptcy Code, and to join in the proposal of the Plan, and will also
seek to cause those Non-Debtor Subsidiaries to be substantively consolidated with the
current Debtors for the purposes set forth in the Plan.

The Bankruptcy Court
may confirm a plan of reorganization only upon making certain findings required by the
Bankruptcy Code, and a plan may be confirmed over the dissent of non-accepting creditors
and equity security holders if certain requirements of the Bankruptcy Code are met. The
payment rights and other entitlements of pre-petition creditors and Owens Cornings
shareholders may be substantially altered by any plan or plans of reorganization
confirmed in the Chapter 11 Cases, and the pre-petition creditors of some Debtors may be
treated differently than those of other Debtors.

#  52 

ITEM 2.      MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
                    CONDITION AND RESULTS OF OPERATIONS (continued)

Pursuant to the
Bankruptcy Code, schedules have been filed by the Debtors with the Bankruptcy Court
setting forth the assets and liabilities of the Debtors as of the date of the Filing.
Differences between amounts recorded by the Debtors and claims filed by creditors will be
investigated and resolved as part of the proceedings in the Chapter 11 Cases.

Bar Dates for Filing
Claims

GENERAL BAR DATE

In connection with
the Chapter 11 Cases, the Bankruptcy Court set April 15, 2002 as the last date by which
holders of certain pre-petition claims against the Debtors must file their claims (the
General Bar Date). The General Bar Date does not apply to asbestos-related
personal injury claims and asbestos-related wrongful death claims (other than claims for
contribution, indemnity, reimbursement, or subrogation). Any holder of a claim that was
required to file a claim by the General Bar Date and did not do so will be barred from
asserting such claim against any of the Debtors and will not participate in any
distribution in any of the Chapter 11 Cases on account of such claim.

Approximately 24,000
proofs of claim (including late-filed claims), totaling approximately $16.1 billion,
alleging a right to payment from a Debtor were filed with the Bankruptcy Court in
response to the General Bar Date. Owens Corning is investigating these claims to
determine their validity. The Bankruptcy Court will ultimately determine liability
amounts that will be allowed for these claims in the Chapter 11 Cases.

In its initial
review of the filed claims, Owens Corning has identified approximately 15,000 claims,
totaling approximately $8.4 billion, which it believes should be disallowed by the
Bankruptcy Court, primarily because they appear to be duplicate claims or claims that are
not related to the indicated Debtor (the Objectionable Claims). Owens Corning
has filed omnibus objections to certain of these Objectionable Claims and likely will
file additional objections. While the Bankruptcy Court will ultimately determine
liability amounts, if any, that will be allowed as part of the Chapter 11 Cases, Owens
Corning believes that all or substantially all of these Objectionable Claims will be
disallowed.

In addition to the
Objectionable Claims described above, at March 31, 2003, the remaining filed proofs of
claim included approximately 9,000 claims, totaling approximately $7.7 billion, as
follows:

|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|- | Approximately 2,900 claims, totaling approximately $1.4 billion, associated with
asbestos-related contribution, indemnity, reimbursement, or subrogation claims. Owens
Corning will address all asbestos-related personal injury and wrongful death claims in the
future as part of the Chapter 11 Cases. Please see Note 8 to the Consolidated Financial
Statements for additional information concerning asbestos-related liabilities.                                                                
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|- | Approximately 600 claims, totaling approximately $0.7 billion, alleging asbestos-related
property damage. Most of these claims were submitted with insufficient documentation to
assess their validity. Owens Corning expects to vigorously defend any asserted
asbestos-related property damage claims in the Bankruptcy Court. Based upon its historic
experience in respect of asbestos-related property damage claims, Owens Corning does not
anticipate significant liability from any such claims.

#  53 

ITEM 2.      MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
                    CONDITION AND RESULTS OF OPERATIONS (continued)

|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|- | Approximately 5,500 claims, totaling approximately $5.6 billion, alleging rights to
payment for financing, environmental, trade debt and other matters (the General
Claims). The Company has previously recorded approximately $3.7 billion in
liabilities for these claims. Based upon the claims information submitted, the General
Claims with the largest variance from the recorded amounts are: claims by the United
States Department of Treasury, totaling approximately $530 million, in connection with
taxes (see discussion under the heading Tax Claim in Note 8 to the
Consolidated Financial Statements); a contingent claim for approximately $458 million by
the Pension Benefit Guaranty Corporation, as described more fully under the heading
PBGC Claim in Note 8 to the Consolidated Financial Statements; claims for
contract rejections, totaling approximately $310 million, of which approximately $250
million are protective claims covering contracts which have not been rejected by the
Debtors as of March 31, 2003; a $275 million class action claim involving alleged problems
with a specialty roofing product, which claim Owens Corning does not believe is
meritorious based upon its historic experience with servicing its warranty program for
such product; and environmental claims, totaling approximately $244 million.

Owens Corning has
recorded liability amounts for those claims that can be reasonably estimated and which it
believes are probable of being allowed by the Bankruptcy Court. At this time, it is
impossible to reasonably estimate the value of all the claims that will ultimately be
allowed by the Bankruptcy Court, due to the uncertainties of the Chapter 11 process, the
in-progress state of Owens Cornings investigation of submitted claims, and the lack
of documentation submitted in support of many claims. Owens Corning continues to evaluate
claims filed in the Chapter 11 Cases and will make such adjustments as may be
appropriate. Any such adjustments could be material to the Companys consolidated
financial position and results of operations in any given period. For a discussion of
liability amounts in respect of asbestos personal injury claims, see Note 8 to the
Consolidated Financial Statements.

ASBESTOS BAR DATE

A bar date for
filing proofs of claim against the Debtors with respect to asbestos-related personal
injury claims and asbestos-related wrongful death claims (other than claims for
contribution, indemnity, reimbursement, or subrogation) has not been set. On April 11,
2003, the Official Committee of Unsecured Creditors filed a motion seeking establishment
of a bar date for such asbestos-related claims. On April 25, 2003, the District Court
entered an order withdrawing the reference of the Chapter 11 Cases to the USBC with
respect to such motion, and staying all proceedings on such motion pending further order
of the District Court.

As indicated above,
the General Bar Date does not apply to asbestos-related personal injury claims and
asbestos-related wrongful death claims (other than claims for contribution, indemnity,
reimbursement, or subrogation). Despite this, approximately 2,900 proofs of claim (in
addition to claims described above under General Bar Date), totaling
approximately $2.2 billion, with respect to asbestos-related personal injury or wrongful
death were filed with the Bankruptcy Court in response to the General Bar Date. Of these
claims, Owens Corning has identified approximately 1,100, totaling approximately $0.5
billion, as Objectionable Claims. Of the remaining claims, Owens Corning believes that a
substantial majority represent claimants that had previously asserted asbestos-related
claims against the Company.

As noted above,
under the Plan all asbestos-related personal injury and wrongful death claims will be
channeled to the Section 524(g) trust, subject to approval by the Bankruptcy Court.
Please see Note 8 to the Consolidated Financial Statements for additional information
concerning asbestos-related liabilities.

#  54 

ITEM 2.      MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
                    CONDITION AND RESULTS OF OPERATIONS (continued)

RESULTS OF OPERATIONS

Business Overview

Owens Corning is
committed to investing in our businesses and to providing quality products to our
customers. During the third quarter of 2002, the Company increased its investment in
Owens Corning (India) Limited, a producer of composite materials, to approximately 60%.
The Company is also committed to engaging our employees to provide outstanding service
and support for our customers and world-class performance.

Owens Cornings
strategy also includes the divestiture of non-strategic businesses and the realignment of
existing businesses. In 2000, we implemented the first phase of a strategic restructuring
program, which continued throughout 2001, 2002, and the first quarter of 2003. The
specific objectives of this program are discussed in Restructuring of Operations
and Other Charges below and in Note 4 to the Consolidated Financial Statements.
This program was initiated in 2000 as a result of the Company experiencing significant
increases in certain of our costs, particularly roofing and vinyl raw material costs, due
to higher crude oil prices and tight supply conditions for polyvinyl chloride (PVC),
respectively. Increased energy costs, reflecting changes in the availability of natural
gas, also contributed to cost increases during 2000. These increases, coupled with a fall
in demand for building materials associated with a weakening economy, significantly
reduced our margins and income from operations for the second half of the year 2000 and
into the first half of 2001. During 2001, 2002, and the first quarter of 2003, the
overall economy remained weak, particularly impacting results in Composite Solutions
markets. The Company forecasts that the ongoing implementation of the strategic
restructuring program will lead to lower manufacturing and administrative costs in the
remainder of 2003.

Key factors
affecting the Companys Building Materials markets include interest rates, new
housing starts, and remodeling activity. Despite the weakness in the overall economy, the
historically low interest rates experienced in recent periods have contributed to
relative strength in new housing starts and demand for the Companys Building
Materials products. Were interest rates to rise, it is likely that housing starts and
demand for Building Materials products would be negatively impacted. In addition, higher
energy and material costs may cause pressure on margins. In the Composite Solutions
segment, the Company forecasts that a moderate market in North America and a slow
European market will combine for minimal growth over the next year. In addition,
overcapacity in the global market will contribute to price pressure on the Composite
Solutions business, and higher energy and material costs may cause continuing pressure on
margins.

Sales and Profitability for the
Quarter Ended March 31, 2003 and 2002

Net sales for the
quarter ended March 31, 2003, were $1.133 billion, a 2% increase from the first quarter
of 2002 level of $1.107 billion. The higher sales in 2003 reflect the benefit of higher
prices in both Building Materials and Composite Solutions primarily in the United States,
partially offset by volume decreases in our siding business primarily in the United
States. In addition, the impact of currency translation on sales denominated in foreign
currencies was slightly favorable during 2003 compared to 2002, reflecting a weaker U.S.
dollar during 2003.

Sales outside the
United States represented 15% of total sales for the quarter ended March 31, 2003,
compared to 14% during the first quarter of 2002.

#  55 

ITEM 2.      MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
                    CONDITION AND RESULTS OF OPERATIONS (continued)

Gross margin for the
first quarter of 2003 was 14% of net sales, compared to 16% in 2002. The decrease was
primarily the result of other charges of $28 million included in cost of sales, as
described below in Restructuring of Operations and Other Charges. Also
contributing to the decrease were increased material, labor, and delivery costs in both
business segments, partially offset by higher prices in our residential roofing business
in the United States. While the Composite Solutions business also achieved price
increases in certain markets, such increases generally were the result of passing through
higher raw material costs.

Marketing and
administrative expenses were $114 million during the first quarter of 2003 compared to
$127 million during the first quarter of 2002. The decrease is primarily attributable to
continued cost-cutting measures.

On a comparative
basis, income from operations increased to $8 million for the quarter ended March 31,
2003 from $3 million in 2002. This increase was primarily due to a decrease in marketing
and administrative expenses. Other factors contributing to the increase included lower
restructure costs, as described below in Restructuring of Operations and Other
Charges, of $2 million in 2003 as compared to $8 million in 2002, and a favorable
currency translation effect on income. Negatively impacting income from operations were a
lower gross margin in 2003 and Chapter 11 related reorganization items increasing to $32
million in the first quarter of 2003 from $25 million in the first quarter of 2002. In
addition to the impact on gross margin above, on a business segment basis, income from
operations was impacted by volume increases in the residential roofing business. Please
see Note 2 to the Consolidated Financial Statements for further details of segment income
from operations.

The Company
currently projects that its effective tax rate for the full year 2003 will be 42%,
compared to 1% for the full year 2002. In the third quarter of 2002, the Company
increased its asbestos-related reserves through charges to income of $1.381 billion for
Owens Corning asbestos-related liabilities and $975 million for Fibreboard
asbestos-related liabilities, for an aggregate charge of $2.356 billion (See Note 10 to
the Consolidated Financial Statements). In connection with such charges, management
evaluated the amount of deferred tax assets attributable to such charges and also
assessed the likelihood of realization of such deferred tax assets in light of the Companys
financial position and the Chapter 11 proceedings. As the result of such assessment,
management determined that, as of September 30, 2002, a valuation allowance was required
for the full amount of such attributable deferred tax assets. As a result, no tax benefit
was recorded in connection with the third quarter 2002 asbestos-related charges discussed
above.

For the quarter
ended March 31, 2003, Owens Corning reported a net loss of $1 million, or $(0.02) per
share, compared to a net loss of $447 million, or $(8.12) per share, for the first
quarter of 2002. In addition to the items described above, the decrease in net loss in
the first quarter of 2003 as compared to 2002 was due to a non-cash charge of $491
million ($441 million net of tax) in the first quarter of 2002 as the result of the
Companys adoption of Statement of Financial Accounting Standards No. 142, effective
January 1, 2002. Please see Accounting Changes below for additional
information. Cost of borrowed funds during each of 2002 and 2001 was $4 million (from the
Petition Date through March 31, 2003, contractual interest expense not accrued or
recorded on pre-petition debt totaled $394 million, of which $32 million relates to the
first quarter of 2003 and $36 million relates to the first quarter of 2002 (please see
Note 1 to the Consolidated Financial Statements)).

#  56 

ITEM 2.      MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
                    CONDITION AND RESULTS OF OPERATIONS (continued)

RESTRUCTURING OF
OPERATIONS AND OTHER CHARGES

Ongoing Business Review

In connection with
the Chapter 11 proceedings and the development of a plan or plans of reorganization, the
Company initiated a comprehensive strategic review of its businesses. As a result of that
review, the Company anticipates that additional restructuring and similar charges,
including asset impairment and wind-up costs, may be identified and recorded during the
remainder of 2003 and periods beyond. Such charges could be material to the consolidated
financial position and results of operations of the Company in any given period. In
addition, Owens Corning notes that certain of its businesses are operated wholly or in
part through subsidiary entities. To the extent that any restructuring or similar charges
impact such subsidiary entities, the financial condition or results of operations of such
subsidiary entities, and potentially other entities holding obligations of such
subsidiary entities, may be adversely impacted, perhaps materially.

First Quarter 2003

In the first quarter
of 2003, the Company recorded approximately $30 million in pretax charges comprised of a
$2 million pretax charge to restructure costs (classified as a separate component of
operating expenses in the Consolidated Statement of Income (Loss)) and a charge of $28
million to cost of sales. The $2 million restructure charge represents additional
non-cash asset write-downs of previously closed non-strategic facilities to fair value.

The $28 million
charge to cost of sales represents the additional write-down of two groups of assets in
the Building Materials segment to net realizable value. The Company is in the process of
selling these assets and accordingly a valuation of the future cash flows of the assets
was revised during the first quarter of 2003 using assumptions consistent with current
market conditions. The Companys ultimate decisions and actions regarding these
assets require approval by the Bankruptcy Court.

2002

As a result of a
comprehensive strategic review and actions taken, the Company recorded approximately $166
million in pretax charges during 2002, comprised of a $61 million pretax restructure
charge and $105 million of pretax other charges. The Company recorded $113 million in the
fourth quarter of 2002, $44 million in the third quarter, $(3) million in the second
quarter, and $12 million in the first quarter.

The $61 million
restructure charge includes $17 million of severance costs associated with the
elimination of 830 positions due to plant closures in the U.S. and U.K. and $18 million
of severance costs associated with the elimination of 349 other positions, primarily
impacting administrative personnel. As of March 31, 2003, all but 14 of these
positions were actually eliminated. As of March 31, 2003, approximately $28 million has
been paid and charged against the reserve. The remaining $26 million restructure charge
represents the cost of closure of non-strategic facilities, comprised of $24 million in
non-cash asset write-downs to fair value and $2 million of other exit cost liabilities.
As of March 31, 2003, approximately $1 million has been paid and charged against the
reserve for exit cost liabilities.

#  57 

ITEM 2.      MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
                    CONDITION AND RESULTS OF OPERATIONS (continued)

The $105 million in
other pretax charges was recorded as a $110 million charge to cost of sales and a credit
of $5 million to other operating expenses. The $110 million charge to cost of sales
includes: (1) charges of $66 million to write-down assets to net realizable value based
on valuations of the future cash flows of the assets using assumptions consistent with
current market conditions, $28 million in the Composite Solutions segment, primarily as
the result of a plant closure, and $38 million in the Building Materials segment,
primarily as the result of plans to sell certain facilities; (2) a $19 million charge for
inventory made obsolete by changes in the Companys manufacturing and marketing
processes; (3) a charge of $6 million associated with the Companys previously
announced plan to realign its Newark, OH manufacturing facility; and (4) $19 million of
other restructure charges.

LIQUIDITY, CAPITAL
RESOURCES AND OTHER RELATED MATTERS

Cash flow from
operations was negative $160 million for the quarter ended March 31, 2003, versus
negative $172 million for the quarter ended March 31, 2002. Cash flow from operations in
each period was driven primarily by changes in working capital items. Cash flow from
operations in the first quarter of 2003 also reflects a restructuring agreement with the
financial institution responsible for an Asian credit facility to certain subsidiaries of
the Company, guaranteed by Owens Corning. As a result of this agreement, the Company
recorded (1) an increase of approximately $22 million in debt subject to compromise for
an allowed guarantee claim and (2) a reduction of debt of approximately $4 million.

Inventories at March
31, 2003 were $523 million, an increase of $77 million from the December 31, 2002 level
of $446 million. Receivables at March 31, 2003 were $528 million, a $98 million increase
over the December 31, 2002 level of $430 million. Accounts payable and accrued
liabilities were $681 million at March 31, 2003 as compared to $756 million at December
31, 2002, a decrease of $75 million primarily attributable to a decrease in employee
benefit related liabilities and a decrease in reserves for restructure and other related
charges discussed above in Restructuring of Operations and Other Charges. At
March 31, 2003, our net working capital was $1,003 million and we had a current ratio of
2.29, compared to $913 million and 2.06, respectively, at December 31, 2002. The change
in working capital and current ratio reflect normal seasonal trends.

Investing activities
consumed $18 million of cash during the quarter ended March 31, 2003, compared to $30
million during the first quarter of 2002. Capital spending for property, plant and
equipment, excluding acquisitions, was $26 million in the first quarter of 2003 and $39
million in the first quarter of 2002. We anticipate that 2003 spending for capital and
investments will be approximately $260 million, the majority of which is uncommitted. We
expect that these expenditures will be funded from the Companys operations and
existing cash on hand.

Financing activities
in the quarter ended March 31, 2003 resulted in a decrease of cash of $2 million compared
to no change in the quarter ended March 31, 2002. At March 31, 2003, we had $2.875
billion of borrowings subject to compromise and $169 million of other borrowings (of
which $74 million were in default as a consequence of the Filing and therefore classified
as current on the Consolidated Balance Sheet). At March 31, 2002, we had $2.843 billion
of borrowings subject to compromise and $113 million of other borrowings (of which $96
million were in default as a consequence of the Filing and therefore classified as
current on the Consolidated Balance Sheet).

#  58 

ITEM 2.      MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
                    CONDITION AND RESULTS OF OPERATIONS (continued)

At March 31, 2003,
the Company had $701 million of Cash and Cash Equivalents (of which approximately $2
million was subject to administrative freeze pending the resolution of certain alleged
set-off rights by certain pre-petition lenders) as compared to $561 million at March 31,
2002 (of which approximately $38 million was subject to such administrative freeze). The
$2 million of cash and cash equivalents subject to administrative freeze on March 31,
2003, is expected to be applied during the second quarter of 2003 to reduce debt
outstanding under the Asian credit facility discussed above. Approximately $2 million of
amounts previously subject to administrative freeze were released during the first
quarter of 2003 as part of the restructuring of such credit facility. During the second
quarter of 2002, the Bankruptcy Court approved a settlement reached with certain
pre-petition lenders covering approximately $36 million of funds previously subject to
administrative freeze (of which approximately $32 million was previously reflected in
cash and cash equivalents). Under this settlement, the Company received approximately $18
million of the funds and the remainder was applied by the lenders to satisfy certain
pre-petition indebtedness.

The Company has
significant liabilities related to pension plans for its employees. The Company has
reviewed its assumptions related to the valuation of this liability, including the rate
of return on pension plan assets and the discount rate on the liability compared to
actual results to date. This resulted in management changing its assumptions for 2003,
which will contribute to an increase in the pension plan expense of approximately $33
million in 2003 as compared to 2002. In addition, the actual decrease in the market value
of assets during 2002 and lower interest rates will likely result in the Company making
contributions to the pension plans in the range of $300 million to $400 million over the
remainder of 2003 and 2004. These contributions will be made from the Companys
current cash balance and cash generated in the future. The Companys recorded
long-term pension plan liability increased to $511 million at March 31, 2003, from $296
million at March 31, 2002, primarily as the result of changes in certain actuarial
assumptions and a decline in plan asset values due to market conditions. These factors
were also the primary contributors to the increase in accumulated other comprehensive
loss. The ultimate cash flow impact to the Company, if any, of the pension plan
liability, and the timing of any such impact, will depend on numerous variables,
including future changes in actuarial assumptions and market conditions.

In connection with
the Filing, the Debtors obtained a $500 million debtor-in-possession credit facility from
a group of lenders led by Bank of America, N.A. (the DIP Financing), which
was originally scheduled to expire November 15, 2002. Effective October 31, 2002, the DIP
Financing was amended to, among other things, reduce the maximum available credit amount
to $250 million and extend the scheduled expiration to November 15, 2004. There were no
borrowings outstanding under the DIP financing at March 31, 2003, however, approximately
$64 million of the availability under this credit facility was utilized as a result of
the issuance of standby letters of credit and similar uses.

As a consequence of
the Filing and the impact of certain provisions of the Companys DIP Financing and
in a cash management order entered by the Bankruptcy Court, the Company and its
subsidiaries are now subject to certain restrictions, including on their ability to pay
dividends and to transfer cash and other assets to each other and to its affiliates.

#  59 

ITEM 2.      MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
                    CONDITION AND RESULTS OF OPERATIONS (continued)

The Company
believes, based on information presently available to it, that its cash and cash
equivalents, cash available from operations and the DIP Financing will provide sufficient
liquidity to allow it to continue as a going concern for the foreseeable future. However,
the ability of the Company to continue as a going concern (including its ability to meet
post-petition obligations of the Debtors and to meet obligations of the Non-Debtor
Subsidiaries) and the appropriateness of using the going concern basis for its financial
statements are dependent upon, among other things, (i) the Companys ability to
comply with the terms of the DIP Financing and any cash management order entered by the
Bankruptcy Court in connection with the Chapter 11 Cases, (ii) the ability of the Company
to maintain adequate cash on hand, (iii) the ability of the Company to generate cash from
operations, (iv) the ability of the Non-Debtor Subsidiaries to obtain necessary
financing, (v) confirmation of a plan or plans of reorganization under the Bankruptcy
Code, and (vi) the Companys ability to achieve profitability following such
confirmation.

ACCOUNTING CHANGES

Effective January 1,
2002, the Company adopted Statement of Financial Accounting Standards No. 142, Goodwill
and Other Intangible Assets (SFAS No. 142), which it uses to account
for goodwill and other intangible assets. SFAS No. 142 eliminates the amortization of
goodwill and indefinite-lived intangible assets; identifiable intangible assets with a
determinable useful life will continue to be amortized. SFAS No. 142 requires an annual
review for impairment using a fair value methodology. The impact of adoption resulted in
a non-cash charge of $491 million ($441 million net of tax). This charge was determined
during the second quarter of 2002 and, as required by SFAS No. 142, was recorded as a
cumulative effect of a change in accounting principle in the first quarter of 2002. The
goodwill recorded in the December 31, 2001 financial statements, which included the $491
million described above, was supported by the undiscounted estimated future cash flow of
the related operations in accordance with Statement of Financial Accounting Standards No.
121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to Be Disposed Of. See Note 10 to Owens Cornings Consolidated Financial
Statements for further details.

Effective January 1,
2003, the Company adopted Statement of Financial Accounting Standards No. 143, Accounting
for Asset Retirement Obligations. This statement requires that the fair value of a
liability for an asset retirement obligation be recognized in the period in which it is
incurred if a reasonable estimate of fair value can be made. The effect of adoption was
not material to the Company, and the prospective effects of adoption are not expected to
be material to the Company.

Effective January 1,
2003, the Company adopted Statement of Financial Accounting Standards No. 145, Rescission
of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections as of April 2002". This Statement (1) rescinds FASB Statement No. 4,
Reporting Gains and Losses from Extinguishment of Debt, FASB Statement No.
64, Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements, and
FASB Statement No. 44, Accounting for Intangible Assets of Motor Carriers,
(2) amends FASB Statement No. 13, Accounting for Leases, to eliminate an
inconsistency between the required accounting for sale-leaseback transactions and the
required accounting for certain lease modifications that have economic effects that are
similar to sale-leaseback transactions, and (3) amends other existing authoritative
pronouncements to make various technical corrections, clarify meanings, or describe their
applicability under changed conditions. The effect of adoption was not material to the
Company.

#  60 

ITEM 2.      MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
                    CONDITION AND RESULTS OF OPERATIONS (continued)

Effective January 1,
2003, the Company adopted Statement of Financial Accounting Standards No. 146, Accounting
for Costs Associated with Exit or Disposal Activities. This Statement addresses
financial accounting and reporting for costs associated with exit or disposal activities
and nullifies Emerging Issues Task Force (EITF) Issue No. 94-3, Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity
(including Certain Costs Incurred in a Restructuring)". This Statement requires that
a liability for a cost associated with an exit or disposal activity be recognized and
measured initially at fair value only when the liability is incurred. The effect of
adoption was not material to the Company, however, prospectively the timing of related
future charges may be different than those recorded in prior periods.

In December 2002,
the Financial Accounting Standards Board issued Financial Accounting Standards Board
Interpretation No. 45, Guarantor ́s Accounting and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of Indebtedness of Others - an
interpretation of FASB Statements No. 5, 57, and 107 and rescission of FASB
Interpretation No. 34". This Interpretation clarifies disclosures that are required
to be made for certain guarantees at the time the guarantees are issued. It also
clarifies that a guarantor is required to recognize, at the inception of a guarantee, a
liability for the fair value of the obligation undertaken in issuing the guarantee.
Effective December 31, 2002, the Company adopted the disclosure requirements in this
Interpretation, including those relating to warranty obligations. Effective January 1,
2003, the Company adopted the initial recognition and initial measurement provisions of
this Interpretation on a prospective basis for guarantees issued or modified after
December 31, 2002. The effect of adoption was not material to the Company, and the
prospective effects of adoption are not expected to be material to the Company.

In December 2002,
the Financial Accounting Standards Board issued Statement of Financial Accounting
Standards No. 148 Accounting for Stock-Based Compensation - Transition and
Disclosure - an amendment of FASB Statement No. 123". Effective December 31,
2002, the Company adopted the amendments to Statement of Financial Accounting Standards
No. 123, Accounting for Stock-Based Compensation (SFAS No. 123)
provided in paragraphs 2(a)-2(e) of this Statement. Effective January 1, 2003, the
Company adopted the amendment to SFAS No. 123 provided in paragraph 2(f) of this
Statement, and the amendment to Opinion 28 provided in paragraph 3. The effect of
adoption was not material to the Company.

In January 2003, the
Financial Accounting Standards Board issued Interpretation No. 46, Consolidation of
Variable Interest Entities - an interpretation of ARB No. 51". Effective July
1, 2003, the Company will adopt the provisions of this interpretation which requires the
primary beneficiary in a variable interest entity to consolidate the entity, even if the
primary beneficiary does not have a majority voting interest, for variable interest
entities existing prior to January 31, 2003. Effective January 31, 2003, the Company
adopted the consolidation requirements of this Interpretation for any variable interest
entity created on or after that date. Effective December 31, 2002, the Company adopted
the requirements of this interpretation for entities to disclose information regarding
guarantees or exposures to loss relating to any variable interest entity existing prior
to January 31, 2003 in financial statements issued after January 31, 2003. The effect of
adoption was not material to the Company, and the prospective effects of adoption are not
expected to be material to the Company.

#  61 

ITEM 2.      MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
                    CONDITION AND RESULTS OF OPERATIONS (continued)

ENVIRONMENTAL MATTERS

The Company has been
deemed by the Environmental Protection Agency (EPA) to be a Potentially Responsible Party
(PRP) with respect to certain sites under the Comprehensive Environmental Response,
Compensation and Liability Act (Superfund). The Company has also been deemed a PRP under
similar state or local laws. In other instances, other PRPs have brought suits against
the Company as a PRP for contribution under such federal, state or local laws. At March
31, 2003, a total of 57 such PRP designations remained unresolved by the Company. The
Company is also involved with environmental investigation or remediation at a number of
other sites at which it has not been designated a PRP.

The Company has
established a $24 million reserve for our Superfund (and similar state, local and private
action) contingent liabilities. In connection with the Filing, the Company has initiated
a program to identify and discharge contingent environmental liabilities as part of its
plan or plans of reorganization. Under the program, the Company will seek settlements,
subject to approval of the Bankruptcy Court, with various federal, state and local
authorities, as well as private claimants. The Company will continue to review its
environmental reserve in light of such program and make such adjustments as may be
appropriate.

The 1990 Clean Air
Act Amendments (Act) provide that the EPA will issue regulations on a number of air
pollutants over a period of years. The EPA issued final regulations for wool fiberglass
and mineral wool in June 1999, for amino/phenolic resin in January 2000, for secondary
aluminum smelting in March 2000, and for wet formed glass mat and metal coil coating in
June, 2002. The Company anticipates that other sources to be regulated will be asphalt
processing and roofing, open molded fiber-reinforced plastics, and large burners and
boilers. Based on information now known to the Company, including the nature and limited
number of regulated materials Owens Corning emits, we do not expect the Act to have a
materially adverse effect on our results of operations, financial condition or long-term
liquidity.

ITEM 3.      QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Please refer to the Companys 2002
annual report on Form 10-K for the Companys quantitative and qualitative disclosure
about market risk.

ITEM 4.      CONTROLS AND PROCEDURES

CONTROLS AND PROCEDURES

The Companys
Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of
the Companys disclosure controls and procedures (as such term is defined in Rules
13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934, as amended (the Exchange
Act)) as of a date within 90 days prior to the filing date of this quarterly report
(the Evaluation Date). Based on such evaluation, such officers have concluded
that, as of the Evaluation Date, the Companys disclosure controls and procedures
are effective in alerting them on a timely basis to material information relating to the
Company (including its consolidated subsidiaries) required to be included in the Companys
periodic filings under the Exchange Act.

CHANGES IN INTERNAL
CONTROLS

Since the Evaluation
Date, there have not been any significant changes in the Companys internal controls
or in other factors that could significantly affect such controls.

#  62 

PART II

ITEM 1.      LEGAL PROCEEDINGS

Note 8 to Owens
Cornings Consolidated Financial Statements, entitled Contingent Liabilities
and Other Matters, is incorporated here by reference.

On October 5, 2000
(the Petition Date), Owens Corning and the 17 United States subsidiaries
listed below (collectively, the Debtors) filed voluntary petitions for relief
(the Filing) under Chapter 11 of the United States Bankruptcy Code (the Bankruptcy
Code) in the United States Bankruptcy Court for the District of Delaware (the USBC).
The Debtors are currently operating their businesses as debtors-in-possession in
accordance with provisions of the Bankruptcy Code. The Chapter 11 cases of the Debtors
(collectively, the Chapter 11 Cases) are being jointly administered under
Case No. 00-3837 (JKF). The Chapter 11 Cases do not include other United States
subsidiaries of Owens Corning or any of its foreign subsidiaries (collectively, the Non-Debtor
Subsidiaries). The subsidiary Debtors that filed Chapter 11 petitions for relief
are:

| |                                     |                                        
| | ----------------------------------- | ---------------------------------------
| | CDC Corporation                     | Integrex Testing Systems LLC           
| | Engineered Yarns America, Inc.      | HOMExperts LLC                         
| | Falcon Foam Corporation             | Jefferson Holdings, Inc.               
| | Integrex                            | Owens-Corning Fiberglas Technology Inc.
| | Fibreboard Corporation              | Owens Corning HT, Inc.                 
| | Exterior Systems, Inc.              | Owens-Corning Overseas Holdings, Inc.  
| | Integrex Ventures LLC               | Owens Corning Remodeling Systems, LLC  
| | Integrex Professional Services LLC  | Soltech, Inc.                          
| | Integrex Supply Chain Solutions LLC |                                        

In late 2001, the asbestos-related Chapter 11 cases pending in the District of Delaware (the Chapter 11 Cases of Owens
Corning and the cases of Armstrong World Industries, Inc., W. R. Grace & Co.,
Federal-Mogul Global, Inc., and USG Corporation) were ordered transferred to the United
States District Court for the District of Delaware (the District Court)
before Judge Alfred M. Wolin to facilitate development and implementation of a
coordinated plan for management (the Administrative Consolidation). The
District Court has entered an order referring the Chapter 11 Cases back to the USBC,
where they were previously pending, subject to its ongoing right to withdraw such
referral with respect to any proceedings or issues (the applicable court from time to
time responsible for any particular aspect of the Chapter 11 Cases being hereinafter
referred to as the Bankruptcy Court).

The Company
anticipates that substantially all liabilities of the Debtors as of the date of the
Filing will be resolved under one or more Chapter 11 plans of reorganization to be
proposed and voted on in the Chapter 11 Cases in accordance with the provisions of the
Bankruptcy Code. As a consequence of the Filing, all pending litigation against the
Debtors is stayed automatically by section 362 of the Bankruptcy Code and, absent further
order of the Bankruptcy Court, no party may take any action to recover on pre-petition
claims against the Debtors. Please see Note 1 to the Consolidated Financial Statements.

On January 17, 2003,
the Debtors, together with the Official Committee of Asbestos Claimants and the Legal
Representative for the class of future asbestos claimants, filed a proposed joint plan of
reorganization in the USBC. On March 28, 2003, the same proponents filed a proposed
amended joint plan of reorganization (the Plan) in the USBC. The Plan is
subject to confirmation by the Bankruptcy Court. Owens Corning believes that it is likely
that the terms, conditions and provisions of the Plan will be the subject of continuing
negotiations or litigation to resolve differences among the creditor constituencies as to
their treatment. Accordingly, Owens Corning is unable to predict at this time what the
treatment of creditors and equity holders of the respective Debtors will ultimately be
under any plan or plans of reorganization finally confirmed. The current Plan provides
for partial payment of all unsecured creditors claims, in the form of distributions
of new common stock and notes of the

#  63 

ITEM 1.      LEGAL PROCEEDINGS (continued)

reorganized company,
and cash. Additional distributions from potential insurance and other third-party claims
may also be paid to certain classes of unsecured creditors, but it is expected that all
classes of pre-petition unsecured creditors will be impaired. Therefore, the Plan also
provides that the existing common stock of Owens Corning will be cancelled, and that
current shareholders will receive no distribution or other consideration in exchange for
their shares. It is impossible to predict at this time the terms and provisions of any
plan or plans of reorganization that may ultimately be confirmed or the treatment of
creditors thereunder. The Plan is discussed in greater detail in Note 1 to the
Consolidated Financial Statements.

ITEM 2.      CHANGES IN SECURITIES AND USE OF PROCEEDS

As a consequence of
the Filing and the impact of certain provisions of the Companys DIP Financing and
in a cash management order entered by the Bankruptcy Court, the Company and its
subsidiaries are subject to certain restrictions, including on their ability to pay
dividends and to transfer cash and other assets to each other and to their affiliates.
See Note 1, Voluntary Petition for Relief Under Chapter 11, to Owens Cornings
Consolidated Financial Statements above. Also see Part II, Item 1, above.

ITEM 3.      DEFAULTS UPON SENIOR SECURITIES

Substantially all of
the Companys pre-petition debt is now in default due to the Filing. See Note 1,
Voluntary Petition for Relief Under Chapter 11, to Owens Cornings Consolidated
Financial Statements above. As described in Note 1, the Consolidated Financial Statements
present the Debtors pre-petition debt under the caption Liabilities Subject
to Compromise. This includes debt under the Pre-Petition Credit Facility and
approximately $1.4 billion of other outstanding debt. As required by SOP 90-7, at the
Petition Date the Company recorded the Debtors pre-petition debt instruments at the
allowed amount, as defined by SOP 90-7. The Consolidated Financial Statements present
pre-petition debt of Non-Debtor Subsidiaries that is in default due to the Filing, in the
amount of approximately $74 million as of March 31, 2003, as current on the Consolidated
Balance Sheet.

ITEM 4.      SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matter was
submitted to a vote of security holders during the quarter ended March 31, 2003.

ITEM 5.      OTHER INFORMATION

The Company does not
elect to report any information under this Item.

ITEM 6.      EXHIBITS AND REPORTS ON FORM 8-K

(a)    
          Exhibits.

See
Exhibit Index below, which is incorporated here by reference.

(b)    
          Reports on Form 8-K.

During the quarter ended March 31, 2003, Owens Corning filed the following current reports on          Form 8-K:

|  |                                                                                                                                                                                                                                        
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|- | Dated January 17, 2003, under Item 5, in connection with the filing of a Joint
        Plan of Reorganization of Owens Corning and Its Affiliated Debtors and Debtors-in-Possession.                                                   
|- | Dated February 10, 2003, under Item 9, in connection with a press release of Owens Corning
        dated February 10, 2003.                                                                                                            
|- | Dated March 21, 2003, under Item 5, in connection with a press release of Owens Corning
        dated March 21, 2003.                                                                                                                  
|- | Dated March 28, 2003, under Item 5, in connection with the filing
        of an Amended Joint Plan of Reorganization of Owens Corning and Its Affiliated Debtors and Debtors-in- Possession and a related Disclosure
        Statement.

 64 

SIGNATURES

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

|                  |  |                                                                                                                
|----------------- |  | ---------------------------------------------------------------------------------------------------------------
|                  |  | OWENS CORNING                                                                                                  
|                  |  |                                                                                                                
|                  |  | Registrant                                                                                                     
|                  |  |                                                                                                                
|Date:May 12, 2003 |  | By:/s/ Michael H. Thaman                                                                                       
|                  |  | Michael H. Thaman      Chairman of the Board and      Chief Financial Officer      (as duly authorized officer)
|                  |  |                                                                                                                
|                  |  |                                                                                                                
|Date:May 12, 2003 |  | By:/s/ Charles E. Dana                                                                                         
|                  |  | Charles E. Dana      Vice President - Corporate      Controller and Global Sourcing                            

 65

CERTIFICATION

I, David T. Brown,
Chief Executive Officer of the registrant, certify that:

|(1) | I have reviewed this quarterly report on Form 10-Q of Owens Corning;
|--- | --------------------------------------------------------------------

|(2) | Based on my knowledge, this quarterly report does not contain any untrue statement
          of a material fact or omit to state a material fact necessary to make the
          statements made, in light of the circumstances under which such statements were
          made, not misleading with respect to the period covered by this quarterly report;
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Based on my knowledge, the financial statements, and other financial information
          included in this quarterly report, fairly present in all material respects the
          financial condition, results of operations and cash flows of the registrant as
          of, and for, the periods presented in this quarterly report;
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | The registrants other certifying officer and I are responsible for
          establishing and maintaining disclosure controls and procedures (as defined in
          Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(a) | designed such disclosure controls and procedures to ensure that material
               information relating to the registrant, including its consolidated subsidiaries,
               is made known to us by others within those entities, particularly during the
               period in which this quarterly report is being prepared;
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(b) | evaluated the effectiveness of the registrants disclosure controls and
               procedures as of a date within 90 days prior to the filing date of this quarterly
               report (the Evaluation Date); and
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(c) | presented in this quarterly report our conclusions about the effectiveness of the
               disclosure controls and procedures based on our evaluation as of the Evaluation
               Date;
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | The registrants other certifying officer and I have disclosed, based on
          our most recent evaluation, to the registrants auditors and the audit
          committee of registrants board of directors (or persons performing the
          equivalent function):
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(a) | all significant deficiencies in the design or operation of internal controls
               which could adversely affect the registrants ability to record, process,
               summarize and report financial data and have identified for the
               registrants auditors any material weaknesses in internal controls; and
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(b) | any fraud, whether or not material, that involves management or other employees
               who have a significant role in the registrants internal controls; and
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(6) | The registrants other certifying officer and I have indicated in this
          quarterly report whether or not there were significant changes in internal controls or in
          other factors that could significantly affect internal controls subsequent to
          the date of our most recent evaluation, including any corrective actions with
          regard to significant deficiencies and material weaknesses.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

May 12, 2003

/s/ David T. Brown

David T. BrownChief Executive
Officer

 66

CERTIFICATION

I, Michael H. Thaman, Chief Financial Officer of the registrant, certify that:

|(1) | I have reviewed this quarterly report on Form 10-Q of Owens Corning;
|--- | --------------------------------------------------------------------

|(2) | Based on my knowledge, this quarterly report does not contain any untrue statement
          of a material fact or omit to state a material fact necessary to make the
          statements made, in light of the circumstances under which such statements were
          made, not misleading with respect to the period covered by this quarterly report;
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Based on my knowledge, the financial statements, and other financial information
          included in this quarterly report, fairly present in all material respects the
          financial condition, results of operations and cash flows of the registrant as
          of, and for, the periods presented in this quarterly report;
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | The registrants other certifying officer and I are responsible for
          establishing and maintaining disclosure controls and procedures (as defined in
          Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(a) | designed such disclosure controls and procedures to ensure that material
               information relating to the registrant, including its consolidated subsidiaries,
               is made known to us by others within those entities, particularly during the
               period in which this quarterly report is being prepared;
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(b) | evaluated the effectiveness of the registrants disclosure controls and
               procedures as of a date within 90 days prior to the filing date of this quarterly
               report (the Evaluation Date); and
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(c) | presented in this quarterly report our conclusions about the effectiveness of the
               disclosure controls and procedures based on our evaluation as of the Evaluation
               Date;
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | The registrants other certifying officer and I have disclosed, based on
          our most recent evaluation, to the registrants auditors and the audit
          committee of registrants board of directors (or persons performing the
          equivalent function):
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(a) | all significant deficiencies in the design or operation of internal controls
               which could adversely affect the registrants ability to record, process,
               summarize and report financial data and have identified for the
               registrants auditors any material weaknesses in internal controls; and
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(b) | any fraud, whether or not material, that involves management or other employees
               who have a significant role in the registrants internal controls; and
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(6) | The registrants other certifying officer and I have indicated in this
          quarterly report whether or not there were significant changes in internal controls or in
          other factors that could significantly affect internal controls subsequent to
          the date of our most recent evaluation, including any corrective actions with
          regard to significant deficiencies and material weaknesses.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

May 12, 2003

/s/ Michael H. Thaman

Michael H. ThamanChief Financial Officer

 67 

EXHIBIT INDEX

|              |                                                                                                                                                                                                                                                                                                                                                
|------------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber | Document Description                                                                                                                                                                                                                                                                                                                           
|              |                                                                                                                                                                                                                                                                                                                                                
|(2)           | Plan of Acquisition, Reorganization, Arrangement, Liquidation or Succession.                                                                                                                                                                                                                                                                   
|              |                                                                                                                                                                                                                                                                                                                                                
|              | Amended
Joint Plan of Reorganization of Owens Corning and Its Affiliated Debtors and
Debtors-In-Possession, filed in the United States Bankruptcy Court for the District of
Delaware on March 28, 2003 (incorporated herein by reference to Exhibit (2) to Owens
Cornings current report on Form 8-K (File No. 1-3660), filed March 28, 2003).
|              |                                                                                                                                                                                                                                                                                                                                                
|              | Joint
Plan of Reorganization of Owens Corning and Its Affiliated Debtors and
Debtors-In-Possession, filed in the United States Bankruptcy Court for the District of
Delaware on January 17, 2003 (incorporated herein by reference to Exhibit (2) to Owens
Cornings current report on Form 8-K (File No. 1-3660), filed January 17, 2003).    
|              |                                                                                                                                                                                                                                                                                                                                                
|(3)           | Articles of Incorporation and By-Laws.                                                                                                                                                                                                                                                                                                         
|              |                                                                                                                                                                                                                                                                                                                                                
|              | (i)     Certificate of Incorporation of Owens Corning, as amended (incorporated herein
          by          reference to Exhibit (3) to Owens Cornings quarterly report on Form
          10-Q (File No. 1-3660) for the          quarter ended March 31, 1997).                                                                             
|              |                                                                                                                                                                                                                                                                                                                                                
|              | (ii)    By-Laws of Owens Corning, as amended (incorporated herein by reference to
          Exhibit         (3) to Owens Cornings annual report on Form 10-K (File No. 1-3660)
          for the year 1999).                                                                                                                                  
|              |                                                                                                                                                                                                                                                                                                                                                
|(4)           | Instruments Defining the Rights of Security Holders, Including Indentures.                                                                                                                                                                                                                                                                     
|              |                                                                                                                                                                                                                                                                                                                                                
|              | Amended
Joint Plan of Reorganization of Owens Corning and Its Affiliated Debtors and
Debtors-In-Possession, filed in the United States Bankruptcy Court for the District of
Delaware on March 28, 2003 (incorporated herein by reference to Exhibit (2) to Owens
Cornings current report on Form 8-K (File No. 1-3660), filed March 28, 2003).
|              |                                                                                                                                                                                                                                                                                                                                                
|              | Joint
Plan of Reorganization of Owens Corning and Its Affiliated Debtors and
Debtors-In-Possession, filed in the United States Bankruptcy Court for the District of
Delaware on January 17, 2003 (incorporated herein by reference to Exhibit (2) to Owens
Cornings current report on Form 8-K (File No. 1-3660), filed January 17, 2003).    
|              |                                                                                                                                                                                                                                                                                                                                                
|(10)          | Material Contracts.                                                                                                                                                                                                                                                                                                                            
|              |                                                                                                                                                                                                                                                                                                                                                
|              | Executive Supplemental Benefit Plan, as amended (filed herewith).                                                                                                                                                                                                                                                                              
|              |                                                                                                                                                                                                                                                                                                                                                
|(99)          | Additional Exhibits.                                                                                                                                                                                                                                                                                                                           
|              |                                                                                                                                                                                                                                                                                                                                                
|              | Certification
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
        Sarbanes-Oxley Act of 2002 (Chief Executive Officer) (filed herewith).                                                                                                                                                                     
|              |                                                                                                                                                                                                                                                                                                                                                
|              | Certification
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
        Sarbanes-Oxley Act of 2002 (Chief Financial Officer) (filed herewith).