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
September 30, 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 $0.10 per share, outstanding at September 30, 2003

55,355,264

 2 

PART IITEM 1.     FINANCIAL
STATEMENTS

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

|                                                     | Quarter Ended | Nine Months Ended |   |      
|---------------------------------------------------- | ------------- | ----------------- | - | -----
|
|
|
|
|NET SALES                                            |               |                   | $ | 1,349
|COST OF SALES                                        |               |                   |   | 1,127
|                                                     |               |                   |   |      
|Gross margin                                         |               |                   |   | 222  
|                                                     |               |                   |   |      
|OPERATING EXPENSES                                   |               |                  
|Marketing and administrative expenses                |               |                   |   | 115  
|Science and technology expenses                      |               |                   |   | 11   
|Restructure costs (Note 4)                           |               |                   |   | -    
|Chapter 11 related reorganization items (Notes 1     |               |                  
|and 13)                                              |               |                   |   | 5    
|Owens Corning provision (credit) for asbestos        |               |                  
|litigation claims (Note 9)                           |               |                   |   | -    
|Fibreboard provision for asbestos litigation claims  |               |                  
|(Notes 9 and 10)                                     |               |                   |   | -    
|Other (Note 4)                                       |               |                   |   | (13  
|                                                     |               |                   |   |      
|Total operating expenses                             |               |                   |   | 118  
|                                                     |               |                   |   |      
|INCOME (LOSS) FROM OPERATIONS                        |               |                   |   | 104  
|                                                     |               |                  
|Interest expense, net                                |               |                   |   | 2    
|                                                     |               |                   |   |      
|INCOME (LOSS) BEFORE INCOME TAX                      |               |                  
|EXPENSE                                              |               |                   |   | 102  
|                                                     |               |                  
|Income tax expense                                   |               |                   |   | 47   
|                                                     |               |                   |   |      
|INCOME (LOSS) BEFORE MINORITY                        |               |                  
|INTEREST AND EQUITY IN NET INCOME                    |               |                  
|(LOSS) OF AFFILIATES                                 |               |                   |   | 55   
|                                                     |               |                  
|Minority interest                                    |               |                   |   | -    
|Equity in net income (loss) of affiliates            |               |                   |   | -    
|                                                     |               |                   |   |      
|NET INCOME (LOSS) BEFORE CUMULATIVE                  |               |                  
|EFFECT OF CHANGE IN ACCOUNTING                       |               |                  
|PRINCIPLE                                            |               |                   |   | 55   
|                                                     |               |                  
|Cumulative effect of change in accounting principle, |               |                  
|net of tax (Note 11)                                 |               |                   |   | -    
|                                                     |               |                   |   |      
|NET INCOME (LOSS)                                    |               |                   | $ | 55   
|                                                     |               |                   |   |      

The
accompanying notes are an integral part of this statement.

 3 

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

|                                                     | Quarter Ended | Nine Months Ended |   |     
|---------------------------------------------------- | ------------- | ----------------- | - | ----
|
|
|
|NET INCOME (LOSS) PER COMMON SHARE                   |               |                   |   |     
|Basic net income (loss) per share (Notes 8 and 11)   |               |                   | $ | 0.99
|                                                     |               |                   |   |     
|Diluted net income (loss) per share (Notes 8 and 11) |               |                   | $ | 0.92
|                                                     |               |                   |   |     
|WEIGHTED AVERAGE NUMBER OF COMMON                    |               |                  
|SHARES OUTSTANDING AND COMMON                        |               |                  
|EQUIVALENT SHARES DURING THE PERIOD                  |               |                  
|Basic                                                |               |                   |   | 55.2
|                                                     |               |                  
|Diluted                                              |               |                   |   | 59.9

The
accompanying notes are an integral part of this statement.

 4 

OWENS CORNING AND
SUBSIDIARIESCONSOLIDATED BALANCE
SHEET(unaudited)

|                                                          | September 30, | December 31,
|--------------------------------------------------------- | ------------- | ------------
|
|
|
|CURRENT                                                   |               |             
|Cash and cash equivalents (Note 1)                        |               |             
|Receivables (net of allowance for doubtful accounts)      |               |             
|Inventories (Note 6)                                      |               |             
|Other current assets (Note 13)                            |               |             
|                                                          |               |             
|Total current                                             |               |             
|                                                          |               |             
|OTHER                                                     |               |             
|Restricted cash - asbestos and insurance related (Note 9) |               |             
|Restricted cash, securities, and other - Fibreboard       |               |             
|(Notes 9 and 10)                                          |               |             
|Deferred income taxes                                     |               |             
|Pension-related assets                                    |               |             
|Goodwill (Note 11)                                        |               |             
|Investment in affiliates                                  |               |             
|Other noncurrent assets (Note 13)                         |               |             
|                                                          |               |             
|Total other                                               |               |             
|                                                          |               |             
|PLANT AND EQUIPMENT, at cost                              |               |             
|Land                                                      |               |             
|Buildings and leasehold improvements                      |               |             
|Machinery and equipment                                   |               |             
|Construction in progress                                  |               |             
|                                                          |               |             
|                                                          |               |             
|Accumulated depreciation                                  |               |             
|                                                          |               |             
|Net plant and equipment                                   |               |             
|                                                          |               |             
|TOTAL ASSETS                                              |               |             
|                                                          |               |             

The accompanying
notes are an integral part of this statement.

 5

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

|                                           | September 30, | December 31,
|------------------------------------------ | ------------- | ------------
|
|
|
|CURRENT                                    |               |             
|Accounts payable and accrued liabilities   |               |             
|Short-term debt                            |               |             
|Long-term debt - current portion (Note 13) |               |             
|                                           |               |             
|Total current                              |               |             
|                                           |               |             
|                                           |               |             
|LONG-TERM DEBT (Note 13)                   |               |             
|                                           |               |             
|OTHER                                      |               |             
|Other employee benefits liability          |               |             
|Pension plan liability                     |               |             
|Other                                      |               |             
|                                           |               |             
|Total other                                |               |             
|                                           |               |             
|LIABILITIES SUBJECT TO COMPROMISE          |               |             
|(Notes 1, 9, and 13)                       |               |             
|                                           |               |             
|COMPANY OBLIGATED SECURITIES OF ENTITIES   |               |             
|HOLDING SOLELY PARENT DEBENTURES -         |               |             
|SUBJECT TO COMPROMISE                      |               |             
|                                           |               |             
|COMMITMENTS AND CONTINGENCIES              |               |             
|(Notes 1, 9, and 10)                       |               |             
|                                           |               |             
|MINORITY INTEREST                          |               |             
|                                           |               |             
|STOCKHOLDERS EQUITY                       |               |             
|Common stock                               |               |             
|Additional paid in capital                 |               |             
|Accumulated deficit                        |               |             
|Accumulated other comprehensive loss       |               |             
|Other                                      |               |             
|                                           |               |             
|Total stockholders equity                 |               |             
|                                           |               |             
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY |               |             
|                                           |               |             

The accompanying
notes are an integral part of this statement.

6 

OWENS CORNING AND
SUBSIDIARIESCONSOLIDATED STATEMENT
OF CASH FLOWS(unaudited)

|                                                                  | Nine Months Ended | 
|----------------------------------------------------------------- | ----------------- | 
|
|
|
|NET CASH FLOW FROM OPERATIONS                                     |                   | 
|Net income (loss)                                                 |                   | 
|Reconciliation of net cash flow from operations                   |                   | 
|Noncash items:                                                    |                   | 
|Provision for asbestos litigation claims                          |                   | 
|Provision for depreciation and amortization                       |                   | 
|Provision for impairment of fixed assets (Note 4)                 |                   | 
|Provision for deferred income taxes                               |                   | 
|Cumulative effect of accounting change (Note 11)                  |                   | 
|Other (Note 1 and 13)                                             |                   | 
|Increase in receivables                                           |                   | 
|Increase in inventories                                           |                   | 
|Decrease in accounts payable and accrued liabilities              |                   | 
|(Increase) decrease in restricted cash - asbestos and insurance   |                   | 
|related (Note 9)                                                  |                   | 
|Increase in restricted cash, securities, and other - Fibreboard   |                   | 
|(Notes 9 and 10)                                                  |                   | 
|Change in liabilities subject to compromise (Note 1)              |                   | 
|Proceeds from insurance for asbestos litigation claims, excluding |                   | 
|Fibreboard                                                        |                   | 
|Pension fund contribution                                         |                   | 
|Other                                                             |                   | 
|                                                                  |                   | 
|Net cash flow from operations                                     |                   | 
|                                                                  |                   | 
|NET CASH FLOW FROM INVESTING                                      |                   | 
|Additions to plant and equipment                                  |                   | 
|Investment in subsidiaries, net of cash acquired                  |                   | 
|Proceeds from the sale of affiliate or business (Note 5)          |                   | 
|Other                                                             |                   | 
|                                                                  |                   | 
|Net cash flow from investing                                      |                   | 
|                                                                  |                   | 
|NET CASH FLOW FROM FINANCING                                      |                   | 
|Other additions to long-term debt                                 |                   | 
|Other reductions to long-term debt (Note 13)                      |                   | 
|Net increase in short-term debt                                   |                   | 
|Subject to compromise (Note 1)                                    |                   | 
|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.

 7 

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 with Owens Corning, 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):

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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 referenced Chapter 11 cases do
not include any other United States or foreign subsidiaries of Owens Corning
(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 $1.8 billion pre-petition bank credit facility (the Pre-Petition
Credit Facility, which is in default) to file petitions for relief under Chapter 11
of the Bankruptcy Code under certain circumstances.

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 9 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.

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.

8 

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

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

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. The same
proponents filed a proposed amended joint plan of reorganization in the USBC on March 28,
2003, a proposed second amended joint plan of reorganization in the USBC on May 23, 2003,
a proposed third amended joint plan of reorganization in the USBC on August 8, 2003, and
a proposed fourth amended joint plan of reorganization (as so amended through such fourth
amendment, the Plan) in the USBC on October 24, 2003. 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 was 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.

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 further 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.

Related Developments

PROPOSED ASBESTOS
LEGISLATION

On May 22, 2003, the United States
Senate introduced proposed legislation (S 1125, also known as the Fairness in Asbestos
Injury Resolution Act of 2003 (the FAIR Act)) that, if enacted into law, would
establish an administrative claims resolution structure through which all asbestos
personal injury claims would be channeled and reviewed. The FAIR Act would also establish
a national trust fund, funded through mandated contributions from defendant companies,
insurance companies and existing trusts, that would be the source of compensation of all
approved claims. Under the present terms of the FAIR Act, companies like Owens Corning and
Fibreboard, that have filed for bankruptcy but have not yet emerged through a confirmed
plan of reorganization, would be included as participants in the resolution structure.

The fate of the FAIR Act remains
uncertain, and Owens Corning is unable to make any prediction as to whether the FAIR Act
will be enacted or, if it is enacted, what its final form would be or what the effect, if
any, would be on Owens Corning and Fibreboard or their plan or plans of reorganization.
The provisions of any legislation ultimately enacted may have a material effect on the
amount of liability that Owens Corning and Fibreboard ultimately have for asbestos-related
claims, which could be more or less than the amounts reserved for in Owens Cornings
financial statements.

 9

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

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

OTHER MATTERS FILED IN
THE USBC

On or about October 10, 2003,
Kensington International Limited and Springfield Associates, LLC (collectively,
K&S), two assignees of lenders under Owens Cornings Pre-Petition
Credit Facility, filed a motion in the USBC to recuse District Court Judge Alfred M. Wolin
from further participation in the Chapter 11 Cases. On October 15, 2003, the District
Court entered an order withdrawing the reference of this matter from the USBC. On October
23, 2003, the District Court entered an order staying all discovery and other proceedings
related to the motion until further order of the Court. On October 27, 2003, K&S filed
an Emergency Petition for a Writ of Mandamus with respect to the recusal motion in the
United States Court of Appeals for the Third Circuit (the Third Circuit),
seeking an order directing Judge Wolin either to recuse himself from the Chapter 11 Cases
or to withdraw his order of October 23, 2003, and permit expedited discovery and an
expedited briefing and hearing schedule with respect to the recusal motion. On October 28,
2003, the District Court issued an order setting forth certain procedures with respect to
the recusal motion, including the provision by certain parties of affidavits and a
briefing schedule with respect to the recusal motion. By orders dated October 30, 2003,
and November 3, 2003, the Third Circuit stayed those proceedings in the Chapter 11 Cases
for which the reference had been withdrawn from the USBC and which are pending solely
before Judge Wolin; such orders do not affect other proceedings in the Chapter 11 Cases.

On or about October 15, 2003, Credit
Suisse First Boston (CSFB), the bank agent and a lender under the Pre-Petition
Credit Facility, filed a complaint in the USBC against Owens Corning and twenty unnamed
law firms who are alleged to have received payments under Owens Cornings National
Settlement Program (the NSP, which is discussed more fully in Note 9 to the
Consolidated Financial Statements under the heading Asbestos Liabilities).
This complaint, which is captioned Credit Suisse First Boston v. Owens Corning, et al.,
seeks to impose a constructive trust on all funds held by Owens Corning drawn under the
Pre-Petition Credit Facility between March 1, 2000 and October 5, 2000, and to impose a
constructive trust against the unnamed law firms. The complaint alleges that the NSP
caused financial difficulties for Owens Corning that culminated in loan covenant breaches
under the Pre-Petition Credit Facility that were not disclosed to CSFB, resulting in loans
under the Pre-Petition Credit Facility that the lenders would not have been required to
make. No hearing has been set on this matter.

On or about October 17, 2003, the
Official Committee of Unsecured Creditors filed a motion in the USBC requesting
appointment of a Chapter 11 trustee to assume control of the Chapter 11 Cases due to
alleged breach of the Debtors fiduciary duty of undivided loyalty to act in the best
interest of all creditors. After such motion was dismissed by the USBC for failure to
comply with local court rules, the Official Committee of Unsecured
Creditors re-filed such motion on October 30, 2003. A status conference on this matter has
been set for December 1, 2003.

The Debtors believe that the above
three matters are without merit and intend to vigorously oppose them in appropriate
proceedings.

 10 

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

1.    
          VOLUNTARY PETITION FOR RELIEF UNDER CHAPTER 11 (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 (see
Note 10 to the Consolidated Financial Statements)) 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. Certain creditor constituencies have asserted
that substantive consolidation is not appropriate and are challenging that approach in the
Plan confirmation hearings described below.

As part of the Plan, Owens Corning
intends to effect an internal restructuring in order to adopt a holding company structure.
This internal restructuring is expected to be refined further as steps are taken to
implement it.

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 that liability for
current and future asbestos personal injury claims against Owens Corning and Fibreboard
would be determined by the Bankruptcy Court as part of the confirmation hearing on the
Plan. The Official Committee of Asbestos Claimants and the Legal Representative for the
class of future asbestos claimants have reserved the right to withdraw support of the Plan
if such liability is determined to be less than $16 billion in the aggregate. 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.

 11 

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

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

Under the Plan, 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 10 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 the trust distribution procedures included as part of the Plan. 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 Pre-Petition Credit
Facility 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.

 12 

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

1.    
          VOLUNTARY PETITION FOR RELIEF UNDER CHAPTER 11 (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 continues to investigate these claims to determine their validity. The
Bankruptcy Court will ultimately determine liability amounts that will be allowed for
claims in the Chapter 11 Cases.

In its initial review of the filed
claims, Owens Corning identified approximately 15,000 claims, totaling approximately $8.5
billion, which it believed should be disallowed by the Bankruptcy Court, primarily because
they appeared to be duplicate claims or claims that were not related to the indicated
Debtor (the Objectionable Claims). Owens Corning filed omnibus objections to
certain of these Objectionable Claims and likely will file additional objections. As of
September 30, 2003, approximately 4,000 of the Objectionable Claims, totaling
approximately $2.2 billion, had either been withdrawn by the claimants or disallowed by
the Bankruptcy Court. 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 the remaining Objectionable Claims will be
disallowed.

In addition to the Objectionable
Claims described above, the remaining filed proofs of claim included approximately 9,000
claims, totaling approximately $7.6 billion. As of September 30, 2003, approximately 400
of these claims, totaling approximately $0.1 billion, had either been withdrawn by the
claimants or disallowed by the Bankruptcy Court. The remaining claims consist of:

| | Approximately 2,900 claims, totaling approximately $1.3 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 9 to the Consolidated Financial
Statements for additional information concerning asbestos-related liabilities.
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Approximately 500 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.
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

 13 

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

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

| | Approximately 5,200 claims, totaling approximately $5.5 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 9 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 9 to the Consolidated Financial Statements; 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; environmental claims totaling
approximately $242 million; and claims for contract rejections, totaling approximately
$173 million, of which approximately $113 million are protective claims covering contracts
which have not been rejected by the Debtors as of September 30, 2003.
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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 9 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 3,100 proofs of claim (in addition to claims
described above under General Bar Date), totaling approximately $2.3 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 1,200, 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 9 to
the Consolidated Financial Statements for additional information concerning
asbestos-related liabilities.

 14 

OWENS CORNING AND
SUBSIDIARIESNOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (continued)(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 adversary 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 9 to the
Consolidated Financial Statements) with the Debtors on behalf of claimants asserting
asbestos-related personal injury or wrongful death claims. Lawsuits were brought initially
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. On
or before September 29, 2003, similar lawsuits were brought against 5 additional law firms
whose tolling agreements were about to expire (the Additional Law Firm Suits).
The Official Creditors Committee was named as a defendant in all such lawsuits,
solely with respect to the declaratory relief sought.

 15 

OWENS CORNING AND
SUBSIDIARIESNOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (continued) (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 (other than the Additional Law Firm Suits) pending its disposition in a plan of
reorganization. Pursuant to orders of the Bankruptcy Court, all of the foregoing
litigation, other than the Additional Law Firm Suits and 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, previously scheduled for trial before the District Court commencing in June
2003, has been continued indefinitely by the Court.

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 September 30, 2003,
contractual interest expense not accrued or recorded on pre-petition debt (calculated
using ordinary, non-default interest rates and without regard to debt maturity) totaled
approximately $483 million, of which $34 million relates to the third quarter of 2003,
$104 million relates to the first nine months of 2003, and $37 million and $112 million,
respectively, relate to the corresponding periods of 2002.

At September 30, 2003, the Company
had $769 million of cash and cash equivalents.

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 September 30, 2003; however, approximately $83 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 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.

16

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

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

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 Debtor-In-Possession 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 9 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.

 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
STATEMENT OF INCOME (LOSS)

|                                               | Quarter Ended | Nine Months Ended |   |      
|---------------------------------------------- | ------------- | ----------------- | - | -----
|
|
|
|
|NET SALES                                      |               |                   | $ | 1,186
|COST OF SALES                                  |               |                   |   | 1,017
|                                               |               |                   |   |      
|Gross margin                                   |               |                   |   | 169  
|                                               |               |                   |   |      
|OPERATING EXPENSES                             |               |                  
|Marketing and administrative expenses          |               |                   |   | 102  
|Science and technology expenses                |               |                   |   | 9    
|Restructure costs                              |               |                   |   | -    
|Chapter 11 related reorganization items        |               |                   |   | 5    
|Owens Corning provision (credit) for asbestos  |               |                  
|litigation claims                              |               |                   |   | -    
|Fibreboard provision for asbestos litigation   |               |                  
|claims                                         |               |                   |   | -    
|Other (including interest income from non-     |               |                  
|Debtors of $14 million and $42 million for the |               |                  
|three month and nine month periods ended       |               |                  
|September 30, 2003 and 2002)                   |               |                   |   | (39  
|                                               |               |                   |   |      
|Total operating expenses                       |               |                   |   | 77   
|                                               |               |                   |   |      
|                                               |               |                  
|INCOME (LOSS) FROM OPERATIONS                  |               |                   |   | 92   
|                                               |               |                  
|Interest expense, net                          |               |                   |   | 1    
|                                               |               |                   |   |      
|INCOME (LOSS) BEFORE INCOME TAX                |               |                  
|EXPENSE                                        |               |                   |   | 91   
|                                               |               |                  
|Income tax expense                             |               |                   |   | 43   
|                                               |               |                   |   |      
|INCOME (LOSS) BEFORE EQUITY IN NET             |               |                  
|INCOME (LOSS) OF AFFILIATES                    |               |                   |   | 48   
|                                               |               |                  
|Equity in net income (loss) of affiliates      |               |                   |   | -    
|                                               |               |                   |   |      
|NET INCOME (LOSS) BEFORE                       |               |                  
|CUMULATIVE EFFECT OF CHANGE IN                 |               |                  
|ACCOUNTING PRINCIPLE                           |               |                   |   | 48   
|                                               |               |                  
|Cumulative effect of change in accounting      |               |                  
|principle, net of tax                          |               |                   |   | -    
|                                               |               |                   |   |      
|NET INCOME (LOSS)                              |               |                   | $ | 48   
|                                               |               |                   |   |      

 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
BALANCE SHEET

|                                                     | September 30, | December 31,
|---------------------------------------------------- | ------------- | ------------
|
|
|
|CURRENT                                              |               |             
|Cash and cash equivalents                            |               |             
|Receivables (net of allowance for doubtful accounts) |               |             
|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                                |               |             
|Pension-related assets                               |               |             
|Goodwill                                             |               |             
|Investment in affiliates                             |               |             
|Investment 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                             |               |             
|                                                     |               |             
|                                                     |               |             
|Accumulated depreciation                             |               |             
|                                                     |               |             
|Net plant and equipment                              |               |             
|                                                     |               |             
|TOTAL ASSETS                                         |               |             
|                                                     |               |             

 19 

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)

|                                                       | September 30, | December 31,
|------------------------------------------------------ | ------------- | ------------
|
|
|
|CURRENT                                                |               |             
|Accounts payable and accrued liabilities               |               |             
|Accounts payable and accrued liabilities - non-Debtors |               |             
|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                      |               |             
|                                                       |               |             
|STOCKHOLDERS EQUITY                                   |               |             
|Common stock                                           |               |             
|Additional paid in capital                             |               |             
|Accumulated deficit                                    |               |             
|Accumulated other comprehensive loss                   |               |             
|Other                                                  |               |             
|                                                       |               |             
|Total stockholders equity                             |               |             
|                                                       |               |             
|                                                       |               |             
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY             |               |             
|                                                       |               |             

 20 

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

|                                                                    | Nine Months Ended | 
|------------------------------------------------------------------- | ----------------- | 
|
|
|
|
|NET CASH FLOW FROM OPERATIONS                                       |                   | 
|Net income (loss)                                                   |                   | 
|Reconciliation of net cash flow from operations                     |                   | 
|Noncash items:                                                      |                   | 
|Provision for asbestos litigation claims                            |                   | 
|Provision for depreciation and amortization                         |                   | 
|Provision for impairment of fixed assets                            |                   | 
|Provision for deferred income taxes                                 |                   | 
|Cumulative effect of accounting change                              |                   | 
|Other                                                               |                   | 
|Increase in receivables and receivables - non-Debtors               |                   | 
|Increase in inventories                                             |                   | 
|Increase (decrease) in accounts payable and accrued liabilities and |                   | 
|accounts payable and accrued liabilities - non-Debtors              |                   | 
|(Increase) decrease in restricted cash - asbestos and insurance     |                   | 
|related                                                             |                   | 
|Increase in restricted cash, securities, and other - Fibreboard     |                   | 
|Change in liabilities subject to compromise                         |                   | 
|Proceeds from insurance for asbestos litigation claims, excluding   |                   | 
|Fibreboard                                                          |                   | 
|Pension fund contribution                                           |                   | 
|Other                                                               |                   | 
|                                                                    |                   | 
|Net cash flow from operations                                       |                   | 
|                                                                    |                   | 
|NET CASH FLOW FROM INVESTING                                        |                   | 
|Additions to plant and equipment                                    |                   | 
|Investment in subsidiaries, net of cash acquired                    |                   | 
|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                                  |                   | 
|Subject to compromise                                               |                   | 
|Other                                                               |                   | 
|                                                                    |                   | 
|Net cash flow from financing                                        |                   | 
|                                                                    |                   | 
|NET DECREASE IN CASH AND CASH EQUIVALENTS                           |                   | 
|                                                                    |                   | 
|Cash and cash equivalents at beginning of period                    |                   | 
|                                                                    |                   | 
|CASH AND CASH EQUIVALENTS AT END OF PERIOD                          |                   | 
|                                                                    |                   | 

 21 

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:

|                                                       | September 30, | December 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 | Nine Months Ended |   |   
|----------------------------------------- | ------------- | ----------------- | - | --
|
|
|
|
|Professional fees                         |               |                   | $ | 8 
|Payroll and compensation                  |               |                   |   | 4 
|Settlement of Asian credit facility       |               |                   |   | - 
|Renegotiation of World Headquarters lease |               |                   |   | - 
|Interest income                           |               |                   |   | (8
|Other, net                                |               |                   |   | 1 
|                                          |               |                   |   |   
|Total                                     |               |                   | $ | 5 
|                                          |               |                   |   |   

 22 

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 remained appropriate; however, certain
components within the segments have changed. Net sales and income from operations have
been reclassified 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 | Nine Months Ended |   |      
|-------------------------------------------- | ------------- | ----------------- | - | -----
|
|
|
|
|Reportable Segments                          |               |                   |   |      
|                                             |               |                  
|Building Materials Systems                   |               |                  
|United States                                |               |                   | $ | 1,033
|Europe                                       |               |                   |   | 1    
|Canada and other                             |               |                   |   | 64   
|                                             |               |                   |   |      
|Total Building Materials Systems             |               |                   |   | 1,098
|                                             |               |                   |   |      
|                                             |               |                  
|Composite Solutions                          |               |                  
|United States                                |               |                   |   | 126  
|Europe                                       |               |                   |   | 84   
|Canada and other                             |               |                   |   | 41   
|                                             |               |                   |   |      
|Total Composite Solutions                    |               |                   |   | 251  
|                                             |               |                   |   |      
|                                             |               |                  
|Total reportable segments                    |               |                   | $ | 1,349
|                                             |               |                   |   |      
|                                             |               |                  
|External Customer Sales by Geographic Region |               |                  
|                                             |               |                  
|United States                                |               |                   | $ | 1,160
|Europe                                       |               |                   |   | 85   
|Canada and other                             |               |                   |   | 104  
|                                             |               |                   |   |      
|                                             |               |                  
|NET SALES                                    |               |                   | $ | 1,349
|                                             |               |                   |   |      

 23 

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

2.    
          SEGMENT DATA (continued)

|                                                  | Quarter Ended | Nine Months Ended |   |    
|------------------------------------------------- | ------------- | ----------------- | - | ---
|
|
|
|
|Reportable Segments                               |               |                   |   |    
|                                                  |               |                  
|Building Materials Systems                        |               |                  
|United States                                     |               |                   | $ | 97 
|Europe                                            |               |                   |   | -  
|Canada and other                                  |               |                   |   | 12 
|                                                  |               |                   |   |    
|Total Building Materials Systems                  |               |                   |   | 109
|                                                  |               |                   |   |    
|                                                  |               |                  
|Composite Solutions                               |               |                  
|United States                                     |               |                   |   | (2 
|Europe                                            |               |                   |   | 5  
|Canada and other                                  |               |                   |   | 12 
|                                                  |               |                   |   |    
|Total Composite Solutions                         |               |                   |   | 15 
|                                                  |               |                   |   |    
|                                                  |               |                  
|Total reportable segments                         |               |                   | $ | 124
|                                                  |               |                   |   |    
|                                                  |               |                  
|Geographic Regions                                |               |                  
|                                                  |               |                  
|United States                                     |               |                   | $ | 95 
|Europe                                            |               |                   |   | 5  
|Canada and other                                  |               |                   |   | 24 
|                                                  |               |                   |   |    
|                                                  |               |                  
|Total reportable segments                         |               |                   | $ | 124
|                                                  |               |                   |   |    
|                                                  |               |                  
|Reconciliation to Consolidated Income (Loss)      |               |                  
|Before Income Tax Expense                         |               |                  
|                                                  |               |                  
|Restructuring (Note 4)                            |               |                   |   | -  
|Other charges (Note 4)                            |               |                   |   | (1 
|Chapter 11 related reorganization items (Note 1)  |               |                   |   | (5 
|(Provision) credit for asbestos litigation claims |               |                   |   | -  
|General corporate expense                         |               |                   |   | (14
|Interest expense, net                             |               |                   |   | (2 
|                                                  |               |                   |   |    
|                                                  |               |                  
|CONSOLIDATED INCOME (LOSS)                        |               |                  
|BEFORE INCOME TAX EXPENSE                         |               |                   | $ | 102
|                                                  |               |                   |   |    

 24

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

3.    
          GENERAL

The consolidated financial statements
included in this Report are unaudited, pursuant to certain rules and regulations of the
Securities and Exchange Commission, and 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. Certain reclassifications have been made to the periods presented for 2002 to
conform with the classifications used in the periods presented for 2003.

In connection with the consolidated
financial statements and notes included in this Report, reference is made to the
consolidated 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

Third Quarter 2003

In the third quarter of 2003, the
Company recorded a pretax charge of approximately $1 million as the result of a
contractual post-closing adjustment to the selling price of the Companys metal
systems business, which was sold in the second quarter of 2003. The $1 million charge was
reflected in the Consolidated Statement of Income (Loss) under the caption,
Other.

Second Quarter 2003

In the second quarter of 2003, the
Company recorded a pretax charge of approximately $13 million, consisting of a $14 million
loss on the sale of the Companys metal systems business, offset by a $1 million
credit representing the gain on the sale of assets of the Companys mineral wool
business. Such $13 million charge was reflected in the Consolidated Statement of Income
(Loss) under the caption, Other. See Note 5 to the Consolidated Financial
Statements for additional information concerning these sales.

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 $28 million charge to cost
of sales. The $2 million restructure charge represents additional non-cash asset
write-downs of previously closed non-strategic facilities to their 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 based on valuations of the future cash flows of
the assets using assumptions consistent with current market conditions.

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.

 25 

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

4.    
          RESTRUCTURING OF OPERATIONS AND OTHER CHARGES (continued)

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 September 30, 2003, all of these positions were actually eliminated, and
approximately $32 million had 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 September 30, 2003, all costs have 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 inventory made obsolete
by changes in the Companys manufacturing and marketing processes; (3) a charge of $6
million associated with realignment of the Companys Newark, OH manufacturing
facility; and (4) $19 million of other restructure charges.

Status of Liability for
Restructuring Programs

The following table summarizes the
status of the unpaid liabilities from the Companys restructuring actions since 2000,
when the Company implemented the first phase of a strategic restructuring program,
including cumulative spending and adjustments and the remaining balance as of September
30, 2003:

|                              |  | Facility and |  
|----------------------------- |  | ------------ | -
|
|
|
|
|Charges to expense            |  |              | $
|Payments                      |  |              |  
|                              |  |              |  
|Balance at December 31, 2000  |  |              |  
|                              |  |              |  
|Charges to expense            |  |              |  
|Payments                      |  |              |  
|                              |  |              |  
|Balance at December 31, 2001  |  |              |  
|                              |  |              |  
|Charges to expense            |  |              |  
|Payments                      |  |              |  
|                              |  |              |  
|Balance at December 31, 2002  |  |              |  
|                              |  |              |  
|Payments                      |  |              |  
|                              |  |              |  
|                              |  |              |  
|Balance at September 30, 2003 |  |              | $
|                              |  |              |  

In addition, as of September 30,
2003, a liability of approximately $15 million remains from a restructuring program
implemented during 1997 and 1998 related to closing manufacturing locations and reducing
overhead. This liability is primarily related to extended personnel severance costs.

 26

OWENS CORNING AND
SUBSIDIARIES NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (continued)(unaudited)

4.    
          RESTRUCTURING OF OPERATIONS AND OTHER CHARGES (continued)

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.

5.    
ACQUISITIONS AND DIVESTITURES OF BUSINESSES

Acquisitions

During June 2002, the Company
received Bankruptcy Court approval to consummate the restructuring of the Companys
Indian joint venture, Owens-Corning (India) Limited (OCIL), a producer of
composite material. As part of the restructuring, the Company, through its wholly-owned
subsidiary, IPM Inc., contributed approximately $3 million of cash into OCIL and the
Company agreed to allow a guarantee claim in the amount of approximately $19 million in
its Chapter 11 proceedings in respect of OCILs junior debt. In addition, OCILs
senior debt maturities were extended, and its junior debt was converted to approximately
$7 million of redeemable convertible debentures. Through these restructuring efforts the
Companys ownership interest in OCIL increased from approximately 50% to
approximately 60%. The Company consolidated OCIL on July 1, 2002, when the restructuring
was consummated by all of the parties to the restructuring and approved by the Indian
Government, at which time the allowed claim of approximately $19 million was added to
Liabilities Subject to Compromise. The Company accounted for this transaction under the
purchase method of accounting, whereby the assets acquired and liabilities assumed,
including approximately $57 million of senior debt (consisting of approximately $33
million of debentures due in 2009 at a variable interest rate and approximately $24
million of debentures due in 2009 at a fixed rate of 10%), approximately $7 million of
redeemable convertible debentures due in 2010, and approximately $4 million of other debt,
were recorded at their fair values and the Company began consolidating this subsidiary.
The $19 million allowed claim was recorded at its estimated fair value of approximately $6
million as an additional investment in OCIL and the difference of approximately $13
million was recorded as reorganization expense in the Companys consolidated
statement of income (loss). Prior to July 1, 2002, the Company accounted for this joint
venture under the equity method. The proforma effect of this acquisition on revenues and
earnings was not material.

Divestitures

On May 22, 2003, the Company received
Bankruptcy Court approval to sell the assets of its metal systems business. Net proceeds
from the sale were $48 million, of which $40 million was received in the second quarter of
2003 and $4 million was received in the third quarter of 2003. A pretax loss of
approximately $15 million was realized from the sale, excluding the impact of asset
impairments taken in prior periods. The metal systems business had net sales of
approximately $223 million and $214 million during 2002 and 2001, respectively, including
intercompany sales to other Owens Corning businesses. The Company expects to make
continued purchases from the divested business of approximately $65 million per year.

Also during May 2003, the Company
received Bankruptcy Court approval to sell the assets of its mineral wool business. Net
proceeds from the sale of $8 million were received in the second quarter of 2003. A pretax
gain of approximately $1 million was realized from the sale, excluding the impact of asset
impairments taken in prior periods.

 27 

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

6.     INVENTORIES

Inventories are summarized as
follows:

|                         | September 30, | December 31,
|------------------------ | ------------- | ------------
|
|
|
|Finished goods           |               |             
|Materials and supplies   |               |             
|                         |               |             
|FIFO inventory           |               |             
|Excess of FIFO over LIFO |               |             
|                         |               |             
|                         |               |             
|Total inventories        |               |             
|                         |               |             

Approximately $144 million and $150
million of total inventories were valued using the LIFO method at September 30, 2003 and
December 31, 2002, respectively.

7.    
          COMPREHENSIVE INCOME

The Companys comprehensive
income for the quarters ended September 30, 2003 and 2002 was income of $57 million and a
loss of $2.347 billion, respectively. The Companys 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.

8.    
          EARNINGS PER SHARE

The following table reconciles the
weighted average number of shares used in the basic earnings per share calculation to the
weighted average number of shares used to compute diluted earnings per share.

|                                              | Quarter Ended | Nine Months Ended |   |       
|--------------------------------------------- | ------------- | ----------------- | - | ------
|
|
|
|Net income (loss) used for basic and diluted  |               |                   |   |       
|earnings per share (millions)                 |               |                   | $ | 55    
|                                              |               |                   |   |       
|                                              |               |                  
|Weighted-average number of shares outstanding |               |                  
|used for basic earnings per share (thousands) |               |                   |   | 55,224
|                                              |               |                  
|Non-vested restricted shares (thousands)      |               |                   |   | 75    
|                                              |               |                  
|Deferred awards (thousands)                   |               |                   |   | 24    
|                                              |               |                  
|Shares from assumed conversion of preferred   |               |                  
|securities (thousands)                        |               |                   |   | 4,566 
|                                              |               |                   |   |       
|                                              |               |                  
|Weighted-average number of shares outstanding |               |                  
|and common equivalent shares used for         |               |                  
|diluted earnings per share (thousands)        |               |                   |   | 59,889
|                                              |               |                   |   |       

 28 

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

8.    
          EARNINGS PER SHARE (continued)

For the quarter and nine months ended
September 30, 2002, the number of shares used in the calculation of diluted earnings per
share did not include approximately 129 thousand common equivalent shares of non-vested
restricted stock and 176 thousand common equivalent shares of non-vested restricted stock,
respectively, 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.

9.    
          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 to
the Consolidated Financial Statements). 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 to
the Consolidated Financial Statements 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 October 24, 2003 a
proposed fourth amended joint plan of reorganization for the Debtors. 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.

 29 

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

9.    
          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.

 30 

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

9.    
          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 September 30, 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).

31 

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

9.    
          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, and the matter has
been fully briefed.

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 September 30, 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.

 32 

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

9.    
          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.
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

 33 

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

9.    
          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 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 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

34 

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

9.    
          CONTINGENT LIABILITIES AND OTHER MATTERS (continued)

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 10 to the Consolidated Financial Statements) was reduced to zero as of
September 30, 2002.

As noted above and in Note 1 to the
Consolidated Financial Statements, the Debtors, together with the Official Committee of
Asbestos Claimants and the Legal Representative for the class of future asbestos
claimants, filed on October 24, 2003 a proposed fourth amended joint plan of
reorganization for the Debtors. The Plan provides that liability for current and future
asbestos personal injury claims against Owens Corning and Fibreboard would be determined
by the Bankruptcy Court as part of the confirmation hearing on the Plan. The Official
Committee of Asbestos Claimants and the Legal Representative for the class of future
asbestos claimants have reserved the right to withdraw support of the Plan if such
liability is determined to be less than $16 billion in the aggregate. In this regard, the
Companys bank and bond creditor groups, for example, have continued to assert that
such aggregate liability does not exceed the amount of Owens Cornings existing
reserves. It is therefore 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 or court determination at this time. The ultimate
determination of such liabilities will take 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 September 30, 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          |        

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.
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

35 

OWENS CORNING AND
SUBSIDIARIES NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (continued)(unaudited)

9.    
          CONTINGENT LIABILITIES AND OTHER MATTERS (continued)

| | 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.

On May 22, 2003, the United States
Senate introduced proposed legislation (S 1125, also known as the Fairness in Asbestos
Injury Resolution Act of 2003 (the FAIR Act)) that, if enacted into law, would
establish an administrative claims resolution structure through which all asbestos
personal injury claims would be channeled and reviewed. The FAIR Act would also establish
a national trust fund, funded through mandated contributions from defendant companies,
insurance companies and existing trusts, that would be the source of compensation of all
approved claims. Under the present terms of the proposed FAIR Act, companies like Owens
Corning and Fibreboard, that have filed for bankruptcy but have not yet emerged through a
confirmed plan of reorganization, would be included as participants in the resolution
structure.

The fate of the FAIR Act remains
uncertain, and Owens Corning is unable to make any prediction as to whether the FAIR Act
will be enacted or, if it is enacted, what its final form would be or what the effect, if
any, would be on Owens Corning and Fibreboard or their plan or plans of reorganization.
The provisions of any legislation ultimately enacted may have a material effect on the
amount of liability that Owens Corning and Fibreboard ultimately have for asbestos-related
claims, which could be more or less than the amounts reserved for in Owens Cornings
financial statements.

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 to the
Consolidated Financial Statements). 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.

 36 

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

9.    
          CONTINGENT LIABILITIES AND OTHER MATTERS (continued)

As discussed in Item A above and
under the heading Reserve below, 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 October 24, 2003 a proposed fourth amended
joint plan of reorganization for the Debtors (including Fibreboard). Ultimately, as
described more fully under the heading Reserve below, it is anticipated that
Fibreboards (and Owens Corning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.

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 cost of resolution is 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.

 37

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

9.    
          CONTINGENT LIABILITIES AND OTHER MATTERS (continued)

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 September 30, 2003, the
remaining Insurance Settlement funds were held in and invested by the Fibreboard
Settlement Trust. As of that date, $1.266 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 10 to the
Consolidated Financial Statements) 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 September 30,
2003, these assets were reflected as non-current assets, under the category
Restricted cash, securities and other  Fibreboard. See Note 10 to the
Consolidated Financial Statements 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.

38 

OWENS CORNING AND
SUBSIDIARIES NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (continued) (unaudited)

9.    
          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 September 30,
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 (including Fibreboard), together
with the Official Committee of Asbestos Claimants and the Legal Representative for the
class of future asbestos claimants, filed on October 24, 2003 a proposed fourth amended
joint plan of reorganization for the Debtors (including Fibreboard). The Plan provides
that liability for current and future asbestos personal injury claims against Owens
Corning and Fibreboard would be determined by the Bankruptcy Court as part of the
confirmation hearing on the Plan. The Official Committee of Asbestos Claimants and the
Legal Representative for the class of future asbestos claimants have reserved the right to
withdraw support of the Plan if such liability is determined to be less than $16 billion
in the aggregate. In this regard, the Companys bank and bond creditor groups, for
example, have continued to assert that such aggregate liability does not exceed the amount
of Owens Cornings existing reserves. It is therefore 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 or court determination at this time.
The ultimate determination of such liabilities will take into account numerous factors not
present in the Companys

39 

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

9.    
          CONTINGENT LIABILITIES AND OTHER MATTERS (continued)

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. 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 September 30, 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.

40

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

9.    
          CONTINGENT LIABILITIES AND OTHER MATTERS (continued)

As noted in Item A above, on May 22,
2003, the United States Senate introduced proposed legislation (S 1125, also known as
the Fairness in Asbestos Injury Resolution Act of 2003 (the FAIR Act)) that,
if enacted into law, would establish an administrative claims resolution structure through
which all asbestos personal injury claims would be channeled and reviewed. The FAIR Act
would also establish a national trust fund, funded through mandated contributions from
defendant companies, insurance companies and existing trusts, that would be the source of
compensation of all approved claims. Under the present terms of the FAIR Act, companies
like Owens Corning and Fibreboard, that have filed for bankruptcy but have not yet emerged
through a confirmed plan of reorganization, would be included as participants in the
resolution structure.

The fate of the FAIR Act remains
uncertain, and Owens Corning is unable to make any prediction as to whether the FAIR Act
will be enacted or, if it is enacted, what its final form would be or what the effect, if
any, would be on Owens Corning and Fibreboard or their plan or plans of reorganization.
The provisions of any legislation ultimately enacted may have a material effect on the
amount of liability that Owens Corning and Fibreboard ultimately have for asbestos-related
claims, which could be more or less than the amounts reserved for in Owens Cornings
financial statements.

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. The Supreme Court heard oral arguments on
this matter on October 1, 2003. It is unknown when the court will issue its decision.

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.

 41 

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

9.    
          CONTINGENT LIABILITIES AND OTHER MATTERS (continued)

Insurance

During the second quarter of 2003,
Owens Corning received an additional $4 million payment in respect of a previous
settlement with a bankrupt insurance carrier concerning coverage for asbestos-related
personal injury claims. Owens Corning received an additional $5 million payment in respect
of the same settlement during the second quarter of 2002. These amounts were recorded as
pre-tax income in the respective period of receipt.

As of September 30, 2003, Owens
Cornings consolidated 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.

Other Matters

SECURITIES AND CERTAIN
OTHER 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.

 42 

OWENS CORNING AND
SUBSIDIARIES NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (continued) (unaudited)

9.    
          CONTINGENT LIABILITIES AND OTHER MATTERS (continued)

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. 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. On July 30, 2003, the court consolidated the four cases
under the caption Robert Greenburg, et al. v. Glen Hiner, et al., and appointed lead
plaintiffs JKF Investment Co., Icarus Trading, Inc. and HGK Asset Management. An amended
complaint was filed by the plaintiffs on or about September 8, 2003. 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 4, 2000. The complaint seeks an unspecified amount of damages
and/or, where appropriate, rescission. The Company believes that the claim is without
merit.

On or about September 2, 2003,
certain of the Companys current and former directors and officers were named as
defendants in a lawsuit captioned Kensington International limited, et al. v. Glen Hiner,
et al. in the Supreme Court of the State of New York, County of New York. Owens Corning is
not named in the lawsuit. The suit, which was brought by Kensington International Limited
and Springfield Associates, LLC, two assignees of lenders under the Pre-Petition Credit
Facility, alleges causes of action (1) against all defendants for breach of fiduciary
duty, and (2) against certain defendants for fraud in connection with certain loans made
under the Pre-Petition Credit Facility. The complaint seeks an unspecified amount of
damages. Owens Corning believes that the claim is without merit. On October 6, 2003, the
Company filed in the USBC a Complaint for Temporary Restraining Order, Preliminary
Injunction and Enforcement of the Automatic Stay, requesting a preliminary injunction
against further prosecution of the suit until after confirmation of a plan of
reorganization for the Company. The USBC has scheduled a hearing on January 20, 2004, to
hear arguments on the Companys request.

Owens Corning holds an indirect
ownership interest in ServiceLane.com, Inc. (ServiceLane), which is in Chapter
7 bankruptcy proceedings in the United States Bankruptcy Court for the Northern District
of Texas, Dallas Division, Case No. 01-36044-HCA-7 (Abrahamson, B.J.). Two former
employees of ServiceLane (the SL Plaintiffs) have filed proofs of claim
(Claims No. 8651 and 8622) against Owens Corning in the Chapter 11 Cases, alleging fraud
and misrepresentation. Additionally, on July 24, 2003, the SL Plaintiffs, along with
ServiceLanes Chapter 7 trustee, brought suit against two Owens Corning officers, who
also were directors of ServiceLane, in the United States District Court for the Northern
District of Ohio, Western Division, under the caption ServiceLane.com, Inc., et al. v.
Stein, et al. In the complaint, ServiceLane alleges a breach of fiduciary duty against
both officers and the SL Plaintiffs allege fraud against one officer. Owens Corning is not
named in the lawsuit. On September 10, 2003, Owens Corning filed in the USBC an objection
to the proofs of claim filed by the SL Plaintiffs as well as a counterclaim seeking
declaratory relief in the form of a declaration that neither Owens Corning nor the two
officers harmed the SL Plaintiffs. On October 1, 2003, the two officers filed a similar
adversary proceeding in the USBC. On October 10, 2003, the SL Plaintiffs filed a motion to
dismiss Owens Cornings counterclaim. Owens Corning believes that neither the claims
of the SL Plaintiffs nor the claims of ServiceLanes Chapter 7 trustee have merit.

The named officer and director
defendants in each of the above proceedings have each filed contingent indemnification
claims with respect to such litigation against Owens Corning pursuant to the General Bar
Date process described below.

 43 

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

9.    
          CONTINGENT LIABILITIES AND OTHER MATTERS (continued)

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 to the Consolidated
Financial Statements, under the heading General Bar Date.

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 to the
Consolidated Financial Statements, 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.

 44 

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

9.    
          CONTINGENT LIABILITIES AND OTHER MATTERS (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 adversary 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 initially 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. On or before September 29, 2003, similar lawsuits were brought
against 5 additional law firms whose tolling agreements were about to expire (the
Additional Law Firm Suits). The Official Creditors Committee was named
as a defendant in such lawsuits, solely with respect to the declaratory relief sought.

 45 

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

9.    
          CONTINGENT LIABILITIES AND OTHER MATTERS (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 (other than the Additional Law Firm Suits) pending its disposition in a plan of
reorganization. Pursuant to orders of the Bankruptcy Court, all of the foregoing
litigation, other than the Additional Law Firm Suits and 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, previously scheduled for trial before the District Court commencing in June
2003, has been continued indefinitely by the Court.

10.    
          FIBREBOARD SETTLEMENT TRUST

Under the Insurance Settlement
described in Note 9 to the Consolidated Financial Statements, 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 September 30,
2003, the remaining 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 September 30, 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 9, Part B, to the Consolidated Financial
Statements). As of September 30, 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
September 30, 2003, the Consolidated Financial Statements reflect Fibreboards
reserve for asbestos litigation claims at $2.309 billion.

For accounting purposes, the Trust
Assets are classified as trading securities 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 are
recorded at fair market value.

 46 

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

10.    
          FIBREBOARD SETTLEMENT TRUST (continued)

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).

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 asbestos-related liabilities exceeded the Trust Assets.
Consequently, for periods subsequent to the third quarter of 2002, no amounts have been
recorded to the residual obligation to charity, and earnings/losses on Trust Assets have
been recorded as Chapter 11 related reorganization items.

Results for the Periods Ended
September 30, 2003 and 2002

During the third quarter of 2003 and
2002, Trust Assets generated interest/dividend earnings of approximately $14 million
during each of the quarters ($43 million and $40 million, respectively, for the first nine
months of such years). The $14 million generated in the third quarter of 2003 and the $43
million generated during the nine months ended September 30, 2003 were recorded in
Chapter 11 related reorganization items in the Consolidated Statement of Income (Loss).
The $14 million generated during the third quarter of 2002 and the $40 million generated
during the nine months ended September 30, 2002 were 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
quarter and nine months ended September 30, 2002 was offset by equal charges to other
expense in the relevant period, which represented an increase in the residual liability to
charity.

During the third quarter of 2003 and
2002, the fair market value adjustment for those securities designated as trading
securities resulted in an unrealized loss of approximately $3 million and an unrealized
gain of $11 million, respectively (a loss of $9 million and a gain of $21 million,
respectively, for the first nine months of such years), recorded as a change in the
carrying amount of the assets on the Consolidated Balance Sheet. The $3 million loss
generated during the third quarter of 2003 and the $9 million loss generated during the
nine months ended September 30, 2003 were recorded as Chapter 11 related
reorganization items on the Consolidated Statement of Income (Loss). The $11 million gain
generated during the third quarter of 2002 and the $21 million gain generated during the
nine months ended September 30, 2002 were reflected in the Consolidated Balance Sheet
as a change to the carrying amount of the asset and to other comprehensive income. These
amounts were also reflected as a change to the liability to charity, with a corresponding
effect to other comprehensive income.

 47 

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

10.    
          FIBREBOARD SETTLEMENT TRUST (continued)

As a result of the Filing, there were
no payments for asbestos litigation claims from the Trust during the quarter or nine
months ended September 30, 2003 or 2002. However, approximately $1 million was paid
during the nine months ended September 30, 2002 for taxes related to earnings of the
Trust, of which no payments were made in the third quarter of 2002. No payments were made
for taxes during the quarter or nine months ended September 30, 2003. The payments
made during the nine months ended September 30, 2002 were 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 $3 million and $1 million, respectively, during the third
quarters of 2003 and 2002 (a loss of $5 million and $2 million, respectively, during the
first nine months of such years). 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 September 30, 2003, the fair
value of Trust Assets and Administrative Deposits was $1.393 billion, which was comprised
of Trust Assets of $1.266 billion of marketable securities and Administrative Deposits of
$127 million.

The table below summarizes Trust and
Administrative Deposits activity for the nine months ended September 30, 2003:

|                                |  | Interest |   |       |   |  
|------------------------------- |  | -------- | - | ----- | - | -
|
|
|
|
|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 |   | $
|                                |  |          |   |       |   |  

 48

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

11.    
          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 completed its annual review for impairment as of April 1, 2003,
which resulted in no change to the recorded goodwill.

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 recorded 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, or $8.01 per basic and diluted share for the nine months ended
September 30, 2002). 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 and nine months ended September 30, 2003 and 2002, were as
follows:

|                           | Quarter Ended September 30, 2003 |  |   |    
|-------------------------- | -------------------------------- |  | - | ---
|
|
|
|
|
|Composite Solutions        |                                  |  | $ | 21 
|Building Materials Systems |                                  |  |   | 113
|                           |                                  |  |   |    
|Total                      |                                  |  | $ | 134
|                           |                                  |  |   |    

|                           | Quarter Ended September 30, 2002 |  |  
|-------------------------- | -------------------------------- |  | -
|
|
|
|
|
|Composite Solutions        |                                  |  | $
|Building Materials Systems |                                  |  |  
|                           |                                  |  |  
|Total                      |                                  |  | $
|                           |                                  |  |  

49 

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

11.    
          GOODWILL AND OTHER INTANGIBLES (continued)

|                           | Nine Months Ended September 30, 2003 |  |   |    
|-------------------------- | ------------------------------------ |  | - | ---
|
|
|
|
|
|Composite Solutions        |                                      |  | $ | 18 
|Building Materials Systems |                                      |  |   | 104
|                           |                                      |  |   |    
|Total                      |                                      |  | $ | 122
|                           |                                      |  |   |    

|                           | Nine Months Ended September 30, 2002 |  |   |     | 
|-------------------------- | ------------------------------------ |  | - | --- | 
|
|
|
|
|
|Composite Solutions        |                                      |  | $ | 33  | 
|Building Materials Systems |                                      |  |   | 577 | 
|                           |                                      |  |   |     | 
|Total                      |                                      |  | $ | 610 | 
|                           |                                      |  |   |     | 

Substantially all of the Companys acquired other intangible assets
are subject to amortization. Other intangible asset amortization expense was approximately
$3 million in the first nine months 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:

|                  | September 30, 2003 |  | 
|----------------- | ------------------ |  | 
|
|
|
|
|Contract-based    |                    |  | 
|Technology-based  |                    |  | 
|Marketing-related |                    |  | 
|                  |                    |  | 
|                  |                    |  | 
|                  |                    |  | 

12.    
          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 SFAS No. 148. Effective January 1, 2003,
the Company adopted the amendment to SFAS No. 123 provided in paragraph 2(f), and the
amendment to Opinion 28 provided in paragraph 3, of SFAS No. 148. 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
nine months ended September 30, 2003 and 2002 was not material.

 50 

OWENS CORNING AND
SUBSIDIARIES NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (continued)(unaudited)

12.    
          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 income (loss) and net income (loss) per share would have
been adjusted to the pro forma amounts indicated below:

|                                      | Quarter Ended | Nine Months Ended |  |     
|------------------------------------- | ------------- | ----------------- |  | ----
|
|
|
|
|Net income (loss), as reported        |               | $                 |  | 55  
|                                      |               |                  
|Total stock-based employee            |               |                  
|compensation expense determined       |               |                  
|under fair value based method for all |               |                  
|awards, net of related tax effects    |               |                   |  | (1  
|                                      |               |                   |  |     
|Pro forma net income (loss)           |               | $                 |  | 54  
|                                      |               |                   |  |     
|                                      |               |                  
|Basic net income (loss) per share     |               |                  
|As reported                           |               | $                 |  | 0.99
|Pro forma                             |               |                   |  | 0.99
|                                      |               |                  
|Diluted net income (loss) per share   |               |                  
|As reported                           |               | $                 |  | 0.92
|Pro forma                             |               |                   |  | 0.91

13.    
          LEASES

During the second quarter of 2003,
the Company took various actions with the collective effect of reducing its effective cost
of occupying its World Headquarters facility, including (1) renegotiation of the lease
structure of the facility, including extension of the lease term, reduction of the
payments and modification of the end-of-term purchase option, resulting in a
classification change from an operating lease to a capital lease, (2) purchase of certain
bonds issued by the lessor (the Bonds) in connection with the initial
financing of the facility, and (3) obtaining a legal right of offset, which allows the
Company to apply interest/principal receipts due it under the Bonds toward its lease
liability. Classifying the lease as a capital lease resulted in (1) the recording of a
lease liability of approximately $39 million, (2) the reduction of the previously recorded
prepaid rent attributable to the original operating lease by approximately $45 million,
and (3) the recording of building and furniture at a total value of approximately $84
million.

The Bonds, which had a par value at
the purchase date of approximately $53 million, were purchased in exchange for cash
payments totaling approximately $32 million. Such payments resulted in the Company
reducing the lease liability by the $32 million. Also as part of the agreement, the
Company allowed the selling bondholders a claim in its Chapter 11 proceedings of
approximately $21 million related to the discount on the purchase of the Bonds. The
Company recorded a liability Subject to Compromise in its Consolidated Balance Sheet and a
Chapter 11 related reorganization item in its Consolidated Statement of Income (Loss)
related to this claim.

 51 

OWENS CORNING AND
SUBSIDIARIES NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (continued) (unaudited)

14.     WARRANTIES

|                                 | (In millions of dollars)
|-------------------------------- | ------------------------
|
|Balance at December 31, 2002     |                         
|Amounts accrued for current year |                         
|Reduction for sale of businesses |                         
|Settlements of warranty claims   |                         
|                                 |                         
|Balance at September 30, 2003    |                         
|                                 |                         

15.    
          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.

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.

 52 

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

15.    
          ACCOUNTING PRONOUNCEMENTS (continued)

In January 2003, the Financial
Accounting Standards Board issued Interpretation No. 46, Consolidation of Variable
Interest Entities  an interpretation of ARB No. 51". Effective December 31,
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 February 1, 2003. Effective January 31, 2003, the Company
adopted the consolidation requirements of this Interpretation for any variable interest
entity created 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
February 1, 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.

In April 2003, the Financial
Accounting Standards Board issued Statement of Financial Accounting Standards No. 149,
Amendment of Statement 133 on Derivative Instruments and Hedging Activities.
SFAS No. 149 amends and clarifies accounting for derivative instruments, including certain
derivative instruments embedded in other contracts, and for hedging activities under SFAS
No. 133. The provisions of SFAS No. 149 are generally effective for contracts entered into
or modified after June 30, 2003 and for hedging relationships designated after June 30,
2003. The Company adopted these provisions as of June 30, 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.

 53 

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

Our disclosure and analysis in this
report, including Managements Discussion and Analysis of Financial Condition and
Results of Operations, contain 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. Forward-looking statements present our
current forecasts and estimates of future events. These statements do not strictly relate
to historical or current results and can be identified by words such as
anticipate, believe, estimate, expect,
intend, likely, may, plan,
project, strategy, will, and other terms of similar
meaning or import in connection with any discussion of future operating, financial or
other performance. 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 include:

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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 with Owens Corning, 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):

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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).

 54

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

The referenced Chapter 11 cases do
not include any other United States or foreign subsidiaries of Owens Corning
(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 $1.8 billion pre-petition bank credit facility (the Pre-Petition
Credit Facility, which is in default) to file petitions for relief under Chapter 11
of the Bankruptcy Code under certain circumstances.

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 9 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.

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.

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. The same proponents filed a proposed amended joint plan of reorganization in
the USBC on March 28, 2003, a proposed second amended joint plan of reorganization in the
USBC on May 23, 2003, a proposed third amended joint plan of reorganization in the USBC on
August 8, 2003, and a proposed fourth amended joint plan of reorganization (as so amended
through such fourth amendment, the Plan) in the USBC on October 24, 2003.
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 was 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.

 55

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

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 further 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.

Related Developments

PROPOSED ASBESTOS
LEGISLATION

On May 22, 2003, the United States
Senate introduced proposed legislation (S 1125, also known as the Fairness in Asbestos
Injury Resolution Act of 2003 (the FAIR Act)) that, if enacted into law, would
establish an administrative claims resolution structure through which all asbestos
personal injury claims would be channeled and reviewed. The FAIR Act would also establish
a national trust fund, funded through mandated contributions from defendant companies,
insurance companies and existing trusts, that would be the source of compensation of all
approved claims. Under the present terms of the FAIR Act, companies like Owens Corning and
Fibreboard, that have filed for bankruptcy but have not yet emerged through a confirmed
plan of reorganization, would be included as participants in the resolution structure.

The fate of the FAIR Act remains
uncertain, and Owens Corning is unable to make any prediction as to whether the FAIR Act
will be enacted or, if it is enacted, what its final form would be or what the effect, if
any, would be on Owens Corning and Fibreboard or their plan or plans of reorganization.
The provisions of any legislation ultimately enacted may have a material effect on the
amount of liability that Owens Corning and Fibreboard ultimately have for asbestos-related
claims, which could be more or less than the amounts reserved for in Owens Cornings
financial statements.

OTHER MATTERS FILED IN
THE USBC

On or about October 10, 2003,
Kensington International Limited and Springfield Associates, LLC (collectively,
K&S), two assignees of lenders under Owens Cornings Pre-Petition
Credit Facility, filed a motion in the USBC to recuse District Court Judge Alfred M. Wolin
from further participation in the Chapter 11 Cases. On October 15, 2003, the District
Court entered an order withdrawing the reference of this matter from the USBC. On October
23, 2003, the District Court entered an order staying all discovery and other proceedings
related to the motion until further order of the Court. On October 27, 2003, K&S filed
an Emergency Petition for a Writ of Mandamus with respect to the recusal motion in the
United States Court of Appeals for the Third Circuit (the Third Circuit),
seeking an order directing Judge Wolin either to recuse himself from the Chapter 11 Cases
or to withdraw his order of October 23, 2003, and permit expedited discovery and an
expedited briefing and hearing schedule with respect to the recusal motion. On October 28,
2003, the District Court issued an order setting forth certain procedures with respect to
the recusal motion, including the provision by certain parties of affidavits and a
briefing schedule with respect to the recusal motion. By orders dated October 30, 2003,
and November 3, 2003, the Third Circuit stayed those proceedings in the Chapter 11 Cases
for which the reference had been withdrawn from the USBC and which are pending solely
before Judge Wolin; such orders do not affect other proceedings in the Chapter 11 Cases.

On or about October 15, 2003, Credit
Suisse First Boston (CSFB), the bank agent and a lender under the Pre-Petition
Credit Facility, filed a complaint in the USBC against Owens Corning and twenty unnamed
law firms who are alleged to have received payments under Owens Cornings National
Settlement Program (the NSP, which is discussed more fully in Note 9 to the
Consolidated Financial Statements under the heading Asbestos Liabilities).
This complaint, which is captioned Credit Suisse

 56 

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

First Boston v. Owens Corning, et
al., seeks to impose a constructive trust on all funds held by Owens Corning drawn under
the Pre-Petition Credit Facility between March 1, 2000 and October 5, 2000, and to impose
a constructive trust against the unnamed law firms. The complaint alleges that the NSP
caused financial difficulties for Owens Corning that culminated in loan covenant breaches
under the Pre-Petition Credit Facility that were not disclosed to CSFB, resulting in loans
under the Pre-Petition Credit Facility that the lenders would not have been required to
make. No hearing has been set on this matter.

On or about October 17, 2003, the
Official Committee of Unsecured Creditors filed a motion in the USBC requesting
appointment of a chapter 11 trustee to assume control of the Chapter 11 Cases due to
alleged breach of the Debtors fiduciary duty of undivided loyalty to act in the best
interest of all creditors. After such motion was dismissed by the USBC for failure to
comply with local court rules, the Official Committee of Unsecured
Creditors re-filed such motion on October 30, 2003. A status conference on this matter has
been set for December 1, 2003.

The Debtors believe that the above
three matters are without merit and intend to vigorously oppose them in appropriate
proceedings.

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 (see
Note 10 to the Consolidated Financial Statements)) 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. Certain creditor constituencies have asserted
that substantive consolidation is not appropriate and are challenging that approach in the
Plan confirmation hearings described below.

As part of the Plan, Owens Corning
intends to effect an internal restructuring in order to adopt a holding company structure.
This internal restructuring is expected to be refined further as steps are taken to
implement it.

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.

 57 

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

The Plan provides that liability for
current and future asbestos personal injury claims against Owens Corning and Fibreboard
would be determined by the Bankruptcy Court as part of the confirmation hearing on the
Plan. The Official Committee of Asbestos Claimants and the Legal Representative for the
class of future asbestos claimants have reserved the right to withdraw support of the Plan
if such liability is determined to be less than $16 billion in the aggregate. 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 the Plan, 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 10 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 the trust distribution procedures included as part of the Plan. 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 Pre-Petition Credit
Facility 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.

 58

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

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.

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 continues to investigate these claims to determine their validity. The
Bankruptcy Court will ultimately determine liability amounts that will be allowed for
claims in the Chapter 11 Cases.

In its initial review of the filed
claims, Owens Corning identified approximately 15,000 claims, totaling approximately $8.5
billion, which it believed should be disallowed by the Bankruptcy Court, primarily because
they appeared to be duplicate claims or claims that were not related to the indicated
Debtor (the Objectionable Claims). Owens Corning filed omnibus objections to
certain of these Objectionable Claims and likely will file additional objections. As of
September 30, 2003, approximately 4,000 of the Objectionable Claims, totaling
approximately $2.2 billion, had either been withdrawn by the claimants or disallowed by
the Bankruptcy Court. 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 the remaining Objectionable Claims will be
disallowed.

In addition to the Objectionable
Claims described above, the remaining filed proofs of claim included approximately 9,000
claims, totaling approximately $7.6 billion. As of September 30, 2003, approximately 400
of these claims, totaling approximately $0.1 billion, had either been withdrawn by the
claimants or disallowed by the Bankruptcy Court. The remaining claims consist of:

| | Approximately 2,900 claims, totaling approximately $1.3 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 9 to the Consolidated Financial
Statements for additional information concerning asbestos-related liabilities.
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

 59 

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

| | Approximately 500 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.
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Approximately 5,200 claims, totaling approximately $5.5 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 9 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 9 to the Consolidated Financial Statements; 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; environmental claims totaling
approximately $242 million; and claims for contract rejections, totaling approximately
$173 million, of which approximately $113 million are protective claims covering contracts
which have not been rejected by the Debtors as of September 30, 2003.
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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 9 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 3,100 proofs of claim (in addition to claims
described above under General Bar Date), totaling approximately $2.3 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 1,200, 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 9 to
the Consolidated Financial Statements for additional information concerning
asbestos-related liabilities.

 60 

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 providing quality products to our customers. 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. During the second quarter of 2003, the Company completed the sales of its
metal systems and mineral wool businesses. See Note 5 to the Consolidated Financial
Statements for additional information concerning these sales. These businesses were
identified for sale as part of the Companys strategic restructuring program
discussed below in Restructuring of Operations and Other Charges and in Note 4
to the Consolidated Financial Statements. As discussed above under The Plan of
Reorganization, the Company intends to effect an internal restructuring in order to
adopt a holding company structure. This internal restructuring is expected to be refined
further as steps are taken to implement it.

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. If interest
rates rise, it is likely that housing starts and demand for Building Materials products
would be negatively impacted. In addition, high energy and material costs will continue to
cause pressure on margins.

Key factors affecting the
Companys Composite Solutions markets include the condition of automotive markets and
foreign exchange rates. In this segment, the Company forecasts that slow markets in North
America and Europe will combine for minimal or no growth in 2003 compared to 2002. In
addition, overcapacity in the global market will contribute to price pressure on the
Composite Solutions business, while high energy and material costs will cause continuing
pressure on margins.

Sales and Profitability for the
Quarter Ended September 30, 2003 and 2002

NET SALES

Net sales for the quarter ended September
30, 2003 were $1.349 billion, a 3% increase from the third quarter of 2002 level of $1.306
billion. The higher sales in the third quarter of 2003 compared to 2002 primarily reflect
higher volumes in both Building Materials and Composite Solutions, primarily in the United
States. In Building Materials, the higher sales volume, which was primarily in our
residential roofing business and insulation business, was partially offset by lower
pricing in our insulation business. In addition, sales were negatively impacted by the
sale of our metal systems business in May of 2003, discussed below under
Restructuring of Operations and Other Charges. In Composite Solutions, the
higher sales volume was partially offset by lower prices in nearly all geographic regions.
In addition, Composite Solutions sales reflect a decrease due to the exiting of certain
non-strategic product lines. Changes in foreign currency exchange rates increased net
sales in the third quarter of 2003 by 1%. This primarily reflects the weakening of the
U.S. dollar relative to the Euro, which benefited our Composite Solutions net sales
results.

Sales outside the United States
represented 14% of total sales for the quarter ended September 30, 2003, compared to 13%
during the third quarter of 2002. The increase was primarily attributable to the favorable
changes in foreign currency effects, which positively impacted sales outside the United
States, and the sale of our metal systems business and the exiting of other product lines,
which negatively impacted sales in the United States.

 61 

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

GROSS MARGIN

Gross margin for the third quarters
of 2003 and 2002 was 16% of net sales. While volume in 2003 was ahead of last year in
insulation and residential roofing, gross margin as a percentage of sales was adversely
affected by higher energy and material costs negatively impacting all major businesses and
by lower prices in Composite Solutions and the residential insulation business. The higher
raw material costs were mainly attributable to asphalt, PVC, and polystyrene, while the
higher energy costs were principally attributable to natural gas. The results for the
third quarter of 2002 reflect a charge of $33 million to cost of sales, primarily to write
down a group of assets in the Building Materials segment to estimated realizable value.

MARKETING AND
ADMINISTRATIVE EXPENSES

Marketing and administrative expenses
were $115 million and 9% of net sales during the third quarter of 2003, compared to $131
million and 10% of net sales during the third quarter of 2002. The decrease is primarily
attributable to cost-cutting measures entered into during 2002 and the beginning of 2003.
Please see Restructuring of Operations and Other Charges below for further information on
the cost-cutting measures taken.

INCOME FROM OPERATIONS

Income from operations increased to
$104 million for the third quarter of 2003, from a loss from operations of $2.342 billion
for the same period in 2002. The increase was primarily due to the $2.356 billion
provision for asbestos litigation claims taken in the third quarter of 2002. The increase
also reflects higher gross margin dollars and reduced marketing and administrative
expenses. Other factors contributing to the increase were lower Chapter 11 related
reorganization expenses and restructure costs, beneficial foreign exchange rates, and a
gain of $6 million in our Composite Solutions business from the sale of excess assets
(recorded as Other in the Consolidated Statement of Income (Loss)).

INCOME TAXES

The Company currently projects that
its effective tax rate for the full year 2003 will be approximately 50%, compared to 1%
for the full year 2002. The 2003 rate reflects valuation reserves in connection with the
deductibility of certain Chapter 11 related reorganization expenses. The 2002 rate
reflects valuation reserves in connection with the Companys increase, in the third
quarter of 2002, of 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 9 to the
Consolidated Financial Statements). In connection with such charges, management evaluated
the likelihood of allowable tax deductions 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 the increase in asbestos reserves. As a result, no tax benefit was recorded in
connection with the third quarter 2002 asbestos-related charges discussed above.

NET INCOME

For the third quarter of 2003, Owens
Corning reported net income of $55 million, or $0.92 per share, compared to a net loss of
$2.359 billion, or $(42.84) per share for the third quarter of 2002. The increase in 2003
was primarily due to the factors described above. The Company had $2 million of net
interest expense in the third quarter of 2003 (from the Petition Date through September
30, 2003, contractual interest expense not accrued or recorded on pre-petition debt
(calculated using ordinary, non-default interest rates and without regard to debt
maturity) totaled approximately $483 million, of which $34 million relates to the third
quarter of 2003 and $37 million relates to the third quarter of 2002 (please see Note 1 to
the Consolidated Financial Statements)).

 62 

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

Sales and Profitability for the Nine
Months Ended September 30, 2003 and 2002

NET SALES

Net sales for the nine months ended
September 30, 2003 were $3.721 billion, a 1% increase from the 2002 level of $3.698
billion. Sales increased in Building Materials but were partially offset by lower sales in
Composite Solutions. In Building Materials, volume was higher in roofing and insulation,
reflecting growth in housing starts and remodeling, but lower selling prices negatively
affected the insulation business. In the roofing and asphalt product lines, market prices
increased as the industry attempted to adjust for higher material and energy costs.
Despite these higher prices, earnings continue to be negatively impacted, as the effect of
these higher costs have not been fully passed through to customers. In addition,
comparative sales for Building Materials were negatively impacted by the sale of our metal
systems business in May of 2003. In Composite Solutions, volumes grew slightly, while
sales were negatively affected by lower prices in most geographic regions. In addition,
net sales were also impacted as the result of exiting certain product lines. Changes in
foreign currency exchange rates increased net sales in the first nine months of 2003 by
1%, primarily reflecting the benefit of the U.S. dollar weakening relative to the Euro,
which mainly benefited our Composite Solutions net sales results.

Sales outside the United States
represented 15% of total sales for the nine months ended September 30, 2003, compared to
13% during the first nine months of 2002. The increase was primarily attributable to
favorable foreign currency effects, which positively impacted sales outside the United
States, and the sale of our metal systems business and the exiting of other product lines,
which negatively impacted sales in the United States.

GROSS MARGIN

Gross margin for the nine months
ended September 30, 2003 was 16% of net sales, compared to 17% in 2002. The decrease was
primarily the result of higher energy and material costs negatively impacting all major
businesses and lower prices in Composite Solutions and our insulation business, partially
offset by manufacturing productivity improvements. The higher raw material costs were
mainly attributable to asphalt, PVC, and polystyrene, while the higher energy costs were
principally attributable to natural gas. The results for the nine months ended September
30, 2003 reflect charges of $28 million to cost of sales, representing additional
write-downs of two groups of assets in the Building Materials segment to net realizable
value. The results for the nine months ended September 30, 2002 reflect charges of $41
million to cost of sales, primarily representing the write down of a group of assets in
the Building Materials segment to net realizable value and charges associated with the
realignment of the Companys Newark, Ohio manufacturing facility. Please see
Restructuring of Operations and Other Charges below for further information on these
charges. Gross margin during the period benefited from a gain of approximately $6 million
resulting from the settlement of certain vendor payables at a discount.

MARKETING AND
ADMINISTRATIVE EXPENSES

Marketing and administrative expenses
were $345 million and 9% of net sales during the nine months ended September 30,
2003, compared to $402 million and 11% of net sales during the nine months ended
September 30, 2002. The decrease is primarily attributable to cost-cutting measures
entered into during 2002 and the beginning of 2003. Please see Restructuring of Operations
and Other Charges below for further information on the cost-cutting measures taken.

 63

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

INCOME FROM OPERATIONS

Income from operations increased to
$155 million for the nine months ended September 30, 2003, from a loss from operations of
$2.269 billion for the same period in 2002. The increase was primarily due to the
provision for asbestos litigation claims taken in the third quarter of 2002. Also
affecting income from operations was lower gross margin, more than offset by reduced
marketing and administrative expenses. Other factors contributing to the increase were
lower restructuring costs, lower Chapter 11 related reorganization expenses, the
beneficial effect of foreign exchange rates, and a gain of $6 million in our Composite
Solutions business from the sale of excess assets (recorded as Other in the Consolidated
Statement of Income (Loss)).

NET INCOME

For the nine months ended
September 30, 2003 and 2002, Owens Corning reported net income of $72 million, or
$1.20 per share, and a net loss of $2,770 million, or $(50.31) per share, respectively. In
addition to the items discussed above, 2002 results reflected a non-cash charge of $491
million ($441 million net of tax) recorded 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. Net interest expense was $6 million during the nine months ended
September 30, 2003 (from the Petition Date through September 30, 2003,
contractual interest expense not accrued or recorded on pre-petition debt (calculated
using ordinary, non-default interest rates and without regard to debt maturity) totaled
approximately $483 million, of which $104 million relates to the nine months ended
September 30, 2003 and $112 million relates to the nine months ended
September 30, 2002 (please see Note 1 to the Consolidated Financial Statements)).

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.

Third Quarter 2003

In the third quarter of 2003, the
Company recorded a pretax charge of approximately $1 million as the result of a
contractual post-closing adjustment to the selling price of the Companys metal
systems business, which was sold in the second quarter of 2003. The $1 million charge was
reflected in the Consolidated Statement of Income (Loss) under the caption,
Other.

 64 

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

Second Quarter 2003

In the second quarter of 2003, the
Company recorded a pretax charge of approximately $13 million, consisting of a $14 million
loss on the sale of the Companys metal systems business, offset by a $1 million
credit representing the gain on the sale of assets of the Companys mineral wool
business. Such $13 million charge was reflected in the Consolidated Statement of Income
(Loss) under the caption, Other. See Note 5 to the Consolidated Financial
Statements for additional information concerning these sales.

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 $28 million charge to cost
of sales. The $2 million restructure charge represents additional non-cash asset
write-downs of previously closed non-strategic facilities to their 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 based on valuations of the future cash flows of
the assets using assumptions consistent with current market conditions.

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 September 30, 2003, all of these positions were actually eliminated, and
approximately $32 million had 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 September 30, 2003, all costs have 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 inventory made obsolete
by changes in the Companys manufacturing and marketing processes; (3) a charge of $6
million associated with realignment of the Companys Newark, OH manufacturing
facility; and (4) $19 million of other restructure charges.

 65 

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

LEASES

During the second quarter of 2003,
the Company took various actions with the collective effect of reducing its effective cost
of occupying its World Headquarters facility, including (1) renegotiation of the lease
structure of the facility, including extension of the lease term, reduction of the
payments and modification of the end-of-term purchase option, resulting in a
classification change from an operating lease to a capital lease, (2) purchase of certain
bonds issued by the lessor (the Bonds) in connection with the initial
financing of the facility, and (3) obtaining a legal right of offset, which allows the
Company to apply interest/principal receipts due it under the Bonds toward its lease
liability. Classifying the lease as a capital lease resulted in (1) the recording of a
lease liability of approximately $39 million, (2) the reduction of the previously recorded
prepaid rent attributable to the original operating lease by approximately $45 million,
and (3) the recording of building and furniture at a total value of approximately $84
million.

The Bonds, which had a par value at
the purchase date of approximately $53 million, were purchased in exchange for cash
payments totaling approximately $32 million. Such payments resulted in the Company
reducing the lease liability by the $32 million. Also as part of the agreement, the
Company allowed the selling bondholders a claim in its Chapter 11 proceedings of
approximately $21 million related to the discount on the purchase of the Bonds. The
Company recorded a liability Subject to Compromise in its Consolidated Balance Sheet and a
Chapter 11 related reorganization item in its Consolidated Statement of Income (Loss)
related to this claim.

LIQUIDITY, CAPITAL
RESOURCES AND OTHER RELATED MATTERS

Cash flow from operations was
negative $32 million for the nine months ended September 30, 2003, versus positive
$86 million for the nine months ended September 30, 2002. The decrease in cash flow
from operations was primarily driven by contributions of $178 million to the
Companys pension plans. Changes in working capital items, due to seasonality,
adversely impacted cash flow from operations in both nine-month periods. Cash flow from
operations in the nine months ended September 30, 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, recorded as an other noncash item,
and (2) a reduction of debt of approximately $4 million.

At September 30, 2003, our net
working capital was $952 million and we had a current ratio of 2.12, compared to $913
million and 2.06, respectively, at December 31, 2002. The increase in working capital from
December 31, 2002 to September 30, 2003 primarily reflects:

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 66 

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

Investing activities consumed $53
million of cash during the nine months ended September 30, 2003, compared to $172
million during the nine months ended September 30, 2002. The change in net cash flow
from investing activities was primarily attributable to:

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We anticipate that 2003 spending for
capital and investments will be approximately $235 million, a portion of which is
uncommitted. We expect that these expenditures will be funded from the Companys
operations and existing cash on hand.

Financing activities during the nine
months ended September 30, 2003 resulted in a use of cash of $37 million compared to
no change in cash during the nine months ended September 30, 2002. The change in net
cash flow from financing activities was primarily attributable to the following reductions
of long-term debt during 2003:

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At September 30, 2003, the
Company had $769 million of Cash and Cash Equivalents as compared to $875 million at
December 31, 2002. The decline primarily reflects the pension contributions of
$178 million, partially offset by cash from operations.

At September 30, 2003, we had
$2.896 billion of debt subject to compromise and $175 million of other debt (of which $75
million was in default as a consequence of the Filing and therefore classified as current
on the Consolidated Balance Sheet). At December 31, 2002, we had $2.854 billion of
debt subject to compromise and $176 million of other debt (of which $97 million was in
default as a consequence of the Filing and therefore classified as current on the
Consolidated Balance Sheet).

The Company has significant
liabilities related to pension plans for its employees. During 2002, the Company 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 $29 million in 2003
as compared to 2002. In addition, the actual decrease in the market value of assets during
2002 and lower interest rates resulted in the Company making contributions to the pension
plans of $178 million during 2003. The Company also currently projects additional
contributions, in the range of $250 million to $300 million, during 2004. The
Companys pension-related assets increased to $328 million at September 30,
2003, from $179 million at December 31, 2002, primarily due to the contributions to
the pension plans and return on plan assets, partially offset by additional service cost,
interest cost accrued, and amortization of prior actuarial losses. As a result of the
increase, the Company reclassified such assets out of certain other components of the
Consolidated Balance Sheet into Pension-related assets. All periods presented
have been reclassified to conform with the current period. The Companys recorded
long-term pension plan liability was $599 million and $596 million at September 30,
2003 and December 31, 2002, respectively. 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.

 67

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

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 September 30, 2003; however, approximately $83
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.

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 Company completed its annual review for
impairment as of April 1, 2003, which resulted in no change to the recorded goodwill. The
impact of adoption of SFAS No. 142 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 11 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.

 68 

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. 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.

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. Please see Note 12 to the Consolidated Financial Statements for
additional information concerning Stock Compensation.

 69 

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

In January 2003, the Financial
Accounting Standards Board issued Interpretation No. 46, Consolidation of Variable
Interest Entities  an interpretation of ARB No. 51". Effective December 31,
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 February 1, 2003. Effective January 31, 2003, the Company
adopted the consolidation requirements of this Interpretation for any variable interest
entity created 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
February 1, 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.

In April 2003, the Financial
Accounting Standards Board issued Statement of Financial Accounting Standards No. 149,
Amendment of Statement 133 on Derivative Instruments and Hedging Activities.
SFAS No. 149 amends and clarifies accounting for derivative instruments, including certain
derivative instruments embedded in other contracts, and for hedging activities under SFAS
No. 133. The provisions of SFAS No. 149 are generally effective for contracts entered into
or modified after June 30, 2003 and for hedging relationships designated after June 30,
2003. The Company adopted these provisions as of June 30, 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.

ENVIRONMENTAL MATTERS

The Company has been deemed by the
United States 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 September 30, 2003, a total of 57 such PRP designations remained
unresolved by the Company. In most cases the Company is only one of many PRPs with
potential liability for investigation and remediation at the applicable site. 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 estimates a reserve in
accordance with generally accepted accounting principles to reflect environmental
liabilities that have been asserted or are probable of assertion, in which liabilities are
probable and reasonably estimable. At September 30, 2003, the Companys reserve for
such liabilities was $24 million. In connection with the Filing, the Company initiated a
program to identify and discharge contingent environmental liabilities as part of its plan
or plans of reorganization. Under the program, the Company is seeking settlements, subject
to approval of the Bankruptcy Court, with various federal, state and local authorities, as
well as private claimants. On July 23, 2003, the Bankruptcy Court approved one such
settlement agreement with the United States resolving certain environmental liabilities
with respect to the EPA. 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, and for wet
formed glass mat 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.

 70 

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

The Company maintains (a) disclosure
controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under
the Securities Exchange Act of 1934, as amended (the Exchange Act)), designed
to ensure that information required to be disclosed by the Company in the reports that it
files or submits under the Exchange Act is recorded, processed, summarized and reported on
a timely basis, and (b) internal control over financial reporting (as such term is defined
in Rules 13a-15(f) and 15d-15(f) under the Exchange Act).

The Companys management, with
the participation of the Companys Chief Executive Officer and Chief Financial
Officer, has evaluated the effectiveness of the Companys disclosure controls and
procedures as of the end of the period covered by this report. Based on such evaluation,
the Companys Chief Executive Officer and Chief Financial Officer have concluded
that, as of the end of such period, the Companys disclosure controls and procedures
are effective.

There have not been any changes in
the Companys internal control over financial reporting during the fiscal quarter to
which this report relates that have materially affected, or are reasonably likely to
materially affect, the Companys internal control over financial reporting.

 71 

PART II

ITEM 1.    LEGAL PROCEEDINGS

Note 9 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 with Owens Corning, 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):

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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 referenced Chapter 11 cases do
not include any other United States or foreign subsidiaries of Owens Corning
(collectively, the Non-Debtor Subsidiaries).

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).

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.

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 was 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.

 72 

ITEM 1.    LEGAL PROCEEDINGS (continued)

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. The same proponents filed a proposed amended joint plan of reorganization in
the USBC on March 28, 2003, a proposed second amended joint plan of reorganization in the
USBC on May 23, 2003, a proposed third amended joint plan of reorganization in the USBC on
August 8, 2003, and a proposed fourth amended joint plan of reorganization (as so amended
through such fourth amendment, the Plan) in the USBC on October 24, 2003. 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 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
discussed in greater detail in Note 1, Voluntary Petition for Relief Under Chapter 11, to
Owens Cornings Consolidated Financial Statements above.

On or about October 10, 2003,
Kensington International Limited and Springfield Associates, LLC (collectively,
K&S), two assignees of lenders under Owens Cornings Pre-Petition
Credit Facility, filed a motion in the USBC to recuse District Court Judge Alfred M. Wolin
from further participation in the Chapter 11 Cases. On October 15, 2003, the District
Court entered an order withdrawing the reference of this matter from the USBC. On October
23, 2003, the District Court entered an order staying all discovery and other proceedings
related to the motion until further order of the Court. On October 27, 2003, K&S filed
an Emergency Petition for a Writ of Mandamus with respect to the recusal motion in the
United States Court of Appeals for the Third Circuit (the Third Circuit),
seeking an order directing Judge Wolin either to recuse himself from the Chapter 11 Cases
or to withdraw his order of October 23, 2003, and permit expedited discovery and an
expedited briefing and hearing schedule with respect to the recusal motion. On October 28,
2003, the District Court issued an order setting forth certain procedures with respect to
the recusal motion, including the provision by certain parties of affidavits and a
briefing schedule with respect to the recusal motion. By orders dated October 30, 2003,
and November 3, 2003, the Third Circuit stayed those proceedings in the Chapter 11 Cases
for which the reference had been withdrawn from the USBC and which are pending solely
before Judge Wolin; such orders do not affect other proceedings in the Chapter 11 Cases.

On or about October 15, 2003, Credit
Suisse First Boston (CSFB), the bank agent and a lender under the Pre-Petition
Credit Facility, filed a complaint in the USBC against Owens Corning and twenty unnamed
law firms who are alleged to have received payments under Owens Cornings National
Settlement Program (the NSP, which is discussed more fully in Note 9 to the
Consolidated Financial Statements under the heading Asbestos Liabilities).
This complaint, which is captioned Credit Suisse First Boston v. Owens Corning, et al.,
seeks to impose a constructive trust on all funds held by Owens Corning drawn under the
Pre-Petition Credit Facility between March 1, 2000 and October 5, 2000, and to impose a
constructive trust against the unnamed law firms. The complaint alleges that the NSP
caused financial difficulties for Owens Corning that culminated in loan covenant breaches
under the Pre-Petition Credit Facility that were not disclosed to CSFB, resulting in loans
under the Pre-Petition Credit Facility that the lenders would not have been required to
make. No hearing has been set on this matter.

 73 

ITEM 1.    LEGAL PROCEEDINGS (continued)

On or about October 17, 2003, the
Official Committee of Unsecured Creditors filed a motion in the USBC requesting
appointment of a Chapter 11 trustee to assume control of the Chapter 11 Cases due to
alleged breach of the Debtors fiduciary duty of undivided loyalty to act in the best
interest of all creditors. After such motion was dismissed by the USBC for failure to
comply with local court rules, the Official Committee of Unsecured
Creditors re-filed such motion on October 30, 2003. A status conference on this matter has
been set for December 1, 2003.

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 $75 million as of September 30, 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 September 30, 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 September 30, 2003, Owens Corning filed the following current report on
Form 8-K:

| | -  Dated August 8, 2003, under Items 5 and 7, in connection with the filing of a Third
      Amended Joint Plan of Reorganization of Owens Corning and Its Affiliated Debtors and
      Debtors-in-Possession and a related Disclosure Statement.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

 74

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:November 7, 2003 |  | By:/s/ Michael H. Thaman                                                                                       
|                      |  | Michael H. Thaman      Chairman of the Board and      Chief Financial Officer      (as duly authorized officer)
|                      |  |                                                                                                                
|                      |  |                                                                                                                
|Date:November 7, 2003 |  | By:/s/ Charles E. Dana                                                                                         
|                      |  | Charles E. Dana      Vice President - Corporate      Controller and Global Sourcing                            

 75 

EXHIBIT INDEX

|              |                                                                                                                                                                                                                                                                                                                                                           
|------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber | Document Description                                                                                                                                                                                                                                                                                                                                      
|              |                                                                                                                                                                                                                                                                                                                                                           
|(2)           | Plan of Acquisition, Reorganization, Arrangement, Liquidation or Succession.                                                                                                                                                                                                                                                                              
|              |                                                                                                                                                                                                                                                                                                                                                           
|              | Fourth 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 October 24, 2003 (incorporated herein by reference to Exhibit (2) to Owens
Cornings current report on Form 8-K (File No. 1-3660), filed October 27, 2003).
|              |                                                                                                                                                                                                                                                                                                                                                           
|              | Third 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 August 8, 2003 (incorporated herein by reference to Exhibit (2) to Owens
Cornings current report on Form 8-K (File No. 1-3660), filed August 8, 2003).     
|              |                                                                                                                                                                                                                                                                                                                                                           
|              | Second
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 May 23, 2003 (incorporated herein by reference to Exhibit (2) to Owens
Cornings current report on Form 8-K (File No. 1-3660), filed May 27, 2003).        
|              |                                                                                                                                                                                                                                                                                                                                                           
|              | 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.                                                                                                                                                                                                                                                                                
|              |                                                                                                                                                                                                                                                                                                                                                           
|              | Fourth 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 October 24, 2003 (incorporated herein by reference to Exhibit (2) to Owens
Cornings current report on Form 8-K (File No. 1-3660), filed October 27, 2003).
|              |                                                                                                                                                                                                                                                                                                                                                           
|              | Third 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 August 8, 2003 (incorporated herein by reference to Exhibit (2) to Owens
Cornings current report on Form 8-K (File No. 1-3660), filed August 8, 2003).     
|              |                                                                                                                                                                                                                                                                                                                                                           
|              | Second
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 May 23, 2003 (incorporated herein by reference to Exhibit (2) to Owens
Cornings current report on Form 8-K (File No. 1-3660), filed May 27, 2003).        
|              |                                                                                                                                                                                                                                                                                                                                                           

 76 

EXHIBIT INDEX

|              |                                                                                                                                                                                                                                                                                                                                                
|------------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber | Document Description                                                                                                                                                                                                                                                                                                                           
|              |                                                                                                                                                                                                                                                                                                                                                
|              | 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).    
|              |                                                                                                                                                                                                                                                                                                                                                
|(31)          | Rule
13a-14(a)/15d-14(a) Certifications                                                                                                                                                                                                                                                                                                        
|              |                                                                                                                                                                                                                                                                                                                                                
|              | Certification
of Chief Executive Officer (principal executive officer) (filed herewith).                                                                                                                                                                                                                                                       
|              |                                                                                                                                                                                                                                                                                                                                                
|              | Certification
of Chief Financial Officer (principal financial officer) (filed herewith).                                                                                                                                                                                                                                                       
|              |                                                                                                                                                                                                                                                                                                                                                
|(32)          | Section 1350 Certifications                                                                                                                                                                                                                                                                                                                    
|              |                                                                                                                                                                                                                                                                                                                                                
|              | Certification
of Chief Executive Officer (principal executive officer) (filed herewith).                                                                                                                                                                                                                                                       
|              |                                                                                                                                                                                                                                                                                                                                                
|              | Certification
of Chief Financial Officer (principal financial officer) (filed herewith).