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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549



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FORM 10-Q



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Quarterly Report Pursuant to Section 13 or 15(d)

of the Securities Exchange
Act of 1934



For the Quarter Ended September 30, 2004



Commission File No. 1-3660



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Owens Corning



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One Owens Corning Parkway



Toledo, Ohio 43659



Area Code (419) 248-8000



A Delaware Corporation



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



Indicate by check mark whether the Registrant (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90
days.    Yes  x    No ̈



Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule
12b-2 of the Exchange Act).    Yes ̈No  x



Shares of common stock, par value $0.10 per share, outstanding
at September 30, 2004



55,343,098



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##### Table of Contents

(i)



INDEX



|           |  |                                                                                       |  |        
|---------- |  | ------------------------------------------------------------------------------------- |  | -------
|           |  |                                                                                       |  | Page   
|Cover Page |  | 1                                                                                    
|           | 
|PART I     |  |                                                                                      
|           |  |                                                                                      
|Item 1.    |  | Financial Statements                                                                  |  |        
|           |  | Consolidated Statement of Income                                                      |  | 2      
|           |  | Consolidated Balance Sheet                                                            |  | 3 - 4  
|           |  | Consolidated Statement of Cash Flows                                                  |  | 5      
|           |  | Notes to Consolidated Financial Statements                                            |  |        
|           |  | Voluntary Petition for Relief Under Chapter 11                                        |  | 6 - 23 
|           |  | Segment Data                                                                          |  | 24 - 25
|           |  | General                                                                               |  | 26     
|           |  | Inventories                                                                           |  | 26     
|           |  | Goodwill and Other Intangibles                                                        |  | 26 - 27
|           |  | Acquisitions and Divestitures of Businesses                                           |  | 27     
|           |  | Warranties                                                                            |  | 28     
|           |  | Restructuring of Operations and Other Charges                                         |  | 28     
|           |  | Pension Plans and Other Postretirement Benefits                                       |  | 29 - 30
|           |  | Contingent Liabilities and Other Matters                                              |  | 31 - 50
|           |  | Fibreboard Settlement Trust                                                           |  | 50 - 52
|           |  | Stock Compensation                                                                    |  | 52 - 53
|           |  | Earnings per Share                                                                    |  | 53     
|           |  | Comprehensive Income                                                                  |  | 54     
|           |  | Income Taxes                                                                          |  | 54     
|           |  | Leases                                                                                |  | 54     
|           |  | Release of Guaranteed Subsidiary Debt                                                 |  | 54 - 55
|           |  | Accounting Pronouncements                                                             |  | 55 - 56
|           |  |                                                                                      
|Item 2.    |  | Managements Discussion and Analysis of Financial Condition and Results of Operations |  | 57 - 77
|           |  |                                                                                      
|Item 3.    |  | Quantitative and Qualitative Disclosures About Market Risk                            |  | 77     
|           |  |                                                                                      
|Item 4.    |  | Controls and Procedures                                                               |  | 78     



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|        |  |                                                             |  |        
|------- |  | ----------------------------------------------------------- |  | -------
|        |  |                                                             |  | Page   
|PART II |  |                                                            
|        |  |                                                            
|Item 1. |  | Legal Proceedings                                           |  | 79 - 82
|        |  |                                                            
|Item 2. |  | Unregistered Sales of Equity Securities and Use of Proceeds |  | 82     
|        |  |                                                            
|Item 3. |  | Defaults Upon Senior Securities                             |  | 82     
|        |  |                                                            
|Item 4. |  | Submission of Matters to a Vote of Security Holders         |  | 82     
|        |  |                                                            
|Item 5. |  | Other Information                                           |  | 82     
|        |  |                                                            
|Item 6. |  | Exhibits                                                    |  | 82     
|        |  |                                                            
|        |  | Signatures                                                  |  | 83     
|        |  |                                                            
|        |  | Exhibit Index                                               |  | 84 - 86



Exhibits Filed Herewith:



|             |  |                                                                                 
|------------ |  | --------------------------------------------------------------------------------
|Exhibit (10) |  | Standard Retainer/Meeting Fee Arrangement for Non-Employee Directors, as amended
|             | 
|Exhibit (31) |  | Certification (Chief Executive Officer)                                         
|             | 
|Exhibit (31) |  | Certification (Chief Financial Officer)                                         
|             | 
|Exhibit (32) |  | Section 1350 Certification (Chief Executive Officer)                            
|             | 
|Exhibit (32) |  | Section 1350 Certification (Chief Financial Officer)                            
|             | 
|Exhibit (99) |  | Subsidiaries of Owens Corning                                                   



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PART I

ITEM 1. FINANCIAL STATEMENTS



OWENS CORNING AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF INCOME

(unaudited)



|                                                                                                    |  |                                      |       |   |                                |   |       |      |  |   |       |   |  |   |       |  
|--------------------------------------------------------------------------------------------------- |  | ------------------------------------ | ----- | - | ------------------------------ | - | ----- | ---- |  | - | ----- | - |  | - | ----- | -
|                                                                                                    |  | Quarter Ended September 30,          |       |   | Nine Months EndedSeptember 30, |  
|                                                                                                    |  | 2004                                 |       |   | 2003                           |   |       | 2004 |  |   | 2003  |  
|                                                                                                    |  | (In millions, except per share data) |      
|NET SALES                                                                                           |  | $                                    | 1,541 |   |                                | $ | 1,349 |      |  | $ | 4,191 |   |  | $ | 3,721 |  
|COST OF SALES                                                                                       |  |                                      | 1,244 |   |                                |   | 1,127 |      |  |   | 3,459 |   |  |   | 3,125 |  
|                                                                                                    |  |                                      |       |   |                                |   |       |      |  |   |       |   |  |   |       |  
|Gross margin                                                                                        |  |                                      | 297   |   |                                |   | 222   |      |  |   | 732   |   |  |   | 596   |  
|                                                                                                    |  |                                      |       |   |                                |   |       |      |  |   |       |   |  |   |       |  
|OPERATING EXPENSES                                                                                  |  |                                      |       |   |                                |   |       |      |  |   |       |   |  |   |       |  
|Marketing and administrative expenses                                                               |  |                                      | 131   |   |                                |   | 115   |      |  |   | 375   |   |  |   | 345   |  
|Science and technology expenses                                                                     |  |                                      | 12    |   |                                |   | 11    |      |  |   | 34    |   |  |   | 32    |  
|Restructure costs (Note 8)                                                                          |  |                                      |      |   |                                |   |      |      |  |   |      |   |  |   | 2     |  
|Chapter 11 related reorganization items (Notes 1 and 10)                                            |  |                                      | (5    | ) |                                |   | 5     |      |  |   | 33    |   |  |   | 75    |  
|Credit for asbestos litigation claims  Owens Corning (Note 10)                                     |  |                                      | (3    | ) |                                |   |      |      |  |   | (3    | ) |  |   | (4    | )
|Other (Note 8)                                                                                      |  |                                      | 9     |   |                                |   | (13   | )    |  |   | 12    |   |  |   | (9    | )
|                                                                                                    |  |                                      |       |   |                                |   |       |      |  |   |       |   |  |   |       |  
|Total operating expenses                                                                            |  |                                      | 144   |   |                                |   | 118   |      |  |   | 451   |   |  |   | 441   |  
|                                                                                                    |  |                                      |       |   |                                |   |       |      |  |   |       |   |  |   |       |  
|INCOME FROM OPERATIONS                                                                              |  |                                      | 153   |   |                                |   | 104   |      |  |   | 281   |   |  |   | 155   |  
|                                                                                                    |  |                                      |       |  
|Interest expense, net (Note 17)                                                                     |  |                                      | (14   | ) |                                |   | 2     |      |  |   | (12   | ) |  |   | 6     |  
|                                                                                                    |  |                                      |       |   |                                |   |       |      |  |   |       |   |  |   |       |  
|INCOME BEFORE INCOME TAX EXPENSE                                                                    |  |                                      | 167   |   |                                |   | 102   |      |  |   | 293   |   |  |   | 149   |  
|                                                                                                    |  |                                      |       |  
|Income tax expense                                                                                  |  |                                      | 71    |   |                                |   | 47    |      |  |   | 154   |   |  |   | 73    |  
|                                                                                                    |  |                                      |       |   |                                |   |       |      |  |   |       |   |  |   |       |  
|INCOME BEFORE MINORITY INTEREST AND EQUITY IN NET INCOME (LOSS) OF AFFILIATES                       |  |                                      | 96    |   |                                |   | 55    |      |  |   | 139   |   |  |   | 76    |  
|                                                                                                    |  |                                      |       |  
|Minority interest                                                                                   |  |                                      | (2    | ) |                                |   |      |      |  |   | (5    | ) |  |   | (4    | )
|                                                                                                    |  |                                      |       |  
|Equity in net income (loss) of affiliates                                                           |  |                                      |      |   |                                |   |      |      |  |   | (2    | ) |  |   |      |  
|                                                                                                    |  |                                      |       |   |                                |   |       |      |  |   |       |   |  |   |       |  
|NET INCOME                                                                                          |  | $                                    | 94    |   |                                | $ | 55    |      |  | $ | 132   |   |  | $ | 72    |  
|                                                                                                    |  |                                      |       |   |                                |   |       |      |  |   |       |   |  |   |       |  
|NET INCOME PER COMMON SHARE                                                                         |  |                                      |       |   |                                |   |       |      |  |   |       |   |  |   |       |  
|Basic net income per share (Note 13)                                                                |  | $                                    | 1.70  |   |                                | $ | 0.99  |      |  | $ | 2.38  |   |  | $ | 1.30  |  
|                                                                                                    |  |                                      |       |   |                                |   |       |      |  |   |       |   |  |   |       |  
|Diluted net income per share (Note 13)                                                              |  | $                                    | 1.57  |   |                                | $ | 0.92  |      |  | $ | 2.20  |   |  | $ | 1.20  |  
|                                                                                                    |  |                                      |       |   |                                |   |       |      |  |   |       |   |  |   |       |  
|WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING AND COMMON EQUIVALENT SHARES DURING THE PERIOD |  |                                      |       |   |                                |   |       |      |  |   |       |   |  |   |       |  
|Basic                                                                                               |  |                                      | 55.3  |   |                                |   | 55.2  |      |  |   | 55.3  |   |  |   | 55.2  |  
|                                                                                                    |  |                                      |       |  
|Diluted                                                                                             |  |                                      | 59.9  |   |                                |   | 59.9  |      |  |   | 59.9  |   |  |   | 59.9  |  



The accompanying notes
are an integral part of this statement.



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OWENS CORNING AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

(unaudited)



|                                                                            |  |                          |        |   |                   |   |        |  
|--------------------------------------------------------------------------- |  | ------------------------ | ------ | - | ----------------- | - | ------ | -
|                                                                            |  | September 30, 2004       |        |   | December 31, 2003 |  
|                                                                            |  | (In millions of dollars) |       
|ASSETS                                                                      |  |                          |        |   |                   |   |        |  
|                                                                            |  |                         
|CURRENT                                                                     |  |                          |        |   |                   |   |        |  
|Cash and cash equivalents (Note 1)                                          |  | $                        | 822    |   |                   | $ | 1,005  |  
|Receivables, less allowances of $18 million in 2004 and $19 million in 2003 |  |                          | 676    |   |                   |   | 464    |  
|Inventories (Note 4)                                                        |  |                          | 436    |   |                   |   | 390    |  
|Other current assets                                                        |  |                          | 43     |   |                   |   | 29     |  
|                                                                            |  |                          |        |   |                   |   |        |  
|Total current                                                               |  |                          | 1,977  |   |                   |   | 1,888  |  
|                                                                            |  |                          |        |   |                   |   |        |  
|OTHER                                                                       |  |                          |        |   |                   |   |        |  
|Restricted cash - asbestos and insurance related (Note 10)                  |  |                          | 167    |   |                   |   | 166    |  
|Restricted cash, securities, and other - Fibreboard (Notes 10 and 11)       |  |                          | 1,413  |   |                   |   | 1,395  |  
|Deferred income taxes                                                       |  |                          | 1,112  |   |                   |   | 1,310  |  
|Pension-related assets                                                      |  |                          | 507    |   |                   |   | 338    |  
|Goodwill (Note 5)                                                           |  |                          | 193    |   |                   |   | 138    |  
|Investment in affiliates                                                    |  |                          | 74     |   |                   |   | 81     |  
|Other noncurrent assets                                                     |  |                          | 164    |   |                   |   | 92     |  
|                                                                            |  |                          |        |   |                   |   |        |  
|Total other                                                                 |  |                          | 3,630  |   |                   |   | 3,520  |  
|                                                                            |  |                          |        |   |                   |   |        |  
|PLANT AND EQUIPMENT, at cost                                                |  |                          |        |   |                   |   |        |  
|Land                                                                        |  |                          | 78     |   |                   |   | 70     |  
|Buildings and leasehold improvements                                        |  |                          | 789    |   |                   |   | 789    |  
|Machinery and equipment                                                     |  |                          | 3,247  |   |                   |   | 3,232  |  
|Construction in progress                                                    |  |                          | 98     |   |                   |   | 96     |  
|                                                                            |  |                          |        |   |                   |   |        |  
|                                                                            |  |                          | 4,212  |   |                   |   | 4,187  |  
|Accumulated depreciation                                                    |  |                          | (2,252 | ) |                   |   | (2,237 | )
|                                                                            |  |                          |        |   |                   |   |        |  
|Net plant and equipment                                                     |  |                          | 1,960  |   |                   |   | 1,950  |  
|                                                                            |  |                          |        |   |                   |   |        |  
|TOTAL ASSETS                                                                |  | $                        | 7,567  |   |                   | $ | 7,358  |  
|                                                                            |  |                          |        |   |                   |   |        |  



The accompanying notes
are an integral part of this statement.



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OWENS CORNING AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET (continued)

(unaudited)



|                                                                                                  |  |                          |        |   |                   |   |        |  
|------------------------------------------------------------------------------------------------- |  | ------------------------ | ------ | - | ----------------- | - | ------ | -
|                                                                                                  |  | September 30, 2004       |        |   | December 31, 2003 |  
|                                                                                                  |  | (In millions of dollars) |       
|LIABILITIES AND STOCKHOLDERS DEFICIT                                                             |  |                          |        |   |                   |   |        |  
|                                                                                                  |  |                         
|CURRENT                                                                                           |  |                          |        |   |                   |   |        |  
|Accounts payable and accrued liabilities                                                          |  | $                        | 836    |   |                   | $ | 767    |  
|Short-term debt (Note 17)                                                                         |  |                          | 11     |   |                   |   | 44     |  
|Long-term debt - current portion (Note 17)                                                        |  |                          | 12     |   |                   |   | 53     |  
|                                                                                                  |  |                          |        |   |                   |   |        |  
|Total current                                                                                     |  |                          | 859    |   |                   |   | 864    |  
|                                                                                                  |  |                          |        |   |                   |   |        |  
|LONG-TERM DEBT                                                                                    |  |                          | 64     |   |                   |   | 73     |  
|                                                                                                  |  |                          |        |   |                   |   |        |  
|OTHER                                                                                             |  |                          |        |   |                   |   |        |  
|Pension plan liability                                                                            |  |                          | 701    |   |                   |   | 697    |  
|Other employee benefits liability                                                                 |  |                          | 407    |   |                   |   | 400    |  
|Other                                                                                             |  |                          | 200    |   |                   |   | 143    |  
|                                                                                                  |  |                          |        |   |                   |   |        |  
|Total other                                                                                       |  |                          | 1,308  |   |                   |   | 1,240  |  
|                                                                                                  |  |                          |        |   |                   |   |        |  
|LIABILITIES SUBJECT TO COMPROMISE (Notes 1 and 10)                                                |  |                          | 9,268  |   |                   |   | 9,258  |  
|                                                                                                  |  |                          |        |   |                   |   |        |  
|COMPANY OBLIGATED SECURITIES OF ENTITIES HOLDING SOLELY PARENT DEBENTURES - SUBJECT TO COMPROMISE |  |                          | 200    |   |                   |   | 200    |  
|                                                                                                  |  |                          |        |   |                   |   |        |  
|COMMITMENTS AND CONTINGENCIES (Notes 10 and 11)                                                   |  |                          |        |   |                   |   |        |  
|MINORITY INTEREST                                                                                 |  |                          | 46     |   |                   |   | 51     |  
|                                                                                                  |  |                          |        |   |                   |   |        |  
|STOCKHOLDERS DEFICIT                                                                             |  |                          |        |   |                   |   |        |  
|Common stock                                                                                      |  |                          | 6      |   |                   |   | 6      |  
|Additional paid in capital                                                                        |  |                          | 690    |   |                   |   | 690    |  
|Accumulated deficit                                                                               |  |                          | (4,519 | ) |                   |   | (4,651 | )
|Accumulated other comprehensive loss                                                              |  |                          | (354   | ) |                   |   | (371   | )
|Other                                                                                             |  |                          | (1     | ) |                   |   | (2     | )
|                                                                                                  |  |                          |        |   |                   |   |        |  
|Total stockholders deficit                                                                       |  |                          | (4,178 | ) |                   |   | (4,328 | )
|                                                                                                  |  |                          |        |   |                   |   |        |  
|TOTAL LIABILITIES AND STOCKHOLDERS DEFICIT                                                       |  | $                        | 7,567  |   |                   | $ | 7,358  |  
|                                                                                                  |  |                          |        |   |                   |   |        |  



The accompanying notes
are an integral part of this statement.



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OWENS CORNING AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS

(unaudited)



|                                                                             |  |                                |       |   |      |   |      |  
|---------------------------------------------------------------------------- |  | ------------------------------ | ----- | - | ---- | - | ---- | -
|                                                                             |  | Nine Months EndedSeptember 30, |      
|                                                                             |  | 2004                           |       |   | 2003 |  
|                                                                             |  | (In millions of dollars)       |      
|NET CASH FLOW FROM OPERATIONS                                                |  |                                |       |   |      |   |      |  
|Net income                                                                   |  | $                              | 132   |   |      | $ | 72   |  
|Reconciliation of net cash from operating activities                         |  |                                |       |   |      |   |      |  
|Noncash items:                                                               |  |                                |       |   |      |   |      |  
|Provision for depreciation and amortization                                  |  |                                | 167   |   |      |   | 152  |  
|Provision for impairment of fixed assets                                     |  |                                |      |   |      |   | 28   |  
|Provision for deferred income taxes                                          |  |                                | 81    |   |      |   | 20   |  
|Provision for pension and other employee benefits liability                  |  |                                | 88    |   |      |   | 90   |  
|Other                                                                        |  |                                | 27    |   |      |   | (40  | )
|Increase in receivables                                                      |  |                                | (200  | ) |      |   | (162 | )
|Increase in inventories                                                      |  |                                | (37   | ) |      |   | (13  | )
|Increase (decrease) in accounts payable and accrued liabilities              |  |                                | 44    |   |      |   | (40  | )
|Pension fund contribution                                                    |  |                                | (225  | ) |      |   | (186 | )
|Payments for other employee benefits liability                               |  |                                | (23   | ) |      |   | (23  | )
|Increase in restricted cash - asbestos and insurance related                 |  |                                | (1    | ) |      |   | (1   | )
|Increase in restricted cash, securities, and otherFibreboard (Note 11)      |  |                                | (19   | ) |      |   | (29  | )
|Proceeds from insurance for asbestos litigation claims, excluding Fibreboard |  |                                | 3     |   |      |   | 4    |  
|Other                                                                        |  |                                | 22    |   |      |   | 96   |  
|                                                                             |  |                                |       |   |      |   |      |  
|Net cash flow from operations                                                |  |                                | 59    |   |      |   | (32  | )
|                                                                             |  |                                |       |   |      |   |      |  
|NET CASH FLOW FROM INVESTING                                                 |  |                                |       |   |      |   |      |  
|Additions to plant and equipment                                             |  |                                | (147  | ) |      |   | (119 | )
|Investment in subsidiaries, net of cash acquired (Note 6)                    |  |                                | (86   | ) |      |   | 2    |  
|Proceeds from the sale assets, affiliates, or businesses (Note 6)            |  |                                | 7     |   |      |   | 64   |  
|                                                                             |  |                                |       |   |      |   |      |  
|Net cash flow from investing                                                 |  |                                | (226  | ) |      |   | (53  | )
|                                                                             |  |                                |       |   |      |   |      |  
|NET CASH FLOW FROM FINANCING                                                 |  |                                |       |   |      |   |      |  
|Other additions to long-term debt                                            |  |                                |      |   |      |   | 9    |  
|Other reductions to long-term debt (Note 16)                                 |  |                                | (13   | ) |      |   | (50  | )
|Net increase in short-term debt                                              |  |                                |      |   |      |   | 5    |  
|Subject to compromise (Note 1)                                               |  |                                | (5    | ) |      |   | (1   | )
|                                                                             |  |                                |       |   |      |   |      |  
|Net cash flow from financing                                                 |  |                                | (18   | ) |      |   | (37  | )
|                                                                             |  |                                |       |   |      |   |      |  
|Effect of exchange rate changes on cash                                      |  |                                | 2     |   |      |   | 16   |  
|                                                                             |  |                                |       |   |      |   |      |  
|NET DECREASE IN CASH AND CASH EQUIVALENTS                                    |  |                                | (183  | ) |      |   | (106 | )
|Cash and cash equivalents at beginning of period                             |  |                                | 1,005 |   |      |   | 875  |  
|                                                                             |  |                                |       |   |      |   |      |  
|CASH AND CASH EQUIVALENTS AT END OF PERIOD                                   |  | $                              | 822   |   |      | $ | 769  |  
|                                                                             |  |                                |       |   |      |   |      |  



The accompanying notes
are an integral part of this statement.



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##### Table of Contents

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OWENS CORNING AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)



1. VOLUNTARY PETITION FOR RELIEF UNDER CHAPTER 11



On October 5, 2000 (the Petition Date), Owens Corning and the 17 United States subsidiaries listed below (collectively with Owens Corning, the Debtors) filed voluntary petitions for relief (the Filing)
under Chapter 11 of the United States Bankruptcy Code (the Bankruptcy Code) in the United States Bankruptcy Court for the District of Delaware (the USBC):



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



The Debtors are currently operating
their businesses as debtors-in-possession in accordance with provisions of the Bankruptcy Code. The Chapter 11 cases of the Debtors (collectively, the Chapter 11 Cases) are being jointly administered under Case No. 00-3837 (JKF).



The referenced Chapter 11 cases do not include any other United States or
foreign subsidiaries of Owens Corning (collectively, the Non-Debtor Subsidiaries). As described more fully below under the heading The Plan of Reorganization, Owens Corning may cause certain of such Non-Debtor Subsidiaries
that issued guarantees with respect to Owens Cornings $1.8 billion pre-petition bank credit facility (the Pre-Petition Credit Facility, which is in default) to file petitions for relief under Chapter 11 of the Bankruptcy Code under
certain circumstances.



The Debtors filed for relief under Chapter 11 to
address the growing demands on Owens Cornings cash flow resulting from its multi-billion dollar asbestos liability. This liability is discussed in greater detail in Note 10 to the Consolidated Financial Statements.



Overseeing Federal District Court



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



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OWENS CORNING AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



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



On or about October 10, 2003, Kensington International Limited and Springfield Associates,
LLC (collectively, K&S), two assignees of lenders under Owens Cornings Pre-Petition Credit Facility, filed a motion in the USBC seeking to recuse District Court Judge Wolin from further participation in the Chapter 11 Cases.
After various proceedings before the District Court and the United States Court of Appeals for the Third Circuit (the Third Circuit), on May 17, 2004, the Third Circuit entered an order requiring Judge Wolin to recuse himself from
further participation in the Chapter 11 Cases. On May 27, 2004, the Third Circuit assigned Judge John P. Fullam of the United States District Court, Eastern District of Pennsylvania, to replace Judge Wolin in the Chapter 11 Cases. In addition, the
Third Circuit assigned other judges to sit on other of the cases that had previously been consolidated under the terms of the Administrative Consolidation, effectively terminating the consolidation. Owens Corning is unable to predict what impact the
change in District Court Judge or the termination of the Administrative Consolidation will have on the timing, outcome, or other aspects of the Chapter 11 Cases.



Consequence of the Filing



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



Two creditors committees, one representing asbestos claimants and the other representing unsecured creditors, have been appointed as official committees in the
Chapter 11 Cases. In addition, the Bankruptcy Court has appointed James J. McMonagle as Legal Representative for the class of future asbestos personal injury claimants against one or more of the Debtors. The two committees and the Legal
Representative have the right to be heard on all matters that come before the Bankruptcy Court.



Owens Corning 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. On January 17, 2003, the Debtors, together with the Official Committee of Asbestos Claimants and the Legal Representative for the class of future asbestos claimants, filed a proposed
joint plan of reorganization in the USBC. The same proponents filed a proposed amended joint plan of reorganization in the USBC on March 28, 2003, a proposed second amended joint plan of reorganization in the USBC on May 23, 2003, a proposed third
amended joint plan of reorganization in the USBC on August 8, 2003, and a proposed fourth amended joint plan of reorganization (as so amended through such fourth amendment, the Plan) in the USBC on October 24, 2003.



On June 7, 2004, Owens Corning announced that an agreement in principle (the Agreement
in Principle) had been reached with the Official Committee of Asbestos Claimants, the Legal Representative for the class of future asbestos claimants, and the official representatives of the Companys pre-petition bondholders and trade
creditors. Among other things, the Agreement in Principle provides that all holders of bonds, bank debt and senior trade debt would receive a recovery equal to 38.5% of their claims upon Owens Cornings successful emergence from Chapter 11. The
recoveries of



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OWENS CORNING AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



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



all creditors are based on certain agreed and assumed values and would be comprised of cash,
debt and equity. However, their actual recoveries could ultimately be higher or lower based on the value of the equity to be issued by Owens Corning upon emergence from Chapter 11 and other factors.



As a result of this Agreement in Principle, Owens Corning has now gained support for the Plan
(as modified to reflect the Agreement in Principle) from the official representatives of all of its major creditor groups with the exception of the holders of the debt under the Pre-Petition Credit Facility, who continue to oppose the Plan. Certain
members of the major creditor groups have indicated that they also continue to oppose the Plan, including an Ad Hoc Committee of Bondholders that claims to have a blocking position that will allow them to prevent a vote in favor of the
Plan by Owens Cornings bondholders.



It is expected that the Plan will be
amended to reflect the terms of the Agreement in Principle. Certain terms, conditions and provisions of the Plan are discussed below. The Plan is subject to confirmation by the Bankruptcy Court.



There can be no assurance that the Plan will not be further amended prior to confirmation,
nor can there be any assurance that such Plan will be confirmed by the Bankruptcy Court and consummated. Owens Corning is unable to predict what impact the change in District Court Judge, the termination of the Administrative Consolidation, or the
disposition of any of the litigation and other matters described below will have on the timing of the confirmation of a plan or plans of reorganization or its effect, if any, on the terms thereof.



As described more fully below under the heading The Plan of Reorganization, the
Plan is premised upon the substantive consolidation of Owens Corning and certain of its direct and indirect subsidiaries (but not the Fibreboard Settlement Trust (see Note 11 to the Consolidated Financial Statements)) for the purposes of voting,
determining which claims and interests will be entitled to vote to accept or reject the Plan, confirmation of the Plan, and the resultant discharge of and cancellation of claims and interests and distribution of assets, interests and other property
under the Plan. On October 5, 2004, the District Court issued a Memorandum and Order Concerning Substantive Consolidation. In that Memorandum and Order, the District Court granted the Debtors motion for substantive consolidation and ordered
that counsel for the participating parties meet for the purpose of attempting to achieve an agreed-upon plan of reorganization. On October 13, 2004, the holders of the debt under the Pre-Petition Credit Facility filed an appeal of the Memorandum and
Order with the Third Circuit. On November 2, 2004, the Debtors, the Official Committee of Asbestos Claimants, the Legal Representative for the class of future asbestos claimants, and the official representatives of the Companys pre-petition
bondholders and trade creditors filed a joint motion to dismiss such appeal on the grounds that the Memorandum and Order is not a final judgment or otherwise appealable.



On August 19, 2004, the District Court scheduled a claims estimation hearing to be held on January 13, 2005. The purpose of the claims
estimation hearing will be to establish the amount of current and future asbestos liability to be allowed in the Chapter 11 Cases. No assurance can be made as to whether the amount of current and future asbestos liability established as a result of
such claims estimation hearing will be more or less than the amounts reserved for asbestos claims on the financial statements of the Debtors or will be more or less than the $16 billion amount that the Official Committee of Asbestos Claimants and
the Legal Representative for the class of future asbestos claimants have established as the level below which they have reserved the right to withdraw support of the Plan. The holders of the debt under the Pre-Petition Credit Facility have filed a
motion with the District Court requesting that the estimation hearing be postponed beyond January 13, 2005. The District Court has not yet ruled on that motion.



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OWENS CORNING AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



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



Related Developments



PROPOSED ASBESTOS LEGISLATION



As previously disclosed, on May 22, 2003, the United States Senate introduced proposed
legislation (S 1125, also known as the Fairness in Asbestos Injury Resolution Act of 2003). On April 7, 2004, the United States Senate introduced proposed substitute legislation (S 2290, also known as the Fairness in Asbestos Injury Resolution Act
of 2004). References in the following discussion to the FAIR Act refer to each Bill separately.



If enacted into law, the FAIR Act would establish an administrative claims resolution structure through which all asbestos personal injury claims would be channeled and reviewed. The FAIR Act would also establish a
national trust fund, funded through mandated contributions from defendant companies, insurance companies and existing trusts, that would be the source of compensation of all approved claims. Under the present terms of the FAIR Act, companies like
Owens Corning and Fibreboard, that have filed for bankruptcy but have not yet emerged through a confirmed plan of reorganization, would be included as participants in the resolution structure.



The fate of the FAIR Act remains uncertain, and Owens Corning is unable to make any
prediction as to whether the FAIR Act will be enacted or, if it is enacted, what its final form would be or what the effect, if any, would be on Owens Corning and Fibreboard or their plan or plans of reorganization. If Congressional action on the
FAIR Act is not completed prior to the adjournment of the current Congress (expected shortly), the legislation will lapse and similar legislation will be considered in the next Congress only if newly introduced. The provisions of any legislation
ultimately enacted may have a material effect on the amount of liability that Owens Corning and Fibreboard ultimately have for asbestos-related claims, which could be more or less than the amounts reserved for in Owens Cornings financial
statements.



OTHER MATTERS FILED IN THE USBC



On or about October 17, 2003, the Official Committee of Unsecured Creditors
filed a motion in the USBC requesting appointment of a Chapter 11 trustee to assume control of the Chapter 11 Cases due to alleged breach of the Debtors fiduciary duty of undivided loyalty to act in the best interest of all creditors. After
such motion was dismissed by the USBC for failure to comply with local court rules, the Official Committee of Unsecured Creditors re-filed such motion on October 30, 2003. A supplement to the motion of the Official Committee of Unsecured Creditors
was filed on May 28, 2004, and various filings in opposition to such supplemented motion were filed by the Debtors, the Legal Representative for the class of future asbestos claimants, and the Official Committee of Asbestos Claimants. The USBC has
continued further proceedings on this matter to January 26, 2005.



On or about
May 24, 2004, Credit Suisse First Boston, Kensington International Limited, Springfield Associates LLC and Angelo Gordon filed a motion in the USBC requesting the appointment of a Chapter 11 Examiner to examine (i) allegations of improper conduct by
management of the Debtors, (ii) alleged breaches of fiduciary duty by management of the Debtors resulting from the influence of the



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OWENS CORNING AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



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



Legal Representative for the class of future asbestos claimants and the Official Committee
of Asbestos Claimants on the process of developing a Plan and the tort estimation process, (iii) alleged connections between the asbestos plaintiffs interests, a Court appointed mediator, and the Debtors asbestos liability estimation
firm, and (iv) other alleged improper conduct. Owens Corning, the Legal Representative for the class of future asbestos claimants, and the Official Committee of Asbestos Claimants have each filed responsive pleadings to the motion. The USBC has
continued further proceedings on the motion pending issuance of a final order on the motion (described in the preceding paragraph) requesting appointment of a Chapter 11 trustee.



The Debtors believe that the two motions described above are without merit and intend to continue to vigorously oppose them in appropriate
proceedings.



The Plan of Reorganization



Although the basic terms of the Plan, as modified to reflect the Agreement in Principle,
have now been agreed to by the official representatives of all of Owens Cornings major creditor constituencies, except the holders of its debt under the Pre-Petition Credit Facility, who continue to oppose the Plan, Owens Corning believes that
it is likely that the terms, conditions and provisions of the Plan will remain the subject of continuing negotiations or litigation to resolve differences among the creditor constituencies as to their treatment. Accordingly, Owens Corning is unable
to predict at this time what the treatment of creditors and equity holders of the respective Debtors will ultimately be under any plan or plans of reorganization finally confirmed. The current Plan, as modified to reflect the Agreement in Principle,
provides for payment of 38.5% of the face amount of all unsecured creditors claims, in the form of distributions of new common stock and notes of the reorganized company, and cash. However, as described more fully below, the percentage
recovery and value of the payments ultimately made under the Plan to each class of creditors will depend upon a number of factors, including the value of the shares of new common stock and notes to be issued by Owens Corning. Additional
distributions from potential insurance and other third-party claims may also be paid to certain classes of unsecured creditors, but it is expected that all classes of pre-petition unsecured creditors will be impaired. Therefore, the Plan also
provides that the existing common stock of Owens Corning will be cancelled, and that current shareholders will receive no distribution or other consideration in exchange for their shares. It is impossible to predict at this time the terms and
provisions of any plan or plans of reorganization that may ultimately be confirmed, when a plan or plans of reorganization will be confirmed, or the treatment of creditors thereunder.



The Plan is premised upon the substantive consolidation of Owens Corning and certain of its direct and indirect subsidiaries (but not the
Fibreboard Settlement Trust (see Note 11 to the Consolidated Financial Statements)) for the purposes of voting, determining which claims and interests will be entitled to vote to accept or reject the Plan, confirmation of the Plan, and the resultant
discharge of and cancellation of claims and interests and distribution of assets, interests and other property under the Plan. For these purposes, the Plan would treat all assets and liabilities of each substantively consolidated entity (excluding
the Fibreboard Settlement Trust) as though they were merged into one consolidated estate with the assets and liabilities of the other substantively consolidated entities. Substantive consolidation under



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OWENS CORNING AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



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



the Plan will not result in the merger of or the transfer or commingling of any assets of
any of the Debtors or Non-Debtor Subsidiaries. Certain creditor constituencies have asserted that substantive consolidation is not appropriate and continue to challenge that approach.



As described above, on October 5, 2004, the District Court issued a Memorandum and Order Concerning Substantive Consolidation. In that
Memorandum and Order, the District Court granted the Debtors motion for substantive consolidation and ordered that counsel for the participating parties meet for the purpose of attempting to achieve an agreed-upon plan of reorganization. On
October 13, 2004, the holders of the debt under the Pre-Petition Credit Facility filed an appeal of the Memorandum and Order with the Third Circuit. On November 2, 2004, the Debtors, the Official Committee of Asbestos Claimants, the Legal
Representative for the class of future asbestos claimants, and the official representatives of the Companys pre-petition bondholders and trade creditors filed a joint motion to dismiss such appeal on the grounds that the Memorandum and Order
is not a final judgment or otherwise appealable.



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



Although the Plan, as modified to reflect the Agreement in Principle, provides for unsecured
creditors to recover 38.5% of their claims, the percentage recovery and value of the payments ultimately made under the Plan to each class of creditors will depend upon a number of factors. Those factors include the value of the shares of new common
stock and notes to be issued by the Company, the amount of cash available for distribution, the resolution of certain inter-creditor issues, and the ultimate aggregate asbestos liability. In addition, the Plan, as modified to reflect the Agreement
in Principle, is expected to provide that the unsecured creditors may elect to exchange cash or notes that they would otherwise be entitled to receive under the Plan for up to a maximum of 8 million shares of new Owens Corning common stock that
would otherwise be distributable to asbestos claimants.



The Plan provides that
liability for current and future asbestos personal injury claims against Owens Corning and Fibreboard would be determined by the Bankruptcy Court as part of the confirmation hearing on the Plan. In that connection, the District Court has scheduled a
claims estimation hearing to be held on January 13, 2005. The purpose of the claims estimation hearing will be to establish the amount of current and future asbestos liability to be allowed in the Chapter 11 Cases. The Official Committee of Asbestos
Claimants and the Legal Representative for the class of future asbestos claimants have reserved the right to withdraw support of the Plan if such liability is determined to be less than $16 billion in the aggregate. No assurance can be made as to
whether the amount of current and future asbestos liability established as a result of such claims estimation hearing will be more or less than the amounts reserved for asbestos claims on the financial statements of the Debtors or will be more or
less than such $16 billion amount.



Any disagreements raised by creditors with
the terms of the Plan are expected to be handled through negotiation or litigation as part of the confirmation process. Owens Corning is unable to predict the timing or outcome of such negotiation or litigation.



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OWENS CORNING AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



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



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



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



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OWENS CORNING AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



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



The 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. In this respect, unless a consensual arrangement among all
impaired creditor classes is agreed to, the Plan is expected to be amended to provide for certain cramdown provisions, whereby the Plan could be confirmed over the objections of one or more classes of unapproving creditors in the event
that certain percentages in dollar amount and in number of specified classes of creditors accept the Plan and vote in favor of it.



The payment rights and other entitlements of pre-petition creditors and Owens Cornings shareholders may be substantially altered by any plan or plans of
reorganization confirmed in the Chapter 11 Cases, and the pre-petition creditors of some Debtors may be treated differently than those of other Debtors.



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



Bar Dates for Filing Claims



GENERAL BAR DATE



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



Approximately 25,000 proofs of claim
(including late-filed claims), totaling approximately $16.5 billion, alleging a right to payment from a Debtor were filed with the Bankruptcy Court in response to the General Bar Date. Owens Corning continues to investigate these claims to determine
their validity. The Bankruptcy Court will ultimately determine liability amounts that will be allowed for claims in the Chapter 11 Cases.



In its review of the filed claims, Owens Corning identified approximately 16,000 claims, totaling approximately $8.6 billion, which it believed should be disallowed by
the Bankruptcy Court, primarily because they appeared to be duplicate claims or claims that were not related to the indicated Debtor (the Objectionable Claims). Owens Corning filed omnibus objections to certain of these Objectionable
Claims and likely will file additional objections. As of September 30, 2004, approximately 6,200 of the Objectionable Claims, totaling approximately $5.3 billion, had either been withdrawn by the claimants or disallowed by the Bankruptcy Court, and
other of such claims had been reduced by the claimants by approximately $1.7 billion. While the Bankruptcy Court will ultimately determine liability amounts, if any, that will be allowed as part of the Chapter 11 Cases, Owens Corning believes that
all or substantially all of the remaining Objectionable Claims will be disallowed.



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OWENS CORNING AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



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



In addition to the Objectionable Claims described above, the remaining filed proofs of claim
included approximately 9,000 claims, totaling approximately $7.9 billion. As of September 30, 2004, approximately 1,000 of these claims, totaling approximately $0.2 billion, had either been withdrawn by the claimants, disallowed by the Bankruptcy
Court, or otherwise resolved, and other of such claims had been reduced by the claimants by approximately $0.2 billion. The remaining claims consist of:



| | Approximately 2,900 claims, totaling approximately $1.5 billion, associated with asbestos-related contribution, indemnity, reimbursement, or subrogation claims. Owens Corning will
address all asbestos-related personal injury and wrongful death claims in the future as part of the Chapter 11 Cases. See Note 10 to the Consolidated Financial Statements for additional information concerning asbestos-related liabilities.
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | Approximately 100 claims, totaling approximately $0.7 billion, alleging asbestos-related property damage. Most of these claims were submitted with insufficient documentation to
assess their validity. Owens Corning expects to vigorously defend any asserted asbestos-related property damage claims in the Bankruptcy Court. Based upon its historic experience in respect of asbestos-related property damage claims, Owens Corning
does not anticipate significant liability from any such claims.
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | Approximately 5,000 claims, totaling approximately $5.3 billion, alleging rights to payment for financing, environmental, trade debt and other matters (the General
Claims). The Company has recorded approximately $3.6 billion in liabilities for these claims. Based upon the claims information submitted, the General Claims with the largest variance from the recorded amounts are: claims by the United States
Department of Treasury, totaling approximately $538 million, in connection with taxes (see discussion regarding the tax claims and related pending settlement under the heading Tax Claim in Note 10 to the Consolidated Financial
Statements); a contingent claim for approximately $458 million by the Pension Benefit Guaranty Corporation, as described more fully under the heading PBGC Claim in Note 10 to the Consolidated Financial Statements; a $275 million class
action claim involving alleged problems with a specialty roofing product, as described more fully under the heading Specialty Roofing Claim in Note 10 to the Consolidated Financial Statements; environmental claims totaling approximately
$109 million; and claims for contract rejections, totaling approximately $126 million, of which approximately $58 million are protective claims covering contracts which have not been rejected by the Debtors as of September 30, 2004.
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





Owens Corning has recorded liability amounts for those claims that can be reasonably estimated and which it believes are probable of being allowed by the Bankruptcy Court. At this time, it is impossible to reasonably
estimate the value of all the claims that will ultimately be allowed by the Bankruptcy Court, due to the uncertainties of the Chapter 11 process, the in-progress state of Owens Cornings investigation of submitted claims, and the lack of
documentation submitted in support of many claims. Owens Corning continues to evaluate claims filed in the Chapter 11 Cases and will make such adjustments as may be appropriate. Any such adjustments could be material to the Companys
consolidated financial position and results of operations in any given period. For a discussion of liability amounts in respect of asbestos personal injury claims, see Note 10 to the Consolidated Financial Statements.



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OWENS CORNING AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



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



ASBESTOS BAR DATE



A bar date for filing proofs of claim against the Debtors with respect to asbestos-related
personal injury claims and asbestos-related wrongful death claims (other than claims for contribution, indemnity, reimbursement, or subrogation) has not been set. On April 11, 2003, the Official Committee of Unsecured Creditors filed a motion
seeking establishment of a bar date for such asbestos-related claims. On April 25, 2003, the District Court entered an order withdrawing the reference of the Chapter 11 Cases to the USBC with respect to such motion, and staying all proceedings on
such motion pending further order of the District Court. On August 19, 2004, the District Court scheduled a claims estimation hearing for January 13, 2005 to establish the amount of current and future asbestos liability to be allowed in the Chapter
11 Cases. The District Courts scheduling order notes that the Court has preliminarily determined that currently available data, viewed in light of expert testimony at the hearing, should probably suffice for claims estimation purposes. The
order does not reference an asbestos bar date.



As indicated above, the General
Bar Date does not apply to asbestos-related personal injury claims and asbestos-related wrongful death claims (other than claims for contribution, indemnity, reimbursement, or subrogation). Despite this, approximately 3,200 proofs of claim (in
addition to claims described above under General Bar Date), totaling approximately $2.4 billion, with respect to asbestos-related personal injury or wrongful death were filed with the Bankruptcy Court in response to the General Bar Date.
Of these claims, Owens Corning has identified approximately 1,200, totaling approximately $0.5 billion, as Objectionable Claims. Of the remaining claims, Owens Corning believes that a substantial majority represent claimants that had previously
asserted asbestos-related claims against the Company.



As noted above, under
the Plan all asbestos-related personal injury and wrongful death claims will be channeled to the Section 524(g) trust, subject to approval by the Bankruptcy Court. See Note 10 to the Consolidated Financial Statements for additional information
concerning asbestos-related liabilities.



Avoidance Actions



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



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



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OWENS CORNING AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



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



The Debtors have executed tolling agreements with all 12 present and former officers and the
director, as well as with certain other parties identified as having received potentially avoidable transfers. After initially being covered by a tolling agreement, the claim against the joint venture affiliate was subsequently released as part of a
Bankruptcy Court approved settlement with the affiliate, entered into in connection with the affiliates separate bankruptcy proceedings.



The adversary actions were commenced against various other defendants seeking, among other things, (a) avoidance of certain guarantees and certain preferential payments
made in connection with Owens Cornings Pre-Petition Credit Facility (the Pre-Petition Credit Facility Action); (b) the return of up to approximately $515 million paid by the Company to shareholders of Fibreboard in connection with
the Companys purchase of Fibreboard in 1997 (the FBD Shareholder Action); (c) the return of up to approximately $61.8 million paid by the Company to shareholders in dividends in the period 1996 through 2000 (the Dividend
Action); and (d) the return of approximately $133 million paid by the Company to Bank of America Corp. in connection with Owens Cornings purchase of Fibreboard in 1997. Both the FBD Shareholder Action and the Dividend Action are
defendant class actions. Certain present or former officers or directors of the Company may be members of either or both defendant classes. Certain holders of Owens Corning debt securities have filed a Complaint in Intervention in connection with
the Pre-Petition Credit Facility Action, seeking to assert securities fraud related claims against five subsidiaries of Owens Corning that issued guarantees in connection with the Pre-Petition Credit Facility. The Company has opposed such
intervention. It is expected that such matter will be determined by the Bankruptcy Court in conjunction with the Pre-Petition Credit Facility Action.



Separately, and at the request of the Debtors Official Creditors Committee and the direction of the Bankruptcy Court, the Debtors either obtained tolling
agreements from, or filed actions against, approximately 115 law firms that entered into NSP or non-NSP agreements (see Note 10 to the Consolidated Financial Statements) with the Debtors on behalf of claimants asserting asbestos-related personal
injury or wrongful death claims. Lawsuits were brought initially against the 11 law firms that did not sign tolling agreements, seeking two forms of relief: (a) first, a declaratory judgment as to whether payments made, or obligations incurred,
under NSP and non-NSP agreements were in exchange for reasonably equivalent value; and (b) second, in the event reasonably equivalent value was not received, the recovery or avoidance of payments made and obligations incurred under the relevant NSP
and non-NSP agreements pursuant to applicable state and federal fraudulent conveyance law. On or before September 29, 2003, similar lawsuits were brought against 5 additional law firms whose tolling agreements were about to expire. The Official
Creditors Committee was named as a defendant in all such lawsuits, solely with respect to the declaratory relief sought. During the first quarter of 2004, the lawsuit against one of the law firms was dismissed with the consent of the Official
Creditors Committee and Bankruptcy Court approval.



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



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OWENS CORNING AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



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



Certain Post-Petition Matters



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



As a result of the Filing, contractual interest expense has not been
accrued or recorded on pre-petition debt of the Debtors since the Petition Date. From the Petition Date through September 30, 2004, contractual interest expense not accrued or recorded on pre-petition debt (calculated using ordinary, non-default
interest rates and without regard to debt maturity) totaled approximately $620 million, of which $36 million relates to the third quarter of 2004, $105 million relates to the first nine months of 2004, and $34 million and $104 million, respectively,
relates to the same two periods of 2003.



At September 30, 2004, the Company
had $822 million of cash and cash equivalents.



In connection with the Filing,
the Debtors obtained a $500 million debtor-in-possession credit facility from a group of lenders led by Bank of America, N.A. (the DIP Financing), which was originally scheduled to expire November 15, 2002. Effective October 31, 2002,
the DIP Financing was amended to, among other things, reduce the maximum available credit amount to $250 million and extend the scheduled expiration to November 15, 2004. Effective September 20, 2004, the DIP Financing was further amended by a
Second Amendment which, among other things, extended the scheduled expiration to November 15, 2006. There were no borrowings outstanding under the DIP Financing at September 30, 2004; however, approximately $103 million of the availability under
this credit facility was utilized as a result of the issuance of standby letters of credit and similar uses.



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



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



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OWENS CORNING AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



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



Financial Statement Presentation



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



Substantially all of the Companys pre-petition debt is now in default due to the
Filing. As described below, the accompanying Consolidated Financial Statements present the Debtors pre-petition debt under the caption Liabilities Subject to Compromise. This includes debt under the Pre-Petition Credit Facility and
approximately $1.5 billion of other outstanding debt. As required by SOP 90-7, at the Petition Date the Company recorded the Debtors pre-petition debt instruments at the allowed amount, as defined by SOP 90-7.



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



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OWENS CORNING AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



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



OWENS CORNING AND SUBSIDIARIES

DEBTOR-IN-POSSESSION STATEMENT OF INCOME



|                                                        |  |                            |       |   |                                |   |       |      |  |   |       |   |  |   |       |  
|------------------------------------------------------- |  | -------------------------- | ----- | - | ------------------------------ | - | ----- | ---- |  | - | ----- | - |  | - | ----- | -
|                                                        |  | Quarter EndedSeptember 30, |       |   | Nine Months EndedSeptember 30, |  
|                                                        |  | 2004                       |       |   | 2003                           |   |       | 2004 |  |   | 2003  |  
|                                                        |  | (In millions of dollars)   |      
|NET SALES                                               |  | $                          | 1,331 |   |                                | $ | 1,186 |      |  | $ | 3,611 |   |  | $ | 3,247 |  
|COST OF SALES                                           |  |                            | 1,111 |   |                                |   | 1,017 |      |  |   | 3,077 |   |  |   | 2,808 |  
|                                                        |  |                            |       |   |                                |   |       |      |  |   |       |   |  |   |       |  
|Gross margin                                            |  |                            | 220   |   |                                |   | 169   |      |  |   | 534   |   |  |   | 439   |  
|                                                        |  |                            |       |   |                                |   |       |      |  |   |       |   |  |   |       |  
|OPERATING EXPENSES                                      |  |                            |       |   |                                |   |       |      |  |   |       |   |  |   |       |  
|Marketing and administrative expenses                   |  |                            | 116   |   |                                |   | 102   |      |  |   | 330   |   |  |   | 306   |  
|Science and technology expenses                         |  |                            | 10    |   |                                |   | 9     |      |  |   | 30    |   |  |   | 28    |  
|Restructure costs                                       |  |                            |      |   |                                |   |      |      |  |   |      |   |  |   | 2     |  
|Chapter 11 related reorganization items                 |  |                            | (5    | ) |                                |   | 5     |      |  |   | 33    |   |  |   | 75    |  
|Other                                                   |  |                            | (12   | ) |                                |   | (25   | )    |  |   | (41   | ) |  |   | (43   | )
|                                                        |  |                            |       |   |                                |   |       |      |  |   |       |   |  |   |       |  
|Total operating expenses                                |  |                            | 109   |   |                                |   | 91    |      |  |   | 352   |   |  |   | 368   |  
|                                                        |  |                            |       |   |                                |   |       |      |  |   |       |   |  |   |       |  
|INCOME (LOSS) FROM OPERATIONS                           |  |                            | 111   |   |                                |   | 78    |      |  |   | 182   |   |  |   | 71    |  
|                                                        |  |                            |       |  
|Interest expense, net                                   |  |                            | 1     |   |                                |   | 1     |      |  |   | 2     |   |  |   | 3     |  
|                                                        |  |                            |       |  
|Interest income from non-Debtors                        |  |                            | 15    |   |                                |   | 14    |      |  |   | 42    |   |  |   | 42    |  
|                                                        |  |                            |       |   |                                |   |       |      |  |   |       |   |  |   |       |  
|INCOME BEFORE INCOME TAX EXPENSE                        |  |                            | 125   |   |                                |   | 91    |      |  |   | 222   |   |  |   | 110   |  
|                                                        |  |                            |       |  
|Income tax expense                                      |  |                            | 42    |   |                                |   | 43    |      |  |   | 115   |   |  |   | 61    |  
|                                                        |  |                            |       |   |                                |   |       |      |  |   |       |   |  |   |       |  
|INCOME BEFORE EQUITY IN NET INCOME (LOSS) OF AFFILIATES |  |                            | 83    |   |                                |   | 48    |      |  |   | 107   |   |  |   | 49    |  
|                                                        |  |                            |       |  
|Equity in net income (loss) of affiliates               |  |                            |      |   |                                |   |      |      |  |   | 1     |   |  |   | (1    | )
|                                                        |  |                            |       |   |                                |   |       |      |  |   |       |   |  |   |       |  
|NET INCOME                                              |  | $                          | 83    |   |                                | $ | 48    |      |  | $ | 108   |   |  | $ | 48    |  
|                                                        |  |                            |       |   |                                |   |       |      |  |   |       |   |  |   |       |  



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OWENS CORNING AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



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



OWENS CORNING AND SUBSIDIARIES

DEBTOR-IN-POSSESSION BALANCE SHEET



|                                                     |  |                          |        |   |                   |   |        |  
|---------------------------------------------------- |  | ------------------------ | ------ | - | ----------------- | - | ------ | -
|                                                     |  | September 30, 2004       |        |   | December 31, 2003 |  
|                                                     |  | (In millions of dollars) |       
|ASSETS                                               |  |                          |        |   |                   |   |        |  
|                                                     |  |                         
|CURRENT                                              |  |                          |        |   |                   |   |        |  
|Cash and cash equivalents                            |  | $                        | 511    |   |                   | $ | 645    |  
|Receivables (net of allowance for doubtful accounts) |  |                          | 545    |   |                   |   | 334    |  
|Receivables - non-Debtors                            |  |                          | 1,064  |   |                   |   | 1,032  |  
|Inventories                                          |  |                          | 298    |   |                   |   | 278    |  
|Other current assets                                 |  |                          | 41     |   |                   |   | 31     |  
|                                                     |  |                          |        |   |                   |   |        |  
|Total current                                        |  |                          | 2,459  |   |                   |   | 2,320  |  
|                                                     |  |                          |        |   |                   |   |        |  
|OTHER                                                |  |                          |        |   |                   |   |        |  
|Restricted cash - asbestos and insurance related     |  |                          | 167    |   |                   |   | 166    |  
|Restricted cash, securities, and other  Fibreboard  |  |                          | 1,413  |   |                   |   | 1,395  |  
|Deferred income taxes                                |  |                          | 975    |   |                   |   | 1,170  |  
|Pension-related assets                               |  |                          | 430    |   |                   |   | 257    |  
|Goodwill                                             |  |                          | 54     |   |                   |   | 54     |  
|Investment in affiliates                             |  |                          | 29     |   |                   |   | 25     |  
|Investment in non-Debtor subsidiaries                |  |                          | 762    |   |                   |   | 757    |  
|Other noncurrent assets                              |  |                          | 121    |   |                   |   | 47     |  
|                                                     |  |                          |        |   |                   |   |        |  
|Total other                                          |  |                          | 3,951  |   |                   |   | 3,871  |  
|                                                     |  |                          |        |   |                   |   |        |  
|PLANT AND EQUIPMENT, at cost                         |  |                          |        |   |                   |   |        |  
|Land                                                 |  |                          | 39     |   |                   |   | 39     |  
|Buildings and leasehold improvements                 |  |                          | 597    |   |                   |   | 589    |  
|Machinery and equipment                              |  |                          | 2,282  |   |                   |   | 2,253  |  
|Construction in progress                             |  |                          | 59     |   |                   |   | 79     |  
|                                                     |  |                          |        |   |                   |   |        |  
|                                                     |  |                          | 2,977  |   |                   |   | 2,960  |  
|Accumulated depreciation                             |  |                          | (1,621 | ) |                   |   | (1,566 | )
|                                                     |  |                          |        |   |                   |   |        |  
|Net plant and equipment                              |  |                          | 1,356  |   |                   |   | 1,394  |  
|                                                     |  |                          |        |   |                   |   |        |  
|TOTAL ASSETS                                         |  | $                        | 7,766  |   |                   | $ | 7,585  |  
|                                                     |  |                          |        |   |                   |   |        |  



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OWENS CORNING AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



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



OWENS CORNING AND SUBSIDIARIES

DEBTOR-IN-POSSESSION BALANCE SHEET (continued)



|                                                       |  |                          |        |   |                   |   |        |  
|------------------------------------------------------ |  | ------------------------ | ------ | - | ----------------- | - | ------ | -
|                                                       |  | September 30, 2004       |        |   | December 31, 2003 |  
|                                                       |  | (In millions of dollars) |       
|LIABILITIES AND STOCKHOLDERS DEFICIT                  |  |                          |        |   |                   |   |        |  
|                                                       |  |                         
|CURRENT                                                |  |                          |        |   |                   |   |        |  
|Accounts payable and accrued liabilities               |  | $                        | 620    |   |                   | $ | 549    |  
|Accounts payable and accrued liabilities - non-Debtors |  |                          | 23     |   |                   |   | 15     |  
|Long-term debt - current portion                       |  |                          |       |   |                   |   | 1      |  
|                                                       |  |                          |        |   |                   |   |        |  
|Total current                                          |  |                          | 643    |   |                   |   | 565    |  
|                                                       |  |                          |        |   |                   |   |        |  
|LONG-TERM DEBT                                         |  |                          | 6      |   |                   |   | 6      |  
|                                                       |  |                          |        |   |                   |   |        |  
|OTHER                                                  |  |                          |        |   |                   |   |        |  
|Pension plan liability                                 |  |                          | 580    |   |                   |   | 581    |  
|Other employee benefits liability                      |  |                          | 391    |   |                   |   | 384    |  
|Other                                                  |  |                          | 166    |   |                   |   | 123    |  
|                                                       |  |                          |        |   |                   |   |        |  
|Total other                                            |  |                          | 1,137  |   |                   |   | 1,088  |  
|                                                       |  |                          |        |   |                   |   |        |  
|LIABILITIES SUBJECT TO COMPROMISE                      |  |                          | 9,928  |   |                   |   | 9,985  |  
|                                                       |  |                          |        |   |                   |   |        |  
|STOCKHOLDERS DEFICIT                                  |  |                          |        |   |                   |   |        |  
|Common stock                                           |  |                          | 6      |   |                   |   | 6      |  
|Additional paid in capital                             |  |                          | 690    |   |                   |   | 690    |  
|Accumulated deficit                                    |  |                          | (4,309 | ) |                   |   | (4,417 | )
|Accumulated other comprehensive loss                   |  |                          | (333   | ) |                   |   | (336   | )
|Other                                                  |  |                          | (2     | ) |                   |   | (2     | )
|                                                       |  |                          |        |   |                   |   |        |  
|Total stockholders deficit                            |  |                          | (3,948 | ) |                   |   | (4,059 | )
|                                                       |  |                          |        |   |                   |   |        |  
|TOTAL LIABILITIES AND STOCKHOLDERS DEFICIT            |  | $                        | 7,766  |   |                   | $ | 7,585  |  
|                                                       |  |                          |        |   |                   |   |        |  



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OWENS CORNING AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



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



OWENS CORNING AND SUBSIDIARIES

DEBTOR-IN-POSSESSION STATEMENT OF CASH FLOWS



|                                                                                                                |  |                                |      |   |      |   |      |  
|--------------------------------------------------------------------------------------------------------------- |  | ------------------------------ | ---- | - | ---- | - | ---- | -
|                                                                                                                |  | Nine Months EndedSeptember 30, |     
|                                                                                                                |  | 2004                           |      |   | 2003 |  
|                                                                                                                |  | (In millions of dollars)       |     
|NET CASH FLOW FROM OPERATIONS                                                                                   |  |                                |      |   |      |   |      |  
|Net income                                                                                                      |  | $                              | 108  |   |      | $ | 48   |  
|Reconciliation of net cash from operating activities                                                            |  |                                |      |   |      |   |      |  
|Noncash items:                                                                                                  |  |                                |      |   |      |   |      |  
|Provision for depreciation and amortization                                                                     |  |                                | 121  |   |      |   | 110  |  
|Provision for impairment of fixed assets                                                                        |  |                                |     |   |      |   | 28   |  
|Provision for deferred income taxes                                                                             |  |                                | 75   |   |      |   | 37   |  
|Provision for pension and other employee benefits / liabilities                                                 |  |                                | 78   |   |      |   | 82   |  
|Other                                                                                                           |  |                                | 28   |   |      |   | (31  | )
|Increase in receivables and receivables - non-Debtors                                                           |  |                                | (243 | ) |      |   | (208 | )
|Increase in inventories                                                                                         |  |                                | (19  | ) |      |   | (23  | )
|Increase in accounts payable and accrued liabilities and accounts payable and accrued liabilities - non-Debtors |  |                                | 73   |   |      |   | 2    |  
|Increase in restricted cash  asbestos and insurance related                                                    |  |                                | (1   | ) |      |   | (1   | )
|Increase in restricted cash, securities, and other - Fibreboard                                                 |  |                                | (19  | ) |      |   | (29  | )
|                                                                                                                |  |                               
|Proceeds from insurance for asbestos litigation claims, excluding Fibreboard                                    |  |                                | 3    |   |      |   | 4    |  
|Pension fund contribution                                                                                       |  |                                | (222 | ) |      |   | (178 | )
|                                                                                                                |  |                                |      |   |      |   |      |  
|Other                                                                                                           |  |                                | (5   | ) |      |   | 62   |  
|                                                                                                                |  |                                |      |   |      |   |      |  
|Net cash flow from operations                                                                                   |  |                                | (23  | ) |      |   | (97  | )
|                                                                                                                |  |                                |      |   |      |   |      |  
|NET CASH FLOW FROM INVESTING                                                                                    |  |                                |      |   |      |   |      |  
|Additions to plant and equipment                                                                                |  |                                | (104 | ) |      |   | (87  | )
|Investment in subsidiaries, net of cash acquired                                                                |  |                                | (3   | ) |      |   | (1   | )
|Proceeds from the sale of assets, affiliates or businesses                                                      |  |                                |     |   |      |   | 61   |  
|Other                                                                                                           |  |                                |     |   |      |   | 13   |  
|                                                                                                                |  |                                |      |   |      |   |      |  
|Net cash flow from investing                                                                                    |  |                                | (107 | ) |      |   | (14  | )
|                                                                                                                |  |                                |      |   |      |   |      |  
|NET CASH FLOW FROM FINANCING                                                                                    |  |                                |      |   |      |   |      |  
|Other additions to long-term debt                                                                               |  |                                |     |   |      |   | 2    |  
|Other reductions to long-term debt                                                                              |  |                                |     |   |      |   | (32  | )
|Subject to compromise                                                                                           |  |                                | (5   | ) |      |   | (1   | )
|Other                                                                                                           |  |                                | 1    |   |      |   |     |  
|                                                                                                                |  |                                |      |   |      |   |      |  
|Net cash flow from financing                                                                                    |  |                                | (4   | ) |      |   | (31  | )
|                                                                                                                |  |                                |      |   |      |   |      |  
|NET DECREASE IN CASH AND CASH EQUIVALENTS                                                                       |  |                                | (134 | ) |      |   | (142 | )
|                                                                                                                |  |                               
|Cash and cash equivalents at beginning of period                                                                |  |                                | 645  |   |      |   | 622  |  
|                                                                                                                |  |                                |      |   |      |   |      |  
|CASH AND CASH EQUIVALENTS AT END OF PERIOD                                                                      |  | $                              | 511  |   |      | $ | 480  |  
|                                                                                                                |  |                                |      |   |      |   |      |  



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OWENS CORNING AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



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



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



|                                                       |  |                          |       |                   |   |      
|------------------------------------------------------ |  | ------------------------ | ----- | ----------------- | - | -----
|                                                       |  | September 30, 2004       |       | December 31, 2003
|                                                       |  | (In millions of dollars)
|Accounts payable                                       |  | $                        | 213   |                   | $ | 213  
|Accrued interest payable                               |  |                          | 40    |                   |   | 42   
|Debt (Note 17)                                         |  |                          | 2,958 |                   |   | 2,896
|Income taxes payable                                   |  |                          | 183   |                   |   | 233  
|Reserve for asbestos litigation claims - Owens Corning |  |                          | 3,565 |                   |   | 3,565
|Reserve for asbestos-related claims  Fibreboard       |  |                          | 2,309 |                   |   | 2,309
|                                                       |  |                          |       |                   |   |      
|Total consolidated                                     |  |                          | 9,268 |                   |   | 9,258
|                                                       |  |                          |       |                   |   |      
|Payables to non-Debtors (Note 17)                      |  |                          | 660   |                   |   | 727  
|                                                       |  |                          |       |                   |   |      
|Total Debtor                                           |  | $                        | 9,928 |                   | $ | 9,985
|                                                       |  |                          |       |                   |   |      



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



|                                          |  |                            |     |   |                                |   |    |      |  |   |      |   |  |   |     |  
|----------------------------------------- |  | -------------------------- | --- | - | ------------------------------ | - | -- | ---- |  | - | ---- | - |  | - | --- | -
|                                          |  | Quarter EndedSeptember 30, |     |   | Nine Months EndedSeptember 30, |  
|                                          |  | 2004                       |     |   | 2003                           |   |    | 2004 |  |   | 2003 |  
|                                          |  | (In millions of dollars)   |    
|Professional fees                         |  | $                          | 11  |   |                                | $ | 8  |      |  | $ | 39   |   |  | $ | 49  |  
|Payroll and compensation                  |  |                            | 5   |   |                                |   | 4  |      |  |   | 12   |   |  |   | 16  |  
|Settlement of Asian credit facility       |  |                            |    |   |                                |   |   |      |  |   |     |   |  |   | 18  |  
|Renegotiation of World Headquarters lease |  |                            |    |   |                                |   |   |      |  |   |     |   |  |   | 21  |  
|Investment income                         |  |                            | (23 | ) |                                |   | (8 | )    |  |   | (22  | ) |  |   | (33 | )
|Other, net                                |  |                            | 2   |   |                                |   | 1  |      |  |   | 4    |   |  |   | 4   |  
|                                          |  |                            |     |   |                                |   |    |      |  |   |      |   |  |   |     |  
|Total                                     |  | $                          | (5  | ) |                                | $ | 5  |      |  | $ | 33   |   |  | $ | 75  |  
|                                          |  |                            |     |   |                                |   |    |      |  |   |      |   |  |   |     |  



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OWENS CORNING AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



2. SEGMENT DATA



The Company has reviewed its
segments in accordance with SFAS No. 131 and concluded that the aggregation of its operating segments into two reportable segments remains appropriate. The Company has reported financial and descriptive information about each of the Companys
two reportable segments below on a basis that is used internally for evaluating segment performance and deciding how to allocate resources to those segments.



|                                             |  |                            |       |                                |   |       |  |      |       |  |   |      
|-------------------------------------------- |  | -------------------------- | ----- | ------------------------------ | - | ----- |  | ---- | ----- |  | - | -----
|                                             |  | Quarter EndedSeptember 30, |       | Nine Months EndedSeptember 30,
|                                             |  | 2004                       |       | 2003                           |   | 2004  |  | 2003
|                                             |  | (In millions of dollars)  
|NET SALES                                    |  |                            |       |                                |   |       |  |      |       |  |   |      
|                                             |  |                            |       |                               
|Reportable Segments                          |  |                            |       |                                |   |       |  |      |       |  |   |      
|                                             |  |                            |       |                               
|Building Materials Systems                   |  |                            |       |                                |   |       |  |      |       |  |   |      
|United States                                |  | $                          | 1,162 |                                | $ | 1,033 |  | $    | 3,113 |  | $ | 2,810
|Europe                                       |  |                            | 2     |                                |   | 1     |  |      | 7     |  |   | 2    
|Canada and other                             |  |                            | 90    |                                |   | 64    |  |      | 227   |  |   | 165  
|                                             |  |                            |       |                                |   |       |  |      |       |  |   |      
|Total Building Materials Systems             |  |                            | 1,254 |                                |   | 1,098 |  |      | 3,347 |  |   | 2,977
|                                             |  |                            |       |                                |   |       |  |      |       |  |   |      
|Composite Solutions                          |  |                            |       |                                |   |       |  |      |       |  |   |      
|United States                                |  |                            | 139   |                                |   | 126   |  |      | 413   |  |   | 370  
|Europe                                       |  |                            | 93    |                                |   | 84    |  |      | 272   |  |   | 252  
|Canada and other                             |  |                            | 55    |                                |   | 41    |  |      | 159   |  |   | 122  
|                                             |  |                            |       |                                |   |       |  |      |       |  |   |      
|Total Composite Solutions                    |  |                            | 287   |                                |   | 251   |  |      | 844   |  |   | 744  
|                                             |  |                            |       |                                |   |       |  |      |       |  |   |      
|Total reportable segments                    |  | $                          | 1,541 |                                | $ | 1,349 |  | $    | 4,191 |  | $ | 3,721
|                                             |  |                            |       |                                |   |       |  |      |       |  |   |      
|External Customer Sales by Geographic Region |  |                            |       |                                |   |       |  |      |       |  |   |      
|                                             |  |                            |       |                               
|United States                                |  | $                          | 1,301 |                                | $ | 1,159 |  | $    | 3,526 |  | $ | 3,180
|Europe                                       |  |                            | 95    |                                |   | 85    |  |      | 279   |  |   | 254  
|Canada and other                             |  |                            | 145   |                                |   | 105   |  |      | 386   |  |   | 287  
|                                             |  |                            |       |                                |   |       |  |      |       |  |   |      
|NET SALES                                    |  | $                          | 1,541 |                                | $ | 1,349 |  | $    | 4,191 |  | $ | 3,721
|                                             |  |                            |       |                                |   |       |  |      |       |  |   |      



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OWENS CORNING AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



2. SEGMENT DATA (continued)



|                                                                |  |                            |     |   |                                |   |     |      |  |   |      |   |  |   |     |  
|--------------------------------------------------------------- |  | -------------------------- | --- | - | ------------------------------ | - | --- | ---- |  | - | ---- | - |  | - | --- | -
|                                                                |  | Quarter EndedSeptember 30, |     |   | Nine Months EndedSeptember 30, |  
|                                                                |  | 2004                       |     |   | 2003                           |   |     | 2004 |  |   | 2003 |  
|                                                                |  | (In millions of dollars)   |    
|INCOME FROM OPERATIONS                                          |  |                            |     |   |                                |   |     |      |  |   |      |   |  |   |     |  
|                                                                |  |                            |     |  
|Reportable Segments                                             |  |                            |     |   |                                |   |     |      |  |   |      |   |  |   |     |  
|                                                                |  |                            |     |  
|Building Materials Systems                                      |  |                            |     |   |                                |   |     |      |  |   |      |   |  |   |     |  
|United States                                                   |  | $                          | 139 |   |                                | $ | 97  |      |  | $ | 293  |   |  | $ | 243 |  
|Europe                                                          |  |                            |    |   |                                |   |    |      |  |   |     |   |  |   | (1  | )
|Canada and other                                                |  |                            | 26  |   |                                |   | 12  |      |  |   | 48   |   |  |   | 26  |  
|                                                                |  |                            |     |   |                                |   |     |      |  |   |      |   |  |   |     |  
|Total Building Materials Systems                                |  |                            | 165 |   |                                |   | 109 |      |  |   | 341  |   |  |   | 268 |  
|                                                                |  |                            |     |   |                                |   |     |      |  |   |      |   |  |   |     |  
|Composite Solutions                                             |  |                            |     |   |                                |   |     |      |  |   |      |   |  |   |     |  
|United States                                                   |  |                            | 8   |   |                                |   | (2  | )    |  |   | 13   |   |  |   | 9   |  
|Europe                                                          |  |                            | 5   |   |                                |   | 5   |      |  |   | 11   |   |  |   | 15  |  
|Canada and other                                                |  |                            | 8   |   |                                |   | 12  |      |  |   | 29   |   |  |   | 22  |  
|                                                                |  |                            |     |   |                                |   |     |      |  |   |      |   |  |   |     |  
|Total Composite Solutions                                       |  |                            | 21  |   |                                |   | 15  |      |  |   | 53   |   |  |   | 46  |  
|                                                                |  |                            |     |   |                                |   |     |      |  |   |      |   |  |   |     |  
|Total reportable segments                                       |  | $                          | 186 |   |                                | $ | 124 |      |  | $ | 394  |   |  | $ | 314 |  
|                                                                |  |                            |     |   |                                |   |     |      |  |   |      |   |  |   |     |  
|Geographic Regions                                              |  |                            |     |   |                                |   |     |      |  |   |      |   |  |   |     |  
|                                                                |  |                            |     |  
|United States                                                   |  | $                          | 147 |   |                                | $ | 95  |      |  | $ | 306  |   |  | $ | 252 |  
|Europe                                                          |  |                            | 5   |   |                                |   | 5   |      |  |   | 11   |   |  |   | 14  |  
|Canada and other                                                |  |                            | 34  |   |                                |   | 24  |      |  |   | 77   |   |  |   | 48  |  
|                                                                |  |                            |     |   |                                |   |     |      |  |   |      |   |  |   |     |  
|Total reportable segments                                       |  | $                          | 186 |   |                                | $ | 124 |      |  | $ | 394  |   |  | $ | 314 |  
|                                                                |  |                            |     |   |                                |   |     |      |  |   |      |   |  |   |     |  
|Reconciliation to Consolidated Income Before Income Tax Expense |  |                            |     |   |                                |   |     |      |  |   |      |   |  |   |     |  
|                                                                |  |                            |     |  
|Restructuring and other charges (Note 8)                        |  |                            |    |   |                                |   | (1  | )    |  |   | 5    |   |  |   | (44 | )
|Chapter 11 related reorganization items (Note 1)                |  |                            | 5   |   |                                |   | (5  | )    |  |   | (33  | ) |  |   | (75 | )
|Credit for asbestos litigation claims                           |  |                            | 3   |   |                                |   |    |      |  |   | 3    |   |  |   | 4   |  
|General corporate expense                                       |  |                            | (41 | ) |                                |   | (14 | )    |  |   | (88  | ) |  |   | (44 | )
|Interest expense, net (Note 17)                                 |  |                            | 14  |   |                                |   | (2  | )    |  |   | 12   |   |  |   | (6  | )
|                                                                |  |                            |     |   |                                |   |     |      |  |   |      |   |  |   |     |  
|CONSOLIDATED INCOME BEFORE INCOME TAX EXPENSE                   |  | $                          | 167 |   |                                | $ | 102 |      |  | $ | 293  |   |  | $ | 149 |  
|                                                                |  |                            |     |   |                                |   |     |      |  |   |      |   |  |   |     |  



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OWENS CORNING AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



3. GENERAL



The consolidated financial
statements included in this Report are unaudited and have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission, and include, in the opinion of the Company, adjustments necessary for a fair presentation of the
results for the periods indicated, which, however, are not necessarily indicative of results which may be expected for the full year. Certain reclassifications have been made to the periods presented for 2003 to conform to the classifications used
in the periods presented for 2004.



In connection with the consolidated
financial statements and notes included in this Report, reference is made to the consolidated financial statements and notes thereto contained in the Companys 2003 annual report on Form 10-K, as filed with the Securities and Exchange
Commission.



4. INVENTORIES



Inventories are summarized as
follows:



|                         |  |                          |      |   |                   |   |     |  
|------------------------ |  | ------------------------ | ---- | - | ----------------- | - | --- | -
|                         |  | September 30, 2004       |      |   | December 31, 2003 |  
|                         |  | (In millions of dollars) |     
|Finished goods           |  | $                        | 395  |   |                   | $ | 362 |  
|Materials and supplies   |  |                          | 148  |   |                   |   | 123 |  
|                         |  |                          |      |   |                   |   |     |  
|FIFO inventory           |  |                          | 543  |   |                   |   | 485 |  
|Excess of FIFO over LIFO |  |                          | (107 | ) |                   |   | (95 | )
|                         |  |                          |      |   |                   |   |     |  
|Total inventories        |  | $                        | 436  |   |                   | $ | 390 |  
|                         |  |                          |      |   |                   |   |     |  



Approximately $129 million and $144
million of total inventories were valued using the LIFO method at September 30, 2004 and December 31, 2003, respectively.



5. GOODWILL AND OTHER INTANGIBLES



Effective
January 1, 2002, the Company adopted Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets (SFAS No. 142), to account for goodwill and other intangibles. SFAS No. 142 requires at least an
annual review for impairment using a fair value methodology. The Company conducts its annual review for impairment in the second quarter. The 2004 and 2003 reviews resulted in no change to recorded goodwill.



Excluding fluctuations in currency, the only change in goodwill during the quarter and nine
month period ended September 30, 2004 was the result of the Companys purchase of the remaining 60% ownership interest in our Mexican affiliate, Vitro-Fibras, S.A. (See Note 6). This purchase resulted in recording approximately $53 million of
goodwill, subject to further adjustment. The $193 million balance of goodwill at September 30, 2004 was comprised of $47 million for the Composite Solutions segment and $146 million for the Building Materials Systems segment.



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OWENS CORNING AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



5. GOODWILL AND OTHER INTANGIBLES (continued)



Substantially all of the Companys acquired other intangible assets are subject to amortization. Other intangible asset amortization
expense was approximately $2 million for the first nine months of 2004 and $3 million for the first nine months of 2003. The Company estimates that amortization of intangibles will be approximately $2 million annually for each of the next five
years. The components of other intangible assets are as follows:



|                  |  |                          |  |                       |    |                          |   |   
|----------------- |  | ------------------------ |  | --------------------- | -- | ------------------------ | - | --
|                  |  | September 30, 2004      
|                  |  | WeightedAverage Lives    |  | Gross Carrying Amount |    | Accumulated Amortization
|                  |  | (In millions of dollars)
|Contract-based    |  | 7                        |  | $                     | 6  |                          | $ | 2 
|Technology-based  |  | 13                       |  |                       | 15 |                          |   | 10
|Marketing-related |  | 8                        |  |                       | 14 |                          |   | 12
|                  |  |                          |  |                       |    |                          |   |   
|                  |  |                          |  | $                     | 35 |                          | $ | 24
|                  |  |                          |  |                       |    |                          |   |   



6. ACQUISITIONS AND DIVESTITURES OF BUSINESSES



Acquisitions



On April 2, 2004, the Company purchased
the remaining 60% ownership interest in our Mexican affiliate, Vitro-Fibras, S.A. (OC Mexico) for approximately $73 million. This purchase allows the Company to have a strong operating position in Mexico, as well as supply low-cost
manufacturing capacity to service the North American market for both fiberglass insulation and reinforcements. The Company accounted for this transaction under the purchase method of accounting, whereby the assets acquired and liabilities assumed
were recorded at their fair values. During the first quarter of 2004, this affiliate was accounted for under the equity method. The Company began consolidating this subsidiary in April 2004.



Divestitures



During the second quarter of 2003, the Company received Bankruptcy Court approval to sell the assets of its metal systems business. Net
proceeds from the sale were $48 million, of which $40 million were received in the second quarter of 2003 and $5 million were received in the third quarter of 2003. The remaining $3 million were recorded as a long-term note receivable due in 2006. A
pretax loss of approximately $15 million was realized from the sale. Additionally, the Company received Bankruptcy Court approval to sell the assets of its mineral wool business. Net proceeds from the sale of $8 million were received in the second
quarter of 2003. A pretax gain of approximately $1 million was realized from the sale.



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OWENS CORNING AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



7. WARRANTIES



The Company records a liability
for warranty obligations at the date the related products are sold. Adjustments are made as new information becomes available. A reconciliation of the warranty liabilities for the nine months ended September 30, 2004 is as follows:



|                               |  |                          |     |  
|------------------------------ |  | ------------------------ | --- | -
|                               |  | (In millions of dollars) |    
|Balance at December 31, 2003   |  | $                        | 48  |  
|Amounts accrued                |  |                          | 17  |  
|Settlements of warranty claims |  |                          | (15 | )
|                               |  |                          |     |  
|Balance at September 30, 2004  |  | $                        | 50  |  
|                               |  |                          |     |  



8. RESTRUCTURING OF OPERATIONS AND OTHER CHARGES



2004



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



2003



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



In the second quarter of 2003, the Company recorded a pretax charge of approximately $13 million, consisting of a $14 million loss on the sale of the Companys metal systems business, offset by a $1 million credit representing the gain
on the sale of assets of the Companys mineral wool business. Such $13 million charge, along with a net $1 million credit for various other items, was reflected in the Consolidated Statement of Income under the caption, Other. See
Note 6 to the Consolidated Financial Statements for additional information concerning these sales.



During the first quarter of 2003, the Company recorded $30 million in pretax charges, comprised of a $2 million pretax restructure charge (classified as a separate component of operating expense in the Consolidated
Statement of Income) and a charge of $28 million to cost of sales. The $2 million restructure charge represented additional non-cash asset write-downs of previously closed non-strategic facilities to fair value. The $28 million charge to cost of
sales represented the additional write-down of two groups of assets in the Building Materials segment to net realizable value based on valuations of the future cash flows of the assets using assumptions consistent with current market conditions.



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OWENS CORNING AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



9. PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS



Pension Plans



The Company has several defined benefit
pension plans covering most employees. Under the plans, pension benefits are based on an employees years of service and, for certain categories of employees, qualifying compensation. Company contributions to these pension plans are determined
by an independent actuary to meet or exceed minimum funding requirements. The unrecognized cost of retroactive amendments and actuarial gains and losses are amortized over the average future service period of plan participants expected to receive
benefits. In September 2004, the company made a $221 million contribution to its U.S. plan.



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



|                                        |  |                             |     |   |          |   |    |       |  |   |      |   |  |          |     |   |       |   |    |   |  |   |     |  
|--------------------------------------- |  | --------------------------- | --- | - | -------- | - | -- | ----- |  | - | ---- | - |  | -------- | --- | - | ----- | - | -- | - |  | - | --- | -
|                                        |  | Quarter Ended September 30, |    
|                                        |  |                             |     |   | 2004     |   |    |       |  |   |      |   |  | 2003     |     |   |       |  
|                                        |  | U.S.                        |     |   | Non-U.S. |   |    | Total |  |   | U.S. |   |  | Non-U.S. |     |   | Total |  
|                                        |  | (In millions of dollars)    |    
|Components of Net Periodic Pension Cost |  |                             |     |   |          |   |    |       |  |   |      |   |  |          |     |   |       |   |    |   |  |   |     |  
|                                        |  |                             |     |   |          |  
|Service cost                            |  | $                           | 5   |   |          | $ | 1  |       |  | $ | 6    |   |  | $        | 3   |   |       | $ |   |   |  | $ | 3   |  
|Interest cost                           |  |                             | 14  |   |          |   | 5  |       |  |   | 19   |   |  |          | 15  |   |       |   | 4  |   |  |   | 19  |  
|Expected return on plan assets          |  |                             | (14 | ) |          |   | (5 | )     |  |   | (19  | ) |  |          | (12 | ) |       |   | (4 | ) |  |   | (16 | )
|Amortization of transition amount       |  |                             |    |   |          |   |   |       |  |   |     |   |  |          | (1  | ) |       |   |   |   |  |   | (1  | )
|Amortization of actuarial loss          |  |                             | 11  |   |          |   | 2  |       |  |   | 13   |   |  |          | 7   |   |       |   | 2  |   |  |   | 9   |  
|                                        |  |                             |     |   |          |   |    |       |  |   |      |   |  |          |     |   |       |   |    |   |  |   |     |  
|Net periodic pension cost               |  | $                           | 16  |   |          | $ | 3  |       |  | $ | 19   |   |  | $        | 12  |   |       | $ | 2  |   |  | $ | 14  |  
|                                        |  |                             |     |   |          |   |    |       |  |   |      |   |  |          |     |   |       |   |    |   |  |   |     |  



|                                        |  |                                 |     |   |          |   |     |       |  |   |      |   |  |          |     |   |       |   |     |   |  |   |     |  
|--------------------------------------- |  | ------------------------------- | --- | - | -------- | - | --- | ----- |  | - | ---- | - |  | -------- | --- | - | ----- | - | --- | - |  | - | --- | -
|                                        |  | Nine Months Ended September 30, |    
|                                        |  |                                 |     |   | 2004     |   |     |       |  |   |      |   |  | 2003     |     |   |       |  
|                                        |  | U.S.                            |     |   | Non-U.S. |   |     | Total |  |   | U.S. |   |  | Non-U.S. |     |   | Total |  
|                                        |  | (In millions of dollars)        |    
|Components of Net Periodic Pension Cost |  |                                 |     |   |          |   |     |       |  |   |      |   |  |          |     |   |       |   |     |   |  |   |     |  
|                                        |  |                                 |     |   |          |  
|Service cost                            |  | $                               | 16  |   |          | $ | 2   |       |  | $ | 18   |   |  | $        | 11  |   |       | $ | 1   |   |  | $ | 12  |  
|Interest cost                           |  |                                 | 43  |   |          |   | 15  |       |  |   | 58   |   |  |          | 43  |   |       |   | 12  |   |  |   | 55  |  
|Expected return on plan assets          |  |                                 | (41 | ) |          |   | (14 | )     |  |   | (55  | ) |  |          | (36 | ) |       |   | (11 | ) |  |   | (47 | )
|Amortization of transition amount       |  |                                 |    |   |          |   | (1  | )     |  |   | (1   | ) |  |          | (2  | ) |       |   | (1  | ) |  |   | (3  | )
|Amortization of actuarial loss          |  |                                 | 31  |   |          |   | 7   |       |  |   | 38   |   |  |          | 19  |   |       |   | 6   |   |  |   | 25  |  
|                                        |  |                                 |     |   |          |   |     |       |  |   |      |   |  |          |     |   |       |   |     |   |  |   |     |  
|Net periodic pension cost               |  | $                               | 49  |   |          | $ | 9   |       |  | $ | 58   |   |  | $        | 35  |   |       | $ | 7   |   |  | $ | 42  |  
|                                        |  |                                 |     |   |          |   |     |       |  |   |      |   |  |          |     |   |       |   |     |   |  |   |     |  



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OWENS CORNING AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



9. PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS (continued)



Postemployment and Postretirement Benefits Other than Pension Plans



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



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



|                                         |  |                           |    |                                |      |   |      |  |   |      |   |  |   |   
|---------------------------------------- |  | ------------------------- | -- | ------------------------------ | ---- | - | ---- |  | - | ---- | - |  | - | --
|                                         |  | QuarterEndedSeptember 30, |    | Nine months endedSeptember 30,
|                                         |  | 2004                      |    |                                | 2003 |   | 2004 |  |   | 2003
|                                         |  | (In millions of dollars) 
|Components of Net Periodic Benefits Cost |  |                           |    |                                |      |   |      |  |   |      |   |  |   |   
|                                         |  |                           |    |                               
|Service cost                             |  | $                         | 3  |                                |      | $ | 4    |  | $ | 6    |   |  | $ | 11
|Interest cost                            |  |                           | 7  |                                |      |   | 8    |  |   | 21   |   |  |   | 25
|Amortization of loss                     |  |                           | 1  |                                |      |   | 3    |  |   | 5    |   |  |   | 8 
|Amortization of prior service cost       |  |                           | (1 | )                              |      |   |     |  |   | (4   | ) |  |   |  
|                                         |  |                           |    |                                |      |   |      |  |   |      |   |  |   |   
|Net periodic benefits cost               |  | $                         | 10 |                                |      | $ | 15   |  | $ | 28   |   |  | $ | 44
|                                         |  |                           |    |                                |      |   |      |  |   |      |   |  |   |   



In December 2003, the Medicare
Prescription Drug, Improvement and Modernization Act of 2003 (the MPD Act) became law. The MPD Act establishes a prescription drug benefit under Medicare, known as Medicare Part D, as well as a federal subsidy to sponsors of
retiree healthcare benefit plans that provide a benefit that is at least actuarially equivalent to Medicare Part D. In May 2004, the FASB issued FASB Staff Position No. FAS 106-2, Accounting and Disclosure Requirements Related to the Medicare
Prescription Drug, Improvement and Modernization Act of 2003 (FAS 106-2), which became effective for the first interim period beginning after June 15, 2004.



The Companys independent actuary performed a measurement of the effects of the MPD Act on the accumulated postretirement benefit
obligation (APBO) for certain Company retiree healthcare plans. As a result of the measurement, it was determined that benefits provided by those plans were at least actuarially equivalent to Medicare Part D. Pending further guidance on
the criteria used to determine actuarial equivalence, the Company expects to be entitled to the subsidy in all years after 2005.



The Company adopted the provisions of the MPD Act on a retrospective basis, which required remeasurement of plan assets and the APBO as of December 31, 2003. In
accordance with the implementation guidance provided by FAS 106-2, the effects of the remeasurement impacted the Companys financial statements beginning on March 1, 2004.



The remeasurement of plan assets and the APBO resulted in a $24 million decrease in the plans APBO, which was treated as an actuarial
gain and will be recognized through reduced retiree health care expense over the related employee future service lives. Other than this change, the impact of the adoption of the MPD Act was immaterial to the financial statements.



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OWENS CORNING AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



10. CONTINGENT LIABILITIES AND OTHER MATTERS



Asbestos Liabilities



ITEM A. - OWENS CORNING (EXCLUDING FIBREBOARD)



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



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



As more fully discussed in Note 1 to the Consolidated Financial Statements and under the heading Reserve below, the Debtors,
together with the Official Committee of Asbestos Claimants and the Legal Representative for the class of future asbestos claimants, filed on October 24, 2003 a proposed fourth amended joint plan of reorganization for the Debtors and expect to file a
proposed fifth amended joint plan of reorganization reflecting the terms of the Agreement in Principle discussed in Note 1 to the Consolidated Financial Statements. Ultimately, as described more fully under the heading Reserve below, it
is anticipated that Owens Cornings total liability for asbestos claims will be determined after a lengthy period of negotiations and, if necessary, by the Bankruptcy Court, including through the estimation hearing scheduled for January 13,
2005, taking into account numerous factors not present in the Companys pre-petition environment. Such factors include the claims of competing creditor groups as to the appropriate treatment of their allowed claims in the plan or plans of
reorganization, the size of the total asbestos liability, the total number of present asbestos claims allowed, and the total amount of future asbestos claims allowed.



National Settlement Program Claims



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



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OWENS CORNING AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



10. CONTINGENT LIABILITIES AND OTHER MATTERS (continued)



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



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



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



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



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



Non-NSP Claims



As of the Petition Date, approximately 29,000 asbestos personal injury claims were pending against Owens Corning outside the NSP. This compares to approximately 25,000 such claims pending on December 31, 1999. The
information needed for a critical evaluation of pending claims, including the nature and severity of disease and definitive identifying information concerning claimants, typically becomes available only through the discovery process or as a result
of settlement negotiations, neither of which have occurred since the Filing. As a result, Owens Corning has limited information about many of such claims.



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OWENS CORNING AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



10. CONTINGENT LIABILITIES AND OTHER MATTERS (continued)



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



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



Asbestos-Related Payments



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



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



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



Prior to the Petition Date, Owens
Corning deposited certain amounts in escrow accounts to facilitate claims processing under the NSP (Administrative Deposits). Amounts deposited into escrow in Administrative Deposits during a reporting period are included in the payments
shown for NSP Settlements during the period. At September 30, 2004, approximately $106 million of Administrative Deposits previously made by Owens Corning had not been finally distributed to claimants (Undistributed Administrative
Deposits) and, accordingly, are reflected in Owens Cornings consolidated balance sheet as restricted assets (under the caption Restricted cash - asbestos and insurance related) and have not been subtracted from Owens
Cornings reserve for asbestos personal injury claims (discussed below).



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OWENS CORNING AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



10. CONTINGENT LIABILITIES AND OTHER MATTERS (continued)



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



Reserve



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



As of September 30, 2004, a reserve of approximately $3.6 billion in respect of Owens Cornings asbestos-related liabilities was one of the items included in Owens
Cornings consolidated balance sheet under the category Liabilities Subject to Compromise. For periods prior to the Petition Date, these liabilities were reflected as current or other liabilities (depending on the period in which
payment was expected) under the category Reserve for asbestos litigation claims.



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



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OWENS CORNING AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



10. CONTINGENT LIABILITIES AND OTHER MATTERS (continued)



The Chapter 11 Cases have significantly increased the inherent difficulties and
uncertainties involved in estimating the number and cost of resolution of present and future asbestos-related claims against Owens Corning and will likely have the effect of increasing the number and ultimate cost of resolution of such claims
substantially. In particular, the status of the NSP Agreements and the ultimate treatment of pending and future claims thereunder will depend on the outcome of negotiations among the various constituencies in the Chapter 11 Cases and determinations
by the Bankruptcy Court as to the issues involved, including through the estimation hearing scheduled for January 13, 2005, none of which can be predicted at this time. The uncertainties associated with the status of the NSP Agreements and the
treatment of claims thereunder include the following:



| | It is possible that one or more constituencies in the Chapter 11 Cases may seek to set aside the NSP Agreements on various grounds. In any event, it is highly uncertain how any plan
or plans of reorganization will ultimately treat the various types of NSP claims, including without limitation claims with no evidence of significant medical impairment, or whether such unimpaired claims will be treated as allowed claims thereunder.
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | The settlement values for specified categories of disease set forth in the NSP Agreements were established by arms-length negotiations with the participating law firms in
circumstances very different from those prevailing in the Chapter 11 Cases. The settlement values available to individual claimants under the arrangements to be included in any plan or plans of reorganization may vary substantially from those
contemplated by the NSP Agreements. Because Owens Cornings estimate of liabilities in respect of non-NSP claims assumed payment of settlement values similar to those contained in the NSP Agreements, such estimate is subject to similar
uncertainty.
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



| | It is uncertain what claim submission process will be prescribed by the Bankruptcy Court for pre-petition asbestos claims against Owens Corning or Fibreboard and what effects such
process may have, including on the number of such claims. Moreover, the Filing, including the significant publicity associated with the Chapter 11 Cases and notices required by the Bankruptcy Code that must be given to creditors and other parties in
interest, has significantly increased the inherent difficulties and uncertainties involved in estimating the number and cost of resolution of not only pre-petition claims but also additional claims that may be asserted in the course of the Chapter
11 Cases.
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | Owens Corning anticipates that the number and estimated aggregate value of allowed future claims will ultimately be determined either as a result of negotiations involving the Legal
Representative for the class of future asbestos claimants and the other interested constituencies or, if necessary, by the Bankruptcy Court, including through the estimation hearing scheduled for January 13, 2005. It is not possible to predict the
outcome of such negotiations, or Bankruptcy Court determination, at this time.
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



In connection with the process of negotiating a plan or plans of reorganization, or other resolution of the Chapter 11 Cases by the Bankruptcy Court, a number of interested constituencies, including the
representatives of the pre-petition and future asbestos claimants and other pre-petition creditors, have



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OWENS CORNING AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



10. CONTINGENT LIABILITIES AND OTHER MATTERS (continued)



developed or will develop analyses of liability for both pre-petition and future asbestos
claims. Owens Corning and Fibreboard have also developed their own analyses in connection with the Chapter 11 Cases. Such analyses by the Debtors and other interested constituencies are 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. In this regard, in October 2002, Owens Corning and Fibreboard completed analyses of liability for pre-petition and future asbestos claims, which, as to future
asbestos claims, were prepared by an outside consultant experienced in estimating asbestos-related claims in asbestos-related bankruptcies. These analyses indicate net present values for pre-petition and future asbestos claims of Owens Corning and
Fibreboard combined of approximately $5.874 billion, if NSP settlement values are assumed, and $8.547 billion, if 5-year historical settlement values for Owens Corning and Fibreboard, respectively, are used. Based upon these analyses and the
information then available from Owens Cornings discussions and negotiations with the various creditor constituencies concerning their relative positions on the terms of an acceptable plan of reorganization, Owens Corning decided, in connection
with its financial statements for the third quarter of 2002, to increase its and Fibreboards aggregate asbestos-related reserve to the lower of the two net present value numbers indicated by Owens Cornings and Fibreboards analyses.
Consequently, Owens Corning increased its reserves through charges to income for the three-month period ended September 30, 2002 of $1.381 billion for Owens Corning asbestos-related liabilities and $975 million for Fibreboard asbestos-related
liabilities, for an aggregate charge of $2.356 billion. In addition, since the reserve for Fibreboard asbestos-related liabilities exceeds the funds held in the Fibreboard Settlement Trust, the residual amount payable to charity under the terms of
the Trust (see Note 11 to the Consolidated Financial Statements) was reduced to zero as of September 30, 2002.



Owens Corning notes that, as part of the District Courts order scheduling the estimation hearing for January 13, 2005, the Court ordered that all parties intending to present expert testimony at such hearing
must file any expert reports by October 15, 2005. In response, in addition to the analyses of liability prepared on behalf of Owens Corning and Fibreboard (described above), asbestos liability estimates were filed with the District Court on behalf
of various interested parties, including the Official Committee of Asbestos Claimants, the Legal Representative for the class of future asbestos claimants, and the holders of the debt under the Pre-Petition Credit Facility. The net present values of
the aggregate asbestos liabilities estimated in such filings range from approximately $2.2 billion to approximately $11.1 billion for Owens Corning, and up to approximately $7.5 billion for Fibreboard.



Owens Corning notes that the amounts estimated in the above analyses of asbestos liabilities
vary substantially from one another, and certain of them vary substantially from the amounts of Owens Cornings and Fibreboards respective asbestos reserves. Owens Corning believes that these variances occur for a number of reasons.
First, such analyses generally do not involve the same type of estimation process required in connection with the preparation of financial statements under generally accepted accounting principles. In general, such accounting principles require
accruals with respect to contingent liabilities (including asbestos liabilities) only to the extent that such liabilities are both probable and reasonably estimable. With respect to such liabilities that are probable as to which a reasonable
estimate can be made only in terms of a range (with no point within the range determined to be more probable than any other point in such range), such accounting principles require only the accrual of the amount representing the low point in such
range. In contrast, analyses prepared by interested constituencies in



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OWENS CORNING AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



10. CONTINGENT LIABILITIES AND OTHER MATTERS (continued)



asbestos-related bankruptcy cases (including those developed by Owens Corning and
Fibreboard) customarily cover potential liabilities over a 50-year period (at the end of which it is anticipated that potential asbestos claimants would in any event have died as a result of other non-asbestos-related causes). Owens Corning believes
that any such analyses, and any assumptions utilized in the preparation of such analyses, are inherently speculative for a number of reasons, including the variables and uncertainties described in this Note. Moreover, because such analyses are
prepared solely for use in the negotiation of a plan of reorganization or otherwise resolving the Chapter 11 Cases, they naturally reflect the respective interests of the different constituencies putting them forward. Certain constituencies, for
example, may have an interest in presenting an analysis that estimates such liability at the highest level that can arguably be justified; others may have an interest in estimating such liability at the lowest possible level; while others may have
an interest in estimating such liability at a point between the two extremes, in an effort to achieve consensus in the negotiation of the plan of reorganization or otherwise facilitate resolution of the Chapter 11 Cases. In addition, interested
constituencies in Owens Cornings bankruptcy proceedings may also take into account the implications of any such analyses prepared for use in Owens Cornings bankruptcy proceedings on their position in one or more of the other
asbestos-related bankruptcy cases pending in the District of Delaware or elsewhere.



As noted above and in Note 1 to the Consolidated Financial Statements, the Debtors, together with the Official Committee of Asbestos Claimants and the Legal Representative for the class of future asbestos claimants, filed on October 24,
2003 a proposed fourth amended joint plan of reorganization for the Debtors and expect to file a proposed fifth amended joint plan of reorganization reflecting the terms of the Agreement in Principle discussed in Note 1 to the Consolidated Financial
Statements. The Plan provides that liability for current and future asbestos personal injury claims against Owens Corning and Fibreboard would be determined by the Bankruptcy Court as part of the confirmation hearing on the Plan. The Official
Committee of Asbestos Claimants and the Legal Representative for the class of future asbestos claimants have reserved the right to withdraw support of the Plan if such liability is determined to be less than $16 billion in the aggregate. It is
therefore anticipated that the estimated aggregate value of current and future asbestos personal injury claims will ultimately be determined as a result of negotiations involving the Official Committee of Asbestos Claimants, the Legal Representative
for the class of future asbestos claimants and other interested constituencies or, if necessary, by the Bankruptcy Court, including through the estimation hearing scheduled for January 13, 2005. It is not possible to predict the outcome of such
negotiations or court determination at this time. The ultimate determination of such liabilities will take into account numerous factors not present in the Companys pre-petition environment. Such factors include the claims of competing
creditor groups as to the appropriate treatment of their allowed claims in the plan or plans of reorganization, the size of the total asbestos liability, the total number of present asbestos claims allowed, and the total amount of future asbestos
claims allowed.



At September 30, 2004, the approximate balances of the
components of Owens Cornings asbestos-related reserve were:



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



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



10. CONTINGENT LIABILITIES AND OTHER MATTERS (continued)



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



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



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



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



As previously disclosed, on May 22, 2003, the United States Senate introduced proposed legislation (S 1125, also known as the Fairness in
Asbestos Injury Resolution Act of 2003). On April 7, 2004, the United States Senate introduced proposed substitute legislation (S 2290, also known as the Fairness in Asbestos Injury Resolution Act of 2004). References in the following discussion to
the FAIR Act refer to each Bill separately.



If enacted into law,
the FAIR Act would establish an administrative claims resolution structure through which all asbestos personal injury claims would be channeled and reviewed. The FAIR Act would also establish a national trust fund, funded through mandated
contributions from defendant companies, insurance companies and existing trusts, that would be the source of compensation of all approved claims. Under the present terms of the proposed FAIR Act, companies like Owens Corning and Fibreboard, that
have filed for bankruptcy but have not yet emerged through a confirmed plan of reorganization, would be included as participants in the resolution structure.



The fate of the FAIR Act remains uncertain, and Owens Corning is unable to make any prediction as to whether the FAIR Act will be enacted or, if it is enacted, what its
final form would be or what the effect, if any, would be on Owens Corning and Fibreboard or their plan or plans of reorganization. If Congressional action on the FAIR Act is not completed prior to the adjournment of the current Congress (expected
shortly), the legislation will lapse and similar legislation will be considered in the next Congress only if newly introduced. The provisions of any legislation ultimately enacted may have a material effect on the amount of liability that Owens
Corning and Fibreboard ultimately have for asbestos-related claims, which could be more or less than the amounts reserved for in Owens Cornings financial statements.



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



10. CONTINGENT LIABILITIES AND OTHER MATTERS (continued)



ITEM B. - FIBREBOARD (EXCLUDING OWENS CORNING)



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



As discussed in Item A above and under the heading Reserve below,
the Debtors (including Fibreboard), together with the Official Committee of Asbestos Claimants and the Legal Representative for the class of future asbestos claimants, filed on October 24, 2003 a proposed fourth amended joint plan of reorganization
for the Debtors (including Fibreboard) and expect to file a proposed fifth amended joint plan of reorganization reflecting the terms of the Agreement in Principle discussed in Note 1 to the Consolidated Financial Statements. Ultimately, as described
more fully under the heading Reserve below, it is anticipated that Fibreboards (and Owens Cornings) total liability for asbestos claims will be finally determined after a lengthy period of negotiations and, if necessary, by
the Bankruptcy Court, including through the estimation hearing scheduled for January 13, 2005, taking into account numerous factors not present in the Companys pre-petition environment. Such factors include the claims of competing creditor
groups as to the appropriate treatment of their allowed claims in the plan or plans of reorganization, the size of the total asbestos liability, the total number of present asbestos claims allowed, and the total amount of future asbestos claims
allowed.



National Settlement Program Claims



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



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



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



10. CONTINGENT LIABILITIES AND OTHER MATTERS (continued)



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



Non-NSP Claims



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



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



Insurance Settlement



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



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



As of September 30, 2004, the remaining Insurance Settlement funds were held in and invested by the Fibreboard Settlement Trust. As of that
date, $1.286 billion was held in the Fibreboard Settlement Trust and $127 million was held in Undistributed Administrative Deposits in respect of Fibreboard claims. On an ongoing basis, the funds held in the Fibreboard Settlement Trust will be
subject to investment earnings/losses and will be reduced if and as applied to satisfy asbestos-related liabilities. Under the terms of the Fibreboard Settlement Trust, any of such assets that ultimately are not used to fund Fibreboards
asbestos-related liabilities must be distributed to charity. However, since the reserve for Fibreboard asbestos-related liabilities exceeds the funds held in the Fibreboard Settlement Trust, the residual amount payable to charity under the terms of
the Trust (see Note 11 to the Consolidated Financial Statements) was reduced to zero as of September 30, 2002.



Funds held in the Fibreboard Settlement Trust and Fibreboards Undistributed Administrative Deposits are reflected on Owens Cornings consolidated balance sheet as restricted assets. At September 30, 2004,



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



10. CONTINGENT LIABILITIES AND OTHER MATTERS (continued)



these assets were reflected as non-current assets, under the category Restricted cash,
securities and otherFibreboard. See Note 11 to the Consolidated Financial Statements for additional information concerning the Fibreboard Settlement Trust.



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



Asbestos-Related Payments



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



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



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



Reserve



Owens Corning estimates a
reserve for Fibreboard in accordance with generally accepted accounting principles to reflect asbestos-related liabilities. As described in Item A above, this reserve was increased in the third quarter of 2002 through a charge to income of $975
million. As of September 30, 2004, a reserve of approximately $2.3 billion in respect of these asbestos-related liabilities was one of the items included in Owens Cornings consolidated balance sheet under the category Liabilities Subject
to Compromise. For periods prior to the Petition Date, they were reflected as current or other liabilities (depending on the period in which payment was expected) under the category Asbestos-related liabilitiesFibreboard.



As noted in Item A above as to Owens Corning, the estimate of
Fibreboards liabilities for pending and expected future asbestos claims is subject to considerable uncertainty because such liabilities are influenced by numerous variables that are inherently difficult to predict, and such uncertainties
significantly increased as a result of the Filing, including those set forth in Item A above. In addition, as noted above, the Debtors (including Fibreboard), together with the Official Committee of Asbestos Claimants and the Legal Representative
for the class of future asbestos claimants, filed on October 24,



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



10. CONTINGENT LIABILITIES AND OTHER MATTERS (continued)



2003 a proposed fourth amended joint plan of reorganization for the Debtors (including
Fibreboard) and expect to file a proposed fifth amended joint plan of reorganization reflecting the terms of the Agreement in Principle discussed in Note 1 to the Consolidated Financial Statements. The Plan provides that liability for current and
future asbestos personal injury claims against Owens Corning and Fibreboard would be determined by the Bankruptcy Court as part of the confirmation hearing on the Plan. The Official Committee of Asbestos Claimants and the Legal Representative for
the class of future asbestos claimants have reserved the right to withdraw support of the Plan if such liability is determined to be less than $16 billion in the aggregate. It is therefore anticipated that the estimated aggregate value of current
and future asbestos personal injury claims will ultimately be determined as a result of negotiations involving the Official Committee of Asbestos Claimants, the Legal Representative of the class of future asbestos claimants and other interested
constituencies or, if necessary, by the Bankruptcy Court, including through the estimation hearing scheduled for January 13, 2005. It is not possible to predict the outcome of such negotiations or court determination at this time. The ultimate
determination of such liabilities will take into account numerous factors not present in the Companys pre-petition environment. Such factors include the claims of competing creditor groups as to the appropriate treatment of their allowed
claims in the plan or plans of reorganization, the size of the total asbestos liability, the total number of present asbestos claims allowed, and the total amount of future asbestos claims allowed. In light of the above, at this time Owens Corning
is unable to predict what the treatment of funds held in the Fibreboard Settlement Trust and in Undistributed Administrative Deposits in respect of Fibreboard claims will be under the terms of any plan or plans of reorganization ultimately
confirmed.



At September 30, 2004, the approximate balances of the components
of the Fibreboard asbestos-related reserve were:



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



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



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



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



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



10. CONTINGENT LIABILITIES AND OTHER MATTERS (continued)



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



As noted in Item A above, on May 22, 2003, the United States Senate introduced proposed legislation (S 1125, also known as the Fairness in Asbestos Injury Resolution Act of 2003). On April 7, 2004, the United States Senate introduced
proposed substitute legislation (S 2290, also known as the Fairness in Asbestos Injury Resolution Act of 2004). References in the following discussion to the FAIR Act refer to each Bill separately.



If enacted into law, the FAIR Act would establish an administrative claims resolution
structure through which all asbestos personal injury claims would be channeled and reviewed. The FAIR Act would also establish a national trust fund, funded through mandated contributions from defendant companies, insurance companies and existing
trusts, that would be the source of compensation of all approved claims. Under the present terms of the FAIR Act, companies like Owens Corning and Fibreboard, that have filed for bankruptcy but have not yet emerged through a confirmed plan of
reorganization, would be included as participants in the resolution structure.



The fate of the FAIR Act remains uncertain, and Owens Corning is unable to make any prediction as to whether the FAIR Act will be enacted or, if enacted, what its final form would be or what the effect, if any, would be on Owens Corning and
Fibreboard or their plan or plans of reorganization. If Congressional action on the FAIR Act is not completed prior to the adjournment of the current Congress (expected shortly), the legislation will lapse and similar legislation will be considered
in the next Congress only if newly introduced. The provisions of any legislation ultimately enacted may have a material effect on the amount of liability that Owens Corning and Fibreboard ultimately have for asbestos-related claims, which could be
more or less than the amounts reserved for in Owens Cornings financial statements.



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



10. CONTINGENT LIABILITIES AND OTHER MATTERS (continued)



ITEM C. - OTHER ASBESTOS-RELATED MATTERS



Other Asbestos-Related Litigation



As previously reported, the Company believes that it has spent significant amounts to
resolve claims of asbestos claimants whose injuries were caused or exacerbated by cigarette smoking. As described below, Owens Corning and Fibreboard instituted litigation against tobacco companies 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.



In October 1998, the Circuit Court for Jefferson County, Mississippi granted leave to file an amended complaint in an existing action to add claims by Owens Corning
against seven tobacco companies and several other tobacco industry defendants. On June 17, 2001, the Jefferson court entered an order dismissing Owens Cornings case in response to the defendants motion for summary judgment on the basis
that Owens Cornings injuries were indirect and thus too remote under Mississippi law to allow recovery. The Supreme Court of Mississippi issued an opinion upholding the dismissal on March 18, 2004.



In addition to the Mississippi lawsuit, a lawsuit brought in December 1997 by Owens Corning
and Fibreboard is pending in the Superior Court for Alameda County, California against the same tobacco companies. In August 2001, the defendants filed motions to dismiss Owens Cornings and Fibreboards claims on the basis of the decision
in the Mississippi lawsuit as well as California law. As the result of a hearing on these motions on November 20, 2001, the California court denied the motion to dismiss Fibreboards claims on the basis of the decision in the Mississippi
lawsuit and otherwise stayed the proceeding pending the outcome of the Mississippi suit. The proceeding remains stayed. There can be no assurance that this litigation will go to trial or be successful.



Insurance



During the third quarter of 2004, Owens Corning received a payment of approximately $3 million in respect of a previous settlement with a
bankrupt insurance carrier concerning coverage for asbestos-related personal injury claims. Owens Corning received a payment of approximately $4 million in respect of the same settlement during the second quarter of 2003. These amounts were recorded
as pre-tax income in the respective period of receipt.



As of September 30,
2004, Owens Cornings consolidated financial statements reflect $4 million in unexhausted insurance coverage (net of deductibles and self-insured retentions) under its liability insurance policies applicable to asbestos personal injury claims.
This amount represented unconfirmed potential non-products coverage with excess level insurance carriers, as to which Owens Corning had estimated its probable recoveries.



Owens Corning also has other unconfirmed potential non-products coverage with excess level carriers. Owens Corning is actively pursuing
non-products insurance recoveries under these policies. In October, 2001, Owens Corning filed a lawsuit in Lucas County, Ohio, against ten excess level carriers for declaratory relief and damages for failure to make payments under its non-products
insurance coverage.



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OWENS CORNING AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



10. CONTINGENT LIABILITIES AND OTHER MATTERS (continued)



Owens Corning has reached a final settlement with one of such carriers and a tentative
settlement with one other of such carriers. The amount and timing of recoveries from excess level policies with the remaining carriers will depend on the outcome of litigation or other proceedings, possible settlements of those proceedings, or other
negotiations.



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



Other Matters



SECURITIES AND CERTAIN OTHER LITIGATION



On or
about April 30, 2001, certain of the Companys current and former directors and officers, as well as certain underwriters, were named as defendants in a lawsuit captioned John Hancock Life Insurance Company, et al. v. Goldman, Sachs & Co.,
et al. in the United States District Court for the District of Massachusetts. An amended complaint was filed by the plaintiffs on or about July 5, 2001. Owens Corning is not named in the lawsuit. The suit purports to be a securities class action on
behalf of purchasers of certain unsecured debt securities of Owens Corning in offerings occurring on or about April 30, 1998 and July 23, 1998. The complaint alleges that the registration statements pursuant to which the offerings were made
contained untrue and misleading statements of material fact and omitted to state material facts which were required to be stated therein and which were necessary to make the statements therein not misleading, in violation of sections 11, 12(a)(2)
and 15 of the Securities Act of 1933. The amended complaint seeks an unspecified amount of damages or, where appropriate, rescission of the plaintiffs purchases. The defendants filed a motion to dismiss the action on November 20, 2001. A
hearing was held on this motion on April 11, 2002, and the Court issued a decision denying the motion on August 26, 2002. On March 9, 2004, the Court granted class certification as to those claims relating to written representations but denied
certification as to claims relating to alleged oral representations. Owens Corning believes that the claim is without merit.



On or about January 27, 2003, certain of the Companys current and former directors and officers were named as defendants in a lawsuit captioned Robert Greenburg, et
al. v. Glen Hiner, et al. in the United States District Court for the Northern District of Ohio, Western Division. Subsequent to January 27, 2003, three substantially similar actions, with named plaintiffs Nicholas Radosevich, Howard E. Leppla, and
William Benanchietti, respectively, were filed against the same defendants in the same court. On July 30, 2003, the court consolidated the four cases under the caption Robert Greenburg, et al. v. Glen Hiner, et al., and appointed lead plaintiffs JKF
Investment Co., Icarus Trading, Inc. and HGK Asset Management. An amended complaint was filed by the plaintiffs on or about September 8, 2003. Owens Corning is not named in the lawsuit. The suit purports to be a class action for securities fraud
under sections 10(b) and 20(a) of the Securities Exchange Act of 1934, on behalf of a class comprised of persons who purchased stock of Owens Corning during the period from September 20, 1999, through



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



10. CONTINGENT LIABILITIES AND OTHER MATTERS (continued)



October 4, 2000. The complaint seeks an unspecified amount of damages and/or, where
appropriate, rescission. The defendants have filed a motion to dismiss the action, and the matter is fully briefed. Owens Corning believes that the claim is without merit.



On or about September 2, 2003, certain of the Companys current and former directors and officers were named as defendants in a lawsuit
captioned Kensington International Limited, et al. v. Glen Hiner, et al. in the Supreme Court of the State of New York, County of New York. Owens Corning is not named in the lawsuit. The suit, which was brought by Kensington International Limited
and Springfield Associates, LLC, two assignees of lenders under the Pre-Petition Credit Facility, alleges causes of action (1) against all defendants for breach of fiduciary duty, and (2) against certain defendants for fraud in connection with
certain loans made under the Pre-Petition Credit Facility. The complaint seeks an unspecified amount of damages. On October 6, 2003, the Company filed in the USBC a Complaint for Temporary Restraining Order, Preliminary Injunction and Enforcement of
the Automatic Stay, requesting a preliminary injunction against further prosecution of the suit until after confirmation of a plan of reorganization for the Company. By order of the USBC, the New York action has been stayed until November 15, 2004.
Owens Corning believes that the claim is without merit.



Owens Corning holds an
indirect ownership interest in ServiceLane.com, Inc. (ServiceLane), which is in Chapter 7 bankruptcy proceedings in the United States Bankruptcy Court for the Northern District of Texas, Dallas Division, Case No. 01-36044-HCA-7
(Abrahamson, B.J.). Two former employees of ServiceLane (the SL Plaintiffs) have filed proofs of claim (Claims No. 8651 and 8622) against Owens Corning in the Chapter 11 Cases, alleging fraud and misrepresentation. Additionally, on July
24, 2003, the SL Plaintiffs, along with ServiceLanes Chapter 7 trustee, brought suit against two Owens Corning officers, who also were directors of ServiceLane, in the United States District Court for the Northern District of Ohio, Western
Division, under the caption ServiceLane.com, Inc., et al. v. Stein, et al. In the complaint, ServiceLane alleged a breach of fiduciary duty against both officers and the SL Plaintiffs alleged fraud against one officer. Owens Corning was not named in
the lawsuit. On September 10, 2003, Owens Corning filed in the USBC an objection to the proofs of claim filed by the SL Plaintiffs as well as a counterclaim seeking declaratory relief in the form of a declaration that neither Owens Corning nor the
two officers harmed the SL Plaintiffs. On October 1, 2003, the two officers filed a similar adversary proceeding in the USBC. In October 2003, the SL Plaintiffs filed a motion to dismiss Owens Cornings counterclaim and, in November 2003, the
SL Plaintiffs filed a motion to dismiss the adversary proceeding by the two officers. Hearings on both motions to dismiss were held on January 23, 2004. The USBC denied the motion to dismiss Owens Cornings counterclaim and deferred action on
the other motion to dismiss. Subsequently, the SL Plaintiffs and the two officers agreed to a dismissal of the Ohio action and a refiling in the USBC. As a result, all such proceedings are now pending in the USBC. On March 16 2004, the two officers
filed a motion to dismiss the proceedings. The USBC held a hearing on such motion on July 19, 2004. Owens Corning believes that the claims of the SL Plaintiffs and the claims of ServiceLanes Chapter 7 trustee are without merit.



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



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



10. CONTINGENT LIABILITIES AND OTHER MATTERS (continued)



GENERAL BAR DATE CLAIMS



In connection with the Chapter 11 Cases, the Bankruptcy Court set April 15, 2002 as the last
date by which holders of certain pre-petition claims against the Debtors must file their claims (the General Bar Date). The General Bar Date does not apply to asbestos-related personal injury claims and asbestos-related wrongful death
claims (other than claims for contribution, indemnity, reimbursement, or subrogation). Approximately 25,000 proofs of claim (including the claims described below under the headings PBGC Claim, Tax Claim and Specialty
Roofing Claim), totaling approximately $16.5 billion, alleging a right to payment from a Debtor were filed with the Bankruptcy Court in response to the General Bar Date. For further information concerning these claims, see Note 1 to the
Consolidated Financial Statements, under the heading General Bar Date.



PBGC CLAIM



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



TAX CLAIM



Owens Cornings federal income tax returns typically are audited by the Internal
Revenue Service (IRS) in multi-year audit cycles. The audit for the years 1992-1995 was completed in late 2000. Due to the Filing, the IRS also accelerated and completed the audit for the years 1996-1999 by March of 2001. As the result
of these audits and unresolved issues from prior audit cycles, the IRS has asserted claims for approximately $390 million in income taxes plus interest of approximately $175 million. As the result of settlement negotiations, the Company and the IRS
have reached an agreement in principle to settle such claims in return for total settlement payments by the Company of approximately $99 million. The agreed settlement payments are in line with the Companys tax reserves (described below) for
such claims. The settlement is subject to approval by the Bankruptcy Court and the Congressional Joint Committee on Taxation.



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
plus interest, covering a tax refund received by Owens Corning for such year.



As described in Note 1 to the Consolidated Financial Statements, under the heading General Bar Date, the United States Department of Treasury has filed proofs of claim, totaling approximately $538 million, in connection with
these tax claims. Upon finalization of the agreement in principle described above, the filed proofs of claim will be amended appropriately.



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



10. CONTINGENT LIABILITIES AND OTHER MATTERS (continued)



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.



SPECIALTY ROOFING CLAIM



Three purchasers of a specialty roofing product have filed proofs of claim in the aggregate amount of $275 million on behalf of themselves individually and on behalf of a
purported class of pre-petition claimants with respect to such product, and have moved the USBC to certify such class. A hearing on the pre-petition class certification has been set for May 2005. In addition, Owens Corning has been named a defendant
in a purported class action, filed in the Superior Court for the County of San Joaquin, California, on behalf of post-petition claimants with respect to such product. Owens Corning has removed the California proceeding to the United States
Bankruptcy Court for the Eastern District of California (CBC) and has moved the CBC to transfer the proceeding to the USBC. The plaintiffs have moved the CBC to remand the proceeding back to the Superior Court or to abstain from
exercising jurisdiction. The motions to transfer or remand/abstain are scheduled to be heard by the CBC on November 9, 2004. Based upon its historic experience with servicing its warranty program for such specialty roofing product, Owens Corning
does not believe that either of the two proceedings is meritorious.



AVOIDANCE ACTIONS



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



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



The Debtors have executed tolling agreements with all 12 present and former officers and the director, as well as with certain other parties identified as having received potentially avoidable transfers. After
initially being covered by a tolling agreement, the claim against the joint venture affiliate was subsequently released as part of a Bankruptcy Court approved settlement with the affiliate, entered into in connection with the affiliates
separate bankruptcy proceedings.



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



10. CONTINGENT LIABILITIES AND OTHER MATTERS (continued)



The adversary actions were commenced against various other defendants seeking, among other
things, (a) avoidance of certain guarantees and certain preferential payments made in connection with Owens Cornings Pre-Petition Credit Facility (the Pre-Petition Credit Facility Action); (b) the return of up to approximately $515
million paid by the Company to shareholders of Fibreboard in connection with the Companys purchase of Fibreboard in 1997 (the FBD Shareholder Action); (c) the return of up to approximately $61.8 million paid by the Company to
shareholders in dividends in the period 1996 through 2000 (the Dividend Action); and (d) the return of approximately $133 million paid by the Company to Bank of America Corp. in connection with Owens Cornings purchase of Fibreboard
in 1997. Both the FBD Shareholder Action and the Dividend Action are defendant class actions. Certain present or former officers or directors of the Company may be members of either or both defendant classes. Certain holders of Owens Corning debt
securities have filed a Complaint in Intervention in connection with the Pre-Petition Credit Facility Action, seeking to assert securities fraud related claims against five subsidiaries of Owens Corning that issued guarantees in connection with the
Pre-Petition Credit Facility. The Company has opposed such intervention. It is expected that such matter will be determined by the Bankruptcy Court in conjunction with the Pre-Petition Credit Facility Action.



Separately, and at the request of the Debtors Official Creditors Committee and
the direction of the Bankruptcy Court, the Debtors either obtained tolling agreements from, or filed actions against, approximately 115 law firms that entered into NSP or non-NSP agreements with the Debtors on behalf of claimants asserting
asbestos-related personal injury or wrongful death claims. Lawsuits were brought initially against the 11 law firms that did not sign tolling agreements, seeking two forms of relief: (a) first, a declaratory judgment as to whether payments made, or
obligations incurred, under NSP and non-NSP agreements were in exchange for reasonably equivalent value; and (b) second, in the event reasonably equivalent value was not received, the recovery or avoidance of payments made and obligations incurred
under the relevant NSP and non-NSP agreements pursuant to applicable state and federal fraudulent conveyance law. On or before September 29, 2003, similar lawsuits were brought against 5 additional law firms whose tolling agreements were about to
expire. The Official Creditors Committee was named as a defendant in all such lawsuits, solely with respect to the declaratory relief sought. During the first quarter of 2004, the lawsuit against one of the law firms was dismissed with the
consent of the Official Creditors Committee and Bankruptcy Court approval.



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



LARDOISE, FRANCE MANUFACTURING FACILITY



In the fourth quarter of 2003, the Company experienced a flood at its LArdoise, France
manufacturing facility. This facility is insured for property damage and business interruption losses relating to such events, subject to a $5 million deductible (which was expensed in 2003) and applicable policy limits. The



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OWENS CORNING AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



10. CONTINGENT LIABILITIES AND OTHER MATTERS (continued)



Company estimates it has incurred, or will incur, a total of $50 to $60 million of property
damage costs and business interruption losses associated with the LArdoise flood, which the Company believes will be substantially covered by insurance. In connection with the flood, the Company has recorded approximately $14 million in
receivables for property damage costs, offset by a $25 million insurance advance. In addition, approximately $11 million of business interruption costs have been expensed and $19 million of capital expenditures have been recorded. Should the
expected insurance recoveries not be received, they could have a material adverse impact on the results of the Composite Solutions business. Also, the timing of any recoveries may result in expenses being taken and capital expenditures recorded in
periods before the insurance receipts are recorded.



11. FIBREBOARD SETTLEMENT TRUST



Under the
Insurance Settlement described in Note 10 to the Consolidated Financial Statements, two of Fibreboards insurers provided $1.873 billion during the fourth quarter of 1999 to fund the costs of resolving pending and future Fibreboard
asbestos-related liabilities. As of September 30, 2004, the remaining Insurance Settlement funds were held in and invested by the Fibreboard Settlement Trust (the Trust). On an ongoing basis, the funds held in the Trust will be subject
to investment earnings/losses and will be reduced if and as applied to satisfy Fibreboard asbestos-related liabilities. Under the terms of the Trust, any Trust assets that ultimately are not used to fund Fibreboards asbestos-related
liabilities must be distributed to charity. Based on currently available information, Owens Corning does not believe that any such assets will remain for distribution at the conclusion of the Chapter 11 Cases.



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



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



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, 2004, these assets were reflected as non-current
assets, under the category Restricted cash, securities and other - Fibreboard. Owens Corning estimates a reserve for Fibreboard in accordance with generally accepted accounting principles to reflect asbestos-related liabilities (see Note
10, Item B, to the Consolidated Financial Statements). As of September 30, 2004, these liabilities were one of the items included in Owens Cornings consolidated balance sheet under the category Liabilities Subject to Compromise.
For periods prior to the Petition Date, they were reflected as current or other liabilities (depending on the period in which payment was expected) under the category Asbestos-related liabilities - Fibreboard. At September 30, 2004, the
Consolidated Financial Statements reflect Fibreboards reserve for asbestos litigation claims at $2.309 billion.



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OWENS CORNING AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



11. FIBREBOARD SETTLEMENT TRUST (continued)



For accounting purposes, the Trust Assets are classified as trading securities and are reported in the Consolidated Financial
Statements in accordance with Statement of Financial Accounting Standards No. 115, Accounting for Certain Investments in Debt and Equity Securities. Accordingly, marketable securities classified as trading securities are recorded at fair
market value. Unrealized increase/decrease in fair market value is reflected as an increase/decrease in the carrying amount of such assets on the Consolidated Balance Sheet as well as a decrease/increase in Chapter 11 related reorganization items on
the Consolidated Statement of Income. Earnings and realized gains/losses are reflected as an increase/decrease in the carrying amount of such assets on the Consolidated Balance Sheet as well as a decrease/increase in Chapter 11 related
reorganization items on the Consolidated Statement of Income. Cost for purposes of computing realized gains/losses is determined using the specific identification method.



Through the third quarter of 2002, the residual obligation to charity, included in liabilities subject to compromise on the Consolidated
Balance Sheet, increased/decreased with the related decrease/increase to other expense/income on the Consolidated Statement of Income. As of September 30, 2002, the residual obligation to charity was reclassified to Fibreboards reserve for
asbestos litigation claims as the asbestos-related liabilities exceeded the Trust Assets. Consequently, for periods subsequent to the third quarter of 2002, no amounts have been recorded to the residual obligation to charity, and earnings/losses on
Trust Assets have been recorded as Chapter 11 related reorganization items.



Results for the Periods Ended September 30, 2004 and 2003



The
Trust Assets generated interest/dividend earnings of approximately $14 million during the third quarters of 2004 and 2003 (approximately $43 million for the first nine months of both years). These amounts were recorded in Chapter 11 related
reorganization items in the Consolidated Statement of Income.



During the third
quarters of 2004 and 2003, the fair market value adjustment for those securities designated as trading securities resulted in an unrealized gain of approximately $10 million and an unrealized loss of approximately $3 million, respectively, recorded
as a change in the carrying amount of the assets on the Consolidated Balance Sheet. For the nine months ended September 30, 2004 and 2003, the Company recorded unrealized losses of approximately $17 million and $9 million, respectively. These
adjustments were recorded as Chapter 11 related reorganization items on the Consolidated Statement of Income.



As a result of the Filing, there were no payments for asbestos litigation claims from the Trust during the quarterly or nine month periods ended September 30, 2004 or 2003. No payments were made for taxes during the
quarterly or nine month periods ended September 30, 2004 or 2003. The sale of securities resulted in realized losses of approximately $3 million during the third quarters of 2004 and 2003 (a loss of approximately $8 million and $5 million,
respectively, during the first nine months of such years). Realized gains or losses from the sale of securities are reflected on the Companys financial statements in the same manner as actual returns on Trust Assets, described above.



At September 30, 2004, the fair value of Trust Assets and Administrative
Deposits was $1.413 billion, which was comprised of Trust Assets of $1.286 billion of marketable securities and Administrative Deposits of $127 million.



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OWENS CORNING AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



11. FIBREBOARD SETTLEMENT TRUST (continued)



The following table summarizes Trust and Administrative Deposits activity for the nine months ended September 30, 2004:



|                                                               |  |                  |       |   |                          |   |                 |  |   |               |   |  |                |    |   |  |   |       |  
|-------------------------------------------------------------- |  | ---------------- | ----- | - | ------------------------ | - | --------------- |  | - | ------------- | - |  | -------------- | -- | - |  | - | ----- | -
|                                                               |  | Balance 12/31/03 |       |   | Interest and Dividends   |   | Unrealized Loss |  |   | Realized Loss |   |  | Balance9/30/04 |   
|                                                               |  |                  |       |   | (In millions of dollars) |   |                 |  |  
|Assets                                                         |  |                  |       |   |                          |   |                 |  |   |               |   |  |                |    |   |  |   |       |  
|Trust Assets:                                                  |  |                  |       |   |                          |   |                 |  |   |               |   |  |                |    |   |  |   |       |  
|Marketable securities - trading                                |  | $                | 1,268 |   |                          | $ | 43              |  | $ | (17           | ) |  | $              | (8 | ) |  | $ | 1,286 |  
|Administrative Deposits                                        |  |                  | 127   |   |                          |   |                |  |   |              |   |  |                |   |   |  |   | 127   |  
|                                                               |  |                  |       |   |                          |   |                 |  |   |               |   |  |                |    |   |  |   |       |  
|Total assets                                                   |  | $                | 1,395 |   |                          | $ | 43              |  | $ | (17           | ) |  | $              | (8 | ) |  | $ | 1,413 |  
|                                                               |  |                  |       |   |                          |   |                 |  |   |               |   |  |                |    |   |  |   |       |  
|Liabilities                                                    |  |                  |       |   |                          |   |                 |  |   |               |   |  |                |    |   |  |   |       |  
|Accounts payable                                               |  | $                | 19    |   |                          | $ |                |  | $ |              |   |  | $              |   |   |  | $ | 19    |  
|Asbestos litigation claims                                     |  |                  | 2,309 |   |                          |   |                |  |   |              |   |  |                |   |   |  |   | 2,309 |  
|                                                               |  |                  |       |   |                          |   |                 |  |   |               |   |  |                |    |   |  |   |       |  
|Total Trust liabilities                                        |  |                  | 2,328 |   |                          |   |                |  |   |              |   |  |                |   |   |  |   | 2,328 |  
|Liabilities in excess of assets                                |  |                  | (933  | ) |                          |   | 43              |  |   | (17           | ) |  |                | (8 | ) |  |   | (915  | )
|                                                               |  |                  |       |   |                          |   |                 |  |   |               |   |  |                |    |   |  |   |       |  
|Total Trust liabilities net of liabilities in excess of assets |  | $                | 1,395 |   |                          | $ | 43              |  | $ | (17           | ) |  | $              | (8 | ) |  | $ | 1,413 |  
|                                                               |  |                  |       |   |                          |   |                 |  |   |               |   |  |                |    |   |  |   |       |  



12. STOCK COMPENSATION



The Company applies
Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation (SFAS No 123) and Statement of Financial Accounting Standards No. 148, Accounting for Stock-Based Compensation - Transition
and Disclosure - an amendment of FASB Statement No. 123 (SFAS No. 148) for disclosures of its stock based compensation plans. The Company applies Accounting Principles Board Opinion No. 25 and related Interpretations for expense
recognition as permitted by SFAS No. 123 and SFAS No. 148. The expenses recorded in the quarterly and nine month periods ended September 30, 2004 and 2003 were not material.



Had compensation cost for the Companys stock-based compensation plans been determined based on the fair value at the grant dates for
awards under those plans consistent with the method described in SFAS No. 123, the Companys net income and net income per share would have been adjusted to the pro forma amounts indicated below. The stock based compensation adjustments
recorded below are for stock based employee compensation expense determined under the fair value based method for all awards, net of related tax effects.



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OWENS CORNING AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



12. STOCK COMPENSATION (continued)



|                                           |  |                            |      |                                                     |                                |      |      |  |      |      |  |   |      |  
|------------------------------------------ |  | -------------------------- | ---- | --------------------------------------------------- | ------------------------------ | ---- | ---- |  | ---- | ---- |  | - | ---- | -
|                                           |  | Quarter EndedSeptember 30, |      |                                                     | Nine months endedSeptember 30, |     
|                                           |  | 2004                       |      | 2003                                                |                                |      | 2004 |  | 2003 |     
|                                           |  |                            |      | (In millions of dollars) (except per share amounts) |                                |      |     
|Net income, as reported                    |  | $                          | 94   |                                                     | $                              | 55   |      |  | $    | 132  |  | $ | 72   |  
|Total stock-based compensation adjustments |  |                            |     |                                                     |                                | (1   | )    |  |      |     |  |   | (2   | )
|                                           |  |                            |      |                                                     |                                |      |      |  |      |      |  |   |      |  
|Pro forma net income                       |  | $                          | 94   |                                                     | $                              | 54   |      |  | $    | 132  |  | $ | 70   |  
|                                           |  |                            |      |                                                     |                                |      |      |  |      |      |  |   |      |  
|Basic net income per share                 |  |                            |      |                                                     |                                |      |      |  |      |      |  |   |      |  
|As reported                                |  | $                          | 1.70 |                                                     | $                              | 0.99 |      |  | $    | 2.38 |  | $ | 1.30 |  
|Pro forma                                  |  |                            | 1.70 |                                                     |                                | 0.99 |      |  |      | 2.38 |  |   | 1.28 |  
|                                           |  |                            |      |                                                    
|Diluted net income per share               |  |                            |      |                                                     |                                |      |      |  |      |      |  |   |      |  
|As reported                                |  | $                          | 1.57 |                                                     | $                              | 0.92 |      |  | $    | 2.20 |  | $ | 1.20 |  
|Pro forma                                  |  |                            | 1.57 |                                                     |                                | 0.91 |      |  |      | 2.20 |  |   | 1.18 |  



13. EARNINGS PER SHARE



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



|                                                                                                                           |  |                            |        |                                |   |        |  |      |        |  |   |       
|-------------------------------------------------------------------------------------------------------------------------- |  | -------------------------- | ------ | ------------------------------ | - | ------ |  | ---- | ------ |  | - | ------
|                                                                                                                           |  | Quarter EndedSeptember 30, |        | Nine Months EndedSeptember 30,
|                                                                                                                           |  | 2004                       |        | 2003                           |   | 2004   |  | 2003
|Net income used for basic and diluted earnings per share (millions)                                                        |  | $                          | 94     |                                | $ | 55     |  | $    | 132    |  | $ | 72    
|                                                                                                                           |  |                            |        |                                |   |        |  |      |        |  |   |       
|Weighted-average number of shares outstanding used for basic earnings per share (thousands)                                |  |                            | 55,310 |                                |   | 55,224 |  |      | 55,306 |  |   | 55,166
|Non-vested restricted shares (thousands)                                                                                   |  |                            | 34     |                                |   | 75     |  |      | 38     |  |   | 99    
|Deferred awards (thousands)                                                                                                |  |                            | 24     |                                |   | 24     |  |      | 24     |  |   | 24    
|Shares from assumed conversion of preferred securities (thousands)                                                         |  |                            | 4,566  |                                |   | 4,566  |  |      | 4,566  |  |   | 4,566 
|                                                                                                                           |  |                            |        |                                |   |        |  |      |        |  |   |       
|Weighted-average number of shares outstanding and common equivalent shares used for diluted earnings per share (thousands) |  |                            | 59,934 |                                |   | 59,889 |  |      | 59,934 |  |   | 59,855
|                                                                                                                           |  |                            |        |                                |   |        |  |      |        |  |   |       



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OWENS CORNING AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



14. COMPREHENSIVE INCOME



The Companys
comprehensive income for the quarters ended September 30, 2004 and 2003 was $126 million and $57 million, respectively. Comprehensive income for the nine months ended September 30, 2004 and 2003 was $149 million and $117 million, respectively. The
Companys comprehensive income includes: (1) net income; (2) currency translation adjustments; (3) minimum pension liability adjustments; and (4) deferred gains and losses on certain hedging transactions to record at fair value.



15. INCOME TAXES



The Companys effective
tax rate was 43% for the third quarter of 2004, resulting in a 53% rate for the first nine months of 2004. The Company currently projects that its effective tax rate for the full year 2004 will be 51%, compared to 56% for the full year 2003. Based
on recent legislation and enforcement related to the deductibility of certain items for state tax purposes, the Company increased its valuation allowance by approximately $12 million in the second quarter of 2004. The effective tax rates for 2004
reflect the aforementioned item and reserves associated with the deductibility of Chapter 11 related reorganization expenses. The effective tax rate for 2003 reflects reserves associated with the deductibility of Chapter 11 related reorganization
expenses.



16. LEASES



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



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



17. RELEASE OF GUARANTEED SUBSIDIARY DEBT



Prior to the Filing, a consolidated European subsidiary of Owens Corning incurred debt to third parties pursuant to three financing transactions. Such debt was guaranteed by Owens Corning, and the proceeds of the transactions were loaned by
the subsidiary to Owens Corning. After the Filing, Owens Corning discontinued debt payments to the subsidiary on the intercompany loans. As this subsidiary has no assets other than the intercompany receivable, it was unable to make required payments
to the third party debt holders and is in default. During the third quarter of 2004, the Company finalized a settlement with certain holders of such third party debt whereby the holders released the non-Debtor subsidiary from all



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OWENS CORNING AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



17. RELEASE OF GUARANTEED SUBSIDIARY DEBT (continued)



obligations related to this debt, including $16 million of accrued post-petition interest,
and Owens Corning allowed the releasing debtholders various claims in its Chapter 11 proceedings with respect to its guarantees of such debt and its indebtedness to the subsidiary. Prior to this settlement, the guaranteed debt was recorded on the
Consolidated Balance Sheet as components of Short-term debt and Long-term debt  current portion, $32 million and $35 million, respectively.



As a result of this settlement, the Company reclassified the guaranteed debt to Liabilities subject to compromise on the
Consolidated Balance Sheet and recognized a $16 million gain on the release of accrued interest as a component of Interest expense, net on its Consolidated Statement of Income. Additionally, the components of Subject to
compromise in the Debtors-in-Possession Balance Sheet now reflect an increase in Debt and corresponding decrease in Payables to non-Debtors.



18. ACCOUNTING PRONOUNCEMENTS



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



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



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



In December 2002, the Financial Accounting Standards Board issued Financial Accounting Standards Board Interpretation No. 45, Guarantor ́s Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others - an interpretation of FASB Statements No. 5, 57, and 107 and rescission of FASB Interpretation No. 34. This Interpretation clarifies disclosures that



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OWENS CORNING AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



18. ACCOUNTING PRONOUNCEMENTS (continued)



are required to be made for certain guarantees at the time the guarantees are issued. It also clarifies that a guarantor is required to
recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee. Effective December 31, 2002, the Company adopted the disclosure requirements in this Interpretation, including those
relating to warranty obligations. Effective January 1, 2003, the Company adopted the initial recognition and initial measurement provisions of this Interpretation on a prospective basis for guarantees issued or modified after December 31, 2002. The
effect of adoption was not material to the Company, and the prospective effects of adoption are not expected to be material to the Company.



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



In December 2002, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 148, Accounting for Stock-Based Compensation -
Transition and Disclosure - an amendment of FASB Statement No. 123. Effective December 31, 2002, the Company adopted the amendments to Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation
(SFAS No. 123), provided in paragraphs 2(a)-2(e) of this Statement. Effective January 1, 2003, the Company adopted the amendment to SFAS No. 123 provided in paragraph 2(f) of this Statement, and the amendment to Opinion 28 provided in
paragraph 3. The effect of adoption was not material to the Company. Please see Note 12 to the Consolidated Financial Statements for additional information concerning Stock Compensation.



In April 2003, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 149, Amendment of
Statement 133 on Derivative Instruments and Hedging Activities. SFAS No. 149 amends and clarifies accounting for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities under
SFAS No. 133. The provisions of SFAS No. 149 are generally effective for contracts entered into or modified after June 30, 2003 and for hedging relationships designated after June 30, 2003. The Company adopted these provisions as of June 30, 2003.
The effect of adoption was not material to the Company, and the prospective effects of adoption are not expected to be material to the Company.



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



(All per share information discussed below is on a diluted basis. References in this Report to the Consolidated Financial Statements refer to the Consolidated
Financial Statements included in this Report.)



CAUTIONARY STATEMENT
CONCERNING FORWARD-LOOKING STATEMENTS



Our disclosure and analysis in this
report, including Managements Discussion and Analysis of Financial Condition and Results of Operations, contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Forward-looking statements present our current forecasts and estimates of future events. These statements do not strictly relate to historical or current results and can be identified by words such as
anticipate, believe, estimate, expect, intend, likely, may, plan, project, strategy, will, and other terms of similar
meaning or import in connection with any discussion of future operating, financial or other performance. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those
projected in the statements. Some of the important factors that may influence possible differences include:



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



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



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



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



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



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



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



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



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



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



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



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



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



| |  | issuance of new laws or regulations
| | - | -----------------------------------



OVERVIEW



Chapter 11 Proceedings



October
5, 2004 marked the fourth anniversary of the Companys filing under Chapter 11 to resolve our asbestos liability. Our strategy for managing the Chapter 11 process has been to steadily advance our case while attempting to facilitate a consensual
Plan of Reorganization supported by all of our creditors (Consensual Plan). A Consensual Plan would allow us to emerge from Chapter 11 earlier than our current track while still maximizing the value of our estate for all creditors. To
date, we have not been able to reach a Consensual Plan, but we remain committed to emerging as soon as possible even if it is through a non-consensual plan of reorganization.



In recent months, there have been several significant developments in our Chapter 11 proceedings. First, Judge Fullam, the Federal district
judge overseeing our case, issued a Memorandum and Order granting the Companys motion for substantive consolidation. Judge Fullams decision was consistent with the position that we have taken in our Plan of Reorganization. While the
Order left open the possibility that the claims of the holders of the Companys bank debt may be entitled to some priority, the holders of the Companys bank debt have filed a notice of appeal with the Third Circuit Court of Appeals. The
bank debt holders continue to believe that certain guarantees provided by subsidiaries of the Company



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



(including several that currently are not Debtors) should allow them to
receive a significantly higher recovery than other creditors. Until the issue is finally resolved, substantive consolidation is likely to continue to be a difficult issue in settlement discussions among our creditor groups. Judge Fullams
substantive consolidation ruling further required that all parties engage in settlement discussions, repeatedly if necessary. While we expect those settlement discussions to occur, we cannot predict their outcome or the impact that they
will have upon our case.



Another significant development in our case was that
Judge Fullam set an initial hearing date of January 13, 2005 for the estimation of the Companys asbestos liability. Determination of our total asbestos liability has been one of the most significant issues (along with substantive
consolidation) preventing us from reaching a Consensual Plan with our Creditors. The holders of our bank debt have filed a motion asking for the January 13, 2005 hearing to be delayed, arguing that they need more time to develop a factual basis to
argue that the Companys asbestos claims history should not be used to establish current and future liability. They contend that many of the claims paid by the Company were fraudulent and that they need additional time to analyze prior claims
files, including medical records and x-rays, to adequately challenge the Companys claims history. The Company disagrees with the approach being advanced by the holders of our bank debt. Our claims history is a reflection of our tort system
litigation experience and took the validity of claims, and other relevant factors, into account when settling cases. We believe that the holders of our bank debt and their experts already possess the data and information needed to present their view
of our asbestos liability and that it is appropriate to move as quickly as possible to an estimation hearing. Judge Fullam has not yet ruled on the bank creditors motion for an extension.



We are pleased that Judge Fullam is moving aggressively on these key issues in our case. The
recent developments will either lead to productive settlement discussions among our creditor groups, or they will continue to advance our Chapter 11 proceedings closer towards a confirmation hearing and emergence from Chapter 11. Either way, they
represent very real progress in our case.



In June of this year, we announced
an agreement in principle that allowed the official representatives of the holders of our pre-petition bond and trade debt, the Official Committee of Asbestos Claimants, and the Legal Representative for the class of future asbestos claimants to
support our proposed Plan of Reorganization (the Plan), as revised per the agreement. With that agreement in place, we announced that the representatives of only one class of creditors, the holders of our bank debt, continued to oppose
our Plan as so revised. Since that announcement, an Ad Hoc Committee of Bondholders has emerged, and they indicate that they oppose the terms agreed to by the official representatives of the bondholders and trade creditors. The Ad Hoc
Committee further claims to have a blocking position that will allow them to prevent a vote in favor of the revised Plan by the Companys bondholders. The official representatives of the holders of our bond debt, however, continue
to support the Plan as revised per the agreement. Unless a Consensual Plan is reached, the issue of bondholder support for our Plan may ultimately need to be determined through the Chapter 11 voting process.



A third factor that has weighed heavily upon the negotiations among our various creditor
groups relates to proposed asbestos reform legislation (the FAIR Act) that was pending in Congress for much of 2004. The Companys non-asbestos creditors have believed that this legislation would reduce the asbestos liability owed
by the Company, and would therefore potentially increase the recoveries of all other creditors. Congress is not expected to take any further action on the FAIR Act in 2004. However, as long as it remains possible that the FAIR Act or similar
legislation could be enacted into law, it may remain a factor in the negotiations among our various creditor groups.



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Our going-forward strategy continues to be two-fold: (1) continue to look
for a compromise that will result in a Consensual Plan supported by all of our creditors and, otherwise, (2) in the absence of a Consensual Plan, proceed as quickly as possible to confirm our Plan, including obtaining judicial resolution of the two
significant issues in our case (asbestos estimation and substantive consolidation).



As long as the holders of our bank debt continue to oppose our Plan of Reorganization, it is difficult to estimate when we will emerge from Chapter 11. There is no realistic way for the Company to emerge in 2004. However, for the
foreseeable future, we do not believe that continuing to operate in Chapter 11 will inhibit our ability to successfully run and grow our business.



Results of Operations



The Companys strong performance in the first half of 2004 continued into the third quarter generating the highest quarterly net sales in the history of the Company.
Income from operations also continued to outpace the comparable period in the prior year. The strong performance reflects continued demand for our products in both of our reportable segments. Some of the factors driving our results during the third
quarter and first nine months of 2004 were as follows:



| | Low mortgage rates have enabled continued strength in the United States housing markets, positively impacting pricing in insulation products and volumes in our Building Materials
product lines. In order to accommodate the growth in demand stemming from the residential construction market, we have announced the initiation of significant production capacity increases.
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | An improving global economy has increased demand for glass fibers used in the construction, transportation, consumer, industrial, and infrastructure markets. The increased demand
has also allowed us to realize improved operating performance in our Composite Solutions segment.
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | The Company has experienced significantly higher than planned production costs, particularly those associated with energy and energy related commodities and services. These higher
costs have dampened the beneficial impacts of price increases in some product lines, higher volumes and productivity gains.
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



As the result of these factors, along with lower Chapter 11 related reorganization items, the Companys income from operations, compared to the prior year, improved
approximately 47% for the third quarter and 81% for the first nine months. However, because of the nature of certain of the costs and expenses that impact reported income from operations, management does not find it to be the most useful financial
measure of the Companys on-going operational performance. Rather, when management reviews the Companys year-to-year operational performance, we typically look at income from operations excluding Chapter 11 related reorganization items,
restructuring and other charges, and provision (credit) for asbestos litigation claims (recoveries). To help understand that measure of on-going operational performance, you can refer to the segmental data appearing in Note 2 to the Consolidated
Financial Statements. Using that data, we would typically compare year-to-year operations on the basis of income before income tax expense on a total reportable segment basis reduced only by general corporate expense. On that basis, the
Companys income from operations for the quarter ended September 30, 2004 was $145 million, compared to $110 million for the same quarter of 2003, and $306 million for the nine months ended September 30, 2004, compared to $270 million for the
same period of 2003.



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During the third quarter of 2004, Building Materials markets remained
strong as the result of a continued attractive interest rate environment for mortgages and refinancing, which drove strong new residential construction and remodeling markets. Income from operations was up 51% for the third quarter and 27% for the
first nine months of 2004, driven primarily by higher volume, improved pricing, and improved manufacturing productivity.



In Composite Solutions, income from operations improved 40% for the third quarter and 15% for the first nine months of 2004, compared to the same periods of 2003. Results
for both periods of 2004 reflect higher volumes, partially offset by year over year price pressures and higher energy related costs. The results for the first nine months of 2004 also reflect increased costs and lost profits resulting from a flood
in late 2003 in our LArdoise, France manufacturing facility.



Looking
ahead, we are somewhat optimistic about the U.S. economy for the remainder of 2004. Our businesses are sensitive to interest rates in North America as they have a significant impact on new residential construction, residential remodeling markets,
and automotive markets, which are major end-use markets for many of our products. While the recent historically low rates are advantageous to our businesses, an environment of rising interest rates would create a concern for us as we look
ahead. In addition, we continue to closely monitor the higher costs we have been experiencing, particularly for energy and energy related commodities and services. While these higher costs currently are being mitigated by higher sales volumes, price
increases, and productivity gains, they represent a potential risk to future results, particularly if any or all of the beneficial factors weaken.



The Companys 2003 unconditional safety initiative asking all employees to make a commitment to work safely continues to be our priority. This initiative has
resulted in reducing our recordable injuries 16% in the nine months of 2004 compared to 2003. Our goals for the remainder of 2004 call for continued progress in our unconditional commitment to working safely. We also intend to continue efforts for
focusing all the employees of the Company on serving our customers and meeting the needs of our markets. Both our Building Materials and Composite Solutions segments will continue to be focused on improving gross margin performance.



VOLUNTARY PETITION FOR RELIEF UNDER CHAPTER 11



On October 5, 2000 (the Petition Date), Owens Corning and the 17 United States
subsidiaries listed below (collectively with Owens Corning, the Debtors) filed voluntary petitions for relief (the Filing) under Chapter 11 of the United States Bankruptcy Code (the Bankruptcy Code) in the United
States Bankruptcy Court for the District of Delaware (the USBC):



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



The Debtors are currently operating
their businesses as debtors-in-possession in accordance with provisions of the Bankruptcy Code. The Chapter 11 cases of the Debtors (collectively, the Chapter 11 Cases) are being jointly administered under Case No. 00-3837 (JKF).



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The referenced Chapter 11 cases do not include any other United States or
foreign subsidiaries of Owens Corning (collectively, the Non-Debtor Subsidiaries). As described more fully below under the heading The Plan of Reorganization, Owens Corning may cause certain of such Non-Debtor Subsidiaries
that issued guarantees with respect to Owens Cornings $1.8 billion pre-petition bank credit facility (the Pre-Petition Credit Facility, which is in default) to file petitions for relief under Chapter 11 of the Bankruptcy Code under
certain circumstances.



The Debtors filed for relief under Chapter 11 to
address the growing demands on Owens Cornings cash flow resulting from its multi-billion dollar asbestos liability. This liability is discussed in greater detail in Note 10 to the Consolidated Financial Statements.



Overseeing Federal District Court



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



On or about October 10, 2003, Kensington International Limited and Springfield Associates, LLC (collectively, K&S), two assignees of lenders under Owens Cornings Pre-Petition Credit Facility, filed a motion in the USBC
seeking to recuse District Court Judge Wolin from further participation in the Chapter 11 Cases. After various proceedings before the District Court and the United States Court of Appeals for the Third Circuit (the Third Circuit), on May
17, 2004, the Third Circuit entered an order requiring Judge Wolin to recuse himself from further participation in the Chapter 11 Cases. On May 27, 2004, the Third Circuit assigned Judge John P. Fullam of the United States District Court, Eastern
District of Pennsylvania, to replace Judge Wolin in the Chapter 11 Cases. In addition, the Third Circuit assigned other judges to sit on other of the cases that had previously been consolidated under the terms of the Administrative Consolidation,
effectively terminating the consolidation. Owens Corning is unable to predict what impact the change in District Court Judge or the termination of the Administrative Consolidation will have on the timing, outcome, or other aspects of the Chapter 11
Cases.



Consequence of the Filing



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



Two creditors committees, one representing asbestos claimants and the other
representing unsecured creditors, have been appointed as official committees in the Chapter 11 Cases. In addition, the Bankruptcy Court has appointed James J. McMonagle as Legal Representative for the class of future asbestos personal injury
claimants against one or more of the Debtors. The two committees and the Legal Representative have the right to be heard on all matters that come before the Bankruptcy Court.



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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. On January 17, 2003, the
Debtors, together with the Official Committee of Asbestos Claimants and the Legal Representative for the class of future asbestos claimants, filed a proposed joint plan of reorganization in the USBC. The same proponents filed a proposed amended
joint plan of reorganization in the USBC on March 28, 2003, a proposed second amended joint plan of reorganization in the USBC on May 23, 2003, a proposed third amended joint plan of reorganization in the USBC on August 8, 2003, and a proposed
fourth amended joint plan of reorganization (as so amended through such fourth amendment, the Plan) in the USBC on October 24, 2003.



On June 7, 2004, Owens Corning announced that an agreement in principle (the Agreement in Principle) had been reached with the Official Committee of Asbestos
Claimants, the Legal Representative for the class of future asbestos claimants, and the official representatives of the Companys pre-petition bondholders and trade creditors. Among other things, the Agreement in Principle provides that all
holders of bonds, bank debt and senior trade debt would receive a recovery equal to 38.5% of their claims upon Owens Cornings successful emergence from Chapter 11. The recoveries of all creditors are based on certain agreed and assumed values
and would be comprised of cash, debt and equity. However, their actual recoveries could ultimately be higher or lower based on the value of the equity to be issued by Owens Corning upon emergence from Chapter 11 and other factors.



As a result of this Agreement in Principle, Owens Corning has now gained support for the Plan
(as modified to reflect the Agreement in Principle) from the official representatives of all of its major creditor groups with the exception of the holders of the debt under the Pre-Petition Credit Facility, who continue to oppose the Plan. Certain
members of the major creditor groups have indicated that they also continue to oppose the Plan, including an Ad Hoc Committee of Bondholders that claims to have a blocking position that will allow them to prevent a vote in favor of the
Plan by Owens Cornings bondholders.



It is expected that the Plan will be
amended to reflect the terms of the Agreement in Principle. Certain terms, conditions and provisions of the Plan are discussed below. The Plan is subject to confirmation by the Bankruptcy Court.



There can be no assurance that the Plan will not be further amended prior to confirmation,
nor can there be any assurance that such Plan will be confirmed by the Bankruptcy Court and consummated. Owens Corning is unable to predict what impact the change in District Court Judge, the termination of the Administrative Consolidation, or the
disposition of any of the litigation and other matters described below will have on the timing of the confirmation of a plan or plans of reorganization or its effect, if any, on the terms thereof.



As described more fully below under the heading The Plan of Reorganization, the
Plan is premised upon the substantive consolidation of Owens Corning and certain of its direct and indirect subsidiaries (but not the Fibreboard Settlement Trust (see Note 11 to the Consolidated Financial Statements)) for the purposes of voting,
determining which claims and interests will be entitled to vote to accept or reject the Plan, confirmation of the Plan, and the resultant discharge of and cancellation of claims and interests and distribution of assets, interests and other property
under the Plan. On October 5, 2004, the District Court issued a Memorandum and Order Concerning Substantive Consolidation. In that Memorandum and Order, the District Court granted the Debtors motion for substantive consolidation and ordered
that counsel for the participating parties meet for the purpose of attempting to achieve an agreed-upon plan of reorganization. On October 13, 2004, the holders of the debt under the Pre-Petition Credit Facility filed an



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appeal of the Memorandum and Order with the Third Circuit. On November 2,
2004, the Debtors, the Official Committee of Asbestos Claimants, the Legal Representative for the class of future asbestos claimants, and the official representatives of the Companys pre-petition bondholders and trade creditors filed a joint
motion to dismiss such appeal on the grounds that the Memorandum and Order is not a final judgment or otherwise appealable.



On August 19, 2004, the District Court scheduled a claims estimation hearing to be held on January 13, 2005. The purpose of the claims estimation hearing will be to
establish the amount of current and future asbestos liability to be allowed in the Chapter 11 Cases. No assurance can be made as to whether the amount of current and future asbestos liability established as a result of such claims estimation hearing
will be more or less than the amounts reserved for asbestos claims on the financial statements of the Debtors or will be more or less than the $16 billion amount that the Official Committee of Asbestos Claimants and the Legal Representative for the
class of future asbestos claimants have established as the level below which they have reserved the right to withdraw support of the Plan. The holders of the debt under the Pre-Petition Credit Facility have filed a motion with the District Court
requesting that the estimation hearing be postponed beyond January 13, 2005. The District Court has not yet ruled on that motion.



Related Developments



PROPOSED ASBESTOS LEGISLATION



As previously disclosed, on May 22, 2003, the United States Senate introduced proposed legislation (S 1125, also known as the Fairness in Asbestos Injury Resolution Act
of 2003). On April 7, 2004, the United States Senate introduced proposed substitute legislation (S 2290, also known as the Fairness in Asbestos Injury Resolution Act of 2004). References in the following discussion to the FAIR Act refer
to each Bill separately.



If enacted into law, the FAIR Act would establish an
administrative claims resolution structure through which all asbestos personal injury claims would be channeled and reviewed. The FAIR Act would also establish a national trust fund, funded through mandated contributions from defendant companies,
insurance companies and existing trusts, that would be the source of compensation of all approved claims. Under the present terms of the FAIR Act, companies like Owens Corning and Fibreboard, that have filed for bankruptcy but have not yet emerged
through a confirmed plan of reorganization, would be included as participants in the resolution structure.



The fate of the FAIR Act remains uncertain, and Owens Corning is unable to make any prediction as to whether the FAIR Act will be enacted or, if it is enacted, what its final form would be or what the effect, if any,
would be on Owens Corning and Fibreboard or their plan or plans of reorganization. If Congressional action on the FAIR Act is not completed prior to the adjournment of the current Congress (expected shortly), the legislation will lapse and similar
legislation will be considered in the next Congress only if newly introduced. The provisions of any legislation ultimately enacted may have a material effect on the amount of liability that Owens Corning and Fibreboard ultimately have for
asbestos-related claims, which could be more or less than the amounts reserved for in Owens Cornings financial statements.



OTHER MATTERS FILED IN THE USBC



On or about October 17, 2003, the Official Committee of Unsecured Creditors filed a motion in the USBC requesting appointment of a Chapter 11 trustee to assume control of
the Chapter 11 Cases due to alleged breach of the Debtors fiduciary duty of undivided loyalty to act in the best interest of all



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creditors. After such motion was dismissed by the USBC for failure to
comply with local court rules, the Official Committee of Unsecured Creditors re-filed such motion on October 30, 2003. A supplement to the motion of the Official Committee of Unsecured Creditors was filed on May 28, 2004, and various filings in
opposition to such supplemented motion were filed by the Debtors, the Legal Representative for the class of future asbestos claimants, and the Official Committee of Asbestos Claimants. The USBC has continued further proceedings on this matter to
January 26, 2005.



On or about May 24, 2004, Credit Suisse First Boston,
Kensington International Limited, Springfield Associates LLC and Angelo Gordon filed a motion in the USBC requesting the appointment of a Chapter 11 Examiner to examine (i) allegations of improper conduct by management of the Debtors, (ii) alleged
breaches of fiduciary duty by management of the Debtors resulting from the influence of the Legal Representative for the class of future asbestos claimants and the Official Committee of Asbestos Claimants on the process of developing a Plan and the
tort estimation process, (iii) alleged connections between the asbestos plaintiffs interests, a Court appointed mediator, and the Debtors asbestos liability estimation firm, and (iv) other alleged improper conduct. Owens Corning, the
Legal Representative for the class of future asbestos claimants, and the Official Committee of Asbestos Claimants have each filed responsive pleadings to the motion. The USBC has continued further proceedings on the motion pending issuance of a
final order on the motion (described in the preceding paragraph) requesting appointment of a Chapter 11 trustee.



The Debtors believe that the two motions described above are without merit and intend to continue to vigorously oppose them in appropriate proceedings.



The Plan of Reorganization



Although the basic terms of the Plan, as modified to reflect the Agreement in Principle,
have now been agreed to by the official representatives of all of Owens Cornings major creditor constituencies, except the holders of its debt under the Pre-Petition Credit Facility, who continue to oppose the Plan, Owens Corning believes that
it is likely that the terms, conditions and provisions of the Plan will remain the subject of continuing negotiations or litigation to resolve differences among the creditor constituencies as to their treatment. Accordingly, Owens Corning is unable
to predict at this time what the treatment of creditors and equity holders of the respective Debtors will ultimately be under any plan or plans of reorganization finally confirmed. The current Plan, as modified to reflect the Agreement in Principle,
provides for payment of 38.5% of the face amount of all unsecured creditors claims, in the form of distributions of new common stock and notes of the reorganized company, and cash. However, as described more fully below, the percentage
recovery and value of the payments ultimately made under the Plan to each class of creditors will depend upon a number of factors, including the value of the shares of new common stock and notes to be issued by Owens Corning. Additional
distributions from potential insurance and other third-party claims may also be paid to certain classes of unsecured creditors, but it is expected that all classes of pre-petition unsecured creditors will be impaired. Therefore, the Plan also
provides that the existing common stock of Owens Corning will be cancelled, and that current shareholders will receive no distribution or other consideration in exchange for their shares. It is impossible to predict at this time the terms and
provisions of any plan or plans of reorganization that may ultimately be confirmed, when a plan or plans of reorganization will be confirmed, or the treatment of creditors thereunder.



The Plan is premised upon the substantive consolidation of Owens Corning and certain of its direct and indirect subsidiaries (but not the
Fibreboard Settlement Trust (see Note 11 to the Consolidated Financial Statements)) for the purposes of voting, determining which claims and interests will be entitled to vote to accept or reject the Plan, confirmation of the Plan, and the resultant
discharge of and cancellation of claims and interests and distribution of assets, interests and other property under the Plan. For these



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purposes, the Plan would treat all assets and liabilities of each
substantively consolidated entity (excluding the Fibreboard Settlement Trust) as though they were merged into one consolidated estate with the assets and liabilities of the other substantively consolidated entities. Substantive consolidation under
the Plan will not result in the merger of or the transfer or commingling of any assets of any of the Debtors or Non-Debtor Subsidiaries. Certain creditor constituencies have asserted that substantive consolidation is not appropriate and continue to
challenge that approach.



As described above, on October 5, 2004, the District
Court issued a Memorandum and Order Concerning Substantive Consolidation. In that Memorandum and Order, the District Court granted the Debtors motion for substantive consolidation and ordered that counsel for the participating parties meet for
the purpose of attempting to achieve an agreed-upon plan of reorganization. On October 13, 2004, the holders of the debt under the Pre-Petition Credit Facility filed an appeal of the Memorandum and Order with the Third Circuit. On November 2, 2004,
the Debtors, the Official Committee of Asbestos Claimants, the Legal Representative for the class of future asbestos claimants, and the official representatives of the Companys pre-petition bondholders and trade creditors filed a joint motion
to dismiss such appeal on the grounds that the Memorandum and Order is not a final judgment or otherwise appealable.



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



Although the Plan, as
modified to reflect the Agreement in Principle, provides for unsecured creditors to recover 38.5% of their claims, the percentage recovery and value of the payments ultimately made under the Plan to each class of creditors will depend upon a number
of factors. Those factors include the value of the shares of new common stock and notes to be issued by the Company, the amount of cash available for distribution, the resolution of certain inter-creditor issues, and the ultimate aggregate asbestos
liability. In addition, the Plan, as modified to reflect the Agreement in Principle, is expected to provide that the unsecured creditors may elect to exchange cash or notes that they would otherwise be entitled to receive under the Plan for up to a
maximum of 8 million shares of new Owens Corning common stock that would otherwise be distributable to asbestos claimants.



The Plan provides that liability for current and future asbestos personal injury claims against Owens Corning and Fibreboard would be determined by the Bankruptcy Court
as part of the confirmation hearing on the Plan. In that connection, the District Court has scheduled a claims estimation hearing to be held on January 13, 2005. The purpose of the claims estimation hearing will be to establish the amount of current
and future asbestos liability to be allowed in the Chapter 11 Cases. The Official Committee of Asbestos Claimants and the Legal Representative for the class of future asbestos claimants have reserved the right to withdraw support of the Plan if such
liability is determined to be less than $16 billion in the aggregate. No assurance can be made as to whether the amount of current and future asbestos liability established as a result of such claims estimation hearing will be more or less than the
amounts reserved for asbestos claims on the financial statements of the Debtors or will be more or less than such $16 billion amount.



Any disagreements raised by creditors with the terms of the Plan are expected to be handled through negotiation or litigation as part of the confirmation process. Owens
Corning is unable to predict the timing or outcome of such negotiation or litigation.



Under the Plan, a majority of the newly issued common stock, together with notes, and cash, as well as the assets of the existing Fibreboard Settlement Trust (see Note 11 to the Consolidated Financial Statements), will fund a new trust
created under the Plan intended to qualify under Section 524(g) of the Bankruptcy Code. The Section 524(g) trust will assume all obligations of Owens Corning, Fibreboard,



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and their respective subsidiaries and affiliates, for current and future
asbestos personal injury claims and demands, and will, through Owens Corning and Fibreboard sub-accounts, make payments to claimants in accordance with the trust distribution procedures included as part of the Plan. In addition, the Plan provides
for an injunction by the Bankruptcy Court pursuant to Section 524(g) of the Bankruptcy Code that will enjoin actions against the reorganized Debtors for the purpose of, directly or indirectly, collecting, recovering or receiving payment of, on, or
with respect to any claims resulting from asbestos-containing products allegedly manufactured, sold or installed by Owens Corning or Fibreboard, which claims will be paid in whole or in part by the Section 524(g) trust. Similar plans of
reorganization have been confirmed in the Chapter 11 cases of other companies involved in asbestos-related litigation. Section 524(g) of the Bankruptcy Code provides that, if certain specified conditions are satisfied, a court may issue a
supplemental permanent injunction barring the assertion of asbestos-related claims or demands against the reorganized company and channeling those claims to an independent trust.



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



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. In this respect, unless a consensual agreement among all
impaired creditor classes is agreed to, the Plan is expected to be amended to provide for certain cramdown provisions, whereby the Plan could be confirmed over the objections of one or more classes of unapproving creditors in the event
that certain percentages in dollar amount and in number of specified classes of creditors accept the Plan and vote in favor of it.



The payment rights and other entitlements of pre-petition creditors and Owens Cornings shareholders may be substantially altered by any plan or plans of
reorganization confirmed in the Chapter 11 Cases, and the pre-petition creditors of some Debtors may be treated differently than those of other Debtors.



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



Bar Dates for Filing Claims



GENERAL BAR DATE



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



Approximately 25,000 proofs of claim (including late-filed claims), totaling approximately $16.5 billion, alleging a right to payment from a Debtor were filed with the Bankruptcy Court in response to the General Bar
Date. Owens Corning continues to investigate these claims to determine their validity. The Bankruptcy Court will ultimately determine liability amounts that will be allowed for claims in the Chapter 11 Cases.



In its review of the filed claims, Owens Corning identified approximately 16,000 claims,
totaling approximately $8.6 billion, which it believed should be disallowed by the Bankruptcy Court, primarily because they appeared to be duplicate claims or claims that were not related to the indicated Debtor (the Objectionable
Claims). Owens Corning filed omnibus objections to certain of these Objectionable Claims and likely will file additional objections. As of September 30, 2004, approximately 6,200 of the Objectionable Claims, totaling approximately $5.3
billion, had either been withdrawn by the claimants or disallowed by the Bankruptcy Court, and other of such claims had been reduced by the claimants by approximately $1.7 billion. While the Bankruptcy Court will ultimately determine liability
amounts, if any, that will be allowed as part of the Chapter 11 Cases, Owens Corning believes that all or substantially all of the remaining Objectionable Claims will be disallowed.



In addition to the Objectionable Claims described above, the remaining filed proofs of claim included approximately 9,000 claims, totaling
approximately $7.9 billion. As of September 30, 2004, approximately 1,000 of these claims, totaling approximately $0.2 billion, had either been withdrawn by the claimants, disallowed by the Bankruptcy Court, or otherwise resolved, and other of such
claims had been reduced by the claimants by approximately $0.2 billion. The remaining claims consist of:



| | Approximately 2,900 claims, totaling approximately $1.5 billion, associated with asbestos-related contribution, indemnity, reimbursement, or subrogation claims. Owens Corning will
address all asbestos-related personal injury and wrongful death claims in the future as part of the Chapter 11 Cases. See Note 10 to the Consolidated Financial Statements for additional information concerning asbestos-related liabilities.
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | Approximately 100 claims, totaling approximately $0.7 billion, alleging asbestos-related property damage. Most of these claims were submitted with insufficient documentation to
assess their validity. Owens Corning expects to vigorously defend any asserted asbestos-related property damage claims in the Bankruptcy Court. Based upon its historic experience in respect of asbestos-related property damage claims, Owens Corning
does not anticipate significant liability from any such claims.
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| | Approximately 5,000 claims, totaling approximately $5.3 billion, alleging rights to payment for financing, environmental, trade debt and other matters (the General
Claims). The Company has recorded approximately $3.6 billion in liabilities for these claims. Based upon the claims information submitted, the General Claims with the largest variance from the recorded amounts are: claims by the United States
Department of Treasury, totaling approximately $538 million, in connection with taxes (see discussion regarding the tax claims and related pending settlement under the heading Tax Claim in Note 10 to the Consolidated Financial
Statements); a contingent claim for approximately $458 million by the Pension Benefit Guaranty Corporation, as described more fully under the heading PBGC Claim in Note 10 to the Consolidated Financial Statements; a $275 million class
action claim involving alleged problems with a specialty roofing product, as described more fully under the heading Specialty Roofing Claim in Note 10 to the Consolidated Financial Statements; environmental claims totaling approximately
$109 million; and claims for contract rejections, totaling approximately $126 million, of which approximately $58 million are protective claims covering contracts which have not been rejected by the Debtors as of September 30, 2004.
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Owens Corning has recorded liability amounts for those claims
that can be reasonably estimated and which it believes are probable of being allowed by the Bankruptcy Court. At this time, it is impossible to reasonably estimate the value of all the claims that will ultimately be allowed by the Bankruptcy Court,
due to the uncertainties of the Chapter 11 process, the in-progress state of Owens Cornings investigation of submitted claims, and the lack of documentation submitted in support of many claims. Owens Corning continues to evaluate claims filed
in the Chapter 11 Cases and will make such adjustments as may be appropriate. Any such adjustments could be material to the Companys consolidated financial position and results of operations in any given period. For a discussion of liability
amounts in respect of asbestos personal injury claims, see Note 10 to the Consolidated Financial Statements.



ASBESTOS BAR DATE



A bar date for filing proofs of claim against the Debtors with respect to asbestos-related personal injury claims and asbestos-related wrongful death claims (other than
claims for contribution, indemnity, reimbursement, or subrogation) has not been set. On April 11, 2003, the Official Committee of Unsecured Creditors filed a motion seeking establishment of a bar date for such asbestos-related claims. On April 25,
2003, the District Court entered an order withdrawing the reference of the Chapter 11 Cases to the USBC with respect to such motion, and staying all proceedings on such motion pending further order of the District Court. On August 19, 2004, the
District Court scheduled a claims estimation hearing for January 13, 2005 to establish the amount of current and future asbestos liability to be allowed in the Chapter 11 Cases. The District Courts scheduling order notes that the Court has
preliminarily determined that currently available data, viewed in light of expert testimony at the hearing, should probably suffice for claims estimation purposes. The order does not reference an asbestos bar date.



As indicated above, the General Bar Date does not apply to asbestos-related personal injury
claims and asbestos-related wrongful death claims (other than claims for contribution, indemnity, reimbursement, or subrogation). Despite this, approximately 3,200 proofs of claim (in addition to claims described above under General Bar
Date), totaling approximately $2.4 billion, with respect to asbestos-related personal injury or wrongful death were filed with the Bankruptcy Court in response to the General Bar Date. Of these claims, Owens Corning has identified
approximately 1,200, totaling approximately $0.5 billion, as Objectionable Claims. Of the remaining claims, Owens Corning believes that a substantial majority represent claimants that had previously asserted asbestos-related claims against the
Company.



As noted above, under the Plan all asbestos-related personal injury
and wrongful death claims will be channeled to the Section 524(g) trust, subject to approval by the Bankruptcy Court. See Note 10 to the Consolidated Financial Statements for additional information concerning asbestos-related liabilities.



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



RESULTS OF OPERATIONS



Sales and Profitability for the Quarter Ended September 30, 2004 and 2003



NET SALES



Net sales for the quarter ended September 30, 2004 were an all time record high at $1.541
billion, a 14% increase from the 2003 level of $1.349 billion. In Building Materials, sales were up 14%, reflecting volume increases due to growth in the North American housing and remodeling markets, price improvements and consolidation of OC
Mexico, our former Mexican affiliate, which became wholly owned in April 2004. In Composite Solutions, sales were up 14% from last year, reflecting increased volume in our core business, favorable changes in foreign currency exchange rates, and the
consolidation of OC Mexico.



Sales outside the United States represented 16% of
total sales for the quarter ended September 30, 2004, compared to 14% during the same time period in 2003. The increase was primarily attributable to our expansion in Mexico through the acquisition of OC Mexico, the impact of selling our U.S.-based
metal systems assets and the exiting of certain other U.S.-based product lines in 2003, and the impact of favorable changes in foreign currency exchange rates during the third quarter 2004.



GROSS MARGIN



Gross margin for the quarter ended September 30, 2004 was 19% of net sales, compared to 16%
of net sales in the third quarter of 2003. The 3% improvement in gross margin is primarily a result of pricing improvements for insulation products due to continued strong market demand. Gross margin was also positively impacted by improvements in
manufacturing performance from increased volumes and productivity gains. The positive factors were partially offset by higher delivery, energy and material costs experienced across the entire Company. We continue to closely monitor the higher costs
we have been experiencing, particularly for energy and energy related commodities and services. While these higher costs currently are being more than offset by the positive factors discussed above, they represent a potential risk to future results.



MARKETING AND ADMINISTRATIVE EXPENSES



Marketing and administrative expenses for the quarter ended September 30,
2004 increased 14% from the quarter ended September 30, 2003 but, as a percentage of sales, they remained flat at 9% for each of the quarters ended September 30, 2004 and 2003.



INCOME FROM OPERATIONS



Income from operations was $153 million for the quarter ended September 30, 2004, compared to $104 million in the third quarter 2003. The
increase was primarily attributable to increased sales and improved gross margin, offset somewhat by the increased marketing and administrative costs and lower gains from foreign currency exchange. In addition, income from operations was positively
impacted by a credit of $5 million for Chapter 11 reorganization items in 2004 as investment income more than offset higher professional fees.



INCOME TAXES



The Companys effective tax rate for the third quarter of 2004 was 43%. The Company currently projects that its effective tax rate for the full year 2004 will be
51%, compared to 56% for the full year 2003. Based on recent legislation and enforcement related to the deductibility of certain items for state tax



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purposes, the Company increased its valuation allowance by approximately
$12 million in the second quarter of 2004. The effective tax rates for 2004 reflect the aforementioned item and reserves associated with the deductibility of Chapter 11 related reorganization expenses. The effective tax rate for 2003 reflects
reserves associated with the deductibility of Chapter 11 related reorganization expenses.



NET INCOME



For the quarter ended September 30, 2004, Owens Corning reported net income of $94 million, or $1.57 per diluted share, compared to net income of $55 million, or $0.92
per diluted share, for the third quarter of the prior year. A portion of this increase is attributable to a $16 million pre-tax gain (recorded under the category Interest expense, net) due to the reversal of accrued interest as the
result of the settlement of certain guaranteed subsidiary debt. The remainder of the increase in 2004 was primarily due to the other factors described above.



As a result of the Filing, contractual interest expense has not been accrued or recorded on pre-petition debt of the Debtors since the Petition Date. From the Petition
Date through September 30, 2004, contractual interest expense not accrued or recorded on pre-petition debt (calculated using ordinary, non-default interest rates and without regard to debt maturity) totaled approximately $620 million, of which $37
million and $34 million relates to the third quarters of 2004 and 2003, respectively. See Note 1 to the Consolidated Financial Statements.



Sales and Profitability for the Nine Months Ended September 30, 2004 and 2003



NET SALES



Net sales for the nine months ended September 30, 2004 were $4.191 billion, a 13% increase from the 2003 level of $3.721 billion. In Building Materials, sales were up
12%, reflecting volume increases due to growth in the North American housing and remodeling markets, price improvements and consolidation of OC Mexico beginning in the second quarter. In Composite Solutions, sales were up 13% from last year,
reflecting increased volume in our core business, a positive effect from foreign currency exchange rates, and the consolidation of OC Mexico. Competitive pressures and lower industry capacity utilization has kept composite material pricing lower
than in 2003.



Sales outside the United States represented 16% of total sales
for the nine months ended September 30, 2004, compared to 15% during the same period in 2003. The increase was primarily attributable to the impact of the sale of our U.S.-based metal systems assets and the exiting of certain other U.S.-based
product lines in 2003, the acquisition of the remaining 60% ownership interest in OC Mexico in April 2004, and a positive effect from foreign currency exchange rates.



GROSS MARGIN



Gross margin for the nine months ended September 30, 2004 was 17%, compared to 16% during the same period of 2003. The results for the nine months ended September 30,
2004 reflect business interruption costs of $11 million associated with the December 2003 flood in LArdoise, France, and a $5 million credit relating to a reduction in the estimated shut down costs of a manufacturing facility which was sold in
the first quarter 2004. The gross margin results for the nine months ended September 30, 2003 reflect charges of $28 million to cost of sales, representing additional write-downs of assets in the Building Materials segment to net realizable value
prior to their eventual sale during the year, and a gain of approximately $6 million resulting from the settlement of certain vendor payables at a discount.



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After eliminating the impact of the charges or credits referenced above,
gross margin as a percentage of net sales in 2004 increased approximately 1% compared to 2003, due to price increases in certain product lines, stronger volumes, and improvements in manufacturing performance, partially offset by higher delivery,
energy and material costs.



MARKETING AND
ADMINISTRATIVE EXPENSES



Marketing and administrative expenses for the first
nine months of 2004 were $375 million, compared to $345 million in 2003. On a percentage of sales basis, marketing and administrative expenses were 9% for the first nine months of both 2004 and 2003.



INCOME FROM OPERATIONS



Income from operations for the nine months ended September 30, 2004 was $281 million,
compared to $155 million in the first nine months of 2003. The increase was primarily attributable to increased sales, increased gross margin, lower charges related to Chapter 11 reorganization items in 2004, and a loss on the sale of the
Companys metal systems business in 2003. Offsetting the increase were lower gains on foreign currency exchange transactions and lower gains on sales of assets compared to the first nine months of 2003. The decrease in Chapter 11 reorganization
items primarily reflects the $21 million of costs for the settlement of the World Headquarters lease and $18 million of costs associated with restructuring an Asian credit facility, both of which adversely impacted 2003 results.



NET INCOME



For the nine months ended September 30, 2004, Owens Corning reported net income of $132
million, or $2.20 per diluted share, compared to net income of $72 million, or $1.20 per diluted share, for the first nine months of 2003. A portion of this increase is attributable to a $16 million pre-tax gain (recorded under the category
Interest expense, net) due to the reversal of accrued interest as the result of the settlement of certain guaranteed subsidiary debt. The remainder of the increase in 2004 was primarily due to the other factors described above.



From the Petition Date through September 30, 2004, contractual interest
expense not accrued or recorded on pre-petition debt (calculated using ordinary, non-default interest rates and without regard to debt maturity) totaled approximately $620 million, of which $105 million relates to the first nine months of 2004 and
$104 million relates to the same period of 2003. See Note 1 to the Consolidated Financial Statements.



RESTRUCTURING OF OPERATIONS AND OTHER CHARGES



Ongoing Business Review



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



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RESTRUCTURING OF OPERATIONS AND OTHER CHARGES (continued)



The Company did not incur any restructuring or similar charges in the
second or third quarters of 2004. During the first quarter of 2004, the Company recorded a pretax credit to cost of sales in the Consolidated Statement of Income of approximately $5 million. The $5 million credit represents an adjustment to reserves
estimated in 2002 for the shutdown costs of a manufacturing facility, which was sold in the first quarter of 2004.



During the third quarter of 2003, the Company recorded a pretax charge of approximately $1 million as the result of a contractual post-closing adjustment to the selling
price of the Companys metal systems business, which was sold in the second quarter of 2003. The $1 million charge was reflected in the Consolidated Statement of Income under the caption, Other. During the second quarter of 2003,
the Company recorded a pretax charge of approximately $13 million, consisting of a $14 million loss on the sale of the Companys metal systems business, offset by a $1 million credit representing the gain on the sale of assets of the
Companys mineral wool business. Such $13 million charge was reflected in the Consolidated Statement of Income under the caption, Other. In the first quarter of 2003, the Company recorded $30 million in pretax charges, comprised of
a $2 million pretax restructuring charge (classified as a separate component of operating expense in the Consolidated Statement of Income), and a charge of $28 million to cost of sales. The $2 million restructure charge represented additional
non-cash asset write-downs of previously closed non-strategic facilities to fair value. The $28 million charge to cost of sales represented the additional write-down of two groups of assets in the Building Materials segment to net realizable value
based on valuations of the future cash flows of the assets using assumptions consistent with current market conditions.



LArdoise, France Manufacturing Facility



In the fourth quarter of 2003, the Company experienced a flood at its LArdoise, France manufacturing facility. This facility is insured for property damage and
business interruption losses relating to such events, subject to a $5 million deductible (which was expensed in 2003) and applicable policy limits. The Company estimates it has incurred, or will incur, a total of $50 to $60 million of property
damage costs and business interruption losses associated with the LArdoise flood, which the Company believes will be substantially covered by insurance. In connection with the flood, the Company has recorded approximately $14 million in
receivables for property damage costs, offset by a $25 million insurance advance. In addition, approximately $11 million of business interruption costs have been expensed and $19 million of capital expenditures have been recorded. Should the
expected insurance recoveries not be received, they could have a material adverse impact on the results of the Composite Solutions business. Also, the timing of any recoveries may result in expenses being taken and capital expenditures recorded in
periods before the insurance receipts are recorded.



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



RESTRUCTURING OF OPERATIONS AND OTHER CHARGES (continued)



Leases



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



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



LIQUIDITY, CAPITAL RESOURCES AND OTHER RELATED MATTERS



Cash
flow from operations was a positive $59 million for the nine month period ended September 30, 2004, versus negative $32 million for the same period of 2003. The increase in cash flow from operations compared to the prior year was primarily driven by
increases in accounts payable and accrued liabilities, increases in the provision for deferred income taxes, and improved earnings. These factors were partially offset by increases in pension contributions, receivables and inventory.



At September 30, 2004, net working capital was $1.118 billion and the current ratio was 2.30,
compared to $1.024 billion and 2.19, respectively, at December 31, 2003. The increase in working capital and current ratio is partially due to a settlement related to approximately $67 million of pre-petition guaranteed subsidiary debt that had been
classified on the Consolidated Balance Sheet as Short-term debt and Long-term debt  current portion. The Company reached a settlement agreement with the holders of a majority of that debt, resulting in the debt being
included as an allowed claim under the bankruptcy proceedings. As such, the debt was reclassed to Liabilities subject to compromise on the balance sheet. Other changes in net working capital and current ratio reflect normal seasonal
trends.



Investing activities, net of proceeds from the sale of businesses,
consumed $226 million during the nine months ended September 30, 2004, compared to $53 million during the same period of 2003. This increase in cash used for investing activities is primarily attributable to cash outflows of $73 million for the
acquisition of OC Mexico in 2004 compared to $64 million of cash inflows from the sale of businesses in the nine months ended September 30, 2003.



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Spending for capital additions to plant and equipment was $147 million in
the first nine months of 2004, compared to $119 million in the first nine months of 2003. We anticipate that 2004 spending for capital additions to plant and equipment will be approximately $240 million, a portion of which is uncommitted. We expect
that these expenditures will be funded from the Companys operations and existing cash on hand. In addition, in April 2004, the Company completed the acquisition of the remaining 60% ownership interest in our Mexican affiliate, OC Mexico, for
approximately $73 million, net of cash acquired. The Company has made, and expects to make additional, capital expenditures in connection with the 2003 flood of its LArdoise, France manufacturing facility that it expects will be substantially
reimbursed by insurance.



At September 30, 2004, the Company had $822 million
of cash and cash equivalents as compared to $769 million at September 30, 2003 and $1.005 billion at December 31, 2003. The decline from December reflects normal seasonal changes in working capital, the pension plan contributions described below,
and the acquisition of OC Mexico.



At September 30, 2004, the Company had
$2.958 billion of debt subject to compromise and $87 million of other debt (of which $7 million was in default as a consequence of the Filing and therefore classified as current on the Consolidated Balance Sheet). At December 31, 2003, we had $2.896
billion of debt subject to compromise and $170 million of other debt (of which $75 million was in default as a consequence of the Filing and therefore classified as current on the Consolidated Balance Sheet).



The Company has significant liabilities related to pension plans for its employees. The
Company has contributed $225 million to the pension plans in 2004. The Companys pension related assets increased to $507 million at September 30, 2004 from $328 million at September 30, 2003, primarily due to contributions to the pension plans
and return on plan assets, partially offset by additional service costs, interest cost accrued and amortization of prior actuarial losses. The Companys recorded long-term pension plan liability increased to $701 million at September 30, 2004,
from $599 million at September 30, 2003. The ultimate cash flow impact to the Company, if any, of the pension plan liability and the timing of any such impact will depend on numerous variables, including future changes in actuarial assumptions and
financial market conditions.



In connection with the Filing, the Debtors
obtained a $500 million debtor-in-possession credit facility from a group of lenders led by Bank of America, N.A. (the DIP Financing), which was originally scheduled to expire November 15, 2002. Effective October 31, 2002, the DIP
Financing was amended to, among other things, reduce the maximum available credit amount to $250 million and extend the scheduled expiration to November 15, 2004. Effective September 20, 2004, the DIP Financing was further amended by a Second
Amendment which, among other things, extended the scheduled expiration to November 15, 2006. There were no borrowings outstanding under the DIP Financing at September 30, 2004; however, approximately $103 million of the availability under this
credit facility was utilized as a result of the issuance of standby letters of credit and similar uses.



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



The Company believes, based on information presently available to it, that its cash and cash equivalents, and cash available from operations, will provide sufficient
liquidity to allow it to continue as a going concern for the foreseeable future. However, the ability of the Company to continue as a going concern



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(including its ability to meet post-petition obligations of the Debtors
and to meet obligations of the Non-Debtor Subsidiaries) and the appropriateness of using the going concern basis for its financial statements are dependent upon, among other things, (i) the Companys ability to comply with the terms of any cash
management order entered by the Bankruptcy Court from time to time in connection with the Chapter 11 Cases, (ii) the ability of the Company to maintain adequate cash on hand, (iii) the ability of the Company to generate cash from operations, (iv)
the ability of the Non-Debtor Subsidiaries to obtain necessary financing, (v) confirmation of a plan or plans of reorganization under the Bankruptcy Code, and (vi) the Companys ability to maintain profitability following such confirmation.



OFF BALANCE SHEET ARRANGEMENTS



The Company enters into certain off balance sheet arrangements in the ordinary course of
business, such as securitization of accounts receivable and guarantees with respect to unconsolidated affiliates and other entities. There have been no significant changes in the Companys off balance sheet arrangements for the quarter or nine
months ended September 30, 2004.



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



CONTRACTUAL OBLIGATIONS



In the course of business, the Company
enters into contractual obligations to make payments to third parties. During the third quarter and first nine months of 2004, there were no material changes to such contractual obligations outside the ordinary course of the Companys business.



ADOPTION OF NEW ACCOUNTING STANDARDS



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



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



Effective January 1, 2003, the Company adopted Statement of Financial Accounting Standards
No. 146, Accounting for Costs Associated with Exit or Disposal Activities. This Statement addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies Emerging Issues



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



Task Force (EITF) Issue No. 94-3, Liability Recognition
for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring). This Statement requires that a liability for a cost associated with an exit or disposal activity be recognized
and measured initially at fair value only when the liability is incurred. The effect of adoption was not material to the Company, however, prospectively the timing of related future charges may be different than those recorded in prior periods.



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



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



In December 2002, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 148, Accounting for Stock-Based Compensation -
Transition and Disclosure - an amendment of FASB Statement No. 123. Effective December 31, 2002, the Company adopted the amendments to Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation
(SFAS No. 123), provided in paragraphs 2(a)-2(e) of this Statement. Effective January 1, 2003, the Company adopted the amendment to SFAS No. 123 provided in paragraph 2(f) of this Statement, and the amendment to Opinion 28 provided in
paragraph 3. The effect of adoption was not material to the Company. Please see Note 12 to the Consolidated Financial Statements for additional information concerning Stock Compensation.



In April 2003, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 149, Amendment of
Statement 133 on Derivative Instruments and Hedging Activities. SFAS No. 149 amends and clarifies accounting for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities under
SFAS No. 133. The provisions of SFAS No. 149 are generally effective for contracts entered into or modified after June 30, 2003 and for hedging relationships designated after June 30, 2003. The Company adopted these provisions as of June 30, 2003.
The effect of adoption was not material to the Company, and the prospective effects of adoption are not expected to be material to the Company.



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ENVIRONMENTAL MATTERS



The Company has been deemed by the United States Environmental Protection Agency
(EPA) to be a Potentially Responsible Party (PRP) with respect to certain sites under the Comprehensive Environmental Response, Compensation and Liability Act (Superfund). The Company has also been deemed a PRP under similar
state or local laws. In other instances, other PRPs have brought suits against the Company as a PRP for contribution under such federal, state or local laws. At September 30, 2004, a total of 60 such PRP designations remained unresolved by the
Company. In most cases the Company is only one of many PRPs with potential liability for investigation and remediation at the applicable site. The Company is also involved with environmental investigation or remediation at a number of other sites at
which it has not been designated a PRP.



The Company estimates a reserve in
accordance with generally accepted accounting principles to reflect environmental liabilities that have been asserted or are probable of assertion, in which liabilities are probable and reasonably estimable. At September 30, 2004, the Companys
reserve for such liabilities was $16 million. In connection with the Filing, the Company initiated a program to identify and discharge contingent environmental liabilities as part of its plan or plans of reorganization. Under the program, the
Company is seeking settlements, subject to approval of the Bankruptcy Court, with various federal, state and local authorities, as well as private claimants. On July 23, 2003, the Bankruptcy Court approved one such settlement agreement with the
United States resolving certain environmental liabilities with respect to the EPA, including liabilities associated with some of the PRP designations noted above. The Company will continue to review its environmental reserve in light of such program
and make such adjustments as may be appropriate.



The 1990 Clean Air Act
Amendments (Act) provide that the EPA will issue regulations on a number of air pollutants over a period of years. The EPA issued final regulations for wool fiberglass and mineral wool in June 1999, for amino/phenolic resin manufacturing
in January 2000, for wet formed fiberglass mat production in April 2002, and for reinforced plastic composites production and asphalt roofing and processing in April 2003. The Company anticipates that other relevant sources to be regulated in the
near future include large burners and boilers. Based on information now known to the Company, including the nature and limited number of regulated materials Owens Corning emits, we do not expect the Act to have a materially adverse effect on our
results of operations, financial condition or long-term liquidity.



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK



Please refer to the Companys 2003 annual report on Form 10-K for the Companys quantitative and qualitative disclosure about market risk.



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ITEM 4. CONTROLS AND PROCEDURES



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



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



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



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PART II



ITEM 1. LEGAL PROCEEDINGS



Note 10 to the
Consolidated Financial Statements, entitled Contingent Liabilities and Other Matters, is incorporated here by reference.



On October 5, 2000 (the Petition Date), Owens Corning and the 17 United States subsidiaries listed below (collectively with Owens Corning, the
Debtors) filed voluntary petitions for relief (the Filing) under Chapter 11 of the United States Bankruptcy Code (the Bankruptcy Code) in the United States Bankruptcy Court for the District of Delaware (the
USBC):



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



The Debtors are currently operating
their businesses as debtors-in-possession in accordance with provisions of the Bankruptcy Code. The Chapter 11 cases of the Debtors (collectively, the Chapter 11 Cases) are being jointly administered under Case No. 00-3837 (JKF).



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



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



On or about October 10, 2003, Kensington International Limited and Springfield Associates,
LLC (collectively, K&S), two assignees of lenders under Owens Cornings Pre-Petition Credit Facility, filed a motion in the USBC seeking to recuse District Court Judge Wolin from further participation in the Chapter 11 Cases.
After various proceedings before the District Court and the United States Court of Appeals for the Third Circuit (the Third Circuit), on May 17, 2004, the Third Circuit entered an order requiring Judge Wolin to recuse himself from
further participation in the Chapter 11 Cases. On May 27, 2004, the Third Circuit assigned Judge John P. Fullam of the United States District Court, Eastern District of Pennsylvania, to replace Judge Wolin in the Chapter 11 Cases. In addition, the
Third Circuit assigned other judges to sit on other of the cases that had previously been consolidated under the terms of the Administrative Consolidation, effectively terminating the consolidation.



As a consequence of the Filing, all pending litigation against the Debtors was stayed
automatically by section 362 of the Bankruptcy Code and, absent further order of the Bankruptcy Court, no party may take any action to recover on pre-petition claims against the Debtors. See Note 1 to the Consolidated Financial Statements.



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ITEM 1. LEGAL PROCEEDINGS (continued)



Two creditors committees, one representing asbestos claimants and the other representing unsecured creditors, have been appointed as
official committees in the Chapter 11 Cases. In addition, the Bankruptcy Court has appointed James J. McMonagle as Legal Representative for the class of future asbestos personal injury claimants against one or more of the Debtors. The two committees
and the Legal Representative have the right to be heard on all matters that come before the Bankruptcy Court.



Owens Corning 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. On January 17, 2003, the Debtors, together with the Official Committee of Asbestos Claimants and the Legal Representative for the class of future asbestos claimants, filed a proposed
joint plan of reorganization in the USBC. The same proponents filed a proposed amended joint plan of reorganization in the USBC on March 28, 2003, a proposed second amended joint plan of reorganization in the USBC on May 23, 2003, a proposed third
amended joint plan of reorganization in the USBC on August 8, 2003, and a proposed fourth amended joint plan of reorganization (as so amended through such fourth amendment, the Plan) in the USBC on October 24, 2003.



On June 7, 2004, Owens Corning announced that an agreement in principle (the Agreement
in Principle) had been reached with the Official Committee of Asbestos Claimants, the Legal Representative for the class of future asbestos claimants, and the official representatives of the Companys pre-petition bondholders and trade
creditors. Among other things, the Agreement in Principle provides that all holders of bonds, bank debt and senior trade debt would receive a recovery equal to 38.5% of their claims upon Owens Cornings successful emergence from Chapter 11. The
recoveries of all creditors are based on certain agreed and assumed values and would be comprised of cash, debt and equity. However, their actual recoveries could ultimately be higher or lower based on the value of the equity to be issued by Owens
Corning upon emergence from Chapter 11 and other factors.



It is expected that
the Plan will be amended to reflect the terms of the Agreement in Principle. The Plan is subject to confirmation by the Bankruptcy Court.



The Plan is premised upon the substantive consolidation of Owens Corning and certain of its direct and indirect subsidiaries (but not the Fibreboard Settlement Trust (see
Note 11 to the Consolidated Financial Statements)) for the purposes of voting, determining which claims and interests will be entitled to vote to accept or reject the Plan, confirmation of the Plan, and the resultant discharge of and cancellation of
claims and interests and distribution of assets, interests and other property under the Plan. On October 5, 2004, the District Court issued a Memorandum and Order Concerning Substantive Consolidation. In that Memorandum and Order, the District Court
granted the Debtors motion for substantive consolidation and ordered that counsel for the participating parties meet for the purpose of attempting to achieve an agreed-upon plan of reorganization. On October 13, 2004, the holders of the debt
under the Pre-Petition Credit Facility filed an appeal of the Memorandum and Order with the Third Circuit. On November 2, 2004, the Debtors, the Official Committee of Asbestos Claimants, the Legal Representative for the class of future asbestos
claimants, and the official representatives of the Companys pre-petition bondholders and trade creditors filed a joint motion to dismiss such appeal on the grounds that the Memorandum and Order is not a final judgment or otherwise appealable.



On August 19, 2004, the District Court scheduled a claims estimation hearing
to be held on January 13, 2005. The purpose of the claims estimation hearing will be to establish the amount of current and future asbestos liability to be allowed in the Chapter 11 Cases. No assurance can be made as to whether the



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ITEM 1. LEGAL PROCEEDINGS (continued)



amount of current and future asbestos liability established as a result of such claims estimation hearing will be more or less than the
amounts reserved for asbestos claims on the financial statements of the Debtors or will be more or less than the $16 billion amount that the Official Committee of Asbestos Claimants and the Legal Representative for the class of future asbestos
claimants have established as the level below which they have reserved the right to withdraw support of the Plan. The holders of the debt under the Pre-Petition Credit Facility have filed a motion with the District Court requesting that the
estimation hearing be postponed beyond January 13, 2005. The District Court has not yet ruled on that motion.



Although the basic terms of the Plan, as modified to reflect the Agreement in Principle, have now been agreed to by the official representatives of all of Owens Cornings major creditor constituencies, except the
holders of its debt under the Pre-Petition Credit Facility, who continue to oppose the Plan, Owens Corning believes that it is likely that the terms, conditions and provisions of the Plan will remain the subject of continuing negotiations or
litigation to resolve differences among the creditor constituencies as to their treatment. Accordingly, Owens Corning is unable to predict at this time what the treatment of creditors and equity holders of the respective Debtors will ultimately be
under any plan or plans of reorganization finally confirmed. The current Plan, as modified to reflect the Agreement in Principle, provides for payment of 38.5% of the face amount of all unsecured creditors claims, in the form of distributions
of new common stock and notes of the reorganized company, and cash. However, the percentage recovery and value of the payments ultimately made under the Plan to each class of creditors will depend upon a number of factors, including the value of the
shares of new common stock and notes to be issued by Owens Corning. Additional distributions from potential insurance and other third-party claims may also be paid to certain classes of unsecured creditors, but it is expected that all classes of
pre-petition unsecured creditors will be impaired. Therefore, the Plan also provides that the existing common stock of Owens Corning will be cancelled, and that current shareholders will receive no distribution or other consideration in exchange for
their shares. It is impossible to predict at this time the terms and provisions of any plan or plans of reorganization that may ultimately be confirmed, when a plan or plans of reorganization will be confirmed, or the treatment of creditors
thereunder. The Plan, as modified to reflect the Agreement in Principle, is discussed in greater detail in Note 1 to the Consolidated Financial Statements.



On or about October 17, 2003, the Official Committee of Unsecured Creditors filed a motion in the USBC requesting appointment of a Chapter 11 trustee to assume control of
the Chapter 11 Cases due to alleged breach of the Debtors fiduciary duty of undivided loyalty to act in the best interest of all creditors. After such motion was dismissed by the USBC for failure to comply with local court rules, the Official
Committee of Unsecured Creditors re-filed such motion on October 30, 2003. A supplement to the motion of the Official Committee of Unsecured Creditors was filed on May 28, 2004, and various filings in opposition to such supplemented motion were
filed by the Debtors, the Legal Representative for the class of future asbestos claimants, and the Official Committee of Asbestos Claimants. The USBC has continued further proceedings on this matter to January 26, 2005.



On or about May 24, 2004, Credit Suisse First Boston, Kensington International Limited,
Springfield Associates LLC and Angelo Gordon filed a motion in the USBC requesting the appointment of a Chapter 11 Examiner to examine (i) allegations of improper conduct by management of the Debtors, (ii) alleged breaches of fiduciary duty by
management of the Debtors resulting from the influence of the Legal Representative for the class of future asbestos claimants and the Official Committee of Asbestos Claimants on the process of developing a Plan and the tort estimation process, (iii)
alleged connections between the



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ITEM 1. LEGAL PROCEEDINGS (continued)



asbestos plaintiffs interests, a Court appointed mediator, and the Debtors asbestos liability estimation firm, and (iv) other
alleged improper conduct. Owens Corning, the Legal Representative for the class of future asbestos claimants, and the Official Committee of Asbestos Claimants have each filed responsive pleadings to the motion. The USBC has continued further
proceedings on the motion pending issuance of a final order on the motion (described in the preceding paragraph) requesting appointment of a Chapter 11 trustee.



ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS



As a consequence of the Filing and the impact of certain provisions of the Companys DIP Financing and in a cash management order entered by the Bankruptcy Court, the Company and its subsidiaries are subject to
certain restrictions on their ability to pay dividends and to transfer cash and other assets to each other and to their affiliates. See Note 1 to the Consolidated Financial Statements.



ITEM 3. DEFAULTS UPON SENIOR SECURITIES



Substantially all of the Companys pre-petition debt is now in default due to the Filing. See Note 1 to the Consolidated Financial Statements. As described in Note 1, the Consolidated Financial Statements present the Debtors
pre-petition debt under the caption Liabilities Subject to Compromise. This includes debt under the Pre-Petition Credit Facility and approximately $1.5 billion of other outstanding debt. As required by Statement of Position (SOP) 90-7,
at the Petition Date the Company recorded the Debtors pre-petition debt instruments at the allowed amount, as defined by SOP 90-7. The Consolidated Financial Statements present pre-petition debt of Non-Debtor Subsidiaries that is in default
due to the Filing, in the amount of approximately $7 million, as current on the Consolidated Balance Sheet as of September 30, 2004.



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



No matter was submitted to a vote of security holders during the quarter ended September 30, 2004.



ITEM 5. OTHER INFORMATION



No information is
reported under this Item.



ITEM 6. EXHIBITS



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



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SIGNATURES



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



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



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EXHIBIT INDEX



|              |  |                                                                                                                                                                                                                                                                                                                                                          |  |                                                                                                                                                                                                                     
|------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Document Description                                                                                                                                                                                                                                                                                                                                    
|(2)           |  | Plan of Acquisition, Reorganization, Arrangement, Liquidation or Succession.                                                                                                                                                                                                                                                                            
|              | 
|              |  | Bonds/Trade Term Sheet, dated as of June 3, 2004 (incorporated herein by reference to Exhibit (2) to Owens Corningsquarterly report on Form 10-Q (File No. 1-3660) for
the quarter ended June 30, 2004).                                                                                                                                               
|              | 
|              |  | Fourth Amended Joint Plan of Reorganization of Owens Corning and Its Affiliated Debtors and Debtors-In-Possession, filedin the United States Bankruptcy Court for the District
of Delaware on October 24, 2003 (incorporated herein by reference toExhibit (2) to Owens Cornings current report on Form 8-K (File No. 1-3660), filed October 27, 2003).
|              | 
|              |  | Third Amended Joint Plan of Reorganization of Owens Corning and Its Affiliated Debtors and Debtors-In-Possession, filedin the United States Bankruptcy Court for the District
of Delaware on August 8, 2003 (incorporated herein by reference toExhibit (2) to Owens Cornings current report on Form 8-K (File No. 1-3660), filed August 8, 2003).     
|              | 
|              |  | Second Amended Joint Plan of Reorganization of Owens Corning and Its Affiliated Debtors and Debtors-In-Possession,filed in the United States Bankruptcy Court for the District
of Delaware on May 23, 2003 (incorporated herein by referenceto Exhibit (2) to Owens Cornings current report on Form 8-K (File No. 1-3660), filed May 27, 2003).        
|              | 
|              |  | Amended Joint Plan of Reorganization of Owens Corning and Its Affiliated Debtors and Debtors-In-Possession, filed in theUnited States Bankruptcy Court for the District of
Delaware on March 28, 2003 (incorporated herein by reference to Exhibit(2) to Owens Cornings current report on Form 8-K (File No. 1-3660), filed March 28, 2003).           
|              | 
|              |  | Joint Plan of Reorganization of Owens Corning and Its Affiliated Debtors and Debtors-In-Possession, filed in the UnitedStates Bankruptcy Court for the District of Delaware on
January 17, 2003 (incorporated herein by reference to Exhibit (2) toOwens Cornings current report on Form 8-K (File No. 1-3660), filed January 17, 2003).               
|              | 
|(3)           |  | Articles of Incorporation and By-Laws.                                                                                                                                                                                                                                                                                                                  
|              |  |                                                                                                                                                                                                                                                                                                                                                         
|              |  | (i)                                                                                                                                                                                                                                                                                                                                                      |  | Certificate of Incorporation of Owens Corning, as amended (incorporated herein by reference to Exhibit (3) to Owens Cornings quarterly report on Form 10-Q (File No. 1-3660) for the
quarter ended March 31, 1997).
|              |  |                                                                                                                                                                                                                                                                                                                                                         
|              |  | (ii)                                                                                                                                                                                                                                                                                                                                                     |  | By-Laws of Owens Corning, as amended (incorporated herein by reference to Exhibit (3) to Owens Cornings annual report on Form 10-K (File No. 1-3660) for the year 1999).                                           



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EXHIBIT INDEX



|              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Document Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|(4)           |  | Instruments Defining the Rights of Security Holders, Including Indentures.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|              | 
|              |  | Post-Petition Credit Agreement, dated as of December 8, 2000, among Owens Corning and the subsidiaries of Owens Corning named therein, the financial institutions named therein, and Bank of
America, N.A., as Agent (incorporated herein by reference to Exhibit (4) to Owens Cornings annual report on Form 10-K (File No. 1-3660) for the year ended December 31, 2000), as amended by First Amendment to Post-Petition Credit Agreement,
dated as of October 31, 2002 (incorporated herein by reference to Exhibit (4) to Owens Cornings annual report on Form 10-K (file No. 1-3660) for the year ended December 31, 2002), as amended by Second Amendment to Post-Petition Credit
Agreement, dated as of September 20, 2004 (incorporated herein by reference to Exhibit 4 to Owens Cornings current report on Form 8-K (file No. 1-3660), filed November 1, 2004).
|              | 
|              |  | Bonds/Trade Term Sheet, dated as of June 3, 2004 (incorporated herein by reference to Exhibit (2) to Owens Cornings quarterly report on Form 10-Q (File No. 1-3660), Filed August 4,
2004).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|              | 
|              |  | Fourth Amended Joint Plan of Reorganization of Owens Corning and Its Affiliated Debtors and Debtors-In-Possession, filed in the United States Bankruptcy Court for the District of Delaware on
October 24, 2003 (incorporated herein by reference to Exhibit (2) to Owens Cornings current report on Form 8-K (File No. 1-3660), filed October 27, 2003).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|              | 
|              |  | Third Amended Joint Plan of Reorganization of Owens Corning and Its Affiliated Debtors and Debtors-In-Possession, filed in the United States Bankruptcy Court for the District of Delaware on
August 8, 2003 (incorporated herein by reference to Exhibit (2) to Owens Cornings current report on Form 8-K (File No. 1-3660), filed August 8, 2003).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|              | 
|              |  | Second Amended Joint Plan of Reorganization of Owens Corning and Its Affiliated Debtors and Debtors-In-Possession, filed in the United States Bankruptcy Court for the District of Delaware on
May 23, 2003 (incorporated herein by reference to Exhibit (2) to Owens Cornings current report on Form 8-K (File No. 1-3660), filed May 27, 2003).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|              | 
|              |  | Amended Joint Plan of Reorganization of Owens Corning and Its Affiliated Debtors and Debtors-In-Possession, filed in the United States Bankruptcy Court for the District of Delaware on March
28, 2003 (incorporated herein by reference to Exhibit (2) to Owens Cornings current report on Form 8-K (File No. 1-3660), filed March 28, 2003).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|              | 
|              |  | Joint Plan of Reorganization of Owens Corning and Its Affiliated Debtors and Debtors-In-Possession, filed in the United States Bankruptcy Court for the District of Delaware on January 17,
2003 (incorporated herein by reference to Exhibit (2) to Owens Cornings current report on Form 8-K (File No. 1-3660), filed January 17, 2003).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 



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EXHIBIT INDEX



|              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Document Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|(10)          |  | Material Contracts                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|              | 
|              |  | Post-Petition Credit Agreement, dated as of December 8, 2000, among Owens Corning and the subsidiaries of Owens Corning named therein, the financial institutions named therein, and Bank of
America, N.A., as Agent (incorporated herein by reference to Exhibit (4) to Owens Cornings annual report on Form 10-K (File No. 1-3660) for the year ended December 31, 2000), as amended by First Amendment to Post-Petition Credit Agreement,
dated as of October 31, 2002 (incorporated herein by reference to Exhibit (4) to Owens Cornings annual report on Form 10-K (file No. 1-3660) for the year ended December 31, 2002), as amended by Second Amendment to Post-Petition Credit
Agreement, dated as of September 20, 2004 (incorporated herein by reference to Exhibit 4 to Owens Cornings current report on Form 8-K (file No. 1-3660), filed November 1, 2004).
|              | 
|              |  | Standard Retainer/Meeting Fee Arrangement for Non-Employee Directors, as amended (filed herewith).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|              | 
|              |  | Owens Corning Key Employee Retention Incentive Plan (incorporated herein by reference to Exhibit (10) to Owens Cornings quarterly report on Form 10-Q (File No. 1-3660) for the quarter
ended June 30, 2004).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|              | 
|(31)          |  | Rule 13a-14(a)/15d-14(a) Certifications                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|              | 
|              |  | Certification of Chief Executive Officer (principal executive officer) (filed herewith).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|              | 
|              |  | Certification of Chief Financial Officer (principal financial officer) (filed herewith).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|              | 
|(32)          |  | Section 1350 Certifications                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|              | 
|              |  | Certification of Chief Executive Officer (principal executive officer) (filed herewith).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|              | 
|              |  | Certification of Chief Financial Officer (principal financial officer) (filed herewith).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|              | 
|(99)          |  | Subsidiaries of Owens Corning, as amended (filed herewith).