---



SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549



FORM 10-Q



Quarterly Report Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934



For the Quarter Ended March 31, 2004



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 March 31, 2004



55,343,098



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INDEX



|        |  |                                                                                       |  |        
|------- |  | ------------------------------------------------------------------------------------- |  | -------
|        |  |                                                                                       |  | Page   
|        |  |                                                                                      
|        |  | Cover Page                                                                            |  | 1      
|        |  |                                                                                      
|PART I  |  |                                                                                       |  |        
|        |  |                                                                                      
|Item 1. |  | Financial Statements                                                                  |  |        
|        |  |                                                                                      
|        |  | Consolidated Statement of Income (Loss)                                               |  | 2      
|        |  |                                                                                      
|        |  | Consolidated Balance Sheet                                                            |  | 3 - 4  
|        |  |                                                                                      
|        |  | Consolidated Statement of Cash Flows                                                  |  | 5      
|        |  |                                                                                      
|        |  | Notes to Consolidated Financial Statements                                            |  |        
|        |  |                                                                                      
|        |  | Voluntary Petition for Relief Under Chapter 11                                        |  | 6 - 20 
|        |  |                                                                                      
|        |  | Segment Data                                                                          |  | 21 - 22
|        |  |                                                                                      
|        |  | General                                                                               |  | 23     
|        |  |                                                                                      
|        |  | Inventories                                                                           |  | 23     
|        |  |                                                                                      
|        |  | Goodwill and Other Intangibles                                                        |  | 23 - 24
|        |  |                                                                                      
|        |  | Acquisitions and Divestitures of Businesses                                           |  | 24     
|        |  |                                                                                      
|        |  | Warranties                                                                            |  | 24     
|        |  |                                                                                      
|        |  | Restructuring of Operations and Other Charges                                         |  | 25     
|        |  |                                                                                      
|        |  | Pension and Other Postretirement Benefits                                             |  | 25 - 26
|        |  |                                                                                      
|        |  | Contingent Liabilities and Other Matters                                              |  | 27 - 44
|        |  |                                                                                      
|        |  | Fibreboard Settlement Trust                                                           |  | 44 - 46
|        |  |                                                                                      
|        |  | Stock Compensation                                                                    |  | 47     
|        |  |                                                                                      
|        |  | Earnings per Share                                                                    |  | 48     
|        |  |                                                                                      
|        |  | Comprehensive Income                                                                  |  | 48     
|        |  |                                                                                      
|        |  | Income Taxes                                                                          |  | 48     
|        |  |                                                                                      
|        |  | Accounting Pronouncements                                                             |  | 49 - 50
|        |  |                                                                                      
|Item 2. |  | Managements Discussion and Analysis of Financial Condition and Results of Operations |  | 51 - 68
|        |  |                                                                                      
|Item 3. |  | Quantitative and Qualitative Disclosures About Market Risk                            |  | 68     
|        |  |                                                                                      
|Item 4. |  | Controls and Procedures                                                               |  | 68     
|        |  |                                                                                      
|PART II |  |                                                                                       |  |        
|        |  |                                                                                      
|Item 1. |  | Legal Proceedings                                                                     |  | 69 - 71
|        |  |                                                                                      
|Item 2. |  | Changes in Securities, Use of Proceeds, and Issuer Purchases of Equity Securities     |  | 71     
|        |  |                                                                                      
|Item 3. |  | Defaults Upon Senior Securities                                                       |  | 71     
|        |  |                                                                                      
|Item 4. |  | Submission of Matters to a Vote of Security Holders                                   |  | 71     
|        |  |                                                                                      
|Item 5. |  | Other Information                                                                     |  | 71     
|        |  |                                                                                      
|Item 6. |  | Exhibits and Reports on Form 8-K                                                      |  | 72     
|        |  |                                                                                      
|        |  | Signatures                                                                            |  | 73     
|        |  |                                                                                      
|        |  | Exhibit Index                                                                         |  | 74 - 75
|        |  |                                                                                      
|        |  | Certification (Chief Executive Officer), Exhibit (31)                                 |  |        
|        |  |                                                                                      
|        |  | Certification (Chief Financial Officer), Exhibit (31)                                 |  |        
|        |  |                                                                                      
|        |  | Section 1350 Certification (Chief Executive Officer), Exhibit (32)                    |  |        
|        |  |                                                                                      
|        |  | Section 1350 Certification (Chief Financial Officer), Exhibit (32)                    |  |        
|        |  |                                                                                      
|        |  | Subsidiaries of Owens Corning, Exhibit (99)                                           |  |        



(i)



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PART I

|ITEM 1. | FINANCIAL STATEMENTS
|------- | --------------------



OWENS CORNING AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF INCOME (LOSS)

(unaudited)



|                                                                                                    |  |                                                 |       |   |      |   |       |  
|--------------------------------------------------------------------------------------------------- |  | ----------------------------------------------- | ----- | - | ---- | - | ----- | -
|                                                                                                    |  | Quarter Ended March 31,                         |      
|                                                                                                    |  | 2004                                            |       |   | 2003 |  
|                                                                                                    |  | (In millions of dollars, except per share data) |      
|NET SALES                                                                                           |  | $                                               | 1,209 |   |      | $ | 1,133 |  
|COST OF SALES                                                                                       |  |                                                 | 1,037 |   |      |   | 974   |  
|                                                                                                    |  |                                                 |       |   |      |   |       |  
|Gross margin                                                                                        |  |                                                 | 172   |   |      |   | 159   |  
|                                                                                                    |  |                                                 |       |   |      |   |       |  
|OPERATING EXPENSES                                                                                  |  |                                                 |       |   |      |   |       |  
|Marketing and administrative expenses                                                               |  |                                                 | 115   |   |      |   | 114   |  
|Science and technology expenses                                                                     |  |                                                 | 11    |   |      |   | 11    |  
|Restructure costs (Note 8)                                                                          |  |                                                 |      |   |      |   | 2     |  
|Chapter 11 related reorganization items (Notes 1 and 10)                                            |  |                                                 | 10    |   |      |   | 32    |  
|Other                                                                                               |  |                                                 | 2     |   |      |   | (8    | )
|                                                                                                    |  |                                                 |       |   |      |   |       |  
|Total operating expenses                                                                            |  |                                                 | 138   |   |      |   | 151   |  
|                                                                                                    |  |                                                 |       |   |      |   |       |  
|INCOME FROM OPERATIONS                                                                              |  |                                                 | 34    |   |      |   | 8     |  
|Interest expense, net                                                                               |  |                                                 | 1     |   |      |   | 4     |  
|                                                                                                    |  |                                                 |       |   |      |   |       |  
|INCOME BEFORE INCOME TAX EXPENSE                                                                    |  |                                                 | 33    |   |      |   | 4     |  
|Income tax expense                                                                                  |  |                                                 | 27    |   |      |   | 2     |  
|                                                                                                    |  |                                                 |       |   |      |   |       |  
|INCOME BEFORE MINORITY INTEREST AND EQUITY IN NET INCOME OF AFFILIATES                              |  |                                                 | 6     |   |      |   | 2     |  
|Minority interest                                                                                   |  |                                                 | (2    | ) |      |   | (3    | )
|Equity in net income of affiliates                                                                  |  |                                                 | 1     |   |      |   |      |  
|                                                                                                    |  |                                                 |       |   |      |   |       |  
|NET INCOME (LOSS)                                                                                   |  | $                                               | 5     |   |      | $ | (1    | )
|NET INCOME (LOSS) PER COMMON SHARE                                                                  |  |                                                 |       |   |      |   |       |  
|                                                                                                    |  |                                                 |       |   |      |   |       |  
|Basic net income (loss) per share (Note 13)                                                         |  | $                                               | 0.09  |   |      | $ | (0.02 | )
|                                                                                                    |  |                                                 |       |   |      |   |       |  
|Diluted net income (loss) per share (Note 13)                                                       |  | $                                               | 0.09  |   |      | $ | (0.02 | )
|                                                                                                    |  |                                                 |       |   |      |   |       |  
|WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING AND COMMON EQUIVALENT SHARES DURING THE PERIOD |  |                                                 |       |   |      |   |       |  
|Basic                                                                                               |  |                                                 | 55.3  |   |      |   | 55.1  |  
|Diluted                                                                                             |  |                                                 | 59.9  |   |      |   | 55.1  |  



The accompanying notes
to consolidated financial statements are an integral part of this statement.



- 2 -



---

OWENS CORNING AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

(unaudited)



|                                                                      |  |                          |        |   |                   |   |        |  
|--------------------------------------------------------------------- |  | ------------------------ | ------ | - | ----------------- | - | ------ | -
|                                                                      |  | March 31, 2004           |        |   | December 31, 2003 |  
|                                                                      |  | (In millions of dollars) |       
|ASSETS                                                                |  |                          |        |   |                   |   |        |  
|CURRENT                                                               |  |                          |        |   |                   |   |        |  
|Cash and cash equivalents (Note 1)                                    |  | $                        | 821    |   |                   | $ | 1,005  |  
|Receivables, less allowances of $19 million in 2004 and 2003          |  |                          | 572    |   |                   |   | 464    |  
|Inventories (Note 4)                                                  |  |                          | 434    |   |                   |   | 390    |  
|Other current assets                                                  |  |                          | 27     |   |                   |   | 29     |  
|                                                                      |  |                          |        |   |                   |   |        |  
|Total current                                                         |  |                          | 1,854  |   |                   |   | 1,888  |  
|                                                                      |  |                          |        |   |                   |   |        |  
|OTHER                                                                 |  |                          |        |   |                   |   |        |  
|Restricted cash - asbestos and insurance related (Note 10)            |  |                          | 167    |   |                   |   | 166    |  
|Restricted cash, securities, and other - Fibreboard (Notes 10 and 11) |  |                          | 1,406  |   |                   |   | 1,395  |  
|Deferred income taxes                                                 |  |                          | 1,303  |   |                   |   | 1,310  |  
|Pension-related assets                                                |  |                          | 322    |   |                   |   | 338    |  
|Goodwill (Note 5)                                                     |  |                          | 138    |   |                   |   | 138    |  
|Investment in affiliates                                              |  |                          | 83     |   |                   |   | 81     |  
|Other noncurrent assets                                               |  |                          | 100    |   |                   |   | 92     |  
|                                                                      |  |                          |        |   |                   |   |        |  
|Total other                                                           |  |                          | 3,519  |   |                   |   | 3,520  |  
|                                                                      |  |                          |        |   |                   |   |        |  
|PLANT AND EQUIPMENT, at cost                                          |  |                          |        |   |                   |   |        |  
|Land                                                                  |  |                          | 70     |   |                   |   | 70     |  
|Buildings and leasehold improvements                                  |  |                          | 796    |   |                   |   | 789    |  
|Machinery and equipment                                               |  |                          | 3,239  |   |                   |   | 3,232  |  
|Construction in progress                                              |  |                          | 99     |   |                   |   | 96     |  
|                                                                      |  |                          |        |   |                   |   |        |  
|                                                                      |  |                          | 4,204  |   |                   |   | 4,187  |  
|Accumulated depreciation                                              |  |                          | (2,269 | ) |                   |   | (2,237 | )
|                                                                      |  |                          |        |   |                   |   |        |  
|Net plant and equipment                                               |  |                          | 1,935  |   |                   |   | 1,950  |  
|                                                                      |  |                          |        |   |                   |   |        |  
|TOTAL ASSETS                                                          |  | $                        | 7,308  |   |                   | $ | 7,358  |  
|                                                                      |  |                          |        |   |                   |   |        |  



The accompanying notes
to consolidated financial statements are an integral part of this statement.



- 3-



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OWENS CORNING AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET (continued)

(unaudited)



|                                                                                                  |  |                          |        |   |                   |   |        |  
|------------------------------------------------------------------------------------------------- |  | ------------------------ | ------ | - | ----------------- | - | ------ | -
|                                                                                                  |  | March 31, 2004           |        |   | December 31, 2003 |  
|                                                                                                  |  | (In millions of dollars) |       
|LIABILITIES AND STOCKHOLDERS DEFICIT                                                             |  |                          |        |   |                   |   |        |  
|CURRENT                                                                                           |  |                          |        |   |                   |   |        |  
|Accounts payable and accrued liabilities                                                          |  | $                        | 714    |   |                   | $ | 767    |  
|Short-term debt                                                                                   |  |                          | 45     |   |                   |   | 44     |  
|Long-term debt - current portion                                                                  |  |                          | 57     |   |                   |   | 53     |  
|                                                                                                  |  |                          |        |   |                   |   |        |  
|Total current                                                                                     |  |                          | 816    |   |                   |   | 864    |  
|                                                                                                  |  |                          |        |   |                   |   |        |  
|LONG-TERM DEBT                                                                                    |  |                          | 63     |   |                   |   | 73     |  
|                                                                                                  |  |                          |        |   |                   |   |        |  
|OTHER                                                                                             |  |                          |        |   |                   |   |        |  
|Pension plan liability                                                                            |  |                          | 699    |   |                   |   | 697    |  
|Other employee benefits liability                                                                 |  |                          | 405    |   |                   |   | 400    |  
|Other                                                                                             |  |                          | 160    |   |                   |   | 143    |  
|                                                                                                  |  |                          |        |   |                   |   |        |  
|Total other                                                                                       |  |                          | 1,264  |   |                   |   | 1,240  |  
|                                                                                                  |  |                          |        |   |                   |   |        |  
|LIABILITIES SUBJECT TO COMPROMISE (Notes 1 and 10)                                                |  |                          | 9,250  |   |                   |   | 9,258  |  
|                                                                                                  |  |                          |        |   |                   |   |        |  
|COMPANY OBLIGATED SECURITIES OF ENTITIES HOLDING SOLELY PARENT DEBENTURES - SUBJECT TO COMPROMISE |  |                          | 200    |   |                   |   | 200    |  
|                                                                                                  |  |                          |        |   |                   |   |        |  
|COMMITMENTS AND CONTINGENCIES (Notes 10 and 11)                                                   |  |                          |        |   |                   |   |        |  
|MINORITY INTEREST                                                                                 |  |                          | 44     |   |                   |   | 51     |  
|                                                                                                  |  |                          |        |   |                   |   |        |  
|STOCKHOLDERS DEFICIT                                                                             |  |                          |        |   |                   |   |        |  
|Common stock                                                                                      |  |                          | 6      |   |                   |   | 6      |  
|Additional paid in capital                                                                        |  |                          | 690    |   |                   |   | 690    |  
|Accumulated deficit                                                                               |  |                          | (4,646 | ) |                   |   | (4,651 | )
|Accumulated other comprehensive loss                                                              |  |                          | (377   | ) |                   |   | (371   | )
|Other                                                                                             |  |                          | (2     | ) |                   |   | (2     | )
|                                                                                                  |  |                          |        |   |                   |   |        |  
|Total stockholders deficit                                                                       |  |                          | (4,329 | ) |                   |   | (4,328 | )
|                                                                                                  |  |                          |        |   |                   |   |        |  
|TOTAL LIABILITIES AND STOCKHOLDERS DEFICIT                                                       |  | $                        | 7,308  |   |                   | $ | 7,358  |  
|                                                                                                  |  |                          |        |   |                   |   |        |  



The accompanying notes
to consolidated financial statements are an integral part of this statement.



- 4 -



---

OWENS CORNING AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS

(unaudited)



|                                                                          |  |                          |       |   |      |   |      |  
|------------------------------------------------------------------------- |  | ------------------------ | ----- | - | ---- | - | ---- | -
|                                                                          |  | Quarter Ended March 31,  |      
|                                                                          |  | 2004                     |       |   | 2003 |  
|                                                                          |  | (In millions of dollars) |      
|NET CASH FLOW FROM OPERATIONS                                             |  |                          |       |   |      |   |      |  
|Net income (loss)                                                         |  | $                        | 5     |   |      | $ | (1   | )
|Reconciliation of net cash flow from operations                           |  |                          |       |   |      |   |      |  
|Noncash items:                                                            |  |                          |       |   |      |   |      |  
|Provision for depreciation and amortization                               |  |                          | 53    |   |      |   | 50   |  
|Provision for impairment of fixed assets                                  |  |                          |      |   |      |   | 28   |  
|Provision (credit) for deferred income taxes                              |  |                          | 6     |   |      |   | (8   | )
|Provision for pension and other employee benefits liability               |  |                          | 28    |   |      |   | 31   |  
|Other                                                                     |  |                          | 9     |   |      |   | 22   |  
|Increase in receivables                                                   |  |                          | (108  | ) |      |   | (97  | )
|Increase in inventories                                                   |  |                          | (44   | ) |      |   | (74  | )
|Decrease in accounts payable and accrued liabilities                      |  |                          | (43   | ) |      |   | (78  | )
|Pension fund contribution                                                 |  |                          | (3    | ) |      |   | (7   | )
|Payments for other employee benefits liability                            |  |                          | (4    | ) |      |   | (8   | )
|Increase in restricted cash, securities, and other - Fibreboard (Note 11) |  |                          | (12   | ) |      |   | (8   | )
|Other                                                                     |  |                          | (13   | ) |      |   | (10  | )
|                                                                          |  |                          |       |   |      |   |      |  
|Net cash flow from operations                                             |  |                          | (126  | ) |      |   | (160 | )
|                                                                          |  |                          |       |   |      |   |      |  
|NET CASH FLOW FROM INVESTING                                              |  |                          |       |   |      |   |      |  
|Additions to plant and equipment                                          |  |                          | (53   | ) |      |   | (26  | )
|Investment in affiliates and subsidiaries, net of cash acquired           |  |                          | (2    | ) |      |   |     |  
|Proceeds from the sale of assets or affiliate (Note 8)                    |  |                          | 6     |   |      |   | 9    |  
|Other                                                                     |  |                          |      |   |      |   | (1   | )
|                                                                          |  |                          |       |   |      |   |      |  
|Net cash flow from investing                                              |  |                          | (49   | ) |      |   | (18  | )
|                                                                          |  |                          |       |   |      |   |      |  
|NET CASH FLOW FROM FINANCING                                              |  |                          |       |   |      |   |      |  
|Other additions to long-term debt                                         |  |                          |      |   |      |   | 1    |  
|Other reductions to long-term debt                                        |  |                          | (5    | ) |      |   | (10  | )
|Net increase in short-term debt                                           |  |                          | 1     |   |      |   | 7    |  
|Subject to compromise (Note 1)                                            |  |                          | (3    | ) |      |   |     |  
|                                                                          |  |                          |       |   |      |   |      |  
|Net cash flow from financing                                              |  |                          | (7    | ) |      |   | (2   | )
|                                                                          |  |                          |       |   |      |   |      |  
|Effect of exchange rate changes on cash                                   |  |                          | (2    | ) |      |   | 6    |  
|                                                                          |  |                          |       |   |      |   |      |  
|NET DECREASE IN CASH AND CASH EQUIVALENTS                                 |  |                          | (184  | ) |      |   | (174 | )
|Cash and cash equivalents at beginning of period                          |  |                          | 1,005 |   |      |   | 875  |  
|                                                                          |  |                          |       |   |      |   |      |  
|CASH AND CASH EQUIVALENTS AT END OF PERIOD                                |  | $                        | 821   |   |      | $ | 701  |  
|                                                                          |  |                          |       |   |      |   |      |  



The accompanying notes
to consolidated financial statements are an integral part of this statement.



- 5 -



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OWENS CORNING AND SUBSIDIARIES

NOTES 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):



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



The Debtors 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 10 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.



- 6 -



---

OWENS CORNING AND SUBSIDIARIES

NOTES 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



As previously disclosed, 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). On April 7, 2004, the United States Senate introduced proposed substitute legislation (S 2290, also known as the Fairness in Asbestos Injury Resolution Act of 2004). References in the following discussion to the FAIR Act refer
to each Bill separately.



If enacted into law, the FAIR Act 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.



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OWENS CORNING AND SUBSIDIARIES

NOTES 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 (the Mandamus Petition) 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. The Third Circuit held a hearing on the Mandamus Petition on December 12, 2003. On December 18, 2003, the Third Circuit issued an order directing the District Court to vacate its October 23,
2003 stay of discovery, proceed with expedited discovery on the recusal motion, and issue a ruling on the recusal motion. On February 2, 2004, the District Court denied the recusal motion. The Third Circuit held a hearing on April 19, 2004 to review
the District Courts ruling.



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 10 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. Owens Corning has filed a motion to dismiss this action. Following a hearing in February 2004, the USBC continued the proceedings in order to allow the plaintiffs to
conduct limited discovery. A pre-trial conference has been set for May 18, 2004.



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 hearing on this matter has been set for May 18, 2004.



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



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OWENS CORNING AND SUBSIDIARIES

NOTES 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 11 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, are expected to be handled through litigation as part of the confirmation process. Owens Corning is unable to predict the outcome of such litigation.



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OWENS CORNING AND SUBSIDIARIES

NOTES 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 11 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.



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OWENS CORNING AND SUBSIDIARIES

NOTES 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 25,000 proofs of claim (including late-filed claims), totaling approximately $16.4 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 review of the filed claims, Owens Corning identified approximately 16,000 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 March 31, 2004, approximately 6,100 of the Objectionable Claims, totaling approximately $3.9 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 $7.9 billion. As of March 31, 2004, approximately 1,000 of these claims, totaling
approximately $0.2 billion, had either been withdrawn by the claimants, disallowed by the Bankruptcy Court, or otherwise resolved. The remaining claims consist of:



| |  | Approximately 2,900 claims, totaling approximately $1.5 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 10 to the Consolidated Financial Statements for additional information concerning asbestos-related liabilities.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Approximately 100 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.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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OWENS CORNING AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



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



| |  | Approximately 5,000 claims, totaling approximately $5.5 billion, alleging rights to payment for financing, environmental, trade debt and other matters (the General
Claims). The Company has 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 $538 million, in connection with taxes (see discussion under the heading Tax Claim in Note 10 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 10 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 $189 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 March 31, 2004.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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 10 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 10 to the Consolidated Financial Statements for additional information concerning asbestos-related liabilities.



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OWENS CORNING AND SUBSIDIARIES

NOTES 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 (the Pre-Petition Credit Facility Action); (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. Certain holders of Owens Corning debt securities have filed a Complaint in Intervention in connection with
the Pre-Petition Credit Facility Action, seeking to assert securities fraud related claims against five subsidiaries of Owens Corning that issued guarantees in connection with the Pre-Petition Credit Facility. The Company has opposed such
intervention. It is expected that such matter will be determined by the Bankruptcy Court in conjunction with the Pre-Petition Credit Facility Action.



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OWENS CORNING AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



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



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 10 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 Official Creditors Committee was named as a defendant in all such lawsuits, solely with respect to the declaratory relief sought. During the first quarter of 2004, the lawsuit against one of the law
firms was dismissed with the consent of the Official Creditors Committee and Bankruptcy Court approval.



By motions filed on or about October 16, 2002, and December 17, 2003, the Debtors sought an order of the Bankruptcy Court staying all of the foregoing litigation pending its disposition in a plan of reorganization.
Pursuant to a ruling of the Bankruptcy Court, all of the foregoing litigation, other than the Pre-Petition Credit Facility Action, has been stayed until the earlier of (i) February 23, 2005, or (ii) 90 days after the confirmation of a plan of
reorganization for Owens Corning. The Pre-Petition Credit Facility Action, 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 March 31, 2004, 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 $550 million, of which $34 million relates to the first quarter of 2004 and $32 million relates to the first quarter of 2003.



At March 31, 2004, the Company had $821 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 March 31, 2004; however, approximately $82 million of the
availability under this credit facility was utilized as a result of the issuance of standby letters of credit and similar uses.



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OWENS CORNING AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



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



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, and cash available from operations, 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 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.



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.



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OWENS CORNING AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



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



OWENS CORNING AND SUBSIDIARIES

DEBTOR-IN-POSSESSION STATEMENT OF INCOME (LOSS)



|                                                  |  |                         |       |   |      |   |     |  
|------------------------------------------------- |  | ----------------------- | ----- | - | ---- | - | --- | -
|                                                  |  | Quarter Ended March 31, |      
|                                                  |  | 2004                    |       |   | 2003 |  
|                                                  |  | (In millions ofdollars) |      
|NET SALES                                         |  | $                       | 1,046 |   |      | $ | 987 |  
|COST OF SALES                                     |  |                         | 924   |   |      |   | 876 |  
|                                                  |  |                         |       |   |      |   |     |  
|Gross margin                                      |  |                         | 122   |   |      |   | 111 |  
|                                                  |  |                         |       |   |      |   |     |  
|OPERATING EXPENSES                                |  |                         |       |   |      |   |     |  
|Marketing and administrative expenses             |  |                         | 100   |   |      |   | 102 |  
|Science and technology expenses                   |  |                         | 10    |   |      |   | 9   |  
|Restructure costs                                 |  |                         |      |   |      |   | 2   |  
|Chapter 11 related reorganization items           |  |                         | 10    |   |      |   | 32  |  
|Other                                             |  |                         | (13   | ) |      |   | (10 | )
|                                                  |  |                         |       |   |      |   |     |  
|Total operating expenses                          |  |                         | 107   |   |      |   | 135 |  
|                                                  |  |                         |       |   |      |   |     |  
|INCOME (LOSS) FROM OPERATIONS                     |  |                         | 15    |   |      |   | (24 | )
|Interest expense                                  |  |                         |      |   |      |   | 1   |  
|Interest income from non-Debtors                  |  |                         | 14    |   |      |   | 14  |  
|                                                  |  |                         |       |   |      |   |     |  
|INCOME (LOSS) BEFORE INCOME TAX EXPENSE (BENEFIT) |  |                         | 29    |   |      |   | (11 | )
|Income tax expense (benefit)                      |  |                         | 26    |   |      |   | (3  | )
|                                                  |  |                         |       |   |      |   |     |  
|NET INCOME (LOSS)                                 |  | $                       | 3     |   |      | $ | (8  | )
|                                                  |  |                         |       |   |      |   |     |  



- 16 -



---

OWENS CORNING AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



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



OWENS CORNING AND SUBSIDIARIES

DEBTOR-IN-POSSESSION BALANCE SHEET



|                                                     |  |                          |        |   |                   |   |        |  
|---------------------------------------------------- |  | ------------------------ | ------ | - | ----------------- | - | ------ | -
|                                                     |  | March 31, 2004           |        |   | December 31, 2003 |  
|                                                     |  | (In millions of dollars) |       
|ASSETS                                               |  |                          |        |   |                   |   |        |  
|CURRENT                                              |  |                          |        |   |                   |   |        |  
|Cash and cash equivalents                            |  | $                        | 498    |   |                   | $ | 645    |  
|Receivables (net of allowance for doubtful accounts) |  |                          | 434    |   |                   |   | 334    |  
|Receivables - non-Debtors                            |  |                          | 1,044  |   |                   |   | 1,032  |  
|Inventories                                          |  |                          | 309    |   |                   |   | 278    |  
|Other current assets                                 |  |                          | 29     |   |                   |   | 31     |  
|                                                     |  |                          |        |   |                   |   |        |  
|Total current                                        |  |                          | 2,314  |   |                   |   | 2,320  |  
|                                                     |  |                          |        |   |                   |   |        |  
|OTHER                                                |  |                          |        |   |                   |   |        |  
|Restricted cash - asbestos and insurance related     |  |                          | 167    |   |                   |   | 166    |  
|Restricted cash, securities, and other  Fibreboard  |  |                          | 1,406  |   |                   |   | 1,395  |  
|Deferred income taxes                                |  |                          | 1,157  |   |                   |   | 1,170  |  
|Pension-related assets                               |  |                          | 241    |   |                   |   | 257    |  
|Goodwill                                             |  |                          | 54     |   |                   |   | 54     |  
|Investment in affiliates                             |  |                          | 26     |   |                   |   | 25     |  
|Investment in non-Debtor subsidiaries                |  |                          | 762    |   |                   |   | 757    |  
|Other noncurrent assets                              |  |                          | 50     |   |                   |   | 47     |  
|                                                     |  |                          |        |   |                   |   |        |  
|Total other                                          |  |                          | 3,863  |   |                   |   | 3,871  |  
|                                                     |  |                          |        |   |                   |   |        |  
|PLANT AND EQUIPMENT, at cost                         |  |                          |        |   |                   |   |        |  
|Land                                                 |  |                          | 39     |   |                   |   | 39     |  
|Buildings and leasehold improvements                 |  |                          | 597    |   |                   |   | 589    |  
|Machinery and equipment                              |  |                          | 2,260  |   |                   |   | 2,253  |  
|Construction in progress                             |  |                          | 80     |   |                   |   | 79     |  
|                                                     |  |                          |        |   |                   |   |        |  
|                                                     |  |                          | 2,976  |   |                   |   | 2,960  |  
|Accumulated depreciation                             |  |                          | (1,581 | ) |                   |   | (1,566 | )
|                                                     |  |                          |        |   |                   |   |        |  
|Net plant and equipment                              |  |                          | 1,395  |   |                   |   | 1,394  |  
|                                                     |  |                          |        |   |                   |   |        |  
|TOTAL ASSETS                                         |  | $                        | 7,572  |   |                   | $ | 7,585  |  
|                                                     |  |                          |        |   |                   |   |        |  



- 17 -



---

OWENS CORNING AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



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



OWENS CORNING AND SUBSIDIARIES

DEBTOR-IN-POSSESSION BALANCE SHEET (continued)



|                                                       |  |                          |        |   |                   |   |        |  
|------------------------------------------------------ |  | ------------------------ | ------ | - | ----------------- | - | ------ | -
|                                                       |  | March 31, 2004           |        |   | December 31, 2003 |  
|                                                       |  | (In millions of dollars) |       
|LIABILITIES AND STOCKHOLDERS DEFICIT                  |  |                          |        |   |                   |   |        |  
|CURRENT                                                |  |                          |        |   |                   |   |        |  
|Accounts payable and accrued liabilities               |  | $                        | 516    |   |                   | $ | 549    |  
|Accounts payable and accrued liabilities - non-Debtors |  |                          | 17     |   |                   |   | 15     |  
|Long-term debt - current portion                       |  |                          | 1      |   |                   |   | 1      |  
|                                                       |  |                          |        |   |                   |   |        |  
|Total current                                          |  |                          | 534    |   |                   |   | 565    |  
|                                                       |  |                          |        |   |                   |   |        |  
|LONG-TERM DEBT                                         |  |                          | 6      |   |                   |   | 6      |  
|                                                       |  |                          |        |   |                   |   |        |  
|OTHER                                                  |  |                          |        |   |                   |   |        |  
|Pension plan liability                                 |  |                          | 581    |   |                   |   | 581    |  
|Other employee benefits liability                      |  |                          | 389    |   |                   |   | 384    |  
|Other                                                  |  |                          | 141    |   |                   |   | 123    |  
|                                                       |  |                          |        |   |                   |   |        |  
|Total other                                            |  |                          | 1,111  |   |                   |   | 1,088  |  
|                                                       |  |                          |        |   |                   |   |        |  
|LIABILITIES SUBJECT TO COMPROMISE                      |  |                          | 9,977  |   |                   |   | 9,985  |  
|                                                       |  |                          |        |   |                   |   |        |  
|STOCKHOLDERS DEFICIT                                  |  |                          |        |   |                   |   |        |  
|Common stock                                           |  |                          | 6      |   |                   |   | 6      |  
|Additional paid in capital                             |  |                          | 690    |   |                   |   | 690    |  
|Accumulated deficit                                    |  |                          | (4,414 | ) |                   |   | (4,417 | )
|Accumulated other comprehensive loss                   |  |                          | (336   | ) |                   |   | (336   | )
|Other                                                  |  |                          | (2     | ) |                   |   | (2     | )
|                                                       |  |                          |        |   |                   |   |        |  
|Total stockholders deficit                            |  |                          | (4,056 | ) |                   |   | (4,059 | )
|                                                       |  |                          |        |   |                   |   |        |  
|TOTAL LIABILITIES AND STOCKHOLDERS DEFICIT            |  | $                        | 7,572  |   |                   | $ | 7,585  |  
|                                                       |  |                          |        |   |                   |   |        |  



-18 -



---

OWENS CORNING AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



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



OWENS CORNING AND SUBSIDIARIES

DEBTOR-IN-POSSESSION STATEMENT OF CASH FLOWS



|                                                                                                                |  |                         |      |   |      |   |      |  
|--------------------------------------------------------------------------------------------------------------- |  | ----------------------- | ---- | - | ---- | - | ---- | -
|                                                                                                                |  | Quarter Ended March 31, |     
|                                                                                                                |  | 2004                    |      |   | 2003 |  
|                                                                                                                |  | (In millions ofdollars) |     
|NET CASH FLOW FROM OPERATIONS                                                                                   |  |                         |      |   |      |   |      |  
|Net income (loss)                                                                                               |  | $                       | 3    |   |      | $ | (8   | )
|Reconciliation of net cash flow from operations                                                                 |  |                         |      |   |      |   |      |  
|Noncash items:                                                                                                  |  |                         |      |   |      |   |      |  
|Provision for depreciation and amortization                                                                     |  |                         | 37   |   |      |   | 37   |  
|Provision for impairment of fixed assets                                                                        |  |                         |     |   |      |   | 28   |  
|Provision (credit) for deferred income taxes                                                                    |  |                         | 9    |   |      |   | (5   | )
|Provision for pension and other employee benefits liabilities                                                   |  |                         | 25   |   |      |   | 28   |  
|Other                                                                                                           |  |                         | 7    |   |      |   | (2   | )
|Increase in receivables and receivables - non-Debtors                                                           |  |                         | (112 | ) |      |   | (109 | )
|Increase in inventories                                                                                         |  |                         | (31  | ) |      |   | (75  | )
|Decrease in accounts payable and accrued liabilities and accounts payable and accrued liabilities - non-Debtors |  |                         | (33  | ) |      |   | (47  | )
|Payments for other employee benefits liabilities                                                                |  |                         | (4   | ) |      |   | (8   | )
|Increase in restricted cash, securities, and other - Fibreboard                                                 |  |                         | (12  | ) |      |   | (8   | )
|Other                                                                                                           |  |                         | 11   |   |      |   | 21   |  
|                                                                                                                |  |                         |      |   |      |   |      |  
|Net cash flow from operations                                                                                   |  |                         | (100 | ) |      |   | (148 | )
|                                                                                                                |  |                         |      |   |      |   |      |  
|NET CASH FLOW FROM INVESTING                                                                                    |  |                         |      |   |      |   |      |  
|Additions to plant and equipment                                                                                |  |                         | (43  | ) |      |   | (16  | )
|Proceeds from the sale of assets or affiliate                                                                   |  |                         |     |   |      |   | 9    |  
|Investment in subsidiaries and affiliates                                                                       |  |                         | (1   | ) |      |   | (1   | )
|                                                                                                                |  |                         |      |   |      |   |      |  
|Net cash flow from investing                                                                                    |  |                         | (44  | ) |      |   | (8   | )
|                                                                                                                |  |                         |      |   |      |   |      |  
|NET CASH FLOW FROM FINANCING                                                                                    |  |                         |      |   |      |   |      |  
|Subject to Compromise                                                                                           |  |                         | (3   | ) |      |   |     |  
|                                                                                                                |  |                         |      |   |      |   |      |  
|Net cash flow from financing                                                                                    |  |                         | (3   | ) |      |   |     |  
|                                                                                                                |  |                         |      |   |      |   |      |  
|NET DECREASE IN CASH AND CASH EQUIVALENTS                                                                       |  |                         | (147 | ) |      |   | (156 | )
|Cash and cash equivalents at beginning of period                                                                |  |                         | 645  |   |      |   | 622  |  
|                                                                                                                |  |                         |      |   |      |   |      |  
|CASH AND CASH EQUIVALENTS AT END OF PERIOD                                                                      |  | $                       | 498  |   |      | $ | 466  |  
|                                                                                                                |  |                         |      |   |      |   |      |  



- 19 -



---

OWENS CORNING AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



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



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



|                                                       |  |                          |       |                   |   |      
|------------------------------------------------------ |  | ------------------------ | ----- | ----------------- | - | -----
|                                                       |  | March 31, 2004           |       | December 31, 2003
|                                                       |  | (In millions of dollars)
|Accounts payable                                       |  | $                        | 212   |                   | $ | 213  
|Accrued interest payable                               |  |                          | 40    |                   |   | 42   
|Debt                                                   |  |                          | 2,893 |                   |   | 2,896
|Income taxes payable                                   |  |                          | 231   |                   |   | 233  
|Reserve for asbestos litigation claims - Owens Corning |  |                          | 3,565 |                   |   | 3,565
|Reserve for asbestos-related claims  Fibreboard       |  |                          | 2,309 |                   |   | 2,309
|                                                       |  |                          |       |                   |   |      
|Total consolidated                                     |  |                          | 9,250 |                   |   | 9,258
|Payables to non-Debtors                                |  |                          | 727   |                   |   | 727  
|                                                       |  |                          |       |                   |   |      
|Total Debtor                                           |  | $                        | 9,977 |                   | $ | 9,985
|                                                       |  |                          |       |                   |   |      



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



|                                    |  |                          |     |   |      |   |     |  
|----------------------------------- |  | ------------------------ | --- | - | ---- | - | --- | -
|                                    |  | Quarter Ended March 31,  |    
|                                    |  | 2004                     |     |   | 2003 |  
|                                    |  | (In millions of dollars) |    
|Professional fees                   |  | $                        | 17  |   |      | $ | 19  |  
|Payroll and compensation            |  |                          | 4   |   |      |   | 7   |  
|Settlement of Asian credit facility |  |                          |    |   |      |   | 18  |  
|Interest income                     |  |                          | (12 | ) |      |   | (12 | )
|Other, net                          |  |                          | 1   |   |      |   |    |  
|                                    |  |                          |     |   |      |   |     |  
|Total                               |  | $                        | 10  |   |      | $ | 32  |  
|                                    |  |                          |     |   |      |   |     |  



- 20 -



---

OWENS CORNING AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



|2. | SEGMENT DATA
|-- | ------------



In the second quarter of 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 March 31, 
|                                             |  | 2004                     |       | 2003
|                                             |  | (In millions of dollars)
|NET SALES                                    |  |                          |       |      |   |      
|Reportable Segments                          |  |                          |       |      |   |      
|Building Materials Systems                   |  |                          |       |      |   |      
|United States                                |  | $                        | 888   |      | $ | 841  
|Europe                                       |  |                          | 3     |      |   | 1    
|Canada and other                             |  |                          | 54    |      |   | 43   
|                                             |  |                          |       |      |   |      
|Total Building Materials Systems             |  |                          | 945   |      |   | 885  
|                                             |  |                          |       |      |   |      
|Composite Solutions                          |  |                          |       |      |   |      
|United States                                |  |                          | 129   |      |   | 122  
|Europe                                       |  |                          | 85    |      |   | 82   
|Canada and other                             |  |                          | 50    |      |   | 44   
|                                             |  |                          |       |      |   |      
|Total Composite Solutions                    |  |                          | 264   |      |   | 248  
|                                             |  |                          |       |      |   |      
|Total reportable segments                    |  | $                        | 1,209 |      | $ | 1,133
|                                             |  |                          |       |      |   |      
|External Customer Sales by Geographic Region |  |                          |       |      |   |      
|United States                                |  | $                        | 1,017 |      | $ | 963  
|Europe                                       |  |                          | 88    |      |   | 83   
|Canada and other                             |  |                          | 104   |      |   | 87   
|                                             |  |                          |       |      |   |      
|NET SALES                                    |  | $                        | 1,209 |      | $ | 1,133
|                                             |  |                          |       |      |   |      



- 21 -



---

OWENS CORNING AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



|2. | SEGMENT DATA (continued)
|-- | ------------------------



|                                                                |  |                          |     |   |      |   |     |  
|--------------------------------------------------------------- |  | ------------------------ | --- | - | ---- | - | --- | -
|                                                                |  | Quarter Ended March 31,  |    
|                                                                |  | 2004                     |     |   | 2003 |  
|                                                                |  | (In millions of dollars) |    
|INCOME BEFORE INCOME TAX EXPENSE                                |  |                          |     |   |      |   |     |  
|Reportable Segments                                             |  |                          |     |   |      |   |     |  
|Building Materials Systems                                      |  |                          |     |   |      |   |     |  
|United States                                                   |  | $                        | 46  |   |      | $ | 67  |  
|Europe                                                          |  |                          |    |   |      |   |    |  
|Canada and other                                                |  |                          | 5   |   |      |   | 3   |  
|                                                                |  |                          |     |   |      |   |     |  
|Total Building Materials Systems                                |  |                          | 51  |   |      |   | 70  |  
|                                                                |  |                          |     |   |      |   |     |  
|Composite Solutions                                             |  |                          |     |   |      |   |     |  
|United States                                                   |  |                          | (1  | ) |      |   | 3   |  
|Europe                                                          |  |                          | (2  | ) |      |   | 3   |  
|Canada and other                                                |  |                          | 9   |   |      |   | 10  |  
|                                                                |  |                          |     |   |      |   |     |  
|Total Composite Solutions                                       |  |                          | 6   |   |      |   | 16  |  
|                                                                |  |                          |     |   |      |   |     |  
|Total reportable segments                                       |  | $                        | 57  |   |      | $ | 86  |  
|                                                                |  |                          |     |   |      |   |     |  
|Geographic Regions                                              |  |                          |     |   |      |   |     |  
|United States                                                   |  | $                        | 45  |   |      | $ | 70  |  
|Europe                                                          |  |                          | (2  | ) |      |   | 3   |  
|Canada and other                                                |  |                          | 14  |   |      |   | 13  |  
|                                                                |  |                          |     |   |      |   |     |  
|Total reportable segments                                       |  | $                        | 57  |   |      | $ | 86  |  
|                                                                |  |                          |     |   |      |   |     |  
|Reconciliation to Consolidated Income Before Income Tax Expense |  |                          |     |   |      |   |     |  
|Restructuring and other charges (Note 8)                        |  | $                        | 5   |   |      | $ | (30 | )
|Chapter 11 related reorganization items (Note 1)                |  |                          | (10 | ) |      |   | (32 | )
|General corporate expense                                       |  |                          | (18 | ) |      |   | (16 | )
|Interest expense, net                                           |  |                          | (1  | ) |      |   | (4  | )
|                                                                |  |                          |     |   |      |   |     |  
|CONSOLIDATED INCOME BEFORE INCOME TAX EXPENSE                   |  | $                        | 33  |   |      | $ | 4   |  
|                                                                |  |                          |     |   |      |   |     |  



- 22 -



---

OWENS CORNING AND SUBSIDIARIES

NOTES 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 period presented for 2003 to
conform to the classifications used in the period presented for 2004.



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 2003 annual report on Form 10-K, as filed with the
Securities and Exchange Commission.



|4. | INVENTORIES
|-- | -----------



Inventories are summarized as follows:



|                         |  |                          |     |   |                   |   |     |  
|------------------------ |  | ------------------------ | --- | - | ----------------- | - | --- | -
|                         |  | March 31, 2004           |     |   | December 31, 2003 |  
|                         |  | (In millions of dollars) |    
|Finished goods           |  | $                        | 390 |   |                   | $ | 362 |  
|Materials and supplies   |  |                          | 139 |   |                   |   | 123 |  
|                         |  |                          |     |   |                   |   |     |  
|FIFO inventory           |  |                          | 529 |   |                   |   | 485 |  
|Excess of FIFO over LIFO |  |                          | (95 | ) |                   |   | (95 | )
|                         |  |                          |     |   |                   |   |     |  
|Total inventories        |  | $                        | 434 |   |                   | $ | 390 |  
|                         |  |                          |     |   |                   |   |     |  



Approximately $149 million and $144
million of total inventories were valued using the LIFO method at March 31, 2004 and December 31, 2003, respectively.



|5. | 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 at least an annual review for impairment using a fair value methodology. The Company conducts its annual review for impairment in the second quarter. The 2003 review resulted in no
change to recorded goodwill.



- 23 -



---

OWENS CORNING AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



|5. | GOODWILL AND OTHER INTANGIBLES (continued)
|-- | ------------------------------------------



There were no changes in goodwill during the quarter ended March 31, 2004. The $138 million balance of goodwill at
March 31, 2004 was made up of $20 million for the Composite Solutions segment and $118 million for the Building Materials Systems segment.



Substantially all of the Companys acquired other intangible assets are subject to amortization. Other intangible asset amortization expense was approximately $1
million in the first quarter of both 2004 and 2003. The Company estimates that amortization of intangibles will be approximately $3 million annually for each of the next five years. The components of other intangible assets are as follows:



|                  |  |                          |  |                      |    |                          |   |   
|----------------- |  | ------------------------ |  | -------------------- | -- | ------------------------ | - | --
|                  |  | March 31, 2004          
|                  |  | WeightedAverage Lives    |  | GrossCarrying Amount |    | Accumulated Amortization
|                  |  | (In millions of dollars)
|Contract-based    |  | 7                        |  | $                    | 6  |                          | $ | 2 
|Technology-based  |  | 13                       |  |                      | 16 |                          |   | 10
|Marketing-related |  | 8                        |  |                      | 14 |                          |   | 11
|                  |  |                          |  |                      |    |                          |   |   
|                  |  |                          |  | $                    | 36 |                          | $ | 23
|                  |  |                          |  |                      |    |                          |   |   



|6. | ACQUISITIONS AND DIVESTITURES OF BUSINESSES
|-- | -------------------------------------------



Acquisitions



In the first quarter 2004, the Company entered into an agreement to purchase the remaining 60% ownership interest in our Mexican affiliate, Vitro-Fibras, S.A. for
approximately $72 million. This purchase was completed on April 2, 2004 and will allow the Company to have a strong operating position in Mexico, as well as supply low-cost manufacturing capacity to service the North American market for both
fiberglass insulation and reinforcements. The Company will account for this transaction under the purchase method of accounting, whereby the assets acquired and liabilities assumed will be recorded at their fair values. During the first quarter of
2004, this affiliate was accounted for under the equity method. The Company will begin consolidating this subsidiary in April 2004.



|7. | WARRANTIES
|-- | ----------



The Company records a liability for warranty obligations at the date the related products are sold. Adjustments are made as new information becomes available. A reconciliation of the warranty liabilities for the
quarter ended March 31, 2004 is as follows:



|                               |  |                         |    |  
|------------------------------ |  | ----------------------- | -- | -
|                               |  | (In millionsof dollars) |   
|Balance at December 31, 2003   |  | $                       | 48 |  
|Amounts accrued                |  |                         | 3  |  
|Settlements of warranty claims |  |                         | (4 | )
|                               |  |                         |    |  
|Balance at March 31, 2004      |  | $                       | 47 |  
|                               |  |                         |    |  



- 24 -



---

OWENS CORNING AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



|8. | RESTRUCTURING OF OPERATIONS AND OTHER CHARGES
|-- | ---------------------------------------------



In the first quarter of 2004, the Company recorded a pretax credit to cost of sales in the Consolidated Statement of Income (Loss) of approximately $5 million. The $5
million credit represents an adjustment to reserves estimated in 2002 for the shutdown costs of a manufacturing facility, which was sold in the first quarter of 2004.



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



|9. | PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS
|-- | -----------------------------------------------



Pension Plans



The Company has several defined benefit pension plans covering most employees. Under the plans, pension benefits are based on an employees years of service and, for certain categories of employees, qualifying
compensation. Company contributions to these pension plans are determined by an independent actuary to meet or exceed minimum funding requirements. The unrecognized cost of retroactive amendments and actuarial gains and losses are amortized over the
average future service period of plan participants expected to receive benefits.



In accordance with Statement of Financial Accounting Standards No. 132 (revised 2003), Employers Disclosures about Pensions and Other Postretirement Benefits, the following table provides information regarding pension
expense recognized during the quarter:



|                                        |  |                          |     |   |          |   |    |       |  |   |      |   |  |          |     |   |       |   |    |   |  |   |     |  
|--------------------------------------- |  | ------------------------ | --- | - | -------- | - | -- | ----- |  | - | ---- | - |  | -------- | --- | - | ----- | - | -- | - |  | - | --- | -
|                                        |  | Quarter Ended March 31,  |    
|                                        |  | 2004                     |     |   | 2003     |  
|                                        |  | U.S.                     |     |   | Non-U.S. |   |    | Total |  |   | U.S. |   |  | Non-U.S. |     |   | Total |  
|                                        |  | (In millions of dollars) |    
|Components of Net Periodic Pension Cost |  |                          |     |   |          |   |    |       |  |   |      |   |  |          |     |   |       |   |    |   |  |   |     |  
|Service cost                            |  | $                        | 6   |   |          | $ | 0  |       |  | $ | 6    |   |  | $        | 4   |   |       | $ |   |   |  | $ | 4   |  
|Interest cost                           |  |                          | 14  |   |          |   | 5  |       |  |   | 19   |   |  |          | 15  |   |       |   | 4  |   |  |   | 19  |  
|Expected return on plan assets          |  |                          | (14 | ) |          |   | (4 | )     |  |   | (18  | ) |  |          | (12 | ) |       |   | (4 | ) |  |   | (16 | )
|Amortization of transition amount       |  |                          |    |   |          |   |   |       |  |   |     |   |  |          | (1  | ) |       |   |   |   |  |   | (1  | )
|Amortization of actuarial loss          |  |                          | 10  |   |          |   | 2  |       |  |   | 12   |   |  |          | 6   |   |       |   | 2  |   |  |   | 8   |  
|                                        |  |                          |     |   |          |   |    |       |  |   |      |   |  |          |     |   |       |   |    |   |  |   |     |  
|Net periodic pension cost               |  | $                        | 16  |   |          | $ | 3  |       |  | $ | 19   |   |  | $        | 12  |   |       | $ | 2  |   |  | $ | 14  |  
|                                        |  |                          |     |   |          |   |    |       |  |   |      |   |  |          |     |   |       |   |    |   |  |   |     |  



Owens Corning expects to contribute
$200 to $250 million in cash to the pension plans during 2004. The contributions are subject to recently enacted legislative changes and approval of the Bankruptcy Court.



- 25 -



---

OWENS CORNING AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



|9. | PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS (continued)
|-- | -----------------------------------------------------------



Postemployment and Postretirement Benefits Other than Pension Plans



The Company and its subsidiaries maintain health care and life insurance benefit plans for
certain retired employees and their dependents. The health care plans in the U.S. are non-funded and pay either (1) stated percentages of covered medically necessary expenses, after subtracting payments by Medicare or other providers and after
stated deductibles have been met, or (2) fixed amounts of medical expense reimbursement.



In accordance with Statement of Financial Accounting Standards No. 132 (revised 2003), Employers Disclosures about Pensions and Other Postretirement Benefits, the following table provides the
components of net periodic benefits cost for aggregated U.S. and Non-U.S. Plans for the quarter:



|                                         |  |                          |    |   |      |   |   
|---------------------------------------- |  | ------------------------ | -- | - | ---- | - | --
|                                         |  | QuarterEnded March 31,  
|                                         |  | 2004                     |    |   | 2003
|                                         |  | (In millions of dollars)
|Components of Net Periodic Benefits Cost |  |                          |    |   |      |   |   
|Service cost                             |  | $                        | 1  |   |      | $ | 3 
|Interest cost                            |  |                          | 7  |   |      |   | 8 
|Amortization of loss                     |  |                          | 2  |   |      |   | 3 
|Amortization of prior service cost       |  |                          | (1 | ) |      |   |  
|                                         |  |                          |    |   |      |   |   
|Net periodic benefits cost               |  | $                        | 9  |   |      | $ | 14
|                                         |  |                          |    |   |      |   |   



On December 8, 2003, President Bush
signed into law the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the MPD Act). The MPD Act expanded Medicare to include for the first time coverage for prescription drugs. Owens Corning sponsors retiree medical
programs and the Company expects that this legislation will eventually reduce the Companys costs for some of these programs. At this point, the Companys investigation into its response to the legislation is preliminary, as we await
guidance from various governmental and regulatory agencies concerning the requirements that must be met to obtain these cost reductions as well as the manner in which such savings should be measured.



Because of various uncertainties related to the Companys response to this legislation
and the appropriate accounting methodology for this event, the Company has elected to defer financial recognition of this legislation until the Financial Accounting Standards Board issues final accounting guidance. As such, measures of the
accumulated postretirement benefits obligation and net periodic postretirement benefits cost included in these financial statements do not reflect the effects of the MPD Act. When issued, that final guidance could require the Company to change
previously reported information. This deferral election is permitted under FASB Staff Position FAS 106-1, Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003.



- 26 -



---

OWENS CORNING AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



|10. | 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.



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



- 27 -



---

OWENS CORNING AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



|10. | CONTINGENT LIABILITIES AND OTHER MATTERS (continued)
|--- | ----------------------------------------------------



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, neither of which have occurred since the Filing. As
a result, Owens Corning has limited information about many of such claims.



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



- 28 -



---

OWENS CORNING AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



|10. | CONTINGENT LIABILITIES AND OTHER MATTERS (continued)
|--- | ----------------------------------------------------



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:



|                                                       |  |                          |     |                              |   |    
|------------------------------------------------------ |  | ------------------------ | --- | ---------------------------- | - | ---
|                                                       |  | 1999                     |     | 2000(through October 4,2000)
|                                                       |  | (In millions of dollars)
|Pre-NSP Settlements                                    |  | $                        | 170 |                              | $ | 51 
|NSP Settlements                                        |  |                          | 570 |                              |   | 538
|Non-NSP Settlements                                    |  |                          | 30  |                              |   | 42 
|Defense, Claims Processing and Administrative Expenses |  |                          | 90  |                              |   | 54 
|                                                       |  |                          |     |                              |   |    
|                                                       |  | $                        | 860 |                              | $ | 685
|                                                       |  |                          |     |                              |   |    



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



Prior to the Petition Date, Owens
Corning deposited certain amounts in escrow accounts to facilitate claims processing under the NSP (Administrative Deposits). Amounts deposited into escrow in Administrative Deposits during a reporting period are included in the payments
shown for NSP Settlements during the period. At March 31, 2004, 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).



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)



- 29 -



---

OWENS CORNING AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



|10. | CONTINGENT LIABILITIES AND OTHER MATTERS (continued)
|--- | ----------------------------------------------------



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 March 31, 2004, 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.



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



- 30 -



---

OWENS CORNING AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



|10. | CONTINGENT LIABILITIES AND OTHER MATTERS (continued)
|--- | ----------------------------------------------------



| |  | 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.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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, 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.



- 31 -



---

OWENS CORNING AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



|10. | CONTINGENT LIABILITIES AND OTHER MATTERS (continued)
|--- | ----------------------------------------------------



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



- 32 -



---

OWENS CORNING AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



|10. | CONTINGENT LIABILITIES AND OTHER MATTERS (continued)
|--- | ----------------------------------------------------



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 March 31, 2004, the approximate balances of the components of Owens Cornings asbestos-related reserve were:



|                                         |  |                         |    
|---------------------------------------- |  | ----------------------- | ---
|                                         |  | Balance                
|                                         |  | (In billionsof dollars)
|Unpaid Final Settlements (NSP and other) |  | $                       | 0.6
|Other Pending and Future Claims          |  |                         | 3.0



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



| |  | The Unpaid Final Settlements component represented the remaining estimated cost for all asbestos personal injury claims pending against Owens Corning which were subject
to final settlement agreements for which releases from claimants were obtained, and under which all other conditions to settlement had been satisfied, as of the Petition Date.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



- 33 -



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OWENS CORNING AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



|10. | CONTINGENT LIABILITIES AND OTHER MATTERS (continued)
|--- | ----------------------------------------------------



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.



As previously disclosed, 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). On April 7, 2004, the United States Senate introduced proposed substitute legislation (S 2290, also known as the Fairness in Asbestos Injury
Resolution Act of 2004). References in the following discussion to the FAIR Act refer to each Bill separately.



If enacted into law, the FAIR Act 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.



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OWENS CORNING AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



|10. | 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.



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OWENS CORNING AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



|10. | 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 March 31, 2004, the remaining Insurance Settlement funds were held in
and invested by the Fibreboard Settlement Trust. As of that date, $1.279 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 11 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 March 31, 2004, these assets were reflected as non-current assets, under the category Restricted cash, securities and other - Fibreboard. See Note 11 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.



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OWENS CORNING AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



|10. | 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(throughOctober 4,2000)
|                                                       |  | (In millionsof dollars)    
|Pre-NSP Settlements                                    |  | $                           | 29 
|NSP Settlements                                        |  |                             | 705
|Non-NSP Settlements                                    |  |                             | 41 
|Defense, Claims Processing and Administrative Expenses |  |                             | 45 
|                                                       |  |                             |    
|                                                       |  | $                           | 820
|                                                       |  |                             |    



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



Reserve



Owens Corning estimates a
reserve for Fibreboard in accordance with generally accepted accounting principles to reflect asbestos-related liabilities. As described in Item A above, this reserve was increased in the third quarter of 2002 through a charge to income of $975
million. As of March 31, 2004, 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



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OWENS CORNING AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



|10. | 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 March 31, 2004, the approximate
balances of the components of the Fibreboard asbestos-related reserve were:



|                                         |  |                                  |    
|---------------------------------------- |  | -------------------------------- | ---
|                                         |  | Balance (In billions of dollars)
|Unpaid Final Settlements (NSP and other) |  | $                                | 0.4
|Other Pending and Future Claims          |  |                                  | 1.9



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.



- 38 -



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OWENS CORNING AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



|10. | 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). On April 7, 2004, the United States Senate introduced proposed substitute legislation (S 2290, also known as the Fairness in Asbestos Injury Resolution Act of 2004). References in the
following discussion to the FAIR Act refer to each Bill separately.



If enacted into law, the FAIR Act 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 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 Supreme Court of Mississippi issued an opinion upholding the
dismissal on March 18, 2004.



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. The proceeding remains stayed.



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OWENS CORNING AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



|10. | CONTINGENT LIABILITIES AND OTHER MATTERS (continued)
|--- | ----------------------------------------------------



Insurance



As of March 31, 2004, 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. On March 9, 2004, the Court granted class
certification as to those claims relating to written representations but denied certification as to claims relating to alleged oral representations. Owens Corning believes that the claim is without merit.



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OWENS CORNING AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



|10. | 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 defendants have filed a motion to dismiss the action, and the matter is fully briefed. Owens Corning 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. 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. On January 23, 2004, the USBC issued an order staying the New York action until June 21, 2004. Owens Corning believes that the claim is without merit.



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. In October 2003,
the SL Plaintiffs filed a motion to dismiss Owens Cornings counterclaim and, in November 2003, the SL Plaintiffs filed a motion to dismiss the adversary proceeding by the two officers. Hearings on both motions to dismiss were held on January
23, 2004. The USBC denied the motion to dismiss Owens Cornings counterclaim and deferred action on the other motion to dismiss. Subsequently, the SL Plaintiffs and the two officers agreed to a dismissal of the Ohio action and a refiling in the
USBC. As a result, all such proceedings are now pending in the USBC. Owens Corning believes that the claims of the SL Plaintiffs and the claims of ServiceLanes Chapter 7 trustee are without merit.



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OWENS CORNING AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



|10. | CONTINGENT LIABILITIES AND OTHER MATTERS (continued)
|--- | ----------------------------------------------------



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.



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 25,000 proofs of claim (including the claims described below under the headings PBGC Claim and Tax Claim), totaling approximately $16.4 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 $538 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.



- 42 -



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OWENS CORNING AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



|10. | 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 (the Pre-Petition Credit Facility Action); (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. Certain holders of Owens Corning debt securities have filed a Complaint in Intervention in connection with
the Pre-Petition Credit Facility Action, seeking to assert securities fraud related claims against five subsidiaries of Owens Corning that issued guarantees in connection with the Pre-Petition Credit Facility. The Company has opposed such
intervention. It is expected that such matter will be determined by the Bankruptcy Court in conjunction with the Pre-Petition Credit Facility Action.



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 10 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



- 43 -



---

OWENS CORNING AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



|10. | CONTINGENT LIABILITIES AND OTHER MATTERS (continued)
|--- | ----------------------------------------------------



agreements were about to expire. The Official Creditors Committee was named as a defendant in all such lawsuits, solely with respect to the declaratory
relief sought. During the first quarter of 2004, the lawsuit against one of the law firms was dismissed with the consent of the Official Creditors Committee and Bankruptcy Court approval.



By motions filed on or about October 16, 2002, and December 17, 2003, the Debtors sought an
order of the Bankruptcy Court staying all of the foregoing litigation pending its disposition in a plan of reorganization. Pursuant to a ruling of the Bankruptcy Court, all of the foregoing litigation, other than the Pre-Petition Credit Facility
Action, has been stayed until the earlier of (i) February 23, 2005, or (ii) 90 days after the confirmation of a plan of reorganization for Owens Corning. The Pre-Petition Credit Facility Action, previously scheduled for trial before the District
Court commencing in June 2003, has been continued indefinitely by the Court.



LARDOISE, FRANCE MANUFACTURING FACILITY



In the fourth quarter of 2003, the Company experienced a flood at its LArdoise, France manufacturing facility. This facility is insured for property damage and business interruption losses relating to such events, subject to a $5
million deductible (which was expensed in 2003) and applicable policy limits. The Company estimates it has incurred, or will incur, a total of $50 to $60 million of property damage costs and business interruption losses associated with the
LArdoise flood, which the Company believes will be substantially covered by insurance. In the first quarter of 2004, the Company recorded approximately $10 million in receivables for property damage costs, offset by a $10 million insurance
advance. In addition, approximately $6 million of business interruption costs were expensed in the quarter, and the Company also incurred approximately $4 million in capital expenditures, related to the flood. Should the expected insurance
recoveries not be received, they could have a material adverse impact on the Composite Solutions business. Also, the timing of any recoveries may result in expenses being taken and capital expenditures recorded in periods before the insurance
receipts are recorded or received.



|11. | FIBREBOARD SETTLEMENT TRUST
|--- | ---------------------------



Under the Insurance Settlement described in Note 10 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 March 31, 2004, 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.



- 44 -



---

OWENS CORNING AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



|11. | FIBREBOARD SETTLEMENT TRUST (continued)
|--- | ---------------------------------------



General Accounting Treatment



The assets of the Trust are comprised of cash and marketable securities (collectively, the Trust Assets) and, with
Fibreboards Undistributed Administrative Deposits, are reflected on Owens Cornings consolidated balance sheet as restricted assets. At March 31, 2004, 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 10, Item B, to the Consolidated Financial
Statements). As of March 31, 2004, these liabilities were one of the items included in Owens Cornings consolidated balance sheet under the category Liabilities Subject to Compromise. For periods prior to the Petition Date, they
were reflected as current or other liabilities (depending on the period in which payment was expected) under the category Asbestos-related liabilities - Fibreboard. At March 31, 2004, 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. 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). 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 March 31, 2004 and 2003



During the first quarter of 2004 and 2003, Trust Assets generated
interest/dividend earnings of approximately $15 million and $14 million, respectively. These amounts were recorded in Chapter 11 related reorganization items in the Consolidated Statement of Income (Loss).



At March 31, 2004 and 2003, the fair market value adjustment for those securities designated
as trading securities resulted in an unrealized loss of approximately $3 million and $5 million, respectively, recorded as a change in the carrying amount of the assets on the Consolidated Balance Sheet. The $3 million loss during the first quarter
of 2004 and the $5 million loss during the first quarter of 2003 were recorded as Chapter 11 related reorganization items on the Consolidated Statement of Income (Loss).



- 45 -



---

OWENS CORNING AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



|11. | FIBREBOARD SETTLEMENT TRUST (continued)
|--- | ---------------------------------------



As a result of the Filing, there were no payments for asbestos litigation claims from the Trust during the quarter
ended March 31, 2004 or 2003. No payments were made for taxes during the quarter ended March 31, 2004 or 2003. The sale of securities resulted in a realized loss of approximately $1 million during each of the first quarters of 2004 and 2003.
Realized gains or losses from the sale of securities are reflected on the Companys financial statements in the same manner as actual returns on Trust Assets, described above.



At March 31, 2004, the fair value of Trust Assets and Administrative Deposits was $1.406 billion, which was comprised of Trust Assets of
$1.279 billion of marketable securities and Administrative Deposits of $127 million.



The table below summarizes Trust and Administrative Deposits activity for the three months ended March 31, 2004:



|                                                               |  |                          |       |   |                        |   |                 |  |   |               |   |  |       |    |                |  |   |   |  |   |       |  
|-------------------------------------------------------------- |  | ------------------------ | ----- | - | ---------------------- | - | --------------- |  | - | ------------- | - |  | ----- | -- | -------------- |  | - | - |  | - | ----- | -
|                                                               |  | Balance 12/31/03         |       |   | Interest and Dividends |   | Unrealized Loss |  |   | Realized Loss |   |  | Other |    | Balance3/31/04 | 
|                                                               |  | (In millions of dollars) |      
|Assets                                                         |  |                          |       |   |                        |   |                 |  |   |               |   |  |       |    |                |  |   |   |  |   |       |  
|Trust Assets:                                                  |  |                          |       |   |                        |   |                 |  |   |               |   |  |       |    |                |  |   |   |  |   |       |  
|Marketable securities - trading                                |  | $                        | 1,268 |   |                        | $ | 15              |  | $ | (3            | ) |  | $     | (1 | )              |  | $ |  |  | $ | 1,279 |  
|Administrative Deposits                                        |  |                          | 127   |   |                        |   |                |  |   |              |   |  |       |   |                |  |   |  |  |   | 127   |  
|                                                               |  |                          |       |   |                        |   |                 |  |   |               |   |  |       |    |                |  |   |   |  |   |       |  
|Total assets                                                   |  | $                        | 1,395 |   |                        | $ | 15              |  | $ | (3            | ) |  | $     | (1 | )              |  | $ |  |  | $ | 1,406 |  
|                                                               |  |                          |       |   |                        |   |                 |  |   |               |   |  |       |    |                |  |   |   |  |   |       |  
|Liabilities                                                    |  |                          |       |   |                        |   |                 |  |   |               |   |  |       |    |                |  |   |   |  |   |       |  
|Accounts payable                                               |  | $                        | 19    |   |                        | $ |                |  | $ |              |   |  | $     |   |                |  | $ |  |  | $ | 19    |  
|Asbestos litigation claims                                     |  |                          | 2,309 |   |                        |   |                |  |   |              |   |  |       |   |                |  |   |  |  |   | 2,309 |  
|                                                               |  |                          |       |   |                        |   |                 |  |   |               |   |  |       |    |                |  |   |   |  |   |       |  
|Total Trust liabilities                                        |  |                          | 2,328 |   |                        |   |                |  |   |              |   |  |       |   |                |  |   |  |  |   | 2,328 |  
|Liabilities in excess of assets                                |  |                          | (933  | ) |                        |   | 15              |  |   | (3            | ) |  |       | (1 | )              |  |   |  |  |   | (923  | )
|                                                               |  |                          |       |   |                        |   |                 |  |   |               |   |  |       |    |                |  |   |   |  |   |       |  
|Total Trust liabilities net of liabilities in excess of assets |  | $                        | 1,395 |   |                        | $ | 15              |  | $ | (3            | ) |  | $     | (1 | )              |  | $ |  |  | $ | 1,406 |  
|                                                               |  |                          |       |   |                        |   |                 |  |   |               |   |  |       |    |                |  |   |   |  |   |       |  



- 46 -



---

OWENS CORNING AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



|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 quarters ended March
31, 2004 and 2003 was not material.



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 March 31, |    
|                                                                                                                                    |  | 2004                    |     | 2003 |  
|Net income (loss), as reported                                                                                                      |  | $                       | 5   |      | $ | (1    | )
|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)                                                                                                         |  | $                       | 5   |      | $ | (2    | )
|                                                                                                                                    |  |                         |     |      |   |       |  
|Basic net income (loss) per share                                                                                                   |  |                         |     |      |   |       |  
|As reported                                                                                                                         |  | $                       | .09 |      | $ | (0.02 | )
|Pro forma                                                                                                                           |  |                         | .09 |      |   | (0.03 | )
|Diluted net income (loss) per share                                                                                                 |  |                         |     |      |   |       |  
|As reported                                                                                                                         |  | $                       | .09 |      | $ | (0.02 | )
|Pro forma                                                                                                                           |  |                         | .09 |      |   | (0.03 | )



- 47 -



---

OWENS CORNING AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



|13. | 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 March 31, |       
|                                                                                                                           |  | 2004                    |        | 2003 |  
|Net income (loss) used for basic and diluted earnings per share (millions)                                                 |  | $                       | 5      |      | $ | (1     | )
|                                                                                                                           |  |                         |        |      |   |        |  
|Weighted-average number of shares outstanding used for basic earnings per share (thousands)                                |  |                         | 55,291 |      |   | 55,103 |  
|Non-vested restricted shares (thousands)                                                                                   |  |                         | 52     |      |   |       |  
|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) |  |                         | 59,933 |      |   | 55,103 |  
|                                                                                                                           |  |                         |        |      |   |        |  



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



|14. | COMPREHENSIVE INCOME
|--- | --------------------



The Companys comprehensive loss for the quarter ended March 31, 2004 was $1 million, and the comprehensive income for the quarter ended March 31, 2003 was $7 million. The Companys comprehensive income
(loss) 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.



|15. | INCOME TAXES
|--- | ------------



The Companys effective tax rate for the first quarter of 2004 was 82%. The Company currently projects that its effective tax rate for the full year 2004 will be 49%, compared to 56% for the full year 2003. The
effective rates in the first quarter 2004 and for the full years 2004 and 2003 reflect reserves associated with the deductibility of Chapter 11 related reorganization expenses.



- 48 -



---

OWENS CORNING AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



|16. | 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.



In December 2003, the Financial Accounting Standards Board issued a revised Interpretation No. 46, Consolidation of Variable Interest Entities, an interpretation of ARB No. 51, (FIN 46R). FIN 46R requires the consolidation of
entities in which an enterprise absorbs a majority of the entitys expected losses, receives a majority of the entitys expected residual returns, or both, as a result of ownership, contractual or other financial interests in the entity.
Currently entities are generally consolidated by an enterprise when it has a controlling financial interest through ownership of a majority voting interest in the entity. The provisions of FIN 46R are generally effective for existing (prior to
February 1, 2003) variable interest relationships of a public entity no later than the end of the first reporting period that ends



- 49 -



---

OWENS CORNING AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



|16. | ACCOUNTING PRONOUNCEMENTS (continued)
|--- | -------------------------------------



after March 15, 2004. However, prior to the required application of this interpretation a public entity that is not a small business issuer shall apply FIN
46R to those entities that are considered to be special-purpose entities no later than the end of the first reporting period that ends after December 15, 2003. The Company applied the portion of FIN 46R that is applicable to special purpose entities
effective December 31, 2003, with no material effects, and applied the remainder of FIN 46R to its first quarter 2004 financial statements with no material effects.



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.



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.



- 50 -



---

|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. References in this Report to the Consolidated Financial
Statements refer to the Consolidated Financial Statements included in this Report.)



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:



| |  | competitive factors
| | - | -------------------



| |  | pricing pressures
| | - | -----------------



| |  | availability and cost of energy and materials
| | - | ---------------------------------------------



| |  | construction activity
| | - | ---------------------



| |  | interest rate movements
| | - | -----------------------



| |  | issues involving implementation of new business systems
| | - | -------------------------------------------------------



| |  | achievement of expected cost reductions and/or productivity improvements
| | - | ------------------------------------------------------------------------



| |  | developments in and the outcome of the Chapter 11 proceedings described below
| | - | -----------------------------------------------------------------------------



| |  | general economic and political conditions, including new legislation
| | - | --------------------------------------------------------------------



| |  | foreign exchange fluctuations
| | - | -----------------------------



| |  | the success of research and development activities
| | - | --------------------------------------------------



| |  | difficulties or delays in manufacturing
| | - | ---------------------------------------



| |  | labor disputes
| | - | --------------



OVERVIEW



Chapter 11
Proceedings



October 5, 2003 marked the third anniversary of the
Companys filing for relief under Chapter 11 of the United States Bankruptcy Code. Since the date of our filing, the Company has worked diligently to separate the management of its business operations from the management of the Chapter 11
process. We have been successful in that regard.



Our strategy for managing the
Chapter 11 process has been to steadily advance our case while attempting to facilitate a consensual Plan of Reorganization that all creditors would support (Consensual Plan). We believe that a Consensual Plan would allow us to emerge
from Chapter 11 earlier than our current track while still maximizing the value of our estate for all creditors.



Unfortunately, we have been unable to reach a Consensual Plan to date. Absent a Consensual Plan, we continue to move forward with a Plan of Reorganization that is
co-sponsored by the Official Committee of Asbestos Claimants and the Legal Representative for the class of future asbestos claimants in our case. Our current Plan of Reorganization is described in more detail below.



- 51 -



---

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



There are three primary factors that have thus far prevented us from reaching a Consensual Plan with our Creditors:



|(1) | First, the holders of our bank debt believe that our Plan of Reorganization should not be conditioned upon substantive consolidation. They believe that certain guarantees provided
to them by subsidiaries of the Company (including several that currently are not Debtors) should allow them to receive a higher recovery than other creditors. Many of the Companys other creditors believe that substantive consolidation is
appropriate. Judge Wolin held a lengthy hearing on the substantive consolidation issue in 2003, but he has not yet issued his decision.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) | The second factor relates to proposed asbestos reform legislation (the FAIR Act), in the form of both a bill that has been pending for some time and substitute
legislation introduced in April 2004. The Companys non-asbestos creditors believe that this legislation would reduce the asbestos liability owed by the Company, and would therefore potentially increase the recoveries of all other creditors.
While Congress has not acted on the FAIR Act, as long as it remains possible that the FAIR Act could be enacted into law, it will likely remain a factor in the negotiations among our various creditor groups.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(3) | The third factor is the significant disagreement as to the value of the Companys current and future asbestos liability. Our Plan of Reorganization provides that the 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. Our non-asbestos creditors have indicated that they
believe that the amount of such liability is significantly lower than $16 billion. The determination of the value of the aggregate asbestos liability could significantly impact the relative recoveries of the parties.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



We believe that the uncertainty surrounding these three factors, among others, made it
difficult for all of our creditors to reach a Consensual Plan to date. Without a Consensual Plan, our only alternative is to proceed with a Plan of Reorganization that is supported by some, but not all, of our creditors. As a consequence, in our
view, certain of the creditors opposing our plan have filed various challenges, each of which is described in more detail below.



As those challenges are resolved, we will be positioned to continue making progress toward our emergence from Chapter 11. Without a Consensual Plan, however, we believe
that an emergence from Chapter 11 during 2004 can not happen.



We will continue
to work hard to manage the business operations of the Company without distraction from the Chapter 11 process.



- 52 -



---

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



Results of Operations



In the first quarter of 2004, the Companys net sales and net income increased from the comparable period in the prior year. Management
believes that actions taken in early 2004 will lead to improvement in the performance of the operations and growth of the business in the coming years.



In the second quarter of 2003, the leadership of the Company launched a major company-wide safety initiative, asking all employees to make an unconditional commitment to
working safely. This commitment to safety arose from the fact that in late 2002 and early 2003, several employees suffered severe injuries at work, and we perceived that our safety improvement had begun to plateau. As a result of this major
initiative, we are pleased to report a 35% reduction in recordable injuries in first quarter 2004 compared to the prior year.



The Companys revenue for the first quarter was $1.209 billion, a 7% improvement from 2003 first quarter revenue of $1.133 billion. As noted in Results of Operations
below, income from operations for the quarter ended March 31, 2004 was $34 million, compared to $8 million for the quarter ended March 31, 2003. However, because of the nature of certain of the costs and expenses that impact reported income from
operations, management does not find it to be the most useful financial measure of the Companys on-going operational performance. Rather, when management reviews the Companys year-to-year operational performance, we typically look at
income from operations excluding Chapter 11 related reorganization items, restructuring and other charges, and provision (credit) for asbestos litigation claims (recoveries). To help understand that measure of on-going operational performance, you
can refer to the segmental data appearing in Note 2 to the Consolidated Financial Statements. Using that data, we would typically compare quarter-to-quarter operations on the basis of income before income tax expense on a total reportable segment
basis reduced only by general corporate expense. On that basis, the Companys first quarter 2004 performance declined approximately 44% versus the first quarter 2003, in large part reflecting higher delivery, energy and material costs and the
impact of lower pricing in some product lines, partially offset by stronger volumes. Cash flow from operations was negative during the first quarter of both years, reflecting normal seasonal business trends.



Activities in 2004 that are helping to position us for improved future performance include:



| |  | The continued investment in capacity to support our North American insulation sales. Specifically, the Company announced capacity expansions in response to the needs of the
Commercial and Industrial Insulation market resulting from a production disruption at one of our competitors plants.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | On April 2, 2004, the Company purchased the outstanding shares of our Mexican joint venture, Vitro-Fibras, S.A. This purchase will allow us to have a strong operating position in
Mexico, as well as supply low-cost manufacturing capacity to service the North American market for both fiberglass insulation and reinforcements.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Continued investment in the expansion and commercialization of the Companys residential roofing product lines in North America, in particular, expansion of our capacity for
servicing the market for laminated shingles.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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|ITEM 2. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
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In the first quarter of 2004, Building Materials markets were strong as the result of a continued attractive interest
rate environment for mortgages and refinancing, which drove strong new residential construction and remodeling markets. Although sales volumes were up, margins were impacted by higher delivery, energy and material costs, and lower prices in some
product lines. Our outlook for the North American Building Materials markets is that they will continue strong through most of 2004.



In Composite Solutions, the overall market continued to experience below historical average growth rates. Weak global growth for composites over the prior two years
created an over-capacity condition in the industry, which resulted in continued pricing pressure. Although sales volumes in the first quarter of 2004 increased over the prior years first quarter, lower prices and higher operating costs put
pressure on Composites margins. In addition, as described below, our Composites business continues to incur costs related to a major flood of our LArdoise, France manufacturing facility in the fourth quarter of 2003. Our challenges in
this business continue to be both market related and operational. We believe that 2004 represents an important year for continued progress in the performance of our Composites business.



Regarding the flood of our LArdoise, France manufacturing plant, this facility is insured for property damage and business
interruption losses relating to such events, subject to a $5 million deductible (which was charged to expense in 2003) and applicable policy limits. The Company estimates it has incurred, or will incur, a total of $50 to $60 million of property
damage costs and business interruption losses associated with the LArdoise flood, which the Company believes will be substantially covered by insurance. In the first quarter of 2004, the Company recorded approximately $10 million in
receivables for property damage costs, offset by a $10 million insurance advance. In addition, approximately $6 million of business interruption costs were expensed in the quarter, and the Company also incurred approximately $4 million in capital
expenditures, related to the flood. Should the expected insurance recoveries not be received, they could have a material adverse impact on the Composite Solutions business. Also, the timing of any recoveries may result in expenses being taken and
capital expenditures recorded in periods before the insurance receipts are recorded or received.



Looking ahead, we are somewhat optimistic about the U.S. economy for the remainder of 2004. Our businesses are sensitive to interest rates in North America as they have a significant impact on new residential
construction, residential remodeling markets, and automotive markets, which are major end-use markets for many of our products. While the recent low interest rate environment is advantageous to our businesses, an environment of rising
interest rates would create a concern for us as we look ahead.



Our goals for
the remainder of 2004 call for major progress in our unconditional commitment to working safely. We also intend to continue efforts for focusing all the employees of the Company on serving our customers and meeting the needs of our markets. Both our
Building Materials and Composite Solutions businesses will be focused on improving gross margin performance.



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



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



The Debtors 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 10 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.



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



As previously disclosed, 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). On April 7, 2004, the United States Senate introduced proposed substitute legislation (S 2290, also known as the Fairness in Asbestos Injury Resolution Act of 2004). References in the following discussion to the FAIR Act refer
to each Bill separately.



If enacted into law, the FAIR Act 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.



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|ITEM 2. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
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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 (the Mandamus Petition) 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. The Third Circuit held a hearing on the Mandamus Petition on December 12, 2003. On December 18, 2003, the Third Circuit issued an order directing the District Court to vacate its October 23,
2003 stay of discovery, proceed with expedited discovery on the recusal motion, and issue a ruling on the recusal motion. On February 2, 2004, the District Court denied the recusal motion. The Third Circuit held a hearing on April 19, 2004 to review
the District Courts ruling.



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 10 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. Owens Corning has filed a motion to dismiss this action. Following a hearing in February 2004, the USBC continued the proceedings in order to allow the plaintiffs to
conduct limited discovery. A pre-trial conference on this matter has been set for May 18, 2004.



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 hearing on this matter has been set for May 18, 2004.



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



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|ITEM 2. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
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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 11 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, are expected to be handled through litigation as part of the confirmation process. Owens Corning is unable to predict the outcome of such litigation.



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|ITEM 2. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
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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 11 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.



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|ITEM 2. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
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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 25,000 proofs of claim (including late-filed claims), totaling approximately $16.4 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 review of the filed claims, Owens Corning identified approximately 16,000 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 March 31, 2004, approximately 6,100 of the Objectionable Claims, totaling approximately $3.9 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 $7.9 billion. As of March 31, 2004, approximately 1,000 of these claims, totaling
approximately $0.2 billion, had either been withdrawn by the claimants, disallowed by the Bankruptcy Court, or otherwise resolved. The remaining claims consist of:



| |  | Approximately 2,900 claims, totaling approximately $1.5 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 10 to the Consolidated Financial Statements for additional information concerning asbestos-related liabilities.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Approximately 100 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.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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|ITEM 2. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
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| |  | Approximately 5,000 claims, totaling approximately $5.5 billion, alleging rights to payment for financing, environmental, trade debt and other matters (the General
Claims). The Company has 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 $538 million, in connection with taxes (see discussion under the heading Tax Claim in Note 10 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 10 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 $189 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 March 31, 2004.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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 10 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 10 to the Consolidated Financial Statements for additional information concerning asbestos-related liabilities.



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



Sales and Profitability for the Quarter Ended March 31, 2004 and 2003



NET SALES



Net sales for the quarter ended March 31, 2004 were $1.209 billion, a 7% increase from the
2003 level of $1.133 billion. In Building Materials, sales were up 7%, reflecting volume increases due to growth in the North American housing and remodeling markets partially offset by lower pricing in some product lines. In Composite Solutions,
sales were up 6% from last year, reflecting increased volume in our core business and a positive effect from foreign currency exchange rates. Composite material pricing was lower than in the first quarter 2003, generally as a result of lower
industry capacity utilization and competitive pressures.



Sales outside the
United States represented 16% of total sales for the quarter ended March 31, 2004, compared to 15% during the same time period in 2003. The increase was primarily attributable to the impact of favorable changes in foreign currency exchange rates in
2004, and the impact of selling our U.S.-based metal systems assets and the exiting of other U.S.-based product lines in 2003.



GROSS MARGIN



Gross margins for the quarters ended March 31, 2004 and 2003 were 14% of net sales. The results for the quarter ended March 31, 2004 reflect business interruption costs
of $6 million associated with the flood in LArdoise, France, almost entirely offset by a $5 million credit relating to the reduction in the estimated shut down costs of a manufacturing facility, which was sold in the first quarter 2004. The
gross margin results for the quarter ended March 31, 2003 reflect charges of $28 million to cost of sales, representing additional write-downs of assets in the Building Materials segment to net realizable value prior to their eventual sale during
the year.



After eliminating the impact of the charges or credits referenced
above, gross margin as a percent of net sales in 2004 decreased from 2003 as a result of higher delivery, energy and material costs, and lower pricing in some product lines, partially offset by stronger volumes.



MARKETING AND ADMINISTRATIVE EXPENSES



Marketing and administrative expenses were approximately the same level, $115 million during
the quarter ended March 31, 2004 and $114 million during the quarter ended March 31, 2003, in spite of a 7% increase in net sales in 2004.



INCOME FROM OPERATIONS



Income from operations was $34 million for the quarter ended March 31, 2004, compared to $8 million in the first quarter 2003. The increase was primarily attributable to
lower charges related to Chapter 11 reorganization items, as 2003 included $18 million in costs associated with restructuring an Asian credit facility. Offsetting the increase were lower gains on foreign currency exchange transactions and lower
gains on sales of assets compared to the first quarter of 2003.



- 62 -



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



INCOME TAXES



The Companys effective tax rate for the first quarter of 2004 was 82%. The Company currently projects that its effective tax rate for
the full year 2004 will be 49%, compared to 56% for the full year 2003. The effective rates in the first quarter 2004 and for the full years 2004 and 2003 reflect reserves associated with the deductibility of Chapter 11 related reorganization
expenses.



NET INCOME



For the quarter ended March 31, 2004, Owens Corning reported net income of $5 million, or
$.09 per share, compared to a net loss of $1 million, or ($0.02) per share, for the first quarter of the prior year. The increase in 2004 was primarily due to the factors described above.



As a result of the Filing, contractual interest expense has not been accrued or recorded on pre-petition debt of the Debtors since the
Petition Date. From the Petition Date through March 31, 2004, 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
$550 million, of which $34 million relates to the first quarter of 2004 and $32 million relates to the first quarter of 2003. (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, which is ongoing, the Company anticipates that additional restructuring and similar charges, including asset impairment and wind-up costs, may be identified and recorded in future periods. 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.



In the first quarter of 2004, the
Company recorded a pretax credit to cost of sales in the Consolidated Statement of Income (Loss) of approximately $5 million. The $5 million credit represents an adjustment to reserves estimated in 2002 for the shutdown costs of a manufacturing
facility, which was sold in the first quarter of 2004.



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



- 63 -



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



LIQUIDITY, CAPITAL RESOURCES AND OTHER RELATED MATTERS



Cash flow from operations was negative $126 million for the quarter ended March 31, 2004,
versus negative $160 million for the quarter ended March 31, 2003. The decrease in negative cash flow from operations compared to the prior year was primarily driven by lower inventory build and smaller reductions in accounts payable and accrued
liabilities in 2004.



At March 31, 2004, our net working capital was $1.038
billion and we had a current ratio of 2.27, compared to $1.024 billion and 2.19, respectively, at December 31, 2003. The changes in net working capital and current ratio reflect normal seasonal trends.



Investing activities consumed $49 million of cash during the quarter ended March 31, 2004,
compared to $18 million during the quarter ended March 31, 2003. The change in net cash flow from investing activities was primarily attributable to increased spending for additions to plant and equipment.



Spending for capital and investments was $53 million in the first quarter of 2004 compared to
$26 million in the first quarter of 2003. We anticipate that 2004 spending for capital and investments will be approximately $270 million, substantially all of which is uncommitted. We expect that these expenditures will be funded from the
Companys operations and existing cash on hand. In addition, in April 2004, the Company completed the acquisition of the remaining 60% ownership interest in our Mexican affiliate, Vitro-Fibras, S.A. for approximately $72 million. The Company
also expects to make certain expenditures in connection with the flood of its LArdoise, France manufacturing facility that it expects will be substantially reimbursed by insurance.



At March 31, 2004, the Company had $821 million of Cash and Cash Equivalents as compared to $1.005 billion at December 31, 2003. The
decrease primarily reflects negative cash flow from operations, as a result of seasonal working capital trends, and additions to plant and equipment.



At March 31, 2004, we had $2.893 billion of debt subject to compromise and $165 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, 2003, we had $2.896 billion of debt subject to compromise and $170 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).



The
Company has significant liabilities related to pension plans for its employees. The Company expects to make contributions to the pension plans in the range of $200 million to $250 million in 2004. The contributions will be made from the
Companys current cash balance and cash generated in the future. The Companys pension related assets increased to $332 million at March 31, 2004 from $89 million at March 31, 2003, primarily due to contributions to the pension plans and
return on plan assets, partially offset by additional service costs, interest cost accrued and amortization of prior actuarial losses. The Companys recorded long term pension plan liability increased to $699 million at March 31, 2004 from $511
million at March 31, 2003. 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.



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|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 March 31, 2004; however, approximately $82 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 affiliates.



The Company believes, based on information currently available to it, that its cash and cash equivalents, and cash available from operations, 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 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.



OFF BALANCE SHEET ARRANGEMENTS



The Company enters into certain off balance sheet arrangements in the ordinary course of
business, such as securitization of accounts receivable, operating leases, and guarantees with respect to unconsolidated affiliates and other entities. There have been no significant changes in the Companys off balance sheet arrangements
during the quarter ended March 31, 2004.



Other than those effects inherent to
the types of arrangements described, the Company does not believe these arrangements will have a material effect on the Companys financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity,
capital expenditures or capital resources.



CONTRACTUAL OBLIGATIONS



In the course of business, the Company
enters into contractual obligations to make payments to third parties. During the first quarter 2004, there were no material changes to such contractual obligations outside the ordinary course of the Companys business except that the Company
entered into an agreement to purchase the remaining 60% ownership interest in our Mexican affiliate, Vitro-Fibras, S.A. for approximately $72 million.



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



ADOPTION OF NEW ACCOUNTING STANDARDS



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.



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



In December 2003, the Financial Accounting Standards Board issued a revised Interpretation No. 46,
Consolidation of Variable Interest Entities, an interpretation of Accounting Research Bulletin No. 51, (FIN 46R). FIN 46R requires the consolidation of entities in which an enterprise absorbs a majority of the entitys expected
losses, receives a majority of the entitys expected residual returns, or both, as a result of ownership, contractual or other financial interests in the entity. Currently entities are generally consolidated by an enterprise when it has a
controlling financial interest through ownership of a majority voting interest in the entity. The provisions of FIN 46R are generally effective for existing (prior to February 1, 2003) variable interest relationships of a public entity no later than
the end of the first reporting period that ends after March 15, 2004. However, prior to the required application of this interpretation a public entity that is not a small business issuer shall apply FIN 46R to those entities that are considered to
be special-purpose entities no later than the end of the first reporting period that ends after December 15, 2003. The Company applied the portion of FIN 46R that is applicable to special purpose entities effective December 31, 2003, with no
material effect, and applied the remainder of FIN 46R to its first quarter 2004 financial statements with no material effect.



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.



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 March 31, 2004, a total of 60 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.



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



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 March 31, 2004, the Companys reserve for such liabilities was $17 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,
including liabilities associated with some of the PRP designations noted above. 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 manufacturing in January 2000, for wet formed fiberglass mat production in
April 2002, and for reinforced plastic composites production and asphalt roofing and processing in April 2003. The Company anticipates that other relevant sources to be regulated in the near future include large burners and boilers. Based on
information now known to the Company, including the nature and limited number of regulated materials Owens Corning emits, we do not expect the Act to have a materially adverse effect on our results of operations, financial condition or long-term
liquidity.



|ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|------- | ----------------------------------------------------------



Please refer to the Companys 2003 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.



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PART II



|ITEM 1. | LEGAL PROCEEDINGS
|------- | -----------------



Note 10 to the 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):



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



The Debtors 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.



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|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 to the Consolidated Financial
Statements.



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 (the Mandamus Petition) 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. The Third Circuit held a hearing on the Mandamus Petition on December 12, 2003. On December 18, 2003, the Third Circuit issued an order directing the
District Court to vacate its October 23, 2003 stay of discovery, proceed with expedited discovery on the recusal motion, and issue a ruling on the recusal motion. On February 2, 2004, the District Court denied the recusal motion. The Third Circuit
held a hearing on April 19, 2004 to review the District Courts ruling.



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|ITEM 1. | LEGAL PROCEEDINGS (continued)
|------- | -----------------------------



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 10 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.
Owens Corning has filed a motion to dismiss this action. Following a hearing in February 2004, the USBC continued the proceedings in order to allow the plaintiffs to conduct limited discovery. A pre-trial conference on this matter has been set for
May 18, 2004.



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 hearing on this matter has been set for May 18, 2004.



|ITEM 2. | CHANGES IN SECURITIES, USE OF PROCEEDS, AND ISSUER PURCHASES OF EQUITY SECURITIES
|------- | ---------------------------------------------------------------------------------



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 on their ability to pay dividends and to transfer cash and other assets to each other and to their affiliates. See Note 1 to the Consolidated
Financial Statements. 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 to the Consolidated Financial Statements. 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 Statement of Position (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 current on the Consolidated Balance Sheet as of March 31, 2004.



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



No matter was submitted to a vote of security holders during the quarter ended March 31, 2004.



|ITEM 5. | OTHER INFORMATION
|------- | -----------------



During the quarter ended March 31, 2004, there were no material changes to the procedures by which security holders may recommend nominees to Owens Cornings board of directors.



- 71 -



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|ITEM 6. | EXHIBITS AND REPORTS ON FORM 8-K
|------- | --------------------------------



|(a) | Exhibits.
|--- | ---------



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



|(b) | Reports on Form 8-K.
|--- | --------------------



During the quarter ended March 31, 2004, Owens Corning filed the following current report on Form 8-K:



| |  | Dated February 6, 2004, under Items 7 and 12, in connection with a press release of Owens Corning dated February 6, 2004.
| | - | -------------------------------------------------------------------------------------------------------------------------



- 72 -



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SIGNATURES



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



|                  |  |  |  |                           |  |                          |  |                                                                                                 
|----------------- |  |  |  | ------------------------- |  | ------------------------ |  | ------------------------------------------------------------------------------------------------
|                  |  |  |  | OWENS CORNING  Registrant
|                  |  |  | 
|Date: May 4, 2004 |  |  |  | By:                       |  | /s/    MICHAEL H. THAMAN
|                  |  |  |  |                           |  |                          | 
|                  |  |  |  |                           |  |                          |  | Michael H. Thaman Chairman of the Board and Chief Financial Officer (as duly authorized
officer)
|                  |  |  | 
|Date: May 4, 2004 |  |  |  | By:                       |  | /s/    ROY D. DEAN      
|                  |  |  |  |                           |  |                          | 
|                  |  |  |  |                           |  |                          |  | Roy D. Dean Vice President and Corporate Controller                                             



- 73 -



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EXHIBIT INDEX



|               |  |                                                                                                                                                                                                                                                                                                                                                           
|-------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit Number |  | 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).        



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---

EXHIBIT INDEX



|               |  |                                                                                                                                                                                                                                                                                                                                                
|-------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit Number |  | 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).                                                                                                                                                                                                                                                       
|               | 
|(99)           |  | Subsidiaries of Owens Corning, as amended (filed herewith).                                                                                                                                                                                                                                                                                    



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