UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q (Mark One) /X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For The Quarterly Period Ended SEPTEMBER 30, 2007 OR / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 33-81808 BUILDING MATERIALS CORPORATION OF AMERICA (Exact name of registrant as specified in its charter) DELAWARE 22-3276290 (State or Other Jurisdiction of (IRS Employer Incorporation or Organization) Identification No.) 1361 ALPS ROAD, WAYNE, NEW JERSEY 07470 (Address of Principal Executive Offices) (Zip Code)

(Mark One)
x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For The Quarterly Period EndedSeptember 28, 2008

OR

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number33-81808

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

Delaware		22-3276290
(State or Other Jurisdiction of Incorporation or Organization)		(IRS Employer Identification No.)

1361 Alps Road, Wayne, New Jersey		07470
(Address of Principal Executive Offices)		(Zip Code)

(973) 628-3000 ~~(Registrant's~~

(Registrant’s telephone number, including area code) ~~NONE (Former~~

None

(Former Name, Former Address and Former Fiscal Year,

if Changed Since Last Report)

See Table of Additional Registrants Below.

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

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

Large accelerated filero		Accelerated filero
Non-accelerated filerx	(Do not check if a smaller reporting company)	Smaller reporting companyo

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ~~|_|~~ oNo ~~|X|~~ x

As of November ~~14, 2007,~~12, 2008, 1,015,010 shares of Class A Common Stock, $.001 par value of the registrant were outstanding. There is no trading market for the common stock of the registrant. As of November ~~14, 2007,~~12, 2008, 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 November ~~14, 2007,~~12, 2008, no shares of the registrant or the additional registrant were held by non-affiliates.

ADDITIONAL REGISTRANTS

~~Address, including zip~~
Exact name of registrant as specified in its charter		State or other jurisdiction of incorporation or organization		No. of Shares Outstanding		Commission File No./I.R.S. Employer Identification No.			Address, including zip code and telephone number, ~~registrant as jurisdiction of No. of No./I.R.S.~~ including area code, of ~~specified in its incorporation or Shares Employer registrant's~~registrant’s principal ~~charter organization Outstanding Identification No.~~ executive offices ~~- ------- ------------ ----------- ------------------ -----------------~~
Building Materials Manufacturing Corporation		Delaware		10		333-69749-01/ 22-3626208			1361 Alps Road ~~Manufacturing Corporation 22-3626208~~ Wayne, NJ 07470 (973) 628-3000

2 ~~PART~~

Part I - FINANCIAL INFORMATION ~~ITEM~~

Item 1 - FINANCIAL STATEMENTS

BUILDING MATERIALS CORPORATION OF AMERICA

CONSOLIDATED STATEMENTS OF OPERATIONS ~~(UNAUDITED) (DOLLARS IN THOUSANDS)~~
THIRD QUARTER ENDED NINE MONTHS ENDED ---------------------------- ---------------------------- SEPT. 30, OCT. 1, SEPT. 30, OCT. 1, 2007 2006 2007 2006 ----------- ----------- ----------- ----------- Net sales ....................... $ 680,741 $ 530,349 $ 1,874,002 $ 1,571,213 ----------- ----------- ----------- ----------- Costs and expenses, net: Cost of products sold ......... 493,434 372,250 1,372,316 1,100,842 Selling, general and administrative................ 134,078 114,682 383,067 347,562 Amortization of intangible assets ....................... 3,938 -- 3,938 -- Restructuring and other expenses ..................... 24,628 -- 79,622 -- Other (income) expense, net ... (982) 132 (1,359) (386) ----------- ----------- ----------- ----------- Total costs and expenses, net. 655,096 487,064 1,837,584 1,448,018 ----------- ----------- ----------- ----------- Income before interest expense and income taxes ............... 25,645 43,285 36,418 123,195 Interest expense ................ (44,289) (15,771) (139,237) (46,352) ----------- ----------- ----------- ----------- Income (loss) before income taxes .......................... (18,644) 27,514 (102,819) 76,843 Income tax (expense) benefit .... 7,463 (10,455) 31,874 (29,200) ----------- ----------- ----------- ----------- Net income (loss) ............... $ (11,181) $ 17,059 $ (70,945) $ 47,643 =========== =========== =========== ===========
(Unaudited)

(Dollars in Thousands)

	Third Quarter Ended						Nine Months Ended
	Sept. 28, 2008			Sept. 30, 2007			Sept. 28, 2008			Sept. 30, 2007

Net sales	$	852,826		$	680,741		$	2,160,181		$	1,874,002

Costs and expenses:
Cost of products sold		602,459			493,434			1,543,252			1,372,316
Selling, general and administrative		144,617			134,078			376,116			383,067
Amortization of intangible assets		2,846			3,938			8,539			3,938
Restructuring and other expenses		6,606			24,628			33,794			79,622
Other (income) expense, net		1,758			(982	)		3,166			(1,359	)
Total costs and expenses, net		758,286			655,096		��	1,964,867			1,837,584

Income before interest expense and income taxes		94,540			25,645			195,314			36,418
Interest expense		(39,541	)		(44,289	)		(119,404	)		(139,237	)
Income (loss) before income taxes		54,999			(18,644	)		75,910			(102,819	)
Income tax (expense) benefit		(20,326	)		7,463			(28,481	)		31,874

Net income (loss)	$	34,673		$	(11,181	)	$	47,429		$	(70,945	)

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. 3

BUILDING MATERIALS CORPORATION OF AMERICA

CONSOLIDATED BALANCE SHEETS ~~(DOLLARS IN THOUSANDS, EXCEPT PER~~
ASSETS Current Assets: Cash and cash equivalents ........................................ Accounts receivable, trade, less allowance of $4,162 and $1,319 in 2007 and 2006, respectively ..................................... Accounts receivable, other ....................................... Income tax receivable ............................................ Income tax receivable from parent corporation .................... Inventories, net ................................................. Deferred income tax assets ....................................... Other current assets ............................................. Discontinued operations - current assets ......................... Total Current Assets ........................................... Property, plant and equipment, net ................................. Goodwill ........................................................... Intangible assets .................................................. Other noncurrent assets ............................................ Discontinued operations - noncurrent assets ........................ Total Assets ....................................................... LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) Current Liabilities: Current maturities of long-term debt ............................. Accounts payable ................................................. Payable to related parties ....................................... Loans payable to parent corporation .............................. Accrued liabilities .............................................. Product warranty claims .......................................... Discontinued operations - current liabilities .................... Total Current Liabilities ...................................... Long-term debt ..................................................... Product warranty claims ............................................ Deferred income tax liabilities .................................... Other liabilities .................................................. Commitments and Contingencies - Note 14 Stockholders' Equity (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 ......................................... Class B Common Stock, $.001 par value per share; 100,000 shares authorized; 0 shares issued and outstanding in 2007 and 2006 ................................... Loans receivable from parent corporation ......................... Retained earnings ................................................ Accumulated other comprehensive income (loss) .................... Total Stockholders' Equity (Deficit) ........................... Total Liabilities and Stockholders' Equity (Deficit) ...............
SHARE AMOUNTS) SEPT. 30, 2007 DEC. 31, (UNAUDITED) 2006 ----------- ----------- $ 34,500 $ 7,777 424,286 190,859 12,309 5,599 11,968 -- 10,016 9,132 262,025 238,709 37,073 21,710 16,897 12,209 2,844 -- ----------- ----------- 811,918 485,995 685,148 411,729 635,303 64,794 235,632 -- 125,393 67,323 1,355 -- ----------- ----------- $ 2,494,749 $ 1,029,841 =========== =========== $ 16,770 $ 102,918 143,078 90,951 17,322 5,952 52,840 52,840 169,903 101,382 13,500 9,000 931 -- ----------- ----------- 414,344 363,043 ----------- ----------- 1,840,523 484,406 ----------- ----------- 28,319 17,972 ----------- ----------- 134,807 39,551 ----------- ----------- 89,929 62,664 ----------- ----------- -- -- 1 1 -- -- (56,179) (56,031) 47,084 118,201 (4,079) 34 ----------- ----------- (13,173) 62,205 ----------- ----------- $ 2,494,749 $ 1,029,841 =========== ===========

(Dollars in thousands, except per share amounts)

ASSETS	September 28, 2008 (Unaudited)			December 31, 2007
ASSETS	September 28, 2008 (Unaudited)			December 31, 2007
Current Assets:
Cash and cash equivalents	$	157,809		$	6,324
Accounts receivable, trade, net		539,864			210,857
Accounts receivable, other		11,749			10,792
Income tax receivable		-			11,968
Inventories, net		315,769			316,912
Deferred income tax assets		42,564			38,017
Other current assets		18,249			13,698
Total Current Assets		1,086,004			608,568
Property, plant and equipment, net		643,948			672,813
Goodwill		653,514			655,200
Intangible assets, net		199,096			207,635
Income tax receivable from parent corporation		10,016			10,016
Other noncurrent assets		122,728			120,159
Total Assets	$	2,715,306		$	2,274,391

LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current Liabilities:
Current maturities of long-term debt	$	25,386		$	24,630
Accounts payable		219,990			142,250
Payable to related parties		39,357			16,133
Loans payable to parent corporation		52,840			52,840
Accrued liabilities		151,768			135,976
Product warranty claims		16,200			13,500
Discontinued operations – current liabilities		560			560
Total Current Liabilities		506,101			385,889
Long-term debt		1,974,751			1,729,395
Product warranty claims		31,225			31,224
Deferred income tax liabilities		94,019			60,869
Other liabilities		160,699			163,332

Commitments and Contingencies – Note 13
Stockholders’ 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		1			1
Class B Common Stock, $.001 par value per share;
100,000 shares authorized; no shares issued		-			-
Loans receivable from parent corporation		(56,323	)		(56,224	)
Retained earnings (accumulated deficit)		28,368			(16,496	)
Accumulated other comprehensive loss		(23,535	)		(23,599	)
Total Stockholders’ Deficit		(51,489	)		(96,318	)
Total Liabilities and Stockholders’ Deficit	$	2,715,306		$	2,274,391

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. 4

BUILDING MATERIALS CORPORATION OF AMERICA

CONSOLIDATED STATEMENTS OF CASH FLOWS ~~(UNAUDITED) (DOLLARS IN THOUSANDS)~~
NINE MONTHS ENDED ---------------------------- SEPT. 30, OCT. 1, 2007 2006 ----------- ----------- Cash and cash equivalents, beginning of period ........ $ 7,777 $ 6,882 ----------- ----------- Cash provided by (used in) operating activities: Net income (loss) ................................... (70,945) 47,643 Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation .................................... 50,655 36,582 Amortization .................................... 6,495 2,161 Restructuring and other expenses ................ 97,647 -- Deferred income taxes ........................... (36,141) (2,422) Noncash interest charges ........................ 7,858 3,926 Increase in working capital items ................... (57,804) (179,648) Increase in product warranty claims ................. 1,172 3,646 Increase in other assets ............................ (5,187) (1,164) Increase (decrease) in other liabilities ............ 4,760 (116) Change in net receivable from/payable to related parties/parent corporations ....................... 10,486 3,070 Other, net .......................................... 577 629 ----------- ----------- Net cash provided by (used in) operating activities ... 9,573 (85,693) ----------- ----------- Cash used in investing activities: Acquisition of ElkCorp, net of cash acquired of $0.1 million ....................................... (944,838) -- Capital expenditures and acquisitions ............... (67,113) (54,830) ----------- ----------- Net cash used in investing activities ................. (1,011,951) (54,830) ----------- ----------- Cash provided by financing activities: Proceeds from issuance of long-term debt ............ 2,318,749 684,000 Purchase of industrial development revenue bond certificates issued by the Company ................. -- (6,325) Repayments of long-term debt ........................ (1,254,005) (535,256) Distributions to parent corporation ................. (171) (521) Loan to parent corporation .......................... (148) (141) Financing fees and expenses ......................... (35,324) (1,990) ----------- ----------- Net cash provided by financing activities ............. 1,029,101 139,767 ----------- ----------- Net change in cash and cash equivalents ............... 26,723 (756) ----------- ----------- Cash and cash equivalents, end of period .............. $ 34,500 $ 6,126 =========== ===========
~~-continued- 5~~ ~~BUILDING MATERIALS CORPORATION OF AMERICA CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) - (CONTINUED) (DOLLARS IN THOUSANDS)~~
NINE MONTHS ENDED ------------------------ SEPT. 30, OCT. 1, 2007 2006 --------- --------- Supplemental Cash Flow Information: Effect on cash from changes in working capital items: Increase in accounts receivable trade and accounts receivable other ....................................... (143,409) (68,934) Increase in income tax receivable ....................... (4,623) -- (Increase) decrease in inventories, net ................. 93,545 (76,363) (Increase) decrease in other current assets ............. 6,163 (341) Increase (decrease) in accounts payable ................. 13,731 (29,205) Increase (decrease) in accrued liabilities .............. 7,616 (4,805) Payments for restructuring and other expenses ........... (30,827) -- --------- --------- Net effect on cash from increase in working capital items $ (57,804) $(179,648) ========= ========= Cash paid during the period for: Interest (net of amount capitalized of $2,167 and $1,801 in 2007 and 2006, respectively) .............. $ 104,284 $ 45,822 Income taxes (including federal income taxes paid to parent corporation pursuant to a tax sharing agreement of $0 and $24,101 in 2007 and 2006, respectively) ....................................... 1,658 25,029
(Unaudited)

(Dollars in thousands)

	Nine Months Ended
	September 28, 2008			September 30, 2007

Cash and cash equivalents, beginning of period	$	6,324		$	7,777
Cash provided by (used in) operating activities:
Net income (loss)		47,429			(70,945	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation		53,763			50,655
Amortization of intangible and other assets		11,516			6,495
Restructuring and other expenses		60,731			97,647
Deferred income taxes		28,213			(36,141	)
Noncash interest charges		6,748			7,858
Increase in working capital items		(292,774	)		(57,804	)
Increase in product warranty claims		2,701			1,172
Increase in other assets		(11,615	)		(5,187	)
Increase in other liabilities		267			4,760
Increase in net payable to related parties/parent corporations		23,224			10,486
Other, net		(14,218	)		577
Net cash provided by (used in) operating activities		(84,015	)		9,573

Cash used in investing activities:
Acquisition of ElkCorp		-			(944,838	)
Capital expenditures and 2007 acquisitions		(28,639	)		(67,113	)
Proceeds from sale of assets		21,443			-
Net cash used in investing activities		(7,196	)		(1,011,951	)

Cash provided by financing activities:
Proceeds from issuance of long-term debt		830,000			2,318,749
Repayments of long-term debt		(574,002	)		(1,254,005	)
Purchase of industrial development revenue bond certificates issued by the Company		(4,800	)		-
Principal repayments of capital leases		(5,262	)		-
Distribution to parent corporation		(65	)		(171	)
Dividend to parent corporation		(2,500	)		-
Loan to parent corporation		(99	)		(148	)
Financing fees and expenses		(576	)		(35,324	)
Net cash provided by financing activities		242,696			1,029,101
Net change in cash and cash equivalents		151,485			26,723
Cash and cash equivalents, end of period	$	157,809		$	34,500

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. 6

(Continued on the following page)

BUILDING MATERIALS CORPORATION OF AMERICA

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - (Continued)

(Dollars in thousands)

	Nine Months Ended
		September 28,			September 30,
		2008			2007
Supplemental Cash Flow Information:
Effect on cash from changes in working capital items:
Increase in accounts receivable trade and accounts receivable other	$	(330,240	)	$	(143,409	)
(Increase) decrease in income tax receivable		11,837			(4,623	)
(Increase) decrease in inventories, net		(6,850	)		93,545
(Increase) decrease in other current assets		(4,551	)		6,163
Increase in accounts payable		79,327			13,731
Increase in accrued liabilities		22,181			7,616
Payments for restructuring and other expenses		(64,478	)		(30,827	)
Net effect on cash from increase in working capital items	$	(292,774	)	$	(57,804	)

Cash paid during the period for:
Interest (net of amount capitalized of $415 and $2,167 in 2008 and 2007, respectively)	$	95,132		$	104,284

Income taxes	$	4,505		$	1,658

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

BUILDING MATERIALS CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ~~(UNAUDITED)~~ (Unaudited)

Note 1.

Formation of the Company

Building Materials Corporation of America ~~("BMCA"~~(“BMCA” or the ~~"Company"~~“Company”) was formed on January 31, 1994 and is a wholly-owned subsidiary of BMCA Holdings Corporation ~~("BHC"~~(“BHC”), which is a wholly-owned subsidiary of G-I Holdings Inc. ("(“G-I ~~Holdings"~~Holdings”). G-I Holdings is a wholly-owned subsidiary of G Holdings Inc. On February 22, 2007 ("(“date of ~~acquisition"~~acquisition”), a subsidiary of BMCA acquired approximately 90% of the outstanding common shares of ElkCorp ~~("Elk"~~(“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 23 for a description of the acquisition.

The consolidated financial statements of the Company reflect, in the opinion of management, all adjustments necessary to present fairly the financial position of the Company at September ~~30, 2007,~~28, 2008, and the results of its operations for the third quarter and nine-month periods ended and its cash flows for the ~~third quarter and nine months~~nine-month periods ended September 28, 2008 and September 30, 2007, ~~and October 1, 2006,~~ respectively. All adjustments are of a normal recurring nature, except for the restructuring and other expenses and debt restructuring costs recorded in the ~~Company's second quarter~~Company’s statement of operations for the nine-month periods ended ~~July 1, 2007~~September 28, 2008 and ~~third quarter ended~~ September 30, 2007, ~~due to the acquisition of Elk.~~respectively. Net sales of roofing products and specialty building products and accessories are generally seasonal in nature. Accordingly, the results of operations and cash flows in the respective quarterly ended periods will vary depending on the time of the year. These financial statements should be read in conjunction with the annual audited financial statements and notes thereto, included in the ~~Company's~~Company’s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2006,~~2007, which was filed with the Securities and Exchange Commission (the ~~"SEC"~~“SEC”) on ~~February 16, 2007~~March 28, 2008 (the ~~"2006~~“2007 Form ~~10-K"~~10-K”). ~~NOTE 1. NEW ACCOUNTING PRONOUNCEMENTS~~

Reclassifications

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

Note 2.

New Accounting Pronouncements

In ~~July~~September 2006, the Financial Accounting Standards Board ~~("FASB"~~(“FASB”) issued FASB Interpretation No. ("FIN") 48, "Accounting for Uncertainty in Income Taxes, an Interpretation of FASB Statement No. 109" ("FIN 48"). FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken in a tax return. A reporting entity must determine whether it is "more-likely-than-not" that a tax position will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. Once it is determined that a position meets the more-likely-than-not recognition threshold, the position is measured to determine the amount of benefit to recognize in the financial statements. FIN 48 became effective for fiscal years beginning after December 15, 2006. In May 2007, the FASB issued FASB Staff Position ("FSP") FIN 48-1 "Definition of Settlement in FASB Interpretation No. 48" ("FSP FIN 48-1"), which amended FIN 48 to provide guidance on how a reporting entity should determine whether a tax position is effectively settled for the purpose of recognizing previously unrecognized tax benefits. Under FSP FIN 48-1, a tax position will be considered effectively settled and any previously unrecognized tax benefits should be recognized based on the terms of settlement if (a) the taxing authority has completed its examination, including all appeals, (b) the reporting entity does not intend to appeal 7 BUILDING MATERIALS CORPORATION OF AMERICA NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED) NOTE 1. NEW ACCOUNTING PRONOUNCEMENTS - (CONTINUED) or litigate any aspect of the tax position; and (c) based on the taxing authority's policies and practices, the reporting entity considers it remote that the taxing authority will re-examine the tax position. 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 did not recognize any material adjustment to its accruals for uncertain tax positions. See Note 13. In September 2006, the FASB issued Statement of Financial Accounting Standards ~~("SFAS"~~(“SFAS”) No. 157, ~~"Fair~~“Fair Value ~~Measurements" ("~~Measurements” (“SFAS No. ~~157"~~157”), which clarifies the definition of fair value, establishes a framework for measuring fair value and expands the disclosures on fair value ~~measurements. SFAS No. 157~~measurements, which is effective for fiscal years beginning after November 15, 2007. ~~The Company will adopt the provisions of SFAS No. 157 beginning in its first quarter of~~In February 2008, ~~and, therefore, has not yet determined the effect, if any, the adoption of SFAS No. 157 will have on its results of operations or financial position. In September 2006,~~ the FASB issued FASB Staff Position (“FSP”) No. 157-2 “Partial Deferral to the Effective Date of Statement 157” (“FSP ~~AUG AIR-1 "Accounting for Planned Major Maintenance Activities" ("FSP AUG AIR-1"~~No. 157-2”), which prohibits the use of the accrue-in-advance method of accounting in annual and interim financial reporting periods for planned major maintenance activities. FSP AUG AIR-1 had previously allowed companies the right to recognize planned major maintenance costs by accruing a liability over several reporting periods before the maintenance was performed. FSP AUG AIR-1 still allows the direct expense, built-in-overhaul and deferral methods of accounting as acceptable, however it mandates that companies apply the same method of accounting in both interim and annual financial reporting periods and that the method be retrospectively applied if applicable. FSP AUG AIR-1 is effective for fiscal years beginning after ~~December~~November 15, ~~2006.~~2008 and excludes SFAS No. 13, “Accounting for Leases,” defers 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~~Company’s adoption of the provisions of SFAS No. 157 for all other items not deferred by FSP ~~AUG AIR-1~~No. 157-2 in its first quarter of ~~2007. FSP AUG AIR-1 has~~2008 did not ~~had~~have a material effect on ~~the Company's~~its consolidated financial statements. The Company is currently evaluating the provisions of FSP No. 157-2, which the Company will adopt in its first quarter beginning January 1, 2009 and does not expect that the adoption will have a material effect on its consolidated financial statements.

BUILDING MATERIALS CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) – (Continued)

Note 2.

New Accounting Pronouncements – (Continued)

In February 2007, the FASB issued SFAS No. 159, ~~"The~~“The Fair Value Option for Financial Assets and Financial Liabilities -– Including an amendment of FASB Statement No. ~~115" ("~~115” (“SFAS No. ~~159"~~159”)~~. 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~~“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 8 ~~BUILDING MATERIALS CORPORATION OF AMERICA NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED) NOTE 1. NEW ACCOUNTING PRONOUNCEMENTS - (CONTINUED)~~ provisions of SFAS No. 133 “Accounting for Derivative Instruments and Hedging Activities” (“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. SFAS No. 159 is~~instruments and was effective ~~as of the~~for fiscal years beginning ~~of a company's first fiscal year that begins~~ after November 15, 2007. ~~Retrospective application~~The Company adopted SFAS No. 159 for its 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 the Company’s consolidated financial statements.

In December 2007, the FASB issued SFAS No. 141 (revised in 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, 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 ~~not permitted.~~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”), which establishes requirements for ownership interests in subsidiaries held by parties other than the Company (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 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; however, the presentation and disclosure requirements must be retrospectively applied to comparative financial statements. The Company will adopt the provisions of SFAS No. ~~159~~160 for its fiscal year beginning ~~in its first quarter of 2008~~January 1, 2009 and ~~therefore, has~~does not ~~yet determined the effect, if any,~~expect the adoption ~~of SFAS No. 159 will~~to have any impact on its results of operations or financial ~~position. NOTE 2. ACQUISITIONS On February 9, 2007, BMCA Acquisition Sub Inc. ("BMCA Acquisition Sub")~~position as the Company does not have any noncontrolling interests.

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and ~~BMCA Acquisition Inc. (collectively~~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 ~~"Purchasers"~~disclosure provisions of SFAS No. 161 for its fiscal year beginning January 1, 2009.

BUILDING MATERIALS CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) – (Continued)

Note 2.New Accounting Pronouncements – (Continued)

In May 2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles” (“SFAS No. 162”), ~~both wholly-owned subsidiaries~~which identifies the sources of ~~BMCA, entered into a merger agreement~~accounting principles and the framework for selecting principles to be used in the preparation and presentation of financial statements in accordance with ~~Elk (the "Merger Agreement").~~ 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 does not expect the adoption of SFAS No. 162 to have any impact on its results of operations or financial position.

Note 3.

Acquisition

On February 22, 2007, ~~an equity tender offer closed, and, as~~ a ~~result thereof (and the purchase~~subsidiary of ~~shares from one of its affiliates),~~ BMCA ~~Acquisition Sub owned~~acquired approximately 90% of ~~Elk's~~Elk common shares at a purchase price of $43.50 per common share. ~~In accordance with~~On March 26, 2007, the ~~Merger Agreement,~~Company acquired the remaining Elk common shares ~~were converted~~ in a second step merger ~~into~~in exchange for the right to receive $43.50 per share in ~~cash. On March 26, 2007, BMCA completed the merger, pursuant to~~cash, which ~~BMCA Acquisition Sub was merged with and into~~resulted in Elk ~~which then became~~becoming an indirect wholly-owned subsidiary of BMCA. The Company completed the acquisition of the Elk common shares ~~was completed~~ at a purchase price of approximately ~~$944.8~~$945.5 million, ~~net of $0.1 million of cash acquired and~~ 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.

The Company financed the purchase of Elk, ~~and~~ refinanced certain of ~~BMCA's~~BMCA’s then outstanding debt and repaid all of ~~Elk's~~Elk’s then outstanding senior notes of $195.0 million with the proceeds from its new senior secured credit facilities. The ~~Company's~~Company’s new senior secured credit facilities consist of a $600.0 million ~~five-year senior secured revolving credit facility,~~Senior Secured Revolving Credit Facility (the “Senior Secured Revolving Credit Facility”), a $975.0 million ~~seven-year senior secured term loan facility~~Term Loan Facility (the “Term Loan”) and a $325.0 million ~~junior lien term loan facility maturing on September 15, 2014.~~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”). See Note ~~6. 9~~ ~~BUILDING MATERIALS CORPORATION OF AMERICA NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED) NOTE 2. ACQUISITIONS - (CONTINUED)~~ 7.

The Company ~~believes~~accounted for the acquisition of Elk will strategically position it for future growth in the roofing industry and other building products markets. The acquisition is expected to provide the Company with an increased market leadership position, create comprehensive market-leading product offerings, generate natural cost savings from synergies, including plant rationalization and re-alignment of distribution networks, raw material procurement, administrative and logistical efficiencies, and leverage the organizational strengths of both BMCA and Elk. The Elk acquisition ~~was accounted for~~ under the purchase method of accounting as prescribed by SFAS No. 141 ~~"Business Combinations," ("~~“Business Combinations” (“SFAS No. ~~141"~~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. ~~The~~During its first quarter ended March 30, 2008, the Company completed its purchase price allocation ~~process required an analysis~~ of ~~plant, property and equipment, inventories, customer lists and relationships, contractual commitments and brand strategies, among others, to identify and record~~ the ~~fair value of~~ assets acquired and liabilities assumed. In connection with the acquisition, the Company used an estimated economic life of 5 to 40 years for land improvements, 10 to 40 years for buildings and building improvements, 3 to 30 years for machinery and equipment, which includes furniture and fixtures, and 1 to 25 years for intangible assets. In valuing acquired assets and assumed liabilities, fair values were based on, but not limited to: future expected discounted cash flows for trade names and customer relationships; current replacement costs for similar capacity and obsolescence for certain fixed assets and inventory; and comparable market rates for contractual obligations, including real estate and liabilities. The Company performed a valuation analysis of the assets and liabilities acquired from Elk which was substantially completed during the three-month period ended September 30, 2007, and the Company expects to finalize its purchase price allocation during the fourth quarter of 2007. At September 30, 2007, the Company recorded $570.5 million of goodwill and $235.6 million of intangible assets, net of amortization of $3.9 million (see ~~Note 5), related to the acquisition of Elk based on the completion of its valuation analysis.~~table below). The operating results of ~~the~~ Elk ~~acquisition~~ are included in the ~~Company's~~Company’s results of operations from the date of acquisition. 10 ~~BUILDING MATERIALS CORPORATION OF AMERICA NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED) NOTE 2. ACQUISITIONS - (CONTINUED)~~

The following ~~unaudited pro-forma consolidated results~~table represents the final fair values of ~~operations assume the acquisition of Elk was completed as of January 1st for each of the three-month~~assets acquired and nine-month periods presented below: THIRD QUARTER ENDED NINE MONTHS ENDED -------------------- ------------------------ SEPT. 30, OCT. 1, SEPT. 30, OCT. 1, 2007 2006 2007 2006 -------- -------- ---------- ---------- (MILLIONS) Net sales ................ $ 680.7 $ 748.5 $ 1,947.7 $ 2,274.3 -------- -------- ---------- ---------- Income before interest and income taxes ............ 23.8 61.4 6.7 184.4 -------- -------- ---------- ---------- Net income (loss) ........ $ (13.9) $ 14.0 $ (100.1) $ 43.7 ======== ======== ========== ========== The unaudited pro-forma consolidated results of operations for the three-month and nine-month periods ended September 30, 2007 include $31.8 and $97.6 million pre-tax ($21.9 and $67.3 million after-tax) of restructuring and other expenses, respectively, of which $7.2 and $18.0 million pre-tax ($5.0 and $12.4 million after-tax) was included in cost of products sold, respectively,liabilities assumed related to the acquisition of ~~Elk. In addition,~~Elk as of the ~~unaudited pro-forma consolidated results~~date of ~~operations for the nine-month period ended September 30, 2007 above includes $13.6 million~~acquisition with amounts paid in excess of merger-related expenses of Elk and $23.2 million of debt restructuring costs of both BMCA and Elk related to the acquisition of Elk. The Company's pro-forma results include a reduction in compensation expense related to Elk employees who were terminated due to the acquisition of Elk of $1.2 and $3.1 million for the three-month periods ended September 30, 2007 and October 1, 2006, respectively and $6.0 and $9.2 million for the nine-month periods ended September 30, 2007 and October 1, 2006, respectively. The Company's pro-forma results also include a reduction in lease expense for excess lease capacity at two Elk facilities. The reduction in lease expense was computed based on the remaining lease payments discounted on a present value basis, straight-lined over the applicable pro-forma period with the present value offsettheir fair values being recorded ~~in interest expense. For the three-month periods ended September 30, 2007 and October 1, 2006, the Company 11~~ BUILDING MATERIALS CORPORATION OF AMERICA NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED) NOTE 2. ACQUISITIONS - (CONTINUED) recorded an increase/(decrease) in lease expense of $0.5 and $(0.5) million, respectively and an (increase)/decrease to interest expense of $0.3 and $(0.3) million, respectively. For the nine-month periods ended September 30, 2007 and October 1, 2006, the Company recorded a reduction in lease expense of $0.5 and $1.6 million, respectively and an increase to interest expense of $0.3 and $0.9 million, respectively. In addition, the Company's pro-forma results for the three-month period ended October 1, 2006 and the nine-month periods ended September 30, 2007 and October 1, 2006 include additional interest expense associated with variable rate debt instruments based on LIBOR plus a specified fixed margin, due to the acquisiton of Elk. A 1/8% change in these variable interest rates would result in a plus or minus $0.5 million in interest expense for the three-month period ended October 1, 2006 and a plus or minus $0.3 and $1.4 million in interest expense for the nine-month periods ended September 30, 2007 and October 1, 2006, respectively. Pro-forma data may not be indicative of the results that would have been achieved had these events actually occurred at the beginning of the periods presented, nor does it intend to be a projection of future results. as goodwill.

Goodwill	$	588,720

Total assets acquired	$	1,411,460
Total liabilities assumed		(465,941	)
Net assets acquired	$	945,519

During the second quarter of 2007, the Company initiated ~~the implementation of~~ a restructuring plan (the ~~"2007~~“2007 Restructuring ~~Plan"~~Plan”) (see Note 4), which ~~was~~it formulated in connection with the ~~February 22, 2007~~ acquisition of ~~Elk (see Note 3). In~~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 ~~Elk,~~Liabilities in Connection with a Purchase Business Combination,” the Company ~~currently~~ identified ~~$69.6~~$8.7 million in purchase accounting adjustments, which ~~primarily relate~~related to ~~the establishment of a change of control accrual,~~ employee severance payments to former Elk employees and ~~integration-related expenses, which include Elk inventory-related valuation write-downs,~~ lease termination expenses and other integration-related expenses. Furthermore, the Company substantially completed its valuation analysis of property, plant and equipment and intangible assets acquired from Elk during its three-month period ended September 30, 2007. The Company accounts for its purchase accounting adjustments in accordance with the provisions of SFAS No. 141. The Company has incurred $64.0 million of the aforementioned purchase accounting adjustments as of September 30, 2007, of which $3.2 million was 12

BUILDING MATERIALS CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ~~(UNAUDITED) - (CONTINUED) NOTE 2. ACQUISITIONS - (CONTINUED) incurred in~~(Unaudited) – (Continued)

Note 3.Acquisition – (Continued)

termination expenses. As of September 28, 2008, the ~~third quarter of 2007, $54.6~~Company had paid $2.9 million ~~was incurred in the second quarter of 2007~~for severance costs and ~~$6.2~~$1.3 million ~~was incurred in the first quarter of 2007(see table below), and which are included in the purchase price allocation.~~for lease termination expenses. The Company expects to ~~accrue the remaining $5.6~~make approximately $4.5 million of ~~identified purchase accounting adjustments as incurred and make the remaining cash~~lease termination payments ~~related to its accrual by its first quarter ending 2008.~~through 2019. The ~~Company's~~Company’s employee severance payments included the termination of approximately ~~125~~130 Elk employees, including certain management positions, in the manufacturing and selling and administrative ~~functional~~ areas.

EMPLOYEE DISCONTINUED INTEGRATION SEVERANCE OPERATIONS CHANGE OF PURCHASE ACCOUNTING ACCRUALS EXPENSES PAYMENTS EXPENSES CONTROL TOTAL - ---------------------------- -------- -------- -------- -------- -------- (THOUSANDS) Beginning Balance, as of December 31, 2006 $ -- $ -- $ -- $ -- $ -- Accrued costs incurred due to the acquisition of Elk 5,785 -- 415 -- 6,200 -------- -------- -------- -------- -------- Balance, as of April 1, 2007 5,785 -- 415 -- 6,200 Additional accrued costs incurred due to the acquisition of Elk 19,624 2,400 -- -- 22,024 Accrued costs incurred related to change in control escrow account -- -- -- 32,574 32,574 Cash Payments (224) (1,773) -- -- (1,997) Amount charged to directly write-off inventory (4,071) -- -- -- (4,071) Non-cash items -- -- -- (8,889) (8,889) -------- -------- -------- -------- -------- Balance, as of July 1, 2007 21,114 627 415 23,685 45,841 Additional accrued costs incurred due to the acquisition of Elk 3,250 -- -- -- 3,250 Cash payments (2,446) (577) -- -- (3,023) Amount charged to directly write-off inventory (517) -- -- -- (517) Non-cash items -- -- -- (7,456) (7,456) -------- -------- -------- -------- -------- Ending Balance, as of September 30, 2007 $ 21,401 $ 50 $ 415 $ 16,229 $ 38,095 ======== ======== ======== ======== ========
Note 4.	Restructuring and Other Expenses

13 BUILDING MATERIALS CORPORATION OF AMERICA NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED) NOTE 3. RESTRUCTURING AND OTHER EXPENSES During the second quarter of 2007, the Company initiated its 2007 Restructuring Plan, which was formulated in connection with the acquisition of Elk on February 22, 2007.

The 2007 Restructuring Plan was created to eliminate cost redundancies recognized due to the acquisition of Elk and to reduce the ~~Company's~~Company’s current cost ~~structure and~~structure. The 2007 Restructuring Plan is expected to be fully implemented by the end of the ~~Company's first quarter of~~Company’s fiscal year ending December 31, 2008. The Company accounts for its restructuring activities in accordance with ~~the guidance of~~ SFAS No. 146, ~~"Accounting~~“Accounting for Costs Associated with Exit or Disposal ~~Activities" ("SFAS No. 146") and~~Activities,” SFAS No. 144, ~~"Accounting~~“Accounting for the Impairment or Disposal of Long-Lived ~~Assets" ("SFAS~~Assets” and EITF No. ~~144").~~ 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 ~~has~~ identified ~~approximately $114.6~~$191.9 million in restructuring and other expenses in its fiscal year ended December 31, 2007, of which ~~$49.8~~$97.0 million ~~relates~~related to property, plant and equipment write-downs at certain of its existing manufacturing facilities and ~~$18.4~~$25.1 million ofrelated to plant closing expenses. ~~The plants included in restructuring and other expenses reflected above were Erie, Pennsylvania; Stockton, California; Millis, Massachusetts; Mobile, Alabama; Dallas, Texas and Hollister, California.~~ Restructuring and other expenses also ~~include~~included $2.0 million in employee severance payments and ~~$44.4~~$67.8 million in integration-related expenses, which primarily ~~consist~~consisted of ~~$18.0~~$24.3 million of inventory-related ~~valuation~~ write-downs, $15.1 million of restructuring-related sales discounts, $1.4 million of lease termination expenses and ~~$25.0~~$27.0 million of other integration expenses.

The Company recorded ~~$97.6~~$181.0 million of the aforementioned restructuring and other expenses in its statement of operations as of ~~September 30, 2007, $31.8 million of which was recorded in the third quarter of~~December 31, 2007, of which ~~$7.2~~$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 ~~$24.6~~$141.6 million was charged to restructuring and other ~~expenses in the Company's statement of operations. In the second quarter of 2007 the~~expenses.

Nine Months Ended September 28, 2008 Restructuring and Other Expenses

The Company ~~recorded $65.8~~identified an additional $58.4 million of restructuring and other expenses in its nine months ended September 28, 2008, which included $12.7 million of plant closing expenses, $2.9 million in employee severance payments and $42.8 million in integration-related expenses. Integration-related expenses primarily consisted of $22.3 million of inventory write-downs, $4.6 million of restructuring-related sales discounts and $15.9 million of other integration expenses.

The Company recorded $60.7 million of the identified restructuring and other expenses in its statement of operations in the nine-month period ended September 28, 2008, of which ~~$10.8~~$4.6 million was reflected as a reduction in net sales due to restructuring-related sales discounts, $22.3 million was charged to cost of products sold and ~~$55.0~~$33.8 million was charged to restructuring and other ~~expenses in the Company's statement of operations.~~expenses. The Company expects to incur the remaining ~~$17.0~~$8.6 million of identified ~~restructuring~~integration and other expenses and to make the remaining cash payments related to its accrual, byonce all matters with the acquisition of Elk are resolved and completed.

BUILDING MATERIALS CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) – (Continued)

Note 4.Restructuring and Other Expenses – (Continued)

The table below details the Company’s restructuring and other expense accruals and charges made against the accrual during its ~~first quarter ending 2008.~~ nine months ended September 28, 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		$	13,850

Current period costs, net		14,364			2,863			43,504			60,731

Cash payments		(19,967	)		(2,863	)		(41,648	)		(64,478	)

Amount related to property, plant and equipment for asset adjustments		6,228			-			(309	)		5,919

Amount charged to write-off inventory		(63	)		-			(3,010	)		(3,073	)

Non-cash items		-			-			(445	)		(445	)

Ending balance, as of September 28, 2008	$	3,467		$	-		$	9,037		$	12,504

The ~~Company's~~Company’s aggregate employee severance payments included the termination of approximately 70100 BMCA employees, including certain management positions, in the manufacturing and selling and administrative ~~functional~~ areas. 14

Note 5.

Comprehensive Income (Loss)

The table below reconciles the Company’s net income (loss) to comprehensive income (loss) for the third quarter and nine-month periods ended September 28, 2008 and September 30, 2007, respectively:

	Third Quarter Ended						Nine Months Ended
	Sept. 28, 2008			Sept. 30, 2007			Sept. 28, 2008		Sept. 30, 2007
	(Thousands)

Net income (loss)	$	34,673		$	(11,181	)	$	47,429	$	(70,945	)

Other comprehensive income (loss), net of tax:
Derivative fair value adjustment - interest rate swaps, net of tax of $1,559 and $6,553 for the three-month periods ended September 28, 2008 and September 30, 2007, respectively, and $177 and $1,505 for the nine-month periods ended September 28, 2008 and September 30, 2007, respectively		(2,543	)		(10,691	)		(288)		(2,455	)

Derivative fair value adjustment - treasury locks, net of tax of ($72) and $1,016 for the three-month periods ended September 28, 2008 and September 30, 2007, respectively, and ($216) and $1,016 for the nine-month periods ended September 28, 2008 and September 30, 2007, respectively.		117			(1,658	)		352		(1,658	)
Comprehensive income (loss)	$	32,247		$	(23,530	)	$	47,493	$	(75,058	)

BUILDING MATERIALS CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ~~(UNAUDITED) - (CONTINUED) NOTE 3. RESTRUCTURING AND OTHER EXPENSES - (CONTINUED)~~ (Unaudited) – (Continued)

PP&E PLANT EMPLOYEE RESTRUCTURING AND WRITE- CLOSING SEVERANCE INTEGRATION OTHER EXPENSES DOWN EXPENSES PAYMENTS EXPENSES TOTAL - ----------------- -------- -------- -------- -------- -------- (THOUSANDS) Beginning Balance, as of December 31, 2006 $ -- $ -- $ -- $ -- $ -- Accrued costs incurred due to the acquisition of Elk -- -- -- -- -- -------- -------- -------- -------- -------- Balance, as of April 1, 2007 -- -- -- -- -- Additional accrued costs incurred due to the acquisition of Elk 41,919 7,234 2,000 14,640 65,793 Cash Payments -- (2,784) (800) (1,800) (5,384) Amount charged to property, plant and equipment for asset write-down (41,919) -- -- -- (41,919) -------- -------- -------- -------- -------- Balance, as of July 1, 2007 -- 4,450 1,200 12,840 18,490 Additional accrued costs incurred due to the acquisition of Elk 7,888 4,475 -- 19,491 31,854 Cash payments -- (4,475) (1,200) (19,768) (25,443) Amount charged to property, plant and equipment for asset write-down (7,888) -- -- -- (7,888) Amount charged to write-off inventory -- (1,545) -- (31) (1,576) Non-cash items -- -- -- (488) (488) -------- -------- -------- -------- -------- Ending Balance, as of September 30, 2007 $ -- $ 2,905 $ -- $ 12,044 $ 14,949 ======== ======== ======== ======== ========
Note 6.	Inventories

15 ~~BUILDING MATERIALS CORPORATION OF AMERICA NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED) NOTE 4. INVENTORIES~~

Inventories consisted of the following as of September ~~30, 2007~~28, 2008 and December 31, ~~2006,~~2007, respectively. Inventories as of September 30, 2007, include Elk from the date of acquisition. SEPTEMBER 30, DECEMBER 31, 2007 2006 --------- --------- (THOUSANDS) Finished goods $ 181,724 $ 173,338 Work-in process 24,352 25,930 Raw materials and supplies 77,851 64,686 --------- --------- Total 283,927 263,954 Less LIFO reserve (21,902) (25,245) --------- --------- Inventories $ 262,025 $ 238,709 ========= ========= NOTE 5. INTANGIBLE ASSETS The Company accounts for its intangible assets acquired in connection with the acquisition of Elk in accordance with the provisions of SFAS No. 142 "Goodwill and Other Intangible Assets" ("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 about actual year-to-date intangible asset amortization expense and the estimated intangible asset amortization expense for each of the next five years. As of September 30, 2007, the Company has not recorded any impairment losses related to its intangible assets and has not written-off any acquired research and development assets. 16 BUILDING MATERIALS CORPORATION OF AMERICA NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED) NOTE 5. INTANGIBLE ASSETS - (CONTINUED) Intangible assets, all of which were acquired from Elk, consisted of the following as of September 30, 2007.

	September 28, 2008			December 31, 2007
	(Thousands)

Finished goods	$	234,333		$	241,511
Work-in process		36,699			26,291
Raw materials and supplies		92,217			72,950
Total		363,249			340,752
Less LIFO reserve		(47,480	)		(23,840	)
Inventories	$	315,769		$	316,912

SEPTEMBER 30, 2007 -------------------------------------------------- GROSS AMORTIZATION CARRYING ACCUMULATED NET PERIOD AMOUNT AMORTIZATION AMOUNT ------------ -------- ----------- -------- (THOUSANDS) AMORTIZED INTANGIBLE ASSETS: - ---------------------------- Customer Relationships 20 yrs. $152,300 $ 1,904 $150,396 Trademark/Trade Names 15-25 yrs. 59,500 605 58,895 Core Technology 10 yrs. 25,000 625 24,375 Roofing Backlog - Current 1 yr 780 780 -- Computer Software 2 yrs. 190 24 166 -------- -------- -------- Amortized Intangible Assets $237,770 $ 3,938 $233,832 -------- -------- -------- NON-AMORTIZED INTANGIBLE ASSETS: - -------------------------------- Regulatory Permits Indefinite 1,800 -- 1,800 -------- -------- -------- Non-Amortized Intangible Assets $ 1,800 $ -- $ 1,800 -------- -------- -------- Intangible Assets, net $239,570 $ 3,938 $235,632 ======== ======== ========
Note 7.	Long-Term Debt

At the completion of its valuation analysis of the assets and liabilities acquired from Elk during the three-month period ended September 30, 2007, the Company recorded $235.6 million of intangible assets, net of amortization of $3.9 million. The following table illustrates, as of September 30, 2007, 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) 2008 $ 12,633 2009 12,609 2010 12,538 2011 12,538 2012 12,538 Thereafter 170,976 -------- Total $233,832 ======== 17 ~~BUILDING MATERIALS CORPORATION OF AMERICA NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED) NOTE 6. LONG-TERM DEBT~~

Long-term debt consists of the following at September ~~30, 2007~~28, 2008 and December 31, 2006: SEPTEMBER 30, DECEMBER 31, 2007 2006 ----------- ----------- (THOUSANDS) 8% Senior Notes due 2007 $ 2,456 $ 99,940 8% Senior Notes due 2008 4,872 154,838 7 3/4% Senior Notes due 2014 250,613 250,680 Borrowings under the Old Senior Secured Revolving Credit Facility -- 60,000 Borrowings under the Senior Secured Revolving Credit Facility 281,000 -- Term Loan 967,706 -- Junior Lien Term Loan 325,000 -- Industrial development revenue bonds with various interest rates and maturity dates to 2029 7,710 7,795 Chester Loan 8,984 11,133 Other notes payable 8,952 2,938 ----------- ----------- Total 1,857,293 587,324 Less current maturities (16,770) (102,918) ----------- ----------- Long-term debt less current maturities $ 1,840,523 $ 484,406 =========== =========== 2007:

	September 28, 2008			December 31, 2007
	(Thousands)

8% Senior Notes due 2008	$	4,876		$	4,874
7 3/4% Senior Notes due 2014		250,523			250,590
Borrowings under the Senior Secured Revolving Credit Facility		386,000			122,000
Term Loan		960,466			965,362
Junior Lien Term Loan		325,000			325,000
Obligations under capital leases		56,733			61,997
Industrial development revenue bonds		2,820			7,710
Chester Loan		5,927			8,241
Other notes payable		7,792			8,251
Total		2,000,137			1,754,025
Less current maturities		(25,386	)		(24,630	)
Long-term debt less current maturities	$	1,974,751		$	1,729,395

On February 22, 2007, BMCA ~~and the Purchasers~~ entered into ~~senior secured credit facilities~~Senior Secured Credit Facilities consisting of a ~~new $975~~$975.0 million ~~term loan facility (the "Term Loan"),~~Term Loan, a new $600 million revolving credit facility (the "Senior Secured Revolving Credit Facility") and a $325 million bridge loan facility (the "Bridge Loan"), which was replaced by a $325 million junior lien term loan facility (the "Junior Lien Term Loan") (collectively the "Credit Facilities"). The initial borrowings under the Credit Facilities were used (i) to pay for shares tendered by Elk shareholders in an equity tender offer, (ii) to repay amounts outstanding under BMCA's old $450.0$600.0 million Senior Secured Revolving Credit Facility ~~(the "Old Senior Secured Revolving Credit Facility"), (iii)~~and a $325.0 million bridge loan facility, which was subsequently replaced by a $325.0 million Junior Lien Term Loan, which collectively financed the purchase of Elk and repaid certain existing BMCA debt facilities and Elk senior note debt.

On April 10, 2008, the Company repurchased and retired $4.8 million of industrial development revenue bond certificates issued by the Company with respect to ~~make payments~~the Mount Vernon, Indiana Industrial Development Revenue Bond issued in ~~connection with the completion by BMCA and Building Materials Manufacturing Corporation ("BMMC") of the tender offer 18~~ 1985.

BUILDING MATERIALS CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED) NOTE 6. LONG-TERM DEBT - (CONTINUED) and consent solicitation for their 8% Senior Notes due 2007 (the "2007 Notes"), (iv) to make payments in connection with the completion by BMCA of its previously announced tender offer and consent solicitation for its outstanding 8% Senior Notes due 2008 (the "2008 Notes"), (v) to pay for transaction fees and expenses incurred in connection with each of the foregoing transactions and (vi) to repay all of the existing Elk senior note debt. The Senior Secured Revolving Credit Facility has a maturity date of February 22, 2012. All amounts outstanding under the Senior Secured Revolving Credit Facility 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"). 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 million. Loans under the Senior Secured Revolving Credit Facility will 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 will be 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. The Senior Secured Revolving Credit Facility provides for optional reductions in the overall $600 million commitment, under certain conditions. In addition, the Senior Secured Revolving Credit Facility provides for optional and mandatory pre-payments of borrowings outstanding under the Senior Secured Revolving Credit 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 million, depending on the ability to obtain commitments from lenders and meeting specified conditions. Under the terms of the Senior Secured Revolving Credit Facility, the borrowers are subject to an interest coverage ratio financial covenant when liquidity falls below a specified threshold. 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 Senior Secured Revolving Credit Facility could be accelerated by the holders of that indebtedness. On March 12, 2007, the Senior Secured Revolving Credit Facility was amended, which did not result in any material changes to the facility. 19 BUILDING MATERIALS CORPORATION OF AMERICA NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED) NOTE 6. LONG-TERM DEBT - (CONTINUED) The Term Loan will mature on February 22, 2014. All amounts outstanding under the Term Loan 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. Amounts due under the Term Loan will 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 will be recalculated periodically based on changes in the base rate and Eurodollar rate, if applicable. The Term Loan requires the Company to pay unused commitment fees. In addition, the Term Loan provides for optional and mandatory pre-payments under certain conditions. The Term Loan also provides the borrowers with the ability to increase the size of the facility by up to $250 million (less any increase in the Senior Secured Revolving Credit Facility in excess of $100 million), depending on the ability to obtain commitments from lenders and meeting specified conditions. Under the terms of the Term Loan, the borrowers are subject to an interest coverage ratio financial covenant, as defined, and a leverage ratio financial covenant, as defined, each of which will need to be complied with starting as of the end of BMCA's second fiscal quarter in 2008. In addition, the borrowers are also required to comply with 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 date of the Term Loan could be accelerated by the holders of that indebtedness. On March 15, 2007, the Term Loan was amended, which did not result in any material changes to the facility. The Bridge Loan would have converted into a term loan maturing on February 22, 2015, however it was amended and restated on March 15, 2007, and redesignated as the Junior Lien Term Loan. The Junior Lien Term Loan matures on September 15, 2014. All amounts outstanding under the Junior Lien Term Loan 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 the Junior Lien Term Loan will 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 will be recalculated periodically based on changes in the base rate or Eurodollar rate, as applicable. The Junior Lien Term Loan provides for optional and mandatory prepayments under certain conditions. 20 BUILDING MATERIALS CORPORATION OF AMERICA NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED) NOTE 6. LONG-TERM DEBT - (CONTINUED) Under the terms of the Junior Lien Term Loan, the borrowers are subject to a leverage ratio financial covenant, as defined, which will need to be complied with starting as of the end of BMCA's second fiscal quarter in 2008. The borrowers are also required to comply with 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 date of the Junior Lien Term Loan could be accelerated by the holders of that indebtedness. On February 22, 2007, BMCA repurchased approximately $97.5 million, or 97.5%, of the aggregate principal amount outstanding of the 2007 Notes and $150.1 million, or 96.9%, of the aggregate principal amount outstanding of the 2008 Notes. In connection with the completion of the tender offer for the 2007 Notes and the 2008 Notes in February 2007, substantially all of the covenants included in the indentures governing the 2007 Notes and 2008 Notes were eliminated. On March 26, 2007, the Company repurchased all of Elk's then outstanding $25.0 million in aggregate principal amount of 4.69% Senior Notes due 2007, $60.0 million in aggregate principal amount of 6.99% Senior Notes due 2009, $60.0 million in aggregate principal amount of 7.49% Senior Notes due 2012 and $50.0 million in aggregate principal amount of 6.28% Senior Notes due 2014. (Unaudited) – (Continued)

Note 7. Long-Term Debt – (Continued)

As of September ~~30, 2007,~~28, 2008, the Company had total outstanding consolidated indebtedness of ~~$1,910.1~~$2,053.0 million, which ~~amount includes~~included $52.8 million of demand loans to its parent corporation and ~~$16.8~~$25.4 million that matures prior to the end of the third quarter of ~~2008. The Company's total outstanding consolidated indebtedness also includes $281.0 million of borrowings outstanding under its $600.0 million Senior Secured Revolving Credit Facility.~~2009. 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 September ~~30, 2007,~~28, 2008, the Company was in compliance with all covenants under the Senior Secured ~~Revolving~~ Credit ~~Facility, the Term Loan, the Junior Lien Term Loan~~Facilities and the indentures governing ~~the remaining 2007~~its 8% Senior Notes ~~the remaining~~due 2008 ~~Notes~~(the “2008 Notes”) and ~~the~~its 7 3/4% Senior Notes due 2014 (the ~~"2014 Notes") (collectively,~~“2014 Notes” and, together with the ~~"Senior Notes"~~2008 Notes, the “Senior Notes”). As of September ~~30, 2007,~~28, 2008, the net book value of the collateral securing the Senior ~~Notes, the Term Loan, the Junior Lien Term Loan and~~Secured Revolving Credit Facility Collateral (as defined in the Senior Secured Revolving Credit ~~Facility~~Facility) and the Term Loan Collateral (as defined in the Term Loan) was ~~approximately $2,485.8 million. 21~~ ~~BUILDING MATERIALS CORPORATION OF AMERICA NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED) NOTE 6. LONG-TERM DEBT - (CONTINUED)~~ $1,109.5 and $1,662.1 million, respectively.

At September ~~30, 2007,~~28, 2008, the Company had outstanding letters of credit of approximately ~~$51.2~~$48.4 million, which ~~includes~~included approximately ~~$10.5~~$10.6 million of standby letters of credit related to certain obligations of G-I Holdings. On January 3, 2006, the Company purchased and retired $6.3 million of industrial revenue bond certificates issued by the Company in 1990 with respect to the Fontana, California Industrial Revenue Development Bond, resulting in BMCA becoming the primary holder of such bond. NOTE 7. HEDGING ACTIVITY

Note 8.

Hedging Activity

In March 2007, the Company ~~began entering~~entered into forward-starting Eurodollar rate, ~~("LIBOR")~~or LIBOR, based pay fixed income interest rate swaps related to ~~the Company's~~its Term Loan, with an effective date of April 23, 2007 and a maturity date of April 23, 2012. In accordance with SFAS No. 133 "Accounting for Derivative Instruments and Hedging Activities" ("SFAS No. 133"), BMCA's swaps are treated as cash flow hedges. At September 30, 2007, BMCA had no ineffectiveness related to its swaps. Therefore, for the quarter ended September 30, 2007, the Company, based on the change in the LIBOR rate, reflected in other liabilities the cumulative changes in the fair value of the derivative instrument when compared to cumulative changes in the present value of the expected future interest cash flows that are attributable to changes in the benchmark LIBOR swap rate. BMCA's offset to the related liability was reflected in other comprehensive loss, net of tax. The current period activity therefore marks the swaps to market and adjusts other comprehensive loss. On each balance sheet date, BMCA will test its fixed income interest rate swaps to determine whether the swaps contain any ineffectiveness. If BMCA's fixed income swaps contain any ineffectiveness, the Company will reflect the ineffective portion in its statement of operations. At September 30, 2007, based on changes in the closing LIBOR rate as of September 28, 2007, BMCA recorded a fair value loss on its fixed income interest rate swaps of $4.0 million to other liabilities, while the offset was recorded to other comprehensive loss, net of tax of $1.5 million. The Company has also recorded $1.4 million in year-to-date interest income as of September 30, 2007 related to its fixed income interest rate swaps. In October 2007, the Company entered into additional interest rate swaps related to ~~the Company's~~its Term Loan with an effective date of October 23, 2007 and a maturity date of October 23, 2012 under terms similar to those of the Company’s swaps entered into in March 2007.

In accordance with ~~similar terms~~SFAS No. 133, the Company’s swaps are treated as ~~dicussed above. 22~~ ~~BUILDING MATERIALS CORPORATION OF AMERICA NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED) NOTE 7. HEDGING ACTIVITY - (CONTINUED)~~ cash flow hedges. As of September 28, 2008, based on changes in the fair value of the interest rate swaps, the Company recognized a cumulative fair value loss on its interest rate swaps of $30.4 million to other liabilities, while the offset was recognized as an other comprehensive loss, net of tax of $11.6 million. Amounts may be reclassified from 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 other comprehensive loss related to its swaps will be reclassified during its fiscal year ending December 31, 2008.

In July 2007, the Company began entering into treasury locks as additional hedging instruments ~~against the Company's~~related to its Term Loan. The Company's treasury locks have a settlement date of October 30, 2007 and a maturity date of July 31, 2012. The Company's treasury locks fix the U.S. treasury component, while excluding the swap component of the forward benchmark LIBOR interest rate. According to SFAS No. 133 the Company's treasury locks are also cash flow hedges, which are accounted for in the same manner as its swaps. At September 30, 2007, the Company determined through statistical analysis that its treasury locks contained 98% effectiveness. Therefore, at September 30, 2007, based on changes in the closing LIBOR rate as of September 28, 2007, BMCA recorded a fair value loss of $2.7 million to accrued liabilities, with the effective portion offset of $2.6 million being recorded to other comprehensive loss, net of tax of $1.0 million and the ineffective portion offset of $0.1 million being recorded in its statement of operations. On October 30, 2007, the Company settled its open treasury lock hedging positions, ~~against its Term Loan,~~ which resulted in a ~~pre-tax~~fair value loss ~~of approximately $4.9 million, which~~and cash settlement. Pursuant to SFAS No. 133, the Company ~~will amortize~~is amortizing the loss into its statement of operations over the ~~remaining~~ life of ~~its~~the Term Loan, ~~pursuant to SFAS No. 133. NOTE 8. WARRANTY CLAIMS~~ of which $0.2 and $0.6 million was amortized into interest expense in its third quarter and nine-month period ended September 28, 2008, respectively.

Note 9.

Warranty Claims

The Company provides certain limited warranties covering most of its residential roofing products for periods generally ranging from 20 to 50 years, ~~with~~although certain product lines provide for a lifetime limited ~~warranties on certain premium designer shingle products.~~warranty. The Company also offers certain limited warranties of varying duration covering most of its commercial roofing products. Most of the ~~Company's~~Company’s specialty building products and accessories ~~products~~ carry limited warranties for periods generally ranging from 5 to 20 years, with lifetime limited warranties on certain products.

BUILDING MATERIALS CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) – (Continued)

Note 9.Warranty Claims – (Continued)

The accrual for product warranty claims consisted of the following for the third ~~quarters~~quarter and ~~nine month~~nine-month periods ended September 28, 2008 and September 30, 2007, ~~which includes Elk from the date of acquisition, and October 1, 2006,~~ respectively: 23 ~~BUILDING MATERIALS CORPORATION OF AMERICA NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED) NOTE 8. WARRANTY CLAIMS - (CONTINUED)~~
THIRD QUARTER ENDED NINE MONTHS ENDED ---------------------- ---------------------- SEPT. 30, OCT. 1, SEPT. 30, OCT. 1, 2007 2006 2007 2006 -------- -------- -------- -------- (THOUSANDS) Beginning balance...................................... $ 41,173 $ 33,940 $ 26,971 $ 31,202 Charged to cost of products sold ....................................... 5,139 6,639 13,450 20,138 Payments/deductions ................................... (4,493) (5,731) (12,277) (16,492) Acquisition of Elk .................................... -- -- 13,675 -- -------- -------- -------- -------- Ending balance......................................... $ 41,819 $ 34,848 $ 41,819 $ 34,848 ======== ======== ======== ========

	Third Quarter Ended						Nine Months Ended
	Sept. 28, 2008			Sept. 30, 2007			Sept. 28, 2008			Sept. 30, 2007
	(Thousands)
Beginning balance	$	47,028		$	41,173		$	44,724		$	26,971
Charged to cost of products sold		5,941			5,139			15,840			13,450
Payments/deductions		(5,544	)		(4,493	)		(13,139	)		(12,277	)
Acquisition of Elk		-			-			-			13,675
Ending balance	$	47,425		$	41,819		$	47,425		$	41,819

The Company ~~adopted, as~~offers extended warranty contracts on sales of ~~December 31, 2006,~~its commercial roofing products. The lives of these extended commercial warranties range from 10 to 20 years. In addition, the ~~provisions~~Company offers enhanced warranties on certain of ~~Staff Accounting Bulletin ("SAB") No. 108, "Considering~~its residential roofing products. These enhanced warranties are the ~~Effects~~“Golden Pledge Warranty™”, “Peace of ~~Prior Year Misstatements when Quantifying Misstatements~~Mind™” and “Peak Performance®” 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 such warranty programs, which is in ~~the Current Year Financial Statements" ("SAB No. 108") issued by the Securities and Exchange Commission ("SEC") in September 2006. In~~ accordance with the ~~transition provisions of SAB No. 108, related to the method the Company uses to recognize revenue on sales of separately priced commercial and residential warranties in accordance with~~accounting prescribed by FASB Technical Bulletin ~~Number~~No. 90-1 ~~"Accounting of~~“Accounting for Separately Priced Extended Warranty and Product Maintenance ~~Contracts" ("FTB No. 90-1"),~~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.

At September 28, 2008 and September 30, 2007, the Company ~~reclassified $10.3~~had deferred revenue related to these agreements of $75.5 and $68.0 million, of ~~its commercial warranty accrual to deferred revenue~~which $8.6 and ~~costs. In addition,~~$8.2 million is included in other current liabilities and $66.9 and $59.8 million is included in other liabilities, respectively. At September 28, 2008 and September 30, 2007, the Company ~~recorded an additional residential warranty accrual~~had related deferred costs of ~~$7.8~~$54.0 and $45.3 million, ~~related to the accrual for future residential warranty costs related to warranties that are not separately priced,~~of which $5.5 and $5.1 million is included in ~~accordance with the transition provisions of SAB No. 108. NOTE 9. BENEFIT PLANS~~ other current assets and $48.5 and $40.2 million is included in other assets, respectively.

Note 10.

Benefit Plans

Defined Benefit Plans

The Company provides a non-contributory defined benefit retirement plan for certain hourly and salaried employees (the ~~"Retirement Plan"~~“Retirement Plan”). Benefits under this plan are based on stated amounts for each year of service. The ~~Company's~~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 "Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans" ("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. SFAS No. 158 replaces FASB Statement No. 87's requirement to report at least a minimum pension liability, measured as the excess of the accumulated benefit obligation over the fair value of the plan assets.

The 24 BUILDING MATERIALS CORPORATION OF AMERICA NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED) NOTE 9. BENEFIT PLANS - (CONTINUED) 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 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 currently deferred when applying FASB Statement Nos. 87 and 106 are now recognized as a component of accumulated other comprehensive income, net of all applicable taxes. The Company adopted SFAS No. 158 during its fourth quarter of the fiscal year ended December 31, 2006. The Company'sCompany’s net periodic pension cost for the Retirement Plan included the following components for the third ~~quarters~~quarter and ~~nine month~~nine-month periods ended September ~~30, 2007~~28, 2008 and ~~October 1, 2006, respectively:~~
THIRD QUARTER ENDED NINE MONTHS ENDED -------------------- -------------------- SEPT. 30, OCT. 1, SEPT. 30, OCT.1, 2007 2006 2007 2006 ------- ------- ------- ------- (THOUSANDS) Service cost ..................... $ 381 $ 370 $ 1,143 $ 1,110 Interest cost .................... 567 523 1,701 1,568 Expected return on plan assets ... (826) (748) (2,478) (2,244) Amortization of unrecognized prior service cost ................... 10 10 30 29 Amortization of net losses from earlier periods ................ 41 86 124 258 ------- ------- ------- ------- Net periodic pension cost ........ $ 173 $ 241 $ 520 $ 721 ======= ======= ======= =======
~~As of the quarter ended~~ September 30, 2007, respectively:

BUILDING MATERIALS CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) – (Continued)

Note 10. Benefit Plans – (Continued)

	Third Quarter Ended						Nine Months Ended
	Sept. 28, 2008			Sept. 30, 2007			Sept. 28, 2008			Sept. 30, 2007
	(Thousands)

Service cost	$	430		$	381		$	1,290		$	1,143
Interest cost		611			567			1,832			1,701
Expected return on plan assets		(792	)		(826	)		(2,376	)		(2,478	)
Amortization of unrecognized prior service cost		3			10			10			30
Amortization of net losses from earlier periods		105			41			315			124
Net periodic pension cost	$	357		$	173		$	1,071		$	520

As of September 28, 2008, the Company ~~expects~~expected to make ~~aggregate~~ pension contributions of ~~$0.9~~$1.3 million to the Retirement Plan in ~~2007,~~2008, which is ~~similar to~~consistent with its expectations as of December 31, ~~2006. In April, July and October 2007, the~~2007. The Company made ~~2007 quarterly~~ Retirement Plan contributions of ~~$0.3, $0.3 and $0.1~~$1.0 million ~~respectively. In addition, in September 2007 the Company made a 2006 Retirement Plan contribution~~during its first nine months of ~~$0.2 million.~~ 2008.

Postretirement Medical and Life Insurance

The Company generally does not provide postretirement medical and life insurance benefits, although it subsidizes such benefits for certain employees and certain retirees. Such subsidies were reduced or ended as of January 1, 1997. Effective March 1, 2005, the Company amended the plan ~~eliminating~~to eliminate postretirement medical benefits ~~affecting~~for all current and future retirees. 25 ~~BUILDING MATERIALS CORPORATION OF AMERICA NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED) NOTE 9. BENEFIT PLANS - (CONTINUED)~~

Net periodic postretirement ~~(benefit) cost~~benefit included the following components for the third ~~quarters~~quarter and ~~nine month~~nine-month periods ended September ~~30, 2007~~28, 2008 and ~~October 1, 2006, respectively:~~
THIRD NINE QUARTER ENDED MONTHS ENDED ---------------- ---------------- SEPT. OCT. SEPT. OCT. 30, 1, 30, 1, 2007 2006 2007 2006 ----- ----- ----- ----- (THOUSANDS) Service cost ....................... $ 3 $ 3 $ 9 $ 10 Interest cost ...................... 30 30 90 89 Amortization of unrecognized prior service cost ..................... (143) (155) (428) (464) Amortization of net gains from earlier periods .................. (57) (61) (170) (183) ----- ----- ----- ----- Net periodic postretirement (benefit) cost ................... $(167) $(183) $(499) $(548) ===== ===== ===== =====
~~As of the quarter ended~~ September 30, 2007, respectively:

	Third Quarter Ended						Nine Months Ended
	Sept. 28, 2008			Sept. 30, 2007			Sept. 28, 2008			Sept. 30, 2007
	(Thousands)

Service cost	$	3		$	3		$	10		$	9
Interest cost		29			30			87			90
Amortization of unrecognized
prior service cost		(143	)		(143	)		(428	)		(428	)
Amortization of net gains from
earlier periods		(56	)		(57	)		(169	)		(170	)
Net periodic postretirement
benefit	$	(167	)	$	(167	)	$	(500	)	$	(499	)

As of September 28, 2008, the Company ~~expects~~expected to make aggregate benefit claim payments of approximately $0.2 million ~~in 2007,~~during 2008, which are related to postretirement life insurance expenses. This amount is consistent with the ~~Company's~~Company’s expectations as of December 31, 2006. In connection with the acquisition of Elk, the Company adopted the Elk 401(k) Plan, which was established effective January 1, 1990. Under the Elk 401(k) Plan, which was amended January 1, 2007, 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 compensation. 26 2007.

BUILDING MATERIALS CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ~~(UNAUDITED) - (CONTINUED) NOTE 10. STOCK/LOAN PLAN In connection with the Company's acquisition of Elk, the Company adopted the Elk Stock/Loan~~(Unaudited) – (Continued)

Note 11. 2001 Long-Term Incentive Plan ~~under which certain Elk employees were~~

Incentive units granted loans for the purpose of purchasing Elk's common stock, which loans were based on a percentage of their salaries, the performance of their operating units, and also as long-term incentive compensation awards. Under the Stock/Loan Plan, a ratable portion of the loans, which are unsecured, and any accrued interest are forgiven and recognized as compensation expense over five years of continuing service with the Company. If employment is terminated for any reason except death, disability or retirement, the balance of the loan becomes due and payable. No further loans will be made under this plan. Loans outstanding at September 30, 2007 were $3.6 million and are included in other noncurrent assets. NOTE 11. 2001 LONG-TERM INCENTIVE PLAN The incentive units under the ~~Company's~~ 2001 Long-Term Incentive Plan are valued at Book Value (as defined in the Plan) or the value ~~specified~~ of such incentive units specified at the date of grant. ~~Changes, either increases~~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 award. Compensation ~~(income)~~ expense for the ~~Company's~~Company’s incentive units was ~~$0.8~~$3.6 and ~~$(0.9)~~$0.8 million for the third ~~quarters~~quarter ended September 28, 2008 and September 30, 2007, ~~and October 1, 2006,~~ respectively, and ~~$1.8~~$4.8 and ~~$4.7~~$1.8 million for the nine-month periods ended September ~~30, 2007~~28, 2008 and ~~October 1, 2006, respectively. At~~ September 30, 2007, ~~and October 1, 2006, the 2001 Long-Term Incentive Plan liability amounted to $10.4 and $27.1 million, respectively, and was included in accrued liabilities.~~ respectively.

The following is a summary of activity for incentive units related to the 2001 Long-Term Incentive Plan: SEPTEMBER 30, DECEMBER 31, 2007 2006 -------- -------- Incentive Units outstanding, beginning of period .................................... 98,633 146,814 Granted ........................................ 45,589 6,200 Exercised ...................................... (37,117) (41,087) Forfeited ...................................... (3,650) (13,294) -------- -------- Incentive Units outstanding, end of period .................................... 103,455 98,633 ======== ========

	Nine Months Ended September 28, 2008		Year-to-Date December 31, 2007
Incentive Units outstanding, beginning of
period	99,120			98,633
Granted	17,000			45,589
Exercised	(18,040	)		(38,387	)
Forfeited	(6,305	)		(6,715	)
Incentive Units outstanding, end of period	91,775			99,120
Vested Units outstanding, end of period	34,462			38,750

The initial value of each of the 17,000 incentive units granted on January 1, 2008 was $592.01. The initial value of each of the 8,000 incentive units granted on July 2, 2007 and the 37,589 incentive units granted on January 1, 2007 ~~July 1, 2006 and January 1, 2006~~ was $589.43 and $583.08, ~~$569.74 and $534.19,~~ respectively. 27 ~~BUILDING MATERIALS CORPORATION OF AMERICA NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED) NOTE 12. RELATED PARTY TRANSACTIONS~~

Note 12.

Related Party Transactions

The Company makes loans to, and borrows from, its parent corporations from time to time at prevailing market rates. As of September 28, 2008 and September 30, 2007, ~~and October 1, 2006,~~ BMCA Holdings Corporation owed the Company ~~$56.2~~$56.3 and ~~$56.0~~$56.2 million, including interest of ~~$0.9~~$1.0 and ~~$0.7~~$0.9 million, respectively, and the Company owed BMCA Holdings Corporation $52.8 and $52.8 million, with no unpaid interest, ~~payable to BMCA Holdings Corporation,~~ respectively. Interest income on the ~~Company's~~Company’s loans to BMCA Holdings Corporation amounted to ~~$1.5~~$0.9 and ~~$1.3~~$1.5 million during the third ~~quarters~~quarter ended September 28, 2008 and September 30, 2007, ~~and October 1, 2006,~~ respectively, and ~~$4.0~~$2.7 and ~~$3.7~~$4.0 million during the ~~nine month~~nine-month periods ended September 28, 2008 and September 30, 2007, ~~and October 1, 2006,~~ respectively. Interest expense on the ~~Company's~~Company’s loans from BMCA Holdings Corporation amounted to ~~$1.4~~$0.8 and ~~$1.2~~$1.4 million during the third ~~quarters~~quarter ended September 28, 2008 and September 30, 2007, ~~and October 1, 2006,~~ respectively, and ~~$3.9~~$2.6 and ~~$3.5~~$3.9 million during the ~~nine month~~nine-month periods ended September 28, 2008 and September 30, 2007, ~~and October 1, 2006,~~ respectively. Loans payable to/receivable from ~~any~~its parent ~~corporation~~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 Facility, the Term Loan, the Junior Lien Term Loan and ~~its~~the Senior Notes. Under the terms of the Senior Secured Revolving Credit Facility and the indentures governing the ~~Company's~~Company’s Senior Notes at September ~~30, 2007,~~28, 2008, the Company could repay demand loans to its parent corporation amounting to $52.8 million, subject to certain conditions. The Company also makes non-interest bearing advances to affiliates, of which no balance was outstanding as of September 28, 2008 and September 30, ~~2007 and October 1, 2006.~~2007. In addition, ~~for the nine months ended~~as of September 28, 2008 and September 30, 2007, ~~and October 1, 2006,~~ the Company did not owe any loans to or enter into any lending activities with other affiliates.

BUILDING MATERIALS CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) – (Continued)

Note 12. Related Party Transactions – (Continued)

The Company ~~also~~ has a management agreement with ISP Management Company, Inc., a subsidiary of International Specialty Products Inc. (which, together with its subsidiaries, is referred to as ~~"ISP"~~“ISP”), an affiliate, ~~(the "ISP Management Agreement")~~ to provide the Company with certain management ~~services. The~~services (the “Management Agreement”). Based on services provided to the Company in 2008 under the Management Agreement, the aggregate amount payable to ISP Management Company, Inc. under the ~~currently proposed ISP~~ Management Agreement for ~~2007,~~2008, inclusive of the services provided to G-I Holdings, is ~~approximately~~not yet available; however, after adjusting for inflationary factors, it is currently estimated to be similar to the $6.7 million ~~based on services provided to the Company~~paid in 2007. The Company ~~expects~~does not expect any changes to ~~finalize~~ the ~~ISP~~ Management Agreement ~~during its fourth quarter~~to have a material impact on the Company’s results of ~~2007.~~ operations.

The Company ~~purchases~~and its subsidiaries purchase a substantial portion of ~~its~~their headlap roofing granules, colored roofing granules and algae-resistant granules, ~~under~~on a ~~long-term requirements contract with~~purchase order basis, from ISP Minerals Inc. ~~("Minerals"~~(“ISP Minerals”), an affiliate of ~~the Company~~BMCA and of ISP. The amount of mineral products purchased each year ~~under the Minerals contract~~on this basis is based on current demand and is not subject to minimum purchase requirements. For the third ~~quarters and nine month periods~~quarter ended September ~~30, 2007 and October 1, 2006,~~28, 2008, the Company purchased ~~$29.0, $26.2, $81.1~~$13.7 million of roofing granules, and ~~$84.9~~for the nine-month period ended September 28, 2008, the Company purchased $33.2 million ~~respectively,~~of roofing granules under this arrangement.

In addition to the granules products purchased by BMCA under the above mentioned purchase order basis, the balance of BMCA’s granules requirements are purchased under a contract expiring in 2013. The amount of mineral products ~~from Minerals~~purchased each year under ~~this contract.~~the contract is based on current demand and is not subject to minimum purchase requirements. Under the contract, for the third quarter ended September 28, ~~BUILDING MATERIALS CORPORATION OF AMERICA NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED) NOTE 12. RELATED PARTY TRANSACTIONS - (CONTINUED)~~ 2008, the Company purchased $24.2 million of roofing granules, and for the nine-month period ended September 28, 2008, the Company purchased $66.1 million of roofing granules.

In August 2008 and October 2008, the Company declared and paid a cash dividend of $2.5 and $5.0 million, respectively, to its parent corporation.

Included in ~~current~~noncurrent assets as a ~~non-interest bearing income~~ tax receivable from parent corporation on the Company’s consolidated balance sheets is $10.0 ~~and $9.1~~ million at both September ~~30, 2007~~28, 2008 and December 31, ~~2006, respectively,~~2007, representing amounts paid in excess of amounts due to G-I Holdings with respect to 2006 under the Tax Sharing ~~Agreement.~~Agreement (as defined). These amounts are included in the ~~change in~~ net ~~receivable from/~~payable to related parties/parent corporations in the consolidated ~~statement~~statements of cash flows. NOTE 13. INCOME TAXES 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 did not need to recognize any material adjustment to its accruals for uncertain tax positions. At January 1, 2007 and September 30, 2007, the Company had approximately $13.1 and $15.6 million, respectively, of unrecognized tax benefits. All of the unrecognized tax benefits would affect the Company's effective tax rate if recognized with the exception of $1.4 million associated with Elk, which would affect goodwill. 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 matters for years through 2004. The tax years 2005 and 2006 remain open to examination by the Internal Revenue Service ("IRS"). Substantially all material state and local matters have been concluded for tax years through 2001. The tax years 2002 through 2006 remain open to examination by the major state taxing jurisdictions to which the Company is subject. The Company's continuing practice is to recognize interest and/or penalties related to income tax matters in income tax expense. As of January 1, 2007 and September 30, 2007, the Company had $3.8 and $4.8 million, respectively, of accrued interest and penalties. The Company's effective tax rate changed from 38.0% for the year ended December 31, 2006 to 31.0% for the nine month period ended September 30, 2007. The change in the effective tax rate was primarily due to the impact of the estimated annual restructuring and other expense charges in 2007, of which $97.6 million was included in the Company's income before interest expense and income taxes for the nine month period ended September 30, 2007 and the establishment of a valuation allowance related to state income taxes. 29 ~~BUILDING MATERIALS CORPORATION OF AMERICA NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED) NOTE 14. CONTINGENCIES Asbestos Litigation Against G-I Holdings~~

Note 13.

Contingencies

In connection with its formation, the Company contractually assumed and agreed to pay the first $204.4 million of liabilities for asbestos-related bodily injury claims relating to the inhalation of asbestos fiber ("(“Asbestos ~~Claims"~~Claims”) of its indirect parent, G-I Holdings. 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 claims related to asbestos-related ~~liabilities.~~liabilities 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~~Asbestos Claims do not specify the amount of damages ~~sought. This Chapter 11 proceeding~~sought, and the value of the Asbestos Claims asserted against G-I Holdings is a contested issue in that bankruptcy, which remains ~~pending, but has been stayed (see below).~~ pending.

Claimants in the G-I ~~Holdings'~~Holdings’ bankruptcy, including judgment creditors, might seek to satisfy their claims by asking the Bankruptcy Court to require the sale of G-I ~~Holdings'~~Holdings’ assets, including its holdings of BMCA Holdings ~~Corporation's~~Corporation’s common stock and its indirect holdings of the ~~Company's~~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

BUILDING MATERIALS CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) – (Continued)

Note 13. Contingencies – (Continued)

Claims against the Company. (Approximately 1,900 Asbestos Claims were filed against the Company prior to February 2, ~~2001).~~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"~~“BMCA Action”). One of the parties to this matter, the Official Committee of Asbestos Claimants (the ~~"creditors' committee"~~“creditors’ committee”), subsequently filed a counterclaim against the Company 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'~~Holdings’ Bankruptcy Court withdrew the reference of the BMCA Action from the Bankruptcy ~~Court, and this matter will therefore be heard by~~Court. By order dated May 30, 2008, the District ~~Court.~~Court dismissed the BMCA Action without ruling on the merits of BMCA’s position that it has no successor liability for Asbestos Claims. The ~~Company believes it will prevail on its claim~~District Court ruled that a federal court declaratory judgment action was not the proper vehicle for ~~a declaratory judgment. Although~~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 ~~its claims are meritorious, and~~ that it does not have asbestos-related ~~liability,~~liability. Nevertheless, it is not possible to predict ~~the outcome of this litigation, or, if it does not prevail,~~ the outcome of any subsequent litigation regarding the continuation of the preliminary injunction and/or prosecution of Asbestos Claims against ~~BMCA. 30~~ ~~BUILDING MATERIALS CORPORATION OF AMERICA NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED) NOTE 14. CONTINGENCIES - (CONTINUED)~~ the Company.

On or about February 8, 2001, the ~~creditors'~~creditors’ committee filed a complaint in the United States Bankruptcy Court, District of New Jersey against G-I Holdings and ~~BMCA.~~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 ~~Company and G-I Holdings intend to vigorously defend the lawsuit. 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'~~plaintiffs’ application for interim relief. In November 2002, the ~~creditors'~~creditors’ committee, joined in by the legal representative of future demand holders, filed a motion for appointment of a trustee in the G-I ~~Holdings'~~Holdings’ bankruptcy. In December 2002, the Bankruptcy Court denied the motion. The ~~creditors'~~creditors’ committee appealed the ruling to the United States District Court, which denied the appeal on June 27, 2003. The ~~creditors'~~creditors’ committee appealed the denial to the Third Circuit Court of Appeals, which denied the appeal on September 24, 2004. The ~~creditors'~~creditors’ committee filed a petition with the Third Circuit Court of Appeals for a rehearing of its denial of the ~~creditors' committee's~~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'~~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~~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 asbestos liabilities (the ~~"1994 transaction"~~“1994 transaction”). The Bankruptcy Court also permitted the ~~creditors'~~creditors’ committee to pursue a claim against holders of the ~~Company's~~Company’s bank and bond debt outstanding in 2000, seeking recovery from them, based on the ~~creditors' committee's~~creditors’ committee’s theory that the 1994 transaction was a fraudulent conveyance. On July 20, 2004, the ~~creditors'~~creditors’ committee appealed certain aspects of the Bankruptcy ~~Court's~~Court’s order (and a June 8, 2004 decision upon which the order was based). G-I Holdings, the holders of the ~~Company's~~Company’s bank and bond debt and BMCA cross-appealed. The District Court

BUILDING MATERIALS CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) – (Continued)

Note 13. Contingencies – (Continued)

entered an order on June 21, 2006 affirming in part and vacating in part the Bankruptcy ~~Court's~~Court’s July 7, 2004 order. Among other things, the District Court vacated that aspect of the Bankruptcy ~~Court's~~Court’s order authorizing the ~~creditors'~~creditors’ committee to pursue avoidance claims against the Company and the holders of the ~~Company's~~Company’s bank and bond debt as of 2000. This issue ~~has been~~was remanded to the Bankruptcy Court for further proceedings consistent with the District ~~Court's opinion.~~Court’s opinion (“Authorization Proceeding”). By order dated August 22, 2008 the Bankruptcy Court stayed the Authorization Proceeding and other adversary proceedings effective upon the filing of a co-proposed Plan of Reorganization of G-I Holdings, Inc. The Company believes the ~~creditors' committee's~~creditors’ committee’s avoidance claims are without merit and that, in the event the stay is terminated, the Bankruptcy Court should not permit the committee to pursue such claims against the Company and the holders of its bank and bond debt as of 2000. 31 BUILDING MATERIALS CORPORATION OF AMERICA NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED) NOTE 14. CONTINGENCIES - (CONTINUED) In March 2007, after participating in

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 ~~mediation which resulted in~~plan of reorganization with the ~~parties agreeing to an outline of the principal terms of a~~Bankruptcy Court that will provide for settlement of ~~the G-I Holdings bankruptcy~~Asbestos Claims and all related ~~litigations, the parties agreed~~litigation. The agreement is subject to a ~~stay~~number of ~~proceedings pending~~contingencies, but if the ~~completion~~reorganization plan is filed and confirmed, all of ~~their negotiations. The judges presiding over~~ the actions described above will be resolved. If the bankruptcy is not resolved, the Company and G-I Holdings ~~bankruptcy proceeding and~~intend to vigorously defend all litigations related thereto. Subsequent to execution of the related litigations, including the BMCA action and the fraudulent conveyance action, have each entered stipulated orders dated March 22, 2007, March 23, 2007 and April 4, 2007, respectively, implementing the stay. There can be no assurance whether the negotiations will result interm sheet, a ~~settlement to the~~Joint Plan of Reorganization of G-I Holdings, ~~bankruptcy~~Inc. was filed with the Bankruptcy Court on August 21, 2008, and ~~related proceedings.~~ a First Amended Joint Plan of Reorganization of G-I Holdings, Inc. was filed with the Bankruptcy Court on October 30, 2008.

If the ~~stay ceases to be in effect~~reorganization plan is not confirmed and the Company is not successful in defending against one or more of ~~these~~the claims outlined above, 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'~~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 credit obligations.

Tax Claims Against G-I Holdings

On September 15, 1997, G-I Holdings received a notice from the ~~IRS~~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 later years) in connection with the formation in 1990 of ~~Rhone-Poulenc~~Rhône-Poulenc Surfactants and Specialties, L.P. (the ~~"surfactants partnership"~~“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'~~Holdings’ bankruptcy. If such proof of claim is sustained, 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 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'~~parties’ respective motions for Partial Summary Judgment, granting the government summary judgment on the issue of ~~"adequate disclosure"~~“adequate disclosure” for ~~statutes~~statute of limitation purposes and denying G-I Holdings summary judgment on its other ~~statutes~~statute of ~~limitation~~limitations defense (finding material issues of fact that must be tried). If the IRS were to prevail onfor the years in which the Company and/or certain of its ~~claims relating to the formation~~subsidiaries were not part of the ~~surfactants partnership,~~G-I Holdings Group, the Company nevertheless could be ~~severally~~ 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'~~Holdings’ ability to satisfy its tax liabilities and the application of tax credits and deductions. ~~If the IRS were to lose on its claims relating to the formation of the surfactants partnership but prevail 32~~ BUILDING MATERIALS CORPORATION OF AMERICA NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED) NOTE 14. CONTINGENCIES - (CONTINUED) on its claims relating to the 1999 distribution of U.S. Treasury bonds, the Company could be severally liable for all or a portion of the taxes and interest on the deficiency. In an opinion dated June 8, 2007, the District Court decided that G-I

BUILDING MATERIALS CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) – (Continued)

Note 13. Contingencies – (Continued)

Holdings cannot avail itself of the ~~"binding contract"~~“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 ~~of this matter~~ will not have a material adverse effect on its business, financial position or results of operations.

For a further discussion with respect to the history of the foregoing litigation, and asbestos-related matters, see Notes ~~5, 11,~~8, 10, 13 and 1620 to the consolidated financial statements contained in the ~~Company's 2006~~Company’s 2007 Form 10-K.

Environmental Litigation ~~We,~~

The Company, together with other companies, ~~are~~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. ~~We refer to these proceedings and lawsuits below as "Environmental Claims."~~ Most of ~~the Environmental Claims~~these environmental claims do not seek to recover an amount of specific damages. At most sites, the Company anticipates that liability will be apportioned among the companies found to be responsible for the presence of hazardous substances at the site. ~~The~~

While the Company cannot predict whether adverse decisions or events can occur in the future, the Company believes that the ultimate disposition of ~~these~~such matters will not have a material adverse effect on the liquidity, results of operations, cash flows or financial position of the Company. ~~However, adverse decisions or events, particularly as~~

Income Tax Contingency Payment

In August 2008, the Company paid $3.7 million in settlement of an outstanding state income tax matter related to ~~increases in remedial costs, discovery of new contamination, assertion of natural resource damages,~~tax years 1999 through 2006. In October 2008, the Company was assessed interest and penalties related to the ~~liability~~tax matter, for which the Company had fully accrued at September 28, 2008 and ~~the financial responsibility of our insurers and of the other parties involved at each site and their insurers, could cause us~~expects 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, reference is made to Note 2, "Environmental Liabilities" in the Company's 2006 Form 10-K and Note 12, "Environmental Litigation" in the Company's Quarterly Report on Form 10-Q for the firstpay during its fourth quarter ended ~~April 1, 2007, which was filed with~~December 31, 2008. The interest and penalties did not have a material effect on the ~~SEC on May 16, 2007. 33~~ ~~BUILDING MATERIALS CORPORATION OF AMERICA NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED) NOTE 14. CONTINGENCIES - (CONTINUED)~~ Company’s statement of operations.

Other Contingencies

In the ordinary course of business, the Company has several supply agreements that include minimum annual purchase requirements. In the event these purchase requirements are not met, the Company may be required to make payments under these supply agreements. There have been no material changes to these contracts in the third quarter of 2007. NOTE 15. SUBSEQUENT EVENT On October 15, 2007, BMCA redeemed all of its remaining $2.5 million outstanding 2007 Notes, including accrued and unpaid interest on such notes through the date of redemption. NOTE 16. GUARANTOR FINANCIAL INFORMATION 2008.

Note 14.

Guarantor Financial Information

At September ~~30, 2007,~~28, 2008, all of the ~~Company's~~Company’s subsidiaries, ~~including Elk,~~ each of which is ~~wholly owned~~wholly-owned by the Company, including Elk, are guarantors under the ~~Company's~~Company’s Senior Secured Revolving Credit Facility, the Term Loan, the Junior Lien Term Loan and the indentures governing the Senior Notes. These guarantees are full, unconditional and joint and several. In addition, ~~BMMC,~~Building Materials Manufacturing Corporation, a wholly-owned subsidiary of the Company, iswas a co-obligor on the 8% Senior Notes due 2007. The Company and BMMC entered into license agreements, effective January 1, 1999, for the right to use intellectual property, including patents, trademarks, know-how, and franchise rights owned by Building Materials Investment Corporation ("BMIC"), a wholly-owned subsidiary of the Company, for a license fee stated as a percentage of net sales. The license agreements2007, which were for a period of one year and were subject to automatic renewal unless either party terminated with 60 days written notice. Also, effective January 1, 1999, BMMC started selling all finished goods to the Company at a manufacturing profit. Such agreements and the related sale of finished goods were terminated on December 31, 2006. 34 redeemed during

BUILDING MATERIALS CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED) NOTE 16. GUARANTOR FINANCIAL INFORMATION - (CONTINUED) Effective January 1, 2007, BMMC and BMIC entered into a new contract manufacturing agreement allowing BMIC the right to purchase all production at the BMMC owned plant locations at a specified transfer price.(Unaudited) – (Continued)

Note 14. Guarantor Financial Information – (Continued)

2007. In ~~addition, effective January 1,~~ 2007, BMCA Acquisition Inc., the direct parent of Elk, and ~~BMIC entered into~~Elk, as a ~~purchase agreement granting~~result of its merger with BMCA Acquisition Sub, became co-obligors on the ~~right to purchase production sufficient to meet required customer demand from BMIC at a specified transfer price. Also, in connection with entering these agreements, BMCA transferred certain employees~~Senior Secured Revolving Credit Facility, the Term Loan and ~~operations of BMCA to BMIC.~~ the Junior Lien Term Loan.

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. 35

Condensed Consolidating Statement of Operations Third Quarter Ended September 28, 2008 (Thousands) (Unaudited)

	Parent Company			Co-Obligor Subsidiary			Guarantor Subsidiaries			Eliminations			Consolidated

Net sales	$	825,441		$	6,749		$	20,636		$	-		$	852,826
Intercompany net sales		-			226,308			1,271,483			(1,497,791	)		-
Total net sales		825,441			233,057			1,292,119			(1,497,791	)		852,826

Costs and expenses:
Cost of products sold		723,507			226,899			1,149,844			(1,497,791	)		602,459
Selling, general and administrative		81,197			9,285			54,135			-			144,617
Amortization of intangible assets		-			2,846			-			-			2,846
Restructuring and other expenses		-			1,324			5,282			-			6,606
Other (income) expense, net		1,399			(27	)		386			-			1,758
Total costs and expenses, net		806,103			240,327			1,209,647			(1,497,791	)		758,286

Income (loss) before equity in earnings of subsidiaries, interest expense and income taxes		19,338			(7,270	)		82,472			-			94,540

Equity in earnings of subsidiaries		36,218			-			-			(36,218	)		-
Interest expense		(21,366	)		(7,427	)		(10,748	)		-			(39,541	)
Income (loss) before income taxes		34,190			(14,697	)		71,724			(36,218	)		54,999
Income tax (expense) benefit		483			5,058			(25,867	)		-			(20,326	)
Net income (loss)	$	34,673		$	(9,639	)	$	45,857		$	(36,218	)	$	34,673

BUILDING MATERIALS CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) – (Continued)

Note 14. Guarantor Financial Information – (Continued)

Condensed Consolidating Statement of Operations Third Quarter Ended September 30, 2007 (Thousands) (Unaudited)

	Parent Company			Co-Obligor Subsidiaries			Guarantor Subsidiaries			Eliminations			Consolidated

Net sales	$	455,479		$	200,774		$	24,488		$	-		$	680,741
Intercompany net sales		-			436,824			394,760			(831,584	)		-
Total net sales		455,479			637,598			419,248			(831,584	)		680,741

Costs and expenses, net:
Cost of products sold		384,400			525,990			414,628			(831,584	)		493,434
Selling, general and administrative		59,694			65,170			9,214			-			134,078
Amortization of intangible assets		-			3,938			-			-			3,938
Restructuring and other expenses		24,628			-			-			-			24,628
Other income, net		(577	)		(360	)		(45	)		-			(982	)
Total costs and expenses, net.		468,145			594,738			423,797			(831,584	)		655,096

Income (loss) before equity in earnings of subsidiaries, interest expense and income taxes		(12,666	)		42,860			(4,549	)		-			25,645

Equity in earnings of subsidiaries		17,923			-			-			(17,923	)		-
Interest expense		(32,161	)		(3,540	)		(8,588	)		-			(44,289	)
Income (loss) before income taxes		(26,904	)		39,320			(13,137	)		(17,923	)		(18,644	)
Income tax (expense) benefit		15,723			(12,723	)		4,463			-			7,463
Net income (loss)	$	(11,181	)	$	26,597		$	(8,674	)	$	(17,923	)	$	(11,181	)

BUILDING MATERIALS CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) – (Continued)

Note 14. Guarantor Financial Information – (Continued)

Condensed Consolidating Statement of Operations Nine Months Ended September 28, 2008 (Thousands) (Unaudited)

	Parent Company			Co-Obligor Subsidiary			Guarantor Subsidiaries			Eliminations			Consolidated

Net sales	$	2,073,823		$	28,186		$	58,172		$	-		$	2,160,181
Intercompany net sales		-			563,601			3,217,142			(3,780,743	)		-
Total net sales		2,073,823			591,787			3,275,314			(3,780,743	)		2,160,181

Costs and expenses:
Cost of products sold		1,807,681			582,158			2,934,156			(3,780,743	)		1,543,252
Selling, general and administrative		214,016			26,185			135,915			-			376,116
Amortization of intangible assets		-			8,539			-			-			8,539
Restructuring and other expenses		-			3,748			30,046			-			33,794
Other expense, net		2,082			32			1,052			-			3,166
Total costs and expenses, net		2,023,779			620,662			3,101,169			(3,780,743	)		1,964,867

Income (loss) before equity in earnings of subsidiaries, interest expense and income taxes		50,044			(28,875	)		174,145			-			195,314

Equity in earnings of subsidiaries		60,466			-			-			(60,466	)		-
Interest expense		(70,911	)		(16,626	)		(31,867	)		-			(119,404	)
Income (loss) before income taxes		39,599			(45,501	)		142,278			(60,466	)		75,910
Income tax (expense) benefit		7,830			17,072			(53,383	)		-			(28,481	)
Net income (loss)	$	47,429		$	(28,429	)	$	88,895		$	(60,466	)	$	47,429

BUILDING MATERIALS CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) – (Continued)

Note 14. Guarantor Financial Information – (Continued)

Condensed Consolidating Statement of Operations Nine Months Ended September 30, 2007 (Thousands) (Unaudited)

	Parent Company			Co-Obligor Subsidiaries			Guarantor Subsidiaries			Eliminations			Consolidated

Net sales	$	1,309,761		$	488,677		$	75,564		$	-		$	1,874,002
Intercompany net sales		-			1,099,226			1,144,013			(2,243,239	)		-
Total net sales		1,309,761			1,587,903			1,219,577			(2,243,239	)		1,874,002

Cost and expenses, net:
Costs of products sold		1,113,635			1,299,133			1,202,787			(2,243,239	)		1,372,316
Selling, general and administrative		163,382			193,952			25,733			-			383,067
Amortization of intangible assets		-			3,938			-			-			3,938
Restructuring and other expenses		79,622			-			-			-			79,622
Other income, net		(1,187	)		(114	)		(58	)		-			(1,359	)
Total costs and expenses, net		1,355,452			1,496,909			1,228,462			(2,243,239	)		1,837,584

Income (loss) before equity in earnings of subsidiaries, interest expense and income taxes		(45,691)			90,994			(8,885	)		-			36,418

Equity in earnings of subsidiaries		23,021			-			-			(23,021	)		-
Interest expense		(90,492	)		(24,993	)		(23,752	)		-			(139,237	)
Income (loss) before income taxes		(113,162	)		66,001			(32,637	)		(23,021	)		(102,819	)
Income tax (expense) benefit		42,217			(20,460	)		10,117			-			31,874
Net income (loss)	$	(70,945	)	$	45,541		$	(22,520	)	$	(23,021	)	$	(70,945	)

BUILDING MATERIALS CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) – (Continued)

Note 14. Guarantor Financial Information – (Continued)

Condensed Consolidating Balance Sheet September 28, 2008 (Thousands) (Unaudited)
	Parent Company			Co-Obligor Subsidiary			Guarantor Subsidiaries			Eliminations			Consolidated
ASSETS
Current Assets:
Cash and cash equivalents	$	157,497		$	72		$	240		$	-		$	157,809
Accounts receivable, trade, net		521,531			4,076			14,257			-			539,864
Accounts receivable, other		2,089			1,590			8,070			-			11,749
Inventories, net		-			81,289			234,480			-			315,769
Deferred income tax assets		42,564			-			-			-			42,564
Other current assets		6,845			1,353			10,051			-			18,249
Total Current Assets		730,526			88,380			267,098			-			1,086,004

Investment in subsidiaries		1,617,490			-			-			(1,617,490	)		-
Intercompany loans including accrued interest		1,372,467			(685,906	)		(686,561	)		-			-
Due from/(to) subsidiaries, net		(1,618,472	)		544,895			1,073,577			-			-
Property, plant and equipment, net		-			284,730			359,218			-			643,948
Goodwill		59,323			588,720			5,471			-			653,514
Intangible assets, net		-			199,096			-			-			199,096
Income tax receivable from parent corporation		10,016			-			-			-			10,016
Other noncurrent assets		87,856			9,533			25,339			-			122,728
Total Assets	$	2,259,206		$	1,029,448		$	1,044,142		$	(1,617,490	)	$	2,715,306

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current Liabilities:
Current maturities of long-term debt	$	14,480		$	669		$	10,237		$	-		$	25,386
Accounts payable		-			53,359			166,631			-			219,990
Payable to related parties		996			-			38,361			-			39,357
Loans payable to parent corporation		52,840			-			-			-			52,840
Accrued liabilities		65,121			15,389			71,258			-			151,768
Product warranty claims		12,600			3,600			-			-			16,200
Discontinued operations – current liabilities		-			560			-			-			560
Total Current Liabilities		146,037			73,577			286,487			-			506,101

Long-term debt less current maturities		1,912,384			3,833			58,534			-			1,974,751
Product warranty claims		29,808			1,317			100			-			31,225
Deferred income tax liabilities		94,019			-			-			-			94,019
Other liabilities		128,447			10,257			21,995			-			160,699
Total Liabilities		2,310,695			88,984			367,116			-			2,766,795
Total Stockholders’ Equity (Deficit)		(51,489	)		940,464			677,026			(1,617,490	)		(51,489	)
Total Liabilities and Stockholders’ Equity (Deficit)	$	2,259,206		$	1,029,448		$	1,044,142		$	(1,617,490	)	$	2,715,306

BUILDING MATERIALS CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) – (Continued)

Note 14. Guarantor Financial Information – (Continued)

Condensed Consolidating Balance Sheet December 31, 2007 (Thousands)
	Parent Company			Co-Obligor Subsidiary			Guarantor Subsidiaries			Eliminations			Consolidated
ASSETS
Current Assets:
Cash and cash equivalents	$	-		$	1,936		$	4,388		$	-		$	6,324
Accounts receivable, trade, net		198,781			3,753			8,323			-			210,857
Accounts receivable, other		2,229			4,651			3,912			-			10,792
Income tax receivable		-			11,968			-			-			11,968
Inventories, net		-			89,735			227,177			-			316,912
Deferred income tax assets		38,017			-			-			-			38,017
Other current assets		5,644			1,985			6,069			-			13,698
Total Current Assets		244,671			114,028			249,869			-			608,568

Investment 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	)		13,469			774,349			-			-
Property, plant and equipment, net		-			297,942			374,871			-			672,813
Goodwill		40,080			590,405			24,715			-			655,200
Intangible assets, net		-			207,635			-			-			207,635
Income tax receivable from parent corporation		10,016			-			-			-			10,016
Other noncurrent assets		86,604			11,963			21,592			-			120,159
Total Assets	$	1,917,661		$	1,040,727		$	873,027		$	(1,557,024	)	$	2,274,391

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current Liabilities:
Current maturities of long-term debt	$	14,530		$	670		$	9,430		$	-		$	24,630
Accounts payable		21			32,026			110,203			-			142,250
Payable to related parties		992			-			15,141			-			16,133
Loans payable to parent corporation		52,840			-			-			-			52,840
Accrued liabilities		63,402			18,412			54,162			-			135,976
Product warranty claims		13,500			-			-			-			13,500
Discontinued operations – current liabilities		-			560			-			-			560
Total Current Liabilities		145,285			51,668			188,936			-			385,889

Long-term debt		1,653,298			4,400			71,697			-			1,729,395
Product warranty claims		25,755			5,369			100			-			31,224
Deferred income tax liabilities		60,869			-			-			-			60,869
Other liabilities		128,772			10,397			24,163			-			163,332
Total Liabilities		2,013,979			71,834			284,896			-			2,370,709
Total Stockholders’ Equity (Deficit)		(96,318	)		968,893			588,131			(1,557,024	)		(96,318	)
Total Liabilities and Stockholders’ Equity (Deficit)	$	1,917,661		$	1,040,727		$	873,027		$	(1,557,024	)	$	2,274,391

BUILDING MATERIALS CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) – (Continued)

Note 14. Guarantor Financial Information – (Continued)

Condensed Consolidating Statement of Cash Flows Nine Months Ended September 28, 2008 (Thousands) (Unaudited)
	Parent Company			Co-Obligor Subsidiary			Guarantor Subsidiaries			Consolidated
Cash and cash equivalents, beginning of period	$	-		$	1,936		$	4,388		$	6,324
Cash provided by (used in) operating activities:
Net income (loss)		(13,037	)		(28,429	)		88,895			47,429
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation		-			20,829			32,934			53,763
Amortization of intangible and other assets		-			8,539			2,977			11,516
Restructuring and other expenses		4,643			15,737			40,351			60,731
Deferred income taxes		28,213			-			-			28,213
Noncash interest charges		5,397			888			463			6,748
(Increase) decrease in working capital items		(326,756	)		28,331			5,651			(292,774	)
Increase (decrease) in product warranty claims		3,153			(452	)		-			2,701
(Increase) decrease in other assets		(5,571	)		757			(6,801	)		(11,615	)
Increase (decrease) in other liabilities		(789	)		912			144			267
Increase (decrease) in net payable to related parties/parent corporations		206,379			(40,604	)		(142,551	)		23,224
Other, net		-			(124	)		(14,094	)		(14,218	)
Net cash provided by (used in) operating activities		(98,368	)		6,384			7,969			(84,015	)
Cash provided by (used in) investing activities:
Capital expenditures		-			(7,700	)		(20,939	)		(28,639	)
Proceeds from sale of assets		-			-			21,443			21,443
Net cash provided by (used in) investing activities		-			(7,700	)		504			(7,196	)
Cash provided by (used in) financing activities:
Proceeds from issuance of long-term debt		830,000			-			-			830,000
Repayments of long-term debt		(570,895	)		(548	)		(2,559	)		(574,002	)
Purchase of industrial development revenue bond certificates issued by the Company		-			-			(4,800	)		(4,800	)
Principal repayments of capital leases		-			-			(5,262	)		(5,262	)
Distribution to parent corporation		(65	)		-			-			(65	)
Dividend to parent corporation		(2,500	)		-			-			(2,500	)
Loan to parent corporation		(99	)		-			-			(99	)
Financing fees and expenses		(576	)		-			-			(576	)
Net cash provided by (used in) financing activities		255,865			(548	)		(12,621	)		242,696
Net change in cash and cash equivalents		157,497			(1,864	)		(4,148	)		151,485
Cash and cash equivalents, end of period	$	157,497		$	72		$	240		$	157,809

BUILDING MATERIALS CORPORATION OF AMERICA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) – (Continued)

Note 14. Guarantor Financial Information – (Continued)

Condensed Consolidating Statement of Cash Flows Nine Months Ended September 30, 2007 (Thousands) (Unaudited)
	Parent Company			Co-Obligor Subsidiaries			Guarantor Subsidiaries			Consolidated
Cash and cash equivalents, beginning of period	$	18		$	1,870		$	5,889		$	7,777
Cash provided by (used in) operating activities:
Net income (loss)		(93,966	)		45,541			(22,520	)		(70,945	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation		-			43,528			7,127			50,655
Amortization		-			6,495			-			6,495
Restructuring and other expenses		97,647			-			-			97,647
Deferred income taxes		(36,141	)		-			-			(36,141	)
Noncash interest charges		6,864			290			704			7,858
(Increase) decrease in working capital items		(160,860	)		68,616			34,440			(57,804)
Increase (decrease) in product warranty claims		2,063			(590	)		(301	)		1,172
Increase in other assets		(3,671	)		(605	)		(911	)		(5,187	)
Increase (decrease) in other liabilities		3,261			1,501			(2	)		4,760
Increase (decrease) in net payable to related parties/parent corporations		(1,143,587	)		1,128,047			26,026			10,486
Other, net		-			(22	)		599			577
Net cash provided by (used in) operating activities		(1,328,390	)		1,292,801			45,162			9,573
Cash used in investing activities:
Acquisition of Elk Corp		-			(944,838	)		-			(944,838	)
Capital expenditures and acquisitions		-			(39,995	)		(27,118	)		(67,113	)
Net cash used in investing activities		-			(984,833	)		(27,118	)		(1,011,951	)
Cash provided by (used in) financing activities:
Proceeds from issuance of long-term debt		2,292,849			25,900			-			2,318,749
Repayments of long-term debt		(928,834	)		(325,171	)		-			(1,254,005	)
Distribution to parent corporation		(171	)		-			-			(171	)
Loan to parent corporation		(148	)		-			-			(148	)
Financing fees and expenses		(35,324	)		-			-			(35,324	)
Net cash provided by (used in) financing activities		1,328,372			(299,271	)		-			1,029,101
Net change in cash and cash equivalents		(18	)		8,697			18,044			26,723
Cash and cash equivalents, end of period	$	-		$	10,567		$	23,933		$	34,500


		BUILDING MATERIALS CORPORATION OF AMERICA ~~NOTES TO CONSOLIDATED~~

Item 2.		MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED) NOTE 16. GUARANTOR FINANCIAL INFORMATION - (CONTINUED) CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS THIRD QUARTER ENDED SEPTEMBER 30, 2007 (THOUSANDS) (UNAUDITED) Parent Co-Obligor Guarantor Company Subsidiary Subsidiaries Eliminations Consolidated --------- --------- --------- --------- --------- Net sales ........................ $ 455,479 $ -- $ 225,262 $ -- $ 680,741 Intercompany net sales ........... -- 436,824 394,760 (831,584) -- --------- --------- --------- --------- --------- Total net sales .............. 455,479 436,824 620,022 (831,584) 680,741 --------- --------- --------- --------- --------- Costs and expenses, net: Cost of products sold .......... 384,400 388,215 552,403 (831,584) 493,434 Selling, general and administrative ............... 59,694 35,615 38,769 -- 134,078 Amortization of intangible assets ....................... -- -- 3,938 -- 3,938 Restructuring and other expenses ..................... 24,628 -- -- -- 24,628 Other income, net .............. (577) (54) (351) -- (982) --------- --------- --------- --------- --------- Total costs and expenses, net. 468,145 423,776 594,759 (831,584) 655,096 --------- --------- --------- --------- --------- Income (loss) before equity in earnings of subsidiaries, interest expense and income taxes .......................... (12,666) 13,048 25,263 -- 25,645 Equity in earnings of subsidiaries .................... 17,923 -- -- (17,923) -- Interest expense ................. (32,161) (147) (11,981) -- (44,289) --------- --------- --------- --------- --------- Income (loss) before income taxes. (26,904) 12,901 13,282 (17,923) (18,644) Income tax (expense) benefit ..... 15,723 (4,347) (3,913) -- 7,463 --------- --------- --------- --------- --------- Net income (loss) ................ $ (11,181) $ 8,554 $ 9,369 $ (17,923) $ (11,181) ========= ========= ========= ========= =========

43 ~~BUILDING MATERIALS CORPORATION OF AMERICA ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL~~

CONDITION AND RESULTS OF OPERATIONS

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. On February 22, 2007, which we refer to as the date of acquisition, a subsidiary of Building Materials Corporation of America, which we refer to as BMCA, 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~~materials, and the remaining common shares of Elk were acquired on March 26, 2007, resulting in Elk becoming an indirect wholly-owned subsidiary of BMCA.

We believe the Elk acquisition has strategically positioned us for future growth in the roofing industry and building products market. We also believe the acquisition of Elk has allowed us to build on our market leadership position and create comprehensive market-leading product offerings. Our principal lines of residential roofing shingles are the Timberline® series, the Sovereign® series, Premium Designer Shingles and Specialty Shingles. The Timberline® series includes the Timberline® Prestique® 30 High-Definition®, Timberline® Natural Shadow™, Timberline® Prestique® 40 High-Definition®, Timberline® Prestique® Lifetime High-Definition® and Timberline® Prestique® Grande shingles. Our premium designer shingles include the Slateline®, Grand Slate™, Grand Sequoia®, Grand Canyon™, Country Mansion®, Capstone®, and Camelot™ shingles. We sell specialty shingles under the TruSlate™ product line, which offers a slate shingle system. We supply the major components necessary to install a complete roofing system from underlayments to attic ventilation products and accessories, under the Weather Stopper® 3-Part Roof Protection System. In recent years, we have improved our sales mix of residential roofing products by increasing our emphasis on laminated shingles and accessory products (the Timberline® series, premium designer shingles and specialty shingles), which are generally sold at higher prices and more attractive profit margins than our standard asphalt strip shingle products (the Sovereign® series). See ~~Acquisitions.~~Acquisition. Unless otherwise indicated by the context, ~~"we," "us,"~~“we,” “us,” and ~~"our"~~“our” refer to Building Materials Corporation of America and its consolidated ~~subsidiaries, including Elk. CRITICAL ACCOUNTING POLICIES~~ subsidiaries.

Critical Accounting Policies

There have been no significant changes to our Critical Accounting Policies during the ~~nine month~~nine-month period ended September ~~30, 2007.~~28, 2008. For a further discussion on our Critical Accounting Policies, reference is made to ~~Management's~~Management’s Discussion and Analysis of Financial Condition and Results of Operations, ~~"Critical~~“Critical Accounting ~~Policies"~~Policies” in our ~~Annual Report~~annual report on Form 10-K for the fiscal year ended December 31, ~~2006,~~2007, which was filed with the Securities and Exchange Commission, which we refer to as the SEC, on ~~February 16, 2007,~~March 28, 2008, which we refer to as the ~~2006~~2007 Form 10-K. ~~RESULTS OF OPERATIONS Sales~~

Results of ~~roofing~~Operations

Roofing products ~~are~~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~~nation’s aging housing stock; existing home sales; new home construction; larger new homes; ~~increased~~ home ownership rates; and ~~severe~~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.

Third Quarter 2008 Compared With

Third Quarter 2007 ~~Compared With Third Quarter 2006~~

Our improved third quarter performance resulted principally from synergies from the successful integration of the Elk acquisition and higher roofing demand as a consequence of severe weather conditions in many parts of the country during the first nine months of 2008.

BUILDING MATERIALS CORPORATION OF AMERICA

Item 2.		MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIALCONDITION AND RESULTS OF OPERATIONS - (Continued)

We recorded net income of $34.7 million in the third quarter of 2008 compared to a reported net loss of $11.2 million in the third quarter of ~~2007 compared to~~2007. Our reported net income ~~of $17.1 million~~ in the third quarter of ~~2006.~~2008 included $10.4 million of after-tax ($16.6 million pre-tax) restructuring and other expenses, of which $1.1 million after-tax ($1.8 million pre-tax) was included as a reduction in net sales and $5.1 million after-tax ($8.2 million pre-tax) was included in cost of products sold related to the integration of Elk operations. Our reported net loss in the third quarter of 2007 included $21.9 million of after-tax ($31.8 million pre-tax) restructuring and other expenses, of which $5.0 million after-tax ($7.2 million pre-tax) was included in cost of products ~~sold related to the integration of Elk operations.~~sold. Included in restructuring and other expenses are plant closing expenses related to the closure of several manufacturing facilities ~~together~~along with the write-down of certain plant assets ~~at these~~related to the closed facilities in 2007, integration-related costs and the write-down of selected inventories. Excluding ~~these items,~~restructuring and other expenses, third quarter of 2008 net income was $45.1 million compared to the third quarter of 2007 net income ~~was~~of $10.7 ~~million, which included the results of operations of Elk.~~million. The ~~decrease 44~~ ~~BUILDING MATERIALS CORPORATION OF AMERICA ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED)~~increase in reported net income for the third quarter of ~~2007~~2008 was primarily attributable to ~~approximately $28.5 million of~~ higher income before interest expense and ~~restructuring~~income taxes and ~~other expenses due to the acquisition of Elk.~~ lower interest expense.

Net sales for the third quarter of ~~2007~~2008 were ~~$680.7~~$852.8 million ~~which included net sales related to Elk~~ compared to ~~third quarter of 2006 net sales of $530.3 million. Excluding net sales of Elk, the decrease in~~ third quarter of 2007 net sales of $680.7 million. The increase in third quarter of 2008 net sales was primarily due to ~~lower~~higher net sales of residential roofing products ~~primarily driven by lower~~due to higher average selling prices. The higher average selling prices realized in the third quarter of 2008 were implemented to mitigate significant increases in raw material costs, including asphalt and higher transportation costs. In the third quarter of 2008, there was also an increase in commercial roofing products unit volumes ~~resulting from softer market demand.~~ and average selling prices.

Income before interest expense and income taxes in the third quarter of ~~2007~~2008, as reported, was ~~$25.7~~$94.5 million compared to reported income before interest expense and income taxes of ~~$43.3~~$25.7 million in the third quarter of ~~2006. Income~~2007. Our income before interest expense and income taxes in the third quarter of 2008, as reported, included $16.6 million of restructuring and other expenses, of which $1.8 million was included as a reduction in net sales and $8.2 million was included in cost of products sold. Our reported income before interest expense and income taxes in the third quarter of 2007 included ~~the results of operations of Elk and~~ $31.8 million of restructuring and other expenses, of which $7.2 million was included in cost of products sold. ~~Income~~Excluding restructuring and other expenses, third quarter of 2008 income before interest expense and income taxes inwas $111.1 million compared to the third quarter of 2007 income before interest expense and income taxes of $57.5 million. The increase was ~~positively affected~~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 higher commercial roofing unit volumes. These benefits were partially offset by ~~the operating results of Elk, lower~~higher raw material costs, including asphalt, and ~~lower selling, general and administrative expenses mostly due to a decline in volume-related distribution costs, which was more than offset by a decrease in net sales of residential roofing products.~~ higher transportation costs.

Interest expense in the third quarter of ~~2007 increased~~2008 decreased to ~~$44.3~~$39.5 million as compared to ~~$15.8~~$44.3 million in the third quarter of ~~2006.~~2007. The decrease in third quarter of 2008 interest expense was primarily due to a slightly lower average interest rate.

Business Segment Information

Net Sales.Net sales of roofing products increased to $817.5 million for the third quarter of 2008 compared to $636.9 million for the third quarter of 2007. The increase in third quarter of ~~2007 interest expense~~2008 net sales was primarily due to higher ~~average borrowings and a slightly~~net sales of residential roofing products due to higher average ~~interest rate due to the acquisition of Elk. BUSINESS SEGMENT INFORMATION Net Sales. Net sales of roofing products for~~selling prices. The higher average selling prices realized in the third quarter of ~~2007~~2008 were ~~$637.8 million, which included net sales of roofing products related~~implemented to ~~Elk compared to $507.6 million for~~mitigate significant increases in raw material

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Item 2.		MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIALCONDITION AND RESULTS OF OPERATIONS - (Continued)

costs, including asphalt, and higher transportation costs. In the third quarter of ~~2006. Excluding net sales of~~2008, there was also an increase in commercial roofing products ~~of Elk, the decrease in net sales of roofing products was primarily driven by lower~~ unit volumes ~~of residential roofing products resulting from softer market demand.~~and average selling prices. Net sales of specialty building products and accessories ~~were $42.9~~decreased to $35.3 million for the third quarter of 2008 compared with $43.8 million for the third quarter of 2007 ~~which included~~due to softer new construction and remodeling demand.

Gross Margin. Our overall gross margin was $250.4 million or 29.4% of net sales ~~of specialty building products and accessories related to Elk as compared with $22.7 million~~ for the third quarter of ~~2006. 45~~ BUILDING MATERIALS CORPORATION OF AMERICA ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED) Gross Margin. Our overall gross margin was2008 compared with $187.3 million or 27.5% of net sales for the third quarter of ~~2007 as compared with $158.1 million or 29.8% of net sales~~2007. Included in our overall gross margin for the third quarter of ~~2006.~~2008 were $10.0 million of restructuring and other expenses, of which $1.8 million was included as a reduction in net sales and $8.2 million was included in cost of products sold. Included in our overall gross margin for the third quarter of 2007 ~~was~~were $7.2 million of restructuring and other expenses, which were included in cost of products ~~sold, and gross margin related to Elk. Our~~sold. The increase in our overall gross margin ~~was positively affected~~is primarily attributable 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 higher commercial unit volumes. These benefits were partially offset by ~~the gross margin related to Elk and lower~~higher raw material costs, including ~~asphalt, which was more than offset by a decrease in residential roofing net sales driven by lower unit volumes.~~ asphalt.

Nine Months 2008 Compared With

Nine Months 2007 ~~Compared With Nine Months 2006~~

We recorded net income of $47.4 million in the first nine months of 2008 compared to a reported net loss of $70.9 million in the first nine months of ~~2007 compared to~~2007. Our reported net income ~~of $47.6 million~~ in the first nine months of ~~2006.~~2008 included $37.9 million of after-tax ($60.7 million pre-tax) restructuring and other expenses, of which $2.9 million after-tax ($4.6 million pre-tax) was included as a reduction in net sales and $13.9 million after-tax ($22.3 million pre-tax) was included in cost of products sold related to the integration of Elk operations. Our reported net loss in the first nine months of 2007 included $67.3 million of after-tax ($97.6 million pre-tax) restructuring and other expenses, of which $12.4 million ~~after tax~~after-tax ($18.0 million pre-tax) was included in cost of products sold, ~~related to the integration of Elk operations~~ and $16.0 million of after-tax ($23.2 million pre-tax) debt restructuring costs also related to 46 ~~BUILDING MATERIALS CORPORATION OF AMERICA ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED)~~ the acquisition. Included in restructuring and other expenses are plant closing expenses related to the closure of several manufacturing facilities ~~together~~along with the write-down of certain plant assets ~~at these~~related to the closed facilities in 2007, integration-related costs and the write-down of selected inventories. Excluding ~~these items,~~restructuring and other expenses, the first nine months of 2008 net income was $85.3 million compared to the first nine months of 2007 net income ~~was~~of $12.4 million ~~which~~after also adjusting for the $23.2 million debt restructuring costs included ~~Elk's operations from the date of acquisition.~~in interest expense. The ~~decrease~~increase in ~~reported~~ net income for the first nine months of ~~2007~~2008 was primarily attributable to ~~approximately $92.8 million of~~ higher income before interest expense and ~~restructuring and other expenses due to the acquisition of Elk.~~ income taxes.

Net sales for the first nine months of ~~2007~~2008 were ~~$1,874.0~~$2,160.2 million ~~which included net sales related to Elk from the date of acquisition~~ compared to ~~the first nine months of 2006 net sales of $1,571.2 million. Excluding net sales of Elk, the decrease in~~ the first nine months of 2007 net sales of $1,874.0 million. The increase in net sales was primarily due to ~~lower~~the first nine months of 2008 residential roofing products net sales including a full nine months of ~~both~~Elk net sales, as compared to the first nine months of 2007 residential ~~and commercial~~ roofing ~~products. The decrease~~products net sales, which only included Elk net sales since the date of acquisition. In addition, the increase in net sales of residential roofing products was ~~primarily driven by lower unit volumes resulting from~~due to higher average selling prices. The higher average selling prices were implemented to mitigate significant increases in raw material costs, including asphalt, and higher transportation costs. In the ~~softer market demand, while the decrease~~first nine months of 2008, there was also an increase in commercial roofing products ~~was primarily driven by lower~~ unit volumes ~~partially offset by a higher~~and average selling ~~price.~~ prices.

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Item 2.		MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIALCONDITION AND RESULTS OF OPERATIONS - (Continued)

Income before interest expense and income taxes in the first nine months of ~~2007~~2008, as reported, was ~~$36.4~~$195.3 million compared to ~~$123.2~~reported income before interest expense and income taxes of $36.4 million in the first nine months of ~~2006.~~2007. Our reported income before interest expense and income taxes in the first nine months of 2008 included $60.7 million of restructuring and other expenses, of which $4.6 million was included as a reduction in net sales and $22.3 million was included in cost of products sold. Our reported income before interest expense and income taxes in the first nine months of 2007 included ~~the results of operations of Elk and~~ $97.6 million of restructuring and other expenses, of which $18.0 million was included in cost of products sold. ~~Income~~Excluding restructuring and other expenses, the first nine months of 2008 income before interest expense and income taxes was $256.0 million compared to the first nine months of 2007 income before interest expense and income taxes of $134.0 million. The increase in the first nine months of ~~2007~~2008 income before interest expense and income taxes was ~~positively affected~~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 higher commercial roofing unit volumes. These benefits which were partially offset by ~~the operating results of Elk, lower~~higher raw material costs, including asphalt, and lower selling, general and administrative expenses mostly due to a decline in volume-related distribution costs, which was more than offset by a decrease in net sales of residential roofing products and commercial roofing products. higher transportation costs.

Interest expense in the first nine months of ~~2007 increased~~2008 decreased to ~~$139.2~~$119.4 million as compared to ~~$46.4~~$139.2 million in the first nine months of ~~2006. Interest expense in the first nine months of~~ 2007, which included $23.2 million of debt restructuring costs ~~and an additional $3.2 million~~related to the acquisition of ~~interest expense of Elk from the date of acquisition. Included in~~Elk. The debt restructuring costs ~~are the~~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, which we refer to as the 2007 Notes, and the 8% Senior Notes due 2008, ~~senior notes~~which we refer to as the 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.~~Elk. Excluding the impact of 47 ~~BUILDING MATERIALS CORPORATION OF AMERICA ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED) the~~these debt restructuring costs, ~~and the additional Elk interest,~~ interest expense for the first nine months of 2007 was ~~$112.8~~$116.0 million. ~~The increase~~After excluding the debt restructuring costs in 2007, the first nine months of ~~2007~~2008 increase in interest expense was primarily due to higher average borrowings, ~~and~~partially offset by a ~~slightly~~lower average interest rate. The higher average borrowings are primarily due to the 2008 interest ~~rate, due~~expense including a full nine months of interest associated with borrowings related to the acquisition of ~~Elk. BUSINESS SEGMENT INFORMATION~~ Elk, while 2007 interest expense included a partial nine months of interest expense associated with these borrowings since the date of acquisition.

Business Segment Information

Net Sales.Net sales of roofing products ~~for the first nine months of 2007 were $1,773.0 million, which included net sales of roofing products related~~increased to ~~Elk compared to $1,509.6~~$2,047.7 million for the first nine months of ~~2006. Excluding net sales~~2008 compared with $1,758.7 million for the first nine months of ~~roofing products of Elk, the decrease~~2007. The increase in net sales of roofing products was ~~driven by a decrease in~~primarily due to the first nine months of 2008 residential roofing products net sales including a full nine months of Elk net sales as compared to the first nine months of 2007 residential roofing products net sales, which only included Elk net sales since the date of acquisition. In addition, the increase in net sales of residential roofing products was ~~primarily driven by lower unit volumes resulting from softer market demand,~~due to higher average selling prices. The higher average selling prices were implemented to mitigate significant increases in raw material costs, including asphalt, and ~~a decrease~~higher transportation costs. In the first nine months of 2008, there was also an increase in commercial roofing products ~~which was primarily driven by lower~~ unit volumes ~~partially offset by a higher~~and average selling ~~price.~~prices. Net sales of specialty building products and accessories ~~were $101.0~~decreased to $112.5 million for the first nine months of 2008 compared with $115.3 million for the first nine months of 2007 ~~which included~~due to softer new construction and remodeling demand.

Gross Margin. Our overall gross margin was $616.9 million or 28.6% of net sales ~~of specialty building products and accessories related to Elk as compared with $61.6 million~~ for the first nine months of ~~2006. Gross Margin. Our overall gross margin was~~2008 compared with $501.7 million or 26.8% of net sales for the first nine months of ~~2007 as compared with $470.4 million or 29.9% of net sales~~2007. Included in our overall gross margin for the first nine months of ~~2006.~~2008 were $26.9 million of restructuring and other expenses, of which $4.6 million was included as a reduction in net sales and $22.3 million was included in cost of products

BUILDING MATERIALS CORPORATION OF AMERICA

Item 2.		MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIALCONDITION AND RESULTS OF OPERATIONS - (Continued)

sold. Included in our overall gross margin for the first nine months of 2007 ~~was~~were $18.0 million of restructuring and other expenses, which were included in cost of products ~~sold, and gross margin related to Elk. Our~~sold. The increase in our overall gross margin ~~was positively affected by~~is primarily due to synergies from the ~~gross margin related to~~successful integration of the Elk acquisition and lower ~~raw material~~manufacturing costs, ~~including asphalt, which was more than offset by a decrease in net sales~~as well as higher average selling prices of both residential and commercial roofing products ~~primarily driven by lower~~and higher commercial roofing unit volumes. 48 BUILDING MATERIALS CORPORATION OF AMERICA ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED) LIQUIDITY AND FINANCIAL CONDITION These benefits were partially offset by higher raw material costs, including asphalt.

Liquidity and Financial Condition

Cash Flows and Cash Position

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, ~~adverse~~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 ~~severe~~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 Long-Term Debt), 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 outflow from operating and investing activities was ~~$1,002.4~~$91.2 million during the first nine months of ~~2007,~~2008, including ~~$944.8 million related to the acquisition of Elk, net of $0.1~~$84.0 million of cash ~~acquired,~~used in operations, the reinvestment of ~~$67.1~~$28.6 million for capital programs, ~~and an acquisition of land and buildings in Fresno, California and $9.5~~partially offset by $21.4 million of ~~cash provided by operations. 49~~ ~~BUILDING MATERIALS CORPORATION OF AMERICA ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED)~~ proceeds from the sale of assets.

Cash invested in additional working capital totaled ~~$57.8~~$292.8 million during the first nine months of ~~2007,~~2008, reflecting an increase in total accounts receivable of ~~$143.4~~$330.2 million, due to the seasonality of our business, ~~a $93.5~~an $11.8 million decrease ~~in inventories to meet our anticipated operating demands and~~ due to the ~~decline~~collection of an income tax receivable, a $6.8 million increase in ~~the housing market,~~inventories, a $4.6 million increase in ~~federal income taxes receivable related to Elk, a $6.1 million decrease in~~ other current assets, a ~~$21.4~~$101.5 million increase in accounts payable and accrued liabilities and an increase of ~~$30.8~~$64.5 million in payments for restructuring and other expenses. The net cash ~~provided by~~used in operating activities also included a ~~$10.5~~$23.2 million net increase in the payable to related parties/parent corporations, primarily ~~attributed~~due to ~~an $11.4 million~~a seasonal increase in amounts due under our long-term granule supply agreement with an affiliated ~~company partially offset by a $0.9 million increase in federal income taxes receivable, pursuant to our Tax Sharing Agreement with our parent corporation.~~company. In addition, net cash ~~provided by~~used in operating activities included ~~$97.6~~an $11.6 million increase in other non-current assets primarily reflecting a $7.0 million increase in deferred warranty-related program costs, net of amortization; and $60.7 million in restructuring and other expenses ~~which primarily included a $49.8 million write-down of property, plant and equipment~~ (see ~~Restructing~~Restructuring and Other ~~Expenses)~~Expenses below).

Net cash provided by financing activities totaled ~~$1,029.1~~$242.7 million during the first nine months of ~~2007,~~2008, including ~~$2,318.7~~$830.0 million of aggregate proceeds from the issuance of long-term debt, related to the first nine months of ~~2007~~2008 cumulative borrowings ~~of $992.8 million~~ under our ~~new $600.0~~Senior Secured Revolving Credit Facility. Financing activities

BUILDING MATERIALS CORPORATION OF AMERICA

Item 2.		MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIALCONDITION AND RESULTS OF OPERATIONS - (Continued)

also included $574.0 million in aggregate repayments of long-term debt, of which $566.0 million related to the first nine months of 2008 cumulative repayments under our Senior Secured Revolving Credit Facility and ~~our old $450.0~~$4.9 million ~~Senior Secured Revolving Credit Facility, which we refer~~related to as our ~~Old Senior Secured Revolving Credit Facility. In addition, proceeds from the issuance of long-term debt included $975.0 million under our new~~ $975.0 million Term Loan Facility, which we refer to as the Term Loan, $325.0 million under our new $325.0 million Junior Lien Term Loan Facility, which we refer to as the Junior Lien Term Loan and $25.9 million of borrowings under the old Elk Revolving Credit Facility, see (Long-Term Debt). Financing activities also included $1,254.0 million in aggregate repayments of long-term debt, of which $771.8 million related to the first nine months of 2007 cumulative repayments under our Senior Secured Revolving Credit Facility and our Old Senior Secured Revolving Credit Facility, $28.6 million related to repayments under the old Elk Revolving Credit Facility and $7.3 million related to repayments under the Term Loan. In addition, repayments of long-term debt included $97.5 million related to our outstanding 8% Senior Notes due 2007, which we refer to as the 2007 Notes, $150.1 million related to our outstanding 8% Senior Notes due 2008, which we refer to as the 2008 Notes, $25.0 million related to the then outstanding Elk 4.69% Senior Notes due 2007, $60.0 million related to the then outstanding Elk 6.99% Senior Notes due 2009, $60.0 million related to the then outstanding Elk 7.49% Senior Notes due 2012 and $50.0 million related to the then outstanding Elk 6.28% Senior Notes due 2014. 50 ~~BUILDING MATERIALS CORPORATION OF AMERICA ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED)~~ In addition, financing activities ~~also~~ included ~~$35.3~~a $4.8 million repurchase of industrial development revenue bond certificates, aggregate principal repayments of $5.2 million on our capital leases, $2.5 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 debt restructuring costs, including the tender premiums and write-off of the remaining deferred financing fees and discounts associated with the aforementioned senior notes and the Old Senior Secured Revolving Credit Facility. Acquisitions On February 9, 2007, BMCA costs.

Acquisition Sub Inc., which we refer to as BMCA Acquisition Sub, and BMCA Acquisition Inc., which together with BMCA Acquisition Sub, we collectively refer to as the Purchasers, both wholly-owned subsidiaries of BMCA, entered into a merger agreement with Elk, which we refer to as the Merger Agreement.

On February 22, 2007, ~~an equity tender offer closed, and, as~~ a ~~result thereof (and the purchase~~subsidiary of ~~shares from one of its affilates),~~ BMCA ~~Acquisition Sub owned~~acquired approximately 90% of ~~Elk's~~Elk common shares at a purchase price of $43.50 per common share. ~~In accordance with the Merger Agreement,~~On March 26, 2007, we acquired the remaining Elk common shares ~~were converted~~ in a second step merger ~~into~~in exchange for the right to receive $43.50 per share in ~~cash. On March 26, 2007, BMCA completed the merger, pursuant to~~cash, which ~~BMCA Acquisition Sub was merged with and into~~resulted in Elk ~~which then became~~becoming an indirect wholly-owned subsidiary of BMCA. ~~The~~We completed the acquisition of the Elk common shares ~~was completed~~ at a purchase price of approximately ~~$944.8~~$945.5 million, ~~net of $0.1 million of cash acquired and~~ 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.

We financed the purchase of Elk, ~~and~~ refinanced certain of ~~BMCA's~~BMCA’s then outstanding debt and repaid all of ~~Elk's~~Elk’s then outstanding senior notes of $195.0 million with the proceeds from our new senior secured credit facilities. Our new senior secured credit facilities consist of a $600.0 million Senior Secured Revolving Credit Facility, a $975.0 million Term Loan Facility and a $325.0 million Junior Lien Term Loan ~~facility maturing on September 15, 2014.~~Facility, which we refer to as the Junior Lien Term Loan, and collectively with the Senior Secured Revolving Credit Facility and the Term Loan, we refer to as the Senior Secured Credit Facilities. See ~~Long-Term Debt.~~ Note 7.

We ~~believe~~accounted for the acquisition of Elk will strategically position us for future growth in the roofing industry and other building product markets. The acquisition is expected to provide us with an increased market leadership position, create comprehensive market-leading product offerings, generate natural cost savings from synergies, including plant rationalization and re-alignment of distribution networks, raw material procurement, administrative and logistical efficiencies, and leverage the organizational strengths of both BMCA and Elk. The Elk acquisition ~~was accounted for~~ under the purchase method of accounting as prescribed by Statement of Financial Accounting Standards, which we refer to as SFAS, No. 141 ~~"Business Combinations,"~~“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 51 ~~BUILDING MATERIALS CORPORATION OF AMERICA ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED)~~ recorded as goodwill. ~~The~~During the first quarter ended March 30, 2008, we completed our purchase price allocation ~~process required an analysis~~ of ~~plant, property and equipment, inventories, customer lists and relationships, contractual commitments and brand strategies, among others to identify and record~~ the ~~fair value of~~ assets acquired and liabilities assumed. In connection with the acquisition, we used an estimated economic life of 5 to 40 years for land improvements, 10 to 40 years for buildings and building improvements, 3 to 30 years for machinery and equipment, which includes furniture and fixtures, and 1 to 25 years for intangible assets. In valuing acquired assets and assumed liabilities, fair values were based on, but not limited to: future expected discounted cash flows for trade names and customer relationships, current replacement costs for similar capacity and obsolescence for certain fixed assets and inventory; and comparable market rates for contractual obligations, including real estate and liabilities. We performed a valuation analysis of the assets and liabilities acquired from Elk which was substantially completed during the three-month period ended September 30, 2007, and we expect to finalize our purchase price allocation during the fourth quarter of 2007. At September 30, 2007, we recorded $570.5 million of goodwill and $235.6 million of intangible assets, net of amortization of $3.9 million (see ~~Note 5 to Consolidated Financial Statements), related to the acquisition of Elk based on the completion of our valuation analysis.~~table below). The operating results of ~~the~~ Elk ~~acquisition~~ are included in our results of operations from the date of acquisition.

The following ~~unaudited pro-forma consolidated results~~table represents the final fair values of ~~operations assume the acquisition of Elk was completed as of January 1st for each of the three-month~~assets acquired and nine-month periods presented below: THIRD QUARTER ENDED NINE MONTHS ENDED SEPT. 30, OCT. 1, SEPT. 30, OCT. 1, 2007 2006 2007 2006 -------- -------- ---------- ---------- (MILLIONS) Net sales ................ $ 680.7 $ 748.5 $ 1,947.7 $ 2,274.3 -------- -------- ---------- ---------- Income before interest and income taxes ............ 23.8 61.4 6.7 184.4 -------- -------- ---------- ---------- Net income (loss) ........ $ (13.9) $ 14.0 $ (100.1) $ 43.7 ======== ======== ========== ========== The unaudited pro-forma consolidated results of operations for the three-month and nine-month periods ended September 30, 2007 include $31.8 and $97.6 million pre-tax ($21.9 and $67.3 million after-tax) of restructuring and other expenses, respectively, of which $7.2 and $18.0 million pre-tax ($5.0 and $12.4 million after-tax) was included in cost of products sold, 52 ~~BUILDING MATERIALS CORPORATION OF AMERICA ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED) respectively,~~liabilities assumed related to the acquisition of ~~Elk. In addition,~~Elk as of the ~~unaudited pro-forma consolidated results~~date of ~~operations for the nine-month period ended September 30, 2007 above includes $13.6 million~~acquisition with amounts paid in excess of merger-related expenses of Elk and $23.2 million of debt restructuring costs of both BMCA and Elk related to the acquisition of Elk. Our pro-forma results include a reduction in compensation expense related to Elk employees who were terminated due to the acquisition of Elk of $1.2 and $3.1 million for the three-month periods ended September 30, 2007 and October 1, 2006, respectively and $6.0 and $9.2 million for the nine-month periods ended September 30, 2007 and October 1, 2006, respectively. Our pro-forma results also include a reduction in lease expense for excess lease capacity at two Elk facilities. The reduction in lease expense was computed based on the remaining lease payments discounted on a present value basis, straight-lined over the applicable pro-forma period with the present value offsettheir fair values being recorded in interest expense. For the three-month periods ended September 30, 2007 and October 1, 2006, we recorded an increase/(decrease) in lease expense of $0.5 and $(0.5) million, respectively and an (increase)/decrease to interest expense of $0.3 and $(0.3) million, respectively. For the nine-month periods ended September 30, 2007 and October 1, 2006, we recorded a reduction in lease expense of $0.5 and $1.6 million, respectively and an increase to interest expense of $0.3 and $0.9 million, respectively. In addition, our pro-forma results for the three-month period ended October 1, 2006 and the nine-month periods ended September 30, 2007 and October 1, 2006 include additional interest expense associated with variable rate debt instruments based on LIBOR plus a specified fixed margin, due to the acquisition of Elk. A 1/8% change in these variable interest rates would result in a plus or minus $0.5 million in interest expense for the three-month period ended October 1, 2006 and a plus or minus $0.3 and $1.4 million in interest expense for the nine-month periods ended September 30, 2007 and October 1, 2006, respectively. Pro-forma data may not be indicative of the results that would have been achieved had these events actually occurred at the beginning of the periods presented, nor does it intend to be a projection of future results. as goodwill.

Goodwill	$	588,720

Total assets acquired	$	1,411,460
Total liabilities assumed		(465,941	)
Net assets acquired	$	945,519

During the second quarter of 2007, we initiated ~~the implementation of~~ a restructuring plan, which we refer to as the 2007 Restructuring Plan, (see Restructuring and Other Expenses), which ~~was~~we formulated in connection with the ~~February 22, 2007~~ acquisition of Elk. ~~See Restructuring and Other Expenses below. In~~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 ~~Elk,~~Liabilities in Connection with a Purchase Business Combination,” we ~~currently~~ identified ~~$69.6~~$8.7 million in purchase accounting adjustments, which ~~primarily relate~~related to ~~the establishment of a change of control accrual,~~ employee severance payments to former Elk 53 employees and lease termination expenses. As of September 28, 2008, we had

BUILDING MATERIALS CORPORATION OF AMERICA ~~ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED) employees~~

Item 2.		MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIALCONDITION AND RESULTS OF OPERATIONS - (Continued)

paid $2.9 million for severance costs and ~~integration-related expenses, which include Elk inventory-related valuation write-downs,~~$1.3 million for lease termination ~~expenses and other integration-related~~ expenses. Furthermore, we completed our valuation analysis of property, plant and equipment and intangible assets acquired from Elk during our three-month period ended September 30, 2007. We account for our purchase accounting adjustments in accordance with the provisions of SFAS No. 141. We have incurred $64.0 million of the aforementioned purchase accounting adjustments as of September 30, 2007, of which $3.2 million was incurred in the third quarter of 2007, $54.6 million was incurred in the second quarter of 2007 and $6.2 million was incurred in the first quarter of 2007, and which are included in the purchase price allocation. We expect to ~~accrue the remaining $5.6~~make approximately $4.5 million of ~~identified purchase accounting adjustments as incurred and make the remaining cash~~lease termination payments ~~related to our accrual by our first quarter ending 2008.~~through 2019. Our employee severance payments included the termination of approximately ~~125~~130 Elk employees, including certain management ~~level~~ positions, in the manufacturing and selling and administrative ~~functional~~ areas. 54 ~~BUILDING MATERIALS CORPORATION OF AMERICA~~
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED) EMPLOYEE DISCONTINUED INTEGRATION SEVERANCE OPERATIONS CHANGE OF PURCHASE ACCOUNTING ACCRUALS EXPENSES PAYMENTS EXPENSES CONTROL TOTAL - ---------------------------- -------- -------- -------- -------- -------- (THOUSANDS) Beginning Balance, as of December 31, 2006 $ -- $ -- $ -- $ -- $ -- Accrued costs incurred due to the acquisition of Elk 5,785 -- 415 -- 6,200 -------- -------- -------- -------- -------- Balance, as of April 1, 2007 5,785 -- 415 -- 6,200 Additional accrued costs incurred due to the acquisition of Elk 19,624 2,400 -- -- 22,024 Accrued costs incurred related to change in control escrow account -- -- -- 32,574 32,574 Cash Payments (224) (1,773) -- -- (1,997) Amount charged to directly write-off inventory (4,071) -- -- -- (4,071) Non-cash items -- -- -- (8,889) (8,889) -------- -------- -------- -------- -------- Balance, as of July 1, 2007 21,114 627 415 23,685 45,841 Additional accrued costs incurred due to the acquisition of Elk 3,250 -- -- -- 3,250 Cash payments (2,446) (577) -- -- (3,023) Amount charged to directly write-off inventory (517) -- -- -- (517) Non-cash items -- -- -- (7,456) (7,456) -------- -------- -------- -------- -------- Ending Balance, as of September 30, 2007 $ 21,401 $ 50 $ 415 $ 16,229 $ 38,095 ======== ======== ======== ======== ========

Restructuring and Other Expenses ~~During the second quarter of 2007, we initiated our 2007 Restructuring Plan, which was formulated in connection with the acquisition of Elk on February 22, 2007.~~

The 2007 Restructuring Plan was created to eliminate cost redundancies recognized due to the acquisition of Elk and to reduce our current cost ~~structure and~~structure. The 2007 Restructuring Plan is expected to be fully implemented by the end of our ~~first quarter of~~fiscal year ending December 31, 2008. We account for our restructuring activities in accordance with ~~the guidance of~~ SFAS No. 146, ~~"Accounting~~“Accounting for Costs Associated with Exit or Disposal ~~Activities" which we refer to as SFAS No. 146 and~~Activities,” SFAS No. 144, ~~"Accounting~~“Accounting for the Impairment ~~and~~or Disposal of Long-Lived ~~Assets" which we refer to as SFAS~~Assets” and EITF No. ~~144. 55~~ ~~BUILDING MATERIALS CORPORATION OF AMERICA ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED)~~ 96-9 “Classification of Inventory Markdowns and Other Costs Associated with Restructuring.”

2007 Restructuring and Other Expenses

In connection with the acquisition of Elk, we ~~have~~ identified ~~approximately $114.6~~$191.9 million in restructuring and other expenses in our fiscal year ended December 31, 2007, of which ~~$49.8~~$97.0 million ~~relates~~related to property, plant and equipment write-downs at certain of our existing manufacturing facilities and ~~$18.4~~$25.1 million ofrelated to plant closing expenses. ~~The plants included in restructuring and other expenses reflected above were Erie, Pennsylvania; Stockton, California; Millis, Massachusetts; Mobile, Alabama; Dallas, Texas and Hollister, California.~~ Restructuring and other expenses also ~~include~~included $2.0 million in employee severance payments and ~~$44.4~~$67.8 million in integration-related expenses, which primarily ~~consist~~consisted of ~~$18.0~~$24.3 million of inventory-related ~~valuation~~ write-downs, $15.1 million of restructuring-related sales discounts, $1.4 million of lease termination expenses and ~~$25.0~~$27.0 million of other integration expenses.

We recorded ~~$97.6~~$181.0 million of the aforementioned restructuring and other expenses in our statement of operations as of ~~September 30, 2007, $31.8 million of which was recorded in the third quarter of~~December 31, 2007, of which ~~$7.2~~$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 ~~$24.6~~$141.6 million was charged to restructuring and other expenses.

Nine Months Ended September 28, 2008 Restructuring and Other Expenses

We identified an additional $58.4 million of restructuring and other expenses during our nine months ended September 28, 2008, which included $12.7 million of plant closing expenses, $2.9 million in employee severance payments and $42.8 million in integration-related expenses. Integration-related expenses primarily consisted of $22.3 million of inventory write-downs, $4.6 million of restructuring-related sales discounts and $15.9 million of other integration expenses.

We recorded $60.7 million of the identified restructuring and other expenses in our statement of ~~operations. In~~operations in the ~~second quarter of 2007 we recorded $65.8 million of restructuring and other expenses,~~nine-month period ended September 28, 2008, of which ~~$10.8~~$4.6 million was reflected as a reduction in net sales due to restructuring-related sales discounts, $22.3 million was charged to cost of products sold and ~~$55.0~~$33.8 million was charged to restructuring and other ~~expenses in our statement of operations.~~expenses. We expect to incur the remaining ~~$17.0~~$8.6 million of identified ~~restructuring~~integration and other expenses and to make the remaining cash payments related to our accrual byonce all matters with the acquisition of Elk are resolved and completed.

BUILDING MATERIALS CORPORATION OF AMERICA

Item 2.		MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIALCONDITION AND RESULTS OF OPERATIONS - (Continued)

The table below details our ~~first quarter ending 2008.~~ restructuring and other expense accruals and charges made against the accrual during our nine months ended September 28, 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		$	13,850

Current period costs, net		14,364			2,863			43,504			60,731

Cash payments		(19,967	)		(2,863	)		(41,648	)		(64,478	)

Amount related to property, plant and equipment for asset adjustments		6,228			-			(309	)		5,919

Amount charged to write-off inventory		(63	)		-			(3,010	)		(3,073	)

Non-cash items		-			-			(445	)		(445	)
Ending balance, as of September 28, 2008	$	3,467		$	-		$	9,037		$	12,504

Our aggregate employee severance payments included the termination of approximately 70100 BMCA employees, including certain management positions, in the manufacturing and selling and administrative ~~functional~~ areas. 56 ~~BUILDING MATERIALS CORPORATION OF AMERICA ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED)~~
PP&E PLANT EMPLOYEE RESTRUCTURING AND WRITE- CLOSING SEVERANCE INTEGRATION OTHER EXPENSES DOWN EXPENSES PAYMENTS EXPENSES TOTAL -------- -------- -------- -------- -------- (THOUSANDS) Beginning Balance, as of December 31, 2006 $ -- $ -- $ -- $ -- $ -- -------- -------- -------- -------- -------- Accrued costs incurred due to the acquisition of Elk -- -- -- -- -- -------- -------- -------- -------- -------- Balance, as of April 1, 2007 -- -- -- -- -- Additional accrued costs incurred due to the acquisition of Elk 41,919 7,234 2,000 14,640 65,793 Cash Payments -- (2,784) (800) (1,800) (5,384) Amount charged to property, plant and equipment for asset write-down (41,919) -- -- -- (41,919) -------- -------- -------- -------- -------- Balance, as of July 1, 2007 -- 4,450 1,200 12,840 18,490 Additional accrued costs incurred due to the acquisition of Elk 7,888 4,475 -- 19,491 31,854 Cash payments -- (4,475) (1,200) (19,768) (25,443) Amount charged to property, plant and equipment for asset write-down (7,888) -- -- -- (7,888) Amount charged to write-off inventory -- (1,545) -- (31) (1,576) Non-cash items -- -- -- (488) (488) -------- -------- -------- -------- -------- Ending Balance, as of September 30, 2007 $ -- $ 2,905 $ -- $ 12,044 $ 14,949 ======== ======== ======== ======== ========

Long-Term Debt

Long-term debt consists of the following at September 28, 2008 and December 31, 2007:

	September 28, 2008			December 31, 2007
	(Thousands)

8% Senior Notes due 2008	$	4,876		$	4,874
7 3/4% Senior Notes due 2014		250,523			250,590
Borrowings under the Senior Secured Revolving Credit Facility		386,000			122,000
Term Loan		960,466			965,362
Junior Lien Term Loan		325,000			325,000
Obligations under capital leases		56,733			61,997
Industrial development revenue bonds		2,820			7,710
Chester Loan		5,927			8,241
Other notes payable		7,792			8,251
Total		2,000,137			1,754,025
Less current maturities		(25,386	)		(24,630	)
Long-term debt less current maturities	$	1,974,751		$	1,729,395

On February 22, 2007, BMCA ~~and the Purchasers~~ entered into ~~senior secured credit facilities~~Senior Secured Credit Facilities consisting of a ~~new $975~~$975.0 million Term Loan, a ~~new $600~~$600.0 million Senior Secured Revolving Credit Facility and a ~~$325~~$325.0 million bridge loan facility, which ~~we refer to as the Bridge Loan, which~~ was subsequently replaced by a ~~$325~~$325.0 million Junior Lien Term Loan, which we collectively ~~refer to as~~financed the ~~Credit Facilities. 57~~ purchase of Elk and repaid certain existing BMCA debt facilities and Elk senior note debt.

BUILDING MATERIALS CORPORATION OF AMERICA ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED) The initial borrowings under these Credit Facilities were used (i) to pay for shares tendered

Item 2.		MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIALCONDITION AND RESULTS OF OPERATIONS - (Continued)

On April 10, 2008, we repurchased and retired $4.8 million of industrial development revenue bond certificates issued by Elk shareholders in an equity tender offer, (ii) to repay amounts outstanding under BMCA's Old Senior Secured Revolving Credit Facility, (iii) to make payments in connection with the completion by BMCA and Building Materials Manufacturing Corporation, which we refer to as BMMC, of the tender offer and consent solicitation for their 2007 Notes, (iv) to make payments in connection with the completion by BMCA of its previously announced tender offer and consent solicitation for its outstanding 2008 Notes, (v) to pay for transaction fees and expenses incurred in connection with each of the foregoing transactions and (vi) to repay all of the existing Elk senior note debt. The Senior Secured Revolving Credit Facility has a maturity date of February 22, 2012. All amounts outstanding under the Senior Secured Revolving Credit Facility 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. 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 million. Loans under the Senior Secured Revolving Credit Facility will 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 will be 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. The Senior Secured Revolving Credit Facility provides for optional reductions in the overall $600 million commitment, under certain conditions. In addition, the Senior Secured Revolving Credit Facility provides for optional and mandatory pre-payments of borrowings outstanding under the Senior Secured Revolving Credit 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 million, depending on the ability to obtain commitments from lenders and meeting specified conditions. Under the terms of the Senior Secured Revolving Credit Facility, the borrowers are subject to an interest coverage ratio financial covenant when liquidity falls below a specified threshold. In addition, the borrowers are also required to comply with other customary covenants and various restrictive covenants, including with respect to ~~incurring additional 58~~ BUILDING MATERIALS CORPORATION OF AMERICA ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED) 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 Senior Secured Revolving Credit Facility could be accelerated by the holders of that indebtedness. On March 12, 2007, the Senior Secured Revolving Credit Facility was amended, which did not resultMount Vernon, Indiana Industrial Development Revenue Bond issued in any material changes to the facility. The Term Loan will mature on February 22, 2014. All amounts outstanding under the Term Loan 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. Amounts due under the Term Loan will 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 will be recalculated periodically based on changes in the base rate and Eurodollar rate, if applicable. The Term Loan requires us to pay unused commitment fees. In addition, the Term Loan provides for optional and mandatory pre-payments under certain conditions. The Term Loan also provides the borrowers with the ability to increase the size of the facility by up to $250 million (less any increase in the Senior Secured Revolving Credit Facility in excess of $100 million), depending on the ability to obtain commitments from lenders and meeting specified conditions. Under the terms of the Term Loan, the borrowers are subject to an interest coverage ratio financial covenant, as defined, and a leverage ratio financial covenant, as defined, each of which will need to be complied with starting as of the end of BMCA's second fiscal quarter in 2008. In addition, the borrowers are also required to comply with 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 date of the Term Loan could be accelerated by the holders of that indebtedness. On March 15, 2007, the Term Loan was amended, which did not result in any material changes to the facility. The Bridge Loan would have converted into a term loan maturing on February 22, 2015, however it was amended and restated on March 15, 2007, and redesignated as the Junior Lien Term Loan. 59 BUILDING MATERIALS CORPORATION OF AMERICA ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED) The Junior Lien Term Loan matures on September 15, 2014. All amounts outstanding under the Junior Lien Term Loan 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 the Junior Lien Term Loan will 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 will be recalculated periodically based on changes in the base rate or Eurodollar rate, as applicable. The Junior Lien Term Loan provides for optional and mandatory prepayments under certain conditions. Under the terms of the Junior Lien Term Loan, the borrowers are subject to a leverage ratio financial covenant, as defined, which will need to be complied with starting as of the end of BMCA's second fiscal quarter in 2008. The borrowers are also required to comply with 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 date of the Junior Lien Term Loan could be accelerated by the holders of that indebtedness. On February 22, 2007, BMCA repurchased approximately $97.5 million, or 97.5%, of the aggregate principal amount outstanding of the 2007 Notes and $150.1 million, or 96.9%, of the aggregate principal amount outstanding of the 2008 Notes. In connection with the completion of the tender offer for the 2007 Notes and the 2008 Notes in February 2007, substantially all of the covenants included in the indentures governing the 2007 Notes and 2008 Notes were eliminated. On March 26, 2007, we repurchased all of Elk's then outstanding $25.0 million in aggregate principal amount of 4.69% Senior Notes due 2007, $60.0 million in aggregate principal amount of 6.99% Senior Notes due 2009, $60.0 million in aggregate principal amount of 7.49% Senior Notes due 2012 and $50.0 million in aggregate principal amount of 6.28% Senior Notes due 2014. 1985.

As of September ~~30, 2007,~~28, 2008, we had total outstanding consolidated indebtedness of ~~$1,910.1~~$2,053.0 million, which ~~amount includes~~included $52.8 million of demand loans to our parent corporation and ~~$16.8~~$25.4 million that matures prior to the end of the third quarter of ~~2008. Our total outstanding consolidated indebtedness also includes $281.0 million of borrowings outstanding under our $600.0 million Senior Secured Revolving Credit Facility.~~2009. 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. 60 ~~BUILDING MATERIALS CORPORATION OF AMERICA ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED)~~

As of September ~~30, 2007,~~28, 2008, we were in compliance with all covenants under the Senior Secured ~~Revolving~~ Credit ~~Facility, the Term Loan, the Junior Lien Term Loan~~Facilities, and the indentures governing ~~the remaining 2007 Notes, the remaining~~our 2008 Notes and ~~the~~our 7 3/4% Senior Notes due 2014, which we refer to as the 2014 Notes ~~which~~and, together ~~we collectively refer to as~~with the 2008 Notes, the Senior Notes. As of September ~~30, 2007,~~28, 2008, the net book value of the collateral securing the Senior ~~Notes, the Term Loan, the Junior Lien Term Loan and~~Secured Revolving Credit Facility Collateral (as defined in the Senior Secured Revolving Credit ~~Facility~~Facility) and the Term Loan Collateral (as defined in the Term Loan) was ~~approximately $2,485.8 million.~~ $1,109.5 and $1,662.1 million, respectively.

At September ~~30, 2007,~~28, 2008, we had outstanding letters of credit of approximately ~~$51.2~~$48.4 million, which ~~includes~~included approximately ~~$10.5~~$10.6 million of standby letters of credit related to certain obligations of G-I Holdings. On January 3, 2006, we purchased and retired $6.3 million of industrial revenue bond certificates issued by us in 1990 with respect to the Fontana, California Industrial Revenue Development Bond, resulting in us becoming the primary holder of such bond.

Hedging Activity

In March 2007, we ~~began entering~~entered into forward-starting Eurodollar rate, ~~(LIBOR)~~or LIBOR, based pay fixed income interest rate swaps related to our Term Loan, with an effective date of April 23, 2007 and a maturity date of April 23, 2012. In accordance with SFAS No. 133 "Accounting for Derivative Instruments and Hedging Activities," which we refer to as SFAS No. 133, BMCA's swaps are treated as cash flow hedges. At September 30, 2007, we had no ineffectiveness related to our swaps. Therefore, for the quarter ended September 30, 2007, we, based on the change in the LIBOR rate, reflected in other liabilities the cumulative changes in the fair value of the derivative instrument when compared to cumulative changes in the present value of the expected future interest cash flows that are attributable to changes in the benchmark LIBOR swap rate. BMCA's offset to the related liability was reflected in other comprehensive loss, net of tax. The current period activity therefore marks the swaps instrument to market and adjusts other comprehensive loss. On each balance sheet date, we will test our fixed income interest rate swaps to determine whether the swaps contain any ineffectiveness. If BMCA's fixed income swaps contain any ineffectiveness, we will reflect the ineffective portion in our statement of operations. 61 BUILDING MATERIALS CORPORATION OF AMERICA ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED) At September 30, 2007, based on changes in the closing LIBOR rate as of September 28, 2007, we recorded a fair value loss on our fixed income interest rate swaps of $4.0 million to other liabilities, while the offset was recorded to other comprehensive loss, net of tax of $1.5 million. We have also recorded $1.4 million in year-to-date interest income as of September 30, 2007 related to our fixed income interest rate swaps. 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 terms similar to those of our swaps entered into in March 2007.

In accordance with ~~similar terms~~SFAS No. 133 “Accounting for Derivative Instruments and Hedging Activities”, our swaps are treated as ~~dicussed above.~~ cash flow hedges. As of September 28, 2008, based on changes in the fair value of the interest rate swaps, we recognized a cumulative fair value loss on our interest rate swaps of $30.4 million to other liabilities, while the offset was recognized as an other comprehensive loss, net of tax of $11.6 million. Amounts may be reclassified from other comprehensive loss to interest expense if any portion of our swaps become ineffective. We do not anticipate that any amount recorded in other comprehensive loss related to our swaps will be reclassified during our fiscal year ending December 31, 2008.

In July 2007, we began entering into treasury locks as additional hedging instruments ~~against~~related to our Term Loan. Our treasury locks have a settlement date of October 30, 2007 and a maturity date of July 31, 2012. Our treasury locks fix the U.S. treasury component, while excluding the swap component of the forward benchmark LIBOR interest rate. According to SFAS No. 133 our treasury locks are also cash flow hedges, which are accounted for in the same manner as our swaps. At September 30, 2007, we determined through statistical analysis that our treasury locks contained 98% effectiveness. Therefore, at September 30, 2007, based on changes in the closing LIBOR rate as of September 28, 2007, BMCA recorded a fair value loss of $2.7 million to accrued liabilities, with the effective portion offset of $2.6 million being recorded to other comprehensive loss, net of tax of $1.0 million and the ineffective portion offset of $0.1 million being recorded in our statement of operations. On October 30, 2007, we settled our open treasury lock hedging positions, ~~against our Term Loan,~~ which resulted in a ~~pre-tax~~fair value loss ~~of approximately $4.9 million, which~~and cash settlement. Pursuant to SFAS No. 133, we ~~will amortize~~are amortizing the loss into our statement of operations over the life of the Term Loan, ~~pursuant to SFAS No. 133.~~ of which $0.2 and $0.6 million was amortized into interest expense in our third quarter and nine-month period ended September 28, 2008, respectively.

Intercompany Transactions

We make loans to, and borrow from, our parent corporations from time to time at prevailing market rates. As of September 28, 2008 and September 30, 2007, ~~and October 1, 2006,~~ BMCA Holdings Corporation owed us ~~$56.2~~$56.3 and ~~$56.0~~$56.2 million, including interest of ~~$0.9~~$1.0 and ~~$0.7~~$0.9 million, respectively, and we owed BMCA Holdings Corporation $52.8 and $52.8 million, with no unpaid interest, ~~payable to BMCA Holdings Corporation,~~ respectively. Interest income on our loans to BMCA Holdings

BUILDING MATERIALS CORPORATION OF AMERICA

Item 2.		MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIALCONDITION AND RESULTS OF OPERATIONS - (Continued)

Corporation amounted to ~~$1.5~~$0.9 and ~~$1.3~~$1.5 million during the third ~~quarters~~quarter ended September 28, 2008 and September 30, 2007, ~~and October 1, 2006,~~ respectively, and ~~$4.0~~$2.7 and ~~$3.7~~$4.0 million during the ~~nine month~~nine-month periods ended September 28, 2008 and September 30, 2007, ~~and October 1, 2006,~~ respectively. Interest expense on our loans from BMCA Holdings Corporation amounted to ~~$1.4~~$0.8 and ~~$1.2~~$1.4 million during the third 62 ~~BUILDING MATERIALS CORPORATION OF AMERICA ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED) quarters~~quarter ended September 28, 2008 and September 30, 2007, ~~and October 1, 2006,~~ respectively, and ~~$3.9~~$2.6 and ~~$3.5~~$3.9 million during the ~~nine month~~nine-month periods ended September 28, 2008 and September 30, 2007, ~~and October 1, 2006,~~ respectively. Loans payable to/receivable from ~~any~~our parent ~~corporation~~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 Facility, the Term Loan, the Junior Lien Term Loan and ~~our~~the Senior Notes. Under the terms of the Senior Secured Revolving Credit Facility and the indentures governing our Senior Notes at September ~~30, 2007,~~28, 2008, we could repay demand loans to our parent corporation amounting to $52.8 million, subject to certain conditions. We also make non-interest bearing advances to affiliates, of which no balance was outstanding as of September 28, 2008 and September 30, ~~2007 and October 1, 2006.~~2007. In addition, ~~for the nine months ended~~as of September 28, 2008 and September 30, 2007, ~~and October 1, 2006,~~ we did not owe any loans to or enter into any lending activities with other affiliates.

We ~~also~~ have a management agreement, which we refer to as the Management Agreement, with ISP Management Company, Inc., a subsidiary of International Specialty Products Inc. ~~(which,~~, which, together with its subsidiaries, ~~we refer~~is referred to as ISP,) an affiliate, ~~which we refer to as the ISP Management Agreement,~~ to provide us with certain management services. ~~The~~Based on services provided to us in 2008 under the Management Agreement, the aggregate amount payable to ISP Management Company, Inc. under the ~~currently proposed ISP~~ Management Agreement for 2008, inclusive of the services provided to G-I Holdings, is ~~approximately~~not yet available; however, after adjusting for inflationary factors, it is currently estimated to be similar to the $6.7 million ~~based on services provided to us~~paid in 2007. We do not expect any changes to ~~finalize~~ the ~~ISP~~ Management Agreement ~~during~~to have a material impact on our ~~fourth quarter~~results of ~~2007.~~ operations.

We and our subsidiaries purchase a substantial portion of our headlap roofing granules, colored roofing granules and algae-resistant granules, ~~under~~on a ~~long-term requirements contract with~~purchase order basis, from ISP Minerals Inc., which we refer to as ISP Minerals, an affiliate of ~~ours~~BMCA and ISP. The amount of mineral products purchased each year ~~under the Minerals contract~~on this basis is based on current demand and is not subject to minimum purchase requirements. For the third ~~quarters and nine month periods~~quarter ended September ~~30, 2007 and October 1, 2006,~~28, 2008, we purchased ~~$29.0, $26.2, $81.1~~$13.7 million of roofing granules, and ~~$84.9~~for the nine-month period ended September 28, 2008, we purchased $33.2 million ~~respectively,~~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 ~~from Minerals~~purchased each year under ~~this contract.~~ the contract is based on current demand and is not subject to minimum purchase requirements. Under the contract, for the third quarter ended September 28, 2008, we purchased $24.2 million of roofing granules, and for the nine-month period ended September 28, 2008, we purchased $66.1 million of roofing granules.

In August 2008 and October 2008, we declared and paid a cash dividend of $2.5 and $5.0 million, respectively, to our parent corporation.

Included in ~~current~~noncurrent assets as a ~~non-interest bearing income~~ tax receivable from parent corporation on our consolidated balance sheets is $10.0 ~~and $9.1~~ million at both September ~~30, 2007~~28, 2008 and December 31, ~~2006, respectively,~~2007, representing amounts paid in excess of amounts due to G-I Holdings with respect to 2006 under the Tax Sharing ~~Agreement.~~Agreement (as defined). These amounts are included in the ~~change in~~ net ~~receivable from/~~payable to related parties/parent corporations in the consolidated ~~statement~~statements of cash flows. 63

BUILDING MATERIALS CORPORATION OF AMERICA ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED) Income Taxes We adopted Financial Accounting Standards Board, which we refer to as, FASB, Interpretation No. 48, which we refer to as FIN 48, as of January 1, 2007 in a manner that is consistent with the provisions of FSP FIN 48-1 (see below) and, as a result of the adoption, we reviewed certain tax positions and did not need to recognize any material adjustment to our accruals for uncertain tax positions. At January 1, 2007 and September 30, 2007, we had approximately $13.1 and $15.6 million, respectively, of unrecognized tax benefits. All of the unrecognized tax benefits would affect our effective tax rate if recognized with the exception of $1.4 million associated with Elk, which would affect goodwill. We and our subsidiaries are subject to United States federal income tax as well as the income tax of multiple state jurisdictions. We have substantially concluded all United States federal income tax matters for years through 2004. The tax years 2005 and 2006 remain open to examination by the Internal Revenue Service (IRS). Substantially all material state and local matters have been concluded for tax years through 2001. The tax years 2002 through 2006 remain open to examination by the major state taxing jurisdictions to which we are subject. Our continuing practice is to recognize interest and/or penalties related to income tax matters in income tax expense. As of January 1, 2007 and September 30, 2007, we had $3.8 and $4.8 million, respectively, of accrued interest and penalties. Our effective tax rate changed from 38.0% for the year ended December 31, 2006 to 31.0% for the nine month period ended September 30, 2007. The change in the effective tax rate was primarily due to the impact of the estimated annual restructuring and other expense charges in 2007, of which $97.6 million was included in our income before interest expense and income taxes for the nine month period ended September 30, 2007 and the establishment of a valuation allowance related to state income taxes.

Item 2.		MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIALCONDITION AND RESULTS OF OPERATIONS - (Continued)

Contingencies

See Note 1413 to Consolidated Financial Statements for information regarding contingencies. Other Matters On October 15, 2007, we redeemed all of our remaining $2.5 million outstanding 2007 Notes, including accrued and unpaid interest on such notes through the date of redemption. 64 ~~BUILDING MATERIALS CORPORATION OF AMERICA ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED)~~

Economic Outlook

We do not believe that inflation has had a material effect on our results of operations during the first nine months of ~~2007.~~2008. 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. ~~During~~

The prices of energy and crude oil continued to remain at relatively high historical levels during the third quarter of ~~2007,~~2008. In addition, the cost of asphalt ~~continued to be~~increased during the third quarter of 2008 reaching record high ~~relative to historical~~ levels, which reflects ~~in large part record high~~higher crude oil ~~prices.~~prices and higher asphalt demand largely driven by the seasonal paving market. 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 future disruption in the supply of asphalt will have a material impact on future net sales, although no assurances can be provided in that regard. ~~To mitigate these and other petroleum-based cost increases, we announced multiple price increases in the first nine months of 2007.~~ We will attempt to pass on future ~~additional unexpected~~ cost increases from suppliers as needed; however, no assurances can be provided that these price increases will be accepted in the marketplace.

Contractual Obligations

There have been no significant changes to our contractual obligations during the third quarter ended September ~~30, 2007.~~28, 2008. For a further discussion on our ~~Contractual Obligations~~contractual obligations related to minimum purchase obligations reference is made to ~~Management's~~Management’s Discussion and Analysis of Financial Condition and Results of Operations ~~"Contractual Obligations" in our 2006 Form 10-K and~~“Contractual Obligations” in our 2007 ~~first quarter~~ Form ~~10-Q, which was filed with~~10-K.

New Accounting Pronouncements

In September 2006, the ~~SEC on May 16, 2007,~~Financial Accounting Standards Board, which we refer to as the 2007 first quarter Form 10-Q. New Accounting Pronouncements In July 2006, the FASB, issued FIN 48 "Accounting for Uncertainty in Income Taxes, an Interpretation of FASB Statement No. 109." FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken in a tax return. A reporting entity must determine whether it is "more-likely-than-not" that a tax position will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. Once it is determined that a position meets the more-likely-than-not recognition threshold, the position is measured to determine the amount of benefit to recognize in the financial statements. FIN 48 became effective for fiscal years beginning after 65 BUILDING MATERIALS CORPORATION OF AMERICA ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (CONTINUED) December 15, 2006. In May 2007, the FASB issued FASB Staff Position, which we refer to as FSP, FIN 48-1 "Definition of Settlement in FASB Interpretation No. 48," which we refer to as FSP FIN 48-1, which amended FIN 48 to provide guidance on how a reporting entity should determine whether a tax position is effectively settled for the purpose of recognizing previously unrecognized tax benefits. Under FSP FIN 48-1, a tax position will be considered effectively settled and any previously unrecognized tax benefits should be recognized based on the terms of settlement if (a) the taxing authority has completed its examination, including all appeals, (b) the reporting entity does not intend to appeal or litigate any aspect of the tax position; and (c) based on the taxing authority's policies and practices, the reporting entity considers it remote that the taxing authority will re-examine the tax position. We 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, we reviewed certain tax positions and did not recognize any material adjustment to our accruals for uncertain tax positions. See Income Taxes. In September 2006, the FASB, issued SFAS No. 157, ~~"Fair~~“Fair Value ~~Measurements,"~~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. SFAS No. 157~~measurements, which is effective for fiscal years beginning after November 15, 2007. ~~We will adopt the provisions of SFAS No. 157 beginning in our first quarter of~~In February 2008, ~~and, therefore, have not yet determined the effect, if any, the adoption of SFAS No. 157 will have on our results of operations or financial position. In September 2006,~~ the FASB issued ~~FSP, AUG AIR-1 "Accounting for Planned Major Maintenance Activities"~~FASB Staff Position, which we refer to as FSP, ~~AUG AIR-1,~~No. 157-2 “Partial Deferral to the Effective Date of Statement 157”, which ~~prohibits the use of the accrue-in-advance method of accounting in annual and interim financial reporting periods for planned major maintenance activities.~~we refer to as FSP AUG AIR-1 previously allowed companies the right to recognize planned major maintenance costs by accruing a liability over several reporting periods before the maintenance was performed. FSP AUG AIR-1 still allows the direct expense, built-in-overhaul and deferral methods of accounting as acceptable, however it mandates that companies apply the same method of accounting in both interim and annual financial reporting periods and that the method be retrospectively applied if applicable. FSP AUG AIR-1No. 157-2, which is effective for fiscal years beginning after ~~December~~November 15, ~~2006. We adopted~~2008 and excludes SFAS No. 13, “Accounting for Leases,” defers certain non-financial assets and non-financial liabilities and further clarifies the principles in SFAS No. 157 on the fair value measurement of liabilities. Our adoption of the provisions of SFAS No. 157 for all other items not deferred by FSP ~~AUG AIR-1~~No. 157-2 in our first quarter of ~~2007. FSP AUG AIR-1 has~~2008 did not ~~had~~have a material effect on our consolidated financial statements. We are currently evaluating the provisions of FSP No. 157-2, which we will adopt in our first quarter beginning January 1, 2009 and do not expect that the adoption will have a material effect on our consolidated financial statements.

BUILDING MATERIALS CORPORATION OF AMERICA

Item 2.		MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIALCONDITION AND RESULTS OF OPERATIONS - (Continued)

earnings caused by measuring related assets and liabilities differently, and it is simpler than using the complex hedge-accounting provisions of SFAS No. 133 “Accounting for Derivative Instruments and Hedging Activities” 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. SFAS No. 159 is~~instruments and was effective ~~as of the~~for fiscal years beginning ~~of a company's first fiscal year that begins~~ after November 15, 2007. ~~Retrospective application~~We adopted 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 ~~not permitted.~~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 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; however, the presentation and disclosure requirements must be retrospectively applied to comparative financial statements. We will adopt the provisions of SFAS No. ~~159~~160 for our fiscal year beginning ~~in our first quarter of 2008~~January 1, 2009, and ~~therefore, have~~we do not ~~yet determined the effect, if any,~~expect the adoption ~~of SFAS No. 159 will~~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.

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 do not expect the adoption of SFAS No. 162 to have any impact on our results of operations or financial position.

* * * ~~FORWARD-LOOKING STATEMENTS~~

BUILDING MATERIALS CORPORATION OF AMERICA

Item 2.		MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIALCONDITION AND RESULTS OF OPERATIONS - (Continued)

Forward-looking Statements

This quarterly report on Form 10-Q 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. 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"~~“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 quarterly report on Form 10-Q 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. ~~See also the "Risk Factors" in our 2006 Form 10-K and the risks identified in Part II of our 2007 first quarter Form 10-Q. 67~~

BUILDING MATERIALS CORPORATION OF AMERICA ~~ITEM~~

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES

ABOUT MARKET RISK

Reference is made to ~~Management's~~Management’s Discussion and Analysis of Financial Condition and Results of Operations in the ~~2006~~2007 Form 10-K for a discussion of ~~"Market-Sensitive~~“Market-Sensitive Instruments and Risk Management.~~" Beginning~~” There were no material changes in ~~March and July 2007, BMCA entered into fixed income interest rate swaps and treasury locks, respectively, to hedge against fluctuations in the variable interest rate~~such information as of ~~our $975.0 million Term Loan.~~September 28, 2008. See Note 78 to the Consolidated Financial Statements. ~~ITEM 4.~~

Item 4T. CONTROLS AND PROCEDURES

Disclosure Controls and ~~Procedures:~~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"~~“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.

Changes in Internal Control ~~Over~~over Financial ~~Reporting:~~Reporting: 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~~management’s evaluation during the third quarter of fiscal year ~~2007~~2008 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting. 68

BUILDING MATERIALS CORPORATION OF AMERICA

PART II

OTHER INFORMATION ~~ITEM~~

Item 1. ~~LEGAL PROCEEDINGS~~ Legal Proceedings

As of September ~~30, 2007,~~28, 2008, approximately 1,900 alleged asbestos-related bodily injury claims relating to the inhalation of asbestos fiber were pending against Building Materials Corporation of America. See Note 1413 to Consolidated Financial Statements in Part I. ~~ITEM~~

Item 6. EXHIBITS Exhibit Number Description 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 Chief Financial Officer. 32.1 Section 1350 Certification of Chief Executive Officer and Chief Financial Officer. 69 Exhibits

Exhibit Number		Description
31.1		Rule 13a-14(a)/Rule 15d-14(a) Certification of Chief Executive Officer.

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

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

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 CORPORATION DATE: November 14, 2007 BY: /s/John F. Rebele ----------------- -------------------------------------- John F. Rebele Senior Vice President, Chief Financial Officer and Chief Administrative Officer (Principal Financial Officer) DATE: November 14, 2007 BY: /s/James T. Esposito ----------------- -------------------------------------- James T. Esposito Vice President and Controller (Principal Accounting Officer) 70

BUILDING MATERIALS CORPORATION OF AMERICA
BUILDING MATERIALS MANUFACTURING CORPORATION

DATE:	November 12, 2008	BY:	/s/John F. Rebele
			John F. Rebele Senior Vice President, Chief Financial Officer and Chief Administrative Officer (Principal Financial Officer)

DATE:	November 12, 2008	BY:	/s/James T. Esposito
			James T. Esposito Vice President and Controller (Principal Accounting Officer)