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 September 30, 2001

                           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 / /

Shares of common stock,  par value $.10 per share,  outstanding at September 30,
2001

                                   55,342,340


<PAGE>


                                      - 2 -

                          PART I. FINANCIAL INFORMATION
                          ITEM 1. FINANCIAL STATEMENTS

                         OWENS CORNING AND SUBSIDIARIES
                     CONSOLIDATED STATEMENT OF INCOME (LOSS)
                                   (unaudited)
<TABLE>
<S>                                                                     <C>              <C>           <C>            <C>


                                                                            Quarter Ended               Nine Months Ended
                                                                            September 30,                 September 30,
                                                                            -------------                 -------------
                                                                         2001           2000           2001           2000
                                                                         ----           ----           ----           ----
                                                                            (In millions of dollars, except share data)

NET SALES                                                               $  1,291      $   1,281      $  3,597       $ 3,833
COST OF SALES                                                              1,046          1,036         2,957         3,003
                                                                       ---------       --------     ---------      --------
     Gross margin                                                            245            245           640           830
                                                                      ----------      ---------    ----------     ---------

OPERATING EXPENSES
     Marketing and administrative expenses                                   141            143           396           437
     Science and technology expenses                                          10             13            30            42
     Restructure costs (Note 4)                                                8              6            24             6
     Chapter 11 related reorganization items (Note 1)                         23              -            60             -
     Provision for asbestos litigation claims (Note 12)                       (5)             -            (5)          790
     Other                                                                      5             3             32            7
                                                                     ------------   -----------    -----------   -----------

        Total operating expenses                                             182            165           537         1,282
                                                                      ----------      ---------    ----------      --------

INCOME (LOSS) FROM OPERATIONS                                                 63             80           103          (452)

OTHER
  Cost of borrowed funds (Note 1)                                              4             55            11           149
  Other                                                                        4              -            (2)            -
                                                                     -----------    -----------    ----------    -----------


INCOME (LOSS) BEFORE PROVISION (CREDIT)
  FOR INCOME TAXES                                                            55             25            94          (601)

Provision (credit) for income taxes (Note 6)                                  26             10             46         (244)
                                                                      ----------      ---------    -----------     ---------

INCOME (LOSS) BEFORE MINORITY INTEREST
  AND EQUITY IN NET INCOME (LOSS) OF
  AFFILIATES                                                                  29             15            48          (357)

Minority Interest                                                             (2)            (3)           (3)           (6)

Equity in net income (loss) of affiliates                                       -             2             1             -
                                                                     ------------       ---------  ------------  -----------

NET INCOME (LOSS)                                                     $       27      $      14    $       46      $   (363)
                                                                      ==========      =========    ==========      =========

NET INCOME (LOSS) PER COMMON SHARE

Basic net income (loss) per share                                     $      .50      $     .25    $      .84     $   (6.64)
                                                                      ----------      ---------    ----------     ----------
Diluted net income (loss) per share                                   $      .46      $     .25     $      .77    $   (6.64)
                                                                      ----------      ---------     ----------    ----------

Weighted average number of common shares outstanding and common equivalent
   shares during the period (in millions)

   Basic                                                                    55.1           55.0          55.1          54.8
   Diluted                                                                  59.9           55.5          60.0          54.8

                 The accompanying notes are an integral part of this statement.
</TABLE>

<PAGE>


                                      - 3 -

                         OWENS CORNING AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
                                   (unaudited)
<TABLE>
<S>                                                                  <C>                       <C>                <C>

                                                                 September 30,       December 31,            September 30,
                                                                     2001                2000                    2000
                                                                     ----                ----                    ----
                                                                                  (In millions of dollars)
ASSETS
------

CURRENT
     Cash and cash equivalents                                   $      551             $       550              $      378
     Restricted cash (Note 12)                                            -                       -                     100
     Restricted cash and securities - Fibreboard -
       current portion (Note 12)                                          -                       -                     850
     Receivables                                                        597                     488                     507
     Inventories (Note 7)                                               480                     469                     532
     Insurance for asbestos litigation claims -
       current portion (Note 12)                                          -                       -                      33
     Deferred income taxes                                                5                       6                     181
     Income tax receivable                                                5                      31                       4
     Other current assets                                                22                      20                      25
                                                               ------------           -------------             -----------

           Total current                                              1,660                   1,564                   2,610
                                                                 ----------             -----------               ---------

OTHER
     Insurance for asbestos litigation claims
      (Note 12)                                                           4                      59                      59
     Restricted cash - asbestos-related (Note 12)                       171                     164                      44
     Restricted cash, securities and other - Fibreboard
       (Notes 12 and 13)                                              1,285                   1,274                     395
     Deferred income taxes                                            1,037                   1,075                     828
     Goodwill                                                           618                     636                     649
     Investments in affiliates                                           50                      62                      87
     Other noncurrent assets                                            359                     257                     273
                                                                -----------            ------------              ----------

           Total other                                                3,524                   3,527                   2,335
                                                                 ----------             -----------               ---------

PLANT AND EQUIPMENT, at cost
Land                                                                     68                      60                      58
Buildings and leasehold improvements                                    666                     663                     672
Machinery and equipment                                               2,866                   2,717                   2,547
Construction in progress                                                172                     327                     360
                                                                 ----------            ------------              ----------
                                                                      3,772                   3,767                   3,637

  Less - accumulated depreciation                                    (1,984)                 (1,946)                 (1,944)
                                                                  ----------            ------------              ----------

      Net plant and equipment                                         1,788                   1,821                   1,693
                                                                 ----------             -----------               ---------

TOTAL ASSETS                                                      $   6,972              $    6,912               $   6,638
                                                                  =========              ==========               =========



                 The accompanying notes are an integral part of this statement.
</TABLE>

<PAGE>


                                      - 4 -

                         OWENS CORNING AND SUBSIDIARIES
                     CONSOLIDATED BALANCE SHEET (continued)
                                   (unaudited)
<TABLE>
<S>                                                                       <C>                   <C>                 <C>
                                                                        September 30,     December 31,          September 30,
                                                                             2001               2000                2000
                                                                             ----               ----                ----
LIABILITIES AND STOCKHOLDERS' EQUITY                                                   (In millions of dollars)
------------------------------------

CURRENT
     Accounts payable and accrued liabilities                            $     678          $      491          $    696
     Reserve for asbestos litigation claims - current portion
       (Note 12)                                                                 -                   -             1,250
     Asbestos-related liabilities - Fibreboard - current portion
       (Note 13)                                                                 -                   -               850
     Short-term debt                                                            43                  50                56
     Long-term debt - current portion                                           65                  68             2,733
                                                                        ----------         -----------          --------

        Total current                                                          786                 609             5,585
                                                                         ---------          ----------          --------

LONG-TERM DEBT                                                                   6                   7                32
                                                                       -----------        ------------        ----------

OTHER
  Reserve for asbestos litigation claims (Note 12)                               -                   -               980
  Asbestos-related liabilities - Fibreboard  (Note 13)                           -                   -               395
  Other employee benefits liability                                            330                 322               322
  Pension plan liability                                                        38                  75                41
  Other                                                                        127                 124               337
                                                                        ----------          ----------          --------

        Total other                                                            495                 521             2,075
                                                                        ----------          ----------           -------

LIABILITIES SUBJECT TO COMPROMISE (Note 1)                                   6,817               6,935                 -
                                                                         ---------           ---------        ----------

COMMITMENTS AND CONTINGENCIES

COMPANY OBLIGATED SECURITIES OF ENTITIES
  HOLDING SOLELY PARENT DEBENTURES -
  SUBJECT TO COMPROMISE                                                        200                 200               195
                                                                         ---------          ----------          --------

MINORITY INTEREST                                                               40                  39                47
                                                                        ----------         -----------         ---------

STOCKHOLDERS' EQUITY
  Common stock                                                                 697                 699               700
  Deficit                                                                   (1,950)             (1,996)           (1,884)
  Accumulated other comprehensive income                                      (115)                (97)             (103)
  Other                                                                         (4)                 (5)               (9)
                                                                       ------------       -------------       -----------

        Total stockholders' equity                                          (1,372)             (1,399)           (1,296)
                                                                          ---------          ----------         ---------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                $  6,972            $  6,912          $  6,638
                                                                          ========            ========          ========


                 The accompanying notes are an integral part of this statement.
</TABLE>

<PAGE>


                                      - 5 -

                         OWENS CORNING AND SUBSIDIARIES
                      CONSOLIDATED STATEMENT OF CASH FLOWS
                                   (unaudited)
<TABLE>
<S>                                                          <C>               <C>           <C>              <C>
                                                                Quarter Ended                   Nine Months Ended
                                                                September 30,                     September 30,
                                                                -------------                     -------------
                                                             2001            2000           2001             2000
                                                             ----            ----           ----             ----
                                                                            (In millions of dollars)
NET CASH FLOW FROM OPERATIONS

  Net income (loss)                                     $        27         $     14    $       46      $   (363)

  Reconciliation of net cash provided by
     operating activities
        Noncash items:
          Provision for asbestos litigation claims                -                -             -           790
          Provision for depreciation and
            amortization                                         51               44           161           137
          Provision (credit) for deferred income
            taxes                                                12               (1)           40          (289)
          Other - noncash items                                  39                9            69           (23)
        (Increase) decrease in receivables                       29               (1)         (123)         (215)
        (Increase) decrease in inventories                        7               15           (21)         (105)
        Increase (decrease) in accounts payable
          and accrued liabilities                                47               17           125           (43)
        Change in liabilities subject to
          compromise, net (Note  1)                              (1)               -           (97)            -
        (Increase) decrease in restricted cash -
          asbestos-related (Note 12)                             (1)             106            48          (144)
        Proceeds from insurance for asbestos
          litigation claims, excluding Fibreboard
          (Note 12)                                               -                -             -           347
        Payments for asbestos litigation claims,
          excluding Fibreboard (Note 12)                          -             (176)            -          (540)
        Pension fund contribution                              (150)               -          (176)            -
        Other                                                     24             (34)            42             4
                                                        ------------       ----------   -----------   -----------

            Net cash flow from operations               $        84       $       (7)   $      114      $   (444)
                                                        -----------       -----------   ----------      ---------

NET CASH FLOW FROM INVESTING

        Additions to plant and equipment                        (50)            (113)         (133)         (278)
        Investment in subsidiaries, net of cash
          acquired                                                -                -             -            (4)
        Proceeds from the sale of affiliate or
          business (Note 5)                                       -                -            20           193
        Other                                                     (4)              1            (2)          (35)
                                                        -------------     ----------    ----------     ----------

            Net cash flow from investing                $       (54)        $   (112)   $     (115)     $   (124)
                                                        ------------        ---------   -----------     ---------



               The accompanying notes are an integral part of this statement.
</TABLE>

<PAGE>


                                      - 6 -

                         OWENS CORNING AND SUBSIDIARIES
                      CONSOLIDATED STATEMENT OF CASH FLOWS (continued)
                                   (unaudited)
<TABLE>
<S>                                                         <C>                <C>            <C>               <C>
                                                                Quarter Ended                    Nine Months Ended
                                                                September 30,                      September 30,
                                                                -------------                      -------------
                                                             2001             2000            2001              2000
                                                             ----             ----            ----              ----
                                                                             (In millions of dollars)

NET CASH FLOW FROM FINANCING

  Net additions to long-term credit facilities         $        -          $       (7)   $         -        $    948
  Other additions to long-term debt                             1                   -             17              22
  Other reductions to long-term debt                           (2)                 (1)            (4)            (84)
  Net decrease in short-term debt                              (2)                 13             (7)              4
  Subject to compromise (Note 1)                                -                   -             (4)              -
  Dividends paid                                                -                  (4)             -             (12)
  Other                                                          -                  -             (1)               -
                                                       -----------       ------------    ------------     -----------

      Net cash flow from financing                             (3)                  1              1             878
                                                       -----------        -----------    -----------        --------

Effect of exchange rate changes on cash                         4                  (1)             1              (2)
                                                       ----------         ------------   -----------      -----------


Net increase (decrease) in cash and cash
  equivalents                                                  31                (119)             1             308

Cash and cash equivalents at beginning of
  period                                                      520                 497            550              70
                                                        ---------           ---------       --------       ---------

Cash and cash equivalents at end of period               $    551           $     378       $    551        $    378
                                                         ========           =========       ========        ========

The accompanying notes are an integral part of this statement.
</TABLE>

<PAGE>


                                      - 7 -

                         OWENS CORNING AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.       VOLUNTARY PETITION FOR RELIEF UNDER CHAPTER 11

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

         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
</TABLE>

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 12 to the
Consolidated Financial Statements.

Consequence of Filing
---------------------

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

Two creditors'  committees,  one representing  asbestos  claimants and the other
representing unsecured creditors,  have been appointed as official committees in
the Chapter 11 Cases. In addition,  the Bankruptcy  Court has appointed James J.
McMonagle as legal  representative  for the class of future  asbestos  claimants
against  one or  more  of the  Debtors.  The  two  committees  and  the  futures
representative  will have the right to be heard on all matters  that come before
the  Bankruptcy  Court.  Owens  Corning  expects that these  committees  and the
futures representative will play important roles in the Chapter 11 Cases and the
negotiation of the terms of any plan or plans of reorganization.

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 file
and seek  confirmation of such a plan or plans,  there can be no assurance as to
when the Debtors

<PAGE>


                                      - 8 -

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

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

will file such a plan or plans, or that such plan or plans will be confirmed by
the Bankruptcy Court and consummated.

As provided by the  Bankruptcy  Code,  the Debtors  initially  had the exclusive
right to propose a plan of  reorganization  for 120 days  following the Petition
Date,  until February 2, 2001. By order,  the Bankruptcy Court has extended such
exclusivity  period until February 2, 2002, and similarly  extended the Debtors'
exclusive rights to solicit  acceptances of a reorganization  plan from April 3,
2001 to April 3,  2002.  If the  Debtors  fail to file a plan of  reorganization
prior to the ultimate  expiration of the exclusivity  period, or if such plan is
not accepted by the requisite  numbers of creditors and equity holders  entitled
to vote on the plan,  other  parties in  interest in the Chapter 11 Cases may be
permitted to propose their own plan(s) of reorganization for the Debtors.

Owens  Corning is unable to predict at this time what the treatment of creditors
and equity holders of the respective  Debtors will be under any proposed plan or
plans of  reorganization.  Such plan or plans may provide,  among other  things,
that all present and future  asbestos-related  liabilities  of Owens Corning and
Fibreboard  will  be  discharged  and  assumed  and  resolved  by  one  or  more
independently  administered trusts established in compliance with Section 524(g)
of the Bankruptcy  Code. Such plan or plans may also provide for the issuance of
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 one or more Section
524(g)  trusts.  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.

Owens Corning is unable to predict at this time what  treatment will be accorded
under  any such  reorganization  plan or plans  to  inter-company  indebtedness,
licenses,   transfers  of  goods  and  services  and  other   inter-company  and
intra-company  arrangements,  transactions and  relationships  that were entered
into  prior  to  the  Petition  Date.  These   arrangements,   transactions  and
relationships  may be challenged by various  parties in the Chapter 11 Cases and
the outcome of those challenges,  if any, may have an impact on the treatment of
various claims under such plan or plans. For example, Owens Corning is unable to
predict  at this  time what the  treatment  will be under any such plan or plans
with respect to (1) the  guaranties  issued by certain of Owens  Corning's  U.S.
subsidiaries,  including  Owens-Corning  Fiberglas  Technology Inc. ("OCFT") and
IPM, Inc., a Non-Debtor Subsidiary that holds Owens Corning's ownership interest
in a majority of Owens Corning's foreign subsidiaries  ("IPM"),  with respect to
Owens   Corning's   $1.8  billion   pre-petition   bank  credit   facility  (the
"Pre-Petition  Credit  Facility"  which is now in default) or (2) OCFT's license
agreements  with Owens  Corning  and  Exterior  Systems,  Inc.,  a  wholly-owned
subsidiary  of Owens  Corning  ("Exterior"),  pursuant  to which  OCFT  licenses
intellectual property to Owens Corning and Exterior.

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


<PAGE>


                                      - 9 -

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

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

may be substantially altered by any plan or plans of reorganization confirmed in
the Chapter 11 Cases. There is no assurance that there will be sufficient assets
to satisfy the Debtors'  pre-petition  liabilities  in whole or in part, and the
pre-petition  creditors of some Debtors may be treated differently than those of
other  Debtors.  Pre-petition  creditors  may receive under a plan or plans less
than  100% of the  face  value  of  their  claims,  and the  interests  of Owens
Corning's equity security  holders may be substantially  diluted or cancelled in
whole or in part. As noted above, it is not possible at this time to predict the
outcome of the Chapter 11 Cases,  the terms and  provisions of any plan or plans
of reorganization, or the effect of the Chapter 11 reorganization process on the
claims of the  creditors  of the  Debtors or the  interests  of Owens  Corning's
equity security holders.

Financial Statement Presentation
--------------------------------

The  accompanying  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, the Company,  beginning in the fourth quarter of 2000, 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.

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.  No bar dates have been set for the filing
of proofs of claim  against the Debtors.  Accordingly,  the ultimate  number and
allowed amount of such claims are not presently known.


<PAGE>


                                     - 10 -

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

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

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.

From the Petition Date through September 30, 2001,  contractual interest expense
not accrued or recorded on pre-petition debt totaled $190 million, of which $139
million  relates to 2001 and $43 million  relates to the quarter ended September
30, 2001.

At September 30, 2001, the Company had $551 million of Cash and Cash Equivalents
(of which approximately $39 million was subject to administrative freeze pending
the  resolution  of  certain  alleged  set-off  rights by  certain  pre-petition
lenders).  In addition,  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").  At  September  30,  2001,  this
facility had not been utilized except for  approximately  $32 million 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  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 cash
available  from  operations  and  the  DIP  Financing  will  provide  sufficient
liquidity to allow it to continue as a going concern for the foreseeable future.
However,  the ability of the Company to continue as a going  concern  (including
its  ability  to  meet  post-petition  obligations  of the  Debtors  and to meet
obligations of the Non-Debtor Subsidiaries) and the appropriateness of using the
going concern basis for its financial statements are dependent upon, among other
things,  (i) the Company's ability to comply with the terms of the DIP Financing
and any cash management order entered by the Bankruptcy Court in connection with
the Chapter 11 Cases,  (ii) the ability of the Company to maintain adequate cash
on hand, (iii) the ability of the Company to generate cash from operations, (iv)
the ability of the Non-Debtor  Subsidiaries to obtain necessary  financing,  (v)
confirmation of a plan or plans of reorganization under the Bankruptcy Code, and
(vi)  the   Company's   ability  to  maintain   profitability   following   such
confirmation.

Debtor-In-Possession Financial Statements
-----------------------------------------

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




<PAGE>


                                     - 11 -

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

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

                         Owens Corning and Subsidiaries
                    Debtor-in-Possession Statement of Income
            for the QUARTER AND NINE MONTHS ended September 30, 2001
<TABLE>
<S>                                                                                 <C>                 <C>

                                                                                                  2001
                                                                                                  ----
                                                                                    Quarter Ended    Nine Months Ended
                                                                                    September 30        September 30
                                                                                    ------------        ------------
                                                                                        (In millions of dollars)

NET SALES                                                                            $   1,143         $    3,139
COST OF SALES                                                                              953              2,663
                                                                                   -----------        -----------
     Gross margin                                                                          190                476
                                                                                   -----------       ------------

OPERATING EXPENSES
     Marketing and administrative expenses                                                 129                356
     Science and technology expenses                                                         9                 27
     Restructure costs (Note 4)                                                              5                 14
     Chapter 11 reorganization items (Note 1)                                               23                 60
     Proceeds from asbestos litigation claims                                               (5)                (5)
     Other (Including interest income from non-debtors of $14 million
        in the third quarter and $42 million for the nine months ended)                    (31)               (71)
                                                                                   ------------      -------------

        Total operating expenses                                                           130                381
                                                                                   -----------        -----------

INCOME FROM OPERATIONS                                                                      60                 95

OTHER
     Cost of borrowed funds                                                                  1                 (1)
     Other (Note 13)                                                                         4                 (2)
                                                                                  -------------      -------------

INCOME BEFORE PROVISION FOR INCOME TAXES                                                    55                 98

Provision for income taxes                                                                  25                 46
                                                                                  ------------       ------------

INCOME BEFORE EQUITY IN NET INCOME (LOSS) OF
  AFFILIATES                                                                                30                 52

Equity in net income (loss) of affiliates                                                   (1)                 -
                                                                                  -------------      -------------

NET INCOME                                                                         $        29        $        52
                                                                                   ===========        ===========
</TABLE>







The accompanying notes are an integral part of this statement.

<PAGE>


                                     - 12 -

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

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

                         Owens Corning and Subsidiaries
                       Debtor-in-Possession Balance Sheet
<TABLE>
<S>                                                                                     <C>                     <C>

                                                                                  September 30,           December 31,
                                                                                       2001                   2000
                                                                                       ----                   ----
                                                                                        (In millions of dollars)
ASSETS
------

CURRENT

     Cash and cash equivalents                                                      $      431               $    461
     Receivables - debtors, net                                                            439                    338
     Receivables - non-debtors                                                             744                    672
     Inventories                                                                           349                    347
     Deferred income taxes                                                                   4                      4
     Income tax receivable                                                                   4                     31
     Other current assets                                                                   20                     18
                                                                                  ------------             ----------

           Total current                                                                 1,991                  1,871
                                                                                    ----------                -------

OTHER
     Insurance for asbestos litigation claims (Note 12)                                      4                     59
     Restricted cash and other - asbestos-related (Note 12)                                171                    164
     Restricted cash, securities and other - Fibreboard (Notes
       12 and 13)                                                                        1,285                  1,274
     Deferred income taxes                                                               1,001                  1,058
     Goodwill, net                                                                         520                    530
     Investments in affiliates                                                              29                     38
     Investments in non-debtor subsidiaries                                                736                    745
     Other noncurrent assets                                                               309                    209
                                                                                   -----------              ---------

           Total other                                                                   4,055                  4,077
                                                                                    ----------                -------

PLANT AND EQUIPMENT, at cost
     Land                                                                                   41                     34
     Buildings and leasehold improvements                                                  526                    522
     Machinery and equipment                                                             2,196                  2,078
     Construction in progress                                                              153                    259
                                                                                   -----------              ---------
                                                                                         2,916                  2,893

  Less:  Accumulated depreciation                                                       (1,527)                (1,502)
                                                                                    -----------               -------

      Net plant and equipment                                                            1,389                  1,391
                                                                                    ----------               --------

TOTAL ASSETS                                                                         $   7,435                $ 7,339
                                                                                     =========                =======



The accompanying notes are an integral part of this statement.
</TABLE>

<PAGE>


                                     - 13 -

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

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

                         Owens Corning and Subsidiaries
                       Debtor-in-Possession Balance Sheet
<TABLE>
<S>                                                                                <C>                      <C>

                                                                               September 30,          December 31,
                                                                                    2001                  2000
                                                                                    ----                  ----
LIABILITIES AND STOCKHOLDERS' EQUITY                                                 (In millions of dollars)
------------------------------------

CURRENT

     Accounts payable and accrued liabilities - debtor                          $     509                $    320
     Accounts payable and accrued liabilities - non-debtors                             7                      46
     Long-term debt - current portion                                                   -                       1
                                                                             ------------             -----------


        Total current                                                                 516                     367
                                                                               ----------               ---------

OTHER
  Other employee benefits liability                                                   316                     308
  Pension plan liability                                                               32                      68
  Other                                                                               103                      96
                                                                               ----------              ----------

        Total other                                                                   451                     472
                                                                               ----------               ---------

LIABILITIES SUBJECT TO COMPROMISE                                                   7,532                   7,623

STOCKHOLDERS' EQUITY
  Common stock                                                                        697                     699
  Deficit                                                                          (1,748)                 (1,807)
  Accumulated other comprehensive loss                                                (11)                    (12)
  Other                                                                                (2)                     (3)
                                                                             -------------             ----------

        Total stockholders' equity                                                 (1,064)                 (1,123)
                                                                                ----------                -------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                      $   7,435                 $ 7,339
                                                                                =========                 =======

</TABLE>
The accompanying notes are an integral part of this statement.

<PAGE>


                                     - 14 -

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

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

                         Owens Corning and Subsidiaries
                  Debtor-in-Possession Statement of CASH FLOWS
            for the QUARTER AND NINE MONTHS ended September 30, 2001
<TABLE>
<S>                                                                                  <C>                 <C>

                                                                                               2001
                                                                                               ----
                                                                                   Quarter         Nine Months
                                                                                    Ended             Ended
                                                                                 September 30      September 30
                                                                                 ------------      -------------
                                                                                       (In millions of dollars)

NET CASH FLOW FROM OPERATIONS

Net income                                                                       $      29             $      52
  Reconciliation of net cash provided by operating activities
        Noncash items:
            Provision for depreciation and amortization                                 37                   115
            Credit for deferred income taxes                                            21                    61
            Other                                                                       26                    71
        Increase (decrease) in receivables                                              16                  (186)
        Increase  (decrease) in inventories                                              7                    (4)
        Increase in accounts payable and accrued liabilities                            38                   100
        (Increase) decrease in restricted cash and other -
          asbestos-related                                                              (1)                   48
        Change in liabilities subject to compromise, net                                (1)                  (97)
        Pension fund contribution                                                     (150)                 (176)
        Other                                                                           28                    88
                                                                                 ---------            ----------

            Net cash flow from operations                                               50                    72
                                                                                 ---------            ----------

NET CASH FLOW FROM INVESTING

        Additions to plant and equipment                                               (38)                 (113)
        Other                                                                           (3)                   (1)
                                                                                -----------           ----------

            Net cash flow from investing                                               (41)                 (114)
                                                                                 ----------             ---------

NET CASH FLOW FROM FINANCING

        Net additions to long-term credit facilities                                     -                    17
        Subject to compromise                                                            -                    (4)
        Other                                                                            -                    (1)
                                                                               -----------             ----------

        Net cash flow from financing                                            $        -              $     12
                                                                                ----------              --------

</TABLE>



The accompanying notes are an integral part of this statement.

<PAGE>


                                     - 15 -

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

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

                         Owens Corning and Subsidiaries
                  Debtor-in-Possession Statement of Cash Flows
            for the quarter and Nine months ended September 30, 2001
<TABLE>
<S>                                                                               <C>                     <C>

                                                                               Quarter Ended       Nine Months Ended
                                                                              September 30           September 30
                                                                              ------------           ------------
                                                                                    (In millions of dollars)

Net increase (decrease) in cash and cash equivalents                        $          9            $       (30)

Cash and cash equivalents at beginning of period                                     422                    461
                                                                             -----------            -----------

Cash and cash equivalents at end of period                                    $      431             $      431
                                                                              ==========             ==========
</TABLE>

The amounts subject to compromise in the Consolidated  and  Debtor-in-Possession
Balance Sheets consist of the following items:
<TABLE>
<S>                                                                                 <C>                    <C>

                                                                               September 30,        December 31,
                                                                                    2001                2000
                                                                                    ----                ----
                                                                                      (amounts in millions)

  Accounts payable                                                              $      193          $      255
  Accrued interest payable                                                              40                  39
  Accrued liabilities                                                                   47                  74
  Debt                                                                               2,843               2,832
  Income taxes payable                                                                 209                 212
  Reserve for asbestos litigation claims - Owens Corning (Note 12)                   2,200               2,249
  Reserve for asbestos related liabilities - Fibreboard
    (Notes 12 and 13)                                                                1,285               1,274
                                                                                 ---------           ---------

         Total consolidated                                                          6,817               6,935

         Payables to non-debtors                                                       715                 688
                                                                                ----------          ----------

         Total debtor                                                             $  7,532            $  7,623
                                                                                  ========            ========
</TABLE>

The   amounts   for    reorganizational    items   in   the   Consolidated   and
Debtor-in-Possession  Income Statements consist of the following for the quarter
and nine months ended September 30:
<TABLE>
<S>                                                                  <C>                      <C>

                                                                 Quarter Ended          Nine Months Ended
                                                                  September 30             September 30
                                                                  ------------             ------------
                                                                           (amounts in millions)

   Professional fees                                                $       15             $      49
   Payroll and compensation                                                  9                    21
   Interest income                                                          (5)                  (15)
   Litigation related expenses and other                                     4                     5
                                                                  ------------            ----------

        Total                                                       $       23             $      60
                                                                    ==========             =========

</TABLE>


<PAGE>


                                     - 16 -

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

2.   Segment Data

During 2000, the Company realigned its internal  operating  segments.  Following
this realignment,  the Company reviewed its segments in accordance with SFAS 131
and concluded that the aggregation of its operating segments into two reportable
segments was still  appropriate.  As a result of this realignment,  intersegment
transactions no longer exist between reportable  segments.  Net sales and income
from  operations  have been  restated for all periods  presented to reflect this
change.
<TABLE>
<S>                                                        <C>             <C>               <C>            <C>

                                                              Quarter Ended                  Nine Months Ended
                                                              September 30,                    September 30,
                                                              -------------                    -------------
NET SALES                                                 2001             2000             2001            2000
                                                          ----             ----             ----            ----
                                                                         (In millions of dollars)
Reportable Operating Segments
-----------------------------

  Building Materials Systems
     United States                                   $     1,024         $    994       $     2,769        $ 2,901
     Europe                                                    2                1                 5             89
     Canada and other                                         50               53               134            143
                                                     -----------        ---------       -----------      ---------

        Total Building Materials Systems                   1,076            1,048             2,908          3,133
                                                     -----------          -------       -----------       --------

  Composite Systems
     United States                                            96              104               293            309
     Europe                                                   76               85               266            256
     Canada and other                                         43               44               130            135
                                                     -----------        ---------       -----------       --------

        Total Composite Systems                              215              233               689            700
                                                     -----------         --------       -----------       --------

        Total Reportable Operating Segments          $     1,291          $ 1,281       $     3,597        $ 3,833
                                                     ===========          =======       ===========        =======

External Customer Sales by Geographic
-------------------------------------
  Region
  ------

     United States                                   $     1,120          $ 1,098       $     3,062        $ 3,210
     Europe                                                   78               86               271            345
     Canada and other                                         93               97               264            278
                                                     -----------        ---------       -----------      ---------

     Net Sales                                       $     1,291          $ 1,281       $     3,597        $ 3,833
                                                     ===========          =======       ===========        =======

</TABLE>






<PAGE>


                                     - 17 -

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

2.  SEGMENT DATA (continued)
<TABLE>
<S>                                                            <C>               <C>              <C>             <C>

                                                                  Quarter Ended                     Nine Months Ended
                                                                  September 30,                       September 30,
                                                                  -------------                       -------------
                                                              2001              2000             2001              2000
                                                              ----              ----             ----              ----
                                                                              (In millions of dollars)
INCOME (LOSS) FROM OPERATIONS

Reportable Operating Segments
-----------------------------

  Building Materials Systems
    United States                                         $      92          $      73        $    180         $     285
    Europe                                                        -                  -               -                 2
    Canada and other                                              5                 12               9                26
                                                         ----------          ---------      ----------        ----------

       Total Building Materials Systems                          97                 85             189               313
                                                          ---------          ---------       ---------         ---------

   Composite Systems
     United States                                               21                  5              63                54
     Europe                                                       8                  7              32                10
     Canada and other                                             4                  4              16                16
                                                        -----------        -----------       ---------         ---------

       Total Composite Systems                                   33                 16             111                80
                                                         ----------        -----------        --------         ---------

       Total Reportable Operating Segments                 $    130          $     101        $    300          $    393
                                                           --------          ---------        --------          --------

Geographic Regions
------------------
    United States                                          $    113         $       78        $    243          $    339
    Europe                                                        8                  7              32                12
    Canada and other                                              9                 16              25                42
                                                         ----------         ----------       ---------         ---------

        Total Reportable Operating Segments                $    130          $     101        $    300          $    393
                                                           ========          =========        ========          ========

Reconciliation to Consolidated Income
  Before Provision for Income Taxes

   Restructuring and other charges                              (35)                 -             (94)                -
   Chapter 11 related reorganization items                      (23)                 -             (60)                -
   Provision for asbestos litigation claims                       5                  -               5              (790)
   General corporate income (expense)                           (14)               (21)            (48)              (55)
   Cost of borrowed funds                                        (4)               (55)            (11)             (149)
   Other                                                         (4)                 -               2                 -
                                                         -----------      ------------      ----------       -----------

      Consolidated Income (Loss) Before
         Provision (Credit) for Income Taxes              $      55        $       25         $     94           $  (601)
                                                          =========        ----------         ========           --------
</TABLE>



<PAGE>


                                     - 18 -

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

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

In connection with the condensed financial statements and notes included in this
Report,  reference  is  made  to the  financial  statements  and  notes  thereto
contained in the  Company's  2000 Annual  Report on Form 10-K, as filed with the
Securities and Exchange Commission.

4.    RESTRUCTURING OF OPERATIONS AND OTHER CHARGES

2001 Charges
------------

Third Quarter 2001
------------------

During the third  quarter of 2001,  the  Company  continued  to  experience  the
effects  of an  overall  slowed  economy  in both  the  building  materials  and
composite  materials  industries.  While  sales  were  flat  with a year ago and
margins showed slight  improvements due to some productivity  gains and material
cost deflation,  the Company continues to review its cost structures in light of
economic  forecasts.  As a result,  the Company  recorded a $35  million  pretax
charge to income from  operations  for  restructuring  and other  charges.  This
charge was comprised of an $8 million pretax  restructure charge and $27 million
in pretax  other  charges.  The  restructure  charge  has been  classified  as a
separate component of operating expenses on the Company's Consolidated Statement
of Income (Loss) and represents  severance costs associated with the elimination
of approximately  160 positions,  primarily in the U.S. and the U.K. The primary
groups impacted  included  manufacturing  and  administrative  personnel.  As of
September 30, 2001,  approximately  $5 million has been paid and charged against
this reserve.

The $27  million  in pretax  other  charges  included:  1) $15  million in costs
associated with the Company's  previously  announced plan to realign its Newark,
Ohio  manufacturing   facility;  2)  $4  million  to  write-down  the  Company's
investment  and related assets in Alcopor Owens  Corning,  a building  materials
joint  venture  in Europe,  to net  realizable  value.  The  Company  reached an
agreement to sell its interest in Alcopor  Owens  Corning and the proceeds  were
placed in escrow.  This transaction  received final approval from the Bankruptcy
Court on October 29, 2001 (see Note 5); and 3) various other charges totaling $8
million.  This $27  million  pretax  charge was  accounted  for as a $19 million
charge to cost of sales and an $8 million charge to other operating expenses.

Second Quarter 2001
-------------------

During the second  quarter of 2001,  the Company  recorded $17 million in pretax
charges for  restructuring and other charges as a result of the continued impact
of a soft overall  economy.  This charge was  comprised  of a $7 million  pretax
restructure  charge and $10  million  in pretax  other  charges.  The $7 million
restructure  charge  represented $5 million for the divestiture of non-strategic
businesses and facilities,  consisting  mainly of non-cash asset  write-downs to
fair  value and exit cost  liabilities,  and a $2 million  charge for  severance
costs associated with the elimination of  approximately 25 positions,  primarily
in  the  U.K.  The  primary   groups   affected   included   manufacturing   and
administrative personnel. As of September 30, 2001, approximately $1 million has
been paid and charged against the reserve for personnel reductions.

<PAGE>


                                     - 19 -

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

4.    RESTRUCTURING OF OPERATIONS AND OTHER CHARGES (continued)


The $10 million in pretax other charges  included $4 million in costs related to
the Company's  continuing plan for the realignment of the Newark, Ohio facility,
$2 million to  write-down  inventory  made  obsolete by changes in the Company's
manufacturing  and marketing  strategies,  and various other charges totaling $4
million.  This $10  million  pretax  charge was  accounted  for as an $8 million
charge to cost of sales and a $2 million charge to other operating expenses.

First Quarter 2001
------------------

During the first  quarter of 2001,  the Company  recorded  $42 million in pretax
charges for  restructuring and other charges as a result of the impact of a soft
overall  economy.  The $42 million  pretax  charge was comprised of a $9 million
pretax restructure charge, $2 million pretax loss from assets held for sale, and
$31 million in other pretax charges.  The $9 million pretax  restructure  charge
represented severance costs associated with the elimination of approximately 130
positions,   primarily  in  the  U.S.  The  primary  groups  affected   included
manufacturing  and   administrative   personnel.   As  of  September  30,  2001,
approximately  $2 million  has been paid and  charged  against  the  reserve for
personnel  reductions.  The $2 million  pretax  loss from  assets  held for sale
represented the results of operations for the Company's  investments in its Pipe
joint ventures and  subsidiaries on a held-for-sale  basis for the first quarter
of 2001. This sale was completed in February 2001.

The $31 million in other  pretax  charges was  comprised of $10 million of asset
impairments,  principally the write-down of equipment;  $4 million to write down
inventory to reflect  updated  estimates of the net realizable  value of certain
inventories;   $4  million  of  payroll-related   charges  associated  with  the
realignment  of the Newark,  Ohio  manufacturing  facility;  and  various  other
charges  totaling $13 million.  This $31 million pretax charge was accounted for
as an $18  million  charge  to cost of sales and a $13  million  charge to other
operating expenses.

2000 Charges
------------

During  2000,  the  Company   recorded   pretax  charges  of  $229  million  for
restructuring  and other  activities as a result of its reassessment of business
strategies  with respect to  investments  in certain  ventures,  facilities  and
overhead  expenditures.  The $229 million  pretax  charge was comprised of a $32
million  charge  associated  with the  restructuring  of the Company's  business
segments and $197 million of other  charges,  the majority of which  represented
impairments of long-lived assets. In addition, the Company recorded a $6 million
pretax  credit  to  minority  interest  resulting  from  charges  related  to  a
majority-owned  consolidated  subsidiary.  The  components of the  restructuring
charge  included  $16  million  for  personnel  reductions,  $10 million for the
divestiture of non-strategic businesses and facilities, and $6 million for asset
impairments  associated  with the planned  closing of two lines at the Company's
Newark,  Ohio  manufacturing  facility.  This represented the first phase of the
Company's plan to realign operations at the Newark facility.

The  $197  million  of other  charges  was  comprised  of $95  million  of asset
impairments,  a $6 million charge for a settlement  loss  associated with one of
Owens  Corning's  U.S.  pension  plans,  and $96  million of charges  focused on
improving business operations. The $95 million of asset impairments included: 1)
$54 million charge to write-down the Company's  investment and related assets in
Alcopor  Owens  Corning,  a building  materials  joint  venture  in  Europe,  to
estimated fair value on a held for sale basis;  2) $12 million to write-down the
Company's  investment  in the  majority  owned,  consolidated  venture  in South
Africa, on a held-in-use  basis based upon management's  analysis of current and


<PAGE>


                                     - 20 -

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

4.     RESTRUCTURING OF OPERATIONS AND OTHER CHARGES (continued)

expected future  financial  results and constraints on the Company's  ability to
fund future significant  capital investments in this subsidiary as a consequence
of the  bankruptcy  filing.  The $12  million  charge was offset by a $6 million
credit to record the minority owner's share,  recorded in the minority  interest
line on the Consolidated Statement of Income (Loss); 3) $8 million to write-down
to  fair  value  the  investments  in the  Company's  Pipe  joint  ventures  and
subsidiaries on a held for sale basis. The sale of a majority of the investments
and  subsidiaries  held for sale was  completed  in  February  2001,  with final
approval  obtained in June, 2001, at which time cash proceeds were released from
escrow; 4) $10 million to write-down the equity investment in ImproveNet, due to
a significant  decrease in market value which management  believes is other than
temporary;  and 5) $11  million  associated  with asset  impairments  within the
Company's Cultured Stone and other businesses.

The $96 million  charge  consisted of $43 million to write-down  inventory  made
obsolete by changes in the Company's manufacturing and marketing strategies; $19
million to  write-down  equipment  and  receivables;  $15  million  to  increase
warranty  reserves  due to general  changes in estimates  associated  with these
reserves;  and various  other  charges  totaling  $19 million  recorded as other
operating expenses. As of September 30, 2001, approximately $13 million has been
paid and charged against the reserve for personnel  reductions and approximately
$2 million has been charged against exit cost liabilities.

1997 and 1998 Charges
---------------------

During 1997 and 1998,  the Company  recorded  pretax charges of $386 million for
restructuring  and her  actions to  implement  a program to close  manufacturing
facilities, enhance manufacturing productivity and reduce overhead. Of the total
pretax charge of $386 million,  $143 million was recorded in the fourth  quarter
of 1997 and the remaining $243 million was recorded during 1998.

The $386 million pretax charge was comprised of a $185 million charge associated
with the  restructuring  of the Company's  business  segments and a $201 million
charge  associated  with asset  impairments,  including  investments  in certain
affiliates. The components of the restructuring charge included $115 million for
personnel   reductions;   $68  million  for  the  divestiture  of  non-strategic
businesses  and  facilities,  of which $52 million  represented  non-cash  asset
revaluations and $16 million  represented exit cost  liabilities,  primarily for
leased  warehouse and office  facilities  that were vacated;  and $2 million for
other  actions.  The  divestiture  of  non-strategic  businesses  and facilities
included the closure of the Candiac, Quebec manufacturing  facility.  During the
second  quarter of 1999,  the Candiac  manufacturing  facility was  re-opened in
order to meet market  demands.  As of  September  30, 2001,  approximately  $105
million has been paid and charged against the reserve for personnel  reductions,
representing the elimination of approximately  2,450 employees,  the majority of
whose  severance  payments  were  made over the  course  of 1998 and  1999,  and
approximately $13 million has been charged against exit cost liabilities.

The following table summarizes the status of the liabilities from the 1997, 1998
and 2000/2001 restructure program described above, including cumulative spending
and adjustments and the remaining balance as of September 30, 2001:
<TABLE>
<S>                                                           <C>               <C>              <C>

                                                                                              Liability at
                                                            Original           Total         September 30,
          (In millions of dollars)                         Liability         Payments             2001
                                                           ---------         --------             ----

          Personnel Costs                                  $   150           $   (126)       $      24
          Facility and Business Exit Costs                      20                (15)               5
          Other                                                  2                 (2)               -
                                                        ----------         -----------     -----------

          Total                                            $   172           $   (143)       $      29
                                                           =======           =========       =========

</TABLE>

<PAGE>


                                     - 21 -

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

4.     RESTRUCTURING OF OPERATIONS AND OTHER CHARGES (continued)

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

5.    ACQUISITIONS AND DIVESTITURES OF BUSINESSES

In September,  2001, the Company  reached  agreement to sell its 40% interest in
Alcopor  Owens  Corning,  an  unconsolidated  joint  venture.  Net  proceeds  of
approximately $23 million were placed in escrow. This transaction received final
approval from the Bankruptcy  Court on October 29, 2001. The Company reduced its
investment in the joint venture to net realizable value during the third quarter
of 2001. See Note 4 to the  Consolidated  Financial  Statements.  As part of the
divestiture,  the  Company  will be  obligated  to  fund  certain  U.K.  pension
obligations. The amount of the contribution will be actuarially determined as of
the  closing  date and is  dependent  on fair market  value of the pension  plan
assets at that time.  The  contribution  is not  expected to exceed the proceeds
from the sale.

During the first quarter of 2001, the Company completed the sale of the majority
of its Engineered  Pipe Business,  a producer of  glass-reinforced  plastic pipe
with operations  mostly in Europe.  Net proceeds from the sale were $22 million,
substantially all of which was received in the first quarter of 2001.

On May 31,  2000,  the  Company  completed  the  sale of its  European  Building
Materials business to Alcopor Owens Corning.  Proceeds from the sale, net of the
Company's $34 million cash infusion into the joint  venture,  were $177 million.
In connection  with this  transaction,  the joint venture assumed $62 million of
debt from Owens  Corning  and the  Company  incurred  fees of  approximately  $6
million,  resulting in net cash proceeds of approximately $109 million. A pretax
gain of approximately $5 million, including a $54 million write-off of goodwill,
was  realized  from the sale.  This pretax gain was  recorded as a reduction  of
other operating expenses on the consolidated statement of income.

The results of  operations  of the  European  Building  Materials  business  are
reflected in the Company's  consolidated  statement of income through the period
ending May 31, 2000. For the nine months ended  September 30, 2000, the European
Building  Materials  business recorded sales of approximately  $88 million,  and
income from operations of approximately $1 million.  Effective May 31, 2000, the
Company accounted for its ownership  interest in Alcopor Owens Corning under the
equity method. Please see Note 1 to the Consolidated Financial Statements.

During the first quarter of 2000,  the Company  completed the sale of the assets
of Falcon Foam, a producer of foam  insulation in Michigan and  California.  Net
proceeds  from the sale  were  $50  million  and  resulted  in a pretax  loss of
approximately  $5  million,  including  transaction  costs.  This  net  loss was
recorded as other  operating  expenses on the  Consolidated  Statement of Income
(Loss).




<PAGE>


                                     - 22 -

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

6.     INCOME TAXES

The  reconciliation  between the U.S.  federal  statutory rate and the Company's
effective income tax rate is:

<TABLE>
<S>                                                      <C>            <C>            <C>          <C>

                                                          Quarter Ended                Nine Months Ended
                                                          September 30,                  September 30,
                                                          -------------                  -------------
                                                       2001            2000           2001          2000
                                                       ----            ----           ----          ----

U.S. federal statutory rate                             35%             35%              35%          (35%)
State and local income taxes                             1              (3)               1            (5)
Operating losses of foreign subsidiaries                 -              11                -             1
Special tax election (a)                                 -               -                -            (2)
Interest                                                 6               -                8             -
Foreign tax rate differences                             2              (1)               2             -
Other                                                    4                -                3            -
                                                   -------          -------          -------     --------

Effective tax rate                                      48%             42%               49%         (41%)
                                                    =======          ======           =======      =======
</TABLE>

(a)  Represents the implementation of a tax strategy associated with one of our
     foreign subsidiaries.

7.    INVENTORIES
<TABLE>
<S>                                                               <C>                          <C>

                                                          September 30, 2001         December 31, 2000
                                                          ------------------         -----------------
                                                                    (In millions of dollars)
Inventories are summarized as follows:

Finished goods                                                 $     414                   $     397
Materials and supplies                                               164                         165
                                                               ---------                   ---------
FIFO inventory                                                       578                         562
Less:  Reduction to LIFO basis                                       (98)                        (93)
                                                              -----------                 -----------
  Total Inventory                                              $     480                   $     469
                                                               =========                   =========
</TABLE>

Approximately  $138  million and $300 million of total  inventories  were valued
using the LIFO method at September 30, 2001 and December 31, 2000, respectively.

8.    CONSOLIDATED STATEMENT OF CASH FLOWS

Cash payments (refunds) for income taxes and cost of borrowed funds are
summarized as follows:
<TABLE>
<S>                                             <C>               <C>             <C>               <C>
                                                   Quarter Ended                    Nine Months Ended
                                                   September 30,                      September 30,
                                                   -------------                      -------------
                                               2001              2000             2001              2000
                                               ----              ----             ----              ----
                                                               (In millions of dollars)

Income taxes                                 $     5            $     5        $    (27)          $    (30)
Cost of borrowed funds                             3                 54               6                154
</TABLE>

The Company  considers  all highly  liquid  debt  instruments  purchased  with a
maturity of three months or less to be cash equivalents.


<PAGE>



                                     - 23 -

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

9.    COMPREHENSIVE INCOME

The Company's comprehensive income for the quarters ended September 30, 2001 and
2000 was income of $34 million and a loss of $14 million,  respectively. For the
nine months ended September 30, 2001 and 2000,  comprehensive  income was income
of  $28  million  and a  loss  of  $415  million,  respectively.  The  Company's
comprehensive   income   includes  net  income  (loss),   currency   translation
adjustments, and deferred gains and losses on certain hedging transactions.

The  comprehensive  loss for the nine months ended September 30, 2000 includes a
reclassification  from other comprehensive income to net income of approximately
$13 million. This reclassification  reflects the expense recognition of currency
translation  adjustments  resulting  from  the  sale  of the  European  Building
Materials business to Alcopor Owens Corning in May, 2000 (see Note 5).

10.   EARNINGS PER SHARE

The following table reconciles the net income (loss) and weighted average number
of shares used in the basic  earnings  per share  calculation  to the net income
(loss) and weighted  average number of shares used to compute  diluted  earnings
per share.
<TABLE>
<S>                                             <C>                    <C>                <C>                  <C>

                                                       Quarter Ended                          Nine Months Ended
                                                       September 30,                            September 30,
                                                2001                   2000               2001                2000
                                                ----                   ----               ----                ----
                                                          (In millions of dollars, except share data)

Net income (loss) used for
  basic earnings per share                  $          27        $     14             $       46         $   (363)
Net income effect of
  assumed conversion of
  preferred securities                                  -               -                      -                -
                                          ---------------      ----------           ------------      -----------


Net income used for diluted
  earnings per share                        $          27        $     14             $       46         $   (363)
                                            =============        ========             ==========         =========

Weighted average number of
  shares outstanding used for
  basic earnings per share
  (thousands)                                      55,079          55,008                 55,064           54,759
Deferred awards (thousands)                           290             457                    323                -

Shares from assumed
  conversion of preferred
  securities (thousands)                            4,566                -                 4,566                -
                                             ------------      -----------             ---------      -----------


Weighted average number of
  shares outstanding and
  common equivalent shares
  used for diluted earnings per
  share (thousands)                                59,935          55,465                 59,953           54,759
                                              ===========         =======               ========          =======
</TABLE>



<PAGE>


                                     - 24 -

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

11.   DERIVATIVE FINANCIAL INSTRUMENTS

Effective  January 1, 2001,  the  Company  implemented  Statement  of  Financial
Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities"  (SFAS  133).  This  statement  and  its  interpretations  establish
accounting and reporting standards requiring derivative  instruments  (including
certain  derivative  instruments  embedded in other contracts) to be recorded in
the balance  sheet as either an asset or  liability  measured at its fair value.
The impact of adoption at January 1, 2001 did not have a material  effect in the
Consolidated  Statement  of Income  (Loss) and  resulted in other  comprehensive
income of approximately $1 million.

12.   CONTINGENT LIABILITIES

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.

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

National Settlement Program
---------------------------

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 agreements also established procedures
and fixed payments for resolving without litigation claims against

<PAGE>


                                     - 25 -

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

12.   CONTINGENT LIABILITIES

ITEM A. - OWENS CORNING (EXCLUDING FIBREBOARD)  (continued)

either Owens Corning or Fibreboard,  or both, arising after a participating firm
entered into an NSP Agreement ("Future Claims").

Terms and Conditions of NSP Agreements
--------------------------------------

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.

Owens  Corning  and  Fibreboard  (see Item B below) each  retained  the right to
terminate  any  individual  NSP  Agreement  if in any year more than a specified
number of plaintiffs  represented by the plaintiffs'  firm in question  rejected
and ultimately opted out of such agreement. Opt out procedures were specified in
the settlement  agreements,  and provided for mediation and further  negotiation
before a claimant could pursue his or her case in the court system.  Through the
Petition  Date,  fewer than 300  claimants  had  elected to reject the  original
settlement proposal, and to mediate under the terms of the NSP Agreement.

As of the Petition Date, the NSP covered  approximately  240,000 Initial Claims,
approximately 148,000 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  $9,000.  As of the
Petition Date,  approximately 88,000 of such Final NSP Settlements had been paid
in full or otherwise resolved,  and approximately 60,000 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  $539
million.  Through the Petition  Date,  Owens Corning had received  approximately
3,800 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 be treated under the
terms of any plan or plans of reorganization.

Non-NSP Claims
--------------

As of the Petition Date,  approximately  36,000 asbestos  personal injury claims
were pending against Owens

<PAGE>


                                     - 26 -

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

12.   CONTINGENT LIABILITIES

ITEM A. - OWENS CORNING (EXCLUDING FIBREBOARD)  (continued)

Corning  outside  the NSP.  This  compares to  approximately  25,300 such claims
pending on December 31, 1999. The information  needed for a critical  evaluation
of pending  claims,  including the nature and severity of disease and definitive
identifying  information concerning claimants,  typically becomes available only
through the discovery process or as a result of settlement  negotiations,  which
often occur years after particular claims are filed. As a result,  Owens Corning
has limited  information  about many of such  claims,  and the actual  number of
pending claims may vary from the numbers indicated.

Owens  Corning  resolved  (by  settlement  or  otherwise)  approximately  10,200
asbestos  personal injury claims outside the NSP during 1998,  4,800 such claims
during 1999 and 3,100 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. As
a rule,  these claims were settled as they were  scheduled  for trial,  and they
typically  involved  more serious  injuries  and  diseases.  Accordingly,  Owens
Corning   does  not  believe  that  such  average   costs  of   resolution   are
representative  of the value of the  non-NSP  claims  then  pending  against the
Company.

At this time,  Owens  Corning is unable to predict  the manner in which  non-NSP
claims will 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  $13 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:
<TABLE>
<S>                                                                         <C>                           <C>

                                                                                (In millions of dollars)
                                                                                                 2000 (through
                                                                            1999               October 4, 2000)
                                                                            ----               ----------------

Pre-NSP Settlements                                                      $    170                   $     51
NSP Settlements                                                               570                        538
Non-NSP Settlements                                                            30                         42
Defense, Claims Processing and Administrative Expenses                         90                         54
                                                                        ---------                  ---------
                                                                          $   860                    $   685
                                                                          =======                    =======
</TABLE>

Prior to the Petition Date,  Owens Corning  deposited  certain amounts in escrow
accounts  to  facilitate  claims  processing  under  the  NSP   ("Administrative
Deposits").  Amounts deposited into escrow in  Administrative  Deposits during a
reporting  period are included in the payments shown for NSP Settlements  during
the period. At September 30, 2001,  approximately $115 million of Administrative
Deposits  previously  made by Owens Corning had not been finally  distributed to


<PAGE>


                                     - 27 -

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

12.   CONTINGENT LIABILITIES

ITEM A. - OWENS CORNING (EXCLUDING FIBREBOARD)  (continued)

claimants  ("Undistributed   Administrative  Deposits")  and,  accordingly,  are
reflected in Owens  Corning's  consolidated  balance sheet as restricted  assets
(under  the  caption  "Restricted  cash - asbestos  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 be under the terms of any
plan or plans of  reorganization.  However,  one of the holders of Undistributed
Administrative  Deposits for Owens Corning (and similar deposits for Fibreboard)
has filed a motion with the  Bankruptcy  Court  requesting an order  authorizing
distribution  of  the  deposits  it  holds  to  the  escrow  beneficiaries.  The
Bankruptcy Court has scheduled a hearing on this motion for November 28, 2001.

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

Tax Legislation
---------------

On April 4, 2001, the United States House of Representatives introduced proposed
legislation  (HR 1412,  also known as the Asbestos  Tax Fairness  Act) to exempt
income  earned  by  qualifying   asbestos-related  settlement  funds,  including
qualifying trusts  established under Section 524(g) of the Bankruptcy Code, from
federal  income tax. The exemption  from income tax would benefit the Fibreboard
Settlement Trust (described  below) by having the effect of enlarging the corpus
of the trust through tax-free income accumulation.  In addition, the legislation
would allow  asbestos  defendants to carry-back  net operating  losses  ("NOLs")
created  by  asbestos  payments  to the years in which the  products  containing
asbestos were produced or distributed  (and to each subsequent year) in order to
obtain a refund of federal  income taxes paid in those  periods.  In the case of
Owens  Corning,  this would  entitle the Company to  carry-back  its NOLs to the
early 1950s. The bill has strong  bipartisan  support in the form of 72 original
cosponsors,  including  a  majority  of the  members of the House Ways and Means
Committee.

On June 14, 2001, a companion  bill  identical to HR 1412 was  introduced in the
United States Senate (S 1048). This bill also has strong bipartisan support.

Despite the  foregoing  developments,  there can be no  assurance  that any such
legislation  will be ultimately  enacted.  Moreover,  as a result of the Filing,
there is uncertainty regarding the impact of the proposed tax legislation on the
Debtors' respective estates even if such legislation were enacted.

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


<PAGE>


                                     - 28 -


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

12.   CONTINGENT LIABILITIES

ITEM A. - OWENS CORNING (EXCLUDING FIBREBOARD)  (continued)

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

In addition to the  Mississippi  lawsuit,  a lawsuit brought in December 1997 by
Owens  Corning  and  Fibreboard  is pending in the  Superior  Court for  Alameda
County, California against the same tobacco companies. The defendants have 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. A hearing on
these motions is set for November 20, 2001.

Insurance
---------

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.  The  Bankruptcy  Court approved such
settlement in July. 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, and the Company's recorded
insurance  asset was reduced.  The escrowed funds plus earnings are reflected on
Owens  Corning's  consolidated  balance  sheet as restricted  assets,  under the
category "Restricted cash - asbestos-related". During the third quarter of 2001,
Owens Corning also  received an  additional  $5 million  payment in respect of a
previous settlement with a bankrupt insurance carrier.  This amount was recorded
as pre-tax income in the third quarter.

As of September  30,  2001,  Owens  Corning's  financial  statements  reflect $4
million in unexhausted  insurance  coverage (net of deductibles and self-insured
retentions)  under its  liability  insurance  policies  applicable  to  asbestos
personal  injury  claims.   This  amount   represented   unconfirmed   potential
non-products  coverage with excess level insurance  carriers,  as to which Owens
Corning had estimated its probable recoveries.

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

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, and $1.0 billion in 2000.

<PAGE>


                                     - 29 -

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

12.   CONTINGENT LIABILITIES

ITEM A. - OWENS CORNING (EXCLUDING FIBREBOARD) (continued)

As of September 30, 2001, a reserve of approximately  $2.2 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."

The approximate  balances of the components of the reserve at September 30, 2000
(the ending date of the last reporting period preceding the Petition Date) were:
<TABLE>
<S>                                                                                           <C>
                                                                                        September 30, 2000
                                                                                        ------------------
                                                                                     (In billions of dollars)
NSP backlog                                                                                 $     1.1
Non-NSP backlog                                                                                   0.3
Future Claims                                                                                     0.7
Defense, Claims Processing and Administrative Expenses                                            0.1
</TABLE>

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

-    The "NSP backlog"  component  represented  the remaining  estimated cost of
     resolving Initial Claims under the NSP.

-    The "Non-NSP backlog" component represented the estimated cost of resolving
     asbestos  personal  injury claims pending against Owens Corning outside the
     NSP.

-    The "Future claims"  component  represented the estimated cost of resolving
     (i) Future Claims under the NSP and (ii) non-NSP claims subsequently made.

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

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


<PAGE>


                                     - 30 -

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

12.   CONTINGENT LIABILITIES

ITEM A. - OWENS CORNING (EXCLUDING FIBREBOARD) (continued)

The  Chapter 11 Cases  significantly  increase  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 may have
the effect of  increasing  the number and ultimate  cost of  resolution  of such
claims, perhaps substantially.  In particular,  the status of the NSP Agreements
and the  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 treat the
     various types of NSP claims,  including  without  limitation claims with no
     evidence of  significant  medical  impairment,  or whether such  unimpaired
     claims will be treated as allowed claims thereunder.

-    The settlement values for specified  categories of disease set forth in the
     NSP  Agreements  were  established  by  arms-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:

-    As a result of the  Filing,  all of the  holders of  pre-petition  asbestos
     claims against Owens Corning or Fibreboard  will be required to file proofs
     of claim in the form and manner  prescribed by the  Bankruptcy  Court.  The
     filing of a proof of claim will be a precondition to any pre-petition claim
     being  considered  for payment as an allowed claim.  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.  Among other
     things, it is not possible to predict at this time how many proofs of claim
     will be timely  filed,  how many  proofs of claim  will  represent  allowed
     claims, or the aggregate value of such allowed claims.

-    Owens Corning  anticipates that the number and estimated aggregate value of
     allowed  future  claims  will be  determined  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  at this time. In  connection  with such  negotiations,  it is
     anticipated  that a number  of  interested  constituencies,  including  the
     representatives of the pre-petition and future asbestos claimants and other
     pre-petition  creditors,  will  develop  analyses  of  liability  for  both
     pre-petition and future asbestos claims. Owens Corning

<PAGE>


                                     - 31 -

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

12.   CONTINGENT LIABILITIES

ITEM A. - OWENS CORNING (EXCLUDING FIBREBOARD)  (continued)

     and  Fibreboard  will  also  prepare  analyses  for use in the  negotiation
     process.   Such  analyses  are  also   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.  These  analyses  could vary
     substantially  from one another and from the amounts of Owens Corning's and
     Fibreboard's  existing reserves.  Such analyses will be prepared solely for
     use in the negotiation of a plan of reorganization and will not involve the
     same type of estimation process required in connection with the preparation
     of financial statements under generally accepted accounting principles.

Ultimately,  Owens  Corning's (and  Fibreboard's)  total  liability for asbestos
claims  will be  determined  after a lengthy  period  of  negotiations  and,  if
necessary,  by the  Bankruptcy  Court  following the bar date for  submission of
proofs of claim,  taking  into  account  numerous  factors  not present in Owens
Corning'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 and the total amount of future
asbestos claims allowed.

At September 30, 2001, as a result of the Filing and the uncertainties  referred
to  above,  the  approximate  balances  of the  components  of  Owens  Corning's
asbestos-related reserve were:
<TABLE>
<S>                                                                                        <C>
                                                                                         Balance
                                                                                         -------
                                                                                 (In billions of dollars)
Unpaid Final Settlements (NSP and other)                                                $    0.6
Other Pending and Future Claims                                                              1.6
</TABLE>

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 (i) asbestos personal injury claims pending against Owens
     Corning which were subject to resolution under NSP Agreements but for which
     releases were not obtained from claimants  prior to the Petition Date; (ii)
     all other asbestos  personal  injury claims  pending  against Owens Corning
     which  were not  subject  to any  settlement  agreement;  and (iii)  future
     asbestos  personal  injury  claims  against  Owens  Corning  made after the
     Petition Date.

Owens Corning 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 revision  to the
reserve is appropriate until significant developments occur during the course of
the Chapter 11 Cases, including resolution of the uncertainties described above.
Any such revision  could,  however,  be material to the  Company's  consolidated
financial position and results of operations in any given period.

<PAGE>


                                     - 32 -

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

12.   CONTINGENT LIABILITIES

ITEM B. - FIBREBOARD (EXCLUDING OWENS CORNING)

Prior to 1972, Fibreboard  manufactured insulation products containing asbestos.
Fibreboard  has since been named as  defendant  in many  thousands  of  personal
injury claims for injuries  allegedly  caused by asbestos  exposure.  Fibreboard
received approximately 21,600 asbestos personal injury claims during 2000. Prior
to the Petition Date, the vast majority of Fibreboard  asbestos  personal injury
claims were in the  process of being  resolved  through  the NSP,  as  described
below. As a result of the Filing,  all pre-petition  asbestos claims and pending
litigation  against the Debtors  were  automatically  stayed (see Note 1). Owens
Corning  expects  that all  pending and future  asbestos  claims  against  Owens
Corning  and  Fibreboard  will  be  resolved  pursuant  to a plan  or  plans  of
reorganization.  Owens  Corning  is unable  to  determine  at this time  whether
asbestos-related  claims asserted against Fibreboard will be treated in the same
manner as those asserted against Owens Corning in any such plan or plans.

National Settlement Program
---------------------------

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  212,000  Initial Claims
against Fibreboard,  approximately 116,000 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  $7,500.
As of the Petition Date,  approximately 61,000 of such Final NSP Settlements had
been paid in full or otherwise resolved and approximately  55,000 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 $357 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 3,800 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 be treated
under the terms of any plan or plans of reorganization.

Non-NSP Claims
--------------

As of the Petition Date,  approximately  15,000 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  2,300 asbestos  personal  injury claims
outside the NSP during  2000 prior to the  Petition  Date at an average  cost of
resolution  of  approximately  $45,000 per claim.  Generally,  these claims were
settled as they were  scheduled  for trial,  and they  typically  involved  more
serious injuries and diseases.  Accordingly, Owens Corning does not believe that
such average costs of resolution are  representative of the value of the non-NSP
claims then pending against Fibreboard.


<PAGE>


                                     - 33 -

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

12.   CONTINGENT LIABILITIES

ITEM B. - FIBREBOARD (EXCLUDING OWENS CORNING) (continued)

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

Insurance Settlement
--------------------

In  1993,  Fibreboard  and two of its  insurers,  Continental  Casualty  Company
("Continental")  and Pacific  Indemnity  Company  ("Pacific"),  entered into the
Insurance  Settlement.  The Insurance  Settlement became effective in the fourth
quarter of 1999, is final and is not subject to appeal.

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  million during the fourth quarter of
1999 to fund costs of  resolving  pending and future  asbestos  claims,  whether
under the NSP, in the tort system, or otherwise.

As of  September  30,  2001,  the  Insurance  Settlement  funds were held in and
invested by the Fibreboard  Settlement  Trust.  As of that date,  $1,150 million
(net of outstanding  payables) was held in the Fibreboard  Settlement  Trust and
$135  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.  It will not be known  whether  any such  assets  will  remain  for
distribution until the conclusion of the Chapter 11 Cases.

Funds held in the Fibreboard  Settlement  Trust and  Fibreboard's  Undistributed
Administrative  Deposits are reflected on Owens Corning's  consolidated  balance
sheet as restricted  assets.  At September 30, 2001, these assets were reflected
as non-current assets, under the category "Restricted cash, securities and other
- Fibreboard." See Note 13 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 will be under the terms of any plan or
plans of reorganization.

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:

<TABLE>
<S>                                                                                        <C>
                                                                                   (In millions of dollars)
                                                                                2000 (through October 4, 2000)

     Pre-NSP Settlements                                                                   $     29
     NSP Settlements                                                                            705
     Non-NSP Settlements                                                                         41
     Defense, Claims Processing and  Administrative Expenses                                     45
                                                                                          ---------
                                                                                            $   820
</TABLE>


<PAGE>


                                     - 34 -

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

12.   CONTINGENT LIABILITIES

ITEM B. - FIBREBOARD (EXCLUDING OWENS CORNING) (continued)

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 of
September 30, 2001, a reserve of approximately  $1.3 billion in respect of these
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."   These  liabilities
(including any reserve for the  charitable  remainder) are always at least equal
to  the  funds  held  in  the  Fibreboard   Settlement  Trust  and  Fibreboard's
Undistributed  Administrative  Deposits since, under the terms of the Trust, the
funds held in the Trust must be expended either in connection with  Fibreboard's
asbestos-related  liabilities,  or to satisfy the obligation  under the Trust to
distribute  to  charity  the  assets,  if  any,  remaining  in the  Trust  after
satisfaction of all such liabilities (see Note 13).

The  approximate  balances of the components of the Fibreboard  asbestos-related
reserve at  September  30, 2000 (the ending  date of the last  reporting  period
preceding the Petition Date) were:
<TABLE>
<S>                                                                                        <C>
                                                                                     September 30, 2000
                                                                                     ------------------
                                                                                  (In billions of dollars)

  NSP backlog                                                                             $     0.80
  Non-NSP backlog                                                                               0.10
  Future Claims                                                                                 0.30
  Defense, Claims Processing and Administrative Expenses                                        0.05
</TABLE>

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

-    The "NSP backlog"  component  represented  the remaining  estimated cost of
     resolving Initial Claims against Fibreboard under the NSP.

-    The "Non-NSP backlog" component represented the estimated cost of resolving
     asbestos personal injury claims pending against Fibreboard outside the NSP.

-    The "Future claims"  component  represented the estimated cost of resolving
     (i) Future Claims against  Fibreboard under the NSP and (ii) non-NSP claims
     subsequently made against 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, 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.


<PAGE>


                                     - 35 -

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

12.   CONTINGENT LIABILITIES

ITEM B. - FIBREBOARD (EXCLUDING OWENS CORNING) (continued)

At September 30, 2001, as a result of the Filing and the uncertainties  referred
to  above,  the  approximate  balances  of  the  components  of  the  Fibreboard
asbestos-related reserve were:
<TABLE>
<S>                                                                                     <C>
                                                                                       Balance
                                                                                       -------
                                                                               (In billions of dollars)
Unpaid Final Settlements (NSP and other)                                                $0.4
Other Pending and Future Claims                                                          0.9
</TABLE>

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  (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. This component also included the residual obligation to charity under
     the Fibreboard Settlement Trust (see Note 13).

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
revision to the reserve is  appropriate  until  significant  developments  occur
during  the  course  of  the  Chapter  11  Cases,  including  resolution  of the
uncertainties  described above. Any such revision could, however, be material to
the Company's  consolidated  financial position and results of operations in any
given period.

Non-Asbestos Liabilities
------------------------

Securities Litigation
---------------------

On or about  April  30,  2001,  certain  of the  Company's  current  and  former
directors  and  officers,  as  well  as  certain  underwriters,  were  named  as
defendants in a lawsuit captioned John Hancock Life Insurance Company, et al. v.
Goldman,  Sachs & Co.,  et al.  in the  United  States  District  Court  for the
District of  Massachusetts.  An amended complaint was filed by the plaintiffs on
or about  July 5, 2001.  Owens  Corning  is not named in the  lawsuit.  The suit
purports to be a  securities  class  action on behalf of  purchasers  of certain
unsecured  debt  securities of Owens Corning in offerings  occurring on or about
April 30, 1998 and July 23, 1998.  The complaint  alleges that the  registration
statements  pursuant  to which the  offerings  were made  contained  untrue  and
misleading statements of material fact and omitted to state material facts which
were  required  to be  stated  therein  and  which  were  necessary  to make the
statements therein not misleading,  in violation of sections 11, 12(a)(2) and 15


<PAGE>


                                     - 36 -

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

12.   CONTINGENT LIABILITIES

ITEM B. - FIBREBOARD (EXCLUDING OWENS CORNING) (continued)

of the Securities Act of 1933. The amended complaint seeks an unspecified amount
of damages or, where appropriate,  rescission of the plaintiffs' purchases.  The
Company believes that the claim is without merit.

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 of the years 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.

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.

13.   FIBREBOARD SETTLEMENT TRUST

Under  the  Insurance  Settlement  described  in Note  12,  two of  Fibreboard's
insurers  provided  $1.873 billion during the fourth quarter of 1999 to fund the
costs of resolving pending and future asbestos claims. As of September 30, 2001,
the  Insurance  Settlement  funds were held in and  invested  by the  Fibreboard
Settlement Trust (the "Trust"). On an ongoing basis, the funds held in the Trust
will be  subject  to  investment  earnings/losses  and will be reduced if and as
applied to satisfy Fibreboard asbestos-related  liabilities.  Under the terms of
the Trust,  any Trust assets that  ultimately are not used to fund  Fibreboard's
asbestos-related liabilities must be distributed to charity.

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.  While there can be no assurance that the
proposed  Asbestos  Tax  Fairness  Bill  discussed  in Note 12,  Item A, will be
enacted  by  Congress,  such  legislation  would  benefit  the Trust  during the
pendency of the Chapter 11 proceedings by eliminating the tax on income, thereby
enlarging the corpus of the Trust through tax-free income accumulation.

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



<PAGE>


                                     - 37 -

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

13.   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 September 30, 2001, 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 12, Part B). As of September 30, 2001,  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."  These  liabilities  (including  any reserve for the
charitable  remainder)  are always at least equal to the funds held in the Trust
and Fibreboard's Undistributed Administrative Deposits since, under the terms of
the Trust,  the funds held in the Trust must be  expended  either in  connection
with  Fibreboard's  asbestos-related  liabilities,  or to satisfy the obligation
under the Trust to  distribute to charity the assets,  if any,  remaining in the
Trust after  satisfaction of all such liabilities.  It will not be known whether
any such assets will remain for distribution until the conclusion of the Chapter
11 Cases. At September 30, 2001, the Consolidated  Financial  Statements reflect
Fibreboard's  liabilities for asbestos litigation claims at $1.215 billion, with
a residual obligation to charity of $70 million.

For accounting  purposes,  the Trust Assets are classified  from time to time as
"available for sale" or "held to maturity" and are reported in the  Consolidated
Financial  Statements in accordance  with SFAS No. 115,  "Accounting for Certain
Investments in Debt and Equity Securities."  Accordingly,  marketable securities
classified  as  available  for  sale  are  recorded  at fair  market  value  and
marketable  securities  designated as held to maturity are recorded at amortized
cost.

Any unrealized  increase/decrease  in fair market value is reflected as a change
in the carrying amount of the asset on the consolidated balance sheet as well as
an increase/decrease to other comprehensive income within stockholders'  equity,
net of tax.  The  residual  liability  that  may be paid to  charity  will  also
increase/decrease,  with a  related  decrease/increase  to  other  comprehensive
income within stockholders' equity, net of tax.

Any earnings and realized  gains/losses  on the Trust Assets are reflected as an
increase/decrease  in the  carrying  amount of such  assets on the  consolidated
balance sheet as well as other  income/expense on the consolidated  statement of
income.

The residual liability that may be paid to charity will also  increase/decrease,
with related other expense/ income on the consolidated statement of income. Cost
for purposes of computing realized gains/losses is determined using the specific
identification method.

Results for the Period Ending September 30, 2001
------------------------------------------------

Trust Assets generated  interest/dividend  earnings of approximately $13 million
and $15 million,  respectively,  during the third  quarter of 2001 and 2000 ($42
million and $53 million,  respectively,  for the first nine months of the year),
which have been recorded as an increase in the carrying  amount of the assets on
Owens  Corning's   consolidated  balance  sheet  and  as  other  income  on  the


<PAGE>


                                     - 38 -

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

13.   FIBREBOARD SETTLEMENT TRUST (continued)

Consolidated  Statement of Income (Loss). This income,  however, has been offset
by an equal  charge  to other  expense,  which  represents  an  increase  in the
residual liability to charity.

As a result of the  Filing,  there were no  payments  from the Trust  during the
first half of 2001.  However,  in the third quarter of 2001,  approximately  $11
million  was paid for taxes  related  to  earnings  of the Trust.  Payments  for
asbestos  litigation claims from the Trust during the third quarter of 2000 were
approximately $186 million, and totaled $820 million for the year. As the result
of the sale of  securities,  the Trust  realized  a gain of less than $1 million
during the third quarter of 2001, compared to a gain of approximately $1 million
during the same  period of 2000 (for the first nine  months of such  years,  the
Trust realized gains of approximately $4 million and $2 million,  respectively).
Realized  gains or  losses  from the sale of  securities  are  reflected  on the
Company's  financial  statements  in the same manner as actual  returns on Trust
Assets, described above.

At  September  30, 2001 and 2000,  the fair market  value  adjustment  for those
securities  designated as available  for sale resulted in an unrealized  gain of
approximately $11 million and $1 million, respectively.  These amounts have been
reflected  in the  Company's  consolidated  balance  sheet  as a  change  to the
carrying amount of the asset and to other  comprehensive  income.  These amounts
have also  been  reflected  as a change  to the  liability  to  charity,  with a
corresponding effect to other comprehensive income.

At September 30, 2001, the fair value of Trust Assets was $1.285 billion,  which
was  comprised  of $1.168  billion  of  marketable  securities,  $18  million of
outstanding  payables  and $135 million of  restricted  cash,  which  represents
undistributed administrative deposits.

The amortized cost, gross unrealized  holding gains and losses and fair value of
the investment  securities available for sale at September 30, 2001 and December
31, 2000 are as follows:
<TABLE>
<S>                                  <C>                  <C>                      <C>                  <C>
                                                                 September 30, 2001
                                                                 ------------------
                                   Amortized         Gross Unrealized       Gross Unrealized
                                      Cost                 Gain                    Loss              Fair Value
                                      ----                 ----                    ----              ----------
                                                              (In millions of dollars)

Municipal Bonds                      $  1,151            $       11             $        -           $  1,162
Mutual Funds                                2                     -                      -                  2
US Government Bonds                         4                     -                      -                  4
                                   ----------           -----------            -----------         ----------

Total                                $  1,157            $       11             $        -           $  1,168
</TABLE>



<PAGE>


                                     - 39 -

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

13.   FIBREBOARD SETTLEMENT TRUST (continued)
<TABLE>
<S>                                       <C>                <C>                       <C>                 <C>
                                                                    December 31, 2000
                                                                    -----------------
                                         Amortized     Gross Unrealized          Gross Unrealized
                                           Cost              Gain                      Loss          Fair Value
                                           ----              ----                      ----          ----------
                                                                 (In millions of dollars)

Corporate Bonds                          $    148         $       -                $      -           $    148
Corporate Notes                               449                 1                       -                450
Municipal Bonds                               284                 -                       -                284
Mutual Funds                                  116                 -                       -                116
Time Deposits                                  37                 -                       -                 37
US Government Bonds                            57                 -                       -                 57
                                       ----------        ----------               ---------         ----------

Total                                     $ 1,091         $       1                $      -            $ 1,092
                                          =======         =========                ========            =======
</TABLE>

Maturities  of  investment  securities  classified  as  available  for  sale  at
September  30, 2001 and  December  31, 2000 by  contractual  maturity  are shown
below.  Expected  maturities  will differ from  contractual  maturities  because
borrowers  may have the right to recall or prepay  obligations  with or  without
call or prepayment penalties.
<TABLE>
<S>                                                       <C>               <C>            <C>           <C>
                                                           September 30, 2001               December 31, 2000
                                                           ------------------               -----------------
                                                       Amortized                        Amortized
                                                         Cost          Fair Value          Cost        Fair Value
                                                         ----          ----------          ----        ----------
                                                                        (In millions of dollars)

Due within one year                                    $      37        $      37        $     656      $     656
Due after one year through five years                        581              589                2              2
Due after five years through ten years                       219              221               51             51
Due after ten years                                          320              321              382            383
                                                       ---------        ---------        ---------      ---------
Total                                                   $  1,157         $  1,168         $  1,091       $  1,092
</TABLE>



<PAGE>


                                     - 40 -

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

13.   FIBREBOARD SETTLEMENT TRUST (continued)

The table below summarizes Trust and  Administrative  Deposits  activity for the
period ended September 30, 2001:
<TABLE>

<S>              <C>              <C>             <C>            <C>            <C>            <C>              <c>            <c>
                               Interest       Unrealized      Net Sales       Realized
                Balance           and            Gain/           of             Gain/                                        Balance
                12/31/00       Dividends        (Loss)        Securities        (Loss)         Other         Payments        9/30/01
                --------       ---------        ------        ----------        ------         -----         --------        -------
Assets
------

Cash          $      12       $       -       $      -       $      (30)       $     -         $    -        $      -        $  (18)
Restricted
 Cash               170               -              -                -              -            (35)              -            135
Marketable
 Securities:
  Available
   for Sale       1,092              42             11               30              4              -             (11)         1,168
              ---------        --------         ----------      -----------    ---------       --------      ------------    -------

Total Assets  $   1,274       $      42        $    11       $        -        $     4         $  (35)       $    (11)       $ 1,285
              ========         ========         =========      ============     =========      ========      ===========     =======

Liabilities
-----------

Asbestos
 Litigation
 Claims       $  1,250        $      -         $     -       $        -        $     -         $   (35)      $      -        $ 1,215
Charity             24              42              11                -              4               -            (11)            70
              ----------       --------        ----------     ------------      ---------      --------      ------------    -------

Total
 Liabilities  $  1,274        $     42         $    11       $        -        $     4         $   (35)      $    (11)       $ 1,285
              ========        ========          =========      ============       =========    ========      ===========     =======
</TABLE>




<PAGE>


                                     - 41 -

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

(All per share information in Item 2 is on a diluted basis.)

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

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

GENERAL

Voluntary Petition for Relief Under Chapter 11
----------------------------------------------

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

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 12 to the
Consolidated Financial Statements.

Consequence of Filing
---------------------

As a consequence of the Filing,  all pending  litigation  against the Debtors is
stayed  automatically  by section 362 of the Bankruptcy Code and, absent further
order of the  Bankruptcy  Court,  no party  may take any  action to  recover  on
pre-petition claims against the Debtors. In addition, pursuant to section 365 of
the  Bankruptcy  Code, the Debtors may reject or assume  pre-petition  executory


<PAGE>


                                     - 42 -

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

contracts  and unexpired  leases,  and other parties to contracts or leases that
are rejected may assert rejection  damages claims as permitted by the Bankruptcy
Code.

Two creditors'  committees,  one representing  asbestos  claimants and the other
representing unsecured creditors,  have been appointed as official committees in
the Chapter 11 Cases. In addition,  the Bankruptcy  Court has appointed James J.
McMonagle as legal  representative  for the class of future asbestos  claimants.
The two  committees  and the  futures  representative  will have the right to be
heard on all  matters  that come  before the  Bankruptcy  Court.  Owens  Corning
expects that these committees and the futures representative will play important
roles in the  Chapter 11 Cases and the  negotiation  of the terms of any plan or
plans of reorganization.

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 file
and seek  confirmation of such a plan or plans,  there can be no assurance as to
when the Debtors will file such a plan or plans, or that such plan or plans will
be confirmed by the Bankruptcy Court and consummated.

As provided by the  Bankruptcy  Code,  the Debtors  initially  had the exclusive
right to propose a plan of  reorganization  for 120 days  following the Petition
Date,  until February 2, 2001. By order,  the Bankruptcy Court has extended such
exclusivity  period until February 2, 2002, and similarly  extended the Debtors'
exclusive rights to solicit  acceptances of a reorganization  plan from April 3,
2001 to April 3,  2002.  If the  Debtors  fail to file a plan of  reorganization
prior to the ultimate  expiration of the exclusivity  period, or if such plan is
not accepted by the requisite  numbers of creditors and equity holders  entitled
to vote on the plan,  other  parties in  interest in the Chapter 11 Cases may be
permitted to propose their own plan(s) of reorganization for the Debtors.

Owens  Corning is unable to predict at this time what the treatment of creditors
and equity holders of the respective  Debtors will be under any proposed plan or
plans of  reorganization.  Such plan or plans may provide,  among other  things,
that all present and future  asbestos-related  liabilities  of Owens Corning and
Fibreboard  will  be  discharged  and  assumed  and  resolved  by  one  or  more
independently  administered trusts established in compliance with Section 524(g)
of the Bankruptcy  Code. Such plan or plans may also provide for the issuance of
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 one or more Section
524(g)  trusts.  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.

Owens Corning is unable to predict at this time what  treatment will be accorded
under  any such  reorganization  plan or plans  to  inter-company  indebtedness,


<PAGE>


                                     - 43 -

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

licenses,   transfers  of  goods  and  services  and  other   inter-company  and
intra-company  arrangements,  transactions and  relationships  that were entered
into  prior  to  the  Petition  Date.  These   arrangements,   transactions  and
relationships  may be challenged by various  parties in the Chapter 11 Cases and
the outcome of those challenges,  if any, may have an impact on the treatment of
various claims under such plan or plans. For example, Owens Corning is unable to
predict  at this  time what the  treatment  will be under any such plan or plans
with respect to (1) the  guaranties  issued by certain of Owens  Corning's  U.S.
subsidiaries,  including  Owens-Corning  Fiberglas  Technology Inc. ("OCFT") and
IPM, Inc., a Non-Debtor Subsidiary that holds Owens Corning's ownership interest
in a majority of Owens Corning's foreign subsidiaries  ("IPM"),  with respect to
Owens   Corning's   $1.8  billion   pre-petition   bank  credit   facility  (the
"Pre-Petition  Credit  Facility"  which is now in default) or (2) OCFT's license
agreements  with Owens  Corning  and  Exterior  Systems,  Inc.,  a  wholly-owned
subsidiary  of Owens  Corning  ("Exterior"),  pursuant  to which  OCFT  licenses
intellectual property to Owens Corning and Exterior.

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. There is no assurance that there will be sufficient assets
to satisfy the Debtors'  pre-petition  liabilities  in whole or in part, and the
pre-petition  creditors of some Debtors may be treated differently than those of
other  Debtors.  Pre-petition  creditors  may receive under a plan or plans less
than  100% of the  face  value  of  their  claims,  and the  interests  of Owens
Corning's equity security  holders may be substantially  diluted or cancelled in
whole or in part. As noted above, it is not possible at this time to predict the
outcome of the Chapter 11 Cases,  the terms and  provisions of any plan or plans
of reorganization, or the effect of the Chapter 11 reorganization process on the
claims of the  creditors  of the  Debtors or the  interests  of Owens  Corning's
equity security holders.

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.  No bar dates have been set for the filing
of proofs of claim  against the Debtors.  Accordingly,  the ultimate  number and
allowed amount of such claims are not presently known.

RESULTS OF OPERATIONS

Business Overview
-----------------

Owens Corning is committed to continuing to invest in our businesses and provide
quality  products  to our  customers.  In  recent  years,  we  have  focused  on
increasing  sales and earnings by (i) achieving  productivity  improvements  and
cost  reductions  in existing and acquired  businesses,  (ii)  targeting  growth
markets and (iii) forming strategic alliances and partnerships to complement our
existing  businesses.  We are  committed to taking full  advantage of e-Business
opportunities.  We are also expanding our role as a service provider by offering
complementary  services  in order to meet all of our  customers'  needs.  In the
Composite  Systems Business,  Owens Corning has partnered with end users,  OEMs,
systems  suppliers and other players within the supply chain for  development of
substitution opportunities for composite systems.

Owens  Corning's   strategy  also  includes  the  divestiture  of  non-strategic
businesses and the realignment of existing businesses.  During the third quarter
of 2001,  Owens  Corning  reached  agreement to sell its 40% interest in Alcopor
Owens Corning, an unconsolidated  joint venture. This transaction received final
<PAGE>


                                     - 44 -

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

approval from the  Bankruptcy  Court on October 29, 2001 (see Note 5). Also part
of this strategy was the sale of the Engineered  Pipe Business  during the first
quarter of 2001,  the Falcon Foam business in the U.S.  during the first quarter
of 2000, and the Building  Materials business in Europe to Alcopor Owens Corning
in the  second  quarter of 2000.  Please  see Notes 2 and 5 to the  Consolidated
Financial Statements.

As a result of  significant  increases  in certain  materials  costs,  increased
energy  costs and a fall in demand  for  building  materials  associated  with a
weakening  economy,  during  late  2000 we  implemented  the  first  phase  of a
strategic  restructuring  program,  which  continues  into  2001.  The  specific
objectives of this program are  discussed in  "Restructuring  of Operations  and
Other Charges" below and in Note 4 to the Consolidated Financial Statements.

During the first nine months of 2001,  the overall  economy  remained  weak. The
weakened  economy  resulted in lower demands in both the Building  Materials and
Composite  Systems markets.  In the third quarter,  slightly improved demand for
Building Materials was offset by some price decline, resulting in flat sales for
the third quarter of 2001 compared to the third quarter of 2000. The Company had
some margin  improvements  attributable to productivity  gains and material cost
deflation.

Quarter and Nine Months Ended September 30, 2001
------------------------------------------------

Sales and Profitability
-----------------------

Net sales for the quarter  ended  September  30, 2001 were  $1.291  billion,  up
slightly  from the third quarter 2000 level of $1.281  billion.  The increase is
due  primarily  to  increased  volume  in  North  American  Building   Materials
businesses,  partially  offset  by  decreased  sales in the  overall  Composites
Systems business.  In the Building Materials Systems business,  sales during the
third  quarter of 2001  reflect  volume  increases in U.S.  Building  Materials,
partially offset by price decreases in the U.S.  insulation and roofing markets,
compared to the third quarter of 2000. In the Composite Systems business,  sales
reflect volume  decreases only partially  offset by price increases  compared to
the year earlier  period.  On a  consolidated  basis,  the currency  translation
impact of sales  denominated in foreign  currencies was  unfavorable  during the
third quarter of 2001 compared to the third quarter of 2000.  Please see Notes 2
and 5 to the Consolidated Financial Statements.

Sales outside the U.S.  represented  13% of total sales during the third quarter
of 2001, compared to 14% during the third quarter of 2000.

For the quarter ended September 30, 2001,  Owens Corning  reported net income of
$27 million, or $.46 per share,  compared to $14 million, or $.25 per share, for
the quarter ended September 30, 2000. On a pre-tax basis, Owens Corning reported
income from  operations  of $63 million in the third quarter of 2001 compared to
$80 million for the same period in 2000.  When adjusted for $35 million in costs
of  restructuring  and  other  charges,   $23  million  in  Chapter  11  related
expenditures   and  $5  million  in  income  from   asbestos-related   insurance
recoveries,  Owens Corning  generated $116 million in income from  operations in
the third  quarter of 2001,  compared to $106  million for the third  quarter of
2000  (adjusted  for  restructuring  and other  charges).  Net  income for third
quarter 2001 reflects increased gross margin and reduced operating costs as well
as the  impact  of the  Company's  ongoing  review  of its  cost  structures  as
described below in  "restructuring  and other  charges".  Cost of borrowed funds
during the third  quarter of 2001 was $4  million,  $51  million  lower than the
third quarter 2000 level, due to the cessation of interest (totaling $43 million
during the  quarter,  and $139  million  year to date  (please see Note 1 to the
Consolidated  Financial  Statements)) on most debt as a result of the Chapter 11
Filing.



<PAGE>


                                     - 45 -

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

Marketing and administrative expenses were $141 million during the third quarter
of 2001, compared to $143 million in the third quarter of 2000.

Net sales for the nine months ended September 30, 2001 were $3.597 billion, down
6% from the  $3.833  billion  reported  for the first nine  months of 2000.  The
decline  reflects  volume  decreases  across North American  Building  Materials
markets and the  disposition of Building  Materials  Europe.  Net income for the
nine  months  ended  September  30,  2001 was $46  million,  or $.77 per  share,
compared  to a net loss of $363  million,  or $(6.64)  per  share,  for the same
period  in  2000.  On a  pre-tax  basis,  Owens  Corning  reported  income  from
operations of $103 million for the nine months ended  September  30, 2001.  When
adjusted  for $94  million  in costs of  restructuring  and other  charges,  $60
million  in  Chapter 11  related  expenditures  and $5  million  in income  from
asbestos-related  insurance recoveries,  Owens Corning generated $252 million in
income from  operations in 2001  compared to $363 million in 2000  (adjusted for
asbestos-related charges and restructuring and other charges).

Building Materials Systems
--------------------------

In the  Building  Materials  Systems  segment,  sales  increased  3%,  to $1.076
billion,  in the third  quarter of 2001  compared to the third  quarter of 2000.
This increase  resulted  primarily from slightly higher volume in U.S.  Building
Materials.  Income from  operations  was $97 million during the third quarter of
2001, up approximately  14% from the same period in 2000. The increase  reflects
the combined  effects of volume  increases,  raw material  cost  decreases and a
decline in energy costs from earlier in the year.

Composite Systems
-----------------

In the Composite  Systems segment,  sales were down 7%, to $215 million,  during
the third quarter of 2001  compared to the third  quarter of 2000.  This decline
reflects volume decreases  partially  offset by increases in price.  Income from
operations was $33 million in the third quarter of 2001, compared to $16 million
in the prior-year  period,  as a result of increased gross margin due to process
improvements  and  reduction  of  manufacturing  costs,  price  increases,   and
continued focus on operating expenses.

Restructuring of Operations and Other Charges
---------------------------------------------

2001 Charges
------------

Third Quarter 2001
------------------

During the third  quarter of 2001,  the  Company  continued  to  experience  the
effects  of an  overall  slowed  economy  in both  the  building  materials  and
composite materials  industries.  While sales were flat with a year ago, margins
showed  slight  improvements  due to some  productivity  gains and material cost
deflation.  As a result,  the Company  recorded a $35 million  pretax  charge to
income from  operations for  restructuring  and other  charges.  This charge was
comprised of an $8 million pretax  restructure  charge and $27 million in pretax
other  charges.  The  restructure  charge  has  been  classified  as a  separate
component  of  operating  expenses on the  Company's  Consolidated  Statement of
Income (Loss) and represents  severance costs associated with the elimination of
approximately  160  positions,  primarily  in the U.S.  and the U.K. The primary
groups impacted  included  manufacturing  and  administrative  personnel.  As of
September 30, 2001,  approximately  $5 million has been paid and charged against
this reserve.

The $27  million  in pretax  other  charges  included:  1) $15  million in costs
associated with the Company's  previously  announced plan to realign its Newark,


<PAGE>


                                     - 46 -

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

Ohio  manufacturing   facility;  2)  $4  million  to  write-down  the  Company's
investment  and related assets in Alcopor Owens  Corning,  a building  materials
joint  venture  in Europe,  to net  realizable  value.  The  Company  reached an
agreement to sell its interest in Alcopor  Owens  Corning and the proceeds  were
placed in escrow.  This transaction  received final approval from the Bankruptcy
Court on October 29, 2001 (see Note 5); and 3) various other charges totaling $8
million.  This $27  million  pretax  charge was  accounted  for as a $19 million
charge to cost of sales and an $8 million charge to other operating expenses.

Second Quarter 2001
-------------------

During the second  quarter of 2001,  the Company  recorded $17 million in pretax
charges for  restructuring and other charges as a result of the continued impact
of a soft overall  economy.  This charge was  comprised  of a $7 million  pretax
restructure  charge and $10  million  in pretax  other  charges.  The $7 million
restructure  charge  represented $5 million for the divestiture of non-strategic
businesses and facilities,  consisting  mainly of non-cash asset  write-downs to
fair  value and exit cost  liabilities,  and a $2 million  charge for  severance
costs associated with the elimination of  approximately 25 positions,  primarily
in  the  U.K.  The  primary   groups   affected   included   manufacturing   and
administrative personnel. As of September 30, 2001, approximately $1 million has
been paid and charged against the reserve for personnel reductions.

The $10 million in pretax other charges  included $4 million in costs related to
the Company's  continuing plan for the realignment of the Newark, Ohio facility,
$2 million to  write-down  inventory  made  obsolete by changes in the Company's
manufacturing  and marketing  strategies,  and various other charges totaling $4
million.  This $10  million  pretax  charge was  accounted  for as an $8 million
charge to cost of sales and a $2 million charge to other operating expenses.

First Quarter 2001
------------------

During the first  quarter of 2001,  the Company  recorded  $42 million in pretax
charges for  restructuring and other charges as a result of the impact of a soft
overall  economy.  The $42 million  pretax  charge was comprised of a $9 million
pretax restructure charge, $2 million pretax loss from assets held for sale, and
$31 million in other pretax charges.  The $9 million pretax  restructure  charge
represented severance costs associated with the elimination of approximately 130
positions,   primarily  in  the  U.S.  The  primary  groups  affected   included
manufacturing  and   administrative   personnel.   As  of  September  30,  2001,
approximately  $2 million  has been paid and  charged  against  the  reserve for
personnel  reductions.  The $2 million  pretax  loss from  assets  held for sale
represented the results of operations for the Company's  investments in its Pipe
joint ventures and  subsidiaries on a held-for-sale  basis for the first quarter
of 2001. This sale was completed in February 2001.

The $31 million in other  pretax  charges was  comprised of $10 million of asset
impairments,  principally the write-down of equipment;  $4 million to write down
inventory to reflect  updated  estimates of the net realizable  value of certain
inventories;   $4  million  of  payroll-related   charges  associated  with  the
realignment  of the Newark,  Ohio  manufacturing  facility;  and  various  other
charges  totaling $13 million.  This $31 million pretax charge was accounted for
as an $18  million  charge  to cost of sales and a $13  million  charge to other
operating expenses.

2000 Charges
------------

During  2000,  the  Company   recorded   pretax  charges  of  $229  million  for
restructuring  and other  activities as a result of its reassessment of business
strategies  with respect to  investments  in certain  ventures,  facilities  and
overhead  expenditures.  The $229 million  pretax  charge was comprised of a $32


<PAGE>


                                     - 47 -

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

million  charge  associated  with the  restructuring  of the Company's  business
segments and $197 million of other  charges,  the majority of which  represented
impairments of long-lived assets. In addition, the Company recorded a $6 million
pretax  credit  to  minority  interest  resulting  from  charges  related  to  a
majority-owned  consolidated  subsidiary.  The  components of the  restructuring
charge  included  $16  million  for  personnel  reductions,  $10 million for the
divestiture of non-strategic businesses and facilities, and $6 million for asset
impairments  associated  with the planned  closing of two lines at the Company's
Newark,  Ohio  manufacturing  facility.  This represented the first phase of the
Company's plan to realign operations at the Newark facility.

The  $197  million  of other  charges  was  comprised  of $95  million  of asset
impairments,  a $6 million charge for a settlement  loss  associated with one of
Owens  Corning's  U.S.  pension  plans,  and $96  million of charges  focused on
improving business operations. The $95 million of asset impairments included: 1)
$54 million charge to write-down the Company's  investment and related assets in
Alcopor  Owens  Corning,  a building  materials  joint  venture  in  Europe,  to
estimated fair value on a held for sale basis;  2) $12 million to write-down the
Company's  investment  in the  majority  owned,  consolidated  venture  in South
Africa, on a held-in-use  basis based upon management's  analysis of current and
expected future  financial  results and constraints on the Company's  ability to
fund future significant  capital investments in this subsidiary as a consequence
of the  bankruptcy  filing.  The $12  million  charge was offset by a $6 million
credit to record the minority owner's share,  recorded in the minority  interest
line on the Consolidated Statement of Income (Loss); 3) $8 million to write-down
to  fair  value  the  investments  in the  Company's  Pipe  joint  ventures  and
subsidiaries on a held for sale basis. The sale of a majority of the investments
and  subsidiaries  held for sale was  completed  in  February  2001,  with final
approval  obtained in June, 2001, at which time cash proceeds were released from
escrow; 4) $10 million to write-down the equity investment in ImproveNet, due to
a significant  decrease in market value which management  believes is other than
temporary;  and 5) $11  million  associated  with asset  impairments  within the
Company's Cultured Stone and other businesses.

The $96 million  charge  consisted of $43 million to write-down  inventory  made
obsolete by changes in the Company's manufacturing and marketing strategies; $19
million to  write-down  equipment  and  receivables;  $15  million  to  increase
warranty  reserves  due to general  changes in estimates  associated  with these
reserves;  and various  other  charges  totaling  $19 million  recorded as other
operating expenses. As of September 30, 2001, approximately $13 million has been
paid and charged against the reserve for personnel  reductions and approximately
$2 million has been charged against exit cost liabilities.

1997 and 1998 Charges
---------------------

During 1997 and 1998,  the Company  recorded  pretax charges of $386 million for
restructuring  and other  actions to implement a program to close  manufacturing
facilities, enhance manufacturing productivity and reduce overhead. Of the total
pretax charge of $386 million,  $143 million was recorded in the fourth  quarter
of 1997 and the remaining $243 million was recorded during 1998.

The $386 million pretax charge was comprised of a $185 million charge associated
with the  restructuring  of the Company's  business  segments and a $201 million
charge  associated  with asset  impairments,  including  investments  in certain
affiliates. The components of the restructuring charge included $115 million for
personnel   reductions;   $68  million  for  the  divestiture  of  non-strategic
businesses  and  facilities,  of which $52 million  represented  non-cash  asset
revaluations and $16 million  represented exit cost  liabilities,  primarily for
leased  warehouse and office  facilities  that were vacated;  and $2 million for
other  actions.  The  divestiture  of  non-strategic  businesses  and facilities
included the closure of the Candiac, Quebec manufacturing  facility.  During the
second  quarter of 1999,  the Candiac  manufacturing  facility was  re-opened in
order to meet market  demands.  As of  September  30, 2001,  approximately  $105


<PAGE>


                                     - 48 -

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

million has been paid and charged against the reserve for personnel  reductions,
representing the elimination of approximately  2,450 employees,  the majority of
whose  severance  payments  were  made over the  course  of 1998 and  1999,  and
approximately $13 million has been charged against exit cost liabilities.

Due to timing of events,  we anticipate that additional  restructuring and other
charges will be recorded during 2001.

LIQUIDITY, CAPITAL RESOURCES AND OTHER RELATED MATTERS

Cash flow from  operations  was $84 million for the quarter ended  September 30,
2001,  compared to negative $7 million for the quarter ended September 30, 2000.
Cash flow from operations in the third quarter of 2001 was favorably impacted by
increased  net  income,  decreases  in accounts  receivable  and other long term
assets and increases in accounts payable and accrued  liabilities.  Cash flow in
the third  quarter of 2001 was  negatively  impacted by a  contribution  of $150
million to the Company's U.S.  pension plans.  Cash flow from operations for the
quarter  ended  September  30, 2000  included  payments for asbestos  litigation
claims net of proceeds from insurance of $70 million. As a result of the Filing,
cash payments to asbestos  claimants are stayed.  Cash flow in the third quarter
of 2000 also included $54 million of cost of borrowed  funds. As a result of the
Filing, interest on the pre-petition debt of the Debtors is also stayed.

Inventories  at September 30, 2001 were $480 million,  $11 million more than the
December  31, 2000  level,  due largely to the  seasonal  build of  inventories.
Receivables  at September  30, 2001 were $597 million,  a $109 million  increase
over the  December  31, 2000 level,  attributable  to the  seasonal  increase in
sales.  The  increase in accounts  payable  and  accrued  liabilities  from $491
million at December 31, 2000,  to $678 million at September  30, 2001,  reflects
typical  payment  patterns  during  the first  nine  months of 2001,  as well as
improvements in payment terms initially adversely affected by the Filing.

At September 30, 2001,  Owens Corning's net working capital was $874 million and
our current ratio was 2.11, compared to $955 million and 2.57, respectively,  at
December  31,  2000  and  negative  $2.975  billion  and .47,  respectively,  at
September 30, 2000. The change in working capital and current ratio at September
30, 2001  compared  to  September  30, 2000 is the direct  result of the Filing,
which reclassified  liabilities of Debtors outstanding at the date of the Filing
to "Liabilities  Subject to Compromise."  Please see Note 1 to the  Consolidated
Financial Statements.

At September 30, 2001, the Company had $2.843  billion of borrowings  subject to
compromise and $71 million of other  long-term  borrowings (of which $65 million
were in default as a  consequence  of the Filing  and  therefore  classified  as
current on the Consolidated Balance Sheet).  Long-term borrowings outstanding at
September 30, 2000 were $ 2.765 billion.

At September 30, 2001, the Company had $551 million of Cash and Cash Equivalents
(of which approximately $39 million was subject to administrative freeze pending
the  resolution  of  certain  alleged  set-off  rights by  certain  pre-petition
lenders).  In addition,  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").  At  September  30,  2001,  this
facility had not been utilized except for  approximately  $32 million 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
on their  ability to pay dividends and to transfer cash and other assets to each
other and to their affiliates.


<PAGE>


                                     - 49 -

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

Owens  Corning  maintains  pension  plans for certain of its salaried and hourly
employees.  During  the third  quarter of 2001,  the  Company  contributed  $150
million  to its  U.S.  plans,  for a  total  year-to-date  contribution  of $176
million. The Company does not anticipate making additional  contributions to its
U.S. plans during 2001.

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

Capital spending for property, plant and equipment,  excluding acquisitions, was
$50 million in the third quarter of 2001.  Owens Corning  anticipates  that 2001
capital spending,  exclusive of acquisitions and investments in affiliates, will
be  approximately  $285 million.  We expect that funding for these  expenditures
will be from our operations and the credit availability from the DIP Financing.

Accounting Changes
------------------

Effective  January 1, 2001,  the  Company  implemented  Statement  of  Financial
Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities"  (SFAS  133).  This  statement  and  its  interpretations  establish
accounting and reporting standards requiring derivative  instruments  (including
certain  derivative  instruments  embedded in other contracts) to be recorded in
the balance  sheet as either an asset or  liability  measured at its fair value.
The impact of adoption at January 1, 2001 did not have a material  effect in the
Consolidated  Statement  of Income  (Loss) and  resulted in other  comprehensive
income of approximately $1 million.

Effective  January 1, 2002,  the  Company  will adopt  Statements  of  Financial
Accounting Standards No. 141, Business  Combinations,  and No. 142, Goodwill and
Other  Intangible  Assets.  The  first of  these  statements  requires  business
combinations  initiated  after  June 30,  2001 to be  accounted  for  using  the
purchase  method.  With the  adoption of  Statement  142,  Goodwill is no longer
subject to amortization  over its estimated useful life; rather it is subject to
an annual assessment for impairment charge. During the third and fourth quarters
of 2001, we are reviewing the impairment analysis set forth in Statement 142 and
assessing  the impact of  adoption.  The Company  recognizes  approximately  $18
million in annual Goodwill amortization.

Effective  January 1,  2002,  the  Company  will adopt  Statement  of  Financial
Accounting  Standards  No. 144,  Accounting  for the  Impairment  or Disposal of
Long-Lived Assets.  This statement  replaces FASB Statement No. 121,  Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of. The impact of adoption has not yet been determined.

Effective  January 1,  2003,  the  Company  will adopt  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


<PAGE>


                                     - 50 -

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

estimate of fair value can be made,  while the associated asset retirement costs
are  capitalized  as part of the carrying  amount of the long-lived  asset.  The
impact of adoption has not yet been determined.

Environmental Matters
---------------------

Owens Corning has been deemed by the Environmental Protection Agency (EPA) to be
a  Potentially  Responsible  Party (PRP) with respect to certain sites under the
Comprehensive   Environmental   Response,   Compensation   and   Liability   Act
(Superfund). The Company has also been deemed a PRP under similar state or local
laws. In other instances,  other PRPs have brought suits or claims against Owens
Corning as a PRP for  contribution  under such federal,  state or local laws. At
September 30, 2001, a total of 51 such PRP designations  remained  unresolved by
the Company.  The Company is also involved with  environmental  investigation or
remediation  at a number  of other  sites at which  Owens  Corning  has not been
designated a PRP.

The Company has established a $26 million reserve for our Superfund (and similar
state, local and private action) contingent liabilities.  In connection with the
Filing, the Company has initiated a program to identify and discharge contingent
environmental liabilities as part of its plan or plans of reorganization.  Under
the  program,  the  Company  will seek  settlements,  subject to approval of the
Bankruptcy Court, with various federal, state and local authorities,  as well as
private claimants. The Company will continue to review its environmental reserve
in light of such program and make such adjustments as may be appropriate.

The 1990  Clean  Air Act  Amendments  (Act)  provide  that  the EPA  will  issue
regulations on a number of air pollutants over a period of years. The EPA issued
final  regulations  for wool  fiberglass  and mineral  wool in June,  1999,  for
amino/phenolic  resin in January,  2000 and for secondary  aluminum  smelting in
March, 2000. The Company  anticipates that other sources to be regulated will be
wet formed glass mat, asphalt  processing and roofing,  metal coil coating,  and
open molded  fiber-reinforced  plastics.  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

Owens Corning is exposed to the impact of changes in foreign  currency  exchange
rates and interest rates in the normal course of business.  The Company  manages
such exposures  through the use of certain  financial and  derivative  financial
instruments.  Our  objective  with these  instruments  is to reduce  exposure to
fluctuations  in  earnings  and cash flows  associated  with  changes in foreign
currency exchange rates and interest rates.

The Company enters into various forward  contracts and options,  which change in
value as foreign currency exchange rates change, to preserve the carrying amount
of foreign  currency-denominated  assets, liabilities,  commitments, and certain
anticipated  foreign  currency  transactions  and  earnings.  Owens Corning also
enters into certain  currency  and  interest  rate swaps to protect the carrying
amount of investments in certain  foreign  subsidiaries,  to hedge the principal
and interest  payments of certain debt  instruments,  and to manage  exposure to
fixed versus floating interest rates.

Owens Corning's  policy is to use foreign  currency and interest rate derivative
financial  instruments  only to the  extent  necessary  to manage  exposures  as
described  above.  The Company does not enter into foreign  currency or interest
rate derivative transactions for speculative purposes.


<PAGE>


                                     - 51 -

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

The Company uses a variance-covariance  Value at Risk (VAR) computation model to
estimate the  potential  loss in the fair value of its  interest  rate-sensitive
financial instruments and its foreign currency-sensitive  financial instruments.
The VAR model uses  historical  foreign  exchange rates and interest rates as an
estimate of the volatility and correlation of these rates in future periods.  It
estimates a loss in fair market value using statistical modeling techniques.

The amounts presented below represent the maximum potential one-day loss in fair
value that we would expect from  adverse  changes in foreign  currency  exchange
rates or interest rates assuming a 95% confidence level:
<TABLE>
<S>                 <C>                                          <C>                              <C>
               Risk Category                               September 30, 2001             December 31, 2000
               -------------                               ------------------             -----------------
                                                                      (In millions of dollars)
               Foreign currency                                   $  1                            $  1
               Interest rate                                      $ 12                            $  8
</TABLE>

Virtually  all of the  potential  loss  associated  with  interest  rate risk is
attributable  to fixed-rate  long-term  debt  instruments.  The potential  loss,
identified above, includes interest on debt subject to compromise.


<PAGE>


                                     - 52 -

                           PART II. OTHER INFORMATION

ITEM 1.       LEGAL PROCEEDINGS

See Note 12, Contingent  Liabilities,  to Owens Corning's Consolidated Financial
Statements above, which is incorporated here by reference.

On October 5, 2000 (the "Petition Date"), Owens Corning and the 17 United States
subsidiaries  listed  below  (collectively,   the  "Debtors"),  filed  voluntary
petitions  for relief  (the  "Filing")  under  Chapter  11 of the United  States
Bankruptcy Code (the  "Bankruptcy  Code") in the United States  Bankruptcy Court
for the District of Delaware (the "Bankruptcy Court"). 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 subsidiary  Debtors that filed Chapter 11 petitions for
relief are:
<TABLE>
<S>                                                             <C>
         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
</TABLE>

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

ITEM 2.    CHANGES IN SECURITIES AND USE OF PROCEEDS

As a  consequence  of the Filing and the  impact of  certain  provisions  of the
Company's DIP Financing and in a cash management order entered by the Bankruptcy
Court, the Company and its subsidiaries are 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. See Note 1, Voluntary Petition for
Relief Under Chapter 11, to Owens Corning's  Consolidated  Financial  Statements
above.

ITEM 3.       DEFAULTS UPON SENIOR SECURITIES

Substantially  all of the Company's  pre-petition  debt is now in default due to
the Filing. See Note 1, Voluntary Petition for Relief Under Chapter 11, to Owens
Corning's  Consolidated  Financial Statements above. As described in Note 1, the
Consolidated  Financial Statements present the Debtors'  pre-petition debt under
the caption  "Liabilities  Subject to Compromise."  This includes debt under the
Pre-Petition Credit Facility and approximately $1.4 billion of other outstanding
debt. As required by SOP 90-7,  the Company,  beginning in the fourth quarter of
2000, recorded the Debtors' pre-petition debt instruments at the allowed amount,
as defined by SOP 90-7.


<PAGE>


                                     - 53 -

                     PART II. OTHER INFORMATION (continued)

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

No matter was submitted to a vote of security  holders  during the quarter ended
September 30, 2001.

ITEM 5.       OTHER INFORMATION

As a result of the Filing,  the Debtors are required to file  periodically  with
the Bankruptcy Court certain financial  information on an  unconsolidated  basis
for each of the  Debtors.  This  information  includes  Statements  of Financial
Affairs, Schedules and certain monthly operating reports (in forms prescribed by
the Federal Rules of Bankruptcy Procedure).

As part of these informational filings, the Debtors plan to file certain Amended
and Restated Schedules of Assets and Liabilities (the "Amended  Schedules") with
the Bankruptcy Court on or about November 20, 2001.

The Debtors'  informational  filings with the  Bankruptcy  Court,  including the
Amended Schedules when filed (collectively, the "Reports"), are available to the
public at the office of the Clerk of the  Bankruptcy  Court,  824 Market Street,
5th Floor,  Wilmington,  Delaware 19801. The Reports may also be obtained from a
document retrieval  service,  Lason, One Rodney Square,  Suite 505,  Wilmington,
Delaware 19801, telephone:  (302) 426-1500. Certain of the Reports may be viewed
on the Internet at www.deb.uscourts.gov (Case No. 00-03837 (JKF)).

The Company  cautions that the Reports are unaudited and subject to change,  and
are not  prepared  for the  purpose  of  providing  the basis for an  investment
decision  relating to any of the  securities of the Company or other Debtor,  or
any other  affiliate of the Company.  For example,  the Reports  include certain
information concerning  inter-company  arrangements that were entered into prior
to the filing of the  Bankruptcy  Cases.  Certain of these  arrangements  may be
challenged by various parties in the Bankruptcy  Cases,  and payments in respect
of certain of these  arrangements  may be  restricted by order of, or subject to
review and approval by, the Bankruptcy Court. Such arrangements,  and the manner
in  which  they are  ultimately  treated  in the  Bankruptcy  Cases,  may have a
material impact on the respective assets,  liabilities and results of operations
of the Company and its subsidiaries.

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.

         The Company did not file any reports on Form 8-K during the quarter
         ended September 30, 2001.



<PAGE>



                                     - 54 -

                                   SIGNATURES

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


                                        OWENS CORNING

                                        Registrant



Date: November 13, 2001                 By:  /s/ Michael H. Thaman
    ------------------------------      ----------------------------------------
                                        Michael H. Thaman
                                        Senior Vice President and
                                        Chief Financial Officer
                                        (as duly authorized officer)



Date: November 13, 2001                 By:  /s/ Deyonne F. Epperson
    ------------------------------      ----------------------------------------
                                        Deyonne F. Epperson
                                        Vice President and Controller

<PAGE>


                                     - 55 -

                                  EXHIBIT INDEX

Exhibit
Number                     Document Description

 (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).

(11)          Statement re Computation of Per Share Earnings (filed herewith).

(99)          Additional Exhibits

              Subsidiaries of Owens Corning, as amended (filed herewith).


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