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Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549



FORM 10-K

ý

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2008oro

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period
from                             to


Commission file number 33-81808

BUILDING MATERIALS CORPORATION OF AMERICA(Exact name of registrant as specified in its charter)

Delaware(State or Other Jurisdiction of Incorporation or Organization)

22-3276290(IRS Employer Identification No.)1361 Alps Road
Wayne, New Jersey(Address of Principal Executive Offices)

07470(Zip Code)


Registrant's
Telephone Number, Including Area Code:(973) 628-3000Securities registered pursuant to Section 12(b) of the Act:noneSecurities registered pursuant to Section 12(g) of the Act:noneSee table of additional registrants below

Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes o    No ý

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the
Act. Yes ý    No o

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 ý    No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter)
is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. ý

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See definition of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o

Accelerated filer oNon-accelerated filer ý(Do not check if a smaller reporting company)

Smaller reporting company o


Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act). Yes o    No ý

As of March 30, 2009, 1,015,010 shares of Class A Common Stock, $.001 par value of Building Materials Corporation of America were outstanding. There
is no trading market for the common stock of Building Materials Corporation of America.

As
of March 30, 2009, the additional registrant had the number of shares outstanding which is shown on the table below. There is no trading market for the common stock of the
additional registrant. As of March 30, 2009, no shares of the registrant or the additional registrant were held by non-affiliates.



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ADDITIONAL REGISTRANTS

Exact name of registrant
as specified in its charter

State or other
jurisdiction of
incorporation or
organization

No. of
Shares
outstanding

Registration No./
I.R.S. Employer
Identification
Number

Address, including zip code and
telephone number, including
area code, of registrant's
principal executive officeBuilding Materials

Delaware


10

333-69749-01/

1361 Alps RoadManufacturing Corporation






22-3626208

Wayne, New Jersey 07470
(973) 628-3000


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BUILDING MATERIALS CORPORATION OF AMERICA

Form 10-K
for the fiscal year ended December 31, 2008

TABLE OF CONTENTS



PART IItem 1.

Business

1Item 1A.

Risk Factors

8Item 1B.

Unresolved Staff Comments

16Item 2.

Properties

17Item 3.

Legal Proceedings

18Item 4.

Submission of Matters to a Vote of Security Holders

22PART IIItem 5.

Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

23Item 6.

Selected Financial Data

23Item 7.

Management's Discussion and Analysis of Financial Condition and Results of Operations

23Item 7A.

Quantitative and Qualitative Disclosures About Market Risk

23Item 8.

Financial Statements and Supplementary Data

23Item 9.

Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

23Item 9A(T).

Controls and Procedures

23Item 9B.

Other Information

24PART IIIItem 10.

Directors, Executive Officers and Corporate Governance

25Item 11.

Executive Compensation

26Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

37Item 13.

Certain Relationships and Related Transactions and Director Independence

37Item 14.

Principal Accounting Fees and Services

39PART IVItem 15.

Exhibits and Financial Statement Schedules

40


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PART I

The Business section and other parts of this annual report on Form 10-K contain both
historical and forward-looking statements that involve risks and uncertainties. Many of the forward-looking statements are located in "Management's Discussion and Analysis of Financial Condition and
Results of Operations." These forward-looking statements are only predictions and generally can be identified by words such as "anticipates," "expects," "believes," "intends," "plans," "predicts,"
"foresees" and other related terms. Similarly, statements that describe our objectives, plans or goals are also forward-looking statements. Our operations are subject to certain risks and
uncertainties that could cause actual results to differ materially from those contemplated by the relevant forward-looking statement. Forward-looking statements are not guarantees of future
performance and our actual results may differ significantly from the results discussed in the forward-looking statements. The forward-looking statements included herein are made only as of the date of
this annual report on Form 10-K. We assume no obligation to revise or update any forward-looking statements for any reason, except as required by
law.

Item 1.Business.

General

Building Materials Corporation of America, or BMCA, is a leading national manufacturer and marketer of a broad line of asphalt and
polymer-based roofing products and accessories for the residential and commercial roofing markets. We also manufacture specialty building products and accessories for the professional and
do-it-yourself remodeling and residential construction industries. We were incorporated under the laws of Delaware in 1994 and are a wholly-owned subsidiary of BMCA Holdings
Corporation, which is a wholly-owned subsidiary of G-I Holdings Inc. In 1994, we acquired the operating assets and certain liabilities of GAF Building Materials Corporation, whose
name has been changed to G-I Holdings Inc. G-I Holdings Inc. is a wholly-owned subsidiary of G Holdings Inc. ("G Holdings"). Samuel J. Heyman beneficially
owns (as defined in Rule 13d-3 of the Securities Exchange Act) approximately 99% of G Holdings Inc. We do business under the name "GAF Materials Corporation." Unless
otherwise indicated by the context, "we," "us," "our" and "BMCA" refer to Building Materials Corporation of America and its consolidated subsidiaries.

To
facilitate administrative efficiency, effective October 31, 2000, GAF Corporation, our former indirect parent, merged into its direct subsidiary, G-I
Holdings Inc. G-I Holdings Inc. then merged into its direct subsidiary, G Industries Corp., which in turn merged into its direct subsidiary, GAF Fiberglass Corporation. In
that merger GAF Fiberglass Corporation changed its name to GAF Corporation. Effective November 13, 2000, GAF Corporation merged into its direct subsidiary, GAF Building Materials Corporation,
whose name was changed in the merger to G-I Holdings Inc. G-I Holdings Inc. is now our indirect parent, and our direct parent is BMCA Holdings Corporation. We
refer to G-I Holdings Inc. and any and all of its predecessor corporations, including GAF Corporation, G-I Holdings Inc., G Industries Corp., GAF Fiberglass
Corporation and GAF Building Materials Corporation in this report as "G-I Holdings."

On
January 5, 2001, G-I Holdings filed a voluntary petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code in the United States Bankruptcy
Court for the District of New Jersey in Newark, New Jersey due to its asbestos-related bodily injury claims, which related to the inhalation of asbestos fiber. We refer to these claims in this report
as "Asbestos Claims." G-I Holdings, the successor to GAF Corporation by merger, is a privately-held holding company and we are its only operating subsidiary. We are not
included in the bankruptcy filing.

On
February 22, 2007 ("date of acquisition"), a subsidiary of BMCA acquired approximately 90% of the outstanding common shares of ElkCorp ("Elk"), a Dallas, Texas-based
manufacturer of roofing products and building materials. The remaining common shares of Elk were acquired on March 26,

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2007,
resulting in Elk becoming an indirect wholly-owned subsidiary of BMCA. See Acquisition of ElkCorp.

Our
executive offices are located at 1361 Alps Road, Wayne, New Jersey 07470 and our telephone number is (973) 628-3000.

Residential Roofing

We are a leading national manufacturer of a complete line of premium residential roofing products. Residential roofing product sales
represented approximately 78%, 75% and 74% of our net sales in 2008, 2007 and 2006, respectively. Our principal residential roofing products consist of laminated and strip asphalt shingles. We have
improved our sales mix of residential roofing products by increasing our emphasis on laminated shingles and accessory products, which are generally sold at higher prices with more attractive profit
margins than our standard strip shingle products. We believe, based on unit sales, that we are the largest manufacturer of residential roofing shingles in the United States. Statements contained in
this report as to our competitive position are based on management's estimates and industry information which we believe is reliable.

Our
two principal lines of residential roofing shingles are the Timberline® series and the Sovereign® series. We also produce a wide array of designer lifetime
shingles.

The Timberline Series.

The Timberline series offers a premium architectural laminated product line that adds dramatic shadow lines, while adding depth and
dimension and substantially improving the appearance of a roof. The series includes:



The Sovereign Series.

The Sovereign series includes:



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Designer Lifetime Shingles.

Our designer lifetime asphalt shingles include:



Specialty Roofing.



Roof System Solution.In addition to shingles, we supply the major components necessary to install a complete roofing system. Our Roof
System
Solution begins with Weather Watch® and StormGuard® waterproof underlayments for eaves, valleys and flashings to protect against water seepage between the roof deck and the
shingles caused by ice build-up and wind-driven rain. Our Roof System Solution also includes Shingle-Mate® and Deck-Armor
underlayments; Timbertex®, Ridglass®, Seal-A-Ridge® and Z® Ridge Hip and Ridge shingles, which are thicker and typically larger
than standard hip and ridge shingles and provide dramatic accents to the slopes and planes of a finished roof; and the Cobra® and Master Flow® Vent series, which provide attic
ventilation.

Commercial Roofing

We manufacture a full line of modified bitumen and asphalt built-up roofing products, thermoplastic polyolefin products,
liquid applied membrane systems and roofing accessories for use in the application of commercial roofing systems. Commercial roofing represented approximately 17%, 19% and 22% of our net sales in
2008, 2007 and 2006, respectively. We sell thermoplastic single-ply commercial roofing products under the EverGuard® trademark. The EverGuard products address the important and
growing single ply segment of the commercial roofing market. The thermoplastic products offer building owners the reliability of heat-welded seams and ENERGY STAR® qualified
systems. The EverGuard brand also includes Freedom self-adhered TPO membranes, which feature faster installation without the need for hot asphalt, solvent-based adhesives, or
open-flamed torches.

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We
believe that, based on the combined unit sales of asphalt built-up roofing products and modified bitumen products, we are the largest manufacturer of these products in the United
States.

We
manufacture fiberglass-based felts, which are made from asphalt impregnated glass fiber mat for use as a component in asphalt built-up roofing systems under the
GAFGLAS® trademark. Most of our fiberglass-based roofing systems are assembled on the roof by applying successive layers of roofing with
asphalt and topped, in some applications, with gravel or mineral surfaced sheets. Thermal insulation may be applied beneath the membrane. We also manufacture base sheets, flashings and other roofing
accessories for use in these systems; our TOPCOAT® roofing system, a liquid-applied membrane system designed to protect and waterproof
existing roofing systems; and roof maintenance products. In addition, we market insulation products under the EnergyGuard brand name, which includes perlite and isocyanurate foam in
addition to accessories, such as vent stacks, fasteners and cements and coatings. These products allow us to provide customers with a complete roofing system and the ability to market and sell
extended guarantees.

We
sell modified bitumen products under the Ruberoid® trademark. Modified bitumen products are used in new and re-roofing applications or in combination with
glass membranes in GAF CompositeRoof systems. These products consist of a roofing membrane utilizing polymer-modified asphalt, which strengthens and increases flexibility and is
reinforced with a polyester non-woven mat or a glass mat. Modified bitumen systems provide an alternative to conventional built-up roofing systems, including ease of
installation and maintenance.

Specialty Building Products and Accessories

We manufacture and market a variety of specialty building products and accessories for the professional and
do-it-yourself remodeling and residential construction industries and other industries. Specialty building products and accessories represented approximately 5%, 6% and 4% of
our net sales in 2008, 2007 and 2006, respectively. These products primarily consist of metal and fiberglass air distribution products for the HVAC (heating, ventilating and air conditioning)
industry, decking and railing products, manufactured decorative stone products and specialty fiber products. We also manufacture a line of specialty coatings for various industrial applications.

Marketing and Sales

Our sales and marketing functions are designed to help customers grow their businesses and provide enhanced services while offering
property owners the best and safest choice from our product offerings. We believe we have one of the industry's largest roofing sales forces. We have a staff of technical professionals who work
directly with architects, consultants, contractors and building owners and provide support to our sales force, distributors, lumberyards and retailers. We sell our roofing and specialty building
products and accessories through our own sales force of experienced, full-time employees and independent sales representatives located across the United States and Canada. A major portion
of our roofing product sales are to wholesale distributors and retailers, who resell our products to roofing contractors, builders and property owners. We believe that the wholesale distribution
channel represents the principal distribution channel for professionally-installed roofing products. As a result, we believe that our nationwide coverage has contributed to certain of our roofing
products being among the most recognized and requested brands in the industry.

Our
certified contractor programs offer marketing and support services to nationwide networks of roofing, decorative stone, and decking installers, as well as residential homebuilders.
We view these certified contractors and builders as an effective extension of our sales force, which promotes our products and support services (including enhanced warranty protection) directly to
property owners, construction specifiers and architects.

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Significant Customers

We sell our products through multiple distribution channels with a strong presence in the wholesale, retail, manufactured housing and
lumberyard distribution channels. No single customer accounted for over 10% of our net sales in 2008, 2007 and 2006, except for The Home Depot, Inc. and American Builders & Contractors
Supply Company, Inc.

Raw Materials

The major raw materials required for the manufacture of our roofing products are asphalt, mineral stabilizer, glass fiber, glass fiber
mat, polyester mat and granules. Asphalt and mineral stabilizer are available from a large number of suppliers on substantially similar terms. We currently have contracts with several of these
suppliers, and others are available as substitutes. In 2008, prices of most raw materials, other than asphalt and other petroleum-based raw materials and energy, have been relatively stable, rising
moderately with general industrial prices.

The
prices of energy and crude oil continued to rise reaching record high levels during the third quarter of 2008, including the price of asphalt and other petroleum-based raw materials,
which also reached record high levels. In the fourth quarter of 2008, the prices of energy and crude oil began to decline primarily due to, in our opinion, the current worldwide economic conditions,
which has resulted in weaker demand. The decline in crude oil prices in the fourth quarter of 2008 caused a moderate decline in asphalt and other petroleum-based raw materials; however, these prices
remained high, when compared to historical prices. Due to the strength of our manufacturing operations, which allows us to use many types of asphalt, together with our ability to secure alternative
sources of supply, we do not anticipate that any potential disruption in the supply of asphalt will have a material impact on future net sales, although no assurances can be provided in that regard.
We will attempt to pass on future cost increases from suppliers as needed; however, no assurances can be provided that these price increases will be accepted in the marketplace.

The
major raw materials required for the manufacture of our specialty building products and accessories are steel tubes, sheet metal products, aluminum, motors and cartons. The major raw
materials for the manufacture of our specialty decking and mat product lines are polypropylene, filler, fiberglass and binder. These raw materials are commodity-type products, the pricing
for which is driven by supply and demand. Prices of other raw materials used in the manufacture of specialty building products and accessories are more closely tied to movements in inflation rates.
All of these raw materials are available from a large number of suppliers on substantially similar terms.

Four
of our roofing plants have easy access to deep water ports thereby permitting delivery of asphalt by ship, which we believe is the most economical means of asphalt transport.
Through December 31, 2008, our Nashville, Tennessee plant manufactured a portion of our glass fiber requirements for use in our Chester, South Carolina, Shafter, California and Ennis, Texas
plants, which manufacture glass fiber mat substrate. In February 2009, we announced the temporary shutdown of our Shafter, California and Nashville, Tennessee facilities. We expect production to end
at these facilities during the first six months of 2009.

During
2008, we and our subsidiaries purchased a substantial portion of our headlap roofing granules, colored roofing granules and algae-resistant granules, on a purchase order basis,
from ISP Minerals Inc. ("ISP Minerals"), an affiliate of BMCA and International Specialty Products Inc., which is also an affiliate of BMCA. We refer to International Specialty
Products Inc. and its subsidiaries as "ISP." The amount of mineral products purchased each year on this basis is based on current demand and is not subject to minimum purchase requirements. For
the year ended December 31, 2008, we purchased $40.6 million of roofing granules under this arrangement.

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In
addition to the granules products purchased by BMCA under the above purchase order basis, the balance of BMCA's granules requirements are purchased under a contract expiring in 2013.
The amount of mineral products purchased each year under the contract is based on current demand and is not subject to minimum purchase requirements. Under the contract, for the year ended
December 31, 2008, we purchased $83.2 million of roofing granules.

Backlog

Our backlog varies depending on our seasonal operating demand and is not significant to our overall operations.

Seasonal Variations and Working Capital

Sales of roofing and specialty building products and accessories in the northern regions of the United States generally decline during
the winter months due to adverse
weather conditions. Generally, our inventory practice includes increasing inventory levels in the first and second quarters of each year in order to meet peak season demand from June through November.

Warranty Claims

We provide certain limited warranties covering most of our residential roofing products for periods generally ranging from 20 to
50 years, although certain of our product lines provide for a lifetime limited warranty. Although terms of warranties vary, we believe that our warranties generally are consistent with those
offered by our competitors, with the exception of our unique "Golden Pledge" and "Peace of Mind" warranties. We also offer certain limited warranties of varying duration
covering most of our commercial roofing products. Most of our specialty building products and accessories carry limited warranties for periods generally ranging from 5 to 20 years, with
lifetime limited warranties on certain products. We review the accruals established for estimated probable future warranty claims on a periodic basis.

Competition

The roofing products industry is highly competitive and includes a number of national competitors. The primary competitors in the
residential roofing and accessories markets are Owens Corning, Tamko and CertainTeed Corporation, and in the commercial roofing market are Johns Manville, Firestone Building Products, Carlisle
Companies, Inc., Tamko and CertainTeed Corporation. In addition, in the commercial roofing market, there are numerous regional competitors.

Competition
is based largely upon products and service quality, distribution capability, price and credit terms. We believe that we are well-positioned in the marketplace as
a result of our broad product lines in the residential and commercial roofing markets, consistently high product quality, strong sales force and national distribution capabilities.

Our
specialty building products and accessories business is highly competitive with numerous competitors due to the breadth of the product lines we market. Major competitors include
Gibraltar Industries, Inc., Southwark Metal Manufacturing Co., Lomanco Inc., Standex International Corp., Hart & Cooley, Inc. and Trex Company, Inc.

Research and Development

We primarily focus our research and development activities on the development of new products and process improvements and the testing
of alternative raw materials and supplies. Our research and development activities are located at technical centers in Ennis, Texas; Wayne, New Jersey; Chester,

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South
Carolina and Walpole, Massachusetts. Our research and development expenditures were approximately $8.1, $8.7 and $8.0 million in 2008, 2007 and 2006, respectively.

Intellectual Property

We hold a number of patents, trademarks and licenses obtained over a number of years and expiring at various times consistent with our
business needs. Generally, we seek statutory protection for strategic or financially important intellectual property, including patents, trademarks and licenses developed in connection with our
businesses. Certain intellectual property, where appropriate, is protected by contracts, licenses, confidentiality or other similar agreements.

We
own numerous United States and foreign patents (and their respective counterparts), the more important of which cover those technologies and inventions embodied in current products,
or which are used in the manufacture of those products. While we believe our patent portfolio is important to our business operations and in the aggregate constitutes a valuable asset, no single
patent, or group of patents, is critical to the success of our businesses. We also, from time to time, grant licenses under our patents and technology and obtain licenses under the patents and
technology of others.

In
addition, we own numerous registered trademarks in the United States and in many foreign countries that apply to our product offerings and businesses. Most works of authorship, such
as computer programs, catalogs, product brochures and sales literature, carry appropriate notices indicating our claim to copyright protection under United States laws and, where appropriate, under
international treaties.

Environmental Compliance

Since 1970, Federal, state and local authorities have adopted and amended a wide variety of Federal, state and local environmental laws
and regulations relating to environmental matters. The environmental laws and regulations deal with air and water emissions or discharges into the environment, as well as the generation, storage,
treatment, transportation and disposal of solid and hazardous waste and the remediation of any releases of hazardous substances and materials to the environment. These laws and regulations affect us
because of the nature of our operations and that of our predecessor and certain of the substances that are, or have been used, produced or discharged at our or our predecessor's plants or at other
locations. We made capital expenditures of approximately $0.9, $0.4 and $1.0 million in 2008, 2007 and 2006, respectively, relating to environmental compliance. These expenditures are included
in additions to property, plant and equipment.

We
believe that our manufacturing facilities comply in all material respects with applicable environmental laws and regulations, and, while we cannot predict whether more burdensome
requirements will be adopted by governmental authorities in the future, nor can we predict with certainty future capital expenditures or operating costs for environmental compliance, we do not believe
they will have a material effect on our business, liquidity, results of operations, cash flows, financial position or competitive position.

See
Item 3, "Legal ProceedingsEnvironmental Litigation."

Employees

At December 31, 2008, we employed approximately 3,700 people, approximately 800 of whom were subject to fourteen union
contracts. The contracts are effective for two to five year periods. During 2008 and the first quarter of 2009, seven labor contracts expired and were renegotiated. We believe that our relations with
our employees and their unions are satisfactory.

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Acquisition of ElkCorp

On February 22, 2007, a subsidiary of BMCA acquired approximately 90% of Elk common shares at a purchase price of $43.50 per
common share. On March 26, 2007 we acquired the remaining Elk common shares in a second step merger in exchange for the right to receive $43.50 per share in cash, which resulted in Elk becoming
an indirect wholly-owned subsidiary of BMCA. We completed the acquisition of the Elk common shares at a purchase price of approximately $945.6 million, net of the repayment of
$195.0 million of the then outstanding Elk senior notes, which were assumed in connection with the acquisition and repaid in March 2007.

Other Information

Any materials that we have filed with the Securities and Exchange Commission may be read and copied by the public at the SEC's Public
Reference Room located at 450 Fifth Street, N.W., Washington, DC 20549 or by telephoning the SEC at 1-800-SEC-0330. These reports are also available
electronically on the SEC's EDGAR website atwww.sec.gov. Alternatively, if you wish to receive a paper copy of our reports or any of the exhibits filed
with or furnished to the SEC, they may be obtained by writing to: the Corporate Secretary, Building Materials Corporation of America, 1361 Alps Road, Wayne, New Jersey 07470.

Item 1A.Risk Factors.

Risks Related to Investing in our Securities

We may be forced to contribute assets to our indirect parent to satisfy its bankruptcy creditors, potentially rendering us unable to pay principal and interest on our credit
obligations.

On January 5, 2001, our indirect parent, G-I Holdings, filed a voluntary petition for reorganization under
Chapter 11 of the U.S. Bankruptcy Code due to its asbestos-related bodily injury claims, which relate to the inhalation of asbestos fiber contained in products sold by G-I Holdings
or its predecessors. G-I Holdings, the successor to GAF Corporation by merger, is a privately-held holding company, and we are its only operating subsidiary. Although we were
not included in the bankruptcy filing, the Official Committee of Asbestos Claimants (the "creditors' committee") in the G-I Holdings case petitioned to substantively consolidate us with
G-I Holdings or cause us to file for bankruptcy protection. Although the petition was denied by the Bankruptcy Court on a preliminary basis, the creditors' committee is still seeking such
relief. On July 7, 2004, the Bankruptcy Court entered an order authorizing the creditors' committee to commence an adversary proceeding against us and others challenging, as a fraudulent
conveyance, certain transactions entered into in connection with our formation in 1994 in which G-I Holdings caused to be transferred to us all of its roofing business and assets and in
which we assumed certain liabilities relating to those assets, including a specified amount of asbestos liabilities (the "1994 transaction"). The Bankruptcy Court also permitted the creditors'
committee (in the name of G-I Holdings) to pursue a claim against holders of our bank and bond debt outstanding in 2000, seeking recovery from them, based on the creditors' committee's
theory that the 1994 transaction was a fraudulent conveyance. On July 20, 2004, the creditors' committee appealed certain aspects of the Bankruptcy Court's order (and a June 8, 2004
decision upon which the order was based). G-I Holdings, the holders of our bank and bond debt and BMCA cross-appealed. The District Court entered an order on June 21, 2006 affirming
in part and vacating in part the Bankruptcy Court's July 7, 2004 order. Among other things, the District Court vacated that aspect of the Bankruptcy Court's order authorizing the creditors'
committee to pursue avoidance claims against us and the holders of our bank and bond debt as of 2000. This issue was remanded to the Bankruptcy Court for further proceedings consistent with the
District Court's opinion. By order dated August 22, 2008, the Bankruptcy Court stayed this authorization proceeding and other adversary proceedings effective upon

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the
filing of a Joint Plan of Reorganization by G-I Holdings, the creditors' committee and the legal representative of present and future holders of asbestos-related claims. We believe the
creditors' committee's avoidance claims are without merit and, in the event the stay is terminated, the Bankruptcy Court should not permit the creditors' committee to pursue such claims against us and
the holders of our bank and bond debt as of 2000.

Claimants
in the G-I Holdings bankruptcy case, including judgment creditors, might seek to file their asbestos-related bodily injury claims against us or additional claims of
the G-I Holdings estate under alternative arguments. In these actions, claimants generally do not specify damages and seek to hold BMCA directly liable for damages as would be established
in unspecified future judicial proceedings arising out of asbestos-containing products for which G-I Holdings would be responsible. We have been advised by G-I Holdings that on
August 12, 2008, G-I Holdings reached an agreement with the creditors'
committee and the legal representative of present and future holders of asbestos-related claims to jointly file a plan of reorganization with the Bankruptcy Court that will provide for
settlement of Asbestos Claims and all related litigation. The agreement is subject to a number of contingencies, but if the contingencies are met and the reorganization plan is confirmed, all of the
actions described above will be resolved. If the bankruptcy is not resolved, BMCA and G-I Holdings intend to vigorously defend all litigations related thereto. A Joint Plan of
Reorganization of G-I Holdings was filed with the Bankruptcy Court on August 21, 2008, and a First Amended Joint Plan of Reorganization of G-I Holdings was filed with
the Bankruptcy Court on October 30, 2008. G-I Holdings filed a Second Amended Joint Plan of Reorganization of G-I Holdings with the Bankruptcy Court on
December 3, 2008.

If
the reorganization plan is not confirmed and we are not successful defending against one or more of the claims outlined above, we may be forced to file for bankruptcy protection
and/or contribute all or a substantial portion of our assets to satisfy the claims of G-I Holdings' creditors. Either of these events, or the substantive consolidation of G-I
Holdings and BMCA, would weaken our operations and cause us to divert a material amount of our cash flow to satisfy the asbestos claims of G-I Holdings, and may render us unable to pay
interest or principal on our $600.0 million Senior Secured Revolving Credit Facility, (the "Senior Secured Revolving Credit Facility"), our $975.0 million Term Loan Facility (the "Term
Loan") and our $325.0 million Junior Lien Term Loan Facility (the "Junior Lien Term Loan", and collectively with the Senior Secured Revolving Credit Facility and the Term Loan the "Senior
Secured Credit Facilities") and our 73/4% Senior Notes due 2014 (the "Senior Notes"). See Item 3"Legal Proceedings."

There will be a change of control if our outstanding common stock is liquidated as a result of our parent company's bankruptcy. If a change of control occurs, we may be
unable to satisfy our obligations under our Senior Secured Credit Facilities, our Senior Notes or other debt instruments.

Even if we are not forced to file for bankruptcy protection, contribute our assets to satisfy the claims of G-I Holdings'
creditors or convey our assets to G-I Holdings, the bankruptcy court administering the G-I Holdings case may order the liquidation of the assets of G-I Holdings,
which includes all of our parent company's outstanding common stock. The transfer of our parent company's capital stock could constitute a change of control under our Senior Secured Credit Facilities
and the indenture governing our Senior Notes. A change of control is an event of default under our Senior Secured Credit Facilities, which could result in the acceleration of all our borrowings
thereunder. Any such acceleration would be an event of default under our Senior Notes, pursuant to which payment under our Senior Notes may be accelerated. If a change of control occurs, we may be
unable to satisfy our obligations under our Senior Secured Credit Facilities, our Senior Notes or other debt instruments.

In
addition, the indenture relating to the Senior Notes provides that if a change of control occurs, our noteholders will have the right to require us to repurchase their notes at a
premium above the

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principal
amount, plus any accrued and unpaid interest to the repurchase date. Our Senior Secured Credit Facilities limit us from repurchasing our Senior Notes. Any of our future credit facilities or
other obligations may contain similar restrictions. In the event a change of control occurs at a time when we are effectively prohibited from purchasing our Senior Notes, we could seek the consent of
the lenders to offer to purchase our Senior Notes or could attempt to refinance the borrowings that contain the prohibition. If we do not obtain such consent or refinance such borrowings, we will be
prohibited from repurchasing our Senior Notes. Even if we are permitted to make a change of control offer, we may not have available funds sufficient to pay the change of control purchase price for
any or all of our Senior Notes that are delivered by holders for repurchase. Any failure to repurchase our Senior Notes, whether or not prohibited by our other debt instruments, would constitute an
event of default under the relevant indenture, which in turn would constitute a default under the Senior Secured Revolving Credit Facility. If any of these events of default were to occur, we may be
unable to pay the accelerated principal amount of and interest on our Senior Notes and our noteholders will lose some or all of their investments.

Our substantial leverage could impair our ability to fulfill our obligations under our existing debt and restrict our future operations.

We have substantial outstanding debt and, as a result, significant debt service obligations. At December 31, 2008, we had total
outstanding consolidated debt of $1,731.6 million (including $52.8 million of loans payable to our parent corporation). For the year ended December 31, 2008, we had
$158.9 million of interest expense. We anticipate funding these obligations principally from our cash on hand, cash flow from operations and/or borrowings under our Senior Secured Revolving
Credit Facility. Our substantial outstanding debt has important consequences to our debtholders, including the risk that we may not generate sufficient cash flow from operations to pay principal and
interest on our debt, including our Senior Secured Credit Facilities and our Senior Notes, or to invest in our businesses. We may not be able to satisfy our obligations, including those under our
Senior Secured Credit Facilities and our Senior Notes, from our cash flow from operations and refinancings. If we cannot, we might be able to raise cash to satisfy our obligations through potential
sales of assets or equity. Our ability to do so, however, depends on our results of operations, market conditions, restrictions contained in our Senior Secured Credit Facilities and the indenture
relating to our Senior Notes and other factors. If we are unable to refinance debt or raise funds through sales of assets or equity or otherwise, we may be unable to pay principal of and interest on
our Senior Secured Credit Facilities and our Senior Notes potentially causing foreclosure by our creditors on our assets and potentially rendering us unable to continue as a going concern.

Our substantial leverage could have additional important consequences to our business including:



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In
addition, subject to covenants contained in our Senior Secured Credit Facilities and the indenture relating to our Senior Notes, we may incur additional debt in the future. Under the
most restrictive debt incurrence covenant of our debt instruments, which is the Senior Secured Credit Facilities, we
could incur additional debt of approximately $138.0 million as of December 31, 2008. This does not include any availability under our Senior Secured Revolving Credit Facility, which
amounted to $241.4 million at December 31, 2008. To the extent we incur any additional debt, the risks discussed above will be intensified. Moreover, some of the debt we may incur may be
secured by first-priority liens in the collateral securing our Senior Notes, which would have priority over the rights of holders of the Senior Notes, with respect to the collateral.

The value of the collateral securing the Senior Secured Credit Facilities and the Senior Notes may not be sufficient to satisfy our obligations on the Senior Secured Credit
Facilities and the Senior Notes and the collateral securing the Senior Secured Credit Facilities and the Senior Notes may be diluted or reduced under certain circumstances.

Our Senior Secured Revolving Credit Facility is secured by a first-priority lien on our accounts receivable, inventory, precious
metals, deposit accounts, other current assets and the proceeds thereof (the "Senior Secured Revolving Credit Facility Collateral"). Our Term Loan and Senior Notes are secured by a first-priority lien
on substantially all of the other assets other than the Senior Secured Revolving Credit Facility Collateral (the "Term Loan Collateral") and by a second-priority lien on the Senior Secured Revolving
Credit Facility Collateral. Our Junior Term Loan is secured by second-priority liens on the Term Loan Collateral and by third-priority liens on the Senior Secured Revolving Credit Facility Collateral,
to the extent and for so long as such assets are used to secure borrowings under our Senior Secured Credit Facilities, including refinancings.

As
of December 31, 2008, we and our subsidiaries had $76.0 million of debt secured by the Senior Secured Revolving Credit Facility Collateral and $1,531.2 million of
debt secured by the Term Loan Collateral. The collateral securing the Senior Secured Credit Facilities may also secure additional debt to the extent permitted by our Senior Secured Credit Facilities
and the indenture governing our Senior Notes. Except to the extent that they do not permit us to incur additional debt, the indenture relating to our Senior Notes and our Senior Secured Revolving
Credit Facilities do not limit the amount of debt that may be secured either senior to or equally and ratably with our Senior Notes. There can be no assurances that the value of the collateral will be
sufficient to repay our borrowings under our Senior Secured Credit Facilities and our other secured obligations, including our Senior Notes. In addition, other parties may hold liens (including
statutory liens), whether or not permitted by the indenture governing our Senior Notes, which may entitle them to share in the value of the collateral, and thereby reduce the proceeds available to
satisfy the obligations under our Senior Notes.

As
of December 31, 2008, the value of the Senior Secured Revolving Credit Facility Collateral was $678.7 million and the value of the Term Loan Collateral was
$1,657.9 million. The value of the collateral in the event of liquidation may be less than book value and will depend upon market and economic conditions, the availability of buyers, the
quantity of assets being sold and the speed at which they are to be sold and other factors. By their nature, portions of the collateral may be illiquid and may have no readily ascertainable market
value. In addition, a significant portion of the collateral includes assets that may only be usable, and thus retain value, as part of our operating business. Accordingly, any such sale of the
collateral separate from the sale of certain operating businesses may not be feasible or of significant value.

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The collateral securing our Senior Notes may be subject to the exclusive control of the lenders under our Senior Secured Revolving Credit Facility and the value of such
collateral may therefore not be available to our noteholders.

The lenders under our Senior Secured Revolving Credit Facility may release all or any portion of the collateral securing that facility
and securing the existing Senior Notes in a number of circumstances without the consent of the holders of the Senior Notes. In addition, if the new Senior Secured Credit Facilities are repaid in full
and not refinanced with other secured debt, and certain other conditions are satisfied, the liens securing the Senior Notes will be released.

At
any time our Senior Secured Credit Facilities are outstanding, our senior lenders generally have the exclusive right to exercise rights and remedies against the collateral, including
the ability to direct the commencement of enforcement proceedings. As a result, if there was an event of default under the Senior Notes, the lenders under our Senior Secured Credit Facilities could
decide not to foreclose on the collateral, regardless of whether or not there is a default under the Senior Secured Credit Facilities. In such an event, the only remedy available to the holders of the
Senior Notes would be to sue for payment on the Senior Notes and the subsidiary guarantees related thereto. The interests of our senior lenders and other creditors with first-priority liens on the
collateral may differ from our noteholders and the holders of the Senior Notes will have no control over the collateral following an event of default on the Senior Notes.

Our creditors' ability to foreclose upon and sell the collateral is limited by applicable bankruptcy laws and the value of such collateral may therefore not be available to
our noteholders.

If a bankruptcy petition were filed by or against us, the ability of the collateral agent to exercise remedies against the collateral
would be automatically stayed pending
bankruptcy court approval. The United States Bankruptcy Code permits a debtor to use collateral even though the debtor is in default under applicable debt instruments, provided that the secured
creditor is given "adequate protection." The meaning of the term "adequate protection" may vary according to the circumstances, but it is intended in general to protect the value of the secured
creditor's interest in collateral. In view of the lack of a precise definition of the term "adequate protection" and the broad discretionary powers of a bankruptcy court, it is impossible to predict
how long payments with respect to our Senior Notes could be delayed following commencement of a bankruptcy case, whether or when the collateral agent could repossess or dispose of the collateral for
the benefit of the secured creditors, or whether and to what extent the holders of the Senior Notes would receive any value for the Senior Notes.

Our parent corporations are dependent upon our cash flow to satisfy their obligations, including asbestos-related and tax liabilities, and they could cause us to make
distributions to them that would reduce our liquidity or result in a change of control.

G-I Holdings and BMCA Holdings Corporation, our parent corporations, are dependent upon the cash flow of our company and
their other subsidiaries in order to satisfy their obligations, including asbestos-related claims and tax liabilities. In order to satisfy those obligations, those corporations might take various
actions that would reduce our liquidity, including causing us to make distributions to our stockholders by means of dividends or otherwise, or causing us to make loans to them. Although our Senior
Secured Revolving Credit Facility and the indenture relating to our Senior Notes restrict our ability to pay dividends or make distributions or loans to our parent corporations, there are a number of
exceptions to such restrictions. Our parent corporations might also cause BMCA Holdings Corporation to sell our common stock, resulting in a change of control. Their creditors could also seek to cause
our parent corporations to sell our common stock or take similar action in order to satisfy liabilities owed to them. The only significant asset of our parent corporations is the stock of our company.

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We could be held liable for Federal income tax liabilities of the G-I Holdings consolidated group.

On September 15, 1997, G-I Holdings Inc. received a notice from the Internal Revenue Service, (the "IRS") of
a deficiency in the amount of $84.4 million (after taking into account the use of net operating losses and foreign tax credits otherwise available for use in other years) in connection with the
formation in 1990 of Rhône Poulenc Surfactants and Specialties, L.P. (the "surfactants partnership"), a partnership in which GAF Fiberglass Corporation, another predecessor to
G-I Holdings, held an interest. This notice could result in G-I Holdings incurring liabilities significantly in excess of its deferred tax liability. On September 21,
2001, the IRS filed a proof of claim with respect to such deficiency against
G-I Holdings in the G-I Holdings' bankruptcy. G-I Holdings has filed an objection to the proof of claim, which is the subject of an adversary proceeding pending in
the United States District Court for the District of New Jersey. If the IRS were to prevail for the years in which we and/or certain of our subsidiaries were not part of the G-I Holdings
tax group, and G-I Holdings is unable to satisfy its tax obligations, G-I Holdings may cause us to make distributions to our stockholders by means of dividends, or otherwise,
or cause us to make loans to them, and we could be liable for approximately $40.0 million in taxes plus interest, although this calculation is subject to uncertainty depending upon various
factors including G-I Holdings' ability to satisfy its tax liabilities and the application of tax credits and deductions. If such proof of claim is sustained for years in which we were
part of the G-I Holdings tax group, we and/or certain of our subsidiaries together with G-I Holdings and several current and former subsidiaries of G-I Holdings
could be severally liable for those taxes and interest. See Item 3"Legal ProceedingsTax Claim Against G-I Holdings" and Item 13"Certain
Relationships and Related Transactions and Director IndependenceTax Sharing Agreement."

Federal and state statutes allow courts, under specific circumstances, to void the subsidiary guarantees and the liens securing the subsidiary guarantees.

Our creditors or the creditors of the subsidiary guarantors could challenge the subsidiary guarantees and the liens granted by our
subsidiaries securing the Senior Notes as fraudulent conveyances or on other grounds. Also, the creditors of our parent corporation, which could include the previously mentioned asbestos claimants
under certain circumstances, could challenge the liens granted by our subsidiaries securing the subsidiary guarantees as fraudulent conveyances, preferences or on other grounds. See
Item 3"Legal Proceedings." The delivery of the subsidiary guarantees and the grant of the liens securing the Senior Notes and the subsidiary guarantees could be found to be a
fraudulent transfer and declared void if a court determines that: (1) the subsidiary guarantee was delivered or the lien was granted with the intent to hinder, delay or defraud the subsidiary
guarantor's existing or future creditors, (2) the subsidiary guarantor did not receive fair consideration for the delivery of the guarantee or the incurrence of the lien or (3) the
subsidiary guarantor was insolvent at the time it delivered the subsidiary guarantee or granted the lien or was rendered insolvent by such delivery or grant. The measure of insolvency for purposes of
these fraudulent transfer laws will vary depending upon the law applied in any proceeding to determine whether a fraudulent transfer has occurred.

If
a court declares the security interests in respect of the Senior Notes to be void, any claim asserted against us for amounts payable on the Senior Notes would be unsecured. If a court
declares either the subsidiary guarantees or the security interests in respect thereof to be void, or if the subsidiary guarantees must be limited or voided in accordance with their terms, any claim
that noteholders make against the subsidiary guarantors for amounts payable on the subsidiary guarantees would be unsecured or subordinated to the debt and other liabilities of our subsidiary
guarantors, including trade payables.

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Restrictive covenants in our Senior Secured Credit Facilities and the indenture governing our Senior Notes may prevent us from pursuing business activities that could
otherwise improve our results of operations.

The terms of our Senior Secured Credit Facilities and the indenture governing our Senior Notes limit our ability and the ability of our
subsidiaries to, among other things:



Our
Senior Secured Credit Facilities also require us to maintain certain financial ratios. Complying with these restrictive covenants and the financial ratios, as well as those that may
be contained in any future debt agreements, may impair our ability to finance our future operations or capital needs or to take advantage of other favorable business opportunities. They may also limit
our ability to pay interest or principal on our Senior Notes. Our ability to comply with these restrictive covenants and the financial ratios will depend on our future performance, which may be
affected by events beyond our control. Our failure to comply with the restrictive covenants or financial ratios when they apply will result in a default under the particular debt instrument, which
could permit acceleration of the debt under the instrument and the acceleration of debt under our other debt instruments. If our debt is accelerated, we may not have sufficient funds available to make
the required payments under our debt.

Risks Related to our Business

Changes in economic conditions may adversely affect our results of operations.

Our business can be affected by certain economic conditions. While our net sales are predominantly derived from re-roofing, if the
current housing downturn continues for a prolonged period of time it would have an impact on our results of operations. A slowdown in the demand for asphalt roofing products arising from the current
general economic conditions would result in a decreased demand for our products, adverse pricing and a reduction in our plant capacity utilization.

Increased raw material, energy costs and transportation costs or shortages of raw materials could reduce our profitability.

Our business relies on the availability of reasonably priced raw materials that are used in the production of our products. The
availability and prices of these materials may be influenced by a number of different factors, many of which are not within our control. Shortages of and price increases

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for
certain of these materials, including asphalt, some of which are correlated to increases in the price of crude oil, have occurred from time to time and may occur again in the future. Any
significant price increases for our raw materials or increases in energy costs or transportation costs would reduce our margins to the extent we are unable to pass such price increases on to our
customers. Any significant changes in our suppliers of raw materials could involve delays and costs that could significantly harm our business, financial condition and results of operations. See
Item 1 "BusinessRaw Materials."

We face significant competition in the markets we serve.

The roofing products industry is highly competitive in most product categories and geographic regions. Some of our competitors are
companies or divisions or operating units of companies that have greater financial and other resources than we do. Competition is based largely upon products and service quality, distribution
capability and price. We compete for retail and wholesale business with both large national manufacturers and smaller regional producers. In certain circumstances, due primarily to factors such as
freight rates and customer preference for local brands, manufacturers with better access to certain geographic markets may have a competitive advantage in such markets. In addition, should the roofing
products industry experience a prolonged period of excess capacity, it could result in downward pricing pressure and intensified competition. Given these factors,
we may not be able to continue to compete successfully against existing or new competitors. Any such failure could dramatically reduce our cash flows and adversely affect our results of operations and
financial condition. See Item 1"BusinessCompetition."

The loss of one or two large customers could weaken our business and results of operations.

During 2008, sales to The Home Depot and American Builders & Contractors Supply Company each represented more than 10% of our
overall net sales. If we lose either or both of these customers or other significant customers, or experience extended delays or cancellations of significant volume or a significant decline in the
level of purchases from either or both of them or other significant customers, our net sales could decline and our business, financial condition and results of operations could be significantly
harmed.

Variations in extreme weather conditions can increase or decrease demand for our products and could have a significant affect on our results of operations.

Our sales are generally seasonal in nature with our peak season in demand coming between June and November. Variations in extreme
weather conditions, such as snow, hail, ice storms, hurricanes and tornadoes, or the lack thereof, may increase or decrease the demand for our products and may significantly impact our business,
financial condition and results of operations.

Higher interest rates could affect our borrowing costs.

We anticipate relying on our cash and cash equivalents on hand and our Senior Secured Revolving Credit Facility to support our overall
cash flow requirements. Higher interest rates would affect our Senior Secured Credit Facilities and other variable interest rate debt instruments and adversely impact our borrowing costs.

Increases in labor union organizing activity and work stoppages at our facilities or the facilities of our suppliers could weaken our financial performance.

Our financial performance is affected by the availability of qualified manufacturing personnel. At December 31, 2008,
approximately 21% of our total employees were represented by fourteen labor unions. Our business, financial condition and results of operations could suffer if a strike or other type

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of
conflict with personnel arises or if we become the subject of union organizing activity. Furthermore, some of our direct and indirect suppliers have unionized work forces. Strikes, work stoppages
or slowdowns experienced by these suppliers could result in slowdowns or closures of facilities where components of our products are manufactured. Any interruption in the production or delivery of our
products could reduce sales of our products and increase our costs.

We are dependent on certain key personnel, the loss of whom could weaken our financial performance and prospects.

Our continued success depends to a large extent upon the continued services of our senior management and certain key employees. Our
senior executive management team has significant company and industry experience. The senior operating team has an aggregate of approximately 115 years of work experience with BMCA and/or Elk
and has an extensive knowledge of our company, customers, competitors and the industry. This team has been instrumental in developing a successful business strategy, while successfully integrating two
distinct companies into one and achieving the recent improvements in our operating and financial performance. Members of our senior management may not continue in their current positions. The loss of
the services of any of these individuals could result in reduced revenues and could weaken our financial performance and results of operations.

Environmental laws and regulations could subject us to significant future liabilities.

Our manufacturing facilities are subject to extensive and changing Federal, state and local environmental laws and regulations. These
laws and regulations pertain to air and water emissions or discharges into the environment, the generation, storage, treatment, transportation and disposal of solid and hazardous waste, and the
remediation of any releases of hazardous substances and materials to the environment. We, together with other companies, are a party to a variety of proceedings and lawsuits involving environmental
matters under the U.S. Comprehensive
Environmental Response Compensation and Liability Act and similar state laws. In those proceedings and lawsuits, recovery is sought for the cost of cleanup of contaminated sites or remedial
obligations are imposed. A number of those are in the early stages or have been dormant for protracted periods. We believe that our manufacturing facilities comply in all material respects with
applicable laws and regulations. The discovery of presently unknown environmental conditions, changes in scope or enforcement of environmental laws and regulations or their interpretation, or other
unanticipated events may give rise to expenditures or liabilities that may weaken our business, financial condition or results of operations. See Item 3"Legal
ProceedingsEnvironmental Litigation."

Our controlling stockholder has the ability to elect our entire Board of Directors and can control the outcome of any matter submitted to our stockholders.

We are an indirect subsidiary of G-I Holdings, which is 99% beneficially owned (as defined in Rule 13d-3
of the Securities Exchange Act of 1934) by Samuel J. Heyman. Mr. Heyman is a director of G-I Holdings and was our Acting Chief Executive Officer from October 2005 through April
2006. Accordingly, Mr. Heyman has the ability to elect our entire Board of Directors and to determine the outcome of any other matter submitted to our stockholders for approval, including,
subject to the terms of the indenture relating to the Senior Notes, mergers, consolidations and the sale of all, or substantially all, of our assets. Mr. Heyman may exercise his control over us
according to interests that are different from the interests of our noteholders. See Item 12"Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters."

Item 1B.Unresolved Staff Comments.

Not applicable.

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Item 2.Properties

Our corporate headquarters is located at a 100-acre campus-like office and research park owned by a subsidiary
of International Specialty Products Inc., at 1361 Alps Road, Wayne, New Jersey 07470. We occupy our headquarters pursuant to our management agreement with ISP. See
Item 13"Certain Relationships and Related Transactions and Director IndependenceManagement Agreement."

We
own or lease the principal real properties described below. Unless otherwise indicated, the properties are owned in fee. Included in the principal facilities listed below are regional
sales offices and warehouses that we maintain, substantially all of which are in leased premises under relatively short-term leases.

Location

FacilityAlabamaMobile

PlantTuscaloosa

Plant, Warehouses*CaliforniaBakersfield

Warehouse*Fontana

Plant, Regional Sales Office, Warehouse*Fresno

Plant, Warehouse, Warehouses*Shafter

Plant, PlantStockton

Plant, Warehouse*FloridaTampa

Plant, Regional Sales Office*GeorgiaCumming

PlantSavannah

PlantIllinoisWoodridge

Regional Sales Office*IndianaEvansville

Warehouse*Michigan City

Plant, Administrative Office, Warehouse*Mount Vernon

Plant, PlantKansasLenexa

Plant*MarylandBaltimore

Plant, Warehouse*, WarehouseMassachusettsMillis

Warehouse*Walpole

Plant*MinnesotaLakeville

Warehouse*Minneapolis

PlantNew JerseyBridgewater

Warehouse*North Branch

PlantSwedesboro

Regional Sales Office*Wayne

Headquarters*, Corporate Administrative Offices*, Research Center*North CarolinaBurgaw

Plant


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Location

FacilityOhioCleveland

PlantWadsworth

Plant*PennsylvaniaMyerstown

Plant, Regional Sales OfficeWind Gap

PlantSouth CarolinaChester

Plant, Research CenterTennesseeNashville

PlantTexasDallas

Administrative Offices*, Regional Sales Office*, Plant, Warehouse*Ennis

Plant, Research CenterGainesville

PlantPort Arthur

Plant, Technical Service CenterSan Antonio

Warehouse*WisconsinEdgerton

Warehouse*


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In
addition to the foregoing list, we have manufacturing facilities in Millis, Massachusetts; Albuquerque, New Mexico; Goldsboro, North Carolina; Erie, Pennsylvania; Quakertown,
Pennsylvania and Port Arthur, Texas that are currently closed or have limited operations. During 2008, we restarted our Mobile, Alabama manufacturing facility and sold two manufacturing facilities in
Hollister, California and Stockton, California, property in Fresno, California and our Waxahachie, Texas distribution center. In February 2009, we announced the temporary shutdown of our Shafter,
California glass mat manufacturing facility and our Nashville, Tennessee glass fiber manufacturing facility. We believe that our plants and facilities, which are of varying ages and are of different
construction types, have been satisfactorily maintained, are in good condition, are suitable for their respective operations and generally provide sufficient capacity to meet production requirements.
Due to the seasonality of our business, our production facilities generally run at full capacity during the months necessary to meet our peak seasonal operating demands. Each plant has adequate
transportation facilities for both raw materials and finished products. In 2008, we made capital expenditures of approximately $65.8 million relating to property, plant and equipment.

Item 3.Legal Proceedings.

Asbestos Bodily Injury Claims.In connection with our formation, we contractually assumed and agreed to pay the first
$204.4 million of
liabilities of our indirect parent, G-I Holdings, for asbestos-related bodily injury claims relating to the inhalation of asbestos fiber contained in products sold by G-I
Holdings or its predecessors ("Asbestos Claims"). As of March 30, 1997, we had paid all of our assumed liabilities for Asbestos Claims. G-I Holdings has agreed to indemnify us
against any other existing or future Asbestos Claims if asserted against us. In January 2001, G-I Holdings filed a voluntary petition for reorganization under Chapter 11 of the U.S.
Bankruptcy Code due to Asbestos Claims. Most Asbestos Claims do not specify the amount of damages sought, and the value of the Asbestos Claims asserted against G-I Holdings is a contested
issue in that bankruptcy, which remains pending.

Claimants
in the G-I Holdings' bankruptcy, including judgment creditors, might seek to satisfy their claims by asking the Bankruptcy Court to require the sale of
G-I Holdings' assets, including its

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holdings
of BMCA Holdings Corporation's common stock and its indirect holdings of our common stock. Such action could result in a change of control of our company. In addition, those creditors may
attempt to assert Asbestos Claims against our company. (Approximately 1,900 Asbestos Claims were filed against us prior to February 2, 2001.) We believe that we will not sustain any liability
in connection with these or any other Asbestos Claims. On February 2, 2001, the United States Bankruptcy Court for the District of New Jersey issued a temporary restraining order enjoining any
existing or future claimant from bringing or prosecuting an Asbestos Claim against us. By oral opinion on June 22, 2001, and written order entered February 22, 2002, the Bankruptcy Court
converted the temporary restraints into a preliminary injunction prohibiting the bringing or prosecution of any such Asbestos Claims against us.

On
February 7, 2001, G-I Holdings filed an action in the United States Bankruptcy Court for the District of New Jersey seeking a declaratory judgment that BMCA has no
successor liability for Asbestos Claims against G-I Holdings and that it is not the alter ego of G-I Holdings (the "BMCA Action"). One of the parties to this matter, the
Official Committee of Asbestos Claimants (the "creditors' committee"), subsequently filed a counterclaim against us seeking a declaration that BMCA has successor liability for Asbestos Claims against
G-I Holdings and that it is the alter ego of G-I Holdings. On May 13, 2003, the United States District Court for the District of New Jersey overseeing the
G-I Holdings' Bankruptcy Court withdrew the reference of the BMCA Action from the Bankruptcy Court. By order dated May 30, 2008, the District Court dismissed the BMCA Action without
ruling on the merits of BMCA's position that it has no successor liability for Asbestos Claims. The District Court ruled that a federal court declaratory judgment action was not the proper vehicle for
resolving this issue. The District Court's ruling did not affect the preliminary injunction enjoining the prosecution of Asbestos Claims against BMCA, and we believe that we do not have liability for
Asbestos Claims. Nevertheless, it is not possible to predict the outcome of any subsequent litigation regarding the continuation of the preliminary injunction and/or prosecution of Asbestos Claims
against us.

Actions Relating to G-I Holdings' Bankruptcy.On or about February 8, 2001, the creditors' committee filed a complaint in the
United States Bankruptcy Court, District of New Jersey against G-I Holdings and us. The complaint requests substantive consolidation of BMCA with G-I Holdings or an order
directing G-I Holdings to cause BMCA to file for bankruptcy protection. The plaintiffs also filed for interim relief absent the granting of their requested relief described above. On
March 21, 2001, the Bankruptcy Court denied plaintiffs' application for interim relief. In November 2002, the creditors' committee, joined in by the legal representative of present and future
holders of asbestos-related claims, filed a motion for appointment of a trustee in the G-I Holdings' bankruptcy. In December 2002, the Bankruptcy Court denied the motion. The creditors'
committee appealed the ruling to the United States District Court, which denied the appeal on June 27, 2003. The creditors' committee appealed the denial to the Third
Circuit Court of Appeals, which denied the appeal on September 24, 2004. The creditors' committee filed a petition with the Third Circuit Court of Appeals for a rehearing of its denial of the
creditors' committee's appeal, which was denied by the Court of Appeals on October 26, 2004.

On
July 7, 2004, the Bankruptcy Court entered an order authorizing the creditors' committee to commence an adversary proceeding against us and others challenging, as a fraudulent
conveyance, certain transactions entered into in connection with our formation in 1994, in which G-I Holdings caused to be transferred to our company all of its roofing business and assets
and in which we assumed certain liabilities relating to those assets, including a specified amount of liabilities for Asbestos Claims (the "1994 transaction"). The Bankruptcy Court also permitted the
creditors' committee to pursue a claim against holders of our bank and bond debt outstanding in 2000, seeking recovery from them, based on the creditors' committee's theory that the 1994 transaction
was a fraudulent conveyance. On July 20, 2004, the creditors' committee appealed certain aspects of the Bankruptcy Court's order (and a June 8, 2004 decision upon which the order was
based). G-I Holdings, the holders of our bank and

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bond
debt and BMCA cross-appealed. The District Court entered an order on June 21, 2006 affirming in part and vacating in part the Bankruptcy Court's July 7, 2004 order. Among other
things, the District Court vacated that aspect of the Bankruptcy Court's order authorizing the creditors' committee to pursue avoidance claims against us and the holders of our bank and bond debt as
of 2000. This issue has been remanded to the Bankruptcy Court for further proceedings consistent with the District Court's opinion. By order dated August 22, 2008, the Bankruptcy Court stayed
this authorization proceeding and other adversary proceedings effective upon the filing of a Joint Plan of Reorganization by G-I Holdings, the creditors' committee and the legal
representative of present and future holders of asbestos-related claims. We believe the creditors' committee's avoidance claims are without merit and, in the event the stay is terminated, the
Bankruptcy Court should not permit the creditors' committee to pursue such claims against us and the holders of our bank and bond debt as of 2000.

We
have been advised by G-I Holdings that on August 12, 2008, G-I Holdings reached an agreement with the creditors' committee and the legal representative
of present and future holders of asbestos-related claims to jointly file a plan of reorganization with the Bankruptcy Court that will provide for settlement of Asbestos Claims and all related
litigation. The agreement is subject to a number of contingencies, but if the contingencies are met and the reorganization plan is confirmed, all of the actions described above will be resolved. If
the bankruptcy is not resolved, BMCA and G-I Holdings intend to vigorously defend all litigations related thereto. A Joint Plan of Reorganization of G-I Holdings was filed with
the Bankruptcy Court on August 21, 2008, and a First Amended Joint Plan of Reorganization of G-I Holdings was filed with the Bankruptcy Court on October 30, 2008.
G-I Holdings filed a Second Amended Joint Plan of Reorganization of G-I Holdings with the Bankruptcy Court on December 3, 2008.

If
the reorganization plan is not confirmed and we are not successful in defending against one or more of these claims, we may be forced to file for bankruptcy protection and/or
contribute all or a substantial portion of our assets to satisfy the claims of G-I Holdings' creditors. Either
of these events, or the substantive consolidation of G-I Holdings and the Company, would weaken our operations and cause us to divert a material amount of our cash flow to satisfy the
asbestos claims of G-I Holdings and may render us unable to pay interest or principal on our Senior Secured Credit Facilities and Senior Notes.

Asbestos-in-Building Claims.G-I Holdings has also been named as a co-defendant in
asbestos-in-buildings cases for economic and property damage or other injuries based upon an alleged present or future need to remove asbestos-containing materials from public
and private buildings. We refer to the asbestos-in-building claims as the "Building Claims." Most Building Claims do not seek to recover an amount of specific damages. Since
these actions were first initiated approximately 20 years ago, G-I Holdings has not only successfully disposed of approximately 145 of these cases, but was a
co-defendant in only three remaining lawsuits at the time of the filing of its Chapter 11 petition. No new Building Claims were filed in 2008. We have not assumed any liabilities
with respect to Building Claims, and believe we will not sustain any liability in connection with such claims.

Insurance Matters.In all the Building Claims, which are presently stayed as to G-I Holdings as a result of the G-I Holdings'
bankruptcy filing, G-I Holdings' defense costs have been paid by Insurance Company of North America ("INA"). While G-I Holdings expects that INA will continue to be obligated
to defend and indemnify G-I Holdings, INA has reserved its rights to later refuse to defend and indemnify G-I Holdings and to seek reimbursement for some or all of the fees
paid to defend and resolve the Building Claims.

Environmental Litigation

We, together with other companies, are a party to a variety of proceedings and lawsuits involving environmental matters under the U.S.
Comprehensive Environmental Response Compensation and

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Liability
Act, and similar state laws, in which recovery is sought for the cost of cleanup of contaminated sites or remedial obligations are imposed, a number of which are in the early stages or have
been dormant for protracted periods. Most of these environmental claims do not seek to recover an amount of specific damages.

In
connection with our formation, we contractually assumed all environmental liabilities of G-I Holdings relating to existing plant sites and our business as then conducted.
The estimates referred to below reflect those environmental liabilities assumed by us and our other environmental liabilities. The environmental liabilities of G-I Holdings that we did not
assume relate primarily to closed manufacturing facilities. We estimate our liability as of December 31, 2008, in respect of assumed and other environmental liabilities is $2.6 million,
and expect insurance recoveries, as discussed below, of $1.7 million. Insurance recoveries reflected on these balance sheets relate to both past expenses and estimated future liabilities. We
refer to these recoveries below as "estimated recoveries."

At
most sites, we anticipate that liability will be apportioned among the companies found to be responsible for the presence of hazardous substances at the site. Although it is difficult
to predict the ultimate resolution of these claims, based on our evaluation of the financial responsibility of the parties involved and their insurers, relevant legal issues and cost sharing
arrangements now in place, we estimate that our liability in respect of all environmental claims, including certain environmental compliance expenses, will be as discussed above. While we cannot
predict whether adverse decisions or events can occur in the future, we believe that the ultimate disposition of such matters will not have a material adverse effect on our liquidity, results of
operations, cash flows or financial position. However, adverse decisions or events, particularly as to increases in remedial costs, discovery of new contamination, assertion of natural resource
damages, and the liability and the financial responsibility of our insurers and of the other parties involved at each site and their insurers, could cause us to increase our estimate of our liability
in respect of those matters. It is not currently possible to estimate the amount or range of any additional liability. For information relating to other environmental compliance expenses, see
Item 1, "BusinessEnvironmental Compliance."

After
considering the relevant legal issues and other pertinent factors, we believe that it is probable that we will receive the estimated recoveries, although our insurers have not
affirmed a legal obligation under the policies to provide indemnity for those claims.

In
June 1997, G-I Holdings commenced litigation on behalf of itself and its predecessors, successors, subsidiaries and related corporate entities in the Superior Court of New
Jersey, Somerset County, seeking amounts substantially in excess of the estimated recoveries. This action was removed to the United States Bankruptcy Court for the District of New Jersey in February
2001 in conjunction with the G-I Holdings' bankruptcy case. In November 2002, the parties agreed to have the action remanded to the Superior Court of New Jersey, Somerset County where it
is pending. While we believe that our claims are meritorious, there can be no assurance that we will prevail in our efforts to obtain amounts equal to, or in excess of, the estimated recoveries.

We
believe that we will not sustain any liability for environmental liabilities of G-I Holdings other than those that we have contractually assumed or that relate to the
operations of our business. While we cannot predict whether any claims for non-assumed environmental liabilities will be asserted against us or our assets, or the outcome of any litigation
relative to those claims, we believe that we have meritorious defenses to those claims.

Tax Claim Against G-I Holdings

On September 15, 1997, G-I Holdings received a notice from the IRS of a deficiency in the amount of
$84.4 million (after taking into account the use of net operating losses and foreign tax credits otherwise available for use in later years) in connection with the formation in 1990 of
Rhône-Poulenc Surfactants and Specialties, L.P., or the surfactants partnership, a partnership in which G-I

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Holdings
held an interest. On September 21, 2001, the IRS filed a proof of claim with respect to such deficiency against G-I Holdings in the G-I Holdings' bankruptcy. If
such proof of claim is sustained for years in which we were part of the G-I Holdings tax group, we and/or certain of our subsidiaries together with G-I Holdings and several current and
former subsidiaries of G-I Holdings could be severally liable for those taxes and interest. G-I Holdings has filed an objection to the proof of claim, which is the subject of
an adversary proceeding pending in the United States District Court for the District of New Jersey. By opinion and order dated September 8, 2006, the District Court ruled on the parties'
respective motions for Partial Summary Judgment, granting the government summary judgment on the issue of "adequate disclosure" for statute of limitation purposes and denying G-I Holdings
summary judgment on its other statute of limitations defense (finding material issues of fact that must be tried). If the IRS were to prevail for the years in which we and/or certain of our
subsidiaries were not part of the G-I Holdings tax group, we nevertheless could be liable for approximately $40.0 million in taxes plus interest, although this calculation is
subject to uncertainty depending upon various factors including G-I Holdings' ability to satisfy its tax liabilities and the application of tax credits and deductions. In an opinion dated
June 8, 2007, the District Court decided that G-I Holdings cannot avail itself of the "binding contract" transitional relief with respect to the 1999 distribution of U.S. Treasury
Bonds to G-I Holdings. We believe that we will not be required to pay any incremental income tax to the Federal government with respect to this matter and that the ultimate disposition
will not have a material adverse effect on our business, financial position or results of operations.

Other Litigation

We are, from time to time, a party to litigation that arises in the normal course of our business operations. Although litigation is
inherently unpredictable, we are not presently a party to any such litigation that we believe could reasonably be expected to have a material adverse effect on our business or financial position.

*    *    *

The
cases described above under "Legal ProceedingsAsbestos-in-Building Claims" and "Environmental Litigation" generally do not seek only specific
amounts of damages, but rather seek all damages from whatever claims are asserted. While litigation is inherently unpredictable, we believe that the ultimate disposition of the cases, however, will
not, individually or in the aggregate, have a material adverse effect on our liquidity, financial position or results of operations.

Item 4.Submission of Matters to a Vote of Security Holders.

Not applicable.

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PART II

Item 5.Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of  Equity Securities.

All of our outstanding shares of Class A common stock are owned by BMCA Holdings Corporation, or BHC. Accordingly, there is no
public trading market for our common stock.

In
2008, 2007 and 2006 we declared and paid cash dividends of $7.5, $0 and $15.0 million, respectively, to our parent corporation. See Item 7, "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and Note 18 to our consolidated financial statements included in this
Annual Report on Form 10-K for information regarding restrictions on the payment of dividends. Any decision to pay dividends, and the timing and amount thereof, is dependent upon,
among other things, our results of operations, financial condition, cash requirements, prospects and other factors deemed relevant by our Board of Directors.

Item 6.Selected Financial Data.

See page F-27.

Item 7.Management's Discussion and Analysis of Financial Condition and Results of Operations.

See page F-2.

Item 7A.Quantitative and Qualitative Disclosures About Market Risk.

See "Management's Discussion and Analysis of Financial Condition and Results of OperationsLiquidity and Financial
ConditionMarket-Sensitive Instruments and Risk Management" on page F-25.

Item 8.Financial Statements and Supplementary Data.

See Index on page F-1 and Financial Statements and Supplementary Data on pages F-2 to
F-83.

Item 9.Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.

Not applicable.

Item 9A(T).Controls and Procedures.

(a) Evaluation of Disclosure Controls and Procedures

Our management, under the supervision and with the participation of the Chief Executive Officer and Chief Financial Officer, conducted
an evaluation of the effectiveness of our 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")) as of the end of the period covered by this report. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that, as
of the end of such period, our disclosure controls and procedures are effective in recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by us in
the reports filed, furnished or submitted under the Exchange Act. Our Chief Executive Officer and Chief Financial Officer also concluded that our disclosure controls and procedures are effective to
ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer
and Chief Financial Officer, to allow timely decisions regarding required disclosures.

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(b) Management's Annual Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting.

Internal
control over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act as a process designed by, or under the
supervision of, the Company's principal executive and financial officers and affected by the Company's Board of Directors, management and other personnel to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. All
internal control systems, no matter how well designed, have inherent limitations. Therefore, even systems determined to be effective can provide only reasonable assurance with respect to financial
statement preparation and presentation and the prevention and detection of misstatements. Projections of any evaluations of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of compliance with policies or procedures may deteriorate.

Our
management, under the supervision and with the participation of the Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of internal control over
financial reporting using the criteria established in "Internal ControlIntegrated Framework" issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based
on this evaluation, management concluded that the Company's internal control over financial reporting was effective as of the end of the period covered by this report.

This
annual report does not include an attestation report of the Company's registered public accounting firm regarding internal control over financial reporting. Management's report was
not subject to attestation by the Company's registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management's
report in this annual report.



There were no significant changes in our internal control over financial reporting (as such term is defined in
Rules 13a-15(f) and 15d-15(f) under the Exchange Act) identified in management's evaluation during the fourth quarter of fiscal year 2008 that have materially affected
or are reasonably likely to materially affect our internal control over financial reporting.

Item 9B.Other Information

None.

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PART III

Item 10.Directors, Executive Officers and Corporate Governance.

Directors and Executive Officers of the Registrant

The following are the name, age and respective positions of our directors and executive officers as of March 30, 2009.

Name

Age

PositionRobert B. Tafaro


58

Chief Executive Officer, President and DirectorRichard A. Nowak


67

Executive Vice President, Chief Operating Officer and DirectorJohn F. Rebele


54

Senior Vice President, Chief Financial Officer, Chief Administrative Officer and DirectorMatti Kiik


66

Senior Vice President, Chief Technology Officer and DirectorJan E. Jerger-Stevens


46

Senior Vice President, Human Resources and DirectorDaniel J. Goldstein


48

Senior Vice President, General Counsel and Director


Set
forth below is a description of the backgrounds, including business experience over the past five years, for each of our directors and executive officers. There are no family
relationships that exist between any of our directors or executive officers. Under our bylaws, our officers are elected by the Board of Directors and hold office until their respective successors are
duly elected and qualified.

Robert B. TafaroMr. Tafaro has been President and Chief Executive Officer of BMCA and some of our subsidiaries since April 2006. He previously
held the position of Chief Operating Officer of BMCA and some of our subsidiaries from October 2005 to April 2006 and he was Executive Vice President, Roofing Systems of BMCA and some of our
subsidiaries from February 2005 to April
2006. He was also Senior Vice President and General ManagerRoofing Systems Sales of BMCA and some of our subsidiaries from October 2003 to February 2005. Mr. Tafaro has also been
director of BMCA and some of our subsidiaries for more than five years.

Richard A. NowakUpon the acquisition of Elk on February 22, 2007, Mr. Nowak was appointed Executive Vice President and Chief Operating
Officer of BMCA and some of our subsidiaries. In January 2008, Mr. Nowak was appointed to the Board of Directors of BMCA. Prior to the acquisition of Elk, Mr. Nowak was the President,
Chief Operating Officer and Director of Elk from March 31, 2002 through February 22, 2007.

John F. RebeleMr. Rebele has been Chief Administrative Officer since April 2005 and Senior Vice President and Chief Financial Officer of BMCA
and some of our subsidiaries for more than five years. Mr. Rebele has been a director of BMCA and of our subsidiaries for more than five years.

Matti KiikUpon the acquisition of Elk on February 22, 2007, Mr. Kiik was appointed Senior Vice President and Chief Technology Officer
of BMCA and some of our subsidiaries. In January 2008, Mr. Kiik was appointed to the Board of Directors of BMCA. Prior to the acquisition of Elk, Mr. Kiik was the Senior Vice President
and Chief Technology Officer of Elk from December 2006 through February 22, 2007. Prior to December 2006, Mr. Kiik was the Senior Vice President, Research and Development of Elk for more
than five years.

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Jan E. Jerger-StevensUpon the acquisition of Elk on February 22, 2007, Ms. Jerger-Stevens was appointed Vice
PresidentHuman Resources of BMCA and some of our subsidiaries. In January 2008, Ms. Jerger-Stevens was appointed Senior Vice PresidentHuman Resources of BMCA and some
of our subsidiaries and was appointed to the Board of Directors of BMCA. Prior to the acquisition of Elk, Ms. Jerger-Stevens was the Vice PresidentHuman Resources of Elk from April
2006 through February 22, 2007. Prior to April 2006, Ms. Jerger-Stevens was employed by Jacuzzi Brands, Inc. as Director of Human Resources since 2004.

Daniel J. GoldsteinMr. Goldstein became Senior Vice President, General Counsel of BMCA and some of our subsidiaries effective
September 2, 2008 and was elected to the Board of Directors of BMCA and some of our subsidiaries on March 27, 2009. Prior to his employment at BMCA, Mr. Goldstein was employed at
Pitney Bowes Inc. as Vice President, Deputy General Counsel from 2005 to 2008 and as Associate General Counsel from 1999 to 2005.

Audit Committee Financial Expert

We are not issuers of securities as that term is defined in the Securities Exchange Act of 1934 and do not have any securities listed
on a national exchange or association. Based on the foregoing, our Board of Directors does not, nor is it required to have an audit committee and, therefore, is not required to determine anyone to be
an audit committee financial expert. Our Board of Directors performs customary audit committee functions for us.

Code of Ethics

All of our employees, including our principal executive officer, principal financial officer, principal accounting officer and the
persons performing similar functions, are required to abide by our code of ethics and business conduct policies to ensure that our business is conducted in a consistently legal and ethical manner. We
intend to disclose any changes in or waivers from our code of ethics by filing a current report on Form 8-K with the Securities and Exchange Commission. We will provide to any
person, without charge, upon request, a copy of our code of ethics by writing to: the Corporate Secretary, Building Materials Corporation of America, 1361 Alps Road, Wayne, New Jersey 07470.

Item 11.Executive Compensation.

Compensation Discussion and Analysis

Compensation Philosophy

The primary goal of the Company with respect to executive compensation is to attract, retain and motivate the most qualified and
dedicated executives, who possess the high-quality skills and talent required for the success of the business, to tie annual and long-term incentive compensation to achievement
of certain performance objectives for the individual executives and for the Company, and to encourage executive performance that contributes to the long-term growth of the Company. For
this reason, the Company has formed an internal compensation committee comprised of the Chief Executive Officer, the Chief Financial Officer and the Senior Vice President of Human Resources. Since we
are not a publicly-held company, we are not required to form a compensation committee comprised of independent directors, as required by applicable laws and regulations, including
the Sarbanes-Oxley Act, and applicable listing requirements.

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To achieve the Company's executive compensation objectives, the compensation committee implements and maintains compensation plans and policies that ensure that
executive compensation is fair, reasonable and competitive, and that reward executives' contributions to the overall short and long-term growth of the Company. We use
short-term compensation (base salaries and annual cash bonuses) and long-term incentive compensation in the form of incentive units to achieve our goal of driving
long-term growth in net book value per share as defined in the 2001 Long-Term Incentive Plan (see below). The Company's compensation policy links each executive's earnings
opportunity with the Company's short and long-term performance. To maintain this link, the committee bases performance on the achievement of pre-determined financial targets
and operational goals measured by metrics such as operating income and growth, as well as each executive's individual contributions.

The
Company maintains two compensation plansthe 2001 Long Term Incentive Plan and the Executive Incentive Compensation Plan. The compensation committee meets at least
annually with respect to distributions and grants under each of these plans. The compensation committee also meets annually to review and approve a compensation budget, including any changes in
executive salaries.

Setting Executive Compensation

In setting compensation, the compensation committee evaluates individual executive performance with the goal of setting compensation at
levels they believe are comparable with executives in other companies of similar size, with similar revenues and in similar industries, while taking into account our relative performance and our own
strategic goals. The compensation committee conducts an annual benchmark review of the aggregate level of our executive compensation as well as the mix of elements used to compensate our executive
officers, including base salary, bonus, total cash compensation and long-term compensation. The compensation committee reviews several executive compensation surveys that compare the
amounts paid to executives in peer companies. The compensation committee reviews companies of comparable size for purposes of benchmarking executive compensation. The various survey results are then
compared, and the compensation committee benchmarks our executive compensation against the median updated compensation paid by the aforementioned groups of companies. Once the committee has completed
its benchmark review, it outlines its findings regarding current market pricing for executive salaries and these findings are used as a basis for recommending salary adjustments, bonuses and incentive
plan grants. The Company used Buck Consultants in 2008 to assist with its benchmark process with respect to the compensation of our Chief Executive Officer and used a variety of other tools and
sources for the benchmarking of other executive compensation. The committee does not have a pre-established policy or target for allocating among salary, cash bonuses and
long-term incentive compensation. The proper compensation mix is determined based on the performance of the Company and of the individual executive, as compared to goals that were
established at the beginning of the year for which incentive compensation is to be paid.

Elements of Compensation

For the fiscal year ended December 31, 2008, the Company's compensation components for the named executive officers included the
following elements:



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Base Salary

The Company pays base salaries to its named executive officers and all other employees to compensate them for their services during the
fiscal year. Base salaries for our executives are established based on the scope of their responsibilities, taking into account competitive market compensation paid by other companies for similar
positions. Generally, we believe that executive base salaries should be targeted near the median of the range of salaries for executives in similar positions with similar responsibilities at companies
of similar size, with similar revenues and in similar industries, in line with our compensation philosophy. Base salaries are reviewed annually, and may be adjusted from time to time to reflect
changes in market levels after taking into account the individual responsibilities, performance and experience of each executive as compared with executives in similar positions with similar
responsibilities in the peer group.

Annual Bonus (EIC)

The compensation committee may award discretionary annual bonuses to the named executive officers and to other employees, which amounts
are usually paid under the Executive Incentive Compensation Plan, with limited exceptions. The annual incentive bonuses are intended to compensate officers for achieving financial and operational
goals and for achieving individual annual performance objectives. The Executive Incentive Compensation Plan is an annual cash incentive plan that is overseen by the compensation committee. When the
compensation committee decides to award a bonus, they determine the pool of eligible employees and the amount that those employees will be eligible to receive under the plan. The plan includes various
incentive levels based on the participant's accountability and impact on Company operations, and target award opportunities are established as a percentage of base salary, ranging from 40% of base
salary to 50% of base salary for the Company's named executive officers. In addition, discretionary bonus amounts may be paid to named executives based on individual performance under the Executive
Incentive Compensation Plan.

Each
year, the compensation committee sets minimum, target and maximum levels for corporate and individual performance goals, and payment of awards is based upon the achievement of those
goals for that year. Upon completion of the fiscal year, the compensation committee assesses the performance of the Company and the individual with respect to those goals, and an overall percentage
amount for the corporate financial goals is calculated. The annual bonus is paid in cash and is ordinarily paid in a single installment in February or March following the completion of a given fiscal
year.

For
the fiscal years ended December 31, 2008, 2007 and 2006, each of the named executive officers in our summary compensation table received the following payments in February
2009, March 2008 and February 2007, respectively. The 2008, 2006 and a portion of the 2007 Bonus Awards for Mr. Tafaro were made under the executive compensation plan, while such bonuses for
Messrs. Rebele, Harrison, Nowak, Kiik and Ms. Jerger-Stevens were made under the Executive Incentive Compensation Plan. The remainder of the 2007 Bonus Awards reflect a
one-time integration bonus paid to each of the executives in recognition of the success of the integration of BMCA and Elk.

Executive Name

2008 Bonus Award

2007 Bonus Award

2006 Bonus AwardRobert B. Tafaro

$
1,000,000

$
500,000

$
435,000Richard A. Nowak

$
360,000

$
250,000

$
John F. Rebele

$
300,000

$
250,000

$
230,000David A. Harrison

$


$
180,000

$
135,000Matti Kiik

$
175,000

$
150,000

$



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Awards
were made to the above-named executive officers in February 2009, March 2008 and February 2007 for performance in 2008, 2007 and 2006, respectively and are reflected in the Bonus
column of the Summary Compensation Table on page 32.

Long-Term Incentive Compensation

The Company employs two forms of equity incentives: restricted stock and incentive units. These incentives foster the
long-term perspective necessary for the continued success in the Company's business.



On January 1, 1996, the Company established the BMCA Preferred Stock Option Plan (the "1996 Plan") to issue options to certain
employees to purchase shares of redeemable convertible preferred stock ("Preferred Stock") of the Company, exercisable at a price of $100 per
share. Each share of Preferred Stock was convertible, at the holder's option, into shares of common stock of the Company at a formula price based on the Company's Book Value as of the date of grant.
The options vested ratably over five years and expired after nine years. Dividends would accrue on the Preferred Stock from the date of issuance at the rate of 6% per annum. The Preferred Stock was
redeemable, at the Company's option, for a redemption price equal to $100 per share plus accrued and unpaid dividends. The Preferred Stock, and common stock issuable upon conversion of Preferred Stock
into common stock, was subject to repurchase by the Company under certain circumstances, at a price equal to current Book Value (as defined in the option agreement). The exercise price of the options
to purchase Preferred Stock was equal to the estimated fair value per share of the Preferred Stock at the date of grant. As of December 31, 2008, options to purchase 400,000 shares of Preferred
Stock remained available under the 1996 Plan. No shares or options were granted in 2008, 2007 and 2006 and there are no outstanding shares or options as of March 30, 2009.



Effective December 31, 2000, the Company adopted the 2001 Long-Term Incentive Plan ("2001 LTIP"), which allowed
employees participating in the 1996 Plan to also participate in the 2001 Long-Term Incentive Plan. During 2001, all employees exchanged their Preferred Stock options for incentive plan
units effective as of December 31, 2000. The 2001 Long-Term Incentive Plan provides long-term compensation to employees and key management personnel based on the
Company's book value. Our 2001 Long-Term Incentive Plan authorizes the compensation committee to grant Incentive Units ("Incentive Units") to eligible employees. The number of Incentive
Units granted is determined by the compensation committee in its discretion, and the determination of that number is based on the performance of the individual, the performance of the Company, and the
individual's contribution to the long-term growth of the Company. Generally, Incentive Units vest cumulatively, in 20% increments over five years, except that Incentive Units granted in
exchange for Preferred Stock options retain the vested status and vesting schedule of the options exchanged. The compensation committee may, in its sole discretion, however, grant Incentive Units with
any vesting schedule, other than that normally provided in the 2001 Long-Term Incentive Plan. Vesting will end upon the termination of an employee's employment with BMCA or any subsidiary
for any reason. If, after a change of control of BMCA (as defined in the 2001 LTIP), an employee's employment is terminated within twelve months of the change of control for any reason other than Good
Cause (as defined in the 2001 LTIP), as a result of death or permanent disability, or by the employee for Good Reason (as defined in the 2001 LTIP), all Incentive Units will become fully and
immediately vested. Vested Incentive Units are exercised on the earlier of: (i) the sixth anniversary of the date the Incentive Unit was granted; (ii) a specified date elected by an
employee; and (iii) either one year after the employee's termination of employment with

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the
Company due to retirement, or the date of the employee's termination of employment for reasons other than due to retirement.

At
the end of each fiscal quarter, the value of Incentive Units is calculated based on our book value, as defined in the plan, at that date less book value as of the date of grant
divided by 1,000,010. Upon exercise of an Incentive Unit, a participant receives in cash the excess, if any, of the value of such Incentive Unit as of the end of the fiscal quarter immediately
preceding the exercise date (except in the event the exercise is within thirty days of the end of a fiscal quarter, in which case the value will be calculated as of the end of such fiscal quarter),
over the initial value of such Incentive Unit, subject to all appropriate income tax withholdings. Accordingly, the dollar value of future payouts is not readily ascertainable.

In
December 2005, the compensation committee exercised its rights to amend the 2001 LTIP, and extended the term of the 2001 LTIP through December 2007. In December 2007, the compensation
committee further extended the term of the 2001 LTIP through December 2009. In December 2008, the compensation committee amended the 2001 LTIP to eliminate the termination date provision allowing the
committee to terminate the 2001 LTIP at its discretion.

Post-Termination Compensation

In order for the Company to attract and retain well-qualified executives and key personnel, to provide certain security to
itself and to each executive and to provide for continuity of management in the event of a change in control of the Company, in 2001 the Company entered into employment security agreements with
certain of our executive officers and key personnel, including Messrs. Tafaro, Rebele and Harrison.

The
agreements have no expiration date, are supported by irrevocable letters of credit and provide for a single-sum payment consisting of two times salary and bonus and
related benefits if employment is terminated or a change in employment responsibilities occurs within a thirty-six month period following the change in control event. At
December 31, 2008, the aggregate value of the security agreements related to the above-named individuals was $4.3 million, which excludes the cost of medical benefits and any amounts due
under the 2001 Long-Term Incentive Plan.

A
change of control, as defined in the agreements, would occur when (1) the Heyman Group (as described below) ceases to be the beneficial owner, directly or indirectly, of a
majority voting power of the voting stock of BMCA, (2) the transfer or sale of a substantial portion of the property of BMCA in any transaction or series of transactions to any entity or
entities other than an entity of which the Heyman Group owns at least 80% of such entity's capital stock or beneficial interest or (3) any person or entity, other than the Heyman Group,
assumes, without the consent of the Heyman Group, management responsibilities for the affairs of G-I Holdings or any subsidiary thereof. The filing of the Chapter 11 case by
G-I Holdings did not constitute a change in control but a change in control could occur in the future depending on the outcome of the bankruptcy proceeding. See
Item 1A"Risk Factors."

Under
the agreements, the "Heyman Group" means (1) Samuel J. Heyman, his heirs, administrators, executors and entities of which a majority of the voting stock is owned by Samuel
J. Heyman, his heirs, administrators or executors and (2) any entity controlled, directly or indirectly, by Samuel J. Heyman or his heirs, administrators or executors. Also for purposes of this
section "beneficial ownership" shall be determined in accordance with Rule 13d-3 under the Securities Exchange Act of 1934, as amended.

On
January 30, 2009, Mr. Harrison converted his full-time employment as the Senior Vice President, Chief Marketing Officer and Director of the Company to that
of a consultant to the Company. On such date, Mr. Harrison's employment security agreement terminated. In connection with

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Mr. Harrison's
change in employment status, Mr. Harrison received a discretionary bonus for his fiscal year 2008 performance, in lieu of any bonus under the Company's Executive Incentive
Compensation Plan, in the amount of $180,000.

Additionally,
under their respective employment agreements dated August 9, 2007, Messrs. Nowak and Kiik are entitled to severance payments, which are based on the timing of
their termination.

Other Bonuses

Pursuant to their employment agreements dated August 9, 2007, Messrs. Nowak and Kiik each received a signing bonus in the
amount of $1.0 and $0.3 million, respectively. Additionally, each is entitled to interim stay bonuses in exchange for remaining an employee of the Company through specified dates. In 2008
Messrs. Nowak and Kiik each received an interim stay bonus in the amount of $1.8 and $0.5 million, respectively.

Perquisites and Other Personal Benefits

The Company provides named executive officers with certain perquisites and other personal benefits that the compensation committee
believes are reasonable and consistent with the overall compensation philosophy to attract, retain and motivate the most qualified and
dedicated employees for key positions. The compensation committee periodically reviews the levels of perquisites and other personal benefits provided to named executive officers.

The
named executive officers are provided use of company automobiles, payment of premiums for life insurance policies and long-term disability insurance policies, Company
contributions to the 401(k) plan, and participation in the plans and programs described above. In certain instances and on a case-by-case basis, the Company may reimburse
relocation expenses and pay relocation bonuses to executives who are required, due to promotions or reorganizations, to move to another Company location. Additionally, the Company may pay special
one-time bonuses to certain executives when their performance far-exceeds any targets or goals set by the compensation committee. Such bonuses are not common and are not paid
through any formal compensation plan.

Compensation Committee Report

The compensation committee, reviewed and discussed the above Compensation Discussion and Analysis ("CD&A") with the Company's
management. Based on the review and discussion, the compensation committee recommended to the Company's Board of Directors that the CD&A be included in this Annual Report on
Form 10-K.



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Summary Compensation Table

The following table sets forth the cash and non-cash compensation for each of the last three fiscal years awarded to or
earned by our Chief Executive Officer, Chief Financial Officer and the three other most highly compensated executive officers as of December 31, 2008.

Summary Compensation Table

Name and Principal Position

Year

Salary

Bonus(1)

Option
Awards

All Other
Compensation

TotalRobert B. Tafaro


2008

$
575,000

$
1,000,000

$
1,619,649

$
35,257
(2)
$
3,229,906Chief Executive Officer


2007

$
525,000

$
500,000
(2)
$
190,120

$
34,474
(2)
$
1,249,594and President(2)


2006

$
450,000

$
435,000

$
660,108

$
36,815
(2)
$
1,581,923Richard A. Nowak


2008

$
512,340

$
2,110,000
(3)
$
510,188

$
37,224
(3)
$
3,169,752Executive Vice President and


2007

$
374,318
(3)
$
1,250,000
(3)
$
3,656

$
34,517
(3)
$
1,662,491Chief Operating Officer(3)


2006

$


$


$


$


$
John F. Rebele


2008

$
351,780

$
300,000

$
533,623

$
37,150
(4)
$
1,222,553Senior Vice President,


2007

$
339,900

$
250,000
(4)
$
82,689

$
37,415
(4)
$
710,004Chief Financial Officer and


2006

$
315,833

$
230,000

$
438,325

$
37,308
(4)
$
1,021,466Chief Administrative Officer(4)David A. Harrison


2008

$
322,197

$
180,000
(5)
$
533,041

$
25,351
(5)
$
1,060,589Senior Vice President and


2007

$
314,563

$
180,000
(5)
$
75,922

$
30,254
(5)
$
600,739Chief Marketing Officer(5)


2006

$
290,613

$
135,000

$
353,270

$
26,338
(5)
$
805,221Matti Kiik


2008

$
280,817

$
675,000
(6)
$
258,984

$
32,668
(6)
$
1,247,469Senior Vice President and


2007

$
218,755
(6)
$
450,000
(6)
$
1,755

$
25,418
(6)
$
695,928Chief Technology Officer(6)


2006

$


$


$


$


$



---

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Table of Contents

Long-Term Incentive Plan

The following table sets forth information on awards (incentive units) granted to the executive officers named in the Summary
Compensation Table above during 2008 under our 2001 Long-Term Incentive Plan.

2008 Grants of PlanBased Awards(1)

Name

Grant
Date

Date of
Compensation
Committee
Action

All Other
Option
Awards;
Number of
Securities
Underlying
Options

Exercise or
Base Price of
Option
Awards(2)(3)Robert B. Tafaro


1/08


1/08


6,000

$
592.01Richard A. Nowak











John F. Rebele











David A. Harrison











Matti Kiik














---

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The
following tables set forth detailed information on awards (incentive units) to our executive officers named in the Summary Compensation Table above under our 2001
Long-Term Incentive Plan that are outstanding at December 31, 2008.

Outstanding Equity Awards at December 31, 2008
Option Awards(1)

Name

Number of
Securities
Underlying
Unexercised
Options
Exercisable

Number of
Securities
Underlying
Unexercised
Options
Unexercisable

Equity
Incentive
Plan
Awards:
Numbers of
Securities
Underlying
Unexercised
Unearned
Options

Option
Exercise
Price

Option
Expiration
DateRobert B. Tafaro


1,320





880

$
478.16


4/113,000





2,000

$
534.19


1/121,000





4,000

$
583.08


1/13





6,000

$
592.01


1/14Richard A. Nowak


1,750





3,250

$
583.49


7/13John F. Rebele


600







$
300.00


1/101,080





720

$
478.16


4/11460





1,840

$
583.08


1/13David A. Harrison(2)


1,100







$
300.00


1/10960





640

$
478.16


4/11380





1,520

$
583.08


1/13Matti Kiik


750





2,250

$
583.49


7/13


---

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Table of Contents

Option Exercises in 2008(1)

Name

Number of Shares
Acquired on Exercise

Value Realized
on ExerciseRobert B. Tafaro


2,100

$
657,181Richard A. Nowak




$
John F. Rebele


1,100

$
351,241David A. Harrison


1,100

$
351,241Matti Kiik




$







Employment Security Agreements

In June 2001, we entered into employment security agreements with certain of our executive officers and key personnel, including
Messrs. Tafaro, Rebele and Harrison, in an effort to retain these individuals as well as provide security to us and the executives and to provide for continuity of management in the event of a
change in control. The agreements have no expiration date, are supported by irrevocable letters of credit and provide for a single-sum payment consisting of two times salary and bonus and
related benefits if employment is terminated or a change in employment responsibilities occurs within a thirty-six month period following the
change in control event, as defined. At December 31, 2008, the aggregate value of the security agreements related to the above-named individuals (see Directors and Executive Officers of the
Registrant) was $4.3 million, which excludes the cost of medical benefits and any amounts due under the 2001 Long-Term Incentive Plan.

A
change of control, as defined in the agreements, would occur when (1) the Heyman Group (as described below) ceases to be the beneficial owner, directly or indirectly, of a
majority voting power of the voting stock of BMCA, (2) the transfer or sale of a substantial portion of the property of BMCA in any transaction or series of transactions to any entity or
entities other than an entity of which the Heyman Group owns at least 80% of such entity's capital stock or beneficial interest or (3) any person or entity, other than the Heyman Group,
assumes, without the consent of the Heyman Group, management responsibilities for the affairs of G-I Holdings or any subsidiary thereof. The filing of the Chapter 11 case by
G-I Holdings did not constitute a change in control but a change in control could occur in the future depending on the outcome of the bankruptcy proceeding.

Under
the agreements, the "Heyman Group" means (1) Samuel J. Heyman, his heirs, administrators, executors and entities of which a majority of the voting stock is owned by Samuel
J. Heyman, his heirs, administrators or executors and (2) any entity controlled, directly or indirectly, by Samuel J. Heyman or his heirs, administrators or executors. Also for purposes of this
section, "beneficial ownership" shall be determined in accordance with Rule 13d-3 under the Securities Exchange Act of 1934, as amended.

On
January 30, 2009, Mr. Harrison converted his full-time employment as the Senior Vice President, Chief Marketing Officer and Director of the Company to that
of a consultant to the Company. Accordingly, on such date, Mr. Harrison's employment security agreement terminated.

Additionally,
under their respective employment agreements dated August 9, 2007, Messrs. Nowak and Kiik are entitled to severance payments, which are based on the timing of
their termination.

Compensation of Directors

Our directors do not receive any additional compensation for their services as directors.

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Compensation Committee Interlocks and Insider Participations

We do not have a separate compensation committee within the rules prescribed by the Sarbanes-Oxley Act. Compensation policies are
established by our internal compensation committee, comprised of our Chief Executive Officer, Chief Financial Officer and Senior Vice-President of Human Resources. See Item 13,
"Certain Relationships and Related Transactions and Director Independence."

Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.



As of December 31, 2008, options to purchase 400,000 shares of preferred stock remain available for grants under our 1996
Preferred Stock Option Plan.



As of March 30, 2009, 100% of our outstanding shares of Class A common stock were owned of record by BMCA Holdings
Corporation.

The
following table sets forth information with respect to the ownership of our common stock, as of March 30, 2009, by each other person known to us to own beneficially more than
5% of the common stock outstanding on that date and by all of our directors and executive officers as a group.

Title of Class

Name and Address of Beneficial Owner(1)

Amount and Nature of Beneficial Ownership

Percent of Class

Total Voting PowerClass A Common Stock

Samuel J. Heyman


1,015,010
(2)

100.0
%

100.0
%All directors and executive officers as a group (7 persons)











---

Item 13.Certain Relationships and Related Transactions and Director Independence.

Although
no formal written policy is in place, our Board of Directors is responsible for reviewing and approving the terms and conditions of all significant
related party transactions.

Management Agreement

Pursuant to a management agreement, a subsidiary of ISP (of which Samuel J. Heyman beneficially owns, as defined in
Rule 13d-3 of the Exchange Act, approximately 100%), provides certain general management, administrative, legal and facilities services to us, including the use of our headquarters
in Wayne, New Jersey. We were charged approximately $7.3, $6.7 and $6.1 million in 2008, 2007 and 2006, respectively, for these services under the management agreement, inclusive of the
services provided to G-I Holdings. These charges consist of management fees and other reimbursable expenses attributable to us, or incurred by ISP for our benefit. They are based on an
estimate of the costs ISP incurs to provide those services. The amount payable to ISP for management fees as of December 31, 2008 and 2007 was $0.9 and $0.5 million, respectively. The
management agreement also

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Table of Contents

provides
that we are responsible for providing management services to G-I Holdings and some of its subsidiaries and that G-I Holdings pay to us a management fee for these
services. The aggregate amount paid by G-I Holdings to us for services rendered under the management agreement in 2008, 2007 and 2006 was $0.9, $0.8 and $0.9 million, respectively.
We also allocate a portion of the management fees payable by us under the management agreement as lease payments for the use of our headquarters.

The
salary of Mr. Daniel J. Goldstein, Senior Vice President and General Counsel is paid by ISP pursuant to our management agreement with ISP. We reimburse ISP, through payment of
the management fees payable under the management agreement, for the estimated costs ISP incurs for providing the services of Mr. Goldstein.

Due
to the unique nature of the services provided under the management agreements, comparisons with third party arrangements are difficult. However, we believe that the terms of the
management agreement taken as a whole are no less favorable to us than could be obtained from an unaffiliated third party.

Certain Purchases

During 2008, we and our subsidiaries purchased a substantial portion of our headlap roofing granules, colored roofing granules and
algae-resistant granules, on a purchase order basis, from ISP Minerals, an affiliate of BMCA and ISP, which is also an affiliate of BMCA. The
amount of mineral products purchased each year on this basis is based on current demand and is not subject to minimum purchase requirements. For the year ended December 31, 2008, we purchased
$40.6 million of roofing granules under this arrangement.

In
addition to the granules products purchased by BMCA under the above purchase order basis, the balance of BMCA's granules requirements are purchased under a contract expiring in 2013.
The amount of mineral products purchased each year under the contract is based on current demand and is not subject to minimum purchase requirements. Under the contract, for the year ended
December 31, 2008, we purchased $83.2 million of roofing granules.

Tax Sharing Agreement

We entered into a tax sharing agreement (the "Tax Sharing Agreement") dated January 31, 1994 and later amended on
March 19, 2001, with G-I Holdings, with respect to the payment of Federal income taxes and related matters. During the term of the Tax Sharing Agreement, which is effective for the
period during which we or any of our domestic subsidiaries is included in a consolidated Federal income tax return for the G Holdings' consolidated tax group, we are obligated to pay G Holdings an
amount equal to those Federal income taxes we would have incurred if we, on behalf of ourselves and our domestic subsidiaries, filed our own Federal income tax return. Unused tax attributes will carry
forward for use in reducing amounts payable by us to G Holdings in future years, but cannot be carried back. Our unused tax attributes currently consist of a net operating loss carryforward of
$42.1 million, which will not expire until 2027. If we ever were to leave the G Holdings' consolidated tax group, we would be required to pay to G Holdings the value of any tax attributes to
which we would succeed under the consolidated return regulations to the extent the tax attributes reduced the amounts otherwise payable by us under the Tax Sharing Agreement. Under limited
circumstances, the provisions of the Tax Sharing Agreement could result in us having a greater liability under the agreement than we would have had if we and our domestic subsidiaries had each filed
our own separate Federal income tax return. Under the Tax Sharing Agreement, we and each of our domestic subsidiaries are responsible for any taxes that would be payable by reason of any adjustment to
the tax returns of G Holdings or its subsidiaries for years prior to the adoption of the Tax Sharing Agreement that relate to our business or assets or the business or assets of any of our domestic
subsidiaries. Although, as a member of the

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G Holdings'
consolidated tax group, we are severally liable for certain Federal income tax liabilities of the G Holdings' consolidated tax group, including tax liabilities not related to our
business, we should have no liability other than liabilities arising from our operations and the operations of our domestic subsidiaries and tax liabilities for tax years pre-dating the
Tax Sharing Agreement that relate to our business or assets and the business or assets of any of our domestic subsidiaries. The Tax Sharing Agreement provides for analogous principles to be applied to
any consolidated, combined or unitary state or local income taxes. Under the Tax Sharing Agreement, G Holdings makes all decisions with respect to all matters relating to taxes of the G Holdings'
consolidated tax group. The provisions of the Tax Sharing Agreement take into account both the Federal income taxes we would have incurred
if we filed our own separate Federal income tax return and the fact that we are a member of the G Holdings' consolidated tax group for Federal income tax purposes.

Intercompany Borrowings

We make loans to, and borrow from, our parent corporations from time to time at interest rates ranging from 3.25% to 7.25% in 2008. As
of December 31, 2008 and 2007, BMCA Holdings Corporation owed us $56.3 and $56.2 million, including interest of $1.1 and $1.0 million, respectively, and we owed BMCA Holdings
Corporation $52.8 and $52.8 million, respectively, with no unpaid interest. Interest income on our loans to BMCA Holdings Corporation amounted to $3.4, $5.0 and $4.9 million in 2008,
2007 and 2006, respectively. Interest expense on our loans from BMCA Holdings Corporation amounted to $3.3, $4.8 and $4.7 million in 2008, 2007 and 2006, respectively. Loans payable
to/receivable from our parent corporation are due on demand and provide each party with the right of offset of its related obligation to the other party and are subject to limitations as outlined in
our Senior Secured Credit Facilities and our Senior Notes. Under the terms of our Senior Secured Credit Facility and the indenture governing our Senior Notes at December 31, 2008, we could
repay demand loans to our parent corporation amounting to $52.8 million, subject to certain conditions. See Note 17 to our consolidated financial statements included in this annual
report on Form 10-K.

Director Independence

As of March 30, 2009, our Board of Directors is comprised of Messrs. Tafaro, Nowak, Rebele, Kiik, Goldstein and
Ms. Jerger-Stevens, none of whom are independent.

Item 14.Principal Accounting Fees and Services.

The following table presents fees for professional services rendered by our independent registered public accounting firm,
Ernst & Young LLP and other public accounting firms, for the fiscal years ended December 31, 2008 and 2007.

Audit and Non-Audit Fees

2008

2007Audit Fees(1)

$
546,800

$
542,800Audit-Related Fees(2)


67,500


67,000Tax Fees(3)


164,037


241,818All Other Fees(4)


229,700


1,165,916Total

$
1,008,037

$
2,017,534






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Policy on Pre-Approval of Audit and Non-Audit Services Performed by the Independent Registered Public Accountants

Our Board of Directors approves, prior to the engagement of our independent registered public accountants, consistent with the
Sarbanes-Oxley Act of 2002 and the requirements of the Securities and Exchange Commission, any audit, audit-related and permitted non-audit services reasonably likely to be required by us
from Ernst & Young LLP during the coming fiscal year. The Board may delegate the approval of unanticipated (but otherwise permitted) non-audit services during the coming
fiscal year to our principal financial officer (who is a member of the Board of Directors) or our principal accounting officer as required.

PART IV

Item 15.Exhibits and Financial Statement Schedules.

The
following documents are filed as part of this report:



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EXHIBIT INDEX

Exhibit
Number

Description2.1

Reorganization Agreement, dated as of December 31, 1998, by and among BMCA, Building Materials Manufacturing Corporation and Building Materials Investment Corporation (incorporated by reference to Exhibit 2.1 to
BMCA's Registration Statement on Form S-4 (Registration No. 333-69749) (the "2008 Notes S-4")).3.1

Amended and Restated Certificate of Incorporation of BMCA (incorporated by reference to Exhibit 3.1 to BMCA's Form 10-K for the fiscal year ended December 31, 1999).3.2

By-laws of BMCA (incorporated by reference to Exhibit 3.2 to BMCA's Registration Statement on Form S-4 (Registration No. 33-81808)) (the "Deferred Coupon Note Registration Statement").3.3

Certificate of Incorporation of Building Materials Manufacturing Corporation (incorporated by reference to Exhibit 3.3 to BMCA's Form 10-K for the fiscal year ended December 31, 1998 (the "1998
Form 10-K")).3.4

By-laws of Building Materials Manufacturing Corporation (incorporated by reference to Exhibit 3.4 to the 1998 Form 10-K).3.5

Certificate of Incorporation of Building Materials Investment Corporation (incorporated by reference to Exhibit 3.5 to the 1998 Form 10-K).3.6

By-laws of Building Materials Investment Corporation (incorporated by reference to Exhibit 3.6 to the 1998 Form 10-K).4.1

Indenture, dated as of December 3, 1998, between BMCA and The Bank of New York, as trustee (incorporated by reference to Exhibit 4.1 to the 2008 Notes S-4).4.2

First Supplemental Indenture dated as of January 1, 1999 to Indenture dated as of December 3, 1998 among BMCA, as issuer, Building Materials Manufacturing Corporation and Building Materials Investment
Corporation, as guarantors, and The Bank of New York, as trustee (incorporated by reference to Exhibit 4.4 to the 2008 Notes S-4).4.3

Second Supplemental Indenture, dated as of December 4, 2000, to Indenture dated as of December 3, 1998, among BMCA, as issuer, Building Materials Manufacturing Corporation and Building Materials Investment
Corporation, as original guarantors, the Additional Guarantors signatory thereto, as additional guarantors, and The Bank of New York, as trustee (incorporated by reference to Exhibit 4.12 to BMCA's Form 10-K for the fiscal year ended
December 31, 2000 (the "2000 Form 10-K")).4.4

Third Supplemental Indenture, dated as of January 4, 2007 to Indenture dated as of December 3, 1998, among BMCA, the guarantors signatory thereto and The Bank of New York, as trustee (incorporated by
reference to Exhibit 4.4 to BMCA's Form 10-K for the fiscal year ended December 31, 2007 (the "2007 Form 10-K")).


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Exhibit
Number

Description4.5

Indenture, dated as of July 26, 2004, among BMCA, as issuer, BMCA Insulation Products Inc., BMCA Quakertown Inc., Building Materials Investment Corporation, Building Materials Manufacturing Corporation,
Ductwork Manufacturing Corporation, GAF Leatherback Corp., GAF Materials Corporation (Canada), GAF Premium Products Inc., GAF Real Properties, Inc., GAFTECH Corporation, LL Building Products Inc., Pequannock Valley Claim Service
Company, Inc., South Ponca Realty Corp. and Wind Gap Real Property Acquisition Corp., as guarantors, and Wilmington Trust Company as trustee (incorporated by reference to Exhibit 4.10 to BMCA's Registration Statement on Form S-4
(Registration No. 333-119608)).4.6

First Supplemental Indenture, dated as of December 29, 2006, to the Indenture dated as of July 26, 2004, among BMCA, as issuer, the guarantors signatory thereto and Wilmington Trust Company, as trustee
(incorporated by reference to Exhibit 4.6 to the 2007 Form 10-K).4.7

Second Supplemental Indenture, dated as of December 29, 2006, to the Indenture dated as of July 26, 2004, among BMCA, as issuer, the guarantors signatory thereto and Wilmington Trust Company, as trustee
(incorporated by reference to Exhibit 4.7 to the 2007 Form 10-K).4.8

Third Supplemental Indenture, dated as of December 29, 2006, to the Indenture dated as of July 26, 2004, among BMCA, as issuer, the guarantors signatory thereto and Wilmington Trust Company, as trustee
(incorporated by reference to Exhibit 4.8 to the 2007 Form 10-K).4.9

Fourth Supplemental Indenture, dated as of February 21, 2007, to the Indenture dated as of July 26, 2004, among BMCA, as issuer, the guarantors signatory thereto and Wilmington Trust Company, as trustee
(incorporated by reference to Exhibit 4.9 to the 2007 Form 10-K).4.10

Fifth Supplemental Indenture, dated as of February 22, 2007, to the Indenture dated as of July 26, 2004, among BMCA, as issuer, the guarantors signatory thereto and Wilmington Trust Company, as trustee
(incorporated by reference to Exhibit 4.10 to the 2007 Form 10-K).4.11

Sixth Supplemental Indenture, dated as of March 26, 2007, to the Indenture dated as of July 26, 2004, among BMCA, as issuer, the guarantors signatory thereto and Wilmington Trust Company, as trustee
(incorporated by reference to Exhibit 4.11 to the 2007 Form 10-K).10.1

Amended and Restated Management Agreement, dated as of January 1, 1999, among GAF, G-I Holdings Inc., G Industries Corp., Merick Inc., GAF Fiberglass Corporation, ISP, GAF Building Materials Corporation,
 GAF Broadcasting Company, Inc., BMCA and ISP Opco Holdings Inc. (incorporated by reference to Exhibit 10.1 to the 1998 Form 10-K).10.2

Amendment No. 1 to the Management Agreement, dated as of January 1, 2000 (incorporated by reference to Exhibit 10.2 to International Specialty Products Inc. annual report on Form 10-K for the
fiscal year ended December 31, 1999).10.3

Amendment No. 2 to the Management Agreement, dated as of January 1, 2001 (incorporated by reference to Exhibit 10.3 to International Specialty Products Inc. annual report on Form 10-K for the
fiscal year ended December 31, 2000).10.4

Amendment No. 3 to the Amended and Restated Management Agreement, dated as of June 27, 2001, by and among G-I Holdings Inc., Merick Inc., International Specialty Products Inc., ISP
Investco LLC, GAF Broadcasting Company, Inc., Building Materials Corporation of America and ISP Management Company, Inc., as assignee of ISP Chemco Inc. (incorporated by reference to Exhibit 10.7 to the ISP Chemco Inc.
Registration Statement on Form S-4 (Registration No. 333-70144)).


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Table of Contents

Exhibit
Number

Description10.5

Amendment No. 4 to the Amended and Restated Management Agreement, dated as of January 1, 2002, by and among G-I Holdings Inc., Merick Inc., International Specialty Products Inc., ISP
Investco LLC, GAF Broadcasting Company, Inc., Building Materials Corporation of America and ISP Management Company, Inc. (incorporated by reference to Exhibit 10.5 to BMCA's Form 10-K for the fiscal year ended
December 31, 2001 (the "2001 Form 10-K")).10.6

Amendment No. 5 to the Amended and Restated Management Agreement, dated as of January 1, 2003, by and among G-I Holdings Inc., Merick Inc., International Specialty Products Inc., ISP
Investco LLC, GAF Broadcasting Company, Inc., Building Materials Corporation of America and ISP Management Company, Inc. (incorporated by reference to Exhibit 10.1 to BMCA's Form 10-Q for the quarterly period ended
March 30, 2003).10.7

Amendment No. 6 to the Amended and Restated Management Agreement, dated as of January 1, 2004, by and among G-I Holdings Inc., Merick Inc., International Specialty Products Inc., International
Specialty Holdings Inc., ISP Synthetic Elastomers LP, ISP Investco LLC, GAF Broadcasting Company, Inc., BMCA and ISP Management Company, Inc. as assignee of ISP Chemco, Inc. (incorporated by reference to
Exhibit 10.1 to BMCA's Form 10-Q for the quarterly period ended April 4, 2004).10.8

Amendment No. 7 to the Amended and Restated Management Agreement, dated as of January 1, 2005, by and among G-I Holdings Inc., Merick Inc., International Specialty Products Inc., International
Specialty Holdings Inc., ISP Synthetic Elastomers LP, ISP Investco LLC, GAF Broadcasting Company, Inc., Building Materials Corporation of America and ISP Management Company, Inc. as assignee of ISP Chemco, Inc.
(incorporated by reference to Exhibit 10.1 to BMCA's Form 10-Q for the quarterly period ended July 3, 2005).10.9

Amendment No. 8 to the Amended and Restated Management Agreement, dated as of January 1, 2006, by and among G-I Holdings Inc., Merick Inc., International Specialty Products Inc., International
Specialty Holdings Inc., ISP Minerals Inc., ISP Investco LLC, GAF Broadcasting Company, Inc., Building Materials Corporation of America and ISP Management Company, Inc. as assignee of ISP Chemco, Inc. (incorporated by
reference to Exhibit 10.1 to BMCA's Form 10-Q for the quarterly period ended July 2, 2006).10.10

Amendment No. 9 to the Amended and Restated Management Agreement, dated as of January 1, 2007, by and among G-I Holdings Inc., Merick Inc., International Specialty Products Inc., International
Specialty Holdings LLC, ISP Minerals Inc., ISP Investco LLC, GAF Broadcasting Company, Inc., Building Materials Corporation of America and ISP Management Company, Inc. as assignee of ISP Chemco, LLC, formerly ISP Chemco,
 Inc. (incorporated by reference to Exhibit 10.1 to BMCA's current report on Form 8-K dated February 19, 2008).*10.11

Amendment No. 10 to the Amended and Restated Management Agreement, dated as of January 1, 2008, by and among G-I Holdings Inc., Merick Inc., International Specialty Products Inc.,
International Specialty Holdings LLC, ISP Minerals Inc., ISP Investco LLC, GAF Broadcasting Company, Inc., Building Materials Corporation of America and ISP Management Company, Inc. as assignee of ISP Chemco, LLC,
formerly ISP Chemco, Inc.10.12

BMCA 2001 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.8 to the 2000 Form 10-K).


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Table of Contents

Exhibit
Number

Description10.13

Form of BMCA 2001 Long-Term Incentive Plan Incentive Unit Grant Agreement (incorporated by reference to Exhibit 10.2 to BMCA's Form 10-Q for the quarterly period ended July 3, 2005).10.14

First Amendment to the BMCA 2001 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.11 to BMCA's Form 10-K for the fiscal year ended December 31, 2005).10.15

Second Amendment to the BMCA 2001 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.1 to BMCA's current report on Form 8-K dated December 31, 2007).*10.16

The Amended and Restated Long-Term Incentive Plan effective January 1, 2005.10.17

Tax Sharing Agreement, dated as of January 31, 1994, among GAF, G-I Holdings Inc. and BMCA (incorporated by reference to Exhibit 10.6 to the Deferred Coupon Note Registration Statement).10.18

Amendment to Tax Sharing Agreement, dated as of March 19, 2001, between G-I Holdings and BMCA (incorporated by reference to Exhibit 10.10 to the 2000 Form 10-K).10.19

Reorganization Agreement, dated as of January 31, 1994, among GAF Building Materials Corporation, G-I Holdings Inc. and BMCA (incorporated by reference to Exhibit 10.9 to the Deferred Coupon Note
Registration Statement).10.25

Revolving Credit Agreement, dated as of February 22, 2007, among Building Materials Corporation of America, BMCA Acquisition Inc. and BMCA Acquisition Sub Inc., as borrowers; the initial lenders,
initial issuing bank and swing line bank named therein, as initial lenders, initial issuing bank and swing line bank; Deutsche Bank AG New York Branch, as collateral monitoring agent and administrative agent; Deutsche Bank Securities Inc., Bear
Stearns & Co. Inc. and J.P. Morgan Securities Inc., as joint lead arrangers and joint book managers; Bear Stearns & Co. Inc., as syndication agent; and J.P. Morgan Securities Inc., as documentation
agent (incorporated by reference to Exhibit 10.1 to BMCA's Current Report on Form 8-K dated February 22, 2007).10.26

Amendment No. 1 to the Revolving Credit Agreement, dated as of March 12, 2007, among Building Materials Corporation of America, BMCA Acquisition Inc. and BMCA Acquisition Sub Inc., as borrowers;
the initial lenders, initial issuing bank and swing line bank named therein, as initial lenders, initial issuing bank and swing line bank; Deutsche Bank AG New York Branch, as collateral monitoring agent and administrative agent; Deutsche Bank
Securities Inc., Bear Stearns & Co. Inc. and J.P. Morgan Securities Inc., as joint lead arrangers and joint book managers; Bear Stearns & Co. Inc., as syndication agent; and J.P. Morgan
Securities Inc., as documentation agent (incorporated by reference to Exhibit 10.2 to BMCA's Current Report on Form 8-K dated March 15, 2007).10.27

Term Loan Agreement, dated as of February 22, 2007, among Building Materials Corporation of America, BMCA Acquisition Inc. and BMCA Acquisition Sub Inc., as borrowers; the initial lenders named therein,
as initial lenders; Deutsche Bank AG New York Branch, as administrative agent; Deutsche Bank Securities Inc., Bear Stearns & Co. Inc. and J.P. Morgan Securities Inc., as joint lead arrangers and joint book managers; Bear
Stearns & Co. Inc., as syndication agent; and J.P. Morgan Securities Inc., as documentation agent (incorporated by reference to Exhibit 10.2 to BMCA's Current Report on Form 8-K dated February 22,
2007).


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Exhibit
Number

Description10.28

Amendment No. 1 to the Term Loan Agreement, dated as of March 15, 2007, among Building Materials Corporation of America, BMCA Acquisition Inc. and BMCA Acquisition Sub Inc., as borrowers; the initial
lenders named therein, as initial lenders; Deutsche Bank AG New York Branch, as administrative agent; Deutsche Bank Securities Inc., Bear Stearns & Co. Inc. and J.P. Morgan Securities Inc., as joint lead arrangers and
joint book managers; Bear Stearns & Co. Inc., as syndication agent; and J.P. Morgan Securities Inc., as documentation agent (incorporated by reference to Exhibit 10.3 to BMCA's Current Report on Form 8-K dated
March 15, 2007).10.29

Bridge Loan Agreement, dated as of February 22, 2007, among Building Materials Corporation of America, BMCA Acquisition Inc. and BMCA Acquisition Sub Inc., as borrowers; the initial lenders named
therein, as initial lenders; Deutsche Bank AG Cayman Islands Branch, as collateral agent and administrative agent; Deutsche Bank AG Cayman Islands Branch and Bear Stearns Corporate Lending Inc., as joint lead arrangers; and Deutsche Bank AG
Cayman Islands Branch, Bear Stearns Corporate Lending Inc. and JPMorgan Chase Bank, N.A., as joint book managers (incorporated by reference to Exhibit 10.3 to BMCA's Current Report on Form 8-K dated February 22, 2007).10.30

Junior Lien Term Loan Agreement, (amending and restating in its entirety the Bridge Loan Agreement dated as of February 22, 2007) dated as of March 15, 2007, among Building Materials Corporation of America,
BMCA Acquisition Inc. and BMCA Acquisition Sub Inc., as borrowers; the lenders named therein, as lenders; Deutsche Bank AG New York Branch, as collateral agent and administrative agent; Deutsche Bank Securities, Inc., Bear
Stearns & Co. Inc., and J.P. Morgan Securities, Inc. as joint lead arrangers and joint book managers; and Deutsche Bank AG Cayman Islands Branch, Bear Stearns Corporate Lending Inc. and J.P. Morgan Securities, Inc.,
as documentation agent, and Bear Stearns & Co. Inc., as syndication agents (incorporated by reference to Exhibit 10.1 to BMCA's Current Report on Form 8-K dated March 15, 2007).10.32

Employment Security Agreement between BMCA and David A. Harrison, effective June 2001 (incorporated by reference to Exhibit 10.23 to the 2001 Form 10-K).10.33

Employment Security Agreement between BMCA and Robert B. Tafaro, effective June 2001 (incorporated by reference to Exhibit 10.24 to the 2001 Form 10-K).10.35

Employment Security Agreement between BMCA and John F. Rebele, effective June 2001 (incorporated by reference to Exhibit 10.26 to the 2001 Form 10-K).10.36

Employment Agreement, dated August 9, 2007, between Richard A. Nowak and GAF Materials Corporation (incorporated by reference to Exhibit 10.1 to BMCA's Form 10-Q for the quarterly period ended
July 1, 2007).10.37

Employment Agreement, dated August 9, 2007 between Matti Kiik and GAF Materials Corporation (incorporated by reference to Exhibit 10.2 to BMCA's Form 10-Q for the quarterly period ended July 1,
2007).*10.38

Separation Agreement and General Release dated as of January 30, 2009, by and between David A. Harrison and BMCA.*10.39

Consulting Agreement dated as of January 30, 2009, by and between David A. Harrison and BMCA.


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Exhibit
Number

Description10.40

Collateral Agency Agreement, dated as of February 22, 2007, by and among BMCA, the guarantors party thereto, Deutsche Bank AG New York Branch, as Administrative Agent, The Bank of New York and Wilmington Trust
Company, as trustees, and Deutsche Bank Trust Company Americas, as collateral agent (incorporated by reference to Exhibit 10.38 to the 2007 Form 10-K).10.41

Security Agreement dated February 22, 2007, made by BMCA and the other grantors party thereto to Deutsche Bank Trust Company Americas, as collateral agent (incorporated by reference to Exhibit 10.39 to the
2007 Form 10-K).10.42

Security Agreement dated February 22, 2007, made by BMCA and the other grantors party thereto to Deutsche Bank AG New York Branch, as collateral agent (incorporated by reference to Exhibit 10.40 to the 2007
Form 10-K).10.43

Amended and Restated Security Agreement dated March 15, 2007, made by BMCA and the other grantors party thereto to Deutsche Bank AG New York Branch, as collateral agent (incorporated by reference to
Exhibit 10.41 to the 2007 Form 10-K).10.44

Security Agreement Supplement dated March 26, 2007, made by the additional grantors party thereto to Deutsche Bank AG New York Branch, as collateral agent (incorporated by reference to Exhibit 10.42 to the
2007 Form 10-K).10.45

General Intercreditor Agreement dated as of February 22, 2007, among Deutsche Bank Trust Company Americas, as first lien collateral agent, and Deutsche Bank AG Cayman Islands Branch, as junior lien collateral
agent (incorporated by reference to Exhibit 10.43 to the 2007 Form 10-K).10.46

Additional Party Addendum to General Intercreditor Agreement dated as of February 22, 2007, by Deutsche Bank AG New York Branch, as collateral agent under the Junior Lien Term Loan Agreement (incorporated by
reference to Exhibit 10.44 to the 2007 Form 10-K).10.47

Revolver Intercreditor Agreement dated as of February 22, 2007, among Deutsche Bank AG New York Branch, as first lien collateral agent, Deutsche Bank Trust Company Americas, as second lien collateral agent, and
Deutsche Bank AG Cayman Islands Branch, as third lien collateral agent (incorporated by reference to Exhibit 10.45 to the 2007 Form 10-K).10.48

Additional Party Addendum to Revolver Intercreditor Agreement dated as of February 22, 2007, by Deutsche Bank AG New York Branch, as collateral agent under the Junior Lien Term Loan Agreement (incorporated by
reference to Exhibit 10.46 to the 2007 Form 10-K).16

Letter dated September 22, 2006, from KPMG LLP to the Securities and Exchange Commission regarding the change in certifying accountant (incorporated by reference to Exhibit 16.1 to BMCA's current report
on Form 8-K filed September 22, 2006).*21

Subsidiaries of BMCA.*31.1

Rule 13a-14(a)/Rule 15d-14(a) Certification of the Chief Executive Officer.*31.2

Rule 13a-14(a)/Rule 15d-14(a) Certification of the Chief Financial Officer.*32.1

Section 1350 Certification of the Chief Executive Officer and Chief Financial Officer.


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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, each registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.

BUILDING MATERIALS CORPORATION OF AMERICA
BUILDING MATERIALS MANUFACTURING CORPORATIONDate: March 30, 2009

By:

/s/ JOHN F. REBELEName:

John F. RebeleTitle:

Senior Vice President, Chief Financial
Officer and Chief Administrative Officer


Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed below on March 30, 2009 by the following persons on behalf of each registrant and
in the capacities indicated.

Signature

Title/s/ ROBERT B. TAFARO  Robert B. Tafaro

Chief Executive Officer, President and Director
(Principal Executive Officer)/s/ JOHN F. REBELE John F. Rebele

Senior Vice President, Chief Financial Officer,
Chief Administrative Officer and Director
(Principal Financial Officer)/s/ RICHARD A. NOWAK Richard A. Nowak

Director/s/ MATTI KIIK Matti Kiik

Director/s/ JAN E. JERGER-STEVENS Jan E. Jerger- Stevens

Director/s/ DANIEL J. GOLDSTEIN Daniel J. Goldstein

Director/s/ JAMES T. ESPOSITO James T. Esposito

Vice President and Controller
(Principal Accounting Officer)


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BUILDING MATERIALS CORPORATION OF AMERICA

FORM 10-K

INDEX TO MANAGEMENT'S DISCUSSION AND ANALYSIS, CONSOLIDATED  FINANCIAL STATEMENTS AND SCHEDULES



PageManagement's Discussion and Analysis of Financial
Condition and Results of Operations

F-2Selected Financial Data

F-27Report of Independent Registered Public Accounting Firm

F-28Consolidated Statements of Operations for the three years ended
December 31, 2008

F-29Consolidated Balance Sheets as of December 31, 2008 and 2007

F-30Consolidated Statements of Cash Flows for the three years ended
December 31, 2008

F-31Consolidated Statements of Stockholders' Equity (Deficit)
for the three years ended December 31, 2008

F-33Notes to Consolidated Financial Statements

F-34Supplementary Data (Unaudited):
Quarterly Financial Data (Unaudited)

F-83SCHEDULESConsolidated Financial Statement Schedule:
Schedule IIValuation and Qualifying Accounts

S-1


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BUILDING MATERIALS CORPORATION OF AMERICA        MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL  CONDITION AND RESULTS OF OPERATIONS

Overview

Building Materials Corporation of America or BMCA, a wholly-owned subsidiary of BMCA Holdings Corporation, was formed on
January 31, 1994 to acquire the operating assets and certain liabilities of GAF Building Materials Corporation, whose name was changed to G-I Holdings Inc., our indirect
parent. G-I Holdings Inc. is a wholly-owned subsidiary of G Holdings Inc. See Note 1 to our Consolidated Financial Statements. Unless otherwise indicated by the
context, "we," "us" and "our" refer to Building Materials Corporation of America and its consolidated subsidiaries.

To
facilitate administrative efficiency, effective October 31, 2000, GAF Corporation, the former indirect parent of BMCA, merged into its direct subsidiary, G-I
Holdings Inc. G-I Holdings Inc. then merged into its direct subsidiary, G Industries Corp., which in turn merged into its direct subsidiary, GAF Fiberglass Corporation. In
that merger, GAF Fiberglass Corporation changed its name to GAF Corporation. Effective November 13, 2000, GAF Corporation (formerly known as GAF Fiberglass Corporation) merged into its direct
subsidiary, GAF Building Materials Corporation, whose name was changed in the merger to G-I Holdings Inc. G-I Holdings Inc. is now an indirect parent of BMCA and
BMCA's direct parent is BMCA Holdings Corporation. References herein to "G-I Holdings" mean G-I Holdings Inc. and any and all of its predecessor corporations, including
GAF Corporation, G-I Holdings Inc., G Industries Corp., GAF Fiberglass Corporation and GAF Building Materials Corporation.

On
February 22, 2007, which we refer to as the date of acquisition, a subsidiary of Building Materials Corporation of America acquired approximately 90% of the outstanding common
shares of ElkCorp, which we refer to as Elk, a Dallas, Texas-based manufacturer of roofing products and building materials. The remaining common shares of Elk were acquired on March 26, 2007,
resulting in Elk becoming an indirect wholly-owned subsidiary of BMCA. See Acquisition.

We
are a leading national manufacturer and marketer of a broad line of asphalt and polymer-based roofing products and accessories for the residential and commercial roofing markets. We
also manufacture specialty building products and accessories for the professional and do-it-yourself remodeling and residential construction industries. As of
December 31, 2008, we had 29 strategically located manufacturing facilities currently operating across the United States. Our manufacturing facilities include: 14 asphalt roofing manufacturing
facilities, three roofing accessory plants, two thermoplastic polyolefin plants, one glass fiber manufacturing plant, two glass mat manufacturing plants, one glass mat and asphalt roofing
manufacturing facility, one fiber-
cement shingle and siding plant, one liquid roofing membrane and adhesive plant, one injection molding attic ventilation plant, one attic ventilation and air distribution product plant, one chromium-
chemical coating plant and one composite-decking plant. In February 2009, we announced the temporary shutdown of our Shafter, California glass mat manufacturing facility and our Nashville, Tennessee
glass fiber manufacturing facility.

Our
products are marketed in three groups: residential roofing, commercial roofing and specialty building products and accessories.



We are a leading national manufacturer of a complete line of residential roofing products. In February 2007, we acquired Elk, which we
believe strategically positioned us for growth in the roofing industry and building products market. We also believe the Elk acquisition has allowed us to build on our market leadership position and
create comprehensive market-leading product offerings. Our

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BUILDING MATERIALS CORPORATION OF AMERICA

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)

principal
lines of residential roofing shingles are the Timberline® series, the Sovereign® series, Designer Lifetime Shingles and Specialty Shingles. The Timberline series
includes the Timberline Prestique® 30 High Definition®, Timberline Natural Shadow, Timberline Prestique 40, Timberline Prestique Lifetime and Timberline Prestique
Grande® shingles. Our designer lifetime shingles include the Slateline®, Grand Slate, Grand Sequoia®, Grand Canyon, Country
Mansion®, Capstone®, and Camelot® shingles. We sell specialty roofing products under the TruSlate product line, which offers a patented genuine slate
roofing system. We supply the major components necessary to install a complete roofing system from underlayments to attic ventilation products and accessories, under our Roof System Solution. We have
improved our sales mix of residential roofing products by increasing our emphasis on laminated shingles and accessory products (the Timberline series, designer lifetime shingles and TruSlate), which
are generally sold at higher prices and more attractive profit margins than our standard strip shingle products (the Sovereign series). We believe, based on unit sales, that we are the largest
manufacturer of residential roofing shingles in the United States.



We manufacture a full line of modified bitumen and asphalt built-up roofing products, thermoplastic polyolefin products,
liquid applied membrane systems and roofing accessories for use in the application of commercial roofing systems. We also market thermoplastic single-ply commercial roofing products, which
address the important and growing single-ply segment of the commercial roofing market. We believe that, based on the combined unit sales of asphalt built-up roofing products
and modified bitumen products, we are the largest manufacturer of these products in the United States.

We
sell modified bitumen products under the Ruberoid® trademarks. Modified bitumen products are used in new and re-roofing applications or in combination with
glass membranes in GAF CompositeRoof systems. Modified bitumen systems provide an alternative to conventional built-up roofing systems, including ease of installation and
maintenance.

Over
the past five years, over 80% of industry sales of both residential and commercial roofing products were for re-roofing, as opposed to new construction. As a result, we
believe our exposure and the roofing industry's exposure to cyclical downturns in the new construction market, as currently being experienced, are substantially lower than for other building material
manufacturers. We expect that future demand for residential re-roofing will continue to increase as the existing housing stock ages and as homeowners upgrade from standard strip roofing
shingles to premium laminated shingles for enhanced aesthetics and durability. We also expect commercial roofing demand to rise as construction of new commercial facilities increases and existing
buildings age.

Our
business relies on the availability of reasonably-priced raw materials and energy for the production of our products. Shortages of these products and increases in their prices,
specifically with regard to asphalt, which is correlated to increases in the price of crude oil, have occurred from time to time and may occur again in the future. To mitigate the effect of the
petroleum-based and other cost increases, we will attempt to pass on future cost increases from our suppliers as needed, although no assurances can be provided that these price increases will be
accepted in the marketplace.

Our
net sales for 2008 were $2,748.9 million, which included $6.1 million of restructuring-related sales discounts compared with net sales of $2,310.1 million in
2007, which included the net sales of Elk from the date of acquisition and $15.1 million of restructuring-related sales discounts. We had income before interest expense and income taxes of
$237.8 million in 2008, which included $73.2 million of restructuring and other expenses, compared with a loss before interest expense and income taxes of

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)

$27.4 million
in 2007, which included the operating results of Elk since the date of acquisition and $181.0 million of restructuring and other expenses. See Results of Operations below.

Critical Accounting Policies

The preparation of our consolidated financial statements in conformity with U.S. generally accepted accounting principles requires our
management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent liabilities. On an ongoing basis, we
evaluate our estimates, including but not limited to those related to customer incentives, doubtful accounts, inventory valuation, product warranty claims, extended and enhanced product warranties,
environmental liabilities, the carrying value of goodwill, the carrying value of long-lived tangible and intangible assets, pensions and other post-employment benefits and
contingent liabilities. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis
for making judgments about the carrying values of assets and liabilities. Actual results may differ from these estimates under different assumptions or conditions. In the opinion of our management,
the consolidated financial statements herein contain all adjustments necessary to present fairly our financial position and our results of operations and cash flows for the periods presented. We do
not anticipate any changes in management estimates that would have a material impact on our operations, liquidity or capital resources, subject to the matters discussed in Note 18 to
Consolidated Financial Statements. We believe the following critical accounting policies are the most important to the portrayal of our financial condition and results of operations and require our
management's more significant judgments and estimates in the preparation of our consolidated financial statements.



Revenue is recognized at the time products are shipped to the customer. Products are generally shipped Freight on Board, or FOB,
shipping point. Title and risk of loss pass to the customer at the time of shipment.



We maintain allowances for customer incentives and volume rebates resulting from promotional programs to certain of our customers. The
customer incentives and volume rebates are recorded as a reduction in gross sales, and accruals are recorded based on customers' purchase levels of specific products and the promotional programs
related to these products. Management evaluates customer performance against these incentives and volume rebate programs from time to time. If adjustments to our estimates are required, additional
allowances or reductions to the customer incentive reserves would be recorded.



We maintain allowances for doubtful accounts for estimated losses resulting from the inability of our customers to make required
payments. Management continuously assesses the financial condition of our customers and the markets in which these customers participate and adjusts credit limits or the allowance for doubtful
accounts based on this periodic review, which includes a detailed analysis of financial statements and performance against key financial performance metrics and historical financial information. If
the financial condition of our customers were to deteriorate, resulting in their inability

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BUILDING MATERIALS CORPORATION OF AMERICA

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)

to
make payments, our ability to collect on accounts could be negatively impacted, in which case additional allowances may be required.



Inventories are stated at the lower of cost or market. The LIFO (last-in, first-out) method is used to
determine cost for asphalt-based products used to produce our products, which we believe provides a more appropriate matching of revenue and expense. All other inventories are valued on the FIFO
(first-in, first-out) method. We adjust our inventories for estimated obsolescence or unmarketable inventories equal to the difference between the cost of inventories and their
estimated market value based upon assumptions related to future demand and market conditions. If actual market conditions differ from those projected by management, additional inventory adjustments
may be required. Sales of
inventories and the resulting receivables are included in working capital items in the consolidated statement of cash flows.



We follow the provisions of Statement of Financial Accounting Standards (SFAS) No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets", which we refer to as SFAS No. 144, and was issued by the Financial Accounting Standards Board, which we refer to as FASB. SFAS No. 144 addresses
financial accounting and reporting for the impairment of long-lived assets and for long-lived assets to be disposed. For purposes of recognizing and measuring impairment of
long-lived assets, we evaluate assets of our associated facilities because this is the lowest level of independent cash flows ascertainable to evaluate impairment. We review
long-lived assets to be held and used for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. For
long-lived assets to be held and used, an impairment exists when the carrying amount of the asset exceeds the estimated undiscounted cash flows. Any resulting impairment is measured based
on the fair value of the related asset. Fair value is determined based on future projected demand and estimated discounted cash flows.

During
the years ended December 31, 2008 and 2007, we closed several of our manufacturing facilities, in addition to our previously closed manufacturing facilities. The closing of
these manufacturing facilities in 2008 and 2007 was primarily due to additional manufacturing capacity resulting from our acquisition of Elk and reduced market demand, and such plants may be
re-opened in the future as industry demand rises. For the years ended December 31, 2008 and 2007, we recognized a $0 and $97.0 million SFAS No. 144 impairment loss,
respectively, related to the above-mentioned facilities. See Notes 2 and 5 to the Consolidated Financial Statements.



In accordance with the provisions of SFAS No. 142, "Goodwill and Other Intangible Assets", or SFAS No. 142, goodwill is
not amortized but is subject to at least an annual assessment for impairment or more frequently if circumstances indicate a possible impairment.

We
evaluated the recoverability of goodwill for our roofing products and specialty building products and accessories reporting units. Our methodology included evaluations using estimated
future discounted cash flows, multiples of net sales and multiples of earnings before interest, taxes, depreciation and the amortization of intangibles and other assets, which we refer to as EBITDA.
Our analysis was completed for each of the reporting units to which the goodwill relates. If the estimated

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)

range
of fair values from the methodologies employed are less than the carrying value of the related reporting unit, impairment losses for goodwill are charged to results of operations. In determining
the estimated future discounted cash flows, we considered projected future levels of income, future business trends and market and economic conditions. Our analysis related to multiples of net sales
and EBITDA are based on related industry data. We prepared a SFAS No. 142 impairment analysis at December 31, 2008 and 2007, and determined that no impairment existed. See Note 6
to the Consolidated Financial Statements.



We account for our intangible assets in accordance with the provisions of SFAS No. 142. SFAS No. 142 requires disclosure
of information relating to intangible assets subsequent to their acquisition that was not previously reported, which includes disclosure concerning the changes in the carrying amount of intangible
assets by major intangible asset class for those assets subject to amortization and for those not subject to amortization. SFAS No. 142 also requires disclosure related to actual
year-to-date intangible asset amortization expense and the estimated intangible asset amortization expense for each of the next five years. As of December 31, 2008, we
have not recorded any impairment losses related to our intangible assets. See Note 7 to the Consolidated Financial Statements.



In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements," which we refer to as SFAS No. 157, which
clarifies the definition of fair value, establishes a framework for measuring fair value and expands the disclosures on fair value measurements and is effective for fiscal years beginning after
November 15, 2007. In February 2008, the FASB issued FASB Staff Position FSP No. 157-2 "Partial Deferral to the Effective Date of Statement 157," which we refer to as FSP
No. 157-2, which is effective for fiscal years beginning after November 15, 2008 and defers the application of SFAS No. 157 for certain non-financial
assets and non-financial liabilities and further clarifies the principles in SFAS No. 157 on the fair value measurement of liabilities. We adopted the provisions of SFAS
No. 157 during our fiscal year ended December 31, 2008 and currently are assessing the impact of the adoption of FSP No. 157-2.

SFAS
No. 157 establishes a valuation hierarchy that prioritizes the inputs used to measure fair value based on three defined levels or criteria. The hierarchy requires an entity
to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instruments categorization within the fair value hierarchy is based upon the
lowest level of input that is significant to the fair value measurement. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the reporting
entity's market assumptions. The three levels of inputs that may be used to measure fair value are as follows:



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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)





In March 2007, we entered into forward-starting interest rate swap agreements, with an effective date of April 23, 2007 and a
maturity date of April 23, 2012. These swaps were initiated in order to hedge the interest rate risk associated with our $975.0 million Term Loan, which we refer to as our Term Loan, and
they are structured that we receive interest based on the three-month Eurodollar Rate, which we refer to as LIBOR and pays interest on a fixed rate basis. In October 2007, we entered into additional
interest rate swaps related to our Term Loan with an effective date of October 23, 2007 and a maturity date of October 23, 2012 under similar terms.

We
account for our hedging activity in accordance with SFAS No. 133 "Accounting for Derivative Instruments and Hedging Activities," which we refer to as SFAS No. 133, which
requires a company to measure hedge effectiveness by assessing, on a quarterly basis, the historical and probable future of high correlation of changes in the fair value of the hedged item. Any
ineffective portion is recorded in our statement of operations.

As
of December 31, 2008, based on SFAS No. 157 Level 2 inputs, we recognized a fair value liability on our interest rate swaps of $70.5 million, after
discounting the liability to reflect both the counterparty and credit default risks associated with our swaps, to other non-current liabilities (see table below), while the offset was
recognized to other comprehensive loss, net of tax of $26.8 million. During 2008, we recorded $12.8 million of net interest expense related to our swaps in our statement of operations.
For fiscal year ending December 31, 2009, we estimate approximately $18.2 million will be reclassified from accumulated other comprehensive loss and recognized into interest expense in
our statement of operations, subject to changes in the LIBOR rate. This estimated amount will be approximately offset by lower interest expense associated with our Term Loan. Additional future amounts
may be reclassified from accumulated other comprehensive loss to interest expense if any portion of our swaps become ineffective. We do not anticipate that any amount recorded in accumulated other
comprehensive loss related to our swaps will be reclassified during our fiscal year ending December 31, 2009 due to ineffectiveness.



In July 2007, we entered into treasury locks with a maturity date of July 31, 2012, as additional hedging instruments against
our Term Loan. On October 30, 2007, we settled
our open treasury lock hedging positions, which resulted in a pre-tax fair value loss and cash settlement of approximately $4.9 million, which is being amortized into our statement
of operations over the life of the Term Loan pursuant to SFAS No. 133. We amortized $0.8 million of the loss related to our treasury locks into interest expense in our statement of
operations during our fiscal year ended December 31, 2008 and will amortize $0.8 million annually through July 2012.



We value our interest rate swap agreements based on Level 2 inputs from model derived valuations whose significant inputs are
quoted LIBOR contracts, Eurodollar futures and on-the-run swap markets. SFAS No. 157 requires that the valuation of derivative assets and liabilities must take into
account the parties' nonperformance risk. We discounted the value of our derivative liabilities

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)

based
on the credit spread for its debt as determined by the market trading price. See Note 13 to Consolidated Financial Statements.



We provide certain limited warranties covering most of our residential roofing products for periods generally ranging from 20 to
50 years, although certain of our product lines provide for a lifetime limited warranty. We also offer certain limited warranties of varying duration covering most of our commercial roofing
products. Most of our specialty building products and accessories carry limited warranties for periods generally ranging from 5 to 20 years, with lifetime limited warranties on certain
products. The accrual for product warranty claims is estimated on the basis of historical and projected claims activity, as well as other factors. The accuracy of the estimate of additional costs is
dependent on both the number and cost of future claims submitted during the warranty periods. We believe that the accruals established for estimated probable future product warranty claims are
adequate. If actual claims differ from these estimates, adjustments to this accrual may be required.



We offer extended warranty contracts on sales of our commercial roofing products. The life of these commercial warranties range from 10
to 20 years. In addition, we offer a number of enhanced warranties on certain of our residential roofing products. These enhanced warranties are the "Golden Pledge" and "Peace of
Mind" warranty programs. All revenue for the sale of these warranty programs is deferred and amortized on a straight-line basis over the average life of these warranty
programs, which is in accordance with the accounting prescribed by FASB Technical Bulletin No. 90-1 "Accounting for Separately Priced Extended Warranty and Product Maintenance
Contracts". Incremental direct costs associated with the acquisition of the extended warranty contracts are capitalized and amortized on a straight-line basis over the average life of
these warranty programs. Current costs of services performed related to claims paid under these warranty programs are expensed as incurred. Our analysis of these warranty programs as of
December 31, 2008 indicated that deferred revenue is in excess of deferred costs and accordingly, no loss was recognized. However, if the total expected costs of providing services under these
warranty programs exceed deferred revenues less deferred costs, then a loss would be recognized.



Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future
tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and net operating loss and tax credit
carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is
established to offset any deferred tax asset if it is more-likely-than-not that some or all of the deferred tax asset will not be realized. The determination of the
amount of a valuation allowance to be provided on recorded deferred tax assets involves estimates regarding (1) the timing and amount of the reversal of taxable temporary differences,
(2) expected future taxable income and (3) the impact of tax planning strategies. In assessing the need for a valuation allowance, we consider past operating results, projections of
future taxable income and the feasibility of ongoing tax planning strategies. The

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)

projections
of future taxable income include a number of estimates and assumptions regarding our volume, pricing and costs. Additionally, valuation allowances related to deferred tax assets can be
impacted by changes to tax laws. We are party to a tax sharing agreement, which we refer to as the Tax Sharing Agreement. See Note 9 to the Consolidated Financial Statements.

We
use judgment in determining income tax provisions under SFAS No. 109 "Accounting for Income Taxes," which we refer to as SFAS No. 109, and in evaluating our tax
positions. Additional provisions for income taxes are established when, despite the belief that tax positions are fully supportable, there remain certain positions that do not meet the minimum
probability threshold as defined by FASB Interpretation No., which we refer to as FIN, No. 48, "Accounting for Uncertainty in Income Taxes, an Interpretation of FASB Statement No. 109",
which we refer to as FIN 48, adopted by us on January 1, 2007, which is a tax position that is more-likely-than-not to be sustained upon examination
by the applicable taxing authority. We and our subsidiaries are examined by various Federal and state tax authorities. We regularly assess the potential outcomes of these examinations and any future
examinations for the current or prior years in determining the adequacy of our provision for income taxes. We continually assess the likelihood and amount of potential adjustments and adjust the
income tax provision, the current tax liability and deferred taxes in the period in which the facts that give rise to a revision become known.

In
August 2008, we paid $3.7 million in settlement of an outstanding state income tax matter related to tax years 1999 through 2006. In October 2008, the Company was assessed
interest and penalties related to the tax matter, which amount we paid during our fourth quarter ended December 31, 2008. The interest and penalties did not have a material effect on our
statement of operations.



We accrue environmental costs when it is probable that we have incurred a liability and the expected amount can be reasonably estimated
and, review on an ongoing basis, our estimated environmental liabilities. The amount accrued reflects our assumptions about remedial requirements at the contaminated site, the nature of the remedy,
the outcome of discussions with regulatory agencies and other potential responsible parties at multi-party sites and the number and financial viability of other potentially responsible parties.
Adverse decisions or events, particularly as to increases in remedial costs, discovery of new contamination, assertion of natural resource damages, and the liability and the financial responsibility
of our insurers and of the other parties involved at each site and their insurers, could cause us to increase our estimate of liability in respect of those matters. It is not currently possible to
estimate the amount or range of any additional liabilities or whether any liabilities exist.



We maintain defined benefit plans that provide eligible employees with retirement benefits. In addition, while we generally do not
provide postretirement medical and life insurance benefits, we subsidize life insurance benefits for certain employees and retirees. The costs and obligations related to these benefits reflect our
assumptions related to general economic conditions (particularly interest rates), expected return on plan assets and rate of compensation increases for employees. We set the discount rate assumption
annually for our retirement-related benefit plans at the measurement dates to reflect the yield of high-quality fixed-income debt instruments. The expected long-term rate of
return on assets is derived from a detailed periodic study conducted by our actuaries and our senior

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)

executives.
The study includes a review of anticipated future long-term performance of individual asset categories. While the study gives appropriate consideration to recent plan
performance and historical returns, the assumption is primarily a long-term prospective rate. Our discount rate as of December 31, 2008 and 2007 for determining projected benefit
obligations was 6.25% and 6.25%, respectively. A 25 basis point increase or decrease in the discount rate assumption would result in a plus or minus $0.2 million impact on pension expense and a
plus or minus $1.5 million impact on the projected benefit obligation. Our expected long-term rate of return on assets assumption for our retirement plans was 9.5% in 2008 and 2007,
respectively. In addition, a 25 basis point increase or decrease in the expected long-term rate of return on assets assumption would result in a plus or minus $0.1 million impact on
pension expense.

The
cost of providing plan benefits also depends on demographic assumptions including retirements, mortality, turnover and plan participation. If actual experience differs from these
assumptions, the cost of providing these benefits could increase or decrease.

Results of Operations

Roofing product sales is our dominant business, typically accounting for approximately 95% of our consolidated net sales. The main
drivers of our roofing business include: the nation's aging housing stock; existing home sales; new home construction; larger new homes; home ownership rates; and extreme weather and energy concerns.
Our roofing business is also affected by raw material costs, including asphalt and other petroleum-based raw materials, as well as energy, and transportation and distribution costs. Our improved 2008
performance resulted principally from synergies from the successful integration of the Elk acquisition.

2008 Compared with 2007

We recorded net income in 2008 of $51.4 million compared to a net loss of $134.5 million for 2007. Our reported net
income for 2008 included $47.8 million of after-tax ($73.2 million pre-tax) restructuring and other expenses, of which $4.0 million after-tax
($6.1 million pre-tax) was included as a reduction in net sales and $17.5 million after-tax ($26.9 million pre-tax) was included in cost of
products sold related to the integration of Elk operations. Our reported net loss in 2007 included $116.6 million of after-tax ($181.0 million pre-tax)
restructuring and other expenses, of which $9.7 million after-tax ($15.1 million pre-tax) was included as a reduction in net sales, $15.7 million
after-tax ($24.3 million pre-tax) was included in cost of products sold and $14.9 million of after-tax ($23.2 million pre-tax) debt
restructuring costs also related to the acquisition. Included in restructuring and other expenses are plant closing expenses related to the closure of several manufacturing facilities along with the
write-down of certain plant assets related to the closed facilities in 2007, integration-related costs and the write-down of selected inventories. Excluding restructuring and
other expenses, net income for 2008 was $99.2 million compared to a net loss for 2007 of $3.0 million after also adjusting for the $23.2 million of debt restructuring costs
included in interest expense. The increase in net income for 2008 was primarily attributable to higher income before interest expense and income taxes.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
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Net sales for 2008 were $2,748.9 million, which included $6.1 million of restructuring-related sales discounts, compared with net sales of
$2,310.1 million in 2007, which included $15.1 million of restructuring-related sales discounts. The increase in net sales for 2008 was primarily due to an increase in net sales of
residential roofing products and commercial roofing products due to higher average selling prices and slightly higher unit volumes. In addition, the increase in 2008 net sales was also due to 2008
residential roofing products net sales including a full year of Elk net sales compared with 2007 residential roofing products net sales, which only included Elk net sales since the date of
acquisition. The higher average selling prices were implemented to mitigate significant increases in raw material costs, including asphalt, and higher transportation costs.

Income
before interest expense and income taxes for 2008 was $237.8 million compared to a loss before interest expense and income taxes of $27.4 million for 2007. Our
reported income before interest expense and income taxes for 2008 included $73.2 million of restructuring and other expenses, of which $6.1 million was included as a reduction in net
sales and $26.9 million was included in cost of products sold. Our reported loss before interest expense and income taxes for 2007 included $181.0 million of restructuring and other
expenses, of which $15.1 million was included as a reduction of net sales and $24.3 million was included in cost of products sold. Excluding these items, 2008 income before interest
expense and income taxes was $311.0 million compared with 2007 income before interest expense and income taxes of $153.6 million. The increase in income before interest expense and
income taxes for 2008 was primarily due to synergies from the successful integration of the Elk acquisition and lower manufacturing costs, as well as higher average selling prices of both residential
and commercial roofing products and slightly higher unit volumes. These benefits were partially offset by higher raw material costs, including asphalt, and higher transportation costs.

Interest
expense for 2008 decreased to $158.9 million compared with $181.4 million for 2007, which included $23.2 million of debt restructuring costs related to the
acquisition of Elk. The debt restructuring costs in 2007 were comprised of tender premiums and the write-off of the remaining deferred financing fees and discounts associated with certain
of the then outstanding 8% Senior Notes due 2007, or 2007 Notes, and 8% Senior Notes due 2008, or 2008 Notes, of BMCA and all of the then outstanding senior notes of Elk. Excluding the impact of these
debt restructuring costs, interest expense for 2007 was $158.2 million.

Business Segment Information

Net Sales.Net sales of roofing products increased to $2,612.9 million for 2008, which included $6.1 million of
restructuring-related
sales discounts compared with $2,167.7 million for 2007, which included $15.1 million of restructuring-related sales discounts. The increase in 2008 net sales of roofing products was
primarily due to an increase in net sales of residential roofing products and commercial roofing products due to higher average selling prices and slightly higher unit volumes. In addition, the
increase in 2008 net sales was also due to 2008 residential roofing products net sales including a full year of Elk net sales as compared with 2007 residential roofing products net sales, which only
included Elk net sales since the date of acquisition. The higher average selling prices were implemented to mitigate significant increases in raw material costs, including asphalt, and higher
transportation costs. Net sales of specialty building products and accessories decreased to $136.0 million for 2008 compared with $142.4 million for 2007, which included net sales of
specialty building products related to Elk from the date of acquisition. The decrease in 2008 was due to softer new construction and remodeling demand.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)

Gross Margin.Our gross margin was $770.9 million or 28.0% of net sales for 2008 compared with $614.5 million or 26.6% of net
sales for
2007. Included in our gross margin for 2008 were $33.0 million of restructuring and other expenses, of which $6.1 million was included as a reduction in net sales and
$26.9 million was included in cost of products sold. Included in our gross margin for 2007 were $39.4 million of restructuring and other expenses, of which $15.1 million was
included as a reduction in net sales and $24.3 million was included in cost of products sold. The increase in our gross margin is primarily due to synergies from the successful integration of
the Elk acquisition and lower
manufacturing costs, as well as higher average selling prices of both residential and commercial roofing products and slightly higher unit volumes. These benefits were partially offset by higher raw
material costs, including asphalt.

2007 Compared with 2006

We recorded a net loss in 2007 of $134.5 million compared with net income of $38.7 million for 2006. The increase in
reported net loss for 2007 was primarily attributable to approximately $119.9 million of higher interest expense, as well as restructuring and other expenses due to the acquisition of Elk. Our
net loss in 2007 included $116.6 million of after-tax ($181.0 million pre-tax) restructuring and other expenses, of which $9.7 million after tax
($15.1 million pre-tax) was included as a reduction in net sales and $15.7 million after tax ($24.3 million pre-tax) was included in cost of products sold
related to the integration of Elk operations; and $14.9 million of after-tax ($23.2 million pre-tax) debt restructuring costs also related to the acquisition.
Included in restructuring and other expenses are plant closing expenses related to the closure of several manufacturing facilities together with the write-down of plant assets at these
facilities, integration-related costs and the write-down of selected inventories. Excluding these items, net loss for 2007 was $3.0 million, which included Elk's operations from the
date of acquisition.

Net
sales for 2007 were $2,310.1 million as compared with $1,969.2 million in 2006. The increase in net sales for 2007 was primarily attributable to the acquisition of Elk,
which was partially offset by lower net sales of residential roofing products and commercial roofing products driven by lower unit volumes resulting from softer market demand and $15.1 million
of restructuring-related sales discounts.

We
had a loss before interest expense and income taxes for 2007 of $27.4 million compared with income before interest expense and income taxes of $124.8 million in 2006.
Our loss before interest expense and income taxes in 2007 included $181.0 million of restructuring and other expenses, of which $15.1 million was included as a reduction in net sales and
$24.3 million was included in cost of products sold. Excluding these items, 2007 income before interest and income taxes was $153.6 million, which included the results of operations of
Elk from the date of acquisition. The increase in income before interest expense and income taxes for 2007 was positively affected by the operating results of Elk and lower selling, general and
administrative expenses, mostly due to a decline in volume-related distribution costs, partially offset by a decline in net sales of residential roofing products.

Interest
expense in 2007 increased to $181.4 million as compared with $61.5 million in 2006. Interest expense in 2007 included $23.2 million of debt restructuring
costs, which consisted of the tender premiums and write-off of the remaining deferred financing fees and discounts associated with certain of our then outstanding 2007 Notes and 2008 Notes
of BMCA and all of the then outstanding senior notes of Elk, all of which were redeemed in the first quarter of 2007. Excluding the impact of the debt restructuring costs, interest expense for 2007
was $158.2 million. The increase in
interest expense for 2007 was primarily due to higher average borrowings and a slightly higher average interest rate, due to the acquisition of Elk.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)

Business Segment Information

Net Sales.Net sales of roofing products increased to $2,167.7 million for 2007, which included net sales of roofing products
related to Elk
from the date of acquisition and $15.1 million of restructuring-related sales discounts, compared with $1,893.6 million for 2006. The increase in 2007 net sales of roofing products was
primarily attributable to the acquisition of Elk, which was partially offset by lower net sales of residential roofing products and commercial roofing products driven by lower unit volumes resulting
from softer market demand and $15.1 million of restructuring-related sales discounts. Net sales of specialty building products and accessories increased to $142.4 million for 2007, which
included net sales of specialty building products and accessories related to Elk from the date of acquisition as compared with $75.6 million for 2006.

Gross Margin.Our gross margin was $614.5 million for 2007 or 26.6% of net sales as compared with $572.8 million or 29.1% of
net sales
for 2006. Included in our gross margin for 2007 was $15.1 million of restructuring-related sales discounts included as a reduction in net sales, $24.3 million of restructuring and other
expenses, which were included in cost of products sold and gross margin related to Elk from the date of acquisition. Our gross margin was positively affected by the gross margin related to Elk, which
was more than offset by a decrease in net sales of residential and commercial roofing products primarily driven by lower unit volumes.

Liquidity and Financial Condition



Sales of roofing products and specialty building products and accessories in the northern regions of the United States generally
decline in the late fall and winter months due to cold weather. In addition, extreme weather conditions can result in higher customer demand during our peak operating season depending on the extent
and severity of the damage from these extreme weather conditions. Due to the seasonal demands of our business together with extreme weather conditions, we generally have negative cash flows from
operations during the first six months of our fiscal year. Our negative cash flows from operations are primarily driven by our cash invested in both accounts receivable and inventories to meet these
seasonal operating demands. Generally, in the third and fourth quarters of our fiscal year, our cash flows from operations become positive for each quarter, as our investment in inventories and
accounts receivable no longer continues to increase, as is customary in the first six months of our fiscal year. Our seasonal working capital needs, together with our debt service obligations, capital
expenditure requirements and other contracted arrangements, adversely impact our liquidity during this period. We rely on our cash and cash equivalents on hand and our $600.0 million Senior
Secured Revolving Credit Facility due February 2012, which we refer to as our Senior Secured Revolving Credit Facility (see Debt Instruments, Financial Covenants and Restrictions below), to support
our overall cash flow requirements during these periods. We expect to continue to rely on our cash and cash equivalents on hand and external financings to maintain operations over the short and
long-term and to continue to have access to the financing markets, subject to the then prevailing market terms and conditions.

Net
cash inflow from operating and investing activities was $114.5 million during 2008, including $149.2 million of cash provided by operations, $31.1 million of
proceeds from the sale of property, plant and equipment, partially offset by the reinvestment of $65.8 million for capital programs.

Cash
invested in additional working capital totaled $75.9 million during 2008, reflecting a decrease in total accounts receivable of $11.1 million due to our increased
operating performance offset by the

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)

seasonality
of our business, an $11.8 million decrease due to the collection of an income tax receivable, a $45.7 million increase in inventories to meet our seasonal operating demands,
a $3.4 million increase in other current assets, a $26.6 million increase in accounts payable and accrued liabilities and an increase of $76.3 million in payments for
restructuring and other expenses. The net cash provided by operating activities also included a $6.6 million net increase in the payable to related parties/parent corporations, primarily due to
a seasonal increase in amounts due under our long-term granule supply agreements with an affiliated company and a net decrease in our Federal income tax receivable pursuant to our Tax
Sharing Agreement with our parent corporation. In addition, net cash provided by operating activities also included $73.2 million in restructuring and other expenses, which included
$26.9 million in cost of products sold and $6.1 million of restructuring-related sales discounts, which were included as a reduction of net sales (see Restructuring and Other Expenses).
Cash provided by operating activities also included a $10.4 million increase in other assets, primarily related to a
$4.3 million increase in deferred warranty-related program costs, net of amortization and a $5.2 million increase in capitalized software; a $3.7 million decrease in other
liabilities, which is primarily related to a $6.9 million decrease in our uncertain tax liability provision, primarily due to a $6.0 million payment in settlement of an outstanding state
income tax matter, which included interest and penalties, partially offset by a $4.0 million increase in deferred warranty-related program revenues, net of amortization.

Net
cash used in financing activities totaled $83.8 million during 2008, including $1,083.0 million of aggregate proceeds from the issuance of long-term debt,
related to 2008 cumulative borrowings under our Senior Secured Revolving Credit Facility. Financing activities also included $1,147.7 million in aggregate repayments of long-term
debt, of which $1,129.0 million related to 2008 cumulative repayments under our Senior Secured Revolving Credit Facility, $9.7 million related to our Term Loan, $4.9 million
related to our outstanding 2008 Notes and $3.1 million related to our Chester, South Carolina loan obligation. In addition, financing activities included a $4.8 million repurchase of
industrial development revenue bond certificates, aggregate principal payments of $6.0 million on our capital leases, $7.5 million in cash dividends paid to our parent corporation,
$0.2 million in distributions and loans to our parent corporation and $0.6 million in financing fees and expenses primarily related to prior debt financings.

As
a result of the factors described above related to 2008, cash and cash equivalents increased by $30.7 million during 2008 to $37.0 million.



On February 22, 2007, a subsidiary of BMCA acquired approximately 90% of Elk common shares at a purchase price of $43.50 per
common share. On March 26, 2007, we acquired the remaining Elk common shares in a second step merger in exchange for the right to receive $43.50 per share in cash, which resulted in Elk
becoming an indirect wholly-owned subsidiary of BMCA. We completed the acquisition at a purchase price of approximately $945.6 million, net of the repayment of $195.0 million of the then
outstanding Elk senior notes, which were assumed in connection with the acquisition and were repaid in March 2007.

The
Elk acquisition was accounted for under the purchase method of accounting as prescribed by SFAS No. 141 "Business Combinations," which we refer to as SFAS No. 141,
which requires the total purchase price to be allocated to the fair value of assets acquired and liabilities assumed based on their fair values at the date of acquisition, with amounts exceeding their
fair value being recorded as goodwill. During the first quarter ended March 30, 2008, we completed our purchase price allocation of

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)

the
assets acquired and liabilities assumed from Elk (see table below). The operating results of Elk are included in our results of operations from the date of acquisition.

The
following table represents the final fair values of assets acquired and liabilities assumed related to the acquisition of Elk as of the date of acquisition with amounts paid in
excess of their fair values being recorded as goodwill.

Goodwill

$
588,850Intangible assets

$
214,420Total assets acquired

$
1,411,590Total liabilities assumed


(465,941
)Net assets acquired

$
945,649


During
the second quarter of 2007, we initiated a restructuring plan, which we refer to as the 2007 Restructuring Plan, which we formulated in connection with the acquisition of Elk. See
Restructuring and Other Expenses below. Also, in connection with the Elk acquisition and pursuant to SFAS No. 141 and Emerging Issues Task Force, which we refer to as EITF,
No. 95-3 "Recognition of Liabilities in Connection with a Purchase Business Combination," we identified $8.7 million in purchase accounting adjustments, which related to
employee severance payments to former Elk employees and lease termination expenses. As of December 31, 2008 and 2007, we paid an aggregate of $2.9 and $2.5 million for employee severance
costs, respectively, and $1.6 and $0.6 million for lease termination expenses, respectively. As of December 31, 2008, we expect to make approximately $4.2 million of aggregate
lease termination payments through 2019. Our employee severance payments included the termination of approximately 130 Elk employees, including certain management positions, in the manufacturing and
selling and administrative areas.



The 2007 Restructuring Plan was created to eliminate cost redundancies recognized due to the acquisition of Elk and to reduce our
current cost structure. The 2007 Restructuring Plan has been fully implemented as of December 31, 2008. We account for our restructuring activities in accordance with SFAS No. 146,
"Accounting for Costs Associated with Exit or Disposal Activities," SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" and EITF
No. 96-9 "Classification of Inventory Markdowns and Other Costs Associated with Restructuring".



In connection with the acquisition of Elk, we identified $191.9 million in restructuring and other expenses, of which
$97.0 million related to property, plant and equipment write-downs at certain existing manufacturing facilities and $25.1 million of plant closing expenses. Restructuring and other
expenses also included $2.0 million in employee severance payments and $67.8 million in integration-related expenses, which primarily consisted of $24.3 million of inventory-
related write-downs, $15.1 million of restructuring-related sales discounts, $1.4 million of lease termination expenses and $27.0 million of other integration expenses.

We
recorded $181.0 million of the aforementioned restructuring and other expenses in our statement of operations during our fiscal year ended December 31, 2007, of which
$15.1 million was

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reflected
as a reduction in net sales due to restructuring-related sales discounts, $24.3 million was charged to cost of products sold and $141.6 million was charged to restructuring and
other expenses.



We identified an additional $64.1 million of restructuring and other expenses in our fiscal year ended December 31, 2008,
which included $14.2 million of plant closing expenses, $3.3 million in employee severance payments and $46.6 million in integration-related expenses. Integration-related expenses
primarily consisted of $26.9 million of inventory write-downs, $6.1 million of restructuring-related sales discounts and $13.6 million of other integration expenses.

We
recorded $73.2 million of the identified restructuring and other expenses in our statement of operations during our fiscal year ended December 31, 2008, of which
$6.1 million was reflected as a reduction in net sales due to restructuring-related sales discounts, $26.9 million was charged to cost of products sold and $40.2 million was
charged to restructuring and other expenses. We expect to incur the remaining $1.8 million of identified integration and other expenses and to make the remaining cash payments related to our
accrual when they are required.

The
table below details our restructuring and other expense accruals and the charges made against these accruals during 2008:

Restructuring and Other Expenses

Plant
Closing
Expenses

Employee
Severance
Payments

Integration
Expenses

Total(Thousands)Beginning balance, as of December 31, 2007

$
2,905

$


$
10,945

$
13,850Current period costs, net


17,791


3,259


52,169


73,219Cash payments


(23,409
)

(3,259
)

(49,672
)

(76,340
)Amount related to property, plant and equipment for asset adjustments


6,228





(354
)

5,874Amount charged to write-off inventory


(63
)




(6,735
)

(6,798
)Non-cash items








(1,148
)

(1,148
)Ending balance, as of December 31, 2008

$
3,452

$


$
5,205

$
8,657


Our
aggregate employee severance payments included the termination of approximately 100 BMCA employees, including certain management positions, in the manufacturing and selling and
administrative areas.



On February 22, 2007, BMCA and certain of its subsidiaries entered into the Senior Secured Revolving Credit Facility, the Term
Loan and a $325.0 million Bridge Loan Facility, which was subsequently replaced by a $325.0 million Junior Lien Term Loan Facility, which we refer to as the Junior Lien Term Loan, on
March 15, 2007, and collectively with the Senior Secured Revolving Credit Facility and the Term Loan we refer to as the Senior Secured Credit Facilities. The initial borrowings under the Senior
Secured Credit Facilities were used to finance the purchase of Elk, refinance certain of BMCA's then outstanding debt and repay all of Elk's then outstanding senior notes of $195.0 million,
which occurred on March 26, 2007.

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All amounts outstanding under the Senior Secured Revolving Credit Facility, which has a maturity date of February 2012, are secured by a first-priority perfected
security interest in all receivables, inventory, precious metals, deposit accounts and other current assets of BMCA and its domestic subsidiaries and all proceeds thereof, which we refer to as the
Senior Secured Revolving Credit Facility Collateral.

Credit
availability under the Senior Secured Revolving Credit Facility is based upon eligible accounts receivable, inventory and precious metals used in the production of inventory, as
defined, and includes a sub-limit for letters of credit of $150.0 million. Loans under this facility bear interest at a variable rate based upon either the Base Rate or the
Eurodollar Rate as defined in the Senior Secured Revolving Credit Facility, at the borrowers' option, plus a specified margin in each case. These interest rates are recalculated periodically based on
changes in the Base Rate or Eurodollar Rate and also based on an availability-based pricing grid. The Senior Secured Revolving Credit Facility requires us to pay unused commitment fees, provides for
optional reductions by us in the overall $600.0 million commitment, under certain conditions and provides for optional and mandatory pre-payments of borrowings outstanding under the
facility, subject to certain conditions. The Senior Secured Revolving Credit Facility also provides the borrowers with the ability to increase the size of the facility by up to $350.0 million,
depending on the ability to obtain commitments from lenders and meeting specified conditions.

All
amounts outstanding under the Term Loan, which has a maturity date of February 2014, are secured by (i) a first-priority perfected security interest in substantially all of
the assets and properties of BMCA and its domestic subsidiaries, other than the Senior Secured Revolving Credit Facility
Collateral, which we refer to as the Term Loan Collateral and (ii) a second-priority perfected security interest in the Senior Secured Revolving Credit Facility Collateral. Loans under this
facility bear interest at a variable rate based upon either the Base Rate or Eurodollar Rate, as defined in the Term Loan, at the borrowers' option, plus a specified margin in each case. These
interest rates are recalculated periodically based on changes in the Base Rate and Eurodollar Rate, if applicable. The Term Loan provides for optional and mandatory pre-payments under
certain conditions and provides the borrowers with the ability to increase the size of the facility by up to $250.0 million (less any increase in the Senior Secured Revolving Credit Facility in
excess of $100.0 million), depending on the ability to obtain commitments from lenders and meeting specified conditions.

All
amounts outstanding under the Junior Lien Term Loan, which has a maturity date of September 2014, are secured by (i) a second-priority perfected security interest in the Term
Loan Collateral and (ii) a third-priority perfected security interest in the Senior Secured Revolving Credit Facility Collateral. Loans under this facility bear interest at a variable rate
based upon either the Base Rate or Eurodollar Rate, as defined in the Junior Lien Term Loan at the borrowers' option, plus a specified margin in each case. These interest rates are recalculated
periodically based on changes in the Base Rate or Eurodollar Rate, as applicable. The Junior Lien Term Loan also provides for optional and mandatory prepayments under certain conditions.

Under
the terms of our Senior Secured Credit Facilities, the borrowers are subject to interest coverage ratio financial covenants and leverage ratio financial covenants, both as defined.
In addition, the borrowers are also required to comply with other customary covenants and various restrictive covenants, including with respect to incurring additional indebtedness or guarantees,
creating liens or other encumbrances, making capital expenditures, making restricted payments, including dividends and distributions to our parent corporations and making certain investments. In the
event of a change of

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CONDITION AND RESULTS OF OPERATIONS (Continued)

control
of BMCA, as defined, the maturity dates of our Senior Secured Credit Facilities could be accelerated by the holders of that indebtedness.

On
February 22, 2007, as part of the Elk acquisition, we repurchased approximately $97.5 million, or 97.5%, of the aggregate $100.0 million principal amount
outstanding of the 2007 Notes and $150.1 million, or 96.9%, of the aggregate $155.0 million principal amount outstanding of the 2008 Notes. On October 15, 2007 and
December 1, 2008, we redeemed all of our remaining $2.5 and $4.9 million outstanding 2007 Notes and 2008 Notes, respectively, including accrued and unpaid interest on such notes through
the date of redemption.

In
December 2007, we consummated a $30.0 and $15.0 million sale-leaseback, of certain machinery and equipment located at our Baltimore, Maryland and Gainesville, Texas
manufacturing facilities, respectively, which were accounted for as capital leases, as according to SFAS No. 13 "Accounting for Leases", which we refer to as SFAS No. 13. The sale of the
Baltimore machinery and equipment resulted in a deferred gain of $24.7 million, of which $3.1 million was amortized into our statement of operations during our fiscal year ended
December 31, 2008 and the remaining amount will
be amortized over the remaining life of the lease term. The Baltimore and Gainesville lease terms extend through December 2015 and December 2014, respectively, with early buyout options in September
2012 and December 2013, respectively.

In
December 2007, we also consummated lease extensions of our original operating leases of certain machinery and equipment located at our Michigan City, Indiana and Shafter, California
manufacturing facilities, respectively, which were accounted for as capital leases, as according to SFAS No. 13. The Michigan City and Shafter lease terms extend through September 2016 and
December 2015, respectively, with early purchase options in September 2014 and September 2012, respectively. As of December 31, 2008 and 2007, amounts due under our capital leases aggregated to
$56.0 and $62.0 million, respectively.

In
April 2008, we repurchased and retired $4.8 million of industrial development revenue bond certificates issued by us with respect to the Mount Vernon, Indiana Industrial
Development Revenue Bond issued in 1985. As of December 31, 2008, we had one remaining industrial development revenue bond certificate outstanding, which bears interest at a floating rate,
which ranged between 0.7% and 7.25% during 2008, and is secured by letters of credit under the Senior Secured Revolving Credit Facility.

In
July 2004, we issued $200.0 million in aggregate principal amount of 73/4% Senior Notes due 2014. In November 2004, we issued an additional $50.0 million
in aggregate principal amount of 73/4% Senior Notes due 2014 under an indenture dated July 2004, pursuant to which we previously issued our original $200.0 million of
73/4% Senior Notes due 2014, collectively the Senior Notes. These additional Senior Notes rank equally with and formed a part of a single series with such original Senior Notes and have
the same terms and conditions. The net proceeds from the issuance of the Senior Notes, after deducting the initial purchasers discounts, commission and offering expenses and including the addition of
the applicable premium on the Senior Notes issued in November 2004 were approximately $246.5 million. The original premium of approximately $0.9 million is included in
long-term debt, will be amortized over the life of the Senior Notes, and as of December 31, 2008 amortized to $0.5 million.

Under
the terms and conditions of the Senior Notes, the noteholders have the right under the indenture governing such notes to require us to purchase the Senior Notes at a price of 101%
of the principal amount thereof, plus any accrued and unpaid interest, in the event of a change in control, as defined in the Senior Notes. Upon the expiration of this right, we would have the option
to purchase

F-18

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Table of Contents

BUILDING MATERIALS CORPORATION OF AMERICA

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)

the
Senior Notes at a purchase price equal to 100% of the aggregate principal amount, plus the applicable premium, as defined in the Senior Notes, together with any accrued and unpaid interest. We
also have the option to redeem some or all of the Senior Notes beginning on August 1, 2009 through August 1, 2012, at specified redemption premiums, as defined in the Senior Notes. Our
Senior Notes are secured by a first-priority lien on the Term Loan Collateral and a second-priority lien on the Senior
Secured Revolving Credit Facility Collateral, in each case, having equal priority with the lien securing our obligations under the Term Loan.

In
July 2003, we entered into a $19.7 million secured loan, which we refer to as the Chester Loan, with the proceeds being used to repay a $19.7 million obligation
associated with an early buyout option on a previously transacted capital lease on certain machinery and equipment at our Chester, South Carolina facility. The Chester Loan is secured by a sole
security interest in the machinery and equipment, matures in 2010, requires monthly payments of principal and interest commencing in August 2003 and bears a fixed annual interest rate of 7.41%.

As
of December 31, 2008, we had total outstanding consolidated indebtedness of $1,731.6 million, which included $52.8 million of demand loans to our parent
corporation and $20.6 million that matures prior to December 31, 2009. Our total outstanding consolidated indebtedness also included $76.0 million of borrowings outstanding under
our Senior Secured Revolving Credit Facility. We anticipate funding these obligations principally from our cash and cash equivalents on hand, cash flow from operations and/or borrowings under our
Senior Secured Revolving Credit Facility.

As
of December 31, 2008, we were in compliance with all covenants under the Senior Secured Revolving Credit Facility, the Term Loan, the Junior Lien Term Loan and the indenture
governing the Senior Notes. As of December 31, 2008, the net book value of the collateral securing the Senior Secured Revolving Credit Facility Collateral and the Term Loan Collateral was
$678.7 and $1,657.9 million, respectively.

At
December 31, 2008, we had outstanding letters of credit of approximately $43.1 million, which included approximately $10.6 million of standby letters of credit
related to certain obligations of G-I Holdings. During 2008, we paid $0.1 million as a distribution to our indirect parent corporation related to previously outstanding standby
letters of credit.

See
Note 12 to the Consolidated Financial Statements for further information regarding our Long-Term Debt.



We make loans to and borrow from, our parent corporations from time to time at interest rates ranging from 3.25% to 7.25% in 2008. At
December 31, 2008 and 2007, BMCA Holdings Corporation owed us $56.3 and $56.2 million, including interest of $1.1 and $1.0 million, respectively; and we owed BMCA Holdings
Corporation $52.8 and $52.8 million, respectively, with no unpaid interest. Interest income on our loans to BMCA Holdings Corporation amounted to $3.4, $5.0 and $4.9 million in 2008,
2007 and 2006, respectively. Interest expense on our loans from BMCA Holdings Corporation amounted to $3.3, $4.8 and $4.7 million in 2008, 2007 and 2006, respectively. Loans payable
to/receivable from our parent corporations are due on demand and provide each party with the right of offset of its related obligation to the other party and are subject to limitations as outlined in
our Senior Secured Revolving Credit Facility, our Term Loan, our Junior Lien Term Loan and our Senior Notes. Under the terms of our Senior Secured Revolving Credit Facility and the indenture governing
our Senior Notes at December 31, 2008, we could repay demand loans to our parent corporation

F-19

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Table of Contents

BUILDING MATERIALS CORPORATION OF AMERICA

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)

amounting
to $52.8 million, subject to certain conditions. See Note 17 to the Consolidated Financial Statements.

During
2008 and 2006 after giving effect to the most restrictive of the aforementioned debt covenant restrictions, we declared and paid cash dividends of $7.5 and $15.0 million,
respectively, to our parent corporation. In 2007, we did not declare or pay a cash dividend to our parent corporation.

As
of December 31, 2008 and 2007, we included on our consolidated balance sheets a tax receivable from parent corporation of $8.4 and $10.0 million, respectively,
representing amounts paid in excess of amounts due to G-I Holdings with respect to 2006 under the Tax Sharing Agreement. We expect to utilize the remaining receivable balance at
December 31, 2008 during 2009. See Notes 9 and 17 to the Consolidated Financial Statements.

On
January 5, 2001, G-I Holdings filed a voluntary petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code due to asbestos claims. See
Item 3, "Legal Proceedings" and Note 8 to the Consolidated Financial Statements for further information regarding asbestos-related matters.

Our
parent corporations, G-I Holdings and BMCA Holdings Corporation, are essentially holding companies without independent businesses or operations. As a result, they are
presently dependent upon the earnings and cash flows of their subsidiaries, principally our company, in order to satisfy their obligations, including various tax and other claims and liabilities
including tax liabilities
relating to Rhône-Poulenc Surfactants & Specialties, L.P. (the "surfactants partnership"), a partnership in which G-I Holdings held an interest. We do not
believe that the dependence of our parent corporations on the cash flows of their subsidiaries should have a material adverse effect on our operations, liquidity or capital resources. See
Notes 8, 9, 12, 17 and 18 to the Consolidated Financial Statements.

During
2008, we and our subsidiaries purchased a substantial portion of our headlap roofing granules, colored roofing granules and algae-resistant granules, on a purchase order basis,
from ISP Minerals Inc., which we refer to as ISP Minerals, an affiliate of BMCA and an affiliate of International Specialty Products Inc., which is also an affiliate of BMCA. We refer to
International Specialty Products Inc. and its subsidiaries as ISP. The amount of mineral products purchased each year on this basis is based on current demand and is not subject to minimum
purchase requirements. For the years ended December 31, 2008 and 2007, we purchased $40.6 and $10.5 million, respectively, of roofing granules under this arrangement.

In
addition to the granules products we purchased, under the above purchase order basis, the balance of our granules requirements are purchased under a contract expiring in 2013. The
amount of mineral products purchased each year under the contract is based on current demand and is not subject to minimum purchase requirements. Under the contract, for the years ended
December 31, 2008 and 2007, we purchased $83.2 and $95.8 million of roofing granules, respectively.

Pursuant
to a management agreement, a subsidiary of ISP provides certain general management, administrative, legal and facilities services to us, including the use of our headquarters in
Wayne, New Jersey. Charges to us by ISP for these services under the management agreement, inclusive of the services provided to G-I Holdings, discussed below, aggregated to $7.3, $6.7 and
$6.1 million for 2008, 2007 and 2006, respectively. These charges consist of management fees and other reimbursable expenses attributable to us, or incurred by ISP for our benefit. The amount
payable to ISP for management fees as of December 31, 2008 and 2007 was $0.9 and $0.5 million, respectively, and is included in payable to related parties in the consolidated balance
sheets. The management agreement also provides that we are responsible for providing management services to G-I Holdings and certain of

F-20

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Table of Contents

BUILDING MATERIALS CORPORATION OF AMERICA

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)

its
subsidiaries and that G-I Holdings pay to us a management fee for these services. The aggregate amount paid by G-I Holdings to us for services rendered under the management
agreement in 2008, 2007 and 2006 was approximately $0.9, $0.8 and $0.9 million, respectively. We also allocate a portion of the management fees payable by us under the management agreement as
lease payments for the use of our headquarters.



We use capital resources to maintain existing facilities, expand our operations and make acquisitions. In 2008, we incurred
approximately $65.8 million on maintenance, compliance and expansion capital and in 2009, we expect to incur approximately $80.0 million on maintenance, compliance and expansion capital.
We expect to generate funding for our capital programs from results of operations and additional borrowings under our Senior Secured Revolving Credit Facility.



During 2008, we sold manufacturing facilities in Hollister, California and Stockton, California; property in Fresno, California; a
distribution center in Waxahachie, Texas; and precious metals relating to our Nashville, Tennessee manufacturing facility.



We do not believe that inflation has had a material effect on our results of operations during the past three years. However, we cannot
assure you that our business will not be affected by inflation in the future, or by increases in the cost of energy and asphalt purchases used in our manufacturing process principally due to
fluctuating oil prices.

The
prices of energy and crude oil continued to rise reaching record high levels during the third quarter of 2008, including the price of asphalt and other petroleum-based raw materials,
which also reached record high levels. In the fourth quarter of 2008, the prices of energy and crude oil began to decline primarily due to, in our opinion, the current worldwide economic conditions,
which has resulted in weaker demand. The decline in crude oil prices in the fourth quarter of 2008 caused a moderate decline in asphalt and other petroleum-based raw materials; however, these prices
remained high, when compared to historical prices. Due to the strength of our manufacturing operations, which allows us to use many types of asphalt, together with our ability to secure alternative
sources of supply, we do not anticipate that any potential disruption in the supply of asphalt will have a material impact on future net sales, although no assurances can be provided in that regard.
We will attempt to pass on future cost increases from suppliers as needed; however, no assurances can be provided that these price increases will be accepted in the marketplace.

F-21

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Table of Contents

BUILDING MATERIALS CORPORATION OF AMERICA

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)



At December 31, 2008, the table below summarizes our significant contractual obligations and commercial commitments.

Payments Due by PeriodContractual Obligations

Total

Less than
1 Year

1-3
Years

4-5
Years

After 5
Years(Millions)Long-term Debt(1)

$
1,678.8

$
20.6

$
37.7

$
114.5

$
1,506.0Purchase Obligations(2)


89.9


39.8


48.0


2.1


Operating Leases


89.2


19.1


29.0


19.2


21.9Interest Expense(3)


626.9


125.5


246.5


212.6


42.3Total

$
2,484.8

$
205.0

$
361.2

$
348.4

$
1,570.2


---

We
also have a management agreement with ISP Management Company Inc., a subsidiary of International Specialty Products, Inc., which we refer to as the Management Agreement,
to provide us with certain management services. The management fees payable under the Management Agreement are adjusted annually. Based on services provided to us in 2008 under the Management
Agreement, the aggregate amount payable to ISP under the Management Agreement for 2009 inclusive of the services provided to G-I Holdings, is not yet available, however it is estimated to
be consistent, after adjusting for inflationary factors, with the $7.3 million paid in 2008. For a further discussion on the Management Agreement reference is made to Management's Discussion
and Analysis of Financial Condition and Results of Operations, "Intercompany Transactions."

F-22

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Table of Contents

BUILDING MATERIALS CORPORATION OF AMERICA

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)

During
2008, we and our subsidiaries purchased a substantial portion of our headlap roofing granules, colored roofing granules and algae-resistant granules, on a purchase order basis,
from ISP Minerals, an affiliate of BMCA and an affiliate of International Specialty Products Inc., which is also an affiliate of BMCA. The amount of mineral products purchased each year on this
basis is based on current demand and is not subject to minimum purchase requirements. For the years ended December 31, 2008 and 2007, we purchased $40.6 and $10.5 million, respectively,
of roofing granules under this arrangement.

In
addition to the granules products we purchased, under the above purchase order basis, the balance of our granules requirements are purchased under a contract expiring in 2013. The
amount of mineral products purchased each year under the contract is based on current demand and is not subject to minimum purchase requirements. Under the contract, for the years ended
December 31, 2008 and 2007, we purchased $83.2 and $95.8 million of roofing granules, respectively.

At
December 31, 2008, we have contractual guarantees and commitments as follows:

Expiration per periodContractual Guarantees and Commitments

Total

Less than
1 Year

1-3
Years

4-5
Years

After
5 Years(Millions)Letters of Credit

$
43.1

$
43.1

$


$


$
Total

$
43.1

$
43.1

$


$


$



At
December 31, 2008, letters of credit of $43.1 million, of which are all standby letters of credit, are irrevocable obligations of an issuing bank. These letters of
credit are guaranteed by us.



At December 31, 2008, we have other obligations as follows:

Other Obligations

2008
Actual
Spending

2009
Projected
Spending(Millions)Environmental Matters

$
0.9

$
1.0Pension and Other Benefits


1.5


4.4Total

$
2.4

$
5.4


Our
expenditures for environmental compliance capital projects were $0.9 and $0.4 million in 2008 and 2007, respectively. We anticipate that environmental regulations will
continue to be imposed on the roofing industry. Although we cannot predict with certainty environmental expenditures beyond 2008, management believes the amounts estimated in the table above are
adequate.

Our
policy for pension plans is to accumulate plan assets that, over the long run, will approximate the present value of projected benefit obligations. In 2008 and 2007, we made pension
contributions of $1.3 and $0.8 million, respectively. In 2009, based on current actuarial data, we expect to make a pension contribution of $4.2 million. Actual contributions in 2009 and
future years may vary based on a number of factors including prevailing interest rates and return on plan assets.

Spending
associated with other benefit plans, primarily retiree medical and life insurance and long-term disability, amounted to $0.2 and $0.1 million in 2008 and
2007, respectively. We expect spending to continue at comparable levels in 2009.

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Table of Contents

BUILDING MATERIALS CORPORATION OF AMERICA

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)



At December 31, 2008, we have available sources of liquidity, net of amounts used, as follows:

Expiration per periodAvailable Sources of Liquidity

Total

Less than
1 Year

1-3
Years

4-5
Years

After
5 Years(Millions)Unused Lines of Credit

$
241.4

$


$


$
241.4

$
Total

$
241.4

$


$


$
241.4

$



As
of December 31, 2008, we had total debt of $76.0 million outstanding under our Senior Secured Revolving Credit Facility, of which an additional $43.1 million of
letters of credit were used. We had available sources of liquidity consisting of $241.4 million of unused lines of credit at December 31, 2008, subject to the borrowing base availability
as defined in the Senior Secured Revolving Credit Facility.



In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for Financial Assets and Financial
LiabilitiesIncluding an amendment of FASB Statement No. 115", which we refer to as SFAS No. 159, which permits entities to elect to measure specified financial instruments
and warranty and insurance contracts at fair value on a contract-by-contract basis, with changes in fair value recognized in earnings each reporting period. The election,
called the "fair value option," will enable some companies to reduce the volatility in reported earnings caused by measuring related assets and liabilities differently, and is simpler than using the
complex hedge-accounting provisions of SFAS No. 133 to achieve similar results. SFAS No. 159 applies to all entities and contains financial statement presentation and disclosure
requirements for assets and liabilities reported at fair value as a consequence of the election. SFAS No. 159 is expected to expand the use of fair value measurements for financial instruments
and was effective for fiscal years beginning after November 15, 2007. We adopted the provisions of SFAS No. 159 for our fiscal year beginning January 1, 2008 and, upon adoption,
did not elect the fair value option for any items within the scope of SFAS No. 159. Therefore, SFAS No. 159 did not have any impact on our consolidated financial statements.

In
December 2007, the FASB issued SFAS No. 141 (revised in 2007) "Business Combinations", which we refer to as SFAS No. 141R, which provides revised guidance on how an
acquiring company should recognize and measure the identifiable assets acquired, liabilities assumed, noncontrolling interests, and goodwill acquired in a business combination. SFAS No. 141R
also expands the required disclosures related to the nature and financial statement impact of business combinations and is effective, on a prospective basis, for business combinations completed in
fiscal years beginning after December 15, 2008. We will adopt SFAS No. 141R for our fiscal year beginning January 1, 2009 and, therefore, will apply SFAS No. 141R
prospectively to any business combinations subsequent to that date.

In
December 2007, the FASB issued SFAS No. 160, "Noncontrolling Interests in Consolidated Financial Statements", which we refer to as SFAS No. 160. SFAS No. 160
establishes requirements for ownership interests in subsidiaries held by parties other than us (minority interests) to be clearly identified and disclosed in the consolidated statement of financial
position within equity, but separate from the parent's equity. Any changes in the parent's ownership interests are required to be accounted

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Table of Contents

BUILDING MATERIALS CORPORATION OF AMERICA

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)

for
in a consistent manner as equity transactions and any noncontrolling equity investments in deconsolidated subsidiaries must be measured initially at fair value. SFAS No. 160 is effective,
on a prospective basis, for fiscal years beginning after December 15, 2008, and upon adoption, the presentation and disclosure requirements must be retrospectively applied to comparative
financial statements. We will adopt the provisions of SFAS No. 160 for our fiscal year beginning January 1, 2009, and we do not expect the adoption to have any impact on our results of
operations or financial position as we do not have any noncontrolling interests.

In
March 2008, the FASB issued SFAS No. 161, "Disclosures about Derivative Instruments and Hedging Activities", which we refer to as SFAS No. 161. SFAS No. 161
amends SFAS No. 133 and is intended to improve financial reporting related to derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better
understand their effects on an entity's financial position, financial performance, and cash flows. The provisions of SFAS No. 161 are effective on a prospective basis for fiscal years beginning
on or after November 15, 2008. We will adopt the disclosure provisions of SFAS No. 161 for our fiscal year beginning January 1, 2009, which may increase disclosures in the
financial statements related to our derivative instruments.

In
April 2008, the FASB issued FSP No. 142-3, "Determination of the Useful Life of Intangible Assets", which we refer to as FSP No. 142-3. FSP
No. 142-3 amends the factors an entity should consider in developing renewal or extension assumptions used in determining the useful life of recognized intangible assets under SFAS
No. 142, "Goodwill and Other Intangible Assets". This new guidance applies prospectively to intangible assets that are acquired individually or with a group of other assets in business
combinations and asset acquisitions. FSP No. 142-3 is effective for financial statements issued for fiscal years and interim periods beginning after December 15, 2008. Early
adoption of FSP No. 142-3 is prohibited. We will adopt the provisions of FSP No. 142-3 for our fiscal year beginning January 1, 2009 and are currently
evaluating the impact, if any, that FSP No. 142-3 will have on our financial statements.

In
May 2008, the FASB issued SFAS No. 162, "The Hierarchy of Generally Accepted Accounting Principles", which we refer to as SFAS No. 162, which identifies the sources of
accounting principles and the framework for selecting principles to be used in the preparation and presentation of financial statements in accordance with United States generally accepted accounting
principles. SFAS No. 162 will be effective 60 days after the SEC approves the Public Company Accounting Oversight Board's amendments to Interim Audit Standards Section 411, "The
Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles." We will adopt the provisions and evaluate the impact of SFAS No. 162 upon its effective date.

In
December 2008, the FASB issued FSP No. 132(R)-1, "Employers Disclosures about Postretirement Benefit Plan Assets", which we refer to as FSP
No. 132(R)-1, and provides additional guidance on an employers' disclosures about plan assets of a defined benefit pension or other post retirement plan. FSP
No. 132(R)-1 is effective for financial statements issued for fiscal years ending after December 15, 2009. We will adopt the provisions of FSP No. 132(R)-1
for our fiscal year beginning January 1, 2010, which will increase the disclosures in the financial statements related to the assets of our defined pension and postretirement plans.



Under the terms of the Senior Secured Revolving Credit Facility, we are only permitted to enter into investments in highly-rated
commercial paper, U.S. government-backed securities, certain time

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Table of Contents

BUILDING MATERIALS CORPORATION OF AMERICA

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)

deposits
and hedging arrangements that protect against or mitigate the effect of fluctuations in interest rates on variable interest rate debt, foreign exchange rates or prices of commodities used in
our business. In 2007, BMCA entered into fixed-income interest rate swaps and treasury locks to hedge against fluctuations in the variable interest rate of our $975.0 million Term Loan. We
settled our open treasury lock position in October 2007. See "Market-Sensitive Instruments" caption included in Note 2 and also see Note 13 to the Consolidated Financial Statements.

*  *  *

Forward-looking Statements

This annual report on Form 10-K contains both historical and forward-looking statements. All statements other than
statements of historical fact are, or may be deemed to be, forward-looking statements within the meaning of section 27A of the Securities Act of 1933, as amended and section 21E of the
Securities Exchange Act of 1934, as amended. These forward-looking statements are only predictions and generally can be identified by use of statements that include phrases such as "believe,"
"expect," "anticipate," "intend," "plan," "foresee" or other similar words or phrases. Similarly, statements that describe our objectives, plans or goals also are forward-looking statements. Our
operations are subject to certain risks and uncertainties that could cause actual results to differ materially from those contemplated by the relevant forward-looking statements. The forward-looking
statements included herein are made only as of the date of this annual report on Form 10-K and we undertake no obligation to publicly update any forward-looking statements to
reflect subsequent events or circumstances. We cannot assure you that projected results or events will be achieved.

F-26

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Table of Contents



BUILDING MATERIALS CORPORATION OF AMERICA    SELECTED FINANCIAL DATA

The following table presents our selected consolidated financial data. The selected historical consolidated financial data for the five
fiscal years ended December 31, 2008, 2007, 2006, 2005 and 2004 are derived from our audited consolidated financial statements. See Note 17 to the Consolidated Financial Statements for
cash dividends paid to parent corporation.

Year Ended December 31,2008

2007(1)

2006

2005

2004(Millions)Operating Data:Net sales

$
2,748.9
*
$
2,310.1
*
$
1,969.2

$
1,955.8

$
1,773.4Income (loss) before interest expense and income taxes


237.8
**

(27.4
)**

124.8


160.6


150.2Interest expense


158.9


181.4
***

61.5


62.3


62.7Income (loss) before income taxes


78.9


(208.8
)

63.3


98.3


87.5Net income (loss)


51.4


(134.5
)

38.7


61.0


54.9


---

December 31,2008

2007(1)

2006

2005

2004(Millions)Balance Sheet Data:Total working capital

$
250.9

$
232.7

$
123.0

$
191.7

$
157.7Goodwill


653.6


655.2


64.8


67.1


63.3Total assets


2,280.3


2,274.4


1,029.8


1,004.3


1,065.5Long-term debt less current maturities


1,658.2


1,729.4


484.4


533.5


536.0Total stockholders' equity (deficit)


(79.9
)

(96.3
)

62.2


43.0


(2.7
)




Year Ended December 31,2008

2007(1)

2006

2005

2004(Millions)Other Data:Depreciation

$
72.4

$
69.0

$
49.3

$
45.1

$
43.9Intangible asset amortization


11.4


6.8








Software amortization


4.1


3.4


3.0


2.7


2.7Acquisition of Elk





945.3
(2)







Capital expenditures and acquisitions


65.8


84.5


87.5


65.1


67.2


---

F-27

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Table of Contents



Report of Independent Registered Public Accounting Firm

The
Board of Directors and Shareholders of Building Materials Corporation of America:

We
have audited the accompanying consolidated balance sheets of Building Materials Corporation of America and subsidiaries as of December 31, 2008 and 2007, and the related
consolidated statements of operations, cash flows and shareholders' equity (deficit) for each of the three years in the period ended December 31, 2008. Our audits also included the financial
statement schedule on page S-1. These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these
financial statements and schedule based on our audits.

We
conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company's internal control over financial
reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose
of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In
our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Building Materials Corporation of America and
subsidiaries at December 31, 2008 and 2007, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2008, in
conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a
whole, presents fairly in all material respects the information set forth therein.

Ernst & Young LLP


New
York, New York
March 25, 2009

F-28

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Table of Contents



BUILDING MATERIALS CORPORATION OF AMERICA        CONSOLIDATED STATEMENTS OF OPERATIONS

Year Ended December 31,2008

2007

2006(Thousands)Net sales

$
2,748,909

$
2,310,073

$
1,969,170Costs and expenses, net:Cost of products sold


1,968,239


1,695,584


1,396,376Selling, general and administrative


486,220


496,216


447,655Amortization of intangible assets


11,386


6,785


Restructuring and other expenses


40,261


141,643


Other (income) expense, net


5,032


(2,755
)

282Total costs and expenses, net


2,511,138


2,337,473


1,844,313Income (loss) before interest expense and income taxes


237,771


(27,400
)

124,857Interest expense


(158,921
)

(181,438
)

(61,509
)Income (loss) before income taxes


78,850


(208,838
)

63,348Income tax (expense) benefit


(27,411
)

74,312


(24,598
)Net income (loss)

$
51,439

$
(134,526
)
$
38,750


The
accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

F-29

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Table of Contents



BUILDING MATERIALS CORPORATION OF AMERICA        CONSOLIDATED BALANCE SHEETS        (Dollars in thousands, except per share amounts)

December 31,2008

2007(Thousands)AssetsCurrent Assets:Cash and cash equivalents

$
37,037

$
6,324Accounts receivable, trade, net


199,233


210,857Accounts receivable, other


10,897


10,792Income tax receivable





11,968Inventories, net


348,449


316,912Deferred income tax assets


39,324


38,017Other current assets


17,072


13,698Total Current Assets


652,012


608,568Property, plant and equipment, net


655,269


672,813Goodwill


653,644


655,200Intangible assets, net


196,250


207,635Income tax receivable from parent corporation


8,400


10,016Other noncurrent assets


114,739


120,159Total Assets

$
2,280,314

$
2,274,391Liabilities and Stockholders' DeficitCurrent Liabilities:Current maturities of long-term debt

$
20,596

$
24,630Accounts payable


156,030


142,250Payable to related parties


21,153


16,133Loans payable to parent corporation


52,840


52,840Accrued liabilities


134,341


135,976Product warranty claims


16,200


13,500Discontinued operationscurrent liabilities





560Total Current Liabilities


401,160


385,889Long-term debt


1,658,169


1,729,395Product warranty claims


28,765


31,224Deferred income tax liabilities


73,103


60,869Other liabilities


198,973


163,332Commitments and ContingenciesNote 18Stockholders' Deficit:Series A Cumulative Redeemable Convertible Preferred Stock, $.01 par value per share; 400,000 shares authorized; no shares issued





Class A Common Stock, $.001 par value per share; 1,300,000 shares authorized; 1,015,010 shares issued and outstanding; 0 shares issued in 2008 and
2007


1


1Class B Common Stock, $.001 par value per share; 100,000 shares authorized; 0 shares issued and outstanding in 2008 and 2007





Loans receivable from parent corporation


(56,348
)

(56,224
)Retained earnings (accumulated deficit)


27,372


(16,496
)Accumulated other comprehensive loss


(50,881
)

(23,599
)Total Stockholders' Deficit


(79,856
)

(96,318
)Total Liabilities and Stockholders' Deficit

$
2,280,314

$
2,274,391


The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

F-30

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Table of Contents



BUILDING MATERIALS CORPORATION OF AMERICA        CONSOLIDATED STATEMENTS OF CASH FLOWS

Year Ended December 31,2008

2007

2006(Thousands)Cash and cash equivalents, beginning of year

$
6,324

$
7,777

$
6,882Cash provided by operating activities:Net income (loss)


51,439


(134,526
)

38,750Adjustments to reconcile net income (loss) to net cash provided by operating activities:Depreciation


72,395


69,006


49,321Amortization of intangible and other assets


15,478


10,242


2,993Restructuring and other expenses


73,219


181,012


Deferred income taxes


29,338


(80,635
)

2,770Noncash interest charges


8,978


9,449


4,596(Increase) decrease in working capital items


(75,895
)

55,363


(7,148
)Increase (decrease) in product warranty claims


241


877


(825
)Increase in other assets


(10,448
)

(6,377
)

(11,964
)Increase (decrease) in other liabilities


(3,720
)

7,758


7,651Increase (decrease) in net payable to related parties/parent corporations


6,636


9,297


(14,463
)Other, net


(18,490
)

(3,274
)

872Net cash provided by operating activities


149,171


118,192


72,553Cash used in investing activities:Acquisition of ElkCorp





(945,295
)

Capital expenditures and 2007 and 2006 acquisitions


(65,846
)

(84,511
)

(87,450
)Proceeds from sale of assets


31,153


6,755


Net cash used in investing activities


(34,693
)

(1,023,051
)

(87,450
)Cash provided by (used in) financing activities:Proceeds from issuance of long-term debt


1,083,000


2,457,749


824,000Repayments of long-term debt


(1,147,652
)

(1,557,599
)

(783,948
)Purchase of industrial development revenue bond certificates issued by the Company


(4,800
)




(6,325
)Proceeds from sale-leasebacks





45,000


Principal repayments of capital leases


(6,042
)




Settlement of treasury lock hedges





(4,896
)

Distributions to parent corporation


(71
)

(171
)

(521
)Dividends to parent corporation


(7,500
)




(15,000
)Loan to parent corporation


(124
)

(193
)

(191
)Financing fees and expenses


(576
)

(36,484
)

(2,223
)Net cash provided by (used in) financing activities


(83,765
)

903,406


15,792Net change in cash and cash equivalents


30,713


(1,453
)

895Cash and cash equivalents, end of year

$
37,037

$
6,324

$
7,777


The
accompanying Notes to Consolidated Financial Statements are an integral part of these statements. (continued on the following page)

F-31

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Table of Contents

BUILDING MATERIALS CORPORATION OF AMERICA

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

Year Ended December 31,2008

2007

2006(Thousands)Supplemental Cash Flow Information:Effect on cash from changes in working capital items*:Decrease in accounts receivable trade and accounts receivable other

$
11,035

$
71,037

$
79,986Decrease in income tax receivable


11,837





(Increase) decrease in inventories, net


(45,684
)

28,905


(36,011
)(Increase) decrease in other current assets


(3,374
)

9,362


6,322Increase (decrease) in accounts payable


15,367


12,855


(33,970
)Increase (decrease) in accrued liabilities


11,264


(2,083
)

(23,475
)Payments for restructuring and other expenses


(76,340
)

(64,713
)

Net effect on cash from (increase) decrease in working capital items

$
(75,895
)
$
55,363

$
(7,148
)Cash paid during the period for:Interest (net of amount capitalized of $546, $2,225 and $2,704 in 2008, 2007 and 2006, respectively)

$
149,136

$
139,469

$
54,733Income taxes (including Federal income taxes paid pursuant to a Tax Sharing Agreement of $0, $0 and $24,101 in 2008, 2007 and 2006, respectively**)

$
6,819

$
2,532

$
25,307


---

The
accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

F-32

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Table of Contents



BUILDING MATERIALS CORPORATION OF AMERICA        CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

Capital
Stock and
Additional
Paid-in
Capital

Loans
Receivable
From Parent
Corporation

Retained
Earnings
(Accumulated
Deficit)

Accumulated
Other
Comprehensive
Income (Loss)

Comprehensive
Income (Loss)(Thousands)Balance, December 31, 2005

$
1

$
(55,840
)
$
104,275

$
(5,410
)Comprehensive income year-ended
December 31, 2006:Net income








38,750




$
38,750Other comprehensive income, net of tax:Pension plan adjustment, net of tax of ($849)











1,445


1,445Postretirement plan adjustment net of tax of ($2,348)











3,999


3,999Comprehensive income













$
44,194SAB No. 108 adjustments, net of tax of $5,701








(9,303
)

Distribution to parent corporation








(521
)

Dividend to parent corporation








(15,000
)

Loan to parent corporation





(191
)




Balance, December 31, 2006

$
1

$
(56,031
)
$
118,201

$
34Comprehensive income (loss) year-ended December 31, 2007:Net loss








(134,526
)



$
(134,526
)Other comprehensive income (loss), net of tax:Derivative fair value adjustment interest rate swaps, net of tax of $11,392











(18,588
)

(18,588
)Derivative fair value adjustment treasury locks, net of tax of $1,776











(2,896
)

(2,896
)Pension plan adjustment, net of tax of $1,078











(1,760
)

(1,760
)Postretirement plan adjustment, net of tax of $238











(389
)

(389
)Comprehensive loss













$
(158,159
)Distribution to parent corporation








(171
)

Loan to parent corporation





(193
)




Balance, December 31, 2007

$
1

$
(56,224
)
$
(16,496
)
$
(23,599
)Comprehensive income (loss) year-ended December 31, 2008:Net income








51,439




$
51,439Other comprehensive income (loss), net of tax:Derivative fair value adjustment interest rate swaps, net of tax of $15,380











(25,093
)

(25,093
)Derivative fair value adjustment treasury locks, net of tax of ($288)











470


470Pension plan adjustment, net of tax of $1,323











(2,159
)

(2,159
)Postretirement plan adjustment, net of tax of $306











(500
)

(500
)Comprehensive income













$
24,157Distributions to parent corporation








(71
)

Dividends to parent corporation








(7,500
)

Loan to parent corporation





(124
)




Balance, December 31, 2008

$
1

$
(56,348
)
$
27,372

$
(50,881
)


The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

F-33

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Table of Contents



BUILDING MATERIALS CORPORATION OF AMERICA        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Formation of the Company

Building Materials Corporation of America ("BMCA" or the "Company") is a leading national manufacturer and marketer of a broad line of asphalt and polymer-based roofing products and
accessories for the residential and commercial roofing markets. The Company also manufactures specialty building products and accessories for the professional and
do-it-yourself remodeling and residential construction industries. See Note 16.

The
Company was formed on January 31, 1994 and is a wholly-owned subsidiary of BMCA Holdings Corporation ("BHC"), which is a wholly-owned subsidiary of G-I
Holdings Inc. G-I Holdings Inc. is a wholly-owned subsidiary of G Holdings Inc. ("G Holdings").

To
facilitate administrative efficiency, effective October 31, 2000, GAF Corporation, the former indirect parent of the Company, merged into its direct subsidiary, G-I
Holdings Inc. G-I Holdings Inc. then merged into its direct subsidiary, G Industries Corp., which in turn merged into its direct subsidiary, GAF Fiberglass Corporation. In
that merger, GAF Fiberglass Corporation changed its name to GAF Corporation. Effective November 13, 2000, GAF Corporation merged into its direct subsidiary, GAF Building Materials Corporation,
whose name was changed in the merger to G-I Holdings Inc. G-I Holdings Inc. is now an indirect parent of the Company and the Company's direct parent is BHC.
References below to G-I Holdings means G-I Holdings Inc. and any and all of its predecessor corporations, including GAF Corporation, G-I
Holdings Inc., G Industries Corp., GAF Fiberglass Corporation and GAF Building Materials Corporation.

Effective
as of January 31, 1994, G-I Holdings transferred to the Company all of its business and assets, other than three closed manufacturing facilities, certain
deferred tax assets and receivables from affiliates. The Company recorded the assets and liabilities related to such transfer at G-I Holdings' historical costs. The Company contractually
assumed all of G-I Holdings' liabilities, except (i) all of G-I Holdings' environmental liabilities, other than environmental liabilities relating to the Company's plant
sites and its business as then-conducted, (ii) all of G-I Holdings' tax liabilities, other than tax liabilities arising from the operations or business of the Company
and (iii) all of G-I Holdings' asbestos-related liabilities, other than the first $204.4 million of such liabilities (whether for indemnity or defense) relating to
then-pending asbestos-related bodily injury cases and previously settled asbestos-related bodily injury cases, which the Company contractually assumed and agreed to pay.

On
February 22, 2007, (the "date of acquisition"), a subsidiary of Building Materials Corporation of America acquired approximately 90% of the outstanding common shares of ElkCorp
("Elk") a Dallas, Texas-based manufacturer of roofing products and building materials. The remaining common shares of Elk were acquired on March 26, 2007, resulting in Elk becoming an indirect
wholly-owned subsidiary of BMCA. See Note 4.

Note 2. Summary of Significant Accounting Policies



The consolidated financial statements include the financial statements of the Company and its wholly-owned subsidiaries. All
significant intercompany balances and transactions have been eliminated in consolidation. Net sales of roofing products and specialty building products and accessories are generally seasonal in
nature.

F-34

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Table of Contents

BUILDING MATERIALS CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 2. Summary of Significant Accounting Policies (Continued)



The preparation of the Company's consolidated financial statements in conformity with U.S. generally accepted accounting principles
requires the Company's management to make certain estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent
liabilities. On an ongoing basis, the Company evaluates its estimates including but not limited to those related to doubtful accounts, inventory valuation, product warranty claims, extended and
enhanced product warranties, environmental liabilities, the carrying value of goodwill, the carrying value of long-lived tangible and intangible assets, pensions and other
post-employment benefits and contingent liabilities. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the
circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results may differ from these estimates under different assumptions
or conditions. In the opinion of management, the consolidated financial statements herein contain all adjustments necessary to present fairly the financial position and the results of operations and
cash flows of the Company for the periods presented. The Company does not anticipate any changes in management estimates that would have a material impact on operations, liquidity or capital
resources, subject to the matters discussed in Note 18.



Cash and cash equivalents include cash on deposit and commercial paper purchased with original maturities of three months or less.



Under the Company's $600.0 million Senior Secured Revolving Credit Facility (the "Senior Secured Revolving Credit Facility") the
Company is limited to entering into investments in highly-rated commercial paper, U.S. government-backed securities, certain time deposits
and hedging arrangements that protect against or mitigate the effect of fluctuations in interest rates on variable rate debt, foreign exchange rates or prices of commodities used in the Company's
business. In 2007, the Company entered into fixed income interest rate swaps and treasury locks to hedge against fluctuations in the variable interest rate of the Company's $975.0 million Term
Loan (the "Term Loan"). The Company settled its open treasury lock position in October 2007. See Hedging Activity in Note 2 and see Note 13.



Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The allowance for doubtful accounts is the
Company's best estimate of the amount of credit losses in the Company's existing accounts receivable. The Company determines the allowance based on historical write-off experience, as well
as customer operating performance and payment practices. Consequently, an adverse change in the financial condition of a particular customer could affect the Company's estimate of its bad debts. The
Company reviews its allowance for doubtful accounts periodically. Past due balances are reviewed individually for collectibility. Account balances are charged off against the allowance after all means
of collection have been exhausted and the potential for recovery is considered remote. The Company does not have any off-balance sheet credit exposure related to its

F-35

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Table of Contents

BUILDING MATERIALS CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 2. Summary of Significant Accounting Policies (Continued)

customers.
Accounts receivable are net of the allowances for doubtful accounts and for customer incentives of $104.8 and $68.3 million at December 31, 2008 and 2007, respectively.



Inventories are stated at the lower of cost or market. The LIFO (last-in, first-out) method is utilized to
determine the cost for certain asphalt-based products used to produce the Company's products, which the Company believes provides a more appropriate matching of revenue and expense. All other
inventories are valued on the FIFO (first-in, first-out) method. The Company adjusts its inventories for estimated obsolescence or unmarketable inventories equal to the
difference between the cost of inventories and their estimated market value based upon assumptions related to future demand and market conditions. If actual market conditions differ from those
projected by management, additional inventory adjustments may be required. Sales of inventories and their resulting receivables are included in working capital items in the consolidated statement of
cash flows.



Property, plant and equipment is stated at cost less accumulated depreciation and amortization. Depreciation is computed on the
straight-line method based on the estimated economic lives of the assets. The Company uses an economic life of 5 to 25 years for land improvements, 10 to 40 years for
buildings and building equipment and 3 to 20 years for machinery and equipment, which includes furniture and fixtures. Repairs are capitalized if the repair both extends the useful life of an
asset beyond its original estimated useful life and adds to the value of the asset. Interest charges are capitalized during the period of construction as part of the cost of property, plant and
equipment. Interest capitalized amounted to $0.5, $2.2 and $2.7 million for 2008, 2007 and 2006, respectively.



The Company follows the provisions of Statement of Financial Accounting Standards ("SFAS") No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets" ("SFAS No. 144"), which was issued by the Financial Accounting Standards Board ("FASB") and addresses financial accounting and reporting
for the impairment of long-lived assets and for long-lived assets to be disposed. For purposes of recognizing and measuring impairment of long-lived assets, the
Company evaluates assets of its facilities because this is the lowest level of independent cash flows ascertainable to evaluate impairment. The Company reviews long-lived assets to be held
and used for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. For long-lived assets to be held and used, an
impairment exists when the carrying amount of the asset exceeds the estimated undiscounted cash flows. Any resulting impairment is measured based on the fair value of the related asset. Fair value is
determined based on future projected demand and estimated discounted cash flows.

During
the years ended December 31, 2008 and 2007, the Company closed several of its manufacturing facilities, in addition to its previously closed manufacturing facilities. The
closing of these manufacturing facilities in 2008 and 2007 was primarily due to additional manufacturing capacity resulting from the acquisition of Elk and reduced market demand, and such plants may
be re-opened in the future as industry demand rises. For the years ended December 31, 2008 and 2007, the Company

F-36

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Table of Contents

BUILDING MATERIALS CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 2. Summary of Significant Accounting Policies (Continued)

recognized
a $0 and $97.0 million SFAS No. 144 impairment loss, respectively, related to the above-mentioned facilities. See Note 5.



The Company's goodwill principally arose from the acquisition of Elk, other acquisitions and from the 1989 management-led
buyout of the predecessor company. The Company amortized goodwill using the straight-line method over a period of approximately 40 years prior to January 1, 2002. With the
adoption of SFAS No. 142, "Goodwill and Other Intangible Assets" ("SFAS No. 142") goodwill is not amortized but is subject to at least an annual assessment for impairment or more
frequently if circumstances indicate a possible impairment. See Note 6.



The Company accounts for its intangible assets acquired in connection with the acquisition of Elk in accordance with the provisions of
SFAS No. 142. SFAS No. 142 requires disclosure of information relating to intangible assets subsequent to their acquisition that was not previously reported, which includes disclosure
concerning the changes in the carrying amount of intangible assets by major intangible asset class for those assets subject to amortization and for those not subject to amortization. SFAS
No. 142 also requires disclosure related to actual year-to-date intangible asset amortization expense and the estimated intangible asset amortization expense for each of
the next five years. As of December 31, 2008, the Company has not recorded an impairment loss related to its intangible assets. See Note 7.



In March 2007, the Company entered into forward-starting interest rate swap agreements. These swaps were initiated in order to hedge
the interest rate risk associated with the Company's Term Loan, and they are structured that the Company receives interest based on the three-month Eurodollar rate ("LIBOR") and pays interest on a
fixed rate basis. In October 2007, the Company entered into additional interest rate swaps related to its Term Loan with similar terms. In July 2007, the Company entered into treasury locks as
additional hedging instruments against its Term Loan, which the Company subsequently settled in cash in October 2007.

The
Company accounts for its hedging activity in accordance with SFAS No. 133 "Accounting for Derivative Instruments and Hedging Activities" ("SFAS No. 133"), which
requires a company to measure hedge effectiveness by assessing, on a quarterly basis, the historical and probable future of
high correlation of changes in the fair value of the hedged item. Any ineffective portion is recorded in the Company's statement of operations.



Financial instruments consist mainly of cash and cash equivalents, accounts receivable, accounts payable, interest rate swaps, notes
payable and lease obligations. The fair value of the financial instruments does not significantly vary from their carrying amount included in the Company's consolidated financial statements.

F-37

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Table of Contents

BUILDING MATERIALS CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 2. Summary of Significant Accounting Policies (Continued)

In
September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements" ("SFAS No. 157"), which clarifies the definition of fair value, establishes a framework for
measuring fair value and expands the disclosures on fair value measurements and is effective for fiscal years beginning after November 15, 2007. In February 2008, the FASB issued FASB Staff
Position ("FSP") No. 157-2 "Partial Deferral to the Effective Date of Statement 157" ("FSP No. 157-2"), which is effective for fiscal years beginning after
November 15, 2008 and defers the application of SFAS No. 157 for certain non-financial assets and non-financial liabilities and further clarifies the principles
in SFAS No. 157 on the fair value measurement of liabilities. The Company adopted the provisions of SFAS No. 157 during its fiscal year ending December 31, 2008 as it relates to
its interest rate swap agreements and currently is assessing the impact of the adoption of FSP No. 157-2. See Note 13 for further discussion.



Unamortized financing fees and expenses of $31.0 and $37.1 million are included in other noncurrent assets in the consolidated
balance sheets at December 31, 2008 and 2007, respectively, and are primarily due to the Company's borrowings related to the acquisition of Elk. See Note 4. Financing fees and expenses
are amortized to interest expense over the life of the related debt on a straight-line basis, which approximates the effective interest rate method. In 2008, 2007 and 2006, the Company
amortized $6.6, $9.3 and $4.3 million, respectively, related to such expenses.



Purchased software development costs of $11.0 and $9.9 million are included in other noncurrent assets in the consolidated
balance sheets at December 31, 2008 and 2007, respectively. These costs are amortized to expense over a five year period. In 2008, 2007 and 2006, the Company amortized $4.1, $3.4 and
$3.0 million, respectively, related to such costs.



Revenue is recognized at the time products are shipped to the customer. Products are generally shipped Freight on Board, or FOB
shipping point. Title and risk of loss pass to the customer at the time of shipment.



Shipping and handling costs are included in selling, general and administrative expenses and amounted to $185.5, $192.5 and
$174.6 million in 2008, 2007 and 2006, respectively.



Advertising costs are expensed as incurred and are included in selling, general and administrative expenses and amounted to $19.0,
$17.2 and $17.4 million in 2008, 2007 and 2006, respectively.



Research and development expenses, which are included in selling, general and administrative expenses, are charged to operations as
incurred and amounted to $8.1, $8.7 and $8.0 million in 2008, 2007 and 2006, respectively.

F-38

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Table of Contents

BUILDING MATERIALS CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 2. Summary of Significant Accounting Policies (Continued)



The Company provides certain limited warranties covering most of its residential roofing products for periods generally ranging from 20
to 50 years, although certain product lines provide for a lifetime limited warranty. The Company also offers certain limited warranties of varying duration covering most of its commercial
roofing products. Most of the Company's specialty building products and accessories carry limited warranties for periods generally ranging from 5 to 20 years, with lifetime limited warranties
on certain products. The accrual for product warranty claims is estimated on the basis of historical and projected claims activity, as well as other factors. The accuracy of the estimate of additional
costs is dependent on both the number and cost of future claims submitted during the warranty periods. The Company believes that the accruals established for estimated probable future product warranty
claims are adequate. If actual claims differ from these estimates, adjustments to this accrual may be required. The Company provides product warranties, which are only subject to the disclosure
requirements under FASB Interpretation No. ("FIN") 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others".

The
accrual for product warranty claims consists of the following, which for 2007 includes Elk from the date of acquisition:

2008

2007(Thousands)Balance, January 1

$
44,724

$
26,971Charged to cost of products sold


19,079


20,997Payments/deductions


(18,838
)

(16,919
)Acquisition of Elk





13,675Balance, December 31

$
44,965

$
44,724




The Company offers extended warranty contracts on sales of its commercial roofing products. The life of these commercial warranties
range from 10 to 20 years. In addition, the Company offers enhanced warranties on certain of its residential roofing products. These enhanced warranties are the "Golden Pledge
Warranty" and "Peace of Mind" warranty programs. All revenue for the sale of these warranty programs is deferred and amortized on a straight-line basis over the
life of these warranty programs, which is in accordance with the accounting prescribed by FASB Technical Bulletin No. 90-1 "Accounting for Separately Priced Extended Warranty and
Product Maintenance Contracts". Incremental direct costs associated with the acquisition of the extended warranty contracts are capitalized and amortized on a straight-line basis over the
average life of these warranty programs. Current costs of services performed related to claims paid under these warranty programs are expensed as incurred. The analysis of these warranty programs as
of December 31, 2008 indicated that deferred revenue is in excess of deferred costs and accordingly, no loss was recognized. However, if the total expected costs of providing services under
these warranty programs exceed deferred revenues less deferred costs, then a loss would be recognized.

At
December 31, 2008 and 2007, the Company had deferred revenue of $77.8 and $70.8 million, of which $10.9 and $8.0 million is included in other current liabilities
and $66.9 and $62.8 million is

F-39

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Table of Contents

BUILDING MATERIALS CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 2. Summary of Significant Accounting Policies (Continued)

included
in other liabilities, respectively. At December 31, 2008 and 2007, the Company also had deferred costs of $53.0 and $46.6 million, of which $7.2 and $5.1 million is
included in other current assets and $45.8 and $41.5 million is included in other assets.



Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future
tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and net operating loss and tax credit
carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is
established to offset any deferred tax asset if it is more-likely-than-not that some or all of the deferred tax asset will not be realized. The determination of the
amount of a valuation allowance to be provided on recorded deferred tax assets involves estimates regarding (1) the timing and amount of the reversal of taxable temporary differences,
(2) expected future taxable income and (3) the impact of tax planning strategies. In assessing the need for a valuation allowance, the Company considers past operating results,
projections of future taxable income and the feasibility of ongoing tax planning strategies. The projections of future taxable income include a number of estimates and assumptions regarding our
volume, pricing and costs. Additionally, valuation allowances related to deferred tax assets can be impacted by changes to tax laws. The Company is party to a tax sharing agreement (the "Tax Sharing
Agreement").

The
Company uses judgment in determining income tax provisions under SFAS No. 109 "Accounting for Income Taxes" ("SFAS No. 109") and in evaluating its tax positions.
Additional provisions for income taxes are established when, despite the belief that tax positions are fully supportable, there remain certain positions that do not meet the minimum probability
threshold as defined by FIN 48, "Accounting for Uncertainty in Income Taxes ("FIN 48"), which the Company adopted January 1, 2007, which is a tax position that is
more-likely-than-not to be sustained upon examination by the applicable taxing authority. The Company and its subsidiaries are examined by various Federal and state
tax authorities. The Company regularly assesses the potential outcomes of these examinations and any future examinations for the current or prior years in determining the adequacy of its provision for
income taxes. The Company continually assesses the likelihood and amount of potential adjustments and adjusts the income tax provision, the current tax liability and deferred taxes in the period in
which the facts that give rise to a revision become known. See Note 9.



The Company, together with other companies, is a party to a variety of proceedings and lawsuits involving environmental matters under
the U.S. Comprehensive Environmental Response Compensation and Liability Act, and similar state laws, in which recovery is sought for the cost of cleanup of contaminated sites or remedial obligations
are imposed, a number of which are in the early stages or have been dormant for protracted periods. The Company refers to these proceedings and lawsuits as "Environmental Claims."

F-40

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Table of Contents

BUILDING MATERIALS CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 2. Summary of Significant Accounting Policies (Continued)

The
Company accrues environmental costs when it is probable that it has incurred a liability and the expected amount can be reasonably estimated and, reviews on an ongoing basis, its
estimated environmental liabilities. The amount accrued reflects the Company's assumptions about remedial requirements at the contaminated site, the nature of the remedy, the outcome of discussions
with
regulatory agencies and other potential responsible parties at multi-party sites and the number and financial viability of other potentially responsible parties. Adverse decisions or events,
particularly as to increases in remedial costs, discovery of new contamination, assertion of natural resource damages, and the liability and the financial responsibility of the Company's insurers and
of the other parties involved at each site and their insurers, could cause the Company to increase its estimate of its liability in respect of those matters. The Company estimates that its liability
as of December 31, 2008, in respect of assumed and other environmental liabilities, is $2.6 million, and expects insurance recoveries of $1.7 million. Insurance recoveries relate
to amounts previously provided for in the consolidated balance sheets. The Company refers to these recoveries as "estimated recoveries." The Company's liability is reflected on an undiscounted basis.
The gross environmental liability is included within accrued liabilities and other liabilities, and the estimated recoveries are included within other noncurrent assets. It is not currently possible
to estimate the amount or range of any additional liabilities or whether any such liabilities exist.



The Company maintains defined benefit plans that provide eligible employees with retirement benefits. In addition, while the Company
generally does not provide postretirement medical and life insurance benefits, it subsidizes life insurance benefits for certain employees and retirees. The costs and obligations related to these
benefits reflect the Company's assumptions related to general economic conditions (particularly interest rates), expected return on plan assets and rate of compensation increases for employees. The
Company sets the discount rate assumption annually for its retirement-related benefit plans at the measurement dates to reflect the yield of high-quality fixed-income debt instruments. The
expected long-term rate of return on assets is derived from a detailed periodic study conducted by the Company's actuaries and its senior executives. The study includes a review of
anticipated future long-term performance of individual asset categories. While the study gives appropriate consideration to recent plan performance and historical returns, the assumption
is primarily a long-term prospective rate. The Company's discount rate as of December 31, 2008 and 2007 for determining projected benefit obligations was 6.25% and 6.25%,
respectively. A 25 basis point increase or decrease in the discount rate assumption would result in a plus or minus $0.2 million impact on pension expense and a plus or minus
$1.5 million impact on the projected benefit obligation. The Company's expected long-term rate of return on assets assumption for its retirement plans was 9.5% in 2008 and 2007. In
addition, a 25 basis point increase or decrease in the expected long-term rate of return on assets assumption would result in a plus or minus $0.1 million impact on pension expense.

The
cost of providing plan benefits also depends on demographic assumptions including retirements, mortality, turnover and plan participation. If actual experience differs from these
assumptions, the cost of providing these benefits could increase or decrease.



The Company measures compensation in accordance with SFAS No. 123(R) "Share-Based Payment," which requires compensation costs
related to share-based payments to be recognized in the

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Table of Contents

BUILDING MATERIALS CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 2. Summary of Significant Accounting Policies (Continued)

financial
statements. The Company measures compensation as the amount by which the Book Value (as defined in the Company's 2001 Long-Term Incentive Plan) of the incentive units covered by
the grant exceeds the option price or value specified of such incentive units at the date of grant. Changes, either increases or decreases, in the Book Value of those incentive units between the date
of grant and the measurement date result in a change in the measure of compensation for the right or award. See Note 15.



Comprehensive income (loss) and its components in the Company's consolidated financial statements include net income (loss), losses
from derivative instruments and hedging activities, net of tax effect, pension plan adjustments, net of tax effect, and postretirement plan adjustments, net of tax effect. The Company has disclosed
comprehensive income (loss) in the consolidated statements of stockholders' equity (deficit).

Changes
in the components of accumulated other comprehensive income (loss) for the years 2008, 2007 and 2006 are as follows:

Postretirement
Plan
Adjustment

Pension
Plan
Adjustment

Interest
Rate Swap
Adjustment

Treasury
Lock
Adjustment

Accumulated
Other
Comprehensive
Income (Loss)(Thousands)Balance, December 31, 2005

$


$
(5,410
)
$


$


$
(5,410
)Change for the year 2006, net of tax of $(3,197)


3,999


1,445








5,444Balance, December 31, 2006


3,999


(3,965
)







34Change for the year 2007, net of tax of $14,484


(389
)

(1,760
)

(18,588
)

(2,896
)

(23,633
)Balance, December 31, 2007


3,610


(5,725
)

(18,588
)

(2,896
)

(23,599
)Change for the year 2008, net of tax of $16,721


(500
)

(2,159
)

(25,093
)

470


(27,282
)Balance, December 31, 2008

$
3,110

$
(7,884
)
$
(43,681
)
$
(2,426
)
$
(50,881
)




Financial instruments which potentially subject the Company to a concentration of credit risk principally consist of cash equivalents,
trade receivables and the Company's derivative instruments. The Company places its temporary cash investments with highly-rated U.S. Government instruments, commercial paper of prime quality and
certain time deposits. To reduce credit risk, the Company performs periodic credit evaluations of its customers while monitoring the credit worthiness of its customers to which it extends credit, but
does not generally require advance payments or collateral. Concentration of credit risk with respect to trade receivables is generally limited other than to those significant customers as discussed in
Note 18, as the Company's remaining customer base is comprised of a large number of other individual customers. The terms and conditions of the Company's credit type sales are specifically
designed to mitigate concentration of credit risk with any single customer.

F-42

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Table of Contents

BUILDING MATERIALS CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 2. Summary of Significant Accounting Policies (Continued)

The
Company's long-term derivative instruments expose it to counterparty credit risk for nonperformance and to credit market risk related to changes in variable interest rates. The Company
manages its exposure to counterparty credit risk through diversification of counterparties and manages its variable interest rate risk through its fixed income interest rate swaps. See Note 13
for further discussion.



Certain reclassifications have been made to conform to current year presentation.

Note 3. Recent Accounting Pronouncements

In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for Financial Assets and Financial LiabilitiesIncluding an amendment of FASB Statement
No. 115" ("SFAS No. 159"), which permits entities to elect to measure specified financial instruments and warranty and insurance contracts at fair value on a
contract-by-contract basis, with changes in fair value recognized in earnings each reporting period. The election, called the "fair value option," will enable some companies to
reduce the volatility in reported earnings caused by measuring related assets and liabilities differently, and it is simpler than using the complex hedge-accounting provisions of SFAS No. 133
to achieve similar results. SFAS No. 159 applies to all entities and contains financial statement presentation and disclosure requirements for assets and liabilities reported at fair value as a
consequence of the election. SFAS No. 159 is expected to expand the use of fair value measurements for financial instruments and was effective for fiscal years beginning after
November 15, 2007. The Company adopted the provisions of SFAS No. 159 beginning January 1, 2008 and, upon adoption, did not elect the fair value option for items within the scope
of SFAS No. 159. Therefore, SFAS No. 159 did not have any impact on the Company's consolidated financial statements.

In
December 2007, the FASB issued SFAS No. 141 (revised 2007) "Business Combinations" ("SFAS No. 141R") which provides revised guidance on how an acquiring company should
recognize and measure the identifiable assets acquired, liabilities assumed, any noncontrolling interests, and goodwill acquired in a business combination. SFAS No. 141R also expands the
required disclosures related to the nature and financial statement effects of business combinations and is effective, on a prospective basis, for business combinations completed in fiscal years
beginning after December 15, 2008. The Company will adopt SFAS No. 141R for its fiscal year beginning January 1, 2009 and, therefore, will apply SFAS No. 141R prospectively
to any business combinations subsequent to that date.

In
December 2007, the FASB issued SFAS No. 160, "Noncontrolling Interests in Consolidated Financial Statements," ("SFAS No. 160"). SFAS No. 160 establishes
requirements for ownership interests in subsidiaries held by parties other than the Company (minority interests) be clearly identified and disclosed in the consolidated statement of financial position
within equity, but separate from the parent's equity. Any changes in the parent's ownership interests are required to be accounted for in a consistent manner as equity transactions and any
noncontrolling equity investments in deconsolidated subsidiaries must be measured initially at fair value. SFAS No. 160 is effective, on a prospective basis, for fiscal years beginning after
December 15, 2008, and upon adoption, the presentation and disclosure requirements must be retrospectively applied to comparative financial statements. The Company will adopt SFAS
No. 160 in its fiscal year beginning January 1, 2009, and the

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Table of Contents

BUILDING MATERIALS CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 3. Recent Accounting Pronouncements (Continued)

Company
does not expect the adoption to have any impact on its results of operations or financial position as it does not have any noncontrolling interests.

In
March 2008, the FASB issued SFAS No. 161, "Disclosures about Derivative Instruments and Hedging Activities" ("SFAS No. 161"), which amends SFAS No. 133 and is
intended to improve financial reporting related to derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity's
financial position, financial performance, and cash flows. The provisions of SFAS No. 161 are effective on a prospective basis for fiscal years beginning on or after November 15, 2008.
The Company will adopt the disclosure provisions of SFAS No. 161 for its fiscal year beginning January 1, 2009, which may increase disclosures in the financial statements related to the
Company's derivative instruments.

In
April 2008, the FASB issued FSP No. 142-3, "Determination of the Useful Life of Intangible Assets", ("FSP No. 142-3"), which amends the factors
an entity should consider in developing renewal or extension assumptions used in determining the useful life of recognized intangible assets under SFAS No. 142, "Goodwill and Other Intangible
Assets". This new guidance applies prospectively to intangible assets that are acquired individually or with a group of other assets in business combinations and asset acquisitions. FSP
No. 142-3 is effective for financial statements issued for fiscal years and interim periods beginning after December 15, 2008. Early adoption of FSP
No. 142-3 is prohibited. The Company will adopt the provisions of FSP No. 142-3 for its fiscal year beginning January 1, 2009 and is currently evaluating
the impact, if any, that FSP No. 142-3 will have on its financial statements.

In
May 2008, the FASB issued SFAS No. 162, "The Hierarchy of Generally Accepted Accounting Principles" ("SFAS No. 162"), which identifies the sources of accounting
principles and the framework for selecting principles to be used in the preparation and presentation of financial statements in accordance with United States generally accepted accounting principles.
SFAS No. 162 will be effective 60 days after the SEC approves the Public Company Accounting Oversight Board's amendments to Interim Audit Standards Section 411, "The Meaning of
Present Fairly in Conformity With Generally Accepted Accounting Principles." The Company will adopt the provisions and evaluate the impact of SFAS No. 162 upon its effective date.

In
December 2008, the FASB issued FSP No. 132(R)-1, "Employers Disclosures about Postretirement Benefit Plan Assets" ("FSP No. 132(R)-1"), which
provides additional guidance on an employers' disclosures about plan assets of a defined benefit pension or other post retirement plan. FSP No. 132(R)-1 is effective for financial
statements issued for fiscal years ending after December 15, 2009. The Company will adopt the provisions of FSP No. 132(R)-1 for its fiscal year beginning January 1,
2010, which will increase the disclosures in the financial statements related to the assets held by its defined pension and postretirement plans.

Note 4. Acquisition

On February 22, 2007, a subsidiary of BMCA acquired approximately 90% of Elk common shares at a purchase price of $43.50 per common share. On March 26, 2007, the Company
acquired the remaining Elk common shares in a second step merger in exchange for the right to receive $43.50 per share in cash, which resulted in Elk, which became an indirect wholly-owned subsidiary
of BMCA. The Company completed the acquisition at a purchase price of approximately $945.6 million, net of the repayment of $195.0 million of the then outstanding Elk senior notes, which
were assumed in connection with the acquisition and were repaid in March 2007.

F-44

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Table of Contents

BUILDING MATERIALS CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 4. Acquisition (Continued)

The
Company accounted for the Elk acquisition under the purchase method of accounting as prescribed by SFAS No. 141 "Business Combinations" ("SFAS No. 141"), which requires
the total purchase price to be allocated to the fair value of assets acquired and liabilities assumed based on their fair values at the date of acquisition, with amounts exceeding their fair value
being recorded as goodwill. During its first quarter ended March 30, 2008, the Company completed its purchase price allocation of the assets acquired and liabilities assumed from Elk (see table
below). The operating results of Elk are included in the Company's results of operations from the date of acquisition.

The
following table represents the final fair values of assets acquired and liabilities assumed related to the acquisition of Elk as of the date of acquisition with amounts paid in
excess of their fair values being recorded as goodwill.

Goodwill

$
588,850Intangible assets

$
214,420Total assets acquired

$
1,411,590Total liabilities assumed


(465,941
)Net assets acquired

$
945,649


During
the second quarter of 2007, the Company initiated a restructuring plan (the "2007 Restructuring Plan") (see Note 5), which it formulated in connection with the acquisition
of Elk. Also, in connection with the Elk acquisition and pursuant to SFAS No. 141 and Emerging Issues Task Force ("EITF") No. 95-3 "Recognition of Liabilities in Connection
with a Purchase Business Combination" ("EITF No. 95-3"), the Company identified $8.7 million in purchase accounting adjustments, which related to employee severance payments
to former Elk employees and lease termination expenses. As of December 31, 2008 and 2007, the Company paid an aggregate of $2.9 and $2.5 million for employee severance costs,
respectively, and $1.6 and $0.6 million for lease termination expenses, respectively. As of December 31, 2008, the Company expects to make approximately $4.2 million of aggregate
lease termination payments through 2019. The Company's employee severance payments included the termination of approximately 130 Elk employees, including certain management positions, in the
manufacturing and selling and administrative areas.

Note 5. Restructuring and Other Expenses

The 2007 Restructuring Plan was created to eliminate cost redundancies recognized due to the acquisition of Elk and to reduce the Company's current cost structure. The 2007 Restructuring
Plan has been fully implemented as of December 31, 2008. The Company accounts for its restructuring activities in accordance with SFAS No. 146, "Accounting for Costs Associated with Exit
or Disposal Activities," SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" and EITF No. 96-9 "Classification of Inventory Markdowns
and Other Costs Associated with Restructuring."

2007 Restructuring and Other Expenses

In connection with the acquisition of Elk, the Company identified $191.9 million in restructuring and other expenses in its
fiscal year ended December 31, 2007, of which $97.0 million related to property, plant and equipment write-downs at certain existing manufacturing facilities and $25.1 million
related to plant closing expenses. Restructuring and other expenses also included $2.0 million in

F-45

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Table of Contents

BUILDING MATERIALS CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 5. Restructuring and Other Expenses (Continued)

employee
severance payments and $67.8 million in integration-related expenses, which primarily consisted of $24.3 million of inventory-related write-downs, $15.1 million of
restructuring-related sales discounts, $1.4 million of lease termination expenses and $27.0 million of other integration expenses.

The
Company recorded $181.0 million of the aforementioned restructuring and other expenses in its statement of operations during its fiscal year ended December 31, 2007, of
which $15.1 million was reflected as a reduction in net sales due to restructuring-related sales discounts, $24.3 million was charged to cost of products sold and $141.6 million
was charged to restructuring and other expenses.

2008 Restructuring and Other Expenses

The Company identified an additional $64.1 million of restructuring and other expenses in its fiscal year ended
December 31, 2008, which included $14.2 million of plant closing expenses, $3.3 million in employee severance payments and $46.6 million in integration-related expenses.
Integration-related expenses primarily consisted of $26.9 million of inventory write-downs, $6.1 million of restructuring-related sales discounts and $13.6 million of other
integration expenses.

The
Company recorded $73.2 million of the identified restructuring and other expenses in its statement of operations during its fiscal year ended December 31, 2008, of
which $6.1 million was reflected as a reduction in net sales due to restructuring-related sales discounts, $26.9 million was charged to cost of products sold and $40.2 million was
charged to restructuring and other expenses. The Company expects to incur the remaining $1.8 million of identified integration and other expenses and to make the remaining cash payments related
to its accrual when they are required.

The
table below details the Company's restructuring and other expense accruals and charges made against the accrual during its fiscal year ended December 31, 2008:

Restructuring and Other Expenses

Plant
Closing
Expenses

Employee
Severance
Payments

Integration
Expenses

Total(Thousands)Beginning balance, as of December 31, 2007

$
2,905

$


$
10,945

$
13,850Current period costs, net


17,791


3,259


52,169


73,219Cash payments


(23,409
)

(3,259
)

(49,672
)

(76,340
)Amount related to property, plant and equipment for asset adjustments


6,228





(354
)

5,874Amount charged to write-off inventory


(63
)




(6,735
)

(6,798
)Non-cash items








(1,148
)

(1,148
)Ending balance, as of December 31, 2008

$
3,452

$


$
5,205

$
8,657


The
Company's aggregate employee severance payments included the termination of approximately 100 BMCA employees, including certain management positions, in the manufacturing and selling
and administrative areas.

Note 6. Goodwill

The Company evaluated the recoverability of goodwill for its roofing products and specialty building products and accessories reporting units. The Company's methodology included
evaluations using estimated future discounted cash flows, multiples of net sales and multiples of earnings before

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Table of Contents

BUILDING MATERIALS CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 6. Goodwill (Continued)

interest,
taxes, depreciation and the amortization of intangibles and other assets ("EBITDA"). The Company's analysis was completed for each of the reporting units to which the goodwill relates. If
the estimated range of fair values from the methodologies employed are less than the carrying value of the related reporting unit, impairment losses for goodwill are charged to results of operations.
In determining the estimated future discounted cash flows, the Company considered projected future levels of income, future business trends and market and economic conditions. The Company's analysis
related to multiples of net sales and EBITDA are based on related industry data. The Company prepared a SFAS No. 142 impairment analysis at December 31, 2008 and 2007 and determined that
no impairment existed.

The
carrying amount of goodwill was $653.6 and $655.2 million as of December 31, 2008 and 2007. Such goodwill amounts to $648.1 and $649.7 million for the roofing
products reporting unit and $5.5 and $5.5 million related to the specialty building products and accessories reporting unit as of December 31, 2008 and 2007, respectively.

Note 7. Intangible Assets

The Company accounts for its intangible assets in accordance with the provisions of SFAS No. 142. SFAS No. 142 requires disclosure of information relating to intangible
assets subsequent to their acquisition that was not previously reported, which includes disclosure concerning the changes in the carrying amount of intangible assets by major intangible asset class
for those assets subject to amortization and for those not subject to amortization. SFAS No. 142 also requires disclosure related to actual year-to-date intangible asset
amortization expense and the estimated intangible asset amortization expense for each of the next five years. As of December 31, 2008, the Company has not recorded any impairment losses related
to its intangible assets.

Intangible
assets consisted of the following:

December 31,
2008

December 31,
2007Amortization
Period

Gross
Carrying
Amount

Accumulated
Amortization

Net
Amount

Gross
Carrying
Amount

Accumulated
Amortization

Net
Amount(Thousands)Intangible Assets Subject to Amortization:Customer Relationships


20 yrs.

$
138,350

$
10,554

$
127,796

$
138,350

$
3,634

$
134,716Trademark/Trade Names


15-25 yrs.


50,200


3,169


47,031


50,200


1,118


49,082Core Technology


10 yrs.


23,200


3,525


19,675


23,200


1,205


21,995Roofing BacklogCurrent


1 yr


780


780





780


780


Computer Software


2 yrs.


190


142


48


190


48


142Total Intangible Assets Subject to Amortization




$
212,720

$
18,170

$
194,550

$
212,720

$
6,785

$
205,935Intangible Assets Not Subject to Amortization:Regulatory Permits


Indefinite


1,700





1,700


1,700





1,700Total Intangible Assets Not Subject to Amortization




$
1,700

$


$
1,700

$
1,700

$


$
1,700Intangible Assets, net




$
214,420

$
18,170

$
196,250

$
214,420

$
6,785

$
207,635


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Table of Contents

BUILDING MATERIALS CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 7. Intangible Assets (Continued)

The aggregate intangible asset amortization expense for the Company's fiscal years ended December 31, 2008 and 2007 was $11.4 and $6.8 million, respectively. The following
table summarizes, as of December 31, 2008, the amount of estimated amortization expense the Company expects to record in its statement of operations related to intangible assets for each of the
next five years and thereafter.

(Thousands)2009

$
11,3352010


11,2882011


11,2882012


11,2882013


11,288Thereafter


138,063Total

$
194,550


Note 8. Asbestos-related Bodily Injury Claims

In connection with its formation, the Company contractually assumed and agreed to pay the first $204.4 million of liabilities of its indirect parent, G-I Holdings, for
asbestos-related bodily injury claims relating to the inhalation of asbestos fiber contained in products sold by G-I Holdings or its predecessors ("Asbestos Claims"). As of
March 30, 1997, the Company paid all of its assumed liabilities for Asbestos Claims. G-I Holdings has agreed to indemnify the Company against any other existing or future Asbestos
Claims if asserted against the Company. In January 2001, G-I Holdings filed a voluntary petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code due to Asbestos
Claims. Most Asbestos Claims do not specify the amount of damages sought, and the value of the Asbestos Claims asserted against G-I Holdings is a contested issue in that bankruptcy, which
remains pending.

Claimants
in the G-I Holdings' bankruptcy, including judgment creditors, might seek to satisfy their claims by asking the Bankruptcy Court to require the sale of
G-I Holdings' assets, including its holdings of BMCA Holdings Corporation's common stock and its indirect holdings of the Company's common stock. Such action could result in a change of
control of the Company. In addition, those creditors may attempt to assert Asbestos Claims against the Company. (Approximately 1,900 Asbestos Claims were filed against the Company prior to
February 2, 2001.) The Company believes that it will not sustain any liability in connection with these or any other Asbestos Claims. On February 2, 2001, the United States Bankruptcy
Court for the District of New Jersey issued a temporary restraining order enjoining any existing or future claimant from bringing or prosecuting an Asbestos Claim against the Company. By oral opinion
on June 22, 2001, and written order entered February 22,
2002, the Bankruptcy Court converted the temporary restraints into a preliminary injunction, prohibiting the bringing or prosecution of any such Asbestos Claims against the Company.

On
February 7, 2001, G-I Holdings filed an action in the United States Bankruptcy Court for the District of New Jersey seeking a declaratory judgment that BMCA has no
successor liability for Asbestos Claims against G-I Holdings and that it is not the alter ego of G-I Holdings (the "BMCA Action"). One of the parties to this matter, the
Official Committee of Asbestos Claimants (the "creditors' committee"), subsequently filed a counterclaim against the Company seeking a declaration

F-48

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Table of Contents

BUILDING MATERIALS CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 8. Asbestos-related Bodily Injury Claims (Continued)

that
BMCA has successor liability for Asbestos Claims against G-I Holdings and that it is the alter ego of G-I Holdings. On May 13, 2003, the United States District
Court for the District of New Jersey overseeing the G-I Holdings' Bankruptcy Court withdrew the reference of the BMCA Action from the Bankruptcy Court. By order dated May 30, 2008,
the District Court dismissed the BMCA Action without ruling on the merits of BMCA's position that it has no successor liability for Asbestos Claims. The District Court ruled that a Federal court
declaratory judgment action was not the proper vehicle for resolving this issue. The District Court's ruling did not affect the preliminary injunction enjoining the prosecution of Asbestos Claims
against BMCA, and the Company believes that it does not have liability for Asbestos Claims. Nevertheless, it is not possible to predict the outcome of any subsequent litigation regarding the
continuation of the preliminary injunction and/or prosecution of Asbestos Claims against the Company.

On
or about February 8, 2001, the creditors' committee filed a complaint in the United States Bankruptcy Court, District of New Jersey against G-I Holdings and the
Company. The complaint requests substantive consolidation of BMCA with G-I Holdings or an order directing G-I Holdings to cause BMCA to file for bankruptcy protection. The
plaintiffs also filed for interim relief absent the granting of their requested relief described above. On March 21, 2001, the Bankruptcy Court denied plaintiffs' application for interim
relief. In November 2002, the creditors' committee, joined in by the legal representative of present and future holders of asbestos-related claims, filed a motion for appointment of a trustee in the
G-I Holdings' bankruptcy. In December 2002, the Bankruptcy Court denied the motion. The creditors' committee appealed the ruling to the United States District Court, which denied the
appeal on June 27, 2003. The creditors' committee appealed the denial to the Third Circuit Court of Appeals, which denied the appeal on September 24, 2004. The creditors' committee filed
a petition with the Third Circuit Court of Appeals for a rehearing of its denial of the creditors' committee's appeal, which was denied by the Court of Appeals on October 26, 2004.

On
July 7, 2004, the Bankruptcy Court entered an order authorizing the creditors' committee to commence an adversary proceeding against the Company and others challenging, as a
fraudulent conveyance, certain transactions entered into in connection with the Company's formation in 1994, in which G-I Holdings caused to be transferred to the Company all of its
roofing business and assets and in which the Company assumed certain liabilities relating to those assets, including a specified amount of liabilities for Asbestos Claims (the "1994 transaction"). The
Bankruptcy Court also permitted the creditors' committee to pursue a claim against holders of the Company's bank and bond debt outstanding in 2000, seeking recovery from them, based on the creditors'
committee's theory that the 1994 transaction was a fraudulent conveyance. On July 20, 2004, the creditors' committee appealed certain aspects of the Bankruptcy Court's order (and a
June 8, 2004 decision upon which the order was based). G-I Holdings, the holders of the Company's bank and bond debt and BMCA cross-appealed. The District Court entered an order on
June 21, 2006 affirming in part and vacating in part the Bankruptcy Court's July 7, 2004 order. Among other things, the District Court vacated that aspect of the Bankruptcy Court's order
authorizing the creditors' committee to pursue avoidance claims against the Company and the holders of the Company's bank and bond debt as of 2000. This issue has been remanded to the Bankruptcy Court
for further proceedings consistent with the District Court's opinion. By order dated August 22, 2008, the Bankruptcy Court stayed this authorization proceeding and other adversary proceedings
effective upon the filing of a Joint Plan of Reorganization by G-I Holdings, the creditors' committee and the legal representative of present and future holders of asbestos-related claims.
The Company believes the creditors' committee's avoidance claims are without merit and, in the

F-49

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Table of Contents

BUILDING MATERIALS CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 8. Asbestos-related Bodily Injury Claims (Continued)

event
the stay is terminated, the Bankruptcy Court should not permit the creditors' committee to pursue such claims against the Company and the holders of its bank and bond debt as of 2000.

The
Company has been advised by G-I Holdings that on August 12, 2008, G-I Holdings reached an agreement with the creditors' committee and the legal
representative of present and future holders of asbestos-related claims to jointly file a plan of reorganization with the Bankruptcy Court that will provide for settlement of Asbestos Claims
and all related litigation. The agreement is subject to a number of contingencies, but if the contingencies are met and the reorganization plan is confirmed, all of the actions described above will be
resolved. If the bankruptcy is not resolved, the Company and G-I Holdings intend to vigorously defend all litigations related thereto. A Joint Plan of Reorganization of G-I
Holdings was filed with the Bankruptcy Court on August 21, 2008, and a First Amended Joint Plan of Reorganization of G-I Holdings was filed with the Bankruptcy Court on
October 30, 2008. G-I Holdings filed a Second Amended Joint Plan of Reorganization of G-I Holdings with the Bankruptcy Court on December 3, 2008.

If
the reorganization plan is not confirmed and the Company is not successful in defending against one or more of the claims, the Company may be forced to file for bankruptcy protection
and/or contribute all or a substantial portion of its assets to satisfy the claims of G-I Holdings' creditors. Either of these events, or the substantive consolidation of G-I
Holdings and the Company, would weaken its operations and cause it to divert a material amount of its cash flow to satisfy the asbestos claims of G-I Holdings and may render it unable to
pay interest or principal on its Senior Secured Credit Facilities and Senior Notes (see Long-Term Debt below).

For
a further discussion with respect to the history of the foregoing litigation, and asbestos-related matters and other litigation, see Notes 2, 9, 12 and 18.

Note 9. Income Taxes

Income tax (expense) benefit, which has been computed on a separate return basis, consists of the following:

Year Ended December 31,2008

2007

2006(Thousands)Federal:Current

$
(1,846
)
$
884

$
(15,772
)Deferred


(29,378
)

76,955


(5,269
)Total Federal


(31,224
)

77,839


(21,041
)State and local:Current


3,773


(7,206
)

(6,055
)Deferred


40


3,679


2,498Total state and local


3,813


(3,527
)

(3,557
)Income tax (expense) benefit

$
(27,411
)
$
74,312

$
(24,598
)


F-50

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Table of Contents

BUILDING MATERIALS CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 9. Income Taxes (Continued)

The
differences between the income tax (expense) benefit computed by applying the statutory Federal income tax rate to pre-tax income (loss), and the income tax (expense)
benefit reflected in the consolidated statements of operations are as follows:

Year Ended December 31,2008

2007

2006(Thousands)Statutory (expense) benefit

$
(27,598
)
$
73,093

$
(22,172
)Impact of:State and local taxes, net of Federal benefits


2,200


(2,385
)

(2,312
)Other, net


(2,013
)

3,604


(114
)Income tax (expense) benefit

$
(27,411
)
$
74,312

$
(24,598
)


The
components of the net deferred tax liabilities are as follows:

December 31,2008

2007(Thousands)Deferred tax liabilities related to:Property, plant and equipment

$
(69,630
)
$
(51,700
)Intangible assets


(81,496
)

(85,264
)Total deferred tax liabilities


(151,126
)

(136,964
)Deferred tax assets related to:Expenses not yet deducted for tax purposes


95,803


79,083Net operating loss carryforwards


37,481


45,664Valuation allowance


(18,755
)

(10,635
)Carryover credits


2,818


Total deferred tax assets


117,347


114,112Net deferred tax liabilities


(33,779
)

(22,852
)Deferred tax assets reclassified to current assets


(39,324
)

(38,017
)Noncurrent deferred tax liabilities

$
(73,103
)
$
(60,869
)


Based
upon the level of historical taxable income, the reversal of temporary differences and projections for future taxable income over the period in which the Company's deferred tax
assets are deductible, the Company believes that it is more-likely-than-not that the Company will realize the benefits of its deductible temporary differences at
December 31, 2008 and 2007 and that a valuation allowance is not required with respect to the Federal net operating loss
carryforward (after-tax) of $14.7 million or Federal credit carryovers of $2.8 million. State net operating loss carryforwards (after-tax) of $4.0 million
and $3.1 million at December 31, 2008 and December 31, 2007 are net of a valuation allowance for separate Company state filings of $18.8 million and $10.6 million,
respectively.

As
of December 31, 2008 and 2007, the Company has included on its consolidated balance sheets a tax receivable from parent corporation of $8.4 and $10.0 million,
respectively, representing amounts paid in excess of amounts due to G-I Holdings with respect to 2006 under the Tax Sharing Agreement

F-51

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Table of Contents

BUILDING MATERIALS CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 9. Income Taxes (Continued)

(as
defined below). The Company expects to utilize the remaining receivable balance at December 31, 2008 during 2009. In addition, as of December 31, 2007, the Company included on its
consolidated balance sheet a tax receivable from the Internal Revenue Service (the "IRS") of $12.0 million related to the acquisition of Elk that was received in 2008.

The
Company and its subsidiaries entered into the Tax Sharing Agreement dated January 31, 1994 and later amended on March 19, 2001, with G-I Holdings, with
respect to the payment of Federal income taxes and related matters. During the term of the Tax Sharing Agreement, which is effective for the period during which the Company or any of its domestic
subsidiaries is included in a consolidated Federal income tax return for the G Holdings' consolidated tax group, the Company is obligated to pay G Holdings an amount equal to those Federal income
taxes it would have incurred if the Company, on behalf of itself and its domestic subsidiaries, filed its own Federal income tax return. Unused tax attributes will carry forward for use in reducing
amounts payable by the Company to G Holdings in future years, but cannot be carried back. The Company's unused tax attributes currently consist of a net operating loss carryforward of
$42.1 million, which will not expire until 2027. If the Company were to leave the G Holdings' consolidated tax group, it would be required to pay to G Holdings the value of any tax attributes
to which it would succeed under the consolidated return regulations to the extent the tax attributes reduced the amounts otherwise payable by the Company under the Tax Sharing Agreement. Under limited
circumstances, the provisions of the Tax Sharing Agreement could result in the Company having a greater liability under the agreement than it would have had if it and its domestic subsidiaries had
each filed its own separate Federal income tax return. Under the Tax Sharing Agreement, the Company and each of its domestic subsidiaries are responsible for any taxes that would be payable by reason
of any adjustment to the tax returns of G Holdings or its subsidiaries for years prior to the adoption of the Tax Sharing Agreement that relate to the Company's business or assets or the business or
assets of any of its domestic subsidiaries. Although, as a member of the G Holdings' consolidated tax group, the Company is severally liable for certain Federal income tax liabilities of the G
Holdings' consolidated tax group, including tax liabilities not related to its business, the Company should have no liability other than liabilities arising from the Company's operations and the
operations of its domestic subsidiaries and tax liabilities for tax years pre-dating the Tax Sharing Agreement that relate to the Company's business or assets and the business or assets of
any of its domestic subsidiaries. The Tax Sharing Agreement provides for analogous principles to be applied to any consolidated, combined or unitary state or local income taxes. Under the Tax Sharing
Agreement, G Holdings makes all decisions with respect to all matters relating to taxes of the G Holdings' consolidated tax group. The provisions of the Tax Sharing Agreement take into account both
the Federal income taxes the Company would have incurred if it filed its own
separate Federal income tax return and the fact that the Company is a member of the G Holdings' consolidated tax group for Federal income tax purposes.

On
September 15, 1997, G-I Holdings received a notice from the IRS of a deficiency in the amount of $84.4 million (after taking into account the use of net
operating losses and foreign tax credits otherwise available for use in later years) in connection with the formation in 1990 of Rhône-Poulenc Surfactants and Specialties, L.P.
(the "surfactants partnership"), a partnership in which G-I Holdings held an interest. On September 21, 2001, the IRS filed a proof of claim with respect to such deficiency against
G-I Holdings in the G-I Holdings' bankruptcy. If such proof of claim is sustained for years in which the Company was part of the G-I Holdings tax group, the Company
and/or certain of the Company's subsidiaries together with G-I Holdings and several current and former subsidiaries of G-I Holdings could be severally liable for those taxes
and interest. G-I Holdings has filed an objection

F-52

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Table of Contents

BUILDING MATERIALS CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 9. Income Taxes (Continued)

to
the proof of claim, which is the subject of an adversary proceeding pending in the United States District Court for the District of New Jersey. By opinion and order dated September 8, 2006,
the District Court ruled on the parties' respective motions for Partial Summary Judgment, granting the government summary judgment on the issue of "adequate disclosure" for statute of limitation
purposes and denying G-I Holdings summary judgment on its other statute of limitations defense (finding material issues of fact that must be tried). If the IRS were to prevail for the
years in which the Company and/or certain of its subsidiaries were not part of the G-I Holdings tax group, the Company nevertheless could be liable for approximately $40.0 million
in taxes plus interest, although this calculation is subject to uncertainty depending upon various factors including G-I Holdings' ability to satisfy its tax liabilities and the
application of tax credits and deductions. In an opinion dated June 8, 2007, the District Court decided that G-I Holdings cannot avail itself of the "binding contract" transitional
relief with respect to the 1999 distribution of U.S. Treasury Bonds to G-I Holdings. The Company believes that it will not be required to pay any incremental income tax to the Federal
government with respect to this matter and that its ultimate disposition will not have a material adverse effect on its business, financial position or results of operations.

The
Company adopted FIN 48 as of January 1, 2007 in a manner that is consistent with the provisions of FSP FIN 48-1, and, as a result of the adoption,
the Company reviewed certain tax positions and determined that it did not need to recognize any material adjustment to its tax accruals for uncertain tax positions upon the FIN 48 adoption
date. At December 31, 2008 and December 31, 2007, the Company had approximately $13.2 and $18.0 million, respectively, of unrecognized tax benefits excluding any Federal tax
benefit on unrecognized state tax benefits. All of the unrecognized tax benefits would affect the Company's effective tax rate if recognized.

A
reconciliation of the beginning and ending balances of unrecognized tax benefits is as follows:

2008

2007(Thousands)Balance, January 1

$
17,965

$
14,009Additions based on tax positions related to the current year





Additions for tax positions of prior years


2,410


4,097Reductions for tax positions of prior years


(3,369
)

Lapses in statute of limitations


(26
)

Settlements


(3,737
)

(141
)Balance, December 31

$
13,243

$
17,965


It
is reasonably possible that as a consequence of the settlement of certain state tax matters, the balance of unrecognized tax benefits may decrease by a range of $0.1 million to
$1.0 million during the next 12-month period.

In
August 2008, the Company paid $3.7 million in settlement of an outstanding state income tax matter related to tax years 1999 through 2006. In October 2008, the Company was
assessed interest and penalties related to the tax matter, which the Company paid during its fourth quarter ended December 31, 2008. The interest and penalties did not have a material effect on
the Company's statement of operations.

F-53

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Table of Contents

BUILDING MATERIALS CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 9. Income Taxes (Continued)

The
Company recognizes interest and/or penalties related to income tax matters in income tax expense. As of December 31, 2008 and December 31, 2007, the Company had $5.4
and $7.5 million, respectively, of accrued interest and penalties excluding any Federal tax benefit thereon.

The
Company and its subsidiaries are subject to United States Federal income tax as well as the income tax of multiple state jurisdictions. The Company has substantially concluded all
United States Federal income tax audit proceedings for years through 2004. The tax years 2005 through 2008 have not been examined by the IRS. Substantially all material state and local matters have
been concluded for tax years through 2001. The tax years 2002 through 2008 are subject to examination by the major state taxing jurisdictions to which the Company is subject.

Note 10. Inventories

At December 31, 2008 and 2007, $97.6 and $59.8 million, respectively, of inventories were valued using the LIFO method. Inventories as of December 31, 2008 and 2007
consist of the following:

December 31,2008

2007(Thousands)Finished goods

$
271,373

$
241,511Work-in process


41,225


26,291Raw materials and supplies


94,381


72,950Total


406,979


340,752Less LIFO reserve


(58,530
)

(23,840
)Inventories, net

$
348,449

$
316,912


Note 11. Property, Plant and Equipment

Property, plant and equipment consist of the following:

December 31,2008

2007(Thousands)Land and land improvements

$
54,268

$
56,690Buildings and building equipment


210,918


215,615Machinery and equipment


702,084


670,171Construction in progress


33,881


25,446Total


1,001,151


967,922Less accumulated depreciation and amortization


(345,882
)

(295,109
)Property, plant and equipment, net

$
655,269

$
672,813


F-54

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Table of Contents

BUILDING MATERIALS CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 11. Property, Plant and Equipment (Continued)

Included in the net book value of machinery and equipment at December 31, 2008 and December 31, 2007 was $54.1 and $62.0 million of assets under capital leases.
Depreciation expense for 2008, 2007 and 2006 was $72.4, $69.0 and $49.3 million, respectively, including amortization expense related to the Company's capital leases in 2008 and 2007. See
Note 12 for a description of the Company's sale-leaseback and capital lease transactions. See Note 5 for the write-down of property, plant and equipment included
in 2007 restructuring expenses.

During
2008, the Company sold manufacturing facilities in Hollister, California and Stockton, California; property in Fresno, California; a distribution center in Waxahachie, Texas; and
precious metals relating to its Nashville, Tennessee manufacturing facility.

Note 12. Long-Term Debt

Long-term debt consists of the following:

December 31,2008

2007(Thousands)8% Senior Notes due 2008

$


$
4,87473/4% Senior Notes due 2014


250,500


250,590Borrowings under the Senior Secured Revolving Credit Facility


76,000


122,000Term Loan


955,670


965,362Junior Lien Term Loan


325,000


325,000Obligations under capital leases


55,956


61,997Industrial development revenue bond


2,820


7,710Chester Loan


5,126


8,241Other notes payable


7,693


8,251Total


1,678,765


1,754,025Less current maturities


(20,596
)

(24,630
)Long-term debt less current maturities

$
1,658,169

$
1,729,395


On
February 22, 2007, BMCA and certain of its subsidiaries entered into the Senior Secured Revolving Credit Facility, the Term Loan, and a $325.0 million Bridge Loan
Facility, which was subsequently replaced by a $325.0 million Junior Lien Term Loan Facility (the "Junior Lien Term Loan") on March 15, 2007, and collectively with the Senior Secured
Revolving Credit Facility and the Term Loan (the "Senior Secured Credit Facilities"). The initial borrowings under the Senior Secured Credit
Facilities were used to finance the purchase of Elk, refinance certain of BMCA's then outstanding debt and repay all of Elk's then outstanding senior notes of $195.0 million, which occurred on
March 26, 2007.

All
amounts outstanding under the Senior Secured Revolving Credit Facility, which has a maturity date of February 2012, are secured by a first-priority perfected security interest in all
receivables, inventory, precious metals, deposit accounts and other current assets of BMCA and its domestic subsidiaries and all proceeds thereof (the "Senior Secured Revolving Credit Facility
Collateral").

F-55

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Table of Contents

BUILDING MATERIALS CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 12. Long-Term Debt (Continued)

Credit
availability under the Senior Secured Revolving Credit Facility is based upon eligible accounts receivable, inventory and precious metals used in the production of inventory, as
defined, and includes a sub-limit for letters of credit of $150.0 million. Loans under this facility bear interest at a variable rate based upon either the Base Rate or the
Eurodollar Rate as defined in the Senior Secured Revolving Credit Facility, at the borrowers' option, plus a specified margin in each case. These interest rates are recalculated periodically based on
changes in the Base Rate or Eurodollar Rate and also based on an availability-based pricing grid. The Senior Secured Revolving Credit Facility requires the Company to pay unused commitment fees. For
2008 and 2007, these commitment fees amounted to $0.6 and $0.7 million, respectively. The Senior Secured Revolving Credit Facility also provides for optional reductions by the Company in the
overall $600.0 million commitment, under certain conditions and provides for optional and mandatory pre-payments of borrowings outstanding under the facility, subject to certain
conditions. The Senior Secured Revolving Credit Facility also provides the borrowers with the ability to increase the size of the facility by up to $350.0 million, depending on the ability to
obtain commitments from lenders and meeting specified conditions.

All
amounts outstanding under the Term Loan, which has a maturity date of February 2014, are secured by (i) a first-priority perfected security interest in substantially all of
the assets and properties of BMCA and its domestic subsidiaries, other than the Senior Secured Revolving Credit Facility Collateral (the "Term Loan Collateral") and (ii) a second-priority
perfected security interest in the Senior Secured Revolving Credit Facility Collateral. Loans under this facility bear interest at a variable rate based upon either the Base Rate or Eurodollar Rate,
as defined in the Term Loan, at the borrowers' option, plus a specified margin in each case. These interest rates are recalculated periodically based on changes in the Base Rate and Eurodollar Rate,
if applicable. The Term Loan provides for optional and mandatory pre-payments under certain conditions and provides the borrowers with the ability to increase the size of the facility by
up to $250.0 million (less any increase in the Senior Secured Revolving Credit Facility in excess of $100.0 million), depending on the ability to obtain commitments from lenders and
meeting specified conditions.

All
amounts outstanding under the Junior Lien Term Loan, which has a maturity date of September 2014, are secured by (i) a second-priority perfected security interest in the Term
Loan Collateral and
(ii) a third-priority perfected security interest in the Senior Secured Revolving Credit Facility Collateral. Loans under this facility bear interest at a variable rate based upon either the
Base Rate or Eurodollar Rate, as defined in the Junior Lien Term Loan at the borrowers' option, plus a specified margin in each case. These interest rates are recalculated periodically based on
changes in the Base Rate or Eurodollar Rate, as applicable. The Junior Lien Term Loan also provides for optional and mandatory prepayments under certain conditions.

Under
the terms of the Company's Senior Secured Credit Facilities, the borrowers are subject to interest coverage ratio financial covenants and leverage ratio financial covenants, both
as defined. In addition, the borrowers are also required to comply with other customary covenants and various restrictive covenants, including with respect to incurring additional indebtedness or
guarantees, creating liens or other encumbrances, making capital expenditures, making restricted payments, including dividends and distributions to BMCA's parent corporations and making certain
investments. In the event of a change of control of BMCA, as defined, the maturity dates of the Company's Senior Secured Credit Facilities could be accelerated by the holders of that indebtedness.

F-56

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Table of Contents

BUILDING MATERIALS CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 12. Long-Term Debt (Continued)

On
February 22, 2007, as part of the Elk acquisition, BMCA repurchased approximately $97.5 million, or 97.5%, of the aggregate $100.0 million principal amount
outstanding of its 8% Senior Notes due 2007 ("2007 Notes") and $150.1 million, or 96.9%, of the aggregate $155.0 million principal amount outstanding of the 8% Senior Notes due 2008
("2008 Notes"). On October 15, 2007 and December 1, 2008, the Company redeemed all of the remaining $2.5 and $4.9 million outstanding 2007 Notes and 2008 Notes, respectively,
including accrued and unpaid interest on such notes through the date of redemption.

In
December 2007, the Company consummated a $30.0 and $15.0 million sale-leaseback, of certain machinery and equipment located at its Baltimore, Maryland and
Gainesville, Texas manufacturing facilities, respectively, which were accounted for as capital leases, as according to SFAS No. 13 "Accounting for Leases" ("SFAS No. 13"). The sale of
the Baltimore machinery and equipment resulted in a deferred gain of $24.7 million, of which $3.1 million was amortized into its statement of operations during its fiscal year ended
December 31, 2008 and the remaining amount will be amortized over the remaining life of the lease term. The Baltimore and Gainesville lease terms extend through December 2015 and December 2014,
respectively, with early buyout options in September 2012 and December 2013, respectively.

In
December 2007, the Company also consummated lease extensions of its original operating leases of certain machinery and equipment located at its Michigan City, Indiana and Shafter,
California manufacturing facilities, respectively, which were accounted for as capital leases, as according to SFAS No. 13. The Michigan City and Shafter lease terms extend through September
2016 and December 2015, respectively, with early purchase options in September 2014 and September 2012, respectively.

In
April 2008, the Company repurchased and retired $4.8 million of industrial development revenue bond certificates issued by the Company with respect to the Mount Vernon, Indiana
Industrial Development Revenue Bond issued in 1985. As of December 31, 2008, the Company had one remaining industrial development revenue bond certificate outstanding, which bears interest at a
floating rate, which ranged between 0.7% and 7.25% during 2008, and is secured by letters of credit under the Senior Secured Revolving Credit Facility.

In
July 2004, the Company issued $200.0 million in aggregate principal amount of 73/4% Senior Notes due 2014. In November 2004, the Company issued an additional
$50.0 million in aggregate principal amount of 73/4% Senior Notes due 2014 under an indenture dated July 2004, pursuant to which the Company previously issued its original
$200.0 million of 73/4% Senior Notes due 2014, collectively (the "Senior Notes"). These additional Senior Notes rank equally with and formed a part of a single series with such
original Senior Notes and have the same terms and conditions. The net proceeds from the issuance of the Senior Notes, after deducting the initial purchasers discounts, commission and offering expenses
and including the addition of the applicable premium on the Senior Notes issued in November 2004 were approximately $246.5 million. The original premium of approximately $0.9 million is
included in long-term debt, will be amortized over the life of the Senior Notes, and as of December 31, 2008 amortized to $0.5 million.

Under
the terms and conditions of the Senior Notes, the noteholders have the right under the indenture governing such notes to require the Company to purchase the Senior Notes at a price
of 101% of the principal amount thereof, plus any accrued and unpaid interest, in the event of a change of control, as defined in the Senior Notes. Upon the expiration of this right, the Company would
have the option to purchase the Senior Notes at a purchase price equal to 100% of the aggregate principal

F-57

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Table of Contents

BUILDING MATERIALS CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 12. Long-Term Debt (Continued)

amount,
plus the applicable premium, as defined in the Senior Notes, together with any accrued and unpaid interest. The Company also has the option to redeem some or all of the Senior Notes beginning
on August 1, 2009 through August 1, 2012, at specified redemption premiums, as defined in the Senior Notes. The Company's Senior Notes are secured by a first-priority lien on the Term
Loan Collateral and a second-priority lien on the Senior Secured Revolving Credit Facility Collateral, in each case, having equal priority with the lien securing its obligations under the Term Loan.

In
July 2003, the Company entered into a $19.7 million secured loan (the "Chester Loan"), with the proceeds being used to repay a $19.7 million obligation associated with
an early buyout option on a previously transacted capital lease on certain machinery and equipment at its Chester, South Carolina facility. The Chester Loan is secured by a sole security interest in
the machinery and equipment, matures in 2010, requires monthly payments of principal and interest commencing in August 2003 and bears a fixed annual interest rate of 7.41%.

As
of December 31, 2008, the Company had total outstanding consolidated indebtedness of $1,731.6 million, which included $52.8 million of demand loans to its parent
corporation and $20.6 million that matures prior to December 31, 2009. The Company's total outstanding consolidated indebtedness also included $76.0 million of borrowings
outstanding under its Senior Secured Revolving Credit Facility. The Company anticipates funding these obligations principally from its cash and cash equivalents on hand, cash flow from operations
and/or borrowings under its Senior Secured Revolving Credit Facility.

As
of December 31, 2008, the Company was in compliance with all covenants under the Senior Secured Revolving Credit Facility, the Term Loan, the Junior Lien Term Loan and the
indenture governing the Senior Notes. As of December 31, 2008, the net book value of the collateral securing the Senior Secured Revolving Credit Facility Collateral and the Term Loan Collateral
was $678.7 and $1,657.9 million, respectively.

At
December 31, 2008, the Company had outstanding letters of credit of approximately $43.1 million, which included approximately $10.6 million of standby letters of
credit related to certain obligations of G-I Holdings. During 2008, the Company paid $0.1 million as a distribution to our indirect parent corporation related to previously
outstanding standby letters of credit.

The
fair values of the Company's Term Loan, Junior Lien Term Loan and Senior Notes at December 31, 2008 and 2007 are based upon quoted market prices as follows:

December 31, 2008

December 31, 2007Carrying Amount

Fair Value

Carrying Amount

Fair Value(Thousands)2008 Notes

$


$


$
4,874

$
4,874Senior Notes


250,500


155,000


250,590


191,250Term Loan


955,670


573,402


965,362


810,904Junior Lien Term Loan


325,000


162,500


325,000


221,000


F-58

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Table of Contents

BUILDING MATERIALS CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 12. Long-Term Debt (Continued)

The
aggregate maturities of long-term debt as of December 31, 2008 for the next five years and thereafter are as follows:

Total

Senior
Secured
Revolving
Credit
Facility

Term
Loan

Junior
Lien
Term
Loan

Senior
Notes

Capital
Leases

Chester
Loan

Other(Thousands)2009

$
20,646

$


$
9,557

$


$


$
6,743

$
3,354

$
9922010


19,433





9,461








7,440


1,772


7602011


18,281





9,367








8,266





6482012


95,055


76,000


9,273








8,930





8522013


19,400





9,180








9,360





860Thereafter


1,505,950





908,832


325,000


250,000


15,217





6,901


Note 13. Fair Value Measurements

SFAS No. 157 establishes a valuation hierarchy that prioritizes the inputs used to measure fair value based on three defined levels or criteria. The hierarchy requires an entity
to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instruments categorization within the fair value hierarchy is based upon the
lowest level of input that is significant to the fair value measurement. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the reporting
entity's market assumptions. The
three levels of inputs that may be used to measure fair value are as follows:



The
following is a description of the Company's hedging activity and the valuation methodologies the Company implemented for instruments measured at fair value (swaps), as well as the
general classification of such instruments pursuant to the valuation hierarchy.



In March 2007, the Company entered into forward-starting interest rate swap agreements, with an effective date of April 23, 2007
and a maturity date of April 23, 2012. These swaps were initiated in order to hedge the interest rate risk associated with the Company's Term Loan, and they are structured that the Company
receives interest based on three-month LIBOR and pays interest on a fixed rate basis. In October 2007, the Company entered into additional interest rate swaps related to its Term Loan with an
effective date of October 23, 2007 and a maturity date of October 23, 2012 under similar terms.

The
Company accounts for its swaps in accordance with SFAS No. 133, and as such its swaps are treated as cash flow hedges. As of December 31, 2008, based on SFAS
No. 157 Level 2 inputs, the

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Table of Contents

BUILDING MATERIALS CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 13. Fair Value Measurements (Continued)

Company
recognized a fair value liability on its interest rate swaps of $70.5 million, to other non-current liabilities (see table below), while the offset was recognized to other
comprehensive loss, net of tax of $26.8 million. During 2008, the Company recorded $12.8 million of net interest expense related to its swaps in its statement of operations. For fiscal
year ending December 31, 2009, the Company estimates approximately $18.2 million will be reclassified from accumulated other comprehensive loss and recognized into interest expense in
its statement of operations, subject to changes in the LIBOR rate. This estimated amount will be approximately offset by lower interest expense associated with the Company's Term Loan. Additional
future amounts may be reclassified from accumulated other comprehensive loss to interest expense if any portion of the Company's swaps become ineffective. The Company does not anticipate that any
amount recorded in accumulated other comprehensive loss related to its swaps will be reclassified during its fiscal year ending December 31, 2009 due to ineffectiveness.



In July 2007, the Company entered into treasury locks with a maturity date of July 31, 2012, as additional hedging instruments
related to its Term Loan. On October 30, 2007, the Company settled its open treasury lock hedging positions, which resulted in a pre-tax fair value loss and cash settlement of
approximately $4.9 million, which is being amortized into its statement of operations over the life of the Term Loan pursuant to SFAS No. 133. The Company amortized $0.8 million
of the loss related to its treasury locks into interest expense in its statement of operations during its fiscal year ended December 31, 2008 and will amortize $0.8 million annually
through July 2012.



The Company values its interest rate swap agreements based on Level 2 inputs from model-derived valuations whose significant
inputs are quoted LIBOR contracts, Eurodollar futures and on-the-run swap markets. SFAS No. 157 requires that the valuation of derivative assets and liabilities must
take into account the parties' nonperformance risk. The Company discounted the value of its derivative liabilities based on credit spread for its debt as determined by the market trading price.

The
following table summarizes the financial instruments measured at fair value as of December 31, 2008:

Total
Measured at
Fair Value

Quoted Prices
In Active
Markets for
Identical
Assets
(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)(Millions)Liabilities:Fixed-income interest rate swap agreements

$
70.5

$


$
70.5

$
Total liabilities

$
70.5

$


$
70.5

$



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Table of Contents

BUILDING MATERIALS CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 14. Benefit Plans

Eligible, full-time employees of the Company are covered by various benefit plans, as described below.



The Company provides a defined contribution plan for eligible salaried employees. The Company contributes up to 7% of participants'
compensation, as defined, and also contributes fixed amounts, ranging from $50 to $750 per year depending on age, to the accounts of participants who are not covered by a Company-provided
postretirement medical benefit plan. Under the terms of the defined contribution plan the Company can, at its discretion, terminate the fixed contribution portion of the plan. Effective
January 1, 2009, the Company elected to terminate the fixed amount portion of the plan and adjusted eligible participant's compensation to reflect the termination of these benefits. The
aggregate contributions by the Company were $6.6, $6.8 and $7.0 million for 2008, 2007 and 2006, respectively.

The
Company provides a defined contribution plan for eligible hourly employees. The Company contributes a discretionary matching contribution ranging between 0% and 50% of each
participant's eligible contributions each year up to a maximum range of either $250 to $6,600 or 3% to 6% of salary, whichever is greater, for each participant, as defined. Certain participants also
receive a contribution equal to 3.5% of their annual compensation regardless of whether the participants participate in the plan. Such contributions were $0.9, $1.0 and $1.1 million for 2008,
2007 and 2006, respectively.

In
connection with the acquisition of Elk, the Company adopted the Elk 401(k) Plan. Under the Elk 401(k) Plan, the Company may contribute a percentage of each Elk participant's annual
compensation into the Elk 401(k) Plan to be invested among various defined alternatives at the participants' direction. Employees are vested immediately in the Company's matching contributions. All
full-time Elk employees, except those covered by plans established through collective bargaining agreements, are eligible for participation upon date of hire.

The
Company contributes a 3% basic contribution and an additional $.50 for every $1.00 of employee contributions into the Elk 401(k) Plan limited to a maximum matching Company
contribution of 2% of an employee's eligible compensation. The aggregate contributions by the Company for 2008 were $3.6 million.

Beginning
January 1, 2009 the Elk 401(k) Plan was liquidated and merged with the Company's existing defined contribution plan for eligible salaried employees and
re-named the GAF Materials Corporation 401(k) Plan. There were no material changes to the provisions of the Company's existing defined contribution plan for salaried employees, as
discussed above.



The Company provides a noncontributory defined benefit retirement plan for certain hourly and salaried employees (the "Retirement
Plan"). Benefits under these plans are based on stated amounts for each year of service. The Company's funding policy is consistent with the minimum funding requirements of the Employee Retirement
Income Security Act of 1974.

In
September 2006, the FASB issued SFAS No. 158, which requires the net amount by which the defined-benefit or postretirement obligation plan is over or underfunded to be reported
on a company's balance sheet. The funded status amount to be recognized by SFAS No. 158 is measured as the difference between the fair value of plan assets and the plan's benefit obligation,
with the benefit

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Table of Contents

BUILDING MATERIALS CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 14. Benefit Plans (Continued)

obligation
including all actuarial gains and losses, prior service cost, and any remaining transition amounts. SFAS No. 158 does not change the components of net periodic benefit cost. All
items previously deferred when applying SFAS Nos. 87 and 106 are now recognized as a component of accumulated other comprehensive income (loss), net of all applicable taxes. SFAS No. 158
also requires a fiscal year-end measurement date of plan assets and benefit obligations, eliminating the use of an earlier measurement date, which became effective for fiscal years ending
after December 15, 2008. All other aspects of SFAS No. 158 were effective as of December 31, 2006. The Company's adoption of SFAS No. 158 during its fourth quarter of
fiscal year ended December 31, 2006 did not have a material impact on its consolidated financial statements. See tables below.

The
Company's net periodic pension cost for the Retirement Plan included the following components:

Year Ended December 31,2008

2007

2006(Thousands)Service cost

$
1,321

$
1,694

$
1,507Interest cost


2,439


2,275


2,095Expected return on plan assets


(3,167
)

(3,302
)

(2,990
)Amortization of unrecognized prior service cost


13


39


39Amortization of net losses from earlier periods


432


201


360Net periodic pension cost

$
1,038

$
907

$
1,011


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Table of Contents

BUILDING MATERIALS CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 14. Benefit Plans (Continued)

The
following tables set forth, for the years 2008 and 2007, reconciliations of the beginning and ending balances of the benefit obligation, fair value of plan assets, funded status and
amounts recognized in the consolidated balance sheets related to the Retirement Plan. The Company uses a December 31 measurement date for its retirement plan.

December 31,2008

2007(Thousands)Change in benefit obligation:Benefit obligation at beginning of year

$
(39,842
)
$
(38,461
)Service cost


(1,321
)

(1,694
)Interest cost


(2,439
)

(2,275
)Actuarial gain (loss)


(5
)

1,135Benefits paid


1,628


1,453Benefit obligation at end of year

$
(41,979
)
$
(39,842
)Change in plan assets:Fair value of plan assets at beginning of year

$
33,470

$
35,046Actual return on plan assets


(756
)

(909
)Employer contributions


1,330


786Benefits paid


(1,628
)

(1,453
)Fair value of plan assets at end of year

$
32,416

$
33,470Amounts recognized in consolidated balance sheets under SFAS No. 158:Noncurrent liabilities

$
(9,563
)
$
(6,372
)Net amount recognized in consolidated balance sheets under SFAS No. 158

$
(9,563
)
$
(6,372
)


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Table of Contents

BUILDING MATERIALS CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 14. Benefit Plans (Continued)

December 31,2008

2007(Thousands)Amounts recognized in other comprehensive loss under SFAS No. 158:Net actuarial loss

$
12,524

$
9,029Prior service cost


89


102Total

$
12,613

$
9,131




December 31,2008

2007(Thousands)Other changes in plan assets and benefit obligations recognized in other comprehensive loss:Net actuarial loss

$
3,927

$
3,078Recognized actuarial loss


(432
)

(201
)Recognized prior service cost


(13
)

(39
)Total recognized in other comprehensive loss


3,482


2,838Total recognized in net periodic cost and other comprehensive loss

$
4,521

$
3,745


The
accumulated benefit obligation for the Retirement Plan was $42.0 and $39.8 million at December 31, 2008 and 2007, respectively.

Information
on actual and future expected benefit payments related to the Retirement Plan follows:

Actual benefit payments

(Thousands)2006

$
1,0382007


1,4532008


1,628




Future expected benefit payments2009

$
1,7582010


1,9042011


2,0822012


2,2892013


2,5102014 through 2018


15,722


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Table of Contents

BUILDING MATERIALS CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 14. Benefit Plans (Continued)

Year ended December 31,2009
Expected

2008
Actual

2007
Actual

2006
Actual(Thousands)Employer contributions:Required

$
4.2

$
1.3

$
0.8

$
Additional discretionary











Total

$
4.2

$
1.3

$
0.8

$



Weighted-average
assumptions:

December 31,2008

2007Discount rate:As of January 1 (for determining net periodic pension cost for years ended December 31)


6.25
%

6.00
%As of December 31 (for determining projected benefit obligation at December 31)


6.25
%

6.25
%Expected return on plan assets


9.50
%

9.50
%Rate of compensation increase


N/A


N/A


The
following table highlights the sensitivity of the Company's pension obligations and expense to changes in assumptions related to the Retirement Plan:

Impact on
Pension
Expense

Impact on
Projected Benefit
Obligation(Thousands)Change in Assumption:25 basis point increase in discount rate

$
-150.0

$
-1,500.025 basis point decrease in discount rate


+150.0


+1,500.025 basis point increase in rate of return on assets


-80.0


N/A25 basis point decrease in rate of return on assets


+80.0


N/A


At
December 31, 2008 and 2007, the asset allocations for the Retirement Plan, by asset category, are as follows:

Plan Assets at December 31,Asset Category:

2009 Target

2008 Actual

2007 ActualEquity securities


40-60
%

43
%

45
%Fixed income securities


25-50
%

26
%

35
%Cash and equivalents


5-20
%

27
%

18
%Other


0-10
%

4
%

2
%Total





100
%

100
%


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Table of Contents

BUILDING MATERIALS CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 14. Benefit Plans (Continued)

With
the assets in the Retirement Plan, the Company invests primarily in market-neutral absolute-return strategies which serve to minimize volatility while providing consistent positive
returns and preserving capital. These investments include both equity and fixed income securities and may incorporate the use of options, futures and other financial instruments. Implementation of
this policy involves investments with outside managers who have expertise in these strategies.

The
Company also provides a nonqualified defined benefit retirement plan for certain key employees. Expense for this plan was not significant for 2008, 2007 and 2006. The liability
related to this plan was $1.2 and $1.2 million at December 31, 2008 and 2007, respectively, and is included within other liabilities.



The Company generally does not provide postretirement medical and life insurance benefits, although it subsidizes life insurance
benefits for certain employees and retirees. Such subsidies were reduced or ended as of January 1, 1997. Effective March 1, 2005, the Company amended the plan eliminating postretirement
medical benefits affecting all current and future retirees.

Net
periodic postretirement benefit cost included the following components:

Year Ended December 31,2008

2007

2006(Thousands)Service cost

$
9

$
14

$
13Interest cost


115


118


122Amortization of unrecognized prior service cost


(570
)

(570
)

(619
)Amortization of net gains from earlier periods


(232
)

(231
)

(237
)Net periodic postretirement benefit

$
(678
)
$
(669
)
$
(721
)


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Table of Contents

BUILDING MATERIALS CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 14. Benefit Plans (Continued)

The following table sets forth, for the years 2008 and 2007, reconciliations of the beginning and ending balances of the postretirement benefit obligation, funded status and amounts
recognized in the consolidated balance sheets related to postretirement medical and life insurance benefits. The Company uses a December 31 measurement date for its postretirement medical and
life insurance plan.

December 31,2008

2007(Thousands)Change in benefit obligation:Benefit obligation at beginning of year

$
(1,962
)
$
(2,105
)Service cost


(9
)

(14
)Interest cost


(115
)

(118
)Actuarial gain (loss)


(3
)

174Benefits paid, net of participant contributions


227


101Benefit obligation at end of year

$
(1,862
)
$
(1,962
)Change in plan assets:Fair value of plan assets at beginning of year

$


$
Employer contributions


227


101Participant contributions


5


10Benefits paid


(232
)

(111
)Fair value of plan assets at end of year

$


$
Reconciliation of funded status:Funded status

$
(1,862
)
$
(1,962
)Net amount recognized in consolidated balance sheetsas accrued benefit cost

$
(1,862
)
$
(1,962
)Amounts recognized in consolidated balance sheets under SFAS No. 158:Noncurrent assets

$


$
Current liabilities


(204
)

(203
)Noncurrent liabilities


(1,658
)

(1,759
)Net amount recognized in consolidated balance sheets under SFAS No. 158

$
(1,862
)
$
(1,962
)Amounts recognized in other comprehensive income (loss) under SFAS No. 158:Net actuarial gain

$
(2,572
)
$
(2,808
)Prior service cost


(2,342
)

(2,912
)Total

$
(4,914
)
$
(5,720
)


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Table of Contents

BUILDING MATERIALS CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 14. Benefit Plans (Continued)

December 31,2008

2007(Thousands)Other changes in plan assets and benefit obligations recognized in other comprehensive lossNet actuarial (gain) loss

$
3

$
(174
)Recognized actuarial gain


232


231Recognized prior service credit


571


570Total recognized in other comprehensive loss


806


627Total recognized in net periodic (benefit) cost and other comprehensive loss

$
128

$
(42
)


The
Company's postretirement medical and life insurance plan is unfunded. Benefits are paid from the Company's cash flows from operations as they are incurred. The Company expects to
contribute approximately $0.2 million to the plan in 2009, which are related to postretirement life insurance expenses. Information on actual and future expected benefit payments related to the
postretirement medical and life insurance plan follows:

Actual benefit payments

(Thousands)2006

$
1802007


1112008


232Future expected benefit payments2009

$
2112010


2052011


1982012


1902013


1812014 through 2018


755


For
purposes of calculating the accumulated postretirement benefit obligation, the following assumptions were made. Retirees as of December 31, 2004 who were formerly salaried
employees (with certain exceptions) were assumed to receive a Company subsidy of $700 to $1,000 per year. For retirees over age 65, this subsidy may be replaced by participation in a managed care
program. With respect to retirees who were formerly hourly employees, most such retirees are subject to a $5,000 per person lifetime maximum benefit. Effective March 1, 2005, the Company
amended the plan eliminating postretirement retiree medical benefits affecting all current and future retirees.

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Table of Contents

BUILDING MATERIALS CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 14. Benefit Plans (Continued)

Weighted-average
assumptions:

December 31,2008

2007Discount rate:As of January 1 (for determining net periodic benefit cost for years ended December 31)


6.25
%

6.00
%As of December 31 (for determining postretirement benefit obligation)


6.25
%

6.25
%


Note 15. 2001 Long-Term Incentive Plan and Preferred Stock Option Plan

On January 1, 1996, the Company established the BMCA Preferred Stock Option Plan (the "1996 Plan") to issue options to certain employees to purchase shares of redeemable
convertible preferred stock ("Preferred Stock") of the Company, exercisable at a price of $100 per share. Each share of Preferred Stock was convertible, at the holder's option, into shares of common
stock of the Company at a formula price based on Book Value (as defined in the option agreement) as of the date of grant. The options vested ratably over five years and expired after nine years.
Dividends would accrue on the Preferred Stock from the date of issuance at the rate of 6% per annum. The Preferred Stock was redeemable, at the Company's option, for a redemption price equal to $100
per share plus accrued and unpaid dividends. The Preferred Stock, and common stock issuable upon conversion of Preferred Stock into common stock, was subject to repurchase by the Company under certain
circumstances, at a price equal to current Book Value (as defined in the option agreement). The exercise price of the options to purchase Preferred Stock was equal to the estimated fair value per
share of the Preferred Stock at the date of grant. As of December 31, 2008, shares or options to purchase 400,000 shares of Preferred Stock remain available for future grant under the 1996
Plan. No shares or options were granted in 2008, 2007 and 2006.

Effective
December 31, 2000, the Company adopted the 2001 Long-Term Incentive Plan (the "2001 LTIP"), which allowed employees participating in the 1996 Plan to also
participate in the 2001 Long-Term Incentive Plan. During 2001, all employees exchanged their preferred stock options for incentive plan units effective as of December 31, 2000. The
2001 Long-Term Incentive Plan authorizes the grant of incentive units ("Incentive Units") to eligible employees. The 2001 Long-Term Incentive Plan is administered by a
Committee appointed by the Board of Directors. The number of Incentive Units granted is determined by the Committee in its sole discretion. Generally, Incentive Units vest cumulatively, in 20%
increments over five years. The Committee, in its sole discretion, may issue options with any vesting schedule, other than normally provided in the 2001 Long-Term Incentive Plan. Vesting
will end upon the termination of an employee's employment with the Company or any subsidiary for any reason. If, after a change in control of the Company, as defined in the 2001 LTIP, an employee's
employment is terminated within twelve months of the change of control by the Company for any reason other than Good Cause, as defined in the 2001 LTIP, as a result of death or permanent disability,
or by the employee for Good Reason, as defined in the 2001 LTIP, all Incentive Units will become fully and immediately vested. Vested Incentive Units are exercised on the earlier of: (i) the
sixth anniversary of the date the Incentive Unit was granted; (ii) a specified date elected by an employee; and (iii) either one year after the employee's termination of employment with
the Company

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Table of Contents

BUILDING MATERIALS CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 15. 2001 Long-Term Incentive Plan and Preferred Stock Option Plan (Continued)

due
to retirement, or the date of the employee's termination of employment for reasons other than due to retirement.

The
value of Incentive Units is calculated at the end of each fiscal quarter based on Book Value (as defined in the 2001 LTIP) at that date less the Book Value as of the date of grant
divided by 1,000,010. Upon exercise of an Incentive Unit, a participant receives in cash the excess, if any, of the value of such Incentive Unit as of the end of the fiscal quarter immediately
proceeding the exercise date (except in the event the exercise is within thirty days of the end of a fiscal quarter, in which case the value will be calculated as of the end of such fiscal quarter),
over the initial value of such Incentive Unit, subject to all appropriate income tax withholdings. Accordingly, the dollar value of future payouts is not readily ascertainable.

The
2001 Long-Term Incentive Plan was to terminate five years after its effective date of December 2000. In December 2005, the Committee exercised its rights to amend the
2001 LTIP, and extended the term of the 2001 LTIP through December 2007. In December 2007, the Committee further extended the term of the 2001 LTIP through December 2009. In December 2008, the
Committee amended the 2001 LTIP to eliminate the termination date provision allowing the Committee to terminate the 2001 LTIP at its discretion.

The
following is a summary of activity for incentive units related to the 2001 Long-Term Incentive Plan:

Year Ended December 31,2008

2007

2006Incentive Units outstanding, January 1,


99,120


98,633


146,814Granted


17,375


45,589


6,200Exercised


(18,686
)

(38,387
)

(41,087
)Forfeited


(7,341
)

(6,715
)

(13,294
)Incentive Units outstanding, December 31,


90,468


99,120


98,633Vested Units outstanding, December 31,


33,702


38,750


55,753


The
initial value of the 17,000 incentive units granted on January 1, 2008 was $592.01, and the 375 incentive units granted on October 1, 2008 was $687.97.
The initial value of the 8,000 incentive units granted on July 2, 2007 and the 37,589 incentive units granted on January 1, 2007 was $589.43 and $583.08, respectively. The initial value
of the 800 incentive units granted on July 1, 2006 and the 5,400 incentive units granted on January 1, 2006 was $569.74 and $534.19, respectively.

Compensation
expense for such Incentive Units was $8.5, $1.2 and $6.4 million in 2008, 2007 and 2006, respectively. At December 31, 2008 and 2007, the 2001
Long-Term Incentive Plan liability amounted to $12.9 and $9.7 million respectively, and was included in accrued liabilities.

Note 16. Business Segment Information

The Company is a leading national manufacturer and marketer of a broad line of asphalt and polymer-based roofing products and accessories for the residential and commercial roofing
markets. The Company also manufactures specialty building products and accessories for the professional and do-it-yourself remodeling and residential construction industries.
The residential roofing product line consists of laminated and asphalt strip shingles. Sales of residential roofing products in 2008, 2007 and

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Table of Contents

BUILDING MATERIALS CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 16. Business Segment Information (Continued)

2006
were $2,133.9, $1,727.9 and $1,451.4 million and represented approximately 78%, 75% and 74%, respectively, of the Company's net sales and included in 2008 and 2007, $6.1 and
$15.1 million, respectively, of restructuring-related sales discounts. The Company's commercial roofing product line includes a full line of modified bitumen and asphalt built-up
roofing products, thermoplastic polyolefin products, liquid applied membrane systems and roofing accessories for use in the application of commercial roofing systems. Sales of commercial roofing
products and accessories in 2008, 2007 and 2006 were $479.0, $439.8 and $442.2 million and represented approximately 17%, 19% and 22%, respectively, of the Company's net sales. Sales of
specialty building products and accessories products in 2008, 2007 and 2006 were $136.0, $142.4 and $75.6 million and represented approximately 5%, 6% and 4%, respectively, of the Company's net
sales.

The
Company aggregates the residential and commercial product lines into one operating segment since they have similar economic characteristics and are similar in each of the following
areas: (i) the nature of the products and services are similar in that they perform the same functionthe protection and covering of residential and commercial roofs;
(ii) the nature of the production processes are similar; (iii) the type or class of customer for their products and services is similar; (iv) the residential and commercial
products have the same distribution channels, whereby the main customers are wholesalers or distributors; and (v) regulatory requirements are generally the same for both the residential and
commercial product lines. The specialty building products and accessories products did not meet quantitative thresholds in 2008, 2007 and 2006 to be considered as a reportable segment.

Note 17. Related Party Transactions

Included in the consolidated balance sheets are the following receivable (payable) balances with related parties, which arise from operating and financing transactions between the
Company and its affiliates:

December 31,2008

2007(Thousands)Tax receivable from parent corporation

$
8,400

$
10,016Payable to related parties

$
(21,153
)
$
(16,133
)Loans payable to parent corporation

$
(52,840
)
$
(52,840
)Loans receivable from parent corporation, included in Stockholders' Equity

$
56,348

$
56,224


The
Company makes loans to, and borrows from, its parent corporations from time to time at interest rates ranging from 3.25% to 7.25% in 2008. At December 31, 2008
and 2007, BMCA Holdings Corporation owed the Company $56.3 and $56.2 million, including interest of $1.1 and $1.0 million, respectively, and the Company owed BMCA Holdings Corporation
$52.8 and $52.8 million, respectively, with no unpaid interest. Interest income on the Company's loans to BMCA Holdings Corporation amounted to $3.4, $5.0 and $4.9 million in 2008, 2007
and 2006, respectively. Interest expense on the Company's loans from BMCA Holdings Corporation amounted to $3.3, $4.8 and $4.7 million in 2008, 2007 and 2006, respectively. Loans payable
to/receivable from its parent corporations are due on demand and provide each party with the right of offset of its related obligation to the other party and are subject to limitations as outlined in
the Senior Secured Revolving Credit

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Table of Contents

BUILDING MATERIALS CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 17. Related Party Transactions (Continued)

Facility,
the Term Loan, the Junior Lien Term Loan and the Senior Notes. Under the terms of the Senior Secured Revolving Credit Facility and the indenture governing the Company's Senior Notes at
December 31, 2008, the Company could repay demand loans to its parent corporation amounting to $52.8 million, subject to certain conditions.

During
2008 and 2006, after giving effect to the most restrictive of the aforementioned debt covenant restrictions, the Company declared and paid cash dividends of $7.5 and
$15.0 million, respectively, to its parent corporation. In 2007, the Company did not declare or pay a cash dividend to its parent corporation.

As
of December 31, 2008 and 2007, the Company has included on its consolidated balance sheets a tax receivable from parent corporation of $8.4 and $10.0 million,
respectively, representing amounts paid in excess of amounts due to G-I Holdings with respect to 2006 under the Tax Sharing Agreement. The Company expects to utilize the remaining
receivable balance at December 31, 2008 during 2009. See Notes 9 and 18.

Mineral Products:The Company and its subsidiaries purchased a substantial portion of their headlap roofing granules, colored roofing
granules and
algae-resistant granules, on a purchase order basis, from ISP Minerals Inc. ("ISP Minerals"), an affiliate of BMCA and an affiliate of International Specialty Products Inc. and its
subsidiaries ("ISP"), which is also an affiliate of BMCA. The amount of mineral products purchased each year on this basis is based on current demand and is not subject to minimum purchase
requirements. For the years ended December 31, 2008 and 2007, the Company and its subsidiaries purchased $40.6 and $10.5 million, respectively, of roofing granules under this
arrangement.

In
addition to the granules products purchased by the Company, under the above purchase order basis, the balance of its granules requirements are purchased under a contract expiring in
2013. The amount of mineral products purchased each year under the contract is based on current demand and is not subject to minimum purchase requirements. Under the contract, for the years ended
December 31, 2008 and 2007, the Company purchased $83.2 and $95.8 million of roofing granules, respectively.

Management Agreements:Pursuant to a management agreement, a subsidiary of ISP provides certain general management, administrative,
legal and
facilities services to the Company, including the use of the Company's headquarters in Wayne, New Jersey. Charges to the Company by ISP for these services under the management agreement, inclusive of
the services provided to G-I Holdings, discussed below, aggregated to $7.3, $6.7 and $6.1 million for 2008, 2007 and 2006, respectively. These charges consist of management fees and
other reimbursable expenses attributable to the Company, or incurred by ISP for the benefit of the Company. The amount payable to ISP for management fees as of December 31, 2008 and 2007 was
$0.9 and $0.5 million, respectively, and is included in payable to related parties in the consolidated balance sheets. The management agreement also provides that the Company is responsible for
providing management services to G-I Holdings and certain of its subsidiaries and that G-I Holdings pay to the Company a management fee for these services. The aggregate amount
paid by G-I Holdings to the Company for services rendered under the management agreement in 2008, 2007 and 2006 was approximately $0.9, $0.8 and $0.9 million, respectively. The
Company also allocates a portion of the management fees payable by the Company under the management agreement as lease payments for the use of the Company's headquarters.

Tax Sharing Agreement:See Note 9.

F-72

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Table of Contents

BUILDING MATERIALS CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 18. Commitments and Contingencies

The Company's parent corporations, G-I Holdings and BMCA Holdings Corporation, are essentially holding companies without independent businesses or operations. G-I
Holdings and BHC are presently dependent upon the earnings and cash flows of their subsidiaries, principally the Company, in order to satisfy their net obligations, including various tax and other
claims and liabilities (net of certain insurance receivables), including tax liabilities relating to the surfactants partnership, see Note 9. G-I Holdings has advised the Company
that it expects to obtain
funds to satisfy G-I Holdings' operating expenses from, among other things, distributions from subsidiaries (principally the Company). See Notes 8, 9 and 17.

On
January 5, 2001, G-I Holdings filed a voluntary petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code due to Asbestos Claims. The Company
is not included in such bankruptcy filing. There are restrictions under the indenture relating to the Senior Notes and the Senior Secured Revolving Credit Facility on payments by the Company to its
parent corporations.

During
the twelve months ending December 31, 2009, the Company expects to make distributions and/or advances to its parent corporations to satisfy the obligations discussed above
for not more than the extent permitted by the Senior Secured Revolving Credit Facility and the Senior Notes. The Company does not believe that the dependence of its parent corporations on the cash
flows of their subsidiaries should have a material adverse effect on the operations, liquidity or capital resources of the Company. See Notes 8, 9, 12 and 17.

At
December 31, 2008, the Company had outstanding letters of credit of approximately $43.1 million under the Senior Secured Revolving Credit Facility, which includes
approximately $10.6 million of standby letters of credit related to certain obligations of G-I Holdings. See Note 8.

In
June 2001, the Company entered into employment security agreements with certain of its executive officers and key personnel. The agreements have no expiration date, are supported by
irrevocable letters of credit and provide for a single-sum payment consisting of one to two times salary and bonus and related benefits if employment is terminated or a change in
employment responsibilities occurs within a thirty-six-month period following the change in control event, as defined. At December 31, 2008 the aggregate value of the
employment security agreements was $5.4 million, which excludes the cost of medical benefits and any amounts due under the 2001 Long-Term Incentive Plan.

In
the ordinary course of business, the Company has several supply agreements that include minimum annual purchase requirements amounting to $89.9 million at December 31,
2008 payable over the next five years. In the event these purchase requirements are not met, the Company may be required to make payments under these supply agreements.

The
leases for certain property, plant and equipment at certain of the Company's glass mat and roofing facilities are accounted for as capital leases, see Note 12. The Company is
also a lessee under operating leases principally for warehouses, production machinery and equipment, and transportation and computer equipment. Rental expense on operating leases was $45.5, $52.2 and
$42.6 million for

F-73

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Table of Contents

BUILDING MATERIALS CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 18. Commitments and Contingencies (Continued)

2008,
2007 and 2006, respectively. Future minimum lease payments for properties which were held under long-term noncancellable leases as of December 31, 2008 were as follows:

Operating
Leases(Thousands)2009

$
19,0612010


16,7852011


12,2412012


9,8582013


9,387Thereafter


21,895Total minimum payments

$
89,227


Included
in net sales in 2008 were net sales to two customers of 15% and 14%, respectively, in 2007, 13% and 14%, respectively, and in 2006, 16% and 13%, respectively. No other customer
accounted for more than 10% of net sales in 2008, 2007 or 2006.

The
Company includes in other expense, net certain legal fees related to its business. For 2008, 2007 and 2006 the Company included $4.8, $4.9 and $3.8 million, respectively, of
legal fees in other expense, net.

Note 19. Guarantor Financial Information

At December 31, 2008, all of the Company's subsidiaries, each of which is wholly-owned by the Company, including Elk, are guarantors under the Company's Senior Secured Credit
Facilities and the indenture governing the Senior Notes. These guarantees are full, unconditional and joint and several. In addition, Building Materials Manufacturing Corporation, a wholly-owned
subsidiary of the Company, was a co-obligor on the 8% Senior Notes due 2007, which were redeemed during 2007. In 2007, BMCA Acquisition Inc., the direct parent of Elk, and Elk, as a
result of its merger with BMCA Acquisition Sub, became co-obligors on the Senior Secured Credit Facilities.

Presented
below is condensed consolidating financial information for the Company, the co-obligor subsidiaries and the guarantor subsidiaries. This financial information
should be read in conjunction with the consolidated financial statements and other notes related thereto. Separate financial statements for the Company and the guarantor subsidiaries are not included
herein, because the guarantees are full, unconditional and joint and several.

F-74

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Table of Contents

BUILDING MATERIALS CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 19. Guarantor Financial Information (Continued)

Condensed Consolidating Statement of Operations  Year Ended December 31, 2008  (Thousands)

Parent
Company

Co-Obligor
Subsidiary

Guarantor
Subsidiaries

Eliminations

ConsolidatedNet sales

$
2,642,994

$
30,960

$
74,955

$


$
2,748,909Intercompany net sales





698,223


4,067,025


(4,765,248
)

Total net sales


2,642,994


729,183


4,141,980


(4,765,248
)

2,748,909Costs and expenses:Cost of products sold


2,302,889


721,331


3,709,267


(4,765,248
)

1,968,239Selling, general and administrative


274,882


33,417


177,921





486,220Amortization of intangible assets





11,386








11,386Restructuring and other expenses





5,279


34,982





40,261Other expense, net


3,365


65


1,602





5,032Total costs and expenses, net


2,581,136


771,478


3,923,772


(4,765,248
)

2,511,138Income (loss) before equity in earnings (loss) of subsidiaries, interest expense and income taxes


61,858


(42,295
)

218,208





237,771Equity in earnings of subsidiaries


70,322








(70,322
)

Interest expense


(90,798
)

(25,120
)

(43,003
)




(158,921
)Income (loss) before income taxes


41,382


(67,415
)

175,205


(70,322
)

78,850Income tax (expense) benefit


10,057


23,433


(60,901
)




(27,411
)Net income (loss)

$
51,439

$
(43,982
)
$
114,304

$
(70,322
)
$
51,439


F-75

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Table of Contents

BUILDING MATERIALS CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 19. Guarantor Financial Information (Continued)

Condensed Consolidating Statement of Operations  Year Ended December 31, 2007  (Thousands)

Parent
Company

Co-Obligor
Subsidiaries

Guarantor
Subsidiaries

Eliminations

ConsolidatedNet sales

$
1,725,601

$
494,785

$
89,687

$


$
2,310,073Intercompany net sales





1,319,682


1,525,007


(2,844,689
)

Total net sales


1,725,601


1,814,467


1,614,694


(2,844,689
)

2,310,073Costs and expenses:Cost of products sold


1,472,000


1,657,000


1,411,273


(2,844,689
)

1,695,584Selling, general and administrative


225,167


232,391


38,658





496,216Amortization of intangible assets





6,785








6,785Restructuring and other expenses


8,849


74,710


58,084





141,643Other income, net


(2,121
)

(561
)

(73
)




(2,755
)Total costs and expenses


1,703,895


1,970,325


1,507,942


(2,844,689
)

2,337,473Income (loss) before equity in earnings (loss) of subsidiaries, interest expense and income taxes


21,706


(155,858
)

106,752





(27,400
)Equity in earnings (loss) of subsidiaries


(71,448
)







71,448


Interest expense


(119,623
)

(28,818
)

(32,997
)




(181,438
)Income (loss) before income taxes


(169,365
)

(184,676
)

73,755


71,448


(208,838
)Income tax (expense) benefit


34,839


65,708


(26,235
)




74,312Net income (loss)

$
(134,526
)
$
(118,968
)
$
47,520

$
71,448

$
(134,526
)


F-76

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Table of Contents

BUILDING MATERIALS CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 19. Guarantor Financial Information (Continued)

Condensed Consolidating Statement of Income  Year Ended December 31, 2006  (Thousands)

Parent
Company

Co-Obligor
Subsidiary

Guarantor
Subsidiaries

Eliminations

ConsolidatedNet sales

$
1,859,910

$


$
109,260

$


$
1,969,170Intercompany net sales


1,384


1,151,622


79,655


(1,232,661
)

Total net sales


1,861,294


1,151,622


188,915


(1,232,661
)

1,969,170Costs and expenses, net:Cost of products sold


1,438,718


1,014,447


175,872


(1,232,661
)

1,396,376Selling, general and administrative


333,177


82,435


32,043





447,655Other (income) expense, net


249


69


(36
)




282Intercompany licensing (income) expense, net


74,452


26,253


(100,705
)




Transition service agreement (income) expense


100


(100
)







Total costs and expenses, net


1,846,696


1,123,104


107,174


(1,232,661
)

1,844,313Income before equity in earnings of subsidiaries, interest expense and income taxes


14,598


28,518


81,741





124,857Equity in earnings of subsidiaries


50,878








(50,878
)

Interest expense


(34,412
)

(7,717
)

(19,380
)




(61,509
)Income before income taxes


31,064


20,801


62,361


(50,878
)

63,348Income tax (expense) benefit


7,686


(8,075
)

(24,209
)




(24,598
)Net income

$
38,750

$
12,726

$
38,152

$
(50,878
)
$
38,750


F-77

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Table of Contents

BUILDING MATERIALS CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 19. Guarantor Financial Information (Continued)

Condensed Consolidating Balance Sheet  December 31, 2008  (Thousands)

Parent
Company

Co-Obligor
Subsidiary

Guarantor
Subsidiaries

Eliminations

ConsolidatedASSETSCurrent Assets:Cash and cash equivalents

$
36,722

$
65

$
250

$


$
37,037Accounts receivable, trade, net


189,245


1,491


8,497





199,233Accounts receivable, other


2,298


727


7,872





10,897Inventories, net





90,999


257,450





348,449Deferred income tax assets


39,324











39,324Other current assets


7,894


1,329


7,849





17,072Total Current Assets


275,483


94,611


281,918





652,012Investment in subsidiaries


1,627,346








(1,627,346
)

Intercompany loans including accrued interest


1,587,885


(867,963
)

(719,922
)




Due from/to subsidiaries, net


(1,723,842
)

670,948


1,052,894





Property, plant and equipment, net





274,194


381,075





655,269Goodwill


59,323


588,850


5,471





653,644Intangible assets, net





196,250








196,250Income tax receivable from parent corporation


8,400











8,400Other noncurrent assets


82,842


7,487


24,410





114,739Total Assets

$
1,917,437

$
964,377

$
1,025,846

$
(1,627,346
)
$
2,280,314LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)Current Liabilities:Current maturities of long-term debt

$
9,557

$
676

$
10,363

$


$
20,596Accounts payable





18,400


137,630





156,030Payable to related parties


1,225





19,928





21,153Loans payable to parent corporation


52,840











52,840Accrued liabilities


52,508


12,953


68,880





134,341Product warranty claims


12,600


3,600








16,200Total Current Liabilities


128,730


35,629


236,801





401,160Long-term debt less current maturities


1,597,614


3,647


56,908





1,658,169Product warranty claims


28,358


307


100





28,765Deferred income tax liabilities


73,103











73,103Other liabilities


169,488


8,242


21,243





198,973Total Liabilities


1,997,293


47,825


315,052





2,360,170Total Stockholders' Equity (Deficit)


(79,856
)

916,552


710,794


(1,627,346
)

(79,856
)Total Liabilities and Stockholders' Equity (Deficit)

$
1,917,437

$
964,377

$
1,025,846

$
(1,627,346
)
$
2,280,314


F-78

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Table of Contents

BUILDING MATERIALS CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 19. Guarantor Financial Information (Continued)

Condensed Consolidating Balance Sheet  December 31, 2007  (Thousands)

Parent
Company

Co-Obligor
Subsidiaries

Guarantor
Subsidiaries

Eliminations

ConsolidatedASSETSCurrent Assets:Cash and cash equivalents

$


$
1,936

$
4,388

$


$
6,324Accounts receivable, trade, net


198,781


3,753


8,323





210,857Accounts receivable, other


2,229


4,651


3,912





10,792Income tax receivable





11,968








11,968Inventories, net





89,735


227,177





316,912Deferred income tax assets


38,017











38,017Other current assets


5,644


1,985


6,069





13,698Total Current Assets


244,671


114,028


249,869





608,568Investment in subsidiaries


1,557,024








(1,557,024
)

Intercompany loans including accrued interest


767,084


(194,715
)

(572,369
)




Due from/(to) subsidiaries, net


(787,818
)

5,110


782,708





Property, plant and equipment, net





297,942


374,871





672,813Goodwill


40,080


590,405


24,715





655,200Intangible assets, net





207,635








207,635Income tax receivable from parent corporation


10,016











10,016Other noncurrent assets


86,604


11,963


21,592





120,159Total Assets

$
1,917,661

$
1,032,368

$
881,386

$
(1,557,024
)
$
2,274,391LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)Current Liabilities:Current maturities of long-term debt

$
14,530

$
670

$
9,430

$


$
24,630Accounts payable


21


32,026


110,203





142,250Payable to related parties


992





15,141





16,133Loans payable to parent corporation


52,840











52,840Accrued liabilities


63,402


18,412


54,162





135,976Product warranty claims


13,500











13,500Discontinued operationscurrent liabilities





560








560Total Current Liabilities


145,285


51,668


188,936





385,889Long-term debt


1,653,298


4,400


71,697





1,729,395Product warranty claims


25,755


5,369


100





31,224Deferred income tax liabilities


60,869











60,869Other liabilities


128,772


10,397


24,163





163,332Total Liabilities


2,013,979


71,834


284,896





2,370,709Total Stockholders' Equity (Deficit)


(96,318
)

960,534


596,490


(1,557,024
)

(96,318
)Total Liabilities and Stockholders' Equity (Deficit)

$
1,917,661

$
1,032,368

$
881,386

$
(1,557,024
)
$
2,274,391


F-79

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Table of Contents

BUILDING MATERIALS CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 19. Guarantor Financial Information (Continued)

Condensed Consolidating Statement of Cash Flows  Year Ended December 31, 2008  (Thousands)

Parent
Company

Co-Obligor
Subsidiary

Guarantor
Subsidiaries

ConsolidatedCash and cash equivalents, beginning of year

$


$
1,936

$
4,388

$
6,324Cash provided by operating activities:Net income (loss)


(18,883
)

(43,982
)

114,304


51,439Adjustments to reconcile net income (loss) to net cash provided by operating activities:Depreciation





27,897


44,498


72,395Amortization of intangible and other assets





11,386


4,092


15,478Restructuring and other expenses


6,085


20,183


46,951


73,219Deferred income taxes


29,338








29,338Noncash interest charges


6,982


1,170


826


8,978Increase in working capital items


(9,783
)

(18,943
)

(47,169
)

(75,895
)Increase (decrease) in product warranty claims


1,703


(1,462
)




241(Increase) decrease in other assets


(4,015
)

795


(7,228
)

(10,448
)Increase (decrease) in other liabilities


(4,045
)

162


163


(3,720
)Increase (decrease) in net payable to related parties/parent corporations


98,180


7,039


(98,583
)

6,636Other, net





1,340


(19,830
)

(18,490
)Net cash provided by operating activities


105,562


5,585


38,024


149,171Cash used in investing activities:Capital expenditures





(16,439
)

(49,407
)

(65,846
)Proceeds from sale of assets





9,710


21,443


31,153Net cash used in investing activities





(6,729
)

(27,964
)

(34,693
)Cash used in financing activities:Proceeds from issuance of long-term debt


1,083,000








1,083,000Repayments of long-term debt


(1,143,569
)

(727
)

(3,356
)

(1,147,652
)Purchase of industrial development revenue bond certificates issued by the Company








(4,800
)

(4,800
)Principal repayments of capital leases








(6,042
)

(6,042
)Distributions to parent corporation


(71
)







(71
)Dividends to parent corporation


(7,500
)







(7,500
)Loan to parent corporation


(124
)







(124
)Financing fees and expenses


(576
)







(576
)Net cash used in financing activities


(68,840
)

(727
)

(14,198
)

(83,765
)Net change in cash and cash equivalents


36,722


(1,871
)

(4,138
)

30,713Cash and cash equivalents, end of year

$
36,722

$
65

$
250

$
37,037


F-80

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Table of Contents

BUILDING MATERIALS CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 19. Guarantor Financial Information (Continued)

Condensed Consolidating Statement of Cash Flows  Year Ended December 31, 2007  (Thousands)

Parent
Company

Co-Obligor
Subsidiaries

Guarantor
Subsidiaries

ConsolidatedCash and cash equivalents, beginning of year

$
18

$
1,870

$
5,889

$
7,777Cash provided by (used in) operating activities:Net income (loss)


(63,078
)

(118,968
)

47,520


(134,526
)Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:Depreciation





59,101


9,905


69,006Amortization of intangible and other assets





10,242





10,242Restructuring and other expenses


23,531


99,158


58,323


181,012Deferred income taxes


(80,635
)







(80,635
)Noncash interest charges


8,400


370


679


9,449Decrease in working capital items


9,949


19,235


26,179


55,363Increase (decrease) in product warranty claims


1,469


(291
)

(301
)

877(Increase) decrease in other assets


(5,863
)

394


(908
)

(6,377
)Increase (decrease) in other liabilities


8,983


(1,258
)

33


7,758Change in net receivable from/payable to related parties/parent corporations


(1,063,271
)

1,198,901


(126,333
)

9,297Other, net





(3,885
)

611


(3,274
)Net cash provided by (used in) operating activities


(1,160,515
)

1,262,999


15,708


118,192Cash used in investing activities:Acquisition of ElkCorp, net of cash acquired of $0.1 million





(945,295
)




(945,295
)Capital expenditures and acquisitions





(54,131
)

(30,380
)

(84,511
)Proceeds from sale of assets





6,755





6,755Net cash used in investing activities





(992,671
)

(30,380
)

(1,023,051
)Cash provided by (used in) financing activities:Proceeds from issuance of long-term debt


2,431,849


25,900





2,457,749Repayments of long-term debt


(1,229,608
)

(327,983
)

(8
)

(1,557,599
)Proceeds from sale-leasebacks





30,038


14,962


45,000Settlement of treasury lock hedges


(4,896
)







(4,896
)Distribution to parent corporation


(171
)







(171
)Loan to parent corporation


(193
)







(193
)Financing fees and expenses


(36,484
)







(36,484
)Net cash provided by (used in) financing activities


1,160,497


(272,045
)

14,954


903,406Net change in cash and cash equivalents


(18
)

(1,717
)

282


(1,453
)Cash and cash equivalents, end of year

$


$
153

$
6,171

$
6,324


F-81

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Table of Contents

BUILDING MATERIALS CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 19. Guarantor Financial Information (Continued)

Condensed Consolidating Statement of Cash Flows  Year Ended December 31, 2006  (Thousands)

Parent
Company

Co-Obligor
Subsidiary

Guarantor
Subsidiaries

ConsolidatedCash and cash equivalents, beginning of year

$
9

$
180

$
6,693

$
6,882Cash provided by (used in) operating activities:Net income (loss)


(12,128
)

12,726


38,152


38,750Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:Depreciation


4,155


38,093


7,073


49,321Amortization





2,993





2,993Deferred income taxes


2,770








2,770Noncash interest charges, net


3,262


1,334





4,596(Increase) decrease in working capital items


49,088


(54,107
)

(2,129
)

(7,148
)Decrease in product warranty claims


(825
)







(825
)(Increase) decrease in other assets


(6,154
)

(5,910
)

100


(11,964
)Increase (decrease) in other liabilities


7,658





(7
)

7,651Change in net receivable from/payable to related parties/parent corporations


(59,228
)

41,871


2,894


(14,463
)Other, net


(42
)

(156
)

1,070


872Net cash provided by (used in) operating activities


(11,444
)

36,844


47,153


72,553Cash provided by (used in) investing activities:Capital expenditures and acquisition of a manufacturing facility


(13,612
)

(25,886
)

(47,952
)

(87,450
)Net cash used in investing activities


(13,612
)

(25,886
)

(47,952
)

(87,450
)Cash provided by (used in) financing activities:Proceeds from issuance of long-term debt


824,000








824,000Repayments of long-term debt


(781,000
)

(2,943
)

(5
)

(783,948
)Repurchase of industrial development revenue bond certificates





(6,325
)




(6,325
)Distributions to parent corporation


(521
)







(521
)Dividends to parent corporation


(15,000
)







(15,000
)Loan to parent corporation


(191
)







(191
)Financing fees and expenses


(2,223
)







(2,223
)Net cash provided by (used in) financing activities


25,065


(9,268
)

(5
)

15,792Net change in cash and cash equivalents


9


1,690


(804
)

895Cash and cash equivalents, end of year

$
18

$
1,870

$
5,889

$
7,777


F-82

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Table of Contents



BUILDING MATERIALS CORPORATION OF AMERICA        SUPPLEMENTARY DATA (UNAUDITED)        Quarterly Financial Data (Unaudited)

2008 by Quarter

2007 by QuarterFirst

Second

Third

Fourth

First

Second

Third

Fourth(Millions)Net sales(1)

$
570.3

$
737.1

$
852.8

$
588.7

$
530.0

$
663.3

$
680.7

$
436.1Cost of products sold(1)


424.9


515.9


602.5


424.9


392.9


486.0


493.4


323.3Gross profit

$
145.4

$
221.2

$
250.3

$
163.8

$
137.1

$
177.3

$
187.3

$
112.8Income (loss) before interest expense and income taxes(1)

$
14.9

$
85.9

$
94.5

$
42.5

$
25.5

$
(14.7
)
$
25.7

$
(63.9
)Interest expense(2)


(39.9
)

(40.0
)

(39.5
)

(39.5
)

(49.3
)

(45.7
)

(44.3
)

(42.1
)Income (loss) before income taxes


(25.0
)

45.9


55.0


3.0


(23.8
)

(60.4
)

(18.6
)

(106.0
)Income tax (expense) benefit


10.0


(18.1
)

(20.3
)

0.9


8.5


15.9


7.4


42.5Net income (loss)

$
(15.0
)
$
27.8

$
34.7

$
3.9

$
(15.3
)
$
(44.5
)
$
(11.2
)
$
(63.5
)


---

F-83

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Table of Contents



SCHEDULE II

BUILDING MATERIALS CORPORATION OF AMERICA

VALUATION AND QUALIFYING ACCOUNTS

Year Ended December 31, 2008

Description

Balance
January 1,
2008

Charged to
Sales or
Expenses

Deductions

Other

Balance
December 31,
2008(Thousands)Valuation and Qualifying AccountsDeducted from Assets To Which They Apply:Allowance for doubtful accounts

$
3,430

$
6,815

$
620
(b)
$


$
9,625Allowance for customer incentives


64,832


487,415
(a)

457,053





95,194Reserve for inventory market valuation


21,116


3,120
(f)

14,446
(f)




9,790Product warranty claims


44,724


19,079


18,838





44,965


Year Ended December 31, 2007

Description

Balance
January 1,
2007

Charged to
Sales or
Expenses

Deductions

Other

Balance
December 31,
2007(Thousands)Valuation and Qualifying AccountsDeducted from Assets To Which They Apply:Allowance for doubtful accounts

$
1,319

$
1,588

$
1,948
(b)
$
2,471
(c)
$
3,430Allowance for customer incentives


50,942


372,174
(a)

387,394
(d)

29,110
(e)

64,832Reserve for inventory market valuation


2,224


40,009
(f)

21,689
(f)

572
(g)

21,116Product warranty claims


26,971


20,997


16,918


13,674
(h)

44,724


Year Ended December 31, 2006

Description

Balance
January 1,
2006

Charged to
Sales or
Expenses

Deductions

Other

Balance
December 31,
2006(Thousands)Valuation and Qualifying AccountsDeducted from Assets To Which They Apply:Allowance for doubtful accounts

$
2,310

$
(1,017
)
$
(26
)(b)
$


$
1,319Allowance for customer incentives


74,505


270,302
(a)

293,865





50,942Reserve for inventory market valuation


4,756


135


2,667





2,224Product warranty claims


31,202


21,220


22,951


(2,500
)(i)

26,971


---

Notes:

S-1

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Table of Contents

S-2

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