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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 March 31, 2005



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 March 31, 2005



55,341,765



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(i)



INDEX



|           |  |                                                                                       |  |        
|---------- |  | ------------------------------------------------------------------------------------- |  | -------
|           |  |                                                                                       |  | Page   
|Cover Page |  |                                                                                       |  | 1      
|           |  |                                                                                      
|PART I     |  |                                                                                       |  |        
|           |  |                                                                                      
|Item 1.    |  | Financial Statements                                                                  |  |        
|           |  | Consolidated Statement of Income (Loss)                                               |  | 2      
|           |  | Consolidated Balance Sheet                                                            |  | 3 - 4  
|           |  | Consolidated Statement of Cash Flows                                                  |  | 5      
|           |  | Notes to Consolidated Financial Statements                                            |  |        
|           |  | Voluntary Petition for Relief Under Chapter 11                                        |  | 6 - 22 
|           |  | Segment Data                                                                          |  | 23 - 24
|           |  | General                                                                               |  | 25     
|           |  | Inventories                                                                           |  | 25     
|           |  | Goodwill and Other Intangibles                                                        |  | 25 - 26
|           |  | Acquisitions                                                                          |  | 26     
|           |  | Warranties                                                                            |  | 26     
|           |  | Pension Plans and Other Postretirement Benefits                                       |  | 27 - 28
|           |  | Contingent Liabilities and Other Matters                                              |  | 28 - 45
|           |  | Fibreboard Settlement Trust                                                           |  | 45 - 47
|           |  | Stock Compensation                                                                    |  | 47     
|           |  | Earnings per Share                                                                    |  | 48     
|           |  | Comprehensive Income/Loss                                                             |  | 48     
|           |  | Income Taxes                                                                          |  | 49     
|           |  | Accounting Pronouncements                                                             |  | 49     
|           |  |                                                                                      
|Item 2.    |  | Managements Discussion and Analysis of Financial Condition and Results of Operations |  | 50 - 68
|           |  |                                                                                      
|Item 3.    |  | Quantitative and Qualitative Disclosures About Market Risk                            |  | 68     
|           |  |                                                                                      
|Item 4.    |  | Controls and Procedures                                                               |  | 68     





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INDEX



|        |  |                                                             |  |        
|------- |  | ----------------------------------------------------------- |  | -------
|        |  |                                                             |  | Page   
|PART II |  |                                                             |  |        
|        |  |                                                            
|Item 1. |  | Legal Proceedings                                           |  | 69 - 72
|        |  |                                                            
|Item 2. |  | Unregistered Sales of Equity Securities and Use of Proceeds |  | 73     
|        |  |                                                            
|Item 3. |  | Defaults Upon Senior Securities                             |  | 73     
|        |  |                                                            
|Item 4. |  | Submission of Matters to a Vote of Security Holders         |  | 73     
|        |  |                                                            
|Item 5. |  | Other Information                                           |  | 74     
|        |  |                                                            
|Item 6. |  | Exhibits                                                    |  | 74     
|        |  |                                                            
|        |  | Signatures                                                  |  | 75     
|        |  |                                                            
|        |  | Exhibit Index                                               |  | 76 - 78





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PART I

ITEM 1. FINANCIAL STATEMENTS



OWENS CORNING AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF INCOME (LOSS)

(unaudited)



|                                                                                                    |  |                                                |        |   |      |   |       |  
|--------------------------------------------------------------------------------------------------- |  | ---------------------------------------------- | ------ | - | ---- | - | ----- | -
|                                                                                                    |  | Quarter EndedMarch 31,                         |       
|                                                                                                    |  | 2005                                           |        |   | 2004 |  
|                                                                                                    |  | (In millions of dollars,except per share data) |       
|NET SALES                                                                                           |  | $                                              | 1,402  |   |      | $ | 1,209 |  
|COST OF SALES                                                                                       |  |                                                | 1,167  |   |      |   | 1,037 |  
|                                                                                                    |  |                                                |        |   |      |   |       |  
|Gross margin                                                                                        |  |                                                | 235    |   |      |   | 172   |  
|                                                                                                    |  |                                                |        |   |      |   |       |  
|OPERATING EXPENSES                                                                                  |  |                                                |        |   |      |   |       |  
|Marketing and administrative expenses                                                               |  |                                                | 124    |   |      |   | 115   |  
|Science and technology expenses                                                                     |  |                                                | 13     |   |      |   | 11    |  
|Chapter 11 related reorganization items                                                             |  |                                                | 36     |   |      |   | 10    |  
|Provision for asbestos litigation claims  Owens Corning                                            |  |                                                | 3,435  |   |      |   |      |  
|Provision for asbestos litigation claims  Fibreboard                                               |  |                                                | 907    |   |      |   |      |  
|Other                                                                                               |  |                                                | 1      |   |      |   | 2     |  
|                                                                                                    |  |                                                |        |   |      |   |       |  
|Total operating expenses                                                                            |  |                                                | 4,516  |   |      |   | 138   |  
|                                                                                                    |  |                                                |        |   |      |   |       |  
|INCOME (LOSS) FROM OPERATIONS                                                                       |  |                                                | (4,281 | ) |      |   | 34    |  
|                                                                                                    |  |                                               
|Interest expense, net                                                                               |  |                                                | 1      |   |      |   | 1     |  
|                                                                                                    |  |                                                |        |   |      |   |       |  
|INCOME (LOSS) BEFORE INCOME TAX (BENEFIT) EXPENSE                                                   |  |                                                | (4,282 | ) |      |   | 33    |  
|                                                                                                    |  |                                               
|Income tax (benefit) expense                                                                        |  |                                                | (48    | ) |      |   | 27    |  
|                                                                                                    |  |                                                |        |   |      |   |       |  
|INCOME (LOSS) BEFORE MINORITY INTEREST AND EQUITY IN NET EARNINGS OF AFFILIATES                     |  |                                                | (4,234 | ) |      |   | 6     |  
|                                                                                                    |  |                                               
|Minority interest and equity in net earnings of affiliates                                          |  |                                                | (3     | ) |      |   | (1    | )
|                                                                                                    |  |                                                |        |   |      |   |       |  
|NET INCOME (LOSS)                                                                                   |  | $                                              | (4,237 | ) |      | $ | 5     |  
|                                                                                                    |  |                                                |        |   |      |   |       |  
|NET INCOME (LOSS) PER COMMON SHARE                                                                  |  |                                                |        |   |      |   |       |  
|Basic net income (loss) per share                                                                   |  | $                                              | (76.59 | ) |      | $ | 0.09  |  
|                                                                                                    |  |                                                |        |   |      |   |       |  
|Diluted net income (loss) per share                                                                 |  | $                                              | (76.59 | ) |      | $ | 0.09  |  
|                                                                                                    |  |                                                |        |   |      |   |       |  
|WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING AND COMMON EQUIVALENT SHARES DURING THE PERIOD |  |                                                |        |   |      |   |       |  
|Basic                                                                                               |  |                                                | 55.3   |   |      |   | 55.3  |  
|                                                                                                    |  |                                               
|Diluted                                                                                             |  |                                                | 55.3   |   |      |   | 59.9  |  



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





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OWENS CORNING AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

(unaudited)



|                                                                            |  |                          |        |   |                   |   |        |  
|--------------------------------------------------------------------------- |  | ------------------------ | ------ | - | ----------------- | - | ------ | -
|                                                                            |  | March 31, 2005           |        |   | December 31, 2004 |  
|                                                                            |  | (In millions of dollars) |       
|ASSETS                                                                      |  |                          |        |   |                   |   |        |  
|                                                                            |  |                         
|CURRENT                                                                     |  |                          |        |   |                   |   |        |  
|Cash and cash equivalents                                                   |  | $                        | 930    |   |                   | $ | 1,125  |  
|Receivables, less allowances of $19 million in 2005 and $18 million in 2004 |  |                          | 665    |   |                   |   | 527    |  
|Inventories                                                                 |  |                          | 513    |   |                   |   | 445    |  
|Other current assets                                                        |  |                          | 25     |   |                   |   | 31     |  
|                                                                            |  |                          |        |   |                   |   |        |  
|Total current                                                               |  |                          | 2,133  |   |                   |   | 2,128  |  
|                                                                            |  |                          |        |   |                   |   |        |  
|OTHER                                                                       |  |                          |        |   |                   |   |        |  
|Restricted cash - asbestos and insurance related                            |  |                          | 188    |   |                   |   | 188    |  
|Restricted cash, securities, and other - Fibreboard                         |  |                          | 1,411  |   |                   |   | 1,418  |  
|Deferred income taxes                                                       |  |                          | 1,057  |   |                   |   | 999    |  
|Pension-related assets                                                      |  |                          | 484    |   |                   |   | 499    |  
|Goodwill                                                                    |  |                          | 198    |   |                   |   | 198    |  
|Investment in affiliates                                                    |  |                          | 82     |   |                   |   | 82     |  
|Other noncurrent assets                                                     |  |                          | 132    |   |                   |   | 117    |  
|                                                                            |  |                          |        |   |                   |   |        |  
|Total other                                                                 |  |                          | 3,552  |   |                   |   | 3,501  |  
|                                                                            |  |                          |        |   |                   |   |        |  
|PLANT AND EQUIPMENT, at cost                                                |  |                          |        |   |                   |   |        |  
|Land                                                                        |  |                          | 80     |   |                   |   | 80     |  
|Buildings and leasehold improvements                                        |  |                          | 806    |   |                   |   | 803    |  
|Machinery and equipment                                                     |  |                          | 3,284  |   |                   |   | 3,293  |  
|Construction in progress                                                    |  |                          | 145    |   |                   |   | 128    |  
|                                                                            |  |                          |        |   |                   |   |        |  
|                                                                            |  |                          | 4,315  |   |                   |   | 4,304  |  
|Accumulated depreciation                                                    |  |                          | (2,329 | ) |                   |   | (2,294 | )
|                                                                            |  |                          |        |   |                   |   |        |  
|Net plant and equipment                                                     |  |                          | 1,986  |   |                   |   | 2,010  |  
|                                                                            |  |                          |        |   |                   |   |        |  
|TOTAL ASSETS                                                                |  | $                        | 7,671  |   |                   | $ | 7,639  |  
|                                                                            |  |                          |        |   |                   |   |        |  



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





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OWENS CORNING AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET (continued)

(unaudited)



|                                                                                                  |  |                          |        |   |                   |   |        |  
|------------------------------------------------------------------------------------------------- |  | ------------------------ | ------ | - | ----------------- | - | ------ | -
|                                                                                                  |  | March 31, 2005           |        |   | December 31, 2004 |  
|                                                                                                  |  | (In millions of dollars) |       
|LIABILITIES AND STOCKHOLDERS DEFICIT                                                             |  |                          |        |  
|                                                                                                  |  |                         
|CURRENT                                                                                           |  |                          |        |   |                   |   |        |  
|Accounts payable and accrued liabilities                                                          |  | $                        | 841    |   |                   | $ | 909    |  
|Short-term debt                                                                                   |  |                          | 11     |   |                   |   | 11     |  
|Long-term debt - current portion                                                                  |  |                          | 31     |   |                   |   | 31     |  
|                                                                                                  |  |                          |        |   |                   |   |        |  
|Total current                                                                                     |  |                          | 883    |   |                   |   | 951    |  
|                                                                                                  |  |                          |        |   |                   |   |        |  
|LONG-TERM DEBT                                                                                    |  |                          | 30     |   |                   |   | 38     |  
|                                                                                                  |  |                          |        |   |                   |   |        |  
|OTHER                                                                                             |  |                          |        |   |                   |   |        |  
|Pension plan liability                                                                            |  |                          | 732    |   |                   |   | 731    |  
|Other employee benefits liability                                                                 |  |                          | 404    |   |                   |   | 401    |  
|Other                                                                                             |  |                          | 182    |   |                   |   | 178    |  
|                                                                                                  |  |                          |        |   |                   |   |        |  
|Total other                                                                                       |  |                          | 1,318  |   |                   |   | 1,310  |  
|                                                                                                  |  |                          |        |   |                   |   |        |  
|LIABILITIES SUBJECT TO COMPROMISE                                                                 |  |                          | 13,511 |   |                   |   | 9,171  |  
|                                                                                                  |  |                          |        |   |                   |   |        |  
|COMPANY OBLIGATED SECURITIES OF ENTITIES HOLDING SOLELY PARENT DEBENTURES - SUBJECT TO COMPROMISE |  |                          | 200    |   |                   |   | 200    |  
|                                                                                                  |  |                          |        |   |                   |   |        |  
|COMMITMENTS AND CONTINGENCIES (Notes 9 and 10)                                                    |  |                          |        |   |                   |   |        |  
|MINORITY INTEREST                                                                                 |  |                          | 48     |   |                   |   | 49     |  
|                                                                                                  |  |                          |        |   |                   |   |        |  
|STOCKHOLDERS DEFICIT                                                                             |  |                          |        |   |                   |   |        |  
|Common stock                                                                                      |  |                          | 6      |   |                   |   | 6      |  
|Additional paid in capital                                                                        |  |                          | 692    |   |                   |   | 692    |  
|Accumulated deficit                                                                               |  |                          | (8,684 | ) |                   |   | (4,447 | )
|Accumulated other comprehensive loss                                                              |  |                          | (332   | ) |                   |   | (330   | )
|Other                                                                                             |  |                          | (1     | ) |                   |   | (1     | )
|                                                                                                  |  |                          |        |   |                   |   |        |  
|Total stockholders deficit                                                                       |  |                          | (8,319 | ) |                   |   | (4,080 | )
|                                                                                                  |  |                          |        |   |                   |   |        |  
|TOTAL LIABILITIES AND STOCKHOLDERS DEFICIT                                                       |  | $                        | 7,671  |   |                   | $ | 7,639  |  
|                                                                                                  |  |                          |        |   |                   |   |        |  



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





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OWENS CORNING AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS

(unaudited)



|                                                                             |  |                          |        |   |      |   |       |  
|---------------------------------------------------------------------------- |  | ------------------------ | ------ | - | ---- | - | ----- | -
|                                                                             |  | Quarter EndedMarch 31,   |       
|                                                                             |  | 2005                     |        |   | 2004 |  
|                                                                             |  | (In millions of dollars) |       
|NET CASH FLOW FROM OPERATIONS                                                |  |                          |        |   |      |   |       |  
|Net income (loss)                                                            |  | $                        | (4,237 | ) |      | $ | 5     |  
|Reconciliation of net cash flow from operations                              |  |                          |        |   |      |   |       |  
|Noncash items:                                                               |  |                          |        |   |      |   |       |  
|Provision for asbestos litigation claims                                     |  |                          | 4,342  |   |      |   |      |  
|Provision for depreciation and amortization                                  |  |                          | 59     |   |      |   | 53    |  
|Provision for impairment of fixed assets                                     |  |                          | 3      |   |      |   |      |  
|Provision (credit) for deferred income taxes                                 |  |                          | (57    | ) |      |   | 6     |  
|Provision for pension and other employee benefits liability                  |  |                          | 29     |   |      |   | 28    |  
|Other                                                                        |  |                          | 7      |   |      |   | 9     |  
|Increase in receivables                                                      |  |                          | (144   | ) |      |   | (108  | )
|Increase in inventories                                                      |  |                          | (71    | ) |      |   | (44   | )
|Decrease in accounts payable and accrued liabilities                         |  |                          | (45    | ) |      |   | (43   | )
|Proceeds from insurance for asbestos litigation claims, excluding Fibreboard |  |                          | 1      |   |      |   |      |  
|Pension fund contribution                                                    |  |                          | (4     | ) |      |   | (3    | )
|Payments for other employee benefits liability                               |  |                          | (6     | ) |      |   | (4    | )
|Decrease (increase) in restricted cash, securities, and other - Fibreboard   |  |                          | 6      |   |      |   | (12   | )
|Other                                                                        |  |                          | (15    | ) |      |   | (13   | )
|                                                                             |  |                          |        |   |      |   |       |  
|Net cash flow from operations                                                |  |                          | (132   | ) |      |   | (126  | )
|                                                                             |  |                          |        |   |      |   |       |  
|NET CASH FLOW FROM INVESTING                                                 |  |                          |        |   |      |   |       |  
|Additions to plant and equipment                                             |  |                          | (46    | ) |      |   | (53   | )
|Investment in affiliates and subsidiaries, net of cash acquired              |  |                          | (1     | ) |      |   | (2    | )
|Proceeds from the sale of assets or affiliate                                |  |                          |       |   |      |   | 6     |  
|                                                                             |  |                          |        |   |      |   |       |  
|Net cash flow from investing                                                 |  |                          | (47    | ) |      |   | (49   | )
|                                                                             |  |                          |        |   |      |   |       |  
|NET CASH FLOW FROM FINANCING                                                 |  |                          |        |   |      |   |       |  
|Payments on long-term debt                                                   |  |                          | (11    | ) |      |   | (5    | )
|Net (decrease) increase in short-term debt                                   |  |                          | (1     | ) |      |   | 1     |  
|Subject to compromise                                                        |  |                          |       |   |      |   | (3    | )
|                                                                             |  |                          |        |   |      |   |       |  
|Net cash flow from financing                                                 |  |                          | (12    | ) |      |   | (7    | )
|                                                                             |  |                          |        |   |      |   |       |  
|Effect of exchange rate changes on cash                                      |  |                          | (4     | ) |      |   | (2    | )
|                                                                             |  |                          |        |   |      |   |       |  
|NET DECREASE IN CASH AND CASH EQUIVALENTS                                    |  |                          | (195   | ) |      |   | (184  | )
|Cash and cash equivalents at beginning of period                             |  |                          | 1,125  |   |      |   | 1,005 |  
|                                                                             |  |                          |        |   |      |   |       |  
|CASH AND CASH EQUIVALENTS AT END OF PERIOD                                   |  | $                        | 930    |   |      | $ | 821   |  
|                                                                             |  |                          |        |   |      |   |       |  



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





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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, it is possible that 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) may file petitions for relief under Chapter 11 of the Bankruptcy Code under
certain circumstances.



The Debtors filed for relief under Chapter 11 to
address the growing demands on Owens Cornings cash flow resulting from its multi-billion dollar asbestos liability. This liability is discussed in greater detail in Note 9 to the Consolidated Financial Statements.



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 May 27, 2004, the United States Court of Appeals for the Third Circuit (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.





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OWENS
CORNING AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



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



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.



The holders of the debt under the Pre-Petition Credit Facility, and certain other members of
the major non-asbestos creditor groups, have indicated that they continue to oppose the Plan.



Certain terms, conditions and provisions of the Plan are discussed below. The Plan is subject to confirmation by the Bankruptcy Court. Because the Plan is based on certain assumptions, negotiating positions and
valuations that are subject to change, it is expected that the Plan will be further amended prior to confirmation. There can be no assurance that a Plan supported by Owens Corning and less than all of the major creditor groups will be confirmed by
the Bankruptcy Court and consummated. Owens Corning is unable to predict what impact 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, as it relates to Debtors other than Fibreboard, 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 10 to the Consolidated Financial Statements)) for the purposes of voting, determining which claims and interests will be entitled to vote to accept or reject the Plan, confirmation of the Plan, and the resultant discharge
of and cancellation of claims and interests and distribution of assets, interests and other property under the Plan. As to Fibreboard, the Plan contemplates that the assets available to satisfy Fibreboard liabilities (which are generally limited to
asbestos-related liabilities) will be limited to the assets of the Fibreboard Settlement Trust and certain other specified assets.





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CORNING AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



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



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. 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. The Third Circuit heard oral arguments on the appeal of the Memorandum and Order on February 7, 2005. Owens Corning is unable to predict what the effect, if any, of the results of the appeal would be on Owens Corning and Fibreboard or their
plan or plans of reorganization. However, because the currently proposed Plan of Reorganization is based upon substantive consolidation, a Third Circuit reversal of the District Courts Order could potentially result in significant
modifications of the Plan and delays in the resolution of the Chapter 11 Cases.



A six-day claims estimation hearing was held before the District Court beginning January 13, 2005. The purpose of the claims estimation hearing was to establish the amount of Owens Cornings and Fibreboards
current and future asbestos liability to be allowed as claims in the Chapter 11 Cases. In general, the holders of the debt under the Pre-Petition Credit Facility argued that the amount of such asbestos liability should be set at an amount
significantly lower than the amounts reserved for asbestos claims on the financial statements of the Debtors, and the Official Committee of Asbestos Claimants and the Legal Representative for the class of future asbestos claimants argued that such
asbestos liability should be set at a significantly higher level. On March 31, 2005, the District Court issued a Memorandum and Order estimating the total amount of contingent and unliquidated claims against Owens Corning for personal injury or
death caused by exposure to asbestos (including pending claims, future claims and contract claims) at $7 billion. As a result of the District Courts estimation, Owens Corning increased its reserve for potential asbestos-related liability by
$3.435 billion for the period ended March 31, 2005, so that its recorded reserve equaled the level of asbestos liability estimated by the District Court (see Note 9 to the Consolidated Financial Statements). Although the District Courts
Memorandum and Order did not specifically address the potential asbestos-related liability of Fibreboard, based upon the analysis that the District Court had followed in establishing estimated asbestos liability for Owens Corning, Owens Corning also
increased Fibreboards recorded reserve for potential asbestos-related liability by $907 million.



Related Developments



PROPOSED ASBESTOS LEGISLATION



Senators Arlen
Specter (R-PA) and Patrick Leahy (D-VT) co-sponsored an asbestos litigation reform bill (S-852) introduced in the United States Senate on April 19, 2005. The proposed legislation is entitled the Fairness in Asbestos Injury Resolution Act of 2005
(the FAIR Act).



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 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.





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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



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



The legislative fate of the FAIR Act remains uncertain, and Owens Corning is unable to make any prediction as to
whether the FAIR Act will be enacted or, if it is enacted, what its final form would be or what the effect, if any, would be on Owens Corning and Fibreboard or their plan or plans of reorganization. The provisions of any legislation ultimately
enacted may have a material effect on the amount of liability that Owens Corning and Fibreboard ultimately have for asbestos-related claims, which could be 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. Further proceedings on this
matter have been continued until a status conference on the motion.



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



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 provides for partial payment of all unsecured creditors allowed claims, in the form of distributions of
new common stock and notes of the reorganized company, and cash. Additional distributions from potential insurance and other third-party claims may also be paid to certain classes of unsecured creditors, but the Plan currently contemplates 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





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CORNING AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



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



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.



As it relates to Debtors other than Fibreboard, 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 10 to the Consolidated Financial Statements)) for the purposes of voting, determining which claims and interests will be entitled to vote to accept or reject the Plan, confirmation of
the Plan, and the resultant discharge of and cancellation of claims and interests and distribution of assets, interests and other property under the Plan. For these purposes, the Plan would treat all assets and liabilities of each 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. The holders of the debt under the Pre-Petition Credit Facility have asserted that substantive consolidation is not appropriate
and continue to challenge that approach. As to Fibreboard, the Plan contemplates that the assets available to satisfy Fibreboard liabilities (which are generally limited to asbestos-related liabilities) will be limited to the assets of the
Fibreboard Settlement Trust and certain other specified assets.



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. 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. The Third Circuit heard oral arguments on the appeal of the Memorandum and Order on February 7, 2005. Owens Corning is
unable to predict what the effect, if any, of the results of the appeal would be on Owens Corning and Fibreboard or their plan or plans of reorganization. However, because the currently proposed Plan of Reorganization is based upon substantive
consolidation, a Third Circuit reversal of the District Courts Order could potentially result in significant modifications of the Plan and delays in the resolution of the Chapter 11 Cases.



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



The percentage recovery and value of the payments 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 amount of Owens Cornings and Fibreboards
current and future asbestos liability.



The Plan provides that the amount of
the current and future asbestos personal injury claims to be allowed in the Chapter 11 Cases against Owens Corning and Fibreboard would be determined by the Bankruptcy Court. A six-day claims estimation hearing was held before the District Court
beginning January 13, 2005. The purpose of the claims estimation hearing was to establish the amount of current and future asbestos liability to be allowed in the Chapter 11 Cases. In general, the holders of the debt under the Pre-Petition Credit
Facility argued that the amount of the Companys current and future asbestos liability should be set at an amount significantly lower than the amounts reserved for asbestos claims on the





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CORNING AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



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



financial statements of the Debtors, and the Official Committee of Asbestos Claimants and the Legal Representative for the class of future asbestos claimants
argued that such asbestos liability should be set at a significantly higher level. On March 31, 2005, the District Court issued a Memorandum and Order estimating the total amount of contingent and unliquidated claims against Owens Corning for
personal injury or death caused by exposure to asbestos (including pending claims, future claims and contract claims) at $7 billion. As a result of the District Courts estimation, Owens Corning increased its reserve for potential
asbestos-related liability by $3.435 billion for the period ended March 31, 2005, so that its recorded reserve equaled the level of asbestos liability estimated by the District Court. Although the District Courts Memorandum and Order did not
specifically address the potential asbestos-related liability of Fibreboard, based upon the analysis that the District Court had followed in establishing estimated asbestos liability for Owens Corning, Owens Corning also increased Fibreboards
recorded reserve for potential asbestos-related liability by $907 million.



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 10 to the Consolidated Financial Statements) and specified other assets, 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, through separate sub-accounts for Owens Corning and Fibreboard, assume all asbestos-related liability of Owens Corning and Fibreboard and will, through those separate
sub-accounts, make payments to claimants in accordance with the trust distribution procedures included as part of the Plan. The Plan contemplates that the assets of the existing Fibreboard Settlement Trust and certain other assets will fund only the
separate Fibreboard sub-account and, as a result, those amounts will not be available under the Plan to pay claims against Owens Corning. Conversely, only the assets in the Fibreboard sub-account will be available to pay claims against Fibreboard.
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, their respective subsidiaries, and certain of their affiliates, 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, Fibreboard, or any
other Debtor, 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





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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



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



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. (Exterior), an indirect wholly-owned subsidiary of Owens Corning, 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, it is possible that 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, may file for relief under Chapter 11 of the Bankruptcy Code, and 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 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.





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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



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



Approximately 25,000 proofs of claim (including late-filed claims), totaling approximately $16.6 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 March 31, 2005, approximately 6,400 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 $1.8 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 $8.0 billion. As of March 31, 2005, approximately 1,000 of these claims, totaling approximately $0.4 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 $0.3 billion. The remaining claims consist of:



| |  | Approximately 2,900 claims, totaling approximately $1.4 billion, associated with asbestos-related contribution, indemnity, reimbursement, or subrogation claims. Owens Corning will
address all asbestos-related personal injury and wrongful death claims in the future as part of the Chapter 11 Cases. See Note 9 to the Consolidated Financial Statements for additional information concerning asbestos-related liabilities.
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Approximately 100 claims, totaling approximately $0.6 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 $3.5 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 9 to the Consolidated
Financial Statements); a contingent claim for approximately $458 million by the Pension Benefit Guaranty Corporation, as described more fully under the heading PBGC Claim in Note 9 to the Consolidated Financial Statements; a $275 million
class action claim involving alleged problems with a specialty roofing product, as described more fully under the heading Specialty Roofing Claim in Note 9 to the Consolidated Financial
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



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



| | Statements; environmental claims totaling approximately $109 million; and claims for contract rejections, totaling approximately $121 million, of which
approximately $50 million are protective claims covering contracts which have not been rejected by the Debtors as of March 31, 2005.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Owens Corning has recorded liability amounts for those claims that can be reasonably estimated and which it believes are probable of being allowed by the Bankruptcy
Court. At this time, it is impossible to reasonably estimate the value of all the claims that will ultimately be allowed by the Bankruptcy Court, due to the uncertainties of the Chapter 11 process, the in-progress state of Owens Cornings
investigation of submitted claims, and the lack of documentation submitted in support of many claims. Owens Corning continues to evaluate claims filed in the Chapter 11 Cases and will make such adjustments as may be appropriate. Any such adjustments
could be material to the Companys consolidated financial position and results of operations in any given period. For a discussion of liability amounts in respect of asbestos personal injury claims, see Note 9 to the Consolidated Financial
Statements.



ASBESTOS BAR DATE



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



As indicated above,
the General Bar Date does not apply to asbestos-related personal injury claims and asbestos-related wrongful death claims (other than claims for contribution, indemnity, reimbursement, or subrogation). Despite this, approximately 3,200 proofs of
claim (in addition to claims described above under General Bar Date), totaling approximately $2.5 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 9 to the Consolidated Financial Statements for additional
information concerning asbestos-related liabilities.



As described above, on
March 31, 2005, the District Court issued a Memorandum and Order estimating the total amount of contingent and unliquidated claims against Owens Corning for personal injury or death caused by exposure to asbestos (including pending claims, future
claims and contract claims) at $7 billion. The Memorandum and Order did not specifically address the potential asbestos-related liability of Fibreboard. In addition, the Memorandum and Order did not address whether a bar date would be established
for asbestos-related personal injury or wrongful death claims as to either Owens Corning or Fibreboard.





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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



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



Avoidance Actions



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



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



The Debtors have executed tolling agreements with all 12 present and former officers 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 9 to the Consolidated Financial Statements) with the Debtors on behalf of claimants asserting asbestos-related personal
injury or wrongful death claims. Lawsuits were brought initially against the 11 law firms that did not sign tolling agreements, seeking two forms of relief: (a) first, a declaratory judgment as to whether





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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



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



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 and two commercial preference actions, has been stayed until August 25, 2005. The Pre-Petition Credit Facility Action has been continued indefinitely by the Court.



Certain Post-Petition Matters



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



As a result of the Filing, contractual interest expense has not been accrued or recorded on pre-petition debt of the Debtors since the
Petition Date. From the Petition Date through March 31, 2005, 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
$697 million, of which $39 million relates to the first quarter of 2005 and $34 million relates to the first quarter of 2004. Of the total calculated amount, approximately $236 million relates to the Pre-Petition Credit Facility, which is the
subject of pre-petition guarantees issued by certain of Owens Cornings Debtor and non-Debtor subsidiaries. There may be circumstances, such as the occurrence of favorable asbestos legislation such as the FAIR Act or a determination that
certain debt is secured or otherwise entitled to a preference over other creditors, when post-petition interest would be determined to be payable by the Company on all or some of its pre-petition debt. Actual post-petition interest determined under
the terms of pre-petition debt may vary from the calculated amounts shown above, perhaps significantly. For example, various holders of the debt under the Pre-Petition Credit Facility have stated that the amount of post-petition interest calculated
under such debt would be more than double the amount shown above, or more. Accrual of any such post-petition interest would result in a charge against income in the period of such accrual. Any such revision could be material to the Companys
consolidated financial position and results of operations in any such period.



At March 31, 2005, the Company had $930 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 March 31, 2005; however, approximately $147
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





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OWENS
CORNING AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



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



subject to certain restrictions, including on their ability to pay dividends and to transfer cash and other assets to each other and to their affiliates.



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



Financial
Statement Presentation



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



Substantially all of the
Companys pre-petition debt is now in default due to the Filing. As described below, the accompanying Consolidated Financial Statements present the Debtors pre-petition debt under the caption Liabilities Subject to Compromise.
This includes debt under the Pre-Petition Credit Facility and approximately $1.5 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 refers to Debtors liabilities incurred prior to the commencement of the Chapter 11 Cases. The amounts of the various liabilities that are subject to compromise are set forth below
following the debtor-in-possession financial statements. These amounts represent Owens Cornings estimate of known or potential pre-petition claims to be resolved in connection with the Chapter 11 Cases. Such claims remain subject to future
adjustments. Adjustments may result from (1) negotiations; (2) actions of the Bankruptcy Court; (3) further developments with respect to disputed claims; (4) rejection of executory contracts and unexpired leases; (5) the determination as to the
value of any collateral securing claims; (6) proofs of claim; or (7) other events. Payment terms for these amounts will be established in connection with the Chapter 11 Cases.





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OWENS
CORNING AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



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



OWENS CORNING AND SUBSIDIARIES

DEBTOR-IN-POSSESSION STATEMENT OF INCOME (LOSS)



|                                                        |  |                          |        |   |      |   |       |  
|------------------------------------------------------- |  | ------------------------ | ------ | - | ---- | - | ----- | -
|                                                        |  | Quarter EndedMarch 31,   |       
|                                                        |  | 2005                     |        |   | 2004 |  
|                                                        |  | (In millions of dollars) |       
|NET SALES                                               |  | $                        | 1,196  |   |      | $ | 1,046 |  
|COST OF SALES                                           |  |                          | 1,031  |   |      |   | 924   |  
|                                                        |  |                          |        |   |      |   |       |  
|Gross margin                                            |  |                          | 165    |   |      |   | 122   |  
|                                                        |  |                          |        |   |      |   |       |  
|OPERATING EXPENSES                                      |  |                          |        |   |      |   |       |  
|Marketing and administrative expenses                   |  |                          | 107    |   |      |   | 100   |  
|Science and technology expenses                         |  |                          | 11     |   |      |   | 10    |  
|Chapter 11 related reorganization items                 |  |                          | 36     |   |      |   | 10    |  
|Owens Corning provision for asbestos litigation claims  |  |                          | 3,435  |   |      |   |      |  
|Fibreboard provision for asbestos litigation claims     |  |                          | 907    |   |      |   |      |  
|Other                                                   |  |                          | (18    | ) |      |   | (13   | )
|                                                        |  |                          |        |   |      |   |       |  
|Total operating expenses                                |  |                          | 4,478  |   |      |   | 107   |  
|                                                        |  |                          |        |   |      |   |       |  
|INCOME (LOSS) FROM OPERATIONS                           |  |                          | (4,313 | ) |      |   | 15    |  
|                                                        |  |                         
|Interest expense                                        |  |                          | 1      |   |      |   |      |  
|                                                        |  |                         
|Interest income from non-Debtors                        |  |                          | 14     |   |      |   | 14    |  
|                                                        |  |                          |        |   |      |   |       |  
|INCOME (LOSS) BEFORE INCOME TAX EXPENSE (BENEFIT)       |  |                          | (4,300 | ) |      |   | 29    |  
|                                                        |  |                         
|Income tax expense (benefit)                            |  |                          | (53    | ) |      |   | 26    |  
|                                                        |  |                          |        |   |      |   |       |  
|INCOME (LOSS) BEFORE EQUITY IN NET INCOME OF AFFILIATES |  |                          | (4,247 | ) |      |   | 3     |  
|                                                        |  |                          |        |   |      |   |       |  
|Equity in net income of affiliates                      |  |                          | 1      |   |      |   |      |  
|                                                        |  |                          |        |   |      |   |       |  
|NET INCOME (LOSS)                                       |  | $                        | (4,246 | ) |      | $ | 3     |  
|                                                        |  |                          |        |   |      |   |       |  





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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



|                                                     |  |                          |        |   |                   |   |        |  
|---------------------------------------------------- |  | ------------------------ | ------ | - | ----------------- | - | ------ | -
|                                                     |  | March 31, 2005           |        |   | December 31, 2004 |  
|                                                     |  | (In millions of dollars) |       
|ASSETS                                               |  |                          |        |   |                   |   |        |  
|                                                     |  |                         
|CURRENT                                              |  |                          |        |   |                   |   |        |  
|Cash and cash equivalents                            |  | $                        | 604    |   |                   | $ | 725    |  
|Receivables (net of allowance for doubtful accounts) |  |                          | 519    |   |                   |   | 408    |  
|Receivables  non-Debtors                            |  |                          | 1,096  |   |                   |   | 1,085  |  
|Inventories                                          |  |                          | 348    |   |                   |   | 295    |  
|Other current assets                                 |  |                          | 28     |   |                   |   | 34     |  
|                                                     |  |                          |        |   |                   |   |        |  
|Total current                                        |  |                          | 2,595  |   |                   |   | 2,547  |  
|                                                     |  |                          |        |   |                   |   |        |  
|OTHER                                                |  |                          |        |   |                   |   |        |  
|Restricted cash  asbestos and insurance related     |  |                          | 187    |   |                   |   | 188    |  
|Restricted cash, securities, and other  Fibreboard  |  |                          | 1,411  |   |                   |   | 1,418  |  
|Deferred income taxes                                |  |                          | 939    |   |                   |   | 887    |  
|Pension-related assets                               |  |                          | 398    |   |                   |   | 415    |  
|Goodwill                                             |  |                          | 55     |   |                   |   | 55     |  
|Investment in affiliates                             |  |                          | 32     |   |                   |   | 30     |  
|Investment in non-Debtor subsidiaries                |  |                          | 762    |   |                   |   | 762    |  
|Other noncurrent assets                              |  |                          | 83     |   |                   |   | 68     |  
|                                                     |  |                          |        |   |                   |   |        |  
|Total other                                          |  |                          | 3,867  |   |                   |   | 3,823  |  
|                                                     |  |                          |        |   |                   |   |        |  
|PLANT AND EQUIPMENT, at cost                         |  |                          |        |   |                   |   |        |  
|Land                                                 |  |                          | 39     |   |                   |   | 39     |  
|Buildings and leasehold improvements                 |  |                          | 597    |   |                   |   | 597    |  
|Machinery and equipment                              |  |                          | 2,278  |   |                   |   | 2,270  |  
|Construction in progress                             |  |                          | 105    |   |                   |   | 93     |  
|                                                     |  |                          |        |   |                   |   |        |  
|                                                     |  |                          | 3,019  |   |                   |   | 2,999  |  
|Accumulated depreciation                             |  |                          | (1,663 | ) |                   |   | (1,632 | )
|                                                     |  |                          |        |   |                   |   |        |  
|Net plant and equipment                              |  |                          | 1,356  |   |                   |   | 1,367  |  
|                                                     |  |                          |        |   |                   |   |        |  
|TOTAL ASSETS                                         |  | $                        | 7,818  |   |                   | $ | 7,737  |  
|                                                     |  |                          |        |   |                   |   |        |  





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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)



|                                                       |  |                          |        |   |                   |   |        |  
|------------------------------------------------------ |  | ------------------------ | ------ | - | ----------------- | - | ------ | -
|                                                       |  | March 31, 2005           |        |   | December 31, 2004 |  
|                                                       |  | (In millions of dollars) |       
|LIABILITIES AND STOCKHOLDERS DEFICIT                  |  |                          |        |   |                   |   |        |  
|CURRENT                                                |  |                          |        |   |                   |   |        |  
|Accounts payable and accrued liabilities               |  | $                        | 618    |   |                   | $ | 649    |  
|Accounts payable and accrued liabilities  non-Debtors |  |                          | 25     |   |                   |   | 25     |  
|Long-term debt  current portion                       |  |                          | 1      |   |                   |   | 1      |  
|                                                       |  |                          |        |   |                   |   |        |  
|Total current                                          |  |                          | 644    |   |                   |   | 675    |  
|                                                       |  |                          |        |   |                   |   |        |  
|LONG-TERM DEBT                                         |  |                          | 10     |   |                   |   | 7      |  
|                                                       |  |                          |        |   |                   |   |        |  
|OTHER                                                  |  |                          |        |   |                   |   |        |  
|Pension plan liability                                 |  |                          | 618    |   |                   |   | 617    |  
|Other employee benefits liability                      |  |                          | 387    |   |                   |   | 384    |  
|Other                                                  |  |                          | 164    |   |                   |   | 159    |  
|                                                       |  |                          |        |   |                   |   |        |  
|Total other                                            |  |                          | 1,169  |   |                   |   | 1,160  |  
|                                                       |  |                          |        |   |                   |   |        |  
|LIABILITIES SUBJECT TO COMPROMISE                      |  |                          | 14,170 |   |                   |   | 9,831  |  
|                                                       |  |                          |        |   |                   |   |        |  
|STOCKHOLDERS DEFICIT                                  |  |                          |        |   |                   |   |        |  
|Common stock                                           |  |                          | 6      |   |                   |   | 6      |  
|Additional paid in capital                             |  |                          | 692    |   |                   |   | 692    |  
|Accumulated deficit                                    |  |                          | (8,517 | ) |                   |   | (4,271 | )
|Accumulated other comprehensive loss                   |  |                          | (350   | ) |                   |   | (358   | )
|Other                                                  |  |                          | (6     | ) |                   |   | (5     | )
|                                                       |  |                          |        |   |                   |   |        |  
|Total stockholders deficit                            |  |                          | (8,175 | ) |                   |   | (3,936 | )
|                                                       |  |                          |        |   |                   |   |        |  
|TOTAL LIABILITIES AND STOCKHOLDERS DEFICIT            |  | $                        | 7,818  |   |                   | $ | 7,737  |  
|                                                       |  |                          |        |   |                   |   |        |  





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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



|                                                                                                                |  |                          |        |   |      |   |      |  
|--------------------------------------------------------------------------------------------------------------- |  | ------------------------ | ------ | - | ---- | - | ---- | -
|                                                                                                                |  | Quarter EndedMarch 31,   |       
|                                                                                                                |  | 2005                     |        |   | 2004 |  
|                                                                                                                |  | (In millions of dollars) |       
|NET CASH FLOW FROM OPERATIONS                                                                                   |  |                          |        |   |      |   |      |  
|Net income (loss)                                                                                               |  | $                        | (4,246 | ) |      | $ | 3    |  
|Reconciliation of net cash flow from operations                                                                 |  |                          |        |   |      |   |      |  
|Noncash items:                                                                                                  |  |                          |        |   |      |   |      |  
|Provision for asbestos litigation claims                                                                        |  |                          | 4,342  |   |      |   |     |  
|Provision for depreciation and amortization                                                                     |  |                          | 42     |   |      |   | 37   |  
|Provision for impairment of fixed assets                                                                        |  |                          | 3      |   |      |   |     |  
|Provision (credit) for deferred income taxes                                                                    |  |                          | (51    | ) |      |   | 9    |  
|Provision for pension and other employee benefits liabilities                                                   |  |                          | 27     |   |      |   | 25   |  
|Other                                                                                                           |  |                          | 10     |   |      |   | 7    |  
|Increase in receivables and receivables  non-Debtors                                                           |  |                          | (121   | ) |      |   | (112 | )
|Increase in inventories                                                                                         |  |                          | (54    | ) |      |   | (31  | )
|Decrease in accounts payable and accrued liabilities and accounts payable and accrued liabilities  non-Debtors |  |                          | (31    | ) |      |   | (33  | )
|Proceeds from insurance for asbestos litigation claims, excluding Fibreboard                                    |  |                          | 1      |   |      |   |     |  
|Payments for other employee benefits liabilities                                                                |  |                          | (6     | ) |      |   | (4   | )
|Decrease (increase) in restricted cash, securities, and other  Fibreboard                                      |  |                          | 6      |   |      |   | (12  | )
|Other                                                                                                           |  |                          | (8     | ) |      |   | 11   |  
|                                                                                                                |  |                          |        |   |      |   |      |  
|Net cash flow from operations                                                                                   |  |                          | (86    | ) |      |   | (100 | )
|                                                                                                                |  |                          |        |   |      |   |      |  
|NET CASH FLOW FROM INVESTING                                                                                    |  |                          |        |   |      |   |      |  
|Additions to plant and equipment                                                                                |  |                          | (34    | ) |      |   | (43  | )
|Proceeds from the sale of assets or affiliate                                                                   |  |                          |       |   |      |   |     |  
|Investment in subsidiaries and affiliates                                                                       |  |                          | (1     | ) |      |   | (1   | )
|                                                                                                                |  |                          |        |   |      |   |      |  
|Net cash flow from investing                                                                                    |  |                          | (35    | ) |      |   | (44  | )
|                                                                                                                |  |                          |        |   |      |   |      |  
|NET CASH FLOW FROM FINANCING                                                                                    |  |                          |        |   |      |   |      |  
|Subject to Compromise                                                                                           |  |                          |       |   |      |   | (3   | )
|                                                                                                                |  |                          |        |   |      |   |      |  
|Net cash flow from financing                                                                                    |  |                          |       |   |      |   | (3   | )
|                                                                                                                |  |                          |        |   |      |   |      |  
|NET DECREASE IN CASH AND CASH EQUIVALENTS                                                                       |  |                          | (121   | ) |      |   | (147 | )
|                                                                                                                |  |                         
|Cash and cash equivalents at beginning of period                                                                |  |                          | 725    |   |      |   | 645  |  
|                                                                                                                |  |                          |        |   |      |   |      |  
|CASH AND CASH EQUIVALENTS AT END OF PERIOD                                                                      |  | $                        | 604    |   |      | $ | 498  |  
|                                                                                                                |  |                          |        |   |      |   |      |  





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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:



|                                                       |  |                          |        |                   |   |      
|------------------------------------------------------ |  | ------------------------ | ------ | ----------------- | - | -----
|                                                       |  | March 31, 2005           |        | December 31, 2004
|                                                       |  | (In millions of dollars)
|Accounts payable                                       |  | $                        | 209    |                   | $ | 209  
|Accrued interest payable                               |  |                          | 40     |                   |   | 40   
|Debt                                                   |  |                          | 2,956  |                   |   | 2,958
|Income taxes payable                                   |  |                          | 90     |                   |   | 90   
|Reserve for asbestos litigation claims  Owens Corning |  |                          | 7,000  |                   |   | 3,565
|Reserve for asbestos-related claims  Fibreboard       |  |                          | 3,216  |                   |   | 2,309
|                                                       |  |                          |        |                   |   |      
|Total consolidated                                     |  |                          | 13,511 |                   |   | 9,171
|Payables to non-Debtors                                |  |                          | 659    |                   |   | 660  
|                                                       |  |                          |        |                   |   |      
|Total Debtor                                           |  | $                        | 14,170 |                   | $ | 9,831
|                                                       |  |                          |        |                   |   |      



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



|                         |  |                          |    |      |   |     |  
|------------------------ |  | ------------------------ | -- | ---- | - | --- | -
|                         |  | Quarter EndedMarch 31,   |   
|                         |  | 2005                     |    | 2004 |  
|                         |  | (In millions of dollars) |   
|Professional fees        |  | $                        | 27 |      | $ | 17  |  
|Payroll and compensation |  |                          | 5  |      |   | 4   |  
|Investment (income) loss |  |                          | 4  |      |   | (12 | )
|Other, net               |  |                          |   |      |   | 1   |  
|                         |  |                          |    |      |   |     |  
|Total                    |  | $                        | 36 |      | $ | 10  |  
|                         |  |                          |    |      |   |     |  





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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 Statement of Financial Accounting Standards No. 131 Disclosures about Segments of an Enterprise and Related Information (SFAS No. 131) and concluded that the aggregation of its operating segments
into two reportable segments remained 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 EndedMarch 31,  
|                                             |  | 2005                     |       | 2004
|                                             |  | (In millions of dollars)
|NET SALES                                    |  |                          |       |      |   |      
|                                             |  |                         
|Reportable Segments                          |  |                          |       |      |   |      
|                                             |  |                         
|Building Materials Systems                   |  |                          |       |      |   |      
|United States                                |  | $                        | 1,016 |      | $ | 888  
|Europe                                       |  |                          | 1     |      |   | 3    
|Canada and other                             |  |                          | 75    |      |   | 54   
|                                             |  |                          |       |      |   |      
|Total Building Materials Systems             |  |                          | 1,092 |      |   | 945  
|                                             |  |                          |       |      |   |      
|Composite Solutions                          |  |                          |       |      |   |      
|United States                                |  |                          | 148   |      |   | 129  
|Europe                                       |  |                          | 106   |      |   | 85   
|Canada and other                             |  |                          | 56    |      |   | 50   
|                                             |  |                          |       |      |   |      
|Total Composite Solutions                    |  |                          | 310   |      |   | 264  
|                                             |  |                          |       |      |   |      
|Total reportable segments                    |  | $                        | 1,402 |      | $ | 1,209
|                                             |  |                          |       |      |   |      
|External Customer Sales by Geographic Region |  |                          |       |      |   |      
|                                             |  |                         
|United States                                |  | $                        | 1,164 |      | $ | 1,017
|Europe                                       |  |                          | 107   |      |   | 88   
|Canada and other                             |  |                          | 131   |      |   | 104  
|                                             |  |                          |       |      |   |      
|NET SALES                                    |  | $                        | 1,402 |      | $ | 1,209
|                                             |  |                          |       |      |   |      





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OWENS
CORNING AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



2. SEGMENT DATA (continued)



|                                                                |  |                          |        |   |      |   |     |  
|--------------------------------------------------------------- |  | ------------------------ | ------ | - | ---- | - | --- | -
|                                                                |  | Quarter EndedMarch 31,   |       
|                                                                |  | 2005                     |        |   | 2004 |  
|                                                                |  | (In millions of dollars) |       
|INCOME BEFORE INCOME TAX EXPENSE                                |  |                          |        |  
|                                                                |  |                         
|Reportable Segments                                             |  |                          |        |   |      |   |     |  
|                                                                |  |                         
|Building Materials Systems                                      |  |                          |        |   |      |   |     |  
|United States                                                   |  | $                        | 83     |   |      | $ | 46  |  
|Europe                                                          |  |                          |       |   |      |   |    |  
|Canada and other                                                |  |                          | 16     |   |      |   | 5   |  
|                                                                |  |                          |        |   |      |   |     |  
|Total Building Materials Systems                                |  |                          | 99     |   |      |   | 51  |  
|                                                                |  |                          |        |   |      |   |     |  
|Composite Solutions                                             |  |                          |        |   |      |   |     |  
|United States                                                   |  |                          | 19     |   |      |   | 8   |  
|Europe                                                          |  |                          |       |   |      |   | (8  | )
|Canada and other                                                |  |                          | 5      |   |      |   | 6   |  
|                                                                |  |                          |        |   |      |   |     |  
|Total Composite Solutions                                       |  |                          | 24     |   |      |   | 6   |  
|                                                                |  |                          |        |   |      |   |     |  
|Total reportable segments                                       |  | $                        | 123    |   |      | $ | 57  |  
|                                                                |  |                          |        |   |      |   |     |  
|Geographic Regions                                              |  |                          |        |   |      |   |     |  
|                                                                |  |                         
|United States                                                   |  | $                        | 102    |   |      | $ | 54  |  
|Europe                                                          |  |                          |       |   |      |   | (8  | )
|Canada and other                                                |  |                          | 21     |   |      |   | 11  |  
|                                                                |  |                          |        |   |      |   |     |  
|Total reportable segments                                       |  | $                        | 123    |   |      | $ | 57  |  
|                                                                |  |                          |        |   |      |   |     |  
|Reconciliation to Consolidated Income Before Income Tax Expense |  |                          |        |   |      |   |     |  
|                                                                |  |                         
|Other charges                                                   |  | $                        |       |   |      | $ | 5   |  
|Chapter 11 related reorganization items                         |  |                          | (36    | ) |      |   | (10 | )
|Provision for asbestos litigation claims                        |  |                          | (4,342 | ) |      |   |    |  
|General corporate expense                                       |  |                          | (26    | ) |      |   | (18 | )
|Interest expense, net                                           |  |                          | (1     | ) |      |   | (1  | )
|                                                                |  |                          |        |   |      |   |     |  
|CONSOLIDATED INCOME BEFORE INCOME TAX EXPENSE                   |  | $                        | (4,282 | ) |      | $ | 33  |  
|                                                                |  |                          |        |   |      |   |     |  





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CORNING AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



3. GENERAL



The consolidated financial statements
included in this Report are unaudited, pursuant to certain rules and regulations of the Securities and Exchange Commission, and include, in the opinion of the Company, adjustments necessary for a fair statement of the results for the periods
indicated, which, however, are not necessarily indicative of results which may be expected for the full year. Certain reclassifications have been made to the period presented for 2004 to conform to the classifications used in the period presented
for 2005.



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 2004 annual report on Form 10-K, as filed with the Securities and Exchange Commission.



4. INVENTORIES



Inventories are summarized as
follows:



|                         |  |                          |      |   |                   |   |      |  
|------------------------ |  | ------------------------ | ---- | - | ----------------- | - | ---- | -
|                         |  | March 31, 2005           |      |   | December 31, 2004 |  
|                         |  | (In millions of dollars) |     
|Finished goods           |  | $                        | 467  |   |                   | $ | 425  |  
|Materials and supplies   |  |                          | 167  |   |                   |   | 139  |  
|                         |  |                          |      |   |                   |   |      |  
|FIFO inventory           |  |                          | 634  |   |                   |   | 564  |  
|Excess of FIFO over LIFO |  |                          | (121 | ) |                   |   | (119 | )
|                         |  |                          |      |   |                   |   |      |  
|Total inventories        |  | $                        | 513  |   |                   | $ | 445  |  
|                         |  |                          |      |   |                   |   |      |  



Approximately $160 million and $155
million of total inventories were valued using the LIFO method at March 31, 2005 and December 31, 2004, respectively.



5. GOODWILL AND OTHER INTANGIBLES



The Company
complies with 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 review resulted in no change to recorded goodwill.





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CORNING AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



5. GOODWILL AND OTHER INTANGIBLES (continued)



The only changes in goodwill during the quarter ended March 31, 2005 were the result of final purchase accounting
adjustments related to our acquisition of OC Mexico in 2004, including allocating the goodwill recorded on this purchase between business segments, and the effects of currency adjustments. The $198 million balance of goodwill at March 31, 2005 was
comprised of $35 million for the Composite Solutions segment and $163 million for the Building Materials Systems segment.



Substantially all of the Companys acquired other intangible assets are subject to amortization. Other intangible asset amortization expense was approximately $1
million in the first quarter of both 2005 and 2004. The Company estimates that amortization of intangibles will be approximately $2 to $3 million annually for each of the next five years. The components of other intangible assets are as follows:



|                  |  |                          |  |                       |    |                          |   |   
|----------------- |  | ------------------------ |  | --------------------- | -- | ------------------------ | - | --
|                  |  | March 31, 2005          
|                  |  | WeightedAverage Lives    |  | Gross Carrying Amount |    | Accumulated Amortization
|                  |  | (In millions of dollars)
|Contract-based    |  | 7                        |  | $                     | 8  |                          | $ | 3 
|Technology-based  |  | 13                       |  |                       | 16 |                          |   | 11
|Marketing-related |  | 8                        |  |                       | 14 |                          |   | 12
|                  |  |                          |  |                       |    |                          |   |   
|                  |  |                          |  | $                     | 38 |                          | $ | 26
|                  |  |                          |  |                       |    |                          |   |   



6. 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. The Company accounted for this transaction under the purchase method of accounting. During the first
quarter of 2004, this affiliate was accounted for under the equity method. The Company began consolidating this subsidiary in April 2004. The proforma effect of this acquisition on revenues and earnings was not material.



7. WARRANTIES



The Company records a liability
for warranty obligations at the date the related products are sold. Adjustments are made as new information becomes available. A reconciliation of the warranty liabilities for the quarter ended March 31, 2005 is as follows:



|                                            |  |                         |    |  
|------------------------------------------- |  | ----------------------- | -- | -
|                                            |  | (In millionsof dollars) |   
|Balance at December 31, 2004                |  | $                       | 48 |  
|Amounts accrued for current year            |  |                         | 4  |  
|Adjustment of preexisting accrual estimates |  |                         | 7  |  
|Settlements of warranty claims              |  |                         | (5 | )
|                                            |  |                         |    |  
|Balance at March 31, 2005                   |  | $                       | 54 |  
|                                            |  |                         |    |  





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CORNING AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



8. 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. Contributions to the U.S. pension plan are based on amounts needed 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.



The following table provides information regarding pension expense recognized during the quarter:



|                                        |  |                          |     |   |          |   |    |       |  |   |      |   |  |          |     |   |       |   |    |   |  |   |     |  
|--------------------------------------- |  | ------------------------ | --- | - | -------- | - | -- | ----- |  | - | ---- | - |  | -------- | --- | - | ----- | - | -- | - |  | - | --- | -
|                                        |  | Quarter Ended March 31,  |    
|                                        |  |                          |     |   | 2005     |   |    |       |  |   |      |   |  | 2004     |     |   |       |  
|                                        |  | 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    |   |  | $        | 6   |   |       | $ |   |   |  | $ | 6   |  
|Interest cost                           |  |                          | 14  |   |          |   | 5  |       |  |   | 19   |   |  |          | 14  |   |       |   | 5  |   |  |   | 19  |  
|Expected return on plan assets          |  |                          | (15 | ) |          |   | (5 | )     |  |   | (20  | ) |  |          | (14 | ) |       |   | (4 | ) |  |   | (18 | )
|Amortization of actuarial loss          |  |                          | 11  |   |          |   | 2  |       |  |   | 13   |   |  |          | 10  |   |       |   | 2  |   |  |   | 12  |  
|                                        |  |                          |     |   |          |   |    |       |  |   |      |   |  |          |     |   |       |   |    |   |  |   |     |  
|Net periodic pension cost               |  | $                        | 15  |   |          | $ | 3  |       |  | $ | 18   |   |  | $        | 16  |   |       | $ | 3  |   |  | $ | 19  |  
|                                        |  |                          |     |   |          |   |    |       |  |   |      |   |  |          |     |   |       |   |    |   |  |   |     |  



Owens Corning expects to contribute
$100 to $150 million in cash to the pension plans during 2005. The contributions are subject to recently enacted legislative changes and approval of the Bankruptcy Court.





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CORNING AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



8. 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.



The following table provides the components of net periodic benefits cost for aggregated U.S. and Non-U.S. Plans for the quarter:



|                                         |  |                         |    |   |      |   |    |  
|---------------------------------------- |  | ----------------------- | -- | - | ---- | - | -- | -
|                                         |  | Quarter EndedMarch 31,  |   
|                                         |  | 2005                    |    |   | 2004 |  
|                                         |  | (In millions ofdollars) |   
|Components of Net Periodic Benefits Cost |  |                         |    |   |      |   |    |  
|                                         |  |                        
|Service cost                             |  | $                       | 2  |   |      | $ | 1  |  
|Interest cost                            |  |                         | 6  |   |      |   | 7  |  
|Amortization of loss                     |  |                         | 1  |   |      |   | 2  |  
|Amortization of prior service cost       |  |                         | (1 | ) |      |   | (1 | )
|                                         |  |                         |    |   |      |   |    |  
|Net periodic benefits cost               |  | $                       | 8  |   |      | $ | 9  |  
|                                         |  |                         |    |   |      |   |    |  



9. CONTINGENT LIABILITIES AND OTHER MATTERS



Asbestos Liabilities



ITEM A. - OWENS CORNING (EXCLUDING FIBREBOARD)



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



Prior to October 5, 2000, when the Debtors, including Fibreboard (see Item B below), filed
voluntary petitions for relief under Chapter 11 of the United States Bankruptcy Code, the vast majority of asserted asbestos personal injury claims were in the process of being resolved through the National Settlement Program described below. As a
result of the Filing, all pre-petition asbestos claims and pending litigation against the Debtors, including without limitation claims arising under the National Settlement Program, were automatically stayed (see Note 1 to the Consolidated Financial
Statements). Owens Corning expects





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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



9. CONTINGENT LIABILITIES AND OTHER MATTERS (continued)



that all pending and future asbestos claims against Owens Corning and Fibreboard will be resolved pursuant to a plan or plans of reorganization. Owens
Corning is unable to determine at this time whether asbestos-related claims asserted against Fibreboard will be treated in the same manner as those asserted against Owens Corning in any such plan or plans ultimately confirmed.



As more fully discussed in Note 1 to the Consolidated Financial Statements and under the
heading Reserve below, the Debtors, together with the Official Committee of Asbestos Claimants and the Legal Representative for the class of future asbestos claimants, filed on October 24, 2003 a proposed fourth amended joint plan of
reorganization for the Debtors. Ultimately, as described more fully under the heading Reserve below, it is anticipated that Owens Cornings total liability for asbestos claims will be determined after a lengthy period of
negotiations and, if necessary, by the Bankruptcy Court, taking into account numerous factors not present in the Companys pre-petition environment. Such factors include the claims of competing creditor groups as to the appropriate treatment of
their allowed claims in the plan or plans of reorganization, the size of the total asbestos liability, the total number of present asbestos claims allowed, and the total amount of future asbestos claims allowed. In this respect, a six-day claims
estimation hearing to establish the amount of current and future asbestos liability to be allowed in the Chapter 11 Cases was held before the District Court beginning January 13, 2005. In general, the holders of the debt under the Pre-Petition
Credit Facility argued that the amount of the Companys current and future asbestos liability should be set at an amount significantly lower than the amounts reserved for asbestos claims on the financial statements of the Debtors, and the
Official Committee of Asbestos Claimants and the Legal Representative for the class of future asbestos claimants argued that it should be set at a significantly higher level. On March 31, 2005, the District Court issued a Memorandum and Order
estimating the total amount of contingent and unliquidated claims against Owens Corning for personal injury or death caused by exposure to asbestos (including pending claims, future claims and contract claims) at $7 billion. The amount estimated by
the Court exceeded the high end of the range of estimates of Owens Cornings liability for asbestos claims that had been provided by Owens Cornings asbestos valuation experts but was below the range of estimates of such liability provided
by the valuation experts of the Official Committee of Asbestos Claimants and the Legal Representative for the class of future asbestos claimants. As described more fully under the heading Reserve below, as a result of the District
Courts estimation, Owens Corning increased its reserve for potential asbestos-related liability by $3.435 billion for the period ended March 31, 2005, so that its recorded reserve equaled the level of asbestos liability estimated by the
District Court. Although the District Courts Memorandum and Order did not specifically address the potential asbestos-related liability of Fibreboard, based upon the analysis that the District Court had followed in establishing estimated
asbestos liability for Owens Corning, Owens Corning also increased Fibreboards recorded reserve for potential asbestos-related liability by $907 million.



National Settlement Program Claims



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



The number of law firms participating
in the NSP expanded from approximately 50 when the NSP was established to approximately 120 as of the Petition Date. Each of these participating law firms agreed to a





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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



9. CONTINGENT LIABILITIES AND OTHER MATTERS (continued)



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. However, the claims covered by the NSP Agreements were taken into account by the District Court in setting the amount of Owens
Cornings current and future asbestos liability at $7 billion. Owens Corning therefore expects that the amount of such NSP Claims will not be in addition to the $7 billion amount established by the District Court, but rather included within
that amount.



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





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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



9. CONTINGENT LIABILITIES AND OTHER MATTERS (continued)



which have occurred since the Filing. As a result, Owens Corning has limited information about many of such claims.



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



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



Asbestos-Related Payments



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



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



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



Prior to the Petition Date, Owens
Corning deposited certain amounts in escrow accounts to facilitate claims processing under the NSP (Administrative Deposits). Amounts deposited into escrow in Administrative Deposits during a reporting period are included in the payments
shown for NSP Settlements during the period. At March 31, 2005, 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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CORNING AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



9. CONTINGENT LIABILITIES AND OTHER MATTERS (continued)



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



Reserve



Owens Corning estimates a reserve in accordance with generally accepted accounting
principles to reflect asbestos-related liabilities that have been asserted or are probable of assertion, in which liabilities are probable and reasonably estimable. This reserve was established initially through a charge to income in 1991, with
additional charges to income of approximately $1.1 billion in 1996, $1.4 billion in 1998, $1.0 billion in 2000 and $1.4 billion in 2002. For the reasons stated below, as a result of the Memorandum and Order of the District Court issued on March 31,
2005, estimating the total asbestos-related liability of Owens Corning at $7 billion, Owens Corning increased its reserve for potential asbestos-related liabilities by $3.435 billion for the first quarter of 2005, so that its recorded reserve for
Owens Cornings asbestos-related liabilities equaled the District Courts estimate. Consequently, as of March 31, 2005, a reserve of $7 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.



As Owens Corning has discussed in previous public filings, and as the District Court emphasized in its March 31, 2005 Memorandum and Order, 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. Prior to the Petition Date, such variables
included, among others, the cost of resolving pending non-NSP claims; the disease mix and severity of disease of pending NSP claims; the number, severity of disease, and jurisdiction of claims filed in the future (especially the number of
mesothelioma claims); how many future claimants were covered by an NSP Agreement; the extent, if any, to which individual claimants exercised a right to opt out of an NSP Agreement and/or engage counsel not participating in the NSP; the extent, if
any, to which counsel not bound by an NSP Agreement undertook the representation of asbestos personal injury plaintiffs against Owens Corning; the extent, if any, to which Owens Corning exercised its right to terminate one or more of the NSP
Agreements due to excessive opt-outs or for other reasons; and Owens Cornings success in controlling the costs of resolving future non-NSP claims.



The Chapter 11 Cases 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. As described more fully below in Items A and B, however, the District Courts order on





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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



9. CONTINGENT LIABILITIES AND OTHER MATTERS (continued)



March 31, 2005, estimating Owens Cornings personal injury asbestos-related liability has served to narrow the range of possible values of
asbestos-related liabilities for both Owens Corning and Fibreboard.



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 developed analyses of liability for both pre-petition and future asbestos claims. Owens Corning and Fibreboard 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 indicated 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, were 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. In addition, since the reserve for Fibreboard asbestos-related liabilities exceeded the funds held
in the Fibreboard Settlement Trust, the residual amount payable to charity under the terms of the Trust (see Note 10 to the Consolidated Financial Statements) was reduced to zero as of September 30, 2002.



As part of the District Courts order scheduling the estimation hearing for January 13,
2005, the District Court ordered that all parties intending to present expert testimony at such hearing file any expert reports by October 15, 2004. 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 ranged 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 varied substantially from one another, and certain of them varied substantially from the amounts then recorded in Owens Cornings and Fibreboards respective
asbestos reserves. Owens Corning further notes that 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 asbestos-related bankruptcy cases (including those developed by Owens Corning and Fibreboard) customarily cover potential liabilities over a
50-year





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9. CONTINGENT LIABILITIES AND OTHER MATTERS (continued)



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, and the District Court emphasized in its March 31, 2005 Memorandum and Order, 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.



On March 31, 2005, the District Court issued a Memorandum and Order estimating the total amount of contingent and unliquidated claims
against Owens Corning for personal injury or death caused by exposure to asbestos (including pending claims, future claims and contract claims) at $7 billion. In its March 31, 2005 Memorandum and Order, the District Court observed that the range of
projected liabilities that were reflected in the various expert reports submitted to it resulted from the attempt to make predictions based upon other predictions and assumptions, and that relatively minor variations in underlying assumptions can
skew the end result enormously. The District Court further noted that it was estimating not how much each potential claimant would actually be entitled to receive but rather the total amount that the claimants, as a group, could legitimately have
claimed as compensation (or, in the case of future claimants, what their claims would have been worth in the tort system) as of the petition date.



Despite the District Courts estimation order, Owens Corning notes that there continues to be uncertainty about the ultimate size of Owens Cornings
asbestos-related liabilities, including due to the possibility of consensual agreement of the parties or asbestos reform legislation. However, Owens Corning believes that the District Courts estimation serves to establish an amount within the
range of possible values of Owens Cornings asbestos liability that is more probable than other possible values in the context of Chapter 11 cases. Accordingly, as a result of the District Courts estimation, Owens Corning increased its
reserve for potential asbestos-related liability by $3.435 billion for the period ended March 31, 2005, so that its recorded reserve equaled the level of asbestos liability estimated by the District Court. Although the District Courts
Memorandum and Order did not specifically address the potential asbestos-related liability of Fibreboard, based upon the analysis that the District Court had followed in establishing estimated asbestos liability for Owens Corning, Owens Corning also
increased Fibreboards recorded reserve for potential asbestos-related liability by $907 million (see Item B below).



As described above, since Owens Corning believes that the District Courts estimation serves to establish an amount within the range of possible values of Owens
Cornings asbestos liability for personal injury or death that is more probable than the other possibilities, Owens Cornings reserve for asbestos-related liabilities has been set equal to such estimate. 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





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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 in light of such information and future developments in the Chapter 11 Cases. Any such revision could be material to the Companys consolidated financial position and results of operations
in any given period.



Senators Arlen Specter (R-PA) and Patrick Leahy (D-VT)
co-sponsored an asbestos litigation reform bill (S-852) introduced in the United States Senate on April 19, 2005. The proposed legislation is entitled the Fairness in Asbestos Injury Resolution Act of 2005 (the FAIR Act).



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



ITEM B. - FIBREBOARD (EXCLUDING OWENS CORNING)



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



As discussed in Item A above and under the heading Reserve below, the Debtors
(including Fibreboard), together with the Official Committee of Asbestos Claimants and the Legal Representative for the class of future asbestos claimants, filed on October 24, 2003 a proposed fourth amended joint plan of reorganization for the
Debtors (including Fibreboard). Ultimately, as described more fully under the heading Reserve below, it is anticipated that Fibreboards (and Owens Cornings) total liability for asbestos claims will be finally determined after
a lengthy period of negotiations and, if necessary, by the Bankruptcy Court, taking into account numerous factors not present in the Companys pre-petition environment. Such factors include the claims of competing creditor groups as to the
appropriate





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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.



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.





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9. CONTINGENT LIABILITIES AND OTHER MATTERS (continued)



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



As of March 31, 2005, the remaining Insurance Settlement funds were held in and invested by the Fibreboard Settlement Trust. As of that date, $1.284 billion was held in the Fibreboard Settlement Trust and $127 million
was held in Undistributed Administrative Deposits in respect of Fibreboard claims. On an ongoing basis, the funds held in the Fibreboard Settlement Trust will be subject to investment earnings/losses and will be reduced if and as applied to satisfy
asbestos-related liabilities. Under the terms of the Fibreboard Settlement Trust, any of such assets that ultimately are not used to fund Fibreboards asbestos-related liabilities must be distributed to charity. However, since the reserve for
Fibreboard asbestos-related liabilities exceeds the funds held in the Fibreboard Settlement Trust, the residual amount payable to charity under the terms of the Trust (see Note 10 to the Consolidated Financial Statements) was reduced to zero as of
September 30, 2002.



Funds held in the Fibreboard Settlement Trust and
Fibreboards Undistributed Administrative Deposits are reflected on Owens Cornings consolidated balance sheet as restricted assets. At March 31, 2005, these assets were reflected as non-current assets, under the category Restricted
cash, securities and other - Fibreboard. See Note 10 to the Consolidated Financial Statements for additional information concerning the Fibreboard Settlement Trust.



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



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 ofdollars)      
|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.





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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, on March 31, 2005, the District Court issued a Memorandum and Order estimating the total amount of contingent and unliquidated claims against Owens Corning for personal injury or death caused by exposure to asbestos. The amount estimated by
the Court exceeded the high end of the range of estimates of Owens Cornings liability for asbestos claims that had been provided by Owens Cornings asbestos valuation experts but was below the range of estimates of such liability provided
by the valuation experts of the Official Committee of Asbestos Claimants and the Legal Representative for the class of future asbestos claimants. Although the District Courts Memorandum and Order did not specifically address the potential
asbestos-related liability of Fibreboard, based upon the analysis that the District Court had followed in establishing estimated asbestos liability for Owens Corning, Owens Corning increased Fibreboards recorded reserve for potential
asbestos-related liability by $907 million for the period ended March 31, 2005, so that it equaled the high end of the range of estimates of Fibreboards liability for asbestos claims that had been provided by Owens Cornings valuation
experts for use in the estimation hearing. Consequently, as of March 31, 2005, a reserve of approximately $3.216 billion in respect of Fibreboards asbestos-related liabilities was one of the items included in Owens Cornings consolidated
balance sheet under the category Liabilities Subject to Compromise.



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. In addition, as noted above, the Debtors (including Fibreboard), together with the Official Committee of Asbestos Claimants and the Legal Representative for the class of future asbestos claimants, filed on
October 24, 2003 a proposed fourth amended joint plan of reorganization for the Debtors (including Fibreboard). The Plan provides that the amount of the current and future asbestos personal injury claims to be allowed in the Chapter 11 Cases against
Owens Corning and Fibreboard would be determined by the Bankruptcy Court. It is therefore anticipated that the estimated aggregate value of Fibreboards current and future asbestos personal injury claims will ultimately be determined as a
result of negotiations involving the Official Committee of Asbestos Claimants, the Legal Representative of the class of future asbestos claimants and other interested constituencies or, if necessary, by the Bankruptcy Court. It is not possible to
predict the outcome of such negotiations or court determination at this time. The ultimate determination of such liabilities will take into account numerous factors not present in the Companys pre-petition environment. Such factors include the
claims of competing creditor groups as to the appropriate treatment of their allowed claims in the plan or plans of reorganization, the size of the total asbestos liability, the total number of present asbestos claims allowed, 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.



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





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9. CONTINGENT LIABILITIES AND OTHER MATTERS (continued)



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 in light of such information and future developments in the Chapter 11 Cases. Any such revision could be material to the Companys
consolidated financial position and results of operations in any given period.



As noted in Item A above, Senators Arlen Specter (R-PA) and Patrick Leahy (D-VT) co-sponsored an asbestos litigation reform bill (S-852) introduced in the United States Senate on April 19, 2005. The proposed legislation is entitled the
Fairness in Asbestos Injury Resolution Act of 2005 (the FAIR Act).



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



ITEM C. - OTHER ASBESTOS-RELATED MATTERS



Other Asbestos-Related Litigation



As previously reported, the Company believes that it has spent significant amounts to resolve claims of asbestos claimants whose injuries were caused or exacerbated by
cigarette smoking. 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





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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



As of March 31, 2005, 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. As described in the following paragraph, Owens Corning reached final settlements with two of such carriers in late
2004. 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 indicated above, in late 2004 Owens Corning entered into settlement agreements with two of
its excess insurance carriers, resolving disputes concerning coverage from such insurers for non-products asbestos-related personal injury claims. As a result, the two carriers funded approximately $21 million into escrow accounts to be released in
conjunction with implementation of an approved plan of reorganization. In 2001, Owens Corning entered into a settlement agreement with another of its excess insurance carriers, whereby the carrier funded $55 million into a similar escrow account.
The escrowed funds described above, plus earnings, are reflected on Owens Cornings consolidated balance sheet as restricted assets, under the category Restricted cash - asbestos and insurance related.



During the first quarter of 2005, Owens Corning received payments of approximately $1 million
in respect of a previous settlement with a bankrupt insurance carrier concerning coverage for asbestos-related personal injury claims.



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





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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. A status conference on this matter is set for May 17, 2005. 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 was not
named in the lawsuit. The suit purported to be a class action for securities fraud under sections 10(b) and 20(a) of the Securities Exchange Act of 1934, on behalf of a class comprised of persons who purchased stock of Owens Corning during the
period from September 20, 1999, through October 4, 2000. The complaint sought an unspecified amount of damages and/or, where appropriate, rescission. On March 3, 2005, the court granted the defendants motion to dismiss the action, on the
grounds that the plaintiffs claims are time-barred under the applicable statute of limitations. The plaintiffs have filed a notice of appeal of the dismissal. 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, with limited exceptions, until the earlier of the entry of an order confirming a plan of reorganization for the Company or further order of the Court. 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





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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 January 19, 2005, the USBC denied the motion of the SL
Plaintiffs for leave to amend their complaint. 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.



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 $16.6 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





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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, in the fourth quarter of 2004 the Company and the IRS reached
an agreement in principle to settle such claims in return for total settlement payments by the Company of approximately $99 million. The settlement was approved by the Bankruptcy Court by order dated November 15, 2004 but remains subject to approval
by 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.



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 continued indefinitely by the USBC. In addition, Owens Corning has been named a defendant in a purported class action, originally filed in the Superior Court for the County of San Joaquin, California, on behalf of post-petition claimants
with respect to such product. Subsequently, Owens Corning removed the California proceeding to the United States Bankruptcy Court for the Eastern District of California (CBC), and the CBC, upon Owens Cornings motion, ordered that
the proceeding be transferred to the USBC. 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





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CORNING AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



9. CONTINGENT LIABILITIES AND OTHER MATTERS (continued)



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.



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.





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CORNING AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



9. CONTINGENT LIABILITIES AND OTHER MATTERS (continued)



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 and two commercial
preference actions, has been stayed until August 25, 2005. The Pre-Petition Credit Facility Action has been continued indefinitely by the Court.



OTHER BANKRUPTCY RELATED MATTERS



See Note 1 to the Consolidated Financial Statements for a discussion of other bankruptcy related matters, including the impact of certain inter-company and intra-company
arrangements, transactions and relationships.



10. FIBREBOARD SETTLEMENT TRUST



Under the
Insurance Settlement described in Note 9 to the Consolidated Financial Statements, two of Fibreboards insurers provided $1.873 billion during the fourth quarter of 1999 to fund the costs of resolving pending and future Fibreboard
asbestos-related liabilities. As of March 31, 2005, 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 March 31, 2005, these assets were reflected as non-current assets,
under the category Restricted cash, securities and other - Fibreboard. Owens Corning estimates a reserve for Fibreboard in accordance with generally accepted accounting principles to reflect asbestos-related liabilities (see Note 9, Item
B, to the Consolidated Financial Statements). As of March 31, 2005, these liabilities were one of the items included in Owens Cornings consolidated balance sheet under the category Liabilities Subject to Compromise. At March 31,
2005, the Consolidated Financial Statements reflect Fibreboards reserve for asbestos litigation claims at $3.216 billion.





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OWENS
CORNING AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



10. FIBREBOARD SETTLEMENT TRUST (continued)



For accounting purposes, the Trust Assets are classified as trading securities and are recorded at fair
market value in the Consolidated Financial Statements in accordance with Statement of Financial Accounting Standards No. 115, Accounting for Certain Investments in Debt and Equity Securities. Earnings, realized gains/losses and
unrealized increase/decrease in fair market value of Trust Assets are reflected as an increase/decrease in the carrying amount of such assets on the Consolidated Balance Sheet as well as a decrease/increase in Chapter 11 related reorganization items
on the Consolidated Statement of Income (Loss). Cost for purposes of computing realized gains/losses is determined using the specific identification method. The residual obligation to charity is included with Fibreboards reserve for asbestos
litigation claims as the asbestos-related liabilities exceeded the Trust Assets.



Results for the Periods Ended March 31, 2005 and 2004



During the first quarters of both 2005 and 2004, Trust Assets generated interest/dividend earnings of approximately $15 million. These amounts were recorded as Chapter 11 related reorganization items in the Consolidated Statement of Income
(Loss).



At March 31, 2005 and 2004, the fair market value adjustment for those
securities designated as trading securities resulted in unrealized losses of approximately $19 million and $3 million, respectively, recorded as a change in the carrying amount of the assets on the Consolidated Balance Sheet and as Chapter 11
related reorganization items in the Consolidated Statement of Income (Loss).



As a result of the Filing, there were no payments for asbestos litigation claims from the Trust during the quarter ended March 31, 2005 or 2004. No payments were made for taxes during the quarter ended March 31, 2005 or 2004. The sale of
securities resulted in realized losses of approximately $3 million and $1 million during the first quarters of 2005 and 2004, respectively. Realized gains or losses from the sale of securities are reflected on the Companys financial statements
in the same manner as actual returns on Trust Assets, described above.



During
the first quarter of 2005, the Company increased Fibreboards recorded reserve for potential asbestos-related liability by $907 million, to an aggregate $3.216 billion.



At March 31, 2005, the fair value of Trust Assets and Administrative Deposits was $1.411 billion, which was comprised of Trust Assets of
$1.284 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)



10. FIBREBOARD SETTLEMENT TRUST (continued)



The table below summarizes Trust and Administrative Deposits activity for the three months ended March 31, 2005:



|                                                               |  |                          |       |   |                        |   |                 |  |   |               |   |  |           |    |   |                |   |      |   |  |   |        |  
|-------------------------------------------------------------- |  | ------------------------ | ----- | - | ---------------------- | - | --------------- |  | - | ------------- | - |  | --------- | -- | - | -------------- | - | ---- | - |  | - | ------ | -
|                                                               |  | Balance 12/31/04         |       |   | Interest and Dividends |   | Unrealized Loss |  |   | Realized Loss |   |  | Provision |    |   | Balance3/31/05 |  
|                                                               |  | (In millions of dollars) |      
|Assets                                                         |  |                          |       |   |                        |   |                 |  |   |               |   |  |           |    |   |                |   |      |   |  |   |        |  
|Trust Assets:                                                  |  |                          |       |   |                        |   |                 |  |   |               |   |  |           |    |   |                |   |      |   |  |   |        |  
|Marketable securities - trading                                |  | $                        | 1,291 |   |                        | $ | 15              |  | $ | (19           | ) |  | $         | (3 | ) |                | $ |     |   |  | $ | 1,284  |  
|Administrative Deposits                                        |  |                          | 127   |   |                        |   |                |  |   |              |   |  |           |   |   |                |   |     |   |  |   | 127    |  
|                                                               |  |                          |       |   |                        |   |                 |  |   |               |   |  |           |    |   |                |   |      |   |  |   |        |  
|Total assets                                                   |  | $                        | 1,418 |   |                        | $ | 15              |  | $ | (19           | ) |  | $         | (3 | ) |                | $ |     |   |  | $ | 1,411  |  
|                                                               |  |                          |       |   |                        |   |                 |  |   |               |   |  |           |    |   |                |   |      |   |  |   |        |  
|Liabilities                                                    |  |                          |       |   |                        |   |                 |  |   |               |   |  |           |    |   |                |   |      |   |  |   |        |  
|Accounts payable                                               |  | $                        | 19    |   |                        | $ |                |  | $ |              |   |  | $         |   |   |                | $ |     |   |  | $ | 19     |  
|Asbestos litigation claims                                     |  |                          | 2,309 |   |                        |   |                |  |   |              |   |  |           |   |   |                |   | 907  |   |  |   | 3,216  |  
|                                                               |  |                          |       |   |                        |   |                 |  |   |               |   |  |           |    |   |                |   |      |   |  |   |        |  
|Total Trust liabilities                                        |  |                          | 2,328 |   |                        |   |                |  |   |              |   |  |           |   |   |                |   | 907  |   |  |   | 3,235  |  
|Liabilities in excess of assets                                |  |                          | (910  | ) |                        |   | 15              |  |   | (19           | ) |  |           | (3 | ) |                |   | (907 | ) |  |   | (1,824 | )
|                                                               |  |                          |       |   |                        |   |                 |  |   |               |   |  |           |    |   |                |   |      |   |  |   |        |  
|Total Trust liabilities net of liabilities in excess of assets |  | $                        | 1,418 |   |                        | $ | 15              |  | $ | (19           | ) |  | $         | (3 | ) |                | $ |     |   |  | $ | 1,411  |  
|                                                               |  |                          |       |   |                        |   |                 |  |   |               |   |  |           |    |   |                |   |      |   |  |   |        |  



11. STOCK COMPENSATION



Owens Corning utilized
the intrinsic value method of accounting for expense recognition related to its stock based compensation plans by applying Accounting Principles Board Opinion No. 25 (Opinion 25). 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, there would have been no impact to reported net income (loss) for the first quarters of 2005 and 2004.



In December 2004, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 123 (revised 2004), Share-Based Payment (SFAS No. 123R), which eliminates the alternative to apply the intrinsic value method of accounting for stock based compensation permitted under Opinion 25. The
Company does not expect to issue additional stock-based compensation while it remains in Chapter 11 proceedings, and, as of March 31, 2005, none of the Companys previously issued stock-based awards were impacted by this standard. As such,
adoption of SFAS No. 123R will not have a material impact on the Companys financial statements.





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OWENS
CORNING AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



12. 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 EndedMarch 31,
|                                                                                                                           |  | 2005                   |        |   | 2004
|Net income (loss), in millions                                                                                             |  | $                      | (4,237 | ) |      | $ | 5     
|                                                                                                                           |  |                        |        |   |      |   |       
|Weighted-average number of shares outstanding used for basic earnings per share (thousands)                                |  |                        | 55,319 |   |      |   | 55,291
|Non-vested restricted shares (thousands)                                                                                   |  |                        |       |   |      |   | 52    
|Deferred awards (thousands)                                                                                                |  |                        |       |   |      |   | 24    
|Shares from assumed conversion of preferred securities (thousands)                                                         |  |                        |       |   |      |   | 4,566 
|                                                                                                                           |  |                        |        |   |      |   |       
|Weighted-average number of shares outstanding and common equivalent shares used for diluted earnings per share (thousands) |  |                        | 55,319 |   |      |   | 59,933
|                                                                                                                           |  |                        |        |   |      |   |       



The number of shares used in the
calculation of diluted earnings per share for the quarter ended March 31, 2005 did not include 15 thousand common equivalent shares of non-vested restricted shares, 24 thousand common equivalent shares of deferred awards, and 4,566 thousand common
equivalent shares from assumed conversion of preferred securities due to their anti-dilutive effect.



13. COMPREHENSIVE INCOME/LOSS



For the quarters
ended March 31, 2005 and 2004, the Company had other comprehensive loss of $2 million and other comprehensive income of $1 million, respectively, resulting in comprehensive loss of $4.239 billion and comprehensive income of $7 million, for the
respective periods. The Companys other comprehensive income (loss) includes: (1) currency translation adjustments; (2) minimum pension liability adjustments; and (3) deferred gains and losses on certain hedging transactions to record at fair
value.





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CORNING AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(unaudited)



14. INCOME TAXES



In the first quarter of 2005,
the Company increased its asbestos-related reserves through charges to income of $3.435 billion for Owens Corning asbestos-related liabilities and $907 million for Fibreboard asbestos-related liabilities, for an aggregate charge of $4.342 billion.
Management evaluated the realization of the $1.720 billion deferred tax assets resulting from the aggregate $4.342 billion charge in light of the Companys financial position and the Chapter 11 proceedings. As a result of such assessment,
management increased its valuation allowance related to charges for asbestos-related liabilities by $1.645 billion, resulting in a $75 million net tax benefit in the first quarter of 2005.



On October 22, 2004, the President signed the American Jobs Creation Act of 2004 (the
Act). The Act creates a temporary incentive for U.S. corporations to repatriate accumulated income earned abroad by providing an 85 percent dividend received deduction for certain dividends from controlled foreign corporations. The
deduction is subject to a number of limitations and, as of today, uncertainty remains as to how to interpret numerous provisions of the Act. As such, we are not yet in a position to reevaluate whether, and to what extent we might repatriate foreign
earnings that have not yet been remitted to the United States. Based on our analysis of this incentive to date, it appears possible that we might reevaluate the repatriation of between $150 million and $200 million of earnings currently considered
as permanently reinvested, resulting in a respective tax liability ranging from $7 million to $11 million. We expect to be in a position to finalize our assessment in the first half of 2005.



15. ACCOUNTING PRONOUNCEMENTS



In December 2004,
the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 123 (revised 2004), Share-Based Payment (SFAS No. 123R). In April 2005, the SEC amended the compliance date for this standard so
that it becomes effective for the Companys interim report for the first quarter of 2006. The standard eliminates the alternative to apply the intrinsic value method of accounting for stock based compensation permitted under Opinion 25. The
Company does not expect to issue additional stock-based compensation while it remains in Chapter 11 proceedings, and, as of March 31, 2005, none of the Companys previously issued stock-based awards were impacted by this standard. As such,
adoption of SFAS No. 123R will not have a material impact on the Companys financial statements.



In March 2005, the Financial Accounting Standards Board issued Interpretation Number 47, Accounting for Conditional Asset Retirement Obligations (FIN 47). This statement clarifies the meaning
of the term conditional asset retirement as used in Statement of Financial Accounting Standards No. 143, Accounting for Asset Retirement Obligations and clarifies when an entity has sufficient information to reasonably
estimate the fair value of an asset retirement obligation. The statement requires the accelerated recognition of certain asset retirement obligations when a fair value of such obligation can be estimated. This statement becomes effective for the
Company in the fourth quarter of 2005. The Company is currently evaluating the effect of adoption of this statement.





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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.)



OVERVIEW



Chapter 11 Overview



Since our filing in 2000, we have worked diligently to formulate a Plan of Reorganization
that deals fairly and equitably with all of our creditors and their claims. Our strategy has been to steadily advance our case while attempting to facilitate a Plan that could be supported by all of our creditors (Consensual Plan).
Having a Consensual Plan would allow Owens Corning to move towards emergence from Chapter 11 without opposition from any of our major creditor groups. As a result, we would emerge sooner while still maximizing the value of our estate for all
creditors. To date, we have been unable to reach a Consensual Plan, but we remain committed to emerging as soon as possible even if the Plan of Reorganization does not have the support of all creditor groups.



For the past few years, uncertainty surrounding two primary issues has negatively impacted
progress in our case. Those issues were (1) substantive consolidation of Owens Corning and the other Debtor entities for purposes of the Chapter 11 proceedings and (2) estimation of the total amount of the Companys asbestos liabilities. In the
first Quarter of 2005, there were significant developments regarding those issues.



With respect to substantive consolidation, Judge Fullam, the Federal District Court Judge overseeing our case, previously issued an Order in 2004 granting the Companys motion requesting substantive consolidation. Applying substantive
consolidation in our case would result in all of the assets of our estate, whether held at the parent company or subsidiary level, being consolidated for purposes of our Plan. All creditors having claims against Owens Corning or any of its Debtor
subsidiaries would then seek recovery from the consolidated estate. The holders of the Companys bank debt believe that the estate should not be substantively consolidated.



Those bank creditors argue that certain pre-petition loan guarantees provided to the banks by subsidiaries of Owens Corning should entitle
them to a preferred recovery over all other unsecured creditors. They have therefore appealed Judge Fullams Order, and we are awaiting a ruling on that appeal from the Third Circuit Court of Appeals. Because our proposed Plan of Reorganization
is based upon substantive consolidation, a reversal of Judge Fullams Order would result in significant revisions to the terms of that Plan of Reorganization and could delay progress in our case.



The other primary issue in our Chapter 11 proceeding is the determination of the value of the
Companys current and future asbestos liability. Judge Fullam conducted a six-day asbestos estimation hearing in mid-January of 2005, and on March 31, 2005, Judge Fullam issued an Order setting Owens Cornings asbestos liability at $7
billion. We are hopeful that the estimation of Owens Cornings asbestos liability will serve as a catalyst for productive settlement discussions among our creditors.



Judge Fullam did not issue a decision as to the asbestos liability of Fibreboard. At this time, it is not clear when or if Judge Fullam will
estimate Fibreboards asbestos liability. Furthermore, based on the reasoning of his decision regarding Owens Cornings liability, it may not be necessary for him to assign a specific number to Fibreboards liability to enable Owens
Corning to emerge from Chapter 11 under either a Consensual or non-Consensual Plan.





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



An external factor that also weighed heavily upon the negotiations among our various creditor groups was the proposed
Federal asbestos reform legislation that was pending in the Senate for much of 2003 and 2004 (the FAIR Act). The Companys non-asbestos creditors have believed that the FAIR Act would reduce the amount of asbestos liability owed by
the Company, and would therefore increase the recoveries of non-asbestos creditors.



Senators Arlen Specter (R-PA) and Patrick Leahy (D-VT) co-sponsored the FAIR Act introduced in the United States Senate as S-852 on April 19, 2005.



Under 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. However, the legislative 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.



As a result of the uncertainty surrounding the FAIR Act, the Companys current strategy is to continue to move forward in our Chapter 11 notwithstanding the
bills introduction. The Company will continue to monitor the legislative progress of the FAIR Act, and we will evaluate any significant developments and their potential impact on our Chapter 11 case.



Our going forward strategy continues to be two-fold: (1) look for a compromise that will
result in a Consensual Plan supported by all of our creditors and (2) in the absence of a Consensual Plan, proceed as quickly as possible to confirm our Plan of Reorganization even if it does not have the support of all creditor groups and emerge
from Chapter 11.



The Asbestos Claimants Committee and the Asbestos Futures
Representative continue to be co-plan proponents with Owens Corning with respect to our Plan of Reorganization. While there are other non-asbestos creditors who also support our Plan, there continues to be those who have objections to it, including
the holders of our bank debt. While we can emerge from Chapter 11 and discharge our current and future asbestos liability without the support of non-asbestos creditors, we continue to believe that a Consensual Plan will allow us to emerge more
quickly. At this time, however, we cannot predict when the Company will be able to confirm a Plan of Reorganization and successfully emerge.



Throughout the first quarter of 2005, we continued to profitably grow our business while operating in Chapter 11. 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.





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



Operations Overview



During the first quarter of 2005, many of our markets remained strong, providing a continued environment of high demand for our products.
The table below provides a summary of our sales and income (loss) from operations for the first quarters of 2005 and 2004:



|                                                  |  |                          |        |    |      |   |       |  
|------------------------------------------------- |  | ------------------------ | ------ | -- | ---- | - | ----- | -
|                                                  |  | Quarter endedMarch 31,   |       
|                                                  |  | 2005                     |        |    | 2004 |  
|                                                  |  | (In millions of dollars) |       
|Sales                                             |  | $                        | 1,402  |    |      | $ | 1,209 |  
|                                                  |  |                          |        |    |      |   |       |  
|Percent change from prior year                    |  |                          | 16.0   | %  |      |   | 6.7   | %
|                                                  |  |                         
|Income (Loss) from operations                     |  | $                        | (4,281 | )  |      | $ | 34    |  
|                                                  |  |                          |        |    |      |   |       |  
|Income (Loss) from operations as percent of sales |  |                          | (305.3 | )% |      |   | 2.8   | %



Strong demand in our markets combined
with an improved pricing environment in our Building Materials Systems segment contributed to 16% growth in sales over 2004. The 2005 operating loss was the result of an additional $4.342 billion provision for asbestos liability, which the Company
recognized as a result of the District Court issuing an opinion estimating Owens Cornings contingent personal injury asbestos liability in the first quarter of 2005.



Because of the nature of certain costs and expenses related to our Chapter 11 proceedings, asbestos liability, and restructuring activities,
as we move towards emergence from bankruptcy, management does not find reported income from operations to be the most useful financial measure of the Companys year-to-year operational performance. These costs and expenses are related primarily
to the Chapter 11 process, liabilities that are not the result of current operations of the Company and activities necessitated by our anticipated plan of reorganization, respectively. Management does not expect these costs and expenses to continue
on an ongoing basis after the Company emerges from bankruptcy.



Management
measures operating performance excluding Chapter 11 related reorganization items, provisions for asbestos litigation claims and restructuring and other charges (credits) for various purposes, including with respect to analysis of performance and
related employee compensation measures and for reporting results to the Board of Directors of the Company. Although management believes that these adjustments to income from operations provide a more meaningful representation of the Companys
performance, our operating performance excluding these items should not be considered in isolation or as a substitute for income from operations prepared in accordance with GAAP.



The table below provides detail of the items management excludes when evaluating year-to-year operating performance.



|                                          |  |                          |       |      |   |    |  
|----------------------------------------- |  | ------------------------ | ----- | ---- | - | -- | -
|                                          |  | Quarter endedMarch 31,   |      
|                                          |  | 2005                     |       | 2004 |  
|                                          |  | (In millions of dollars) |      
|Chapter 11 related reorganization items   |  | $                        | 36    |      | $ | 10 |  
|Provision for asbestos litigation claims  |  |                          | 4,342 |      |   |   |  
|Restructuring and other charges (credits) |  |                          |      |      |   | (5 | )
|                                          |  |                          |       |      |   |    |  
|Total of items                            |  | $                        | 4,378 |      | $ | 5  |  
|                                          |  |                          |       |      |   |    |  





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Excluding these items, operating performance improved approximately 149% in 2005 compared to 2004, reflecting an
improved pricing environment in the Building Materials Systems segment and higher volumes favorably impacting operating efficiencies.



Major factors affecting the performance of our Building Materials Systems segment during 2005 include the following:



| |  |  | A continued attractive interest rate environment for mortgages and refinancing in 2005 resulted in continued strength in the United States housing markets, positively impacting
demand for products in the Building Materials Systems segment and our ability to achieve price increases.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The high demand for Building Materials Systems segment products has enabled us to improve our operating efficiency as several of our product lines continue to operate at very high
utilization rates.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Continued increases in costs for energy-related commodities (including natural gas, asphalt, and resin) and services (including delivery costs) impacted all of our product lines
within this segment to some extent. While not the case for each product line, in total we were able to achieve price increases to offset the impact of these higher costs.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The April 2004 acquisition of the remaining 60% ownership interest in Vitro Fibras (OC Mexico) and expansion of our operations in Asia Pacific positively contributed to
the segments financial performance versus the same period in 2004.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Major factors affecting the performance of our Composite Solutions segment during 2005 include the following:



| |  |  | Global demand for glass fibers continued to strengthen, stabilizing what had been a falling price environment.
| | - |  | --------------------------------------------------------------------------------------------------------------



| |  |  | The increased demand for glass fibers enabled this segment to improve its operating efficiency, contributing to the improvement in its financial performance.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Continued increases in costs for energy-related commodities and services adversely impacted this segment; however, the improvements in operating efficiencies and the pricing
environment offset the impact of these higher costs.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Approximately $6 million of the improvement in 2005s income from operations, compared to 2004, is the result of business interruption costs expensed in the first quarter of
2004 related to a 2003 flood at the LArdoise, France manufacturing plant. These costs (and similar costs expensed in the second and third quarters) were recovered from insurance proceeds in the fourth quarter of 2004.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Liquidity



Due to the seasonality of our business, we typically invest cash in working capital during the first quarter by building inventories to
serve customer demand in future quarters. Cash flow used in operations was $132 million, while our cash used in operations combined with capital spending for plant and equipment was $178 million. We ended the quarter with a cash balance of $930
million.



Safety



We believe that safety is everyones responsibility and that all accidents are
preventable. Consequently, we have made safety a top Company priority. We measure our progress on safety based on two measures, the OSHA Recordable Incidents Rate (ORIR) and the Combined Occupational Disability Index





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(CODI). CODI is a subset of ORIR and includes the more severe incidents that involve lost or restricted time. The table below provides our
performance for the first quarter 2005 and the years ending 2004 and 2003:



|                    |  |                                |   |  |                |   |  |                |  
|------------------- |  | ------------------------------ | - |  | -------------- | - |  | -------------- | -
|                    |  | ThreeMonthsEndedMarch 31, 2005 |   |  | Year Ended2004 |   |  | Year Ended2003 |  
|ORIR                |  | 2.06                           |   |  | 3.03           |   |  | 3.85           |  
|Percent improvement |  | 32                             | % |  | 21             | % |  | 31             | %
|CODI rate           |  | 1.13                           |   |  | 1.91           |   |  | 2.06           |  
|Percent improvement |  | 41                             | % |  | 7              | % |  | 29             | %



Our goal for the remainder of 2005 and
beyond continues to be the elimination of all injuries.



Outlook



Our outlook for the remainder of the year remains positive, yet
cautious. The global demand for energy related commodities and services is likely to continue to exert pressure on our margins and we anticipate we will need to continue to realize price increases to offset inflation. We plan to continue investing
to improve the manufacturing efficiency of our current plants and expand our capacity with a focus on North America and Asia Pacific. However, we believe a rising interest rate environment would cause the United States housing market to soften from
the recent high levels. We will continue to monitor our markets and prepare for any potential downturn.



RESULTS OF OPERATIONS



Sales and
Profitability for the Quarter Ended March 31, 2005 and 2004



NET SALES



Net sales for the quarter ended
March 31, 2005 were $1.402 billion, a 16% increase from the 2004 level of $1.209 billion. This increase was primarily the result of favorable pricing actions in our Building Materials Systems segment and higher volumes in both operating segments.
The increased volumes are a result of continued strength in the United States housing and remodeling markets and an improving global economy.



Sales outside the United States represented 17% of total sales for the quarter ended March 31, 2005, compared to 16% during the same time period in 2004. The increase was
primarily attributable to volumes in Latin America due to the consolidation of OC Mexico beginning in the second quarter of 2004. We expect the percentage of sales outside the United States to continue to increase as our investments in Asia Pacific
continue to mature.





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PROFITABILITY



|                                         |  |                         |        |   |      |   |      
|---------------------------------------- |  | ----------------------- | ------ | - | ---- | - | -----
|                                         |  | Quarter endedMarch 31, 
|                                         |  | 2005                    |        |   | 2004
|                                         |  | (In millions ofdollars)
|Sales                                    |  | $                       | 1,402  |   |      | $ | 1,209
|Gross margin                             |  | $                       | 235    |   |      | $ | 172  
|Marketing and administrative             |  | $                       | 124    |   |      | $ | 115  
|Provision for asbestos litigation claims |  | $                       | 4,342  |   |      | $ |     
|Income (loss) from operations            |  | $                       | (4,281 | ) |      | $ | 34   
|Income tax (benefit) expense             |  | $                       | (48    | ) |      | $ | 27   
|Net income (loss)                        |  | $                       | (4,237 | ) |      | $ | 5    



GROSS
MARGIN



Gross margin as a percent of sales improved by 2.6% for the first
quarter of 2005 compared to the same period of 2004. The improvement in gross margin is primarily attributable to improved pricing, higher volumes and operating efficiencies. These gains more than offset energy, material and product delivery related
inflation during the quarter.



MARKETING AND
ADMINISTRATIVE EXPENSES



Marketing and administrative expenses increased to
$124 million during the quarter ended March 31, 2005. However, as a percent of sales, these expenses declined to 8.8%, compared to 9.5% for the first quarter of 2004.



PROVISION FOR ASBESTOS LITIGATION CLAIMS



During the first quarter of 2005, the District Court provided an estimate of $7 billion for Owens Cornings contingent personal injury
asbestos liability. While uncertainty remains concerning the amount of such liability, as a result of this ruling, the Company determined that this estimate was a more likely outcome than any other in the range of possible outcomes and recorded an
additional provision for asbestos litigation claims for Owens Corning of $3.435 billion, bringing the total reserve recorded for Owens Corning to $7 billion. The Company also re-evaluated its reserve for Fibreboards asbestos claims. Although
the Court did not provide an estimate for Fibreboards liability, management evaluated the Courts process for determining Owens Cornings liability and determined that the range of possible outcomes had narrowed. Consequently, the
Company determined that an additional $907 million liability should be recorded for Fibreboard, bringing the total reserve recorded for Fibreboard to $3.216 billion. The total provision recorded for asbestos litigation claims during the first
quarter 2005 was $4.342 billion. See Note 9 to the Consolidated Financial Statements for further information concerning the provision for asbestos litigation claims.





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INCOME FROM OPERATIONS



The decrease in income from operations was primarily due to the $4.342 billion provision for
asbestos litigation claims taken during the first quarter of 2005. Income from operations was also negatively impacted by a $26 million increase in Chapter 11 reorganization items, which was primarily a result of higher unrealized investment losses
associated with the Fibreboard Settlement Trust and increased professional fees.



INCOME TAX EXPENSES



In connection with provision for asbestos litigation claims, management evaluated the amount of deferred tax assets and likelihood of realization of such deferred tax
assets related to asbestos liability in light of the Companys financial position and the Chapter 11 proceedings. As a result of such assessment, a $75 million net tax benefit was recorded in the first quarter of 2005. This was the only tax
benefit recorded in connection with the first quarter 2005 asbestos-related charges, as a valuation allowance was established against the related deferred tax assets for the balance of the charges.



NET INCOME



For the quarter ended March 31, 2005, Owens Corning reported a net loss of $4.237 billion,
or ($76.59) per share, compared to net income of $5 million, or $0.09 per share, for the first quarter of the prior year. The decrease in 2005 reflected the $4.342 billion provision for asbestos litigation claims and the other items mentioned above.



As a result of the Filing, contractual interest expense has not been accrued
or recorded on pre-petition debt of the Debtors since the Petition Date. From the Petition Date through March 31, 2005, 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 $697 million, of which $39 million relates to the first quarter of 2005 and $34 million relates to the first quarter of 2004. Of the total calculated amount, approximately $236 million
relates to the Pre-Petition Credit Facility, which is the subject of pre-petition guarantees issued by certain of Owens Cornings Debtor and non-Debtor subsidiaries. There may be circumstances, such as the occurrence of favorable asbestos
legislation such as the FAIR Act or a determination that certain debt is secured or otherwise entitled to a preference over other creditors, when post-petition interest would be determined to be payable by the Company on all or some of its
pre-petition debt. Actual post-petition interest determined under the terms of pre-petition debt may vary from the calculated amounts shown above, perhaps significantly. For example, various holders of the debt under the Pre-Petition Credit Facility
have stated that the amount of post-petition interest calculated under such debt would be more than double the amount shown above, or more. Accrual of any such post-petition interest would result in a charge against income in the period of such
accrual. Any such revision could be material to the Companys consolidated financial position and results of operations in any such period. See Note 1 to the Consolidated Financial Statements for further information concerning the Chapter 11
proceedings.



LIQUIDITY, CAPITAL RESOURCES AND OTHER RELATED MATTERS



Due to the seasonality of our business and the timing of certain
expenses, our operations generally utilize cash reserves during the first quarter of the year. The first quarter of 2005 was no different as we ended with a cash balance of $930 million, a decrease of $195 million from December 31, 2004. The
following table provides information regarding our liquidity.



|                                   |  |                         |      |   |      |   |      |  
|---------------------------------- |  | ----------------------- | ---- | - | ---- | - | ---- | -
|                                   |  | Quarter EndedMarch 31,  |     
|                                   |  | 2005                    |      |   | 2004 |  
|                                   |  | (In millions ofdollars) |     
|Cash balance                       |  | $                       | 930  |   |      | $ | 821  |  
|Cash used for operations           |  | $                       | (132 | ) |      | $ | (126 | )
|Cash used for investing activities |  | $                       | (47  | ) |      | $ | (49  | )
|Unused committed credit lines      |  | $                       | 103  |   |      | $ | 168  |  





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Cash flow from operations was negative $132 million for the quarter ended March 31, 2005, compared to negative $126
million for the first quarter of 2004. Net working capital and the current ratio at March 31, 2005 were $1,250 million and 2.42, respectively, compared to $1,038 million and 2.27 as of March 31, 2004.



Investing activities consumed $47 million in cash during the first quarter of 2005, compared
to $49 million during the same period in 2004. Under expected market conditions, we anticipate spending approximately $303 million in capital investments in the last three quarters of 2005, substantially all of which is uncommitted as of March 31,
2005. We expect these expenditures will be funded from the Companys operations and existing cash on hand.



Financing activities during the first quarter of 2005 resulted in a use of cash of $12 million, compared to $7 million for the same period in 2004. The use of cash in
both years primarily relates to payments of outstanding debt in India.



At
March 31, 2005, we had $2.956 billion of debt subject to compromise and $72 million of other debt, compared to $2.958 billion of debt subject to compromise and $80 million of other debt at December 31, 2004.



The Company has several defined benefit pension plans. The Company expects to make
contributions to the pension plans in the range of $100 million to $150 million in 2005. The contributions will be made from the Companys current cash balance and cash generated from operations. The Companys pension related assets
increased to $484 million at March 31, 2005, from $322 million at March 31, 2004, 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 $732 million at March 31, 2005, from $699 million at March 31, 2004. The ultimate cash flow impact to the Company, if any, of the pension plan
liability and the timing of any such impact will depend on numerous variables, including future changes in actuarial assumptions and market conditions.



In connection with the Filing, the Debtors obtained a $500 million debtor-in-possession credit facility from a group of lenders led by Bank of America, N.A. (the
DIP Financing), which was originally scheduled to expire November 15, 2002. In October 2002, the Debtors reached agreement with the lenders to renew the DIP Financing for an additional term of two years, with a reduced maximum
availability of $250 million. In September 2004, the credit facility was renewed for an additional 2 years. There were no borrowings outstanding under the DIP Financing at March 31, 2005; however, approximately $147 million of the availability under
this facility was utilized as the result of the issuance of standby letters of credit and similar uses.



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



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





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



OFF BALANCE SHEET ARRANGEMENTS



The Company enters into certain off balance sheet arrangements in the ordinary course of
business, such as securitization of accounts receivable and guarantees with respect to unconsolidated affiliates and other entities. There have been no significant changes in the Companys off balance sheet arrangements during the quarter ended
March 31, 2005.



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



CONTRACTUAL OBLIGATIONS



In the course of business, the Company enters into contractual obligations to
make payments to third parties. During the first quarter 2005, there were no material changes to such contractual obligations outside the ordinary course of the Companys business.



ADOPTION OF NEW ACCOUNTING STANDARDS



In December 2004, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 123 (revised 2004), Share-Based Payment
(SFAS No. 123R). In April 2005, the SEC amended the compliance date for this standard so that it becomes effective for the Companys interim report for the first quarter of 2006. The standard eliminates the alternative to apply the
intrinsic value method of accounting for stock based compensation permitted under Opinion 25. The Company does not expect to issue additional stock-based compensation while it remains in Chapter 11 proceedings, and, as of March 31, 2005, none of the
Companys previously issued stock-based awards were impacted by this standard. As such, adoption of SFAS No. 123R will not have a material impact on the Companys financial statements.



In March 2005, the Financial Accounting Standards Board issued Interpretation Number 47,
Accounting for Conditional Asset Retirement Obligations (FIN 47). This statement clarifies the meaning of the term conditional asset retirement as used in Statement of Financial Accounting Standards No. 143,
Accounting for Asset Retirement Obligations and clarifies when an entity has sufficient information to reasonably estimate the fair value of an asset retirement obligation. The statement requires the accelerated recognition of certain
asset retirement obligations when a fair value of such obligation can be estimated. This statement becomes effective for the Company in the fourth quarter of 2005. The Company is currently evaluating the effect of adoption of this statement.



ENVIRONMENTAL MATTERS



The Company has been deemed by the United States Environmental Protection Agency
(EPA) to be a Potentially Responsible Party (PRP) with respect to certain sites under the Comprehensive Environmental Response, Compensation and Liability Act (Superfund). The Company has also been deemed a PRP under similar
state or local laws. In other instances, other PRPs have brought suits against the Company as a PRP for contribution under such federal, state or local laws. At March 31, 2005, a total of 61 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





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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 March 31, 2005, the Companys reserve for such liabilities was $15 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.



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, it is possible that 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) may file petitions for relief under Chapter 11 of the Bankruptcy Code under
certain circumstances.





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The Debtors filed for relief under Chapter 11 to address the growing demands on Owens Cornings cash flow
resulting from its multi-billion dollar asbestos liability. This liability is discussed in greater detail in Note 9 to the Consolidated Financial Statements.



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 May 27, 2004, the United States Court of
Appeals for the Third Circuit (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.



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.



The holders of the debt under the Pre-Petition Credit Facility, and certain other members of
the major non-asbestos creditor groups, have indicated that they continue to oppose the Plan.





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Certain terms, conditions and provisions of the Plan are discussed below. The Plan is subject to confirmation by the
Bankruptcy Court. Because the Plan is based on certain assumptions, negotiating positions and valuations that are subject to change, it is expected that the Plan will be further amended prior to confirmation. There can be no assurance that a Plan
supported by Owens Corning and less than all of the major creditor groups will be confirmed by the Bankruptcy Court and consummated. Owens Corning is unable to predict what impact 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, as it relates to Debtors other than Fibreboard, 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 10 to the Consolidated Financial Statements)) for the purposes of voting, determining which claims and
interests will be entitled to vote to accept or reject the Plan, confirmation of the Plan, and the resultant discharge of and cancellation of claims and interests and distribution of assets, interests and other property under the Plan. As to
Fibreboard, the Plan contemplates that the assets available to satisfy Fibreboard liabilities (which are generally limited to asbestos-related liabilities) will be limited to the assets of the Fibreboard Settlement Trust and certain other specified
assets.



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. 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. The Third Circuit heard oral arguments on the appeal of the Memorandum and Order on February 7, 2005. Owens Corning is unable to predict what the effect, if any, of the results of the appeal
would be on Owens Corning and Fibreboard or their plan or plans of reorganization. However, because the currently proposed Plan of Reorganization is based upon substantive consolidation, a Third Circuit reversal of the District Courts Order
could potentially result in significant modifications of the Plan and delays in the resolution of the Chapter 11 Cases.



A six-day claims estimation hearing was held before the District Court beginning January 13, 2005. The purpose of the claims estimation hearing was to establish the
amount of Owens Cornings and Fibreboards current and future asbestos liability to be allowed as claims in the Chapter 11 Cases. In general, the holders of the debt under the Pre-Petition Credit Facility argued that the amount of such
asbestos liability should be set at an amount significantly lower than the amounts reserved for asbestos claims on the financial statements of the Debtors, and the Official Committee of Asbestos Claimants and the Legal Representative for the class
of future asbestos claimants argued that such asbestos liability should be set at a significantly higher level. On March 31, 2005, the District Court issued a Memorandum and Order estimating the total amount of contingent and unliquidated claims
against Owens Corning for personal injury or death caused by exposure to asbestos (including pending claims, future claims and contract claims) at $7 billion. As a result of the District Courts estimation, Owens Corning increased its reserve
for potential asbestos-related liability by $3.435 billion for the period ended March 31, 2005, so that its recorded reserve equaled the level of asbestos liability estimated by the District Court (see Note 9 to the Consolidated Financial
Statements). Although the District Courts Memorandum and Order did not specifically address the potential asbestos-related liability of Fibreboard, based upon the analysis that the District Court had followed in establishing estimated asbestos
liability for Owens Corning, Owens Corning also increased Fibreboards recorded reserve for potential asbestos-related liability by $907 million.





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Related Developments



PROPOSED ASBESTOS LEGISLATION



Senators Arlen Specter (R-PA) and Patrick Leahy (D-VT) co-sponsored an asbestos litigation reform bill (S-852) introduced in the United
States Senate on April 19, 2005. The proposed legislation is entitled the Fairness in Asbestos Injury Resolution Act of 2005 (the FAIR Act).



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 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 legislative fate of the FAIR Act remains uncertain, and Owens Corning is unable to make
any prediction as to whether the FAIR Act will be enacted or, if it is enacted, what its final form would be or what the effect, if any, would be on Owens Corning and Fibreboard or their plan or plans of reorganization. The provisions of any
legislation ultimately enacted may have a material effect on the amount of liability that Owens Corning and Fibreboard ultimately have for asbestos-related claims, which could be 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. Further
proceedings on this matter have been continued until a status conference on the motion.



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.





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



The Plan of Reorganization



Owens Corning believes that it is likely that the terms, conditions and provisions of the Plan will 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 provides for partial payment of all unsecured creditors allowed claims, in the form of distributions of new common stock and notes of the reorganized
company, and cash. Additional distributions from potential insurance and other third-party claims may also be paid to certain classes of unsecured creditors, but the Plan currently contemplates 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.



As it relates to Debtors other than Fibreboard, 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 10 to the Consolidated Financial Statements)) for the purposes of voting, determining which claims and interests
will be entitled to vote to accept or reject the Plan, confirmation of the Plan, and the resultant discharge of and cancellation of claims and interests and distribution of assets, interests and other property under the Plan. For these purposes, the
Plan would treat all assets and liabilities of each 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. The holders of the debt under the Pre-Petition Credit
Facility have asserted that substantive consolidation is not appropriate and continue to challenge that approach. As to Fibreboard, the Plan contemplates that the assets available to satisfy Fibreboard liabilities (which are generally limited to
asbestos-related liabilities) will be limited to the assets of the Fibreboard Settlement Trust and certain other specified assets.



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. 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. The Third Circuit heard
oral arguments on the appeal of the Memorandum and Order on February 7, 2005. Owens Corning is unable to predict what the effect, if any, of the results of the appeal would be on Owens Corning and Fibreboard or their plan or plans of reorganization.
However, because the currently proposed Plan of Reorganization is based upon substantive consolidation, a Third Circuit reversal of the District Courts Order could potentially result in significant modifications of the Plan and delays in the
resolution of the Chapter 11 Cases.



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



The percentage recovery and value of the payments 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 amount of Owens
Cornings and Fibreboards current and future asbestos liability.





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The Plan provides that the amount of the current and future asbestos personal injury claims to be allowed in the
Chapter 11 Cases against Owens Corning and Fibreboard would be determined by the Bankruptcy Court. A six-day claims estimation hearing was held before the District Court beginning January 13, 2005. The purpose of the claims estimation hearing was to
establish the amount of current and future asbestos liability to be allowed in the Chapter 11 Cases. In general, the holders of the debt under the Pre-Petition Credit Facility argued that the amount of the Companys current and future asbestos
liability should be set at an amount significantly lower than the amounts reserved for asbestos claims on the financial statements of the Debtors, and the Official Committee of Asbestos Claimants and the Legal Representative for the class of future
asbestos claimants argued that such asbestos liability should be set at a significantly higher level. On March 31, 2005, the District Court issued a Memorandum and Order estimating the total amount of contingent and unliquidated claims against Owens
Corning for personal injury or death caused by exposure to asbestos (including pending claims, future claims and contract claims) at $7 billion. As a result of the District Courts estimation, Owens Corning increased its reserve for potential
asbestos-related liability by $3.435 billion for the period ended March 31, 2005, so that its recorded reserve equaled the level of asbestos liability estimated by the District Court. Although the District Courts Memorandum and Order did not
specifically address the potential asbestos-related liability of Fibreboard, based upon the analysis that the District Court had followed in establishing estimated asbestos liability for Owens Corning, Owens Corning also increased Fibreboards
recorded reserve for potential asbestos-related liability by $907 million.



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 10 to the Consolidated Financial Statements) and specified other assets, 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, through separate sub-accounts for Owens Corning and Fibreboard, assume all asbestos-related liability of Owens Corning and Fibreboard and will, through those separate
sub-accounts, make payments to claimants in accordance with the trust distribution procedures included as part of the Plan. The Plan contemplates that the assets of the existing Fibreboard Settlement Trust and certain other assets will fund only the
separate Fibreboard sub-account and, as a result, those amounts will not be available under the Plan to pay claims against Owens Corning. Conversely, only the assets in the Fibreboard sub-account will be available to pay claims against Fibreboard.
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, their respective subsidiaries, and certain of their affiliates, 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, Fibreboard, or any
other Debtor, 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





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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. (Exterior), an indirect wholly-owned subsidiary of Owens Corning, 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, it is possible that 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, may file for relief under
Chapter 11 of the Bankruptcy Code, and 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 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 $16.6 billion, alleging a right to payment from a Debtor were filed with the Bankruptcy Court in response to the





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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 March 31, 2005, approximately 6,400 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 $1.8 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 $8.0 billion. As of March 31, 2005, approximately 1,000 of these claims, totaling approximately $0.4 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 $0.3 billion. The remaining claims consist of:



| |  | Approximately 2,900 claims, totaling approximately $1.4 billion, associated with asbestos-related contribution, indemnity, reimbursement, or subrogation claims. Owens Corning will
address all asbestos-related personal injury and wrongful death claims in the future as part of the Chapter 11 Cases. See Note 9 to the Consolidated Financial Statements for additional information concerning asbestos-related liabilities.
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Approximately 100 claims, totaling approximately $0.6 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 $3.5 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 9 to the Consolidated Financial
Statements); a contingent claim for approximately $458 million by the Pension Benefit Guaranty Corporation, as described more fully under the heading PBGC Claim in Note 9 to the Consolidated Financial Statements; a $275 million class
action claim involving alleged problems with a specialty roofing product, as described more fully under the heading Specialty Roofing Claim in Note 9 to the Consolidated Financial Statements; environmental claims totaling approximately
$109 million; and claims for contract rejections, totaling approximately $121 million, of which approximately $50 million are protective claims covering contracts which have not been rejected by the Debtors as of March 31, 2005.
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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





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



reasonably estimate the value of all the claims that will ultimately be allowed by the Bankruptcy Court, due to the uncertainties of the Chapter 11 process,
the in-progress state of Owens Cornings investigation of submitted claims, and the lack of documentation submitted in support of many claims. Owens Corning continues to evaluate claims filed in the Chapter 11 Cases and will make such
adjustments as may be appropriate. Any such adjustments could be material to the Companys consolidated financial position and results of operations in any given period. For a discussion of liability amounts in respect of asbestos personal
injury claims, see Note 9 to the Consolidated Financial Statements.



ASBESTOS BAR DATE



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



As indicated above, the General Bar Date does not apply to asbestos-related personal injury claims and asbestos-related wrongful death claims (other than claims for
contribution, indemnity, reimbursement, or subrogation). Despite this, approximately 3,200 proofs of claim (in addition to claims described above under General Bar Date), totaling approximately $2.5 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 9 to the Consolidated Financial Statements for additional information concerning asbestos-related liabilities.



As described above, on March 31, 2005, the District Court issued a Memorandum and Order estimating the total amount of contingent and
unliquidated claims against Owens Corning for personal injury or death caused by exposure to asbestos (including pending claims, future claims and contract claims) at $7 billion. The Memorandum and Order did not specifically address the potential
asbestos-related liability of Fibreboard. In addition, the Memorandum and Order did not address whether a bar date would be established for asbestos-related personal injury or wrongful death claims as to either Owens Corning or Fibreboard.



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
| | - |  | -------------------





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| |  |  | 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 in this report
| | - |  | --------------------------------------------------------------------------------------



| |  |  | 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
| | - |  | --------------



In addition to the list above, in connection with the Chapter 11 proceedings and the development of a plan or plans of reorganization, we anticipate 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 our 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.



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK



Please refer to the Companys 2004 annual report on Form 10-K for the Companys quantitative and qualitative disclosures about market risk.



ITEM 4. CONTROLS AND PROCEDURES



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



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



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





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PART II



ITEM 1. LEGAL PROCEEDINGS



Contingent
Liabilities and Other Matters



Note 9 to the Consolidated Financial
Statements, entitled Contingent Liabilities and Other Matters, is incorporated here by reference.



Chapter 11 Proceedings



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 May 27, 2004, the United States Court of Appeals for the Third Circuit (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.





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ITEM 1. LEGAL
PROCEEDINGS (continued)



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.



The holders of the debt under the Pre-Petition Credit Facility, and certain other members of
the major non-asbestos creditor groups, have indicated that they continue to oppose the Plan.



The Plan is subject to confirmation by the Bankruptcy Court. Because the Plan is based on certain assumptions, negotiating positions and valuations that are subject to change, it is expected that the Plan will be
further amended prior to confirmation. There can be no assurance that a Plan supported by Owens Corning and less than all of the major creditor groups will be confirmed by the Bankruptcy Court and consummated.



The Plan, as it relates to Debtors other than Fibreboard, 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 10 to the Consolidated Financial Statements)) for the purposes of voting, determining which claims and interests
will be entitled to vote to accept or reject the Plan, confirmation of the Plan, and the resultant discharge of and cancellation of claims and interests and distribution of assets, interests and other property under the Plan. As to Fibreboard, the
Plan contemplates that the assets available to satisfy Fibreboard liabilities (which are generally limited to asbestos-related liabilities) will be limited to the assets of the Fibreboard Settlement Trust and certain other specified assets.



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. 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. The Third Circuit heard oral arguments on the appeal of the Memorandum and Order on February 7, 2005. Owens Corning is unable to predict what the effect, if any, of the results of the appeal
would be on Owens Corning and Fibreboard or their plan or plans of reorganization. However, because the currently proposed Plan of Reorganization is based upon substantive consolidation, a Third Circuit reversal of the District Courts





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ITEM 1. LEGAL
PROCEEDINGS (continued)



Order could potentially result in significant modifications of the Plan and delays in the resolution of the Chapter 11 Cases.



A six-day claims estimation hearing was held before the District Court beginning January 13,
2005. The purpose of the claims estimation hearing was to establish the amount of Owens Cornings and Fibreboards current and future asbestos liability to be allowed as claims in the Chapter 11 Cases. In general, the holders of the debt
under the Pre-Petition Credit Facility argued that the amount of such asbestos liability should be set at an amount significantly lower than the amounts reserved for asbestos claims on the financial statements of the Debtors, and the Official
Committee of Asbestos Claimants and the Legal Representative for the class of future asbestos claimants argued that such asbestos liability should be set at a significantly higher level. On March 31, 2005, the District Court issued a Memorandum and
Order estimating the total amount of contingent and unliquidated claims against Owens Corning for personal injury or death caused by exposure to asbestos (including pending claims, future claims and contract claims) at $7 billion. As a result of the
District Courts estimation, Owens Corning increased its reserve for potential asbestos-related liability by $3.435 billion for the period ended March 31, 2005, so that its recorded reserve equaled the level of asbestos liability estimated by
the District Court (see Note 9 to the Consolidated Financial Statements). Although the District Courts Memorandum and Order did not specifically address the potential asbestos-related liability of Fibreboard, based upon the analysis that the
District Court had followed in establishing estimated asbestos liability for Owens Corning, Owens Corning also increased Fibreboards recorded reserve for potential asbestos-related liability by $907 million.



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



On or about October 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. Further proceedings on this matter have been continued until a status conference on the
motion.



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





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ITEM 1. LEGAL
PROCEEDINGS (continued)



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.



Notice Procedures and Transfer Restrictions on Trading of Equity Securities



On February 23, 2005, the Debtors filed a motion in the USBC for the entry of interim and final orders pursuant to Sections 105(a), 362(a)(3) and 541 of the Bankruptcy
Code to enable the Debtors to avoid limitations on the use of their tax net operating loss carryforwards and certain other tax attributes by imposing certain notice procedures and transfer restrictions on the trading of equity securities of Owens
Corning. The USBC granted the requested interim order (the Interim Equity Order) on March 1, 2005, and granted the requested final order (the Final Equity Order) on April 15, 2005.



In general, the Final Equity Order applies to any person or entity that, directly or
indirectly, beneficially owns (or would beneficially own as a result of a proposed transfer) at least 4.75% of the outstanding equity securities of Owens Corning. Under the Final Equity Order, all persons or entities who at the time of the Final
Equity Order or in the future beneficially own at least 4.75% of the outstanding equity securities of Owens Corning (each a Substantial Equityholder) is required to file with the USBC and serve upon the Debtors and the Debtors
counsel a notice of such status. In addition, the Final Equity Order provides that a person or entity that would become a Substantial Equityholder by reason of a proposed acquisition of equity securities of Owens Corning is also required to comply
with the notice and service provisions before effecting that transaction. The Final Equity Order gives the Debtors the right to object in the USBC to certain acquisitions or sales of Owens Corning common stock if the acquisition or sale would pose a
material risk of adversely affecting the Debtors ability to utilize such tax attributes.



Under the Final Equity Order, prior to any proposed acquisition of equity securities that would result in an increase in the amount of Owens Corning equity securities owned by a Substantial Equityholder, or that would
result in a person or entity becoming a Substantial Equityholder, such person, entity or Substantial Equityholder is required to file with the USBC, and serve on the Debtors and the Debtors counsel, a Notice of Intent to Purchase, Acquire or
Otherwise Accumulate an Equity Security. In addition, prior to effecting any disposition of Owens Cornings equity securities that would result in a decrease in the amount of Owens Corning equity securities beneficially owned by a Substantial
Equityholder, such Substantial Equityholder is required to file with the USBC, and serve on the Debtors and the Debtors counsel, a Notice of Intent to Sell, Trade or Otherwise Transfer Equity Securities.



Any purchase, sale or other transfer of Owens Corning equity securities in violation of the
restrictions of the Final Equity Order would be null and void ab initio as an act in violation of the Final Equity Order and would therefore confer no rights on a proposed transferee.



A copy of the Interim Equity Order is filed as Exhibit 99.1 to Owens Cornings current report on Form 8-K filed March 3, 2005, and is
incorporated here by reference. A copy of the Final Equity Order is filed as Exhibit 99.1 to Owens Cornings current report on Form 8-K filed April 19, 2005, and is incorporated here by reference.





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



The following table provides information about Owens Cornings purchases of its common stock during each month during the quarterly period covered by this report:



Issuer Purchases of Equity Securities*



|                    |  |                                            |  |                                        |      |                                                                                        |   |                                                                                                                   |   |  
|------------------- |  | ------------------------------------------ |  | -------------------------------------- | ---- | -------------------------------------------------------------------------------------- | - | ----------------------------------------------------------------------------------------------------------------- | - | -
|Period              |  | Total Numberof Shares (orUnits)Purchased** |  | Average PricePaid per Share(or Unit)** |      | Total Number ofShares (or Units)Purchased asPart of PubliclyAnnouncedPlans orPrograms* |   | Maximum Number(or ApproximateDollar Value) ofShares (or Units)that May Yet BePurchased Underthe Plans
orPrograms*
|January 1-31, 2005  |  |                                           |  | $                                      |     |                                                                                        |  |                                                                                                                   | $ | 
|February 1-28, 2005 |  | 5,413                                      |  |                                        | 2.94 |                                                                                        |  |                                                                                                                   |   | 
|March 1-31, 2005    |  |                                           |  |                                        |     |                                                                                        |  |                                                                                                                   |   | 
|                    |  |                                            |  |                                        |      |                                                                                        |   |                                                                                                                   |   |  
|Total               |  | 5,413                                      |  | $                                      | 2.94 |                                                                                        |  |                                                                                                                   | $ | 
|                    |  |                                            |  |                                        |      |                                                                                        |   |                                                                                                                   |   |  



|* | During the quarter ended March 31, 2005, Owens Corning did not have a publicly announced program for repurchase of shares of its common stock and did not repurchase any of its
common stock in open-market transactions outside of such a program.
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|** | This column reflects the surrender to Owens Corning of shares of common stock to satisfy tax withholding obligations in connection with the vesting of restricted stock granted to
employees prior to the Petition Date.
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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 March 31, 2005.



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



No matter was submitted to a vote of security holders during the quarter ended March 31, 2005.





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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: May 3, 2005 |  |  |  | By:           |  | /s/ Michael H. Thaman
|                  |  |  |  |               |  |                       |  | Michael H. Thaman Chairman of the Board and Chief Financial Officer (as duly authorized officer)
|                  |  |  | 
|Date: May 3, 2005 |  |  |  | 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.                                                                                                                                                                                                                                                                              
|              | 
|              |  | Fourth Amended Joint Plan of Reorganization of Owens Corning and Its Affiliated Debtors and Debtors-In-Possession, filed in the United States Bankruptcy Court for the District of Delaware on
October 24, 2003 (incorporated herein by reference to Exhibit (2) to Owens Cornings current report on Form 8-K (File No. 1-3660), filed October 27, 2003).
|              | 
|              |  | Third Amended Joint Plan of Reorganization of Owens Corning and Its Affiliated Debtors and Debtors-In-Possession, filed in the United States Bankruptcy Court for the District of Delaware on
August 8, 2003 (incorporated herein by reference to Exhibit (2) to Owens Cornings current report on Form 8-K (File No. 1-3660), filed August 8, 2003).     
|              | 
|              |  | Second Amended Joint Plan of Reorganization of Owens Corning and Its Affiliated Debtors and Debtors-In-Possession, filed in the United States Bankruptcy Court for the District of Delaware on
May 23, 2003 (incorporated herein by reference to Exhibit (2) to Owens Cornings current report on Form 8-K (File No. 1-3660), filed May 27, 2003).        
|              | 
|              |  | Amended Joint Plan of Reorganization of Owens Corning and Its Affiliated Debtors and Debtors-In-Possession, filed in the United States Bankruptcy Court for the District of Delaware on March
28, 2003 (incorporated herein by reference to Exhibit (2) to Owens Cornings current report on Form 8-K (File No. 1-3660), filed March 28, 2003).           
|              | 
|              |  | Joint Plan of Reorganization of Owens Corning and Its Affiliated Debtors and Debtors-In-Possession, filed in the United States Bankruptcy Court for the District of Delaware on January 17,
2003 (incorporated herein by reference to Exhibit (2) to Owens Cornings current report on Form 8-K (File No. 1-3660), filed January 17, 2003).               
|              | 
|(3)           |  | Articles of Incorporation and By-Laws.                                                                                                                                                                                                                                                                                                                    
|              | 
|              |  | (i)     Certificate of Incorporation of Owens Corning, as amended (incorporated herein by reference to Exhibit (3)
to Owens Cornings quarterly report on Form 10-Q (File No. 1-3660) for the quarter ended March 31, 1997).                                                                                                                              
|              | 
|              |  | (ii)    By-Laws of Owens Corning, as amended (incorporated herein by reference to Exhibit (3) to Owens Cornings
annual report on Form 10-K (File No. 1-3660) for the year 1999).                                                                                                                                                                         





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EXHIBIT INDEX



|              |  |                                                                                                                                                                                                                                                                                                                                                           
|------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Document Description                                                                                                                                                                                                                                                                                                                                      
|(4)           |  | Instruments Defining the Rights of Security Holders, Including Indentures.                                                                                                                                                                                                                                                                                
|              | 
|              |  | Memorandum and Order dated March 31, 2005 (filed herewith).                                                                                                                                                                                                                                                                                               
|              | 
|              |  | Final Order Pursuant to Sections 105(a), 362(a)(3) and 541 of the Bankruptcy Code (A) Limiting Certain Transfers of Equity Securities of the Debtors and (B) Approving Related Notice
Procedures (incorporated herein by reference to Exhibit 99.1 to Owens Cornings current report on Form 8-K (File No. 1-3660), filed April 19, 2005).                
|              | 
|              |  | Interim Order Pursuant to Sections 105(a), 362(a)(3) and 541 of the Bankruptcy Code (A) Limiting Certain Transfers of Equity Securities of the Debtors and (B) Approving Related Notice
Procedures (incorporated herein by reference to Exhibit 99.1 to Owens Cornings current report of Form 8-K (File No. 1-3660), filed March 3, 2005).               
|              | 
|              |  | 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                                                                    
|(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).