ADDITIONAL REGISTRANTS

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 October 4, 2009

OR

o	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)

(973) 628-3000

(Registrant’s telephone number, including area code)

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 o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

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

Large accelerated filer ¨		Accelerated filer ¨
Non-accelerated filer x (Do not check if a smaller reporting company)		Smaller reporting company ¨

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

As of November 18, 2009, 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 18, 2009, the additional registrant had the number of shares outstanding which is shown on the table below. There is no trading market for the common stock of the additional registrant. As of November 18, 2009, no shares of the registrant or the additional registrant were held by non-affiliates.

Description

Balance Sheet Classification

Fair Value

Derivatives designated as hedging instruments:

Fixed-income interest rate swap agreements

Other non–current liabilities

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, including area code, of registrant’s principal executive offices
Building Materials Manufacturing Corporation		Delaware		10		333-69749-01/ 22-3626208		1361 Alps Road Wayne, NJ 07470 (973) 628-3000

Part I - FINANCIAL INFORMATION

Item 1 - FINANCIAL STATEMENTS

BUILDING MATERIALS CORPORATION OF AMERICA

CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

(Dollars in Thousands)

	Third Quarter Ended						Nine Months Ended
	Oct. 4,			Sept. 28,			Oct. 4,			Sept. 28,
	2009			2008			2009			2008

Net sales	$	792,383		$	852,826		$	2,149,477		$	2,160,181
Costs and expenses:

Cost of products sold	513,971			602,459			1,385,442			1,543,252
Selling, general and administrative	100,417			144,617			297,594			376,116
Amortization of intangible assets	2,828			2,846			8,521			8,539
Restructuring and other expenses	5,930			6,606			24,244			33,794
Other expense, net	2,262			1,758			3,017			3,166
Total costs and expenses, net	625,408			758,286			1,718,818			1,964,867
Income before interest expense and income taxes	166,975			94,540			430,659			195,314
Interest expense	(36,766		)	(39,541		)	(108,958		)	(119,404		)
Income before income taxes	130,209			54,999			321,701			75,910
Income tax expense	(46,602		)	(20,326		)	(116,038		)	(28,481		)
Net income	$	83,607		$	34,673		$	205,663		$	47,429

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

BUILDING MATERIALS CORPORATION OF AMERICA

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except per share amounts)

	Oct. 4,
	2009			December 31,
	(Unaudited)			2008
ASSETS
Current Assets:
Cash and cash equivalents	$	193,691		$	37,037
Accounts receivable, trade, net	488,910			199,233
Accounts receivable, other	10,444			10,897
Inventories, net	139,997			348,449
Deferred income tax assets	69,320			39,324
Other current assets	13,612			17,072
Total Current Assets	915,974			652,012
Property, plant and equipment, net	633,563			655,269
Goodwill	654,840			653,644
Intangible assets, net	188,063			196,250
Income tax receivable from parent corporation	—			8,400
Other noncurrent assets	110,988			114,739
Total Assets	$	2,503,428		$	2,280,314

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current Liabilities:
Current maturities of long-term debt	$	20,339		$	20,596
Accounts payable	114,687			156,030
Payable to related parties	26,979			21,153
Loans payable to parent corporation	52,840			52,840
Accrued liabilities	231,625			134,341
Product warranty claims	16,200			16,200
Total Current Liabilities	462,670			401,160
Long-term debt	1,567,646			1,658,169
Product warranty claims	47,884			28,765
Deferred income tax liabilities	105,061			73,103
Other liabilities	197,885			198,973
Commitments and Contingencies — Note 13
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	1			1
Class B Common Stock, $.001 par value per share; 100,000 shares authorized; no shares issued	—			—
Loans receivable from parent corporation	(56,408		)	(56,348		)
Retained earnings	223,029			27,372
Accumulated other comprehensive loss	(44,340		)	(50,881		)
Total Stockholders’ Equity (Deficit)	122,282			(79,856		)
Total Liabilities and Stockholders’ Equity (Deficit)	$	2,503,428		$	2,280,314

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

BUILDING MATERIALS CORPORATION OF AMERICA

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(Dollars in thousands)

	Nine Months Ended
	Oct. 4,			Sept. 28,
	2009			2008

Cash and cash equivalents, beginning of period	$	37,037		$	6,324
Cash provided by (used in) operating activities:
Net income	205,663			47,429
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation	53,057			53,763
Amortization of intangible and other assets	11,062			11,516
Restructuring and other expenses	27,924			60,731
Deferred income taxes	(1,484		)	28,213
Noncash interest charges	17,908			6,748
Increase in working capital items	(46,753		)	(292,774		)
Increase in product warranty claims	19,119			2,701
Increase in other assets	(3,921		)	(11,615		)
Increase (decrease) in other liabilities	(80		)	267
Increase in net payable to related parties/parent corporations	14,624			23,224
Other, net	(14		)	(14,218		)
Net cash provided by (used in) operating activities	297,105			(84,015		)

Cash used in investing activities:
Capital expenditures and acquisition in 2009	(37,730		)	(28,639		)
Proceeds from sale of assets	—			21,443
Net cash used in investing activities	(37,730		)	(7,196		)

Cash provided by (used in) financing activities:
Proceeds from issuance of long-term debt	293,000			830,000
Repayments of long-term debt	(379,539		)	(574,002		)
Purchase of industrial development revenue bond certificates issued by the Company	—			(4,800		)
Principal repayments of capital leases	(5,915		)	(5,262		)
Distributions to parent corporation	(7		)	(65		)
Dividends to parent corporation	(10,000		)	(2,500		)
Loan to parent corporation	(60		)	(99		)
Financing fees and expenses	(200		)	(576		)
Net cash provided by (used in) financing activities	(102,721		)	242,696
Net change in cash and cash equivalents	156,654			151,485
Cash and cash equivalents, end of period	$	193,691		$	157,809

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

(Continued on the following page)

BUILDING MATERIALS CORPORATION OF AMERICA

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

(Dollars in thousands)

	Nine Months Ended
	Oct. 4,			Sept. 28,
	2009			2008
Supplemental Cash Flow Information:
Effect on cash from changes in working capital items:
Increase in accounts receivable trade and accounts receivable other	$	(288,566	)	$	(330,240	)
Decrease in income tax receivable	—			11,837
(Increase) decrease in inventories, net	205,836			(6,850		)
(Increase) decrease in other current assets	3,460			(4,551		)
Increase (decrease) in accounts payable	(41,343		)	79,327
Increase in accrued liabilities	97,398			22,181
Payments for restructuring and other expenses	(23,538		)	(64,478		)
Net effect on cash from increase in working capital items	$	(46,753	)	$	(292,774	)

Cash paid during the period for:
Interest (net of amount capitalized of $360 and $415 in 2009 and 2008, respectively)	$	100,442		$	115,262

Income taxes (including Federal income taxes paid pursuant to a Tax Sharing Agreement of $96,690 and $0 in 2009 and 2008, respectively*)	$	98,892		$	4,505

* The amount paid for income taxes in 2008 excluded an $11.8 million Federal income tax receipt related to Elk.

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)

Note 1. Formation of the Company

Building Materials Corporation of America (“BMCA” or the “Company”) was formed on January 31, 1994 and is a wholly-owned subsidiary of BMCA Holdings Corporation (“BHC”), which is a wholly-owned subsidiary of G-I Holdings Inc. (“G-I Holdings”). G-I Holdings is a wholly-owned subsidiary of G Holdings Inc. During the first quarter of 2007, BMCA acquired ElkCorp (“Elk”), a Dallas, Texas-based manufacturer of roofing products and building materials, resulting in Elk becoming an indirect wholly-owned subsidiary of BMCA.

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 October 4, 2009, and the results of its operations for the third quarter and nine-month periods ended and its cash flows for the nine-month periods ended October 4, 2009 and September 28, 2008, respectively. All adjustments are of a normal recurring nature, except for the restructuring and other expenses recorded in the Company’s statements of income for the nine-month periods ended October 4, 2009 and September 28, 2008, respectively. See Note 3. 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 Annual Report on Form 10-K for the fiscal year ended December 31, 2008, which was filed with the Securities and Exchange Commission (the “SEC”) on March 31, 2009 (the “2008 Form 10-K”).

Note 2. New Accounting Pronouncements

In December 2007, the Financial Accounting Standards Board (“FASB”) issued accounting guidance on the recognition and measurement process related to the identifiable assets acquired, liabilities assumed, any noncontrolling interests, and goodwill acquired by an acquiring company in a business combination. The guidance also expands the required disclosures related to the nature and financial statement effects of business combinations and became effective on a prospective basis for business combinations completed in fiscal years beginning after December 15, 2008. The Company adopted the new accounting guidance during its first quarter beginning January 1, 2009, and the adoption did not have a material impact on the Company’s consolidated financial statements. The effects of the new accounting guidance on future reporting periods depend on the nature and significance of the business combination.

In April 2009, the FASB issued accounting guidance that requires the assets acquired and liabilities assumed in a business combination that arise from contingencies be recognized at fair value if fair value can be

BUILDING MATERIALS CORPORATION OF AMERICA

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

Note 2. New Accounting Pronouncements – (Continued)

reasonably estimated. If fair value cannot be reasonably estimated, the assets or liabilities would generally be recognized in accordance with the accounting guidance for contingencies. Furthermore, the FASB removed the subsequent accounting guidance for assets and liabilities arising from contingencies as a result of the guidance issued in December 2007 for business combinations. The new accounting guidance also eliminates the requirement to disclose an estimate of the range of possible outcomes of recognized contingencies at the acquisition date. For unrecognized contingencies, the FASB requires that entities include only the disclosures required by the accounting guidance for contingencies. The Company adopted the new accounting guidance during its second quarter ended July 5, 2009, and the adoption did not have any impact on its consolidated financial statements. The effects of the new accounting guidance on future reporting periods depend on the nature and significance of the business combination.

In March 2008, the FASB issued guidance which changed the disclosure requirements for derivative instruments and hedging activities. This new accounting guidance was 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 new accounting guidance became effective on a prospective basis for fiscal years beginning on or after November 15, 2008. The Company adopted the new accounting guidance during its first quarter beginning January 1, 2009. Since the new accounting guidance requires only disclosures, there was no impact on the Company’s consolidated financial statements. See Note 7 for the required disclosures.

In April 2008, the FASB issued guidance which provides factors an entity should consider in developing renewal or extension assumptions used in determining the useful life of recognized intangible assets. This new accounting guidance applies prospectively to intangible assets that are acquired individually or with a group of other assets in business combinations and asset acquisitions and became effective for financial statements issued for fiscal years and interim periods beginning after December 15, 2008. The Company adopted the new accounting guidance during its first quarter beginning January 1, 2009, and the adoption did not have a material impact on its consolidated financial statements.

In December 2008, the FASB issued guidance on postretirement plans, which provides additional information on an employers’ disclosures surrounding plan assets of a defined benefit pension or other postretirement plan. The new accounting guidance is effective for financial statements

BUILDING MATERIALS CORPORATION OF AMERICA

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

Note 2. New Accounting Pronouncements – (Continued)

issued for fiscal years ending after December 15, 2009. The Company will adopt the provisions of the new accounting guidance for its fiscal year beginning January 1, 2010, which will have no impact on the Company’s consolidated financial statements; however it will require additional disclosures in the financial statements related to the assets held by its defined pension and postretirement plans.

In April 2009, the FASB issued additional guidance related to fair value measurements. According to the new accounting guidance, if an entity determines that the level of activity for an asset or liability has significantly decreased and that a transaction is not orderly, further analysis of the transaction or quoted prices is required, and a significant adjustment to the transaction or quoted prices may be deemed necessary to estimate the fair value in accordance with the fair value measurement accounting guidance issued in September 2006. The new accounting guidance is effective on a prospective basis for interim and annual periods ending after June 15, 2009. The Company adopted the new accounting guidance for its second quarter ended July 5, 2009, and the adoption did not have any impact on its consolidated financial statements.

In April 2009, the FASB issued guidance on new required disclosures surrounding the fair value of financial instruments. The new accounting guidance requires an entity to provide disclosures about fair value measurements of financial instruments in interim financial information and is effective on a prospective basis for interim and annual periods ending after June 15, 2009. The Company adopted the new accounting guidance in its second quarter ended July 5, 2009. Since the new accounting guidance only requires additional financial statement disclosures, there was no impact on the Company’s consolidated financial statements. See Note 8 for the required disclosures.

In May 2009, the FASB issued guidance on subsequent events to establish general standards of accounting for and disclosures of events that occur after the balance sheet date but prior to the issuance of financial statements. The new accounting guidance also requires entities to disclose the date through which subsequent events were evaluated as well as the rationale for why that date was selected. The new accounting guidance is effective for interim and annual periods ending after June 15, 2009, and accordingly, the Company adopted the new guidance during its second quarter ended July 5, 2009. The Company evaluated subsequent events through the time of filing its consolidated financial statements with the SEC on November 18, 2009, and noted there was no impact on its consolidated financial statements other than the disclosures in Note 14.

BUILDING MATERIALS CORPORATION OF AMERICA

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

Note 2. New Accounting Pronouncements – (Continued)

In June 2009, the FASB issued guidance that requires entities to provide more detailed information concerning transfers of financial assets, including securitization transactions and risks related to transferred financial assets. The new accounting guidance eliminates the concept of a “qualifying special-purpose entity,” changes the requirements for derecognizing financial assets, and requires additional disclosures. The Company will adopt the new accounting guidance during its first quarter beginning January 1, 2010 and does not expect the adoption to have a material impact on its consolidated financial statements.

In June 2009, the FASB issued new accounting guidance on variable interest entities, which eliminates the quantitative approach previously required for determining the primary beneficiary of a variable interest entity and requires ongoing qualitative reassessments to determine whether an enterprise is the primary beneficiary of a variable interest entity. The Company will adopt the new accounting guidance during its first quarter beginning January 1, 2010. The Company does not expect the adoption of the new accounting guidance to have a material impact on its consolidated financial statements.

In June 2009, the FASB issued the Accounting Standards Codification (“ASC”), which on July 1, 2009 became the single source of authoritative nongovernmental U.S. generally accepted accounting principles (“GAAP”). The ASC establishes one level of authoritative GAAP and all other literature is considered non-authoritative. The ASC is effective for financial statements issued for interim and annual periods ending after September 15, 2009. The Company adopted the ASC during its third quarter ended October 4, 2009. There was no change to the Company’s consolidated financial statements due to the adoption of the ASC, however, accounting references to specific accounting literature under FASB codification in prior financial statement filings will be replaced in this and future filings with references to accounting guidance under ASC.

BUILDING MATERIALS CORPORATION OF AMERICA

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

Note 3. Restructuring and Other Expenses

The Company initiated a restructuring plan (the “2007 Restructuring Plan”), which it formulated in connection with the Company’s acquisition of Elk. The 2007 Restructuring Plan was created to eliminate cost redundancies recognized due to the acquisition of Elk and to reduce the Company’s overall cost structure. The 2007 Restructuring Plan has been fully implemented as of December 31, 2008 and is substantially complete as of October 4, 2009. The Company accounts for its restructuring activities in accordance with the accounting guidance on exit or disposal cost obligations, impairments or disposal of long-lived assets and inventory markdowns or other costs associated with restructuring.

2008 Restructuring and Other Expenses

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

The Company recorded $73.2 million of its overall identified restructuring and other expenses in its statement of income during its fiscal year ended December 31, 2008, of which $6.1 million was reflected as a reduction in net sales due to restructuring-related sales discounts, $26.9 million was charged to cost of products sold and $40.2 million was charged to restructuring and other expenses.

Nine-Months Ended October 4, 2009 Restructuring and Other Expenses

In February 2009, the Company announced the temporary shutdown of two manufacturing facilities, one in Shafter, California and the other in Nashville, Tennessee as a result of weaker market demand. As a result of these actions and other charges related to the acquisition of Elk, the Company identified an additional $27.6 million of restructuring and other expenses in its nine months ended October 4, 2009, which included $19.0 million of plant closing expenses, $1.5 million in employee severance payments and $7.1 million in integration-related expenses. Integration-related expenses primarily consisted of $3.7 million of inventory write-downs and $3.4 million of other integration expenses.

BUILDING MATERIALS CORPORATION OF AMERICA

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

Note 3. Restructuring and Other Expenses – (Continued)

The Company recorded $27.9 million of its overall restructuring and other expenses in its statement of income during its nine-month period ended October 4, 2009, of which $3.7 million was charged to cost of products sold and $24.2 million was charged to restructuring and other expenses. The Company expects to incur future operating losses in connection with the 2007 Restructuring Plan and the temporary shutdown of the Nashville and Shafter manufacturing facilities, which will be recognized in the periods in which they are incurred.

The table below details the Company’s restructuring and other expense accruals and charges made against the accrual during its nine months ended October 4, 2009:

Restructuring and Other Expenses	Plant Closing Expenses			Employee Severance Payments			Integration Expenses			Total
	(Thousands)

Beginning balance, as of December 31, 2008	$	3,452		$	—		$	5,205		$	8,657

Current period costs, net	18,957			1,493			7,474			27,924

Cash payments	(15,151		)	(1,493		)	(6,894		)	(23,538		)

Amount charged to property, plant and equipment for asset write-down	(4,039		)	—			(584		)	(4,623		)

Amount charged to write-off inventory	—			—			(2,182		)	(2,182		)

Non-cash items	—			—			(336		)	(336		)
Ending balance, as of October 4, 2009	$	3,219		$	—		$	2,683		$	5,902

BUILDING MATERIALS CORPORATION OF AMERICA

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

Note 4. Comprehensive Income

The table below reconciles the Company’s net income to comprehensive income for the third quarter and nine-month periods ended October 4, 2009 and September 28, 2008, respectively:

	Third Quarter Ended					Nine Months Ended
	Oct. 4,		Sept. 28,			Oct. 4,		Sept. 28,
	2009		2008			2009		2008
	(Thousands)

Net income	$	83,607	$	34,673		$	205,663	$	47,429
Other comprehensive income, net of tax:
Derivative fair value adjustment — interest rate swaps, net of tax of ($1,092) and $1,559 for the three-month periods ended October 4, 2009 and September 28, 2008, respectively, and ($3,793) and $177 for the nine-month periods ended October 4, 2009 and September 28, 2008, respectively	1,781		(2,543		)	6,189		(288		)

Derivative fair value adjustment-treasury locks, net of tax of ($72) and ($72) for the three-month periods ended October 4, 2009 and September 28, 2008, respectively, and ($216) and ($216) for the nine-month periods ended October 4, 2009 and September 28, 2008, respectively	117		117			352		352
Comprehensive income	$	85,505	$	32,247		$	212,204	$	47,493

Note 5. Inventories

Inventories consisted of the following as of October 4, 2009 and December 31, 2008, respectively:

	October 4,			December 31,
	2009			2008
	(Thousands)

Finished goods	$	111,339		$	271,373
Work-in process	8,302			41,225
Raw materials and supplies	83,886			94,381
Total	203,527			406,979
Less LIFO reserve	(63,530		)	(58,530		)
Inventories, net	$	139,997		$	348,449

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 October 4, 2009 and December 31, 2008:

	October 4, 2009			December 31, 2008
	(Thousands)

7 3/4% Senior Notes due 2014	$	250,433		$	250,500
Borrowings under the Senior Secured Revolving Credit Facility	—			76,000
Term Loan	948,520			955,670
Junior Lien Term Loan	325,000			325,000
Obligations under capital leases	51,537			55,956
Industrial development revenue bond	2,730			2,820
Chester Loan	2,634			5,126
Other notes payable	7,131			7,693
Total	1,587,985			1,678,765
Less current maturities	(20,339		)	(20,596		)
Long-term debt less current maturities	$	1,567,646		$	1,658,169

As of October 4, 2009, the Company had total outstanding consolidated indebtedness of $1,640.8 million, which included $52.8 million of demand loans to its parent corporation. The Company anticipates funding these obligations principally from its cash and cash equivalents on hand, cash flow from operations and/or borrowings under its $600.0 million Senior Secured Revolving Credit Facility (the “Senior Secured Revolving Credit Facility”).

As of October 4, 2009, the Company was in compliance with all covenants under the Senior Secured Revolving Credit Facility, the $975.0 million Term Loan Facility (the “Term Loan”), the $325.0 million Junior Lien Term Loan Facility (the “Junior Lien Term Loan” and collectively with the Senior Secured Revolving Credit Facility and the Term Loan the “Senior Secured Credit Facilities”) and the indenture governing its 7 3/4% Senior Notes due 2014 (the “Senior Notes”). As of October 4, 2009, the net book value of the collateral securing the Senior Secured Revolving Credit Facility Collateral (as defined in the Senior Secured Revolving Credit Facility) and the Term Loan Collateral (as defined in the Term Loan) was $912.7 and $1,647.1 million, respectively.

At October 4, 2009, the Company had outstanding letters of credit of approximately $40.9 million, which included approximately $10.6 million of standby letters of credit related to certain obligations of G-I Holdings.

BUILDING MATERIALS CORPORATION OF AMERICA

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

Note 6. Long-Term Debt – (Continued)

On September 11, 2009, the Company entered into an amendment to the Senior Secured Revolving Credit Facility. Such amendment did not result in any material changes to the Senior Secured Revolving Credit Facility.

Note 7. Derivative and Hedging Transactions

Hedging Strategy

The Company is exposed to the impact of variable interest rate fluctuations on certain of its debt financings; however, the Company limits its variable interest rate exposure through the use of derivative instruments, which reduce the risk of interest rate fluctuations related to the Company’s debt. As a result of the use of derivative instruments, the Company has exposure to the risk that its counterparties to derivative contracts will fail to meet their contractual obligations. In order to mitigate its counterparty credit risk, the Company enters into derivative contracts with selected major financial institutions. The Company’s policies and procedures for mitigating counterparty credit risk on derivative transactions include reviewing and establishing limits for credit exposure with each financial institution and a continuous assessment of the creditworthiness of each counterparty. The right of set-off that exists under certain of these derivative contracts enables the Company, subject to each derivative contract, to net amounts due to and from the counterparty reducing the maximum loss from credit risk in the event of counterparty default.

Interest Rate Swap Agreements

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

On April 23, 2009, the Company exercised its option under its Term Loan to change the interest rate for its LIBOR advances from three-month to one-month LIBOR. The Company continued to receive three-month LIBOR and pay fixed rate interest under its swap agreements. The election of one-month LIBOR on its Term Loan resulted in the Company de-designating its original swap hedging relationship and subsequently re-designating a new swap hedging relationship for its Term Loan. As a result of the election, the Company recognized a $1.1 and $0 million gain related to swap ineffectiveness as a component of interest expense during its third quarter and nine months ended

BUILDING MATERIALS CORPORATION OF AMERICA

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

Note 7. Derivative and Hedging Transactions – (Continued)

October 4, 2009, respectively. In addition, as a result of this election, the Company recognized $6.4 and $11.3 million of interest expense during its third quarter and nine months ended October 4, 2009, respectively, due to the straight-line amortization of the unrealized losses remaining in accumulated other comprehensive income/loss (“OCI”) at April 23, 2009. The remaining amount of unrealized losses at October 4, 2009 will be amortized over the remaining life of the original swaps.

The Company continues to account for its new swap hedging relationship in accordance with the accounting guidance for derivatives and hedging, and as such its swaps are treated as cash flow hedges. The Company swaps are measured each period using the hypothetical derivative method in accordance with the accounting guidance for derivatives and hedging, which requires the Company’s actual swaps liability to be recorded at fair value, and OCI to reflect the lesser of either the cumulative change in the fair value of the actual swap or the cumulative change in the fair value of the hypothetical swap (the “perfect swap”). In any given period, to the extent the cumulative change in the fair value of the actual swap is greater than the cumulative change in the fair value of the perfect swap, the difference would be recognized as ineffectiveness as a component of interest expense in the Company’s statement of income. As of October 4, 2009, due to amortization, ineffectiveness and accrued swap interest, the Company estimated that during the twelve months ending September 2010, approximately $34.6 million of unrealized losses will be reclassified from OCI and recognized as a component of interest expense in its statement of income, subject to changes in the LIBOR rate.

The Company values its interest rate swap agreements based on fair value measurement Level 2 inputs from model-derived valuations whose significant inputs are quoted LIBOR contracts, Eurodollar futures and on-the-run swap markets. The accounting guidance for fair value measurements requires that the valuation of derivative assets and liabilities must take into account the parties’ nonperformance risk. The Company discounted the value of its derivative liabilities based on the credit spread for its debt as determined by the market trading price. See Note 8, Fair Value Measurements.

Treasury Lock Agreements

In July 2007, the Company entered into treasury lock agreements (“treasury locks”) with a maturity date of July 31, 2012, as additional hedging instruments related to its Term Loan. On October 30, 2007, the Company settled its open treasury lock hedging positions, which resulted in a pre-tax fair value loss and cash settlement of approximately $4.9 million, which is being amortized into its statement of income over the life of the Term Loan pursuant to the requirements of the accounting guidance for derivatives and hedging. During the third quarter ended October 4, 2009 and September 28, 2008, the Company amortized $0.2 and $0.2

BUILDING MATERIALS CORPORATION OF AMERICA

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

Note 7. Derivative and Hedging Transactions – (Continued)

million, respectively, of the loss related to its treasury locks into interest expense in its statements of income and during its nine-month periods ended October 4, 2009 and September 28, 2008, the Company amortized $0.6 and $0.6 million, respectively. The Company will amortize $0.8 million annually related to this loss through July 2012.

The following table sets forth the classification and fair values of the Company’s derivative instruments at October 4, 2009:

FAIR VALUE OF DERIVATIVE INSTRUMENTS

(Millions)

The amount included in OCI, net of tax, related to the Company’s derivative liability at October 4, 2009 and December 31, 2008 was $37.5 and $43.7 million, respectively.

The following table sets forth the effect of the Company’s derivative instruments on financial performance for the three months ended October 4, 2009:

Description	Amount of Gain or (Loss) Recognized in OCI on Derivative (Effective Portion)		Location of Gain or (Loss) Reclassified from OCI Into Income (Effective Portion)	Amount of Gain or (Loss) Reclassified from Accumulated OCI Into Income (Effective Portion)			Location of Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion)	Amount of Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion)
	(Millions)

Derivatives in Cash Flow Hedging Relationships:

Fixed-income interest rate swap agreements	$	1.8	Interest Expense	$	(15.9	)	Interest Expense	$	1.1

Treasury lock contracts	—		Interest Expense	(0.2		)	—	—

BUILDING MATERIALS CORPORATION OF AMERICA

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

Note 7. Derivative and Hedging Transactions – (Continued)

The following table sets forth the effect of the Company’s derivative instruments on financial performance for the nine months ended October 4, 2009:

Description	Amount of Gain or (Loss) Recognized in OCI on Derivative (Effective Portion)		Location of Gain or (Loss) Reclassified from OCI Into Income (Effective Portion)	Amount of Gain or (Loss) Reclassified from Accumulated OCI Into Income (Effective Portion)			Location of Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion)	Amount of Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion)
	(Millions)

Derivatives in Cash Flow Hedging Relationships:

Fixed-income interest rate swap agreements	$	6.2	Interest Expense	$	(36.4	)	Interest Expense	$	—

Treasury lock contracts	—		Interest Expense	(0.6		)	—	—

As of October 4, 2009, the Company did not have any derivatives not designated as hedging instruments according to the accounting guidance on derivatives and hedging.

Note 8. Fair Value Measurements

Financial instruments consist mainly of cash and cash equivalents, accounts receivable, accounts payable, accrued liabilities, interest rate swaps, short and long-term debt and lease obligations. The Company’s interest rate swaps are recorded at fair value, while other financial instruments in the Company’s consolidated balance sheet have carrying values that approximate fair value. In the absence of quoted market prices, considerable judgment is required in developing estimates of fair value. The Company’s estimates are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments concerning the carrying values of assets and liabilities. Actual results may differ from these estimates under different assumptions or conditions. Estimates are not necessarily indicative of the amounts the Company could realize in a current market transaction.

BUILDING MATERIALS CORPORATION OF AMERICA

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

Note 8. Fair Value Measurements – (Continued)

The following table details the carrying and fair values of the Company’s Term Loan, Junior Lien Term Loan and Senior Notes at October 4, 2009 and December 31, 2008. Fair values are based upon quoted market prices as follows:

	October 4, 2009				December 31, 2008
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
	(Thousands)
Senior Notes	$	250,433	$	246,250	$	250,500	$	155,000
Term Loan	948,520		861,968		955,670		573,402
Junior Lien Term	325,000		281,938		325,000		162,500

The following table sets forth information regarding the Company’s financial instruments that are measured at fair value as of October 4, 2009, consistent with the fair value hierarchy provision from the accounting guidance on fair value measurements:

	Total Measured at Fair Value		Quoted Market Prices In Active Markets for Identical Assets/ Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(Millions)
Liabilities:
Fixed-income interest rate swap agreements	$	71.8	$	—	$	71.8	$	—
Total liabilities	$	71.8	$	—	$	71.8	$	—

During the first quarter of 2009, the Company adopted the additional accounting guidance issued by the FASB on fair value measurements, which deferred the application of fair value measurement for certain non-financial assets and non-financial liabilities. Upon adoption, the Company did not have any non-financial assets or liabilities that were recognized or measured at fair value on a recurring basis, therefore there was no impact on the Company’s results of operations.

BUILDING MATERIALS CORPORATION OF AMERICA

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

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

The accrual for product warranty claims consists of the following for the third quarter and nine-month periods ended October 4, 2009 and September 28, 2008, respectively:

	Third Quarter Ended						Nine Months Ended
	Oct. 4,			Sept. 28,			Oct. 4,			Sept. 28,
	2009			2008			2009			2008
	(Thousands)

Beginning balance	$	59,868		$	47,028		$	44,965		$	44,724
Charged to cost of products sold	11,174			5,941			37,129			15,840
Payments/deductions	(6,958		)	(5,544		)	(18,010		)	(13,139		)
Ending balance	$	64,084		$	47,425		$	64,084		$	47,425

The Company offers extended warranty contracts on sales of its commercial roofing products. The lives of these commercial warranties range from 10 to 25 years. In addition, the Company offers enhanced warranties on certain of its residential roofing products. These enhanced warranties are the “Golden Pledge™” and “Peace of Mind™” warranty programs. All revenue for the sale of these warranty programs was deferred and amortized on a straight-line basis over the average life of these warranty programs, which was in accordance with the accounting guidance prescribed for separately priced extended warranty and product maintenance contracts. Incremental direct costs associated with the acquisition of the extended warranty contracts are capitalized and amortized on a straight-line basis over the average life of these warranty programs. Current costs of services performed related to claims paid under these warranty programs are expensed as incurred. The analysis of these warranty programs as of October 4, 2009 indicated that deferred revenue is in excess of deferred costs and accordingly, no loss was recognized. However, if the total expected costs of providing services under these warranty programs exceed deferred revenues less deferred costs, then a loss would be recognized.

BUILDING MATERIALS CORPORATION OF AMERICA

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

Note 9. Warranty Claims – (Continued)

At October 4, 2009 and September 28, 2008, the Company had deferred revenue of $80.0 and $75.5 million, of which $10.9 and $8.6 million is included in other current liabilities and $69.1 and $66.9 million is included in other liabilities, respectively. At October 4, 2009 and September 28, 2008, the Company also had deferred costs of $55.9 and $54.0 million, of which $7.2 and $5.5 million is included in other current assets and $48.7 and $48.5 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”). Benefits under this plan are based on stated amounts for each year of service. The Company’s funding policy is consistent with the minimum funding requirements of the Employee Retirement Income Security Act of 1974.

The Company’s net periodic pension cost for the Retirement Plan included the following components for the third quarter and nine-month periods ended October 4, 2009 and September 28, 2008, respectively:

	Third Quarter Ended						Nine Months Ended
	Oct. 4,			Sept. 28,			Oct. 4,			Sept. 28,
	2009			2008			2009			2008
	(Thousands)

Service cost	$	277		$	430		$	979		$	1,290
Interest cost	646			611			1,931			1,832
Expected return on plan assets	(770		)	(792		)	(2,354		)	(2,376		)
Amortization of unrecognized prior service cost	3			3			7			10
Amortization of net losses from earlier periods	188			105			547			315
Net periodic pension cost	$	344		$	357		$	1,110		$	1,071

The Company made Retirement Plan contributions of $2.9 million during the nine-month period ended October 4, 2009 and does not expect to make a pension plan contribution during the three-month period ending December 31, 2009.

BUILDING MATERIALS CORPORATION OF AMERICA

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

Note 10. Benefit Plans – (Continued)

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 to eliminate postretirement medical benefits for all current and future retirees.

Net periodic postretirement benefit included the following components for the third quarter and nine-month periods ended October 4, 2009 and September 28, 2008, respectively:

	Third Quarter Ended						Nine Months Ended
	Oct. 4,			Sept. 28,			Oct. 4,			Sept. 28,
	2009			2008			2009			2008
	(Thousands)

Service cost	$	1		$	3		$	6		$	10
Interest cost	29			29			84			87
Amortization of unrecognized prior service cost	(143		)	(143		)	(428		)	(428		)
Amortization of net gains from earlier periods	(51		)	(56		)	(157		)	(169		)
Net periodic postretirement benefit	$	(164	)	$	(167	)	$	(495	)	$	(500	)

As of October 4, 2009, the Company expected to make aggregate benefit claim payments of approximately $0.2 million during 2009, which are related to postretirement life insurance expenses.

Note 11. 2001 Long-Term Incentive Plan

Incentive units granted under the 2001 Long-Term Incentive Plan (the “2001 LTIP”) are valued at Book Value (as defined in the 2001 LTIP) or the value of such incentive units specified at the date of grant. Increases or decreases in the Book Value of those incentive units result in a change in the measure of compensation for the award. Compensation expense for the Company’s incentive units was $8.5 and $3.6 million for the third quarter ended October 4, 2009 and September 28, 2008, respectively, and $21.9 and $4.8 million for the nine-month periods ended October 4, 2009 and September 28, 2008, respectively. At October 4, 2009 and December 31, 2008, the 2001 LTIP liability amounted to $32.1 and $12.9 million, respectively, and was included in accrued liabilities.

BUILDING MATERIALS CORPORATION OF AMERICA

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

Note 11. 2001 Long-Term Incentive Plan – (Continued)

The following is a summary of activity for incentive units related to the 2001 LTIP:

	Nine
	Months Ended		Year-to-Date
	October 4,		December 31,
	2009		2008

Incentive Units outstanding, beginning of period	90,468		99,120
Granted	725		17,375
Exercised	(8,175	)	(18,686	)
Forfeited	(2,910	)	(7,341	)
Incentive Units outstanding, end of period	80,108		90,468
Vested Units outstanding, end of period	43,111		33,702

The initial value of each of the 725 incentive units granted on January 1, 2009 was approximately $707. The initial value of each of the 17,000 incentive units granted on January 1, 2008 was approximately $592 and the 375 incentive units granted on October 1, 2008 was approximately $688.

Note 12. Related Party Transactions

The Company makes loans to, and borrows from, its parent corporations from time to time at prevailing market interest rates. As of October 4, 2009 and September 28, 2008, BMCA Holdings Corporation owed the Company $56.4 and $56.3 million, including interest of $1.1 and $1.0 million, respectively, and the Company owed BMCA Holdings Corporation $52.8 and $52.8 million, respectively, with no unpaid interest. Interest income on the Company’s loans to BMCA Holdings Corporation amounted to $0.6 and $0.9 million during the third quarter ended October 4, 2009 and September 28, 2008, respectively, and $1.8 and $2.7 million during the nine-month periods ended October 4, 2009 and September 28, 2008, respectively. Interest expense on the Company’s loans from BMCA Holdings Corporation amounted to $0.6 and $0.8 million during the third quarter ended October 4, 2009 and September 28, 2008, respectively, and $1.7 and $2.6 million during the nine-month periods ended October 4, 2009 and September 28, 2008, respectively. Loans payable to/receivable from its parent corporations are due on demand and provide each party with the right of offset of its related obligation to the other party and are subject to limitations as outlined in the Senior Secured Credit Facilities and the Senior Notes. Under the terms of the Senior Secured Revolving Credit

BUILDING MATERIALS CORPORATION OF AMERICA

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

Note 12. Related Party Transactions – (Continued)

Facilities and the indenture governing the Company’s Senior Notes at October 4, 2009, the Company could repay demand loans to its parent corporation amounting to $52.8 million, subject to certain conditions.

The Company has a management agreement (the “Management Agreement”) with ISP Management Company, Inc., a subsidiary of International Specialty Products Inc. (which, together with its subsidiaries, is referred to as “ISP”), an affiliate, to provide the Company with certain management services. Based on services provided to the Company in 2009 under the Management Agreement, the aggregate amount payable to ISP Management Company, Inc. under the Management Agreement for 2009, inclusive of the services provided to G-I Holdings, is not yet available; however, it is currently estimated to be similar to the $7.3 million paid in 2008. The Company does not expect any changes to the Management Agreement to have a material impact on the Company’s results of operations.

The Company and its subsidiaries purchased a substantial portion of their headlap roofing granules, colored roofing granules and algae-resistant granules, on a purchase order basis, from ISP Minerals Inc. (“ISP Minerals”), an affiliate of BMCA and of ISP. The amount of mineral products purchased each year on this basis is based on current demand and is not subject to minimum purchase requirements. For the third quarter ended October 4, 2009 and September 28, 2008, the Company and its subsidiaries purchased $17.2 and $13.7 million, respectively, of roofing granules, and for the nine-month periods ended October 4, 2009 and September 28, 2008, the Company and its subsidiaries purchased $40.7 and $33.2 million, respectively, of roofing granules under this arrangement.

In addition to the granules products purchased by the Company under the above-referenced purchase order basis, the balance of its granules purchased from ISP Minerals is purchased under a contract expiring in 2013. The amount of mineral products purchased each year under the contract is based on current demand and is not subject to minimum purchase requirements. Under the contract, for the third quarter ended October 4, 2009 and September 28, 2008, the Company purchased $23.4 and $24.2 million of roofing granules, respectively, and for the nine-month periods ended October 4, 2009 and September 28, 2008, the Company purchased $55.4 and $66.1 million of roofing granules, respectively.

In February 2009 and March 2009, after giving effect to the most restrictive of the aforementioned debt covenant restrictions, the Company declared and paid cash dividends of $5.0 and $5.0 million, respectively, to its parent corporation. In August 2008 and October 2008, the Company declared and paid cash dividends of $2.5 and $5.0 million, respectively, to its parent corporation.

Included in noncurrent assets as a tax receivable from parent corporation on the Company’s consolidated balance sheet is $8.4 million at December 31, 2008, representing amounts paid in excess of amounts due to G-I

BUILDING MATERIALS CORPORATION OF AMERICA

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

Note 12. Related Party Transactions – (Continued)

Holdings with respect to 2006 under the Tax Sharing Agreement. The Company utilized the remaining receivable balance at December 31, 2008 during its first quarter of 2009. Included in current liabilities as a payable to related parties on the Company’s consolidated balance sheet at October 4, 2009 is $1.9 million, representing a tax payable due to G-I Holdings under the Tax Sharing Agreement. These amounts are included in the net payable to related parties/parent corporations in the consolidated statements of cash flows.

Note 13. Contingencies

In connection with its formation, the Company contractually assumed and agreed to pay the first $204.4 million of liabilities of its indirect parent, G-I Holdings, for asbestos-related bodily injury claims relating to the inhalation of asbestos fiber contained in products sold by G-I Holdings or its predecessors (“Asbestos Claims”). As of March 30, 1997, the Company paid all of its assumed liabilities for Asbestos Claims. G-I Holdings has agreed to indemnify the Company against any other existing or future Asbestos Claims if asserted against the Company. In January 2001, G-I Holdings filed a voluntary petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code due to Asbestos Claims.

On February 2, 2001, the United States Bankruptcy Court for the District of New Jersey issued a temporary restraining order enjoining any existing or future claimant from bringing or prosecuting an Asbestos Claim against the Company. By oral opinion on June 22, 2001, and written order entered February 22, 2002, the Bankruptcy Court converted the temporary restraints into a preliminary injunction prohibiting the bringing or prosecution of any such Asbestos Claims against the Company.

On February 7, 2001, G-I Holdings filed an action in the United States Bankruptcy Court for the District of New Jersey seeking a declaratory judgment that BMCA has no successor liability for Asbestos Claims against G-I Holdings and that it is not the alter ego of G-I Holdings (the “BMCA Action”). One of the parties to this matter, the Official Committee of Asbestos Claimants (the “creditors’ committee”), subsequently filed a counterclaim against the Company seeking a declaration that BMCA has successor liability for Asbestos Claims against G-I Holdings and that it is the alter ego of G-I Holdings. By order dated May 30, 2008, the District Court dismissed the BMCA Action without ruling on the merits of BMCA’s position that it has no successor liability for Asbestos Claims.

BUILDING MATERIALS CORPORATION OF AMERICA

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

Note 13. Contingencies – (Continued)

On or about February 8, 2001, the creditors’ committee filed a complaint in the United States Bankruptcy Court, District of New Jersey against G-I Holdings and the Company. The complaint requested substantive consolidation of BMCA with G-I Holdings or an order directing G-I Holdings to cause BMCA to file for bankruptcy protection.

On July 7, 2004, the Bankruptcy Court entered an order authorizing the creditors’ committee to commence an adversary proceeding against the Company and others challenging, as a fraudulent conveyance, certain transactions entered into in connection with the Company’s formation in 1994, in which G-I Holdings caused to be transferred to the Company all of its roofing business and assets and in which the Company assumed certain liabilities relating to those assets, including a specified amount of liabilities for Asbestos Claims (the “1994 transaction”). The Bankruptcy Court also permitted the creditors’ committee to pursue a claim against holders of the Company’s bank and bond debt outstanding in 2000, seeking recovery from them, based on the creditors’ committee’s theory that the 1994 transaction was a fraudulent conveyance. The District Court entered an order on June 21, 2006 affirming in part and vacating in part the Bankruptcy Court’s July 7, 2004 order. Among other things, the District Court vacated that aspect of the Bankruptcy Court’s order authorizing the creditors’ committee to pursue avoidance claims against the Company and the holders of the Company’s bank and bond debt as of 2000.

A Joint Plan of Reorganization of G-I Holdings was filed with the Bankruptcy Court on August 21, 2008, and a First Amended Joint Plan of Reorganization of G-I Holdings was filed with the Bankruptcy Court on October 30, 2008. Thereafter, additional amendments to the Joint Plan of Reorganization were filed, culminating with the Eighth Amended Joint Plan of Reorganization (“Eighth Amended Joint Plan”), which was filed on October 5, 2009. On November 12, 2009, the Bankruptcy Court and the Honorable Garrett E. Brown, Jr., Chief Judge of the District Court for the District of New Jersey, jointly entered an Order Confirming Eighth Amended Joint Plan of Reorganization of G-I Holdings and ACI Inc. pursuant to Chapter 11 of the Bankruptcy Code.

BUILDING MATERIALS CORPORATION OF AMERICA

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

Note 13. Contingencies – (Continued)

On November 17, 2009, the Eighth Amended Joint Plan became effective. With the effectiveness of the Eighth Amended Joint Plan, all of the actions described above have been resolved and all “protected parties” (as defined in the Eighth Amended Joint Plan), including the Company and its subsidiaries, have been released from any liability with respect to Asbestos Claims.

Tax Claims Against G-I Holdings

On September 15, 1997, G-I Holdings received a notice from the Internal Revenue Service (the “IRS”) of a deficiency in the amount of $84.4 million (after taking into account the use of net operating losses and foreign tax credits otherwise available for use in later years) in connection with the formation in 1990 of Rhône-Poulenc Surfactants and Specialties, L.P. (the “surfactants partnership”), a partnership in which G-I Holdings held an interest. On September 21, 2001, the IRS filed a proof of claim with respect to such deficiency against G-I Holdings in the G-I Holdings’ bankruptcy. If such proof of claim is sustained for years in which the Company was part of the G-I Holdings tax group, the Company and/or certain of the Company’s subsidiaries together with G-I Holdings and several current and former subsidiaries of G-I Holdings could be severally liable for those taxes and interest. G-I Holdings has filed an objection to the proof of claim, which is the subject of an adversary proceeding pending in the United States District Court for the District of New Jersey. By opinion and order dated September 8, 2006, the District Court ruled on the parties’ respective motions for Partial Summary Judgment, granting the government summary judgment on the issue of “adequate disclosure” for statute of limitation purposes and denying G-I Holdings summary judgment on its other statute of

BUILDING MATERIALS CORPORATION OF AMERICA

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

Note 13. Contingencies – (Continued)

limitations defense (finding material issues of fact that must be tried). If the IRS were to prevail for the years in which the Company and/or certain of its subsidiaries were not part of the G-I Holdings tax group, the Company nevertheless could be liable for approximately $40.0 million in taxes plus interest, although this calculation is subject to uncertainty depending upon various factors including G-I Holdings’ ability to satisfy its tax liabilities and the application of tax credits and deductions. In an opinion dated June 8, 2007, the District Court decided that G-I Holdings cannot avail itself of the “binding contract” transitional relief with respect to the 1999 distribution of U.S. Treasury Bonds to G-I Holdings. The Company believes that it will not be required to pay any incremental income tax to the Federal government with respect to this matter and that its ultimate disposition will not have a material adverse effect on its business, financial position or results of operations.

For a further discussion with respect to the history of the foregoing litigation, and asbestos-related matters, see Notes 8, 9, 12, and 18 to the consolidated financial statements contained in the Company’s 2008 Form 10-K.

Environmental Litigation

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

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

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 first nine months of 2009.

BUILDING MATERIALS CORPORATION OF AMERICA

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

Note 14. Subsequent Events

In October 2009, an indirect parent of BMCA formed a wholly-owned captive insurance subsidiary (the “Captive”) to provide insurance coverage to BMCA and its subsidiaries and other affiliated entities effective November 2009. The Captive insures the deductible portion of BMCA’s general insurance and residential product warranty obligations.

In November 2009, the Company reached an agreement in principal to settle a lawsuit pursuant to which the defendant will be paying the Company $24.0 million during its fourth quarter ending December 31, 2009. Accordingly, the Company has not recognized the $24.0 million settlement in its accompanying consolidated financial statements at October 4, 2009.

On November 17, 2009, the Company requested a letter of credit be issued of approximately $133.8 million under the terms of the Senior Secured Revolving Credit Facility. This letter of credit was issued to provide credit enhancement for the obligations of G-I Holdings under the Eighth Amended Joint Plan.

Note 15. Guarantor Financial Information

At October 4, 2009, all of the Company’s subsidiaries, each of which is wholly-owned by the Company, were guarantors under the Company’s Senior Secured Credit Facilities and the indenture governing the Senior Notes. These guarantees are full, unconditional and joint and several. In 2007, BMCA Acquisition Inc., the direct parent of Elk, and Elk, as a result of its merger with BMCA Acquisition Sub, became co-obligors on the Senior Secured Credit Facilities.

Presented below is condensed consolidating financial information for the Company, the co-obligor subsidiary 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.

BUILDING MATERIALS CORPORATION OF AMERICA

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

Note 15. Guarantor Financial Information – (Continued)

Condensed Consolidating Statement of Operations

Third Quarter Ended October 4, 2009

(Thousands)

(Unaudited)

	Parent			Co-Obligor			Guarantor
	Company			Subsidiary			Subsidiaries			Eliminations			Consolidated

Net sales	$	768,317		$	4,070		$	19,996		$	—		$	792,383
Intercompany net sales	—			165,834			1,189,351			(1,355,185		)	—
Total net sales	768,317			169,904			1,209,347			(1,355,185		)	792,383

Costs and expenses:
Cost of products sold	695,446			168,173			1,005,537			(1,355,185		)	513,971
Selling, general and administrative	54,347			5,517			40,553			—			100,417
Amortization of intangible assets	—			2,823			5			—			2,828
Restructuring and other expenses	—			1,743			4,187			—			5,930
Other (income) expense, net	1,825			(53		)	490			—			2,262
Total costs and expenses, net	751,618			178,203			1,050,772			(1,355,185		)	625,408

Income (loss) before equity in earnings of subsidiaries, interest expense and income taxes	16,699			(8,299		)	158,575			—			166,975

Equity in earnings of subsidiaries	83,797			—			—			(83,797		)	—
Interest expense	(16,990		)	(9,476		)	(10,300		)	—			(36,766		)
Income (loss) before income taxes	83,506			(17,775		)	148,275			(83,797		)	130,209
Income tax (expense) benefit	101			6,354			(53,057		)	—			(46,602		)
Net income (loss)	$	83,607		$	(11,421	)	$	95,218		$	(83,797	)	$	83,607

BUILDING MATERIALS CORPORATION OF AMERICA

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

Note 15. Guarantor Financial Information – (Continued)

Condensed Consolidating Statement of Operations

Third Quarter Ended September 28, 2008

(Thousands)

(Unaudited)

	Parent			Co-Obligor			Guarantor
	Company			Subsidiary			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 15. Guarantor Financial Information – (Continued)

Condensed Consolidating Statement of Operations

Nine Months Ended October 4, 2009

(Thousands)

(Unaudited)

	Parent			Co-Obligor			Guarantor
	Company			Subsidiary			Subsidiaries			Eliminations			Consolidated

Net sales	$	2,075,326		$	15,293		$	58,858		$	—		$	2,149,477
Intercompany net sales	—			434,329			3,166,864			(3,601,193		)	—
Total net sales	2,075,326			449,622			3,225,722			(3,601,193		)	2,149,477

Costs and expenses:
Cost of products sold	1,857,036			444,208			2,685,391			(3,601,193		)	1,385,442
Selling, general and administrative	166,466			15,886			115,242			—			297,594
Amortization of intangible assets	—			8,516			5			—			8,521
Restructuring and other expenses	—			3,744			20,500			—			24,244
Other (income) expense, net	1,764			(221		)	1,474			—			3,017
Total costs and expenses, net	2,025,266			472,133			2,822,612			(3,601,193		)	1,718,818

Income (loss) before equity in earnings of subsidiaries, interest expense and income taxes	50,060			(22,511		)	403,110			—			430,659

Equity in earnings of subsidiaries	207,076			—			—			(207,076		)	—
Interest expense	(52,270		)	(25,991		)	(30,697		)	—			(108,958		)
Income (loss) before income taxes	204,866			(48,502		)	372,413			(207,076		)	321,701
Income tax (expense) benefit	797			17,495			(134,330		)	—			(116,038		)
Net income (loss)	$	205,663		$	(31,007	)	$	238,083		$	(207,076	)	$	205,663

BUILDING MATERIALS CORPORATION OF AMERICA

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

Note 15. Guarantor Financial Information – (Continued)

Condensed Consolidating Statement of Operations

Nine Months Ended September 28, 2008

(Thousands)

(Unaudited)

	Parent			Co-Obligor			Guarantor
	Company			Subsidiary			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 15. Guarantor Financial Information – (Continued)

Condensed Consolidating Balance Sheet

October 4, 2009

(Thousands)

(Unaudited)

	Parent			Co-Obligor			Guarantor
	Company			Subsidiary			Subsidiaries			Eliminations			Consolidated

ASSETS
Current Assets:
Cash and cash equivalents	$	193,386		$	88		$	217		$	—		$	193,691
Accounts receivable, trade, net	474,616			2,944			11,350			—			488,910
Accounts receivable, other	3,459			336			6,649			—			10,444
Inventories, net	—			48,835			91,162			—			139,997
Deferred income tax assets	68,180			—			1,140			—			69,320
Other current assets	8,092			895			4,625			—			13,612
Total Current Assets	747,733			53,098			115,143			—			915,974

Investment in subsidiaries	1,834,421			—			—			(1,834,421		)	—
Intercompany loans including accrued interest	2,022,541			(1,213,047		)	(809,494		)	—			—
Due from/(to) subsidiaries, net	(2,641,345		)	1,060,586			1,580,759			—			—
Property, plant and equipment, net	—			260,716			372,847			—			633,563
Goodwill	59,323			589,127			6,390			—			654,840
Intangible assets, net	—			187,734			329			—			188,063
Other noncurrent assets	81,118			7,054			22,816			—			110,988
Total Assets	$	2,103,791		$	945,268		$	1,288,790		$	(1,834,421	)	$	2,503,428

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Current maturities of long-term debt	$	9,485		$	473		$	10,381		$	—		$	20,339
Accounts payable	—			29,307			85,380			—			114,687
Payable to related parties	3,076			—			23,903			—			26,979
Loans payable to parent corporation	52,840			—			—			—			52,840
Accrued liabilities	71,273			9,837			150,515			—			231,625
Product warranty claims	12,600			3,600			—			—			16,200
Total Current Liabilities	149,274			43,217			270,179			—			462,670

Long-term debt less current maturities	1,514,468			3,345			49,833			—			1,567,646
Product warranty claims	42,838			4,911			135			—			47,884
Deferred income tax liabilities	104,484			—			577			—			105,061
Other liabilities	170,445			8,251			19,189			—			197,885
Total Liabilities	1,981,509			59,724			339,913			—			2,381,146

Total Stockholders’ Equity	122,282			885,544			948,877			(1,834,421		)	122,282
Total Liabilities and Stockholders’ Equity	$	2,103,791		$	945,268		$	1,288,790		$	(1,834,421	)	$	2,503,428

BUILDING MATERIALS CORPORATION OF AMERICA

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

Note 15. Guarantor Financial Information – (Continued)

Condensed Consolidating Balance Sheet

December 31, 2008

(Thousands)

	Parent Company			Co-Obligor Subsidiary			Guarantor Subsidiaries			Eliminations			Consolidated

ASSETS
Current Assets:
Cash and cash equivalents	$	36,722		$	65		$	250		$	—		$	37,037
Accounts receivable, trade, net	189,245			1,491			8,497			—			199,233
Accounts receivable, other	2,298			727			7,872			—			10,897
Inventories, net	—			90,999			257,450			—			348,449
Deferred income tax assets	39,324			—			—			—			39,324
Other current assets	7,894			1,329			7,849			—			17,072
Total Current Assets	275,483			94,611			281,918			—			652,012

Investment in subsidiaries	1,627,346			—			—			(1,627,346		)	—
Intercompany loans including accrued interest	1,587,885			(867,963		)	(719,922		)	—			—
Due from/(to) subsidiaries, net	(1,723,842		)	670,948			1,052,894			—			—
Property, plant and equipment, net	—			274,194			381,075			—			655,269
Goodwill	59,323			588,850			5,471			—			653,644
Intangible assets, net	—			196,250			—			—			196,250
Income tax receivable from parent corporation	8,400			—			—			—			8,400
Other noncurrent assets	82,842			7,487			24,410			—			114,739
Total Assets	$	1,917,437		$	964,377		$	1,025,846		$	(1,627,346	)	$	2,280,314

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current Liabilities:
Current maturities of long-term debt	$	9,557		$	676		$	10,363		$	—		$	20,596
Accounts payable	—			18,400			137,630			—			156,030
Payable to related parties	1,225			—			19,928			—			21,153
Loans payable to parent corporation	52,840			—			—			—			52,840
Accrued liabilities	52,508			12,953			68,880			—			134,341
Product warranty claims	12,600			3,600			—			—			16,200
Total Current Liabilities	128,730			35,629			236,801			—			401,160

Long-term debt less current maturities	1,597,614			3,647			56,908			—			1,658,169
Product warranty claims	28,358			307			100			—			28,765
Deferred income tax liabilities	73,103			—			—			—			73,103
Other liabilities	169,488			8,242			21,243			—			198,973
Total Liabilities	1,997,293			47,825			315,052			—			2,360,170

Total Stockholders’ Equity (Deficit)	(79,856		)	916,552			710,794			(1,627,346		)	(79,856		)
Total Liabilities and Stockholders’ Equity (Deficit)	$	1,917,437		$	964,377		$	1,025,846		$	(1,627,346	)	$	2,280,314

BUILDING MATERIALS CORPORATION OF AMERICA

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

Note 15. Guarantor Financial Information – (Continued)

Condensed Consolidating Statement of Cash Flows

Nine Months Ended October 4, 2009

(Thousands)

(Unaudited)

	Parent			Co-Obligor			Guarantor
	Company			Subsidiary			Subsidiaries			Consolidated

Cash and cash equivalents, beginning of period	$	36,722		$	65		$	250		$	37,037

Cash provided by operating activities:
Net income (loss)	(1,413		)	(31,007		)	238,083			205,663
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation	—			21,397			31,660			53,057
Amortization of intangible and other assets	—			8,516			2,546			11,062
Restructuring and other expenses	—			5,388			22,536			27,924
Deferred income taxes	(1,484		)	—			—			(1,484		)
Noncash interest charges	16,517			636			755			17,908
(Increase) decrease in working capital items	(267,965		)	43,864			177,348			(46,753		)
Increase in product warranty claims	14,480			4,604			35			19,119
(Increase) decrease in other assets	(3,203		)	105			(823		)	(3,921		)
Increase (decrease) in other liabilities	(347		)	9			258			(80		)
Increase (decrease) in net payable to related parties/parent corporations	493,495			(44,553		)	(434,318		)	14,624
Other, net	1			1,891			(1,906		)	(14		)
Net cash provided by operating activities	250,081			10,850			36,174			297,105

Cash used in investing activities:
Capital expenditures and acquisition in 2009	—			(10,321		)	(27,409		)	(37,730		)
Net cash used in investing activities	—			(10,321		)	(27,409		)	(37,730		)

Cash used in financing activities:
Proceeds from issuance of long-term debt	293,000			—			—			293,000
Repayments of long-term debt	(376,150		)	(506		)	(2,883		)	(379,539		)
Principal repayments of capital leases	—			—			(5,915		)	(5,915		)
Distributions to parent corporation	(7		)	—			—			(7		)
Dividends to parent corporation	(10,000		)	—			—			(10,000		)
Loan to parent corporation	(60		)	—			—			(60		)
Financing fees and expenses	(200		)	—			—			(200		)
Net cash used in financing activities	(93,417		)	(506		)	(8,798		)	(102,721		)
Net change in cash and cash equivalents	156,664			23			(33		)	156,654
Cash and cash equivalents, end of period	$	193,386		$	88		$	217		$	193,691

BUILDING MATERIALS CORPORATION OF AMERICA

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

Note 15. Guarantor Financial Information – (Continued)

Condensed Consolidating Statement of Cash Flows

Nine Months Ended September 28, 2008

(Thousands)

(Unaudited)

	Parent			Co-Obligor			Guarantor
	Company			Subsidiary			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

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. During the first quarter of 2007, Building Materials Corporation of America, which we refer to as BMCA, acquired ElkCorp, which we refer to as Elk, a Dallas, Texas-based manufacturer of roofing products and building materials, resulting in Elk becoming an indirect wholly-owned subsidiary of BMCA.

We believe the Elk acquisition has strategically positioned us for growth in the roofing industry and building products market and 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, Designer Lifetime Shingles and Specialty Shingles. The Timberline series includes the Timberline Prestique® 30 High Definition®, Timberline Natural Shadow™, Timberline Prestique 40, Timberline Prestique Lifetime and Timberline Prestique Grande® shingles. Our Designer Lifetime shingles include the Slateline®, Grand Slate™, Grand Sequoia®, Grand Canyon™, Country Mansion®, Capstone®, and Camelot® shingles. We sell specialty roofing products under the TruSlate™ product line, which offers a patented genuine slate roofing system. We supply the major components necessary to install a complete roofing system from underlayments to attic ventilation products and accessories, under our Roof System Solution. We have improved our sales mix of residential roofing products by increasing our emphasis on laminated shingles and accessory products (the Timberline series, Designer Lifetime Shingles and TruSlate), which are generally sold at higher prices and more attractive profit margins than our standard strip shingle products (the Sovereign series). Unless otherwise indicated by the context, “we,” “us,” and “our” refer to Building Materials Corporation of America and its consolidated subsidiaries.

Critical Accounting Policies

There have been no significant changes to our Critical Accounting Policies during the nine-month period ended October 4, 2009. For a further discussion on our Critical Accounting Policies, reference is made to Management’s Discussion and Analysis of Financial Condition and Results of Operations, “Critical Accounting Policies” in our annual report on Form 10-K for the fiscal year ended December 31, 2008, which was filed with the Securities and Exchange Commission, which we refer to as the SEC, on March 31, 2009, which we refer to as the 2008 Form 10-K.

BUILDING MATERIALS CORPORATION OF AMERICA

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS – (Continued)

Results of Operations

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

Third Quarter 2009 Compared With

Third Quarter 2008

We recorded net income of $83.6 million in the third quarter of 2009 compared to net income of $34.7 million in the third quarter of 2008. Our reported net income in the third quarter of 2009 included $4.2 million after-tax ($6.5 million pre-tax) restructuring and other expenses, of which $0.4 million after-tax ($0.6 million pre-tax) was included in cost of products sold. Our reported net income in the third quarter of 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. Included in restructuring and other expenses for the third quarter of 2008 and 2009 are plant closing expenses related to the closure of several manufacturing facilities, integration-related costs and the write-down of selected inventories. Excluding restructuring and other expenses, third quarter of 2009 net income was $87.8 million compared to the third quarter of 2008 net income of $45.1 million. The increase in reported net income for the third quarter of 2009 was primarily attributable to higher income before interest expense and income taxes and lower interest expense.

Net sales for the third quarter of 2009 were $792.4 million compared to third quarter of 2008 net sales of $852.8 million, which included $1.8 million of restructuring-related sales discounts. Net sales in the third quarter of 2009 were positively affected by higher average selling prices of residential and commercial roofing products, which were more than offset by the impact of lower unit volumes of residential and commercial roofing products.

Income before interest expense and income taxes in the third quarter of 2009 was $167.0 million compared to income before interest expense and income taxes of $94.5 million in the third quarter of 2008. Our reported income before interest expense and income taxes in the third quarter of 2009 included $6.5 million of restructuring and other expenses, of which $0.6 million was included in cost of products sold. Our reported income before interest expense and income taxes in the third quarter of 2008 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

BUILDING MATERIALS CORPORATION OF AMERICA

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS – (Continued)

products sold. Excluding these items third quarter of 2009 income before interest expense and income taxes was $173.5 million compared to third quarter of 2008 income before interest expense and income taxes of $111.1 million. The increase was primarily due to higher average selling prices of residential and commercial roofing products, lower raw material costs, including asphalt, improved operating efficiencies and lower transportation costs, which were partially offset by the impact of lower unit volumes of residential and commercial roofing products.

Interest expense in the third quarter of 2009 decreased to $36.8 million compared to $39.5 million in the third quarter of 2008. The decrease in the third quarter of 2009 interest expense was primarily due to lower average borrowings and a lower average interest rate.

Business Segment Information

Net Sales. Net sales of roofing products decreased to $766.5 million for the third quarter of 2009 compared with $817.5 million for the third quarter of 2008, which included $1.8 million of restructuring-related sales discounts. Net sales of roofing products in the third quarter of 2009 were positively affected by higher average selling prices of residential and commercial roofing products, which were more than offset by the impact of lower unit volumes of residential and commercial roofing products. Net sales of specialty building products and accessories decreased to $25.9 million for the third quarter of 2009 compared with $35.3 million for the third quarter of 2008 due to continued softer new construction and remodeling demand.

Gross Margin. Our gross margin was $278.4 million or 35.1% of net sales for the third quarter of 2009 compared with $250.4 million or 29.4% of net sales for the third quarter of 2008. Included in our gross margin for the third quarter of 2009 were $0.6 million of restructuring and other expenses, which was included in cost of products sold. Included in our gross margin for the third quarter of 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. The increase in our gross margin is primarily due to higher average selling prices of residential and commercial roofing products, lower raw material costs, including asphalt, and improved operating efficiencies, which were partially offset by the impact of lower unit volumes of residential and commercial roofing products.

Nine Months 2009 Compared With

Nine Months 2008

We recorded net income of $205.7 million in the first nine months of 2009 compared to net income of $47.4 million in the first nine months of 2008. Our reported net income in the first nine months of 2009 included $17.9 million after-tax ($27.9 million pre-tax) restructuring and other

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expenses, of which $2.4 million after-tax ($3.7 million pre-tax) was included in cost of products sold. Our reported net income in the first nine months of 2008 included $37.9 million 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. Included in restructuring and other expenses for the first nine months of 2008 and 2009 are plant closing expenses related to the closure of several manufacturing facilities, integration-related costs and the write-down of selected inventories. Excluding restructuring and other expenses, the first nine months of 2009 net income was $223.6 million compared to the first nine months of 2008 net income of $85.3 million. The increase in reported net income for the first nine months of 2009 was primarily attributable to higher income before interest expense and income taxes and lower interest expense.

Net sales for the first nine months of 2009 were $2,149.5 million compared to the first nine months of 2008 net sales of $2,160.2 million, which included $4.6 million of restructuring-related sales discounts. Net sales in the first nine months of 2009 were positively affected by higher average selling prices of residential and commercial roofing products, which were more than offset by the impact of lower unit volumes of residential and commercial roofing products and lower net sales of specialty building products and accessories.

Income before interest expense and income taxes in the first nine months of 2009 was $430.7 million compared to income before interest expense and income taxes of $195.3 million in the first nine months of 2008. Our reported income before interest expense and income taxes in the first nine months of 2009 included $27.9 million of restructuring and other expenses, of which $3.7 million was included in cost of products sold. 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. Excluding these items, the first nine months of 2009 income before interest expense and income taxes was $458.6 million compared to the first nine months of 2008 income before interest expense and income taxes of $256.0 million. The increase in the first nine months of 2009 income before interest expense and income taxes was primarily due to higher average selling prices of residential and commercial roofing products, lower raw material costs, including asphalt, improved operating efficiencies and lower transportation costs, which were partially offset by the impact of lower unit volumes of residential and commercial roofing products and lower net sales of specialty building products and accessories.

Interest expense in the first nine months of 2009 decreased to $109.0 million compared to $119.4 million in the first nine months of 2008. The decrease in the first nine months of 2009 interest expense was primarily due to lower average borrowings and a lower average interest rate.

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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
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Business Segment Information

Net Sales. Net sales of roofing products increased to $2,067.7 million for the first nine months of 2009 compared with $2,047.7 million for the first nine months of 2008, which included $4.6 million of restructuring-related sales discounts. The increase in the first nine months of 2009 net sales of roofing products was primarily due to higher average selling prices of residential and commercial roofing products, which were partially offset by the impact of lower unit volumes of residential and commercial roofing products. Net sales of specialty building products and accessories decreased to $81.8 million for the first nine months of 2009 compared with $112.5 million for the first nine months of 2008 due to continued softer new construction and remodeling demand.

Gross Margin. Our gross margin was $764.0 million or 35.5% of net sales for the first nine months of 2009 compared with $616.9 million or 28.6% of net sales for the first nine months of 2008. Included in our gross margin for the first nine months of 2009 were $3.7 million of restructuring and other expenses, which was included in cost of products sold. Included in our gross margin for the first nine months of 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 sold. The increase in our gross margin is primarily due to higher average selling prices of residential and commercial roofing products, lower raw material costs, including asphalt, and improved operating efficiencies, which were partially offset by the impact of lower unit volumes of residential and commercial roofing products and lower net sales of specialty building products and accessories.

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, extreme weather conditions can result in higher customer demand during our peak operating season depending on the extent and severity of the damage from these extreme weather conditions. Due to the seasonal demands of our business, together with extreme weather conditions, we generally have negative cash flows from operations during the first six months of our fiscal year, which 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

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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 inflow from operating and investing activities was $259.4 million during the first nine months of 2009, including $297.1 million of cash provided by operations, partially offset by the reinvestment of $37.7 million for capital programs and an acquisition.

Cash invested in additional working capital totaled $46.8 million during the first nine months of 2009, reflecting an increase in total accounts receivable of $288.6 million, due to the seasonality of our business, a $205.8 million decrease in inventories primarily due to aggressive inventory management due to the current uncertain industry demand including a continued weak housing environment, a $3.5 million decrease in other current assets, a $56.0 million net increase in accounts payable and accrued liabilities and $23.5 million in payments for restructuring and other expenses. The net cash provided by operating activities also included a $14.6 million net increase in the payable to related parties/parent corporations, primarily attributable to $107.4 million in current Federal income taxes, which was partially offset by $96.7 million in Federal income taxes paid, pursuant to our Tax Sharing Agreement with our parent corporation and a $3.9 million increase in amounts due to an affiliated company with respect to the purchases of roofing granules. In addition, net cash provided by operating activities included $17.9 million of non-cash interest charges, of which $11.3 million was attributable to amortization expense related to our swaps (see Derivative and Hedging Transactions below), an increase of $19.1 million for product warranty claims and $27.9 million in restructuring and other expenses (see Restructuring and Other Expenses below).

Net cash used in financing activities totaled $102.7 million during the first nine months of 2009, including $293.0 million of aggregate proceeds from the issuance of long-term debt, related to the first nine months of 2009 cumulative borrowings under our Senior Secured Revolving Credit Facility. Financing activities also included $379.5 million in aggregate repayments of long-term debt, of which $369.0 million related to the first nine months of 2009 cumulative repayments under our Senior Secured Revolving Credit Facility, $7.2 million related to our $975.0 million Term Loan Facility, which we refer to as the Term Loan and $2.5 million related to our Chester, South Carolina loan obligation. In addition, financing activities included aggregate principal payments of $5.9 million on our capital leases, $10.0 million of cash dividends paid to our parent corporation and $0.2 million in financing fees and expenses primarily related to prior debt refinancings.

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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
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Restructuring and Other Expenses

We initiated a restructuring plan, which we refer to as the 2007 Restructuring Plan, which we formulated in connection with the acquisition of Elk. The 2007 Restructuring Plan was created to eliminate cost redundancies recognized due to the acquisition of Elk and to reduce our overall cost structure. The 2007 Restructuring Plan has been fully implemented as of December 31, 2008 and is substantially complete as of October 4, 2009. We account for our restructuring activities in accordance with the accounting guidance on exit or disposal cost obligations, impairments or disposal of long-lived assets and inventory markdowns or other costs associated with restructuring.

2008 Restructuring and Other Expenses

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

We recorded $73.2 million of our overall identified restructuring and other expenses in our statement of income during our fiscal year ended December 31, 2008, of which $6.1 million was reflected as a reduction in net sales due to restructuring-related sales discounts, $26.9 million was charged to cost of products sold and $40.2 million was charged to restructuring and other expenses.

Nine-Months Ended October 4, 2009 Restructuring and Other Expenses

In February 2009, we announced the temporary shutdown of two manufacturing facilities, one in Shafter, California and the other in Nashville, Tennessee as a result of weaker market demand. As a result of these actions and other charges related to the acquisition of Elk, we identified an additional $27.6 million of restructuring and other expenses during our nine months ended October 4, 2009, which included $19.0 million of plant closing expenses, $1.5 million in employee severance payments and $7.1 million in integration-related expenses. Integration-related expenses primarily consisted of $3.7 million of inventory write-downs and $3.4 million of other integration expenses.

We recorded $27.9 million of our overall restructuring and other expenses in our statement of income during our nine-month period ended October 4, 2009, of which $3.7 million was charged to cost of products sold

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and $24.2 million was charged to restructuring and other expenses. We expect to incur future operating losses in connection with the 2007 Restructuring Plan and the temporary shutdown of the Nashville and Shafter manufacturing facilities, which will be recognized in the periods in which they are incurred.

The table below details our restructuring and other expense accruals and charges made against the accrual during our nine months ended October 4, 2009:

Restructuring and Other Expenses	Plant Closing Expenses			Employee Severance Payments			Integration Expenses			Total
	(Thousands)

Beginning balance, as of December 31, 2008	$	3,452		$	—		$	5,205		$	8,657

Current period costs, net	18,957			1,493			7,474			27,924

Cash payments	(15,151		)	(1,493		)	(6,894		)	(23,538		)

Amount charged to property, plant and equipment for asset write-down	(4,039		)	—			(584		)	(4,623		)

Amount charged to write-off inventory	—			—			(2,182		)	(2,182		)

Non-cash items	—			—			(336		)	(336		)
Ending balance, as of October 4, 2009	$	3,219		$	—		$	2,683		$	5,902

BUILDING MATERIALS CORPORATION OF AMERICA

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS – (Continued)

Long-Term Debt

Long-term debt consists of the following at October 4, 2009 and December 31, 2008:

	October 4, 2009			December 31, 2008
	(Thousands)

7 3/4% Senior Notes due 2014	$	250,433		$	250,500
Borrowings under the Senior Secured Revolving Credit Facility	—			76,000
Term Loan	948,520			955,670
Junior Lien Term Loan	325,000			325,000
Obligations under capital leases	51,537			55,956
Industrial development revenue bond	2,730			2,820
Chester Loan	2,634			5,126
Other notes payable	7,131			7,693
Total	1,587,985			1,678,765
Less current maturities	(20,339		)	(20,596		)
Long-term debt less current maturities	$	1,567,646		$	1,658,169

As of October 4, 2009, we had total outstanding consolidated indebtedness of $1,640.8 million, which included $52.8 million of demand loans to our parent corporation. We anticipate funding these obligations principally from our cash and cash equivalents on hand, cash flow from operations and/or borrowings under our Senior Secured Revolving Credit Facility.

As of October 4, 2009, we were in compliance with all covenants under the Senior Secured Revolving Credit Facility, the Term Loan, the $325.0 million Junior Lien Term Loan 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; and the indenture governing our 7 3/4% Senior Notes due 2014, which we refer to as the Senior Notes. As of October 4, 2009, the net book value of the collateral securing the Senior Secured Revolving Credit Facility Collateral (as defined in the Senior Secured Revolving Credit Facility) and the Term Loan Collateral (as defined in the Term Loan) was $912.7 and $1,647.1 million, respectively.

At October 4, 2009, we had outstanding letters of credit of approximately $40.9 million, which included approximately $10.6 million of standby letters of credit related to certain obligations of G-I Holdings.

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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
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On September 11, 2009, we entered into an amendment to the Senior Secured Revolving Credit Facility. Such amendment did not result in any material changes to the Senior Secured Revolving Credit Facility.

Derivative and Hedging Transactions

Hedging Strategy

We were exposed to the impact of variable interest rate fluctuations on certain of our debt financings; however, we limit our variable interest rate exposure through the use of derivative instruments, which reduce the risk of interest rate fluctuations related to our debt. As a result of the use of derivative instruments, we have exposure to the risk that our counterparties to derivative contracts will fail to meet their contractual obligations. In order to mitigate our counterparty credit risk, we enter into derivative contracts with selected major financial institutions. Our policies and procedures for mitigating counterparty credit risk on derivative transactions include reviewing and establishing limits for credit exposure with each financial institution and a continuous assessment of the creditworthiness of each counterparty. The right of set-off that exists under certain of these derivative contracts enables us, subject to each derivative contract, to net amounts due to and from the counterparty reducing the maximum loss from credit risk in the event of counterparty default.

Interest Rate Swap Agreements

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

On April 23, 2009, we exercised our option under our Term Loan to change the interest rate for our LIBOR advances from three-month to one-month LIBOR. We continued to receive three-month LIBOR and pay fixed rate interest under our swap agreements. The election of one-month LIBOR on our Term Loan resulted in de-designating our original swap hedging relationship and subsequently re-designating a new swap hedging relationship for our Term Loan. As a result of the election, we recognized a $1.1 and $0 million gain related to swap ineffectiveness as a component of interest expense during our third quarter and nine months ended October 4, 2009, respectively. In addition, as a result of this election, we recognized $6.4 and $11.3 million of interest expense during our third quarter and nine months ended October 4, 2009, respectively, due to the straight-line amortization of the unrealized

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losses remaining in accumulated other comprehensive income/loss, which we refer to as OCI, at April 23, 2009. The remaining amount of unrealized losses at October 4, 2009 will be amortized over the remaining life of the original swaps.

We continue to account for our new swap hedging relationship in accordance with the accounting guidance for derivatives and hedging, and as such our swaps are treated as cash flow hedges. Our swaps are measured each period using the hypothetical derivative method in accordance with the accounting guidance for derivatives and hedging, which requires our actual swaps liability to be recorded at fair value, and OCI to reflect the lesser of either the cumulative change in the fair value of the actual swap or the cumulative change in the fair value of the hypothetical swap, which we refer to as the perfect swap. In any given period, to the extent the cumulative change in the fair value of the actual swap is greater than the cumulative change in the fair value of the perfect swap, the difference would be recognized as ineffectiveness as a component of interest expense in our statement of income. See Note 7 to Consolidated Financial Statements for tabular disclosure of the fair value of our derivative liability at October 4, 2009 and the effect of our derivative instruments on our operating results for the three and nine-month periods ended October 4, 2009, respectively. As of October 4, 2009, due to amortization, ineffectiveness and accrued swap interest, we estimated that during the twelve months ending September 2010, approximately $34.6 million of unrealized losses will be reclassified from OCI and recognized as a component of interest expense in our statement of income, subject to changes in the LIBOR rate.

We value our interest rate swap agreements based on fair value measurement Level 2 inputs from model-derived valuations whose significant inputs are quoted LIBOR contracts, Eurodollar futures and on-the-run swap markets. The accounting guidance for fair value measurements requires that the valuation of derivative assets and liabilities must take into account the parties’ nonperformance risk. We discounted the value of our derivative liabilities based on the credit spread for our debt as determined by the market trading price. See Fair Value Measurements.

Treasury Lock Agreements

In July 2007, we entered into treasury lock agreements, which we refer to as treasury locks, with a maturity date of July 31, 2012, as additional hedging instruments related to our Term Loan. On October 30, 2007, we settled our open treasury lock hedging positions, which resulted in a pre-tax fair value loss and cash settlement of approximately $4.9 million, which is being amortized into our statement of income over the life of the Term Loan pursuant to the requirements of the accounting guidance for derivatives and hedging. During our third quarter ended October 4, 2009 and September 28, 2008, we amortized $0.2 and $0.2 million, respectively, of the loss related to our treasury locks into interest expense in our statements of income and

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during our nine months ended October 4, 2009 and September 28, 2008, we amortized $0.6 and $0.6 million, respectively. We will amortize $0.8 million annually related to this loss through July 2012.

Fair Value Measurements

Financial instruments consist mainly of cash and cash equivalents, accounts receivable, accounts payable, accrued liabilities, interest rate swaps, short and long-term debt and lease obligations. Our interest rate swaps are recorded at fair value, while other financial instruments in our consolidated balance sheet have carrying values that approximate fair value. In the absence of quoted market prices, considerable judgment is required in developing estimates of fair value. Our estimates are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments concerning the carrying values of assets and liabilities. Actual results may differ from these estimates under different assumptions or conditions. Estimates are not necessarily indicative of the amounts we could realize in a current market transaction. See Note 8 to Consolidated Financial Statements for additional disclosures of our fair value instruments.

During the first quarter of 2009, we adopted the additional accounting guidance issued by the FASB on fair value measurements, which deferred the application of fair value measurement for certain non-financial assets and non-financial liabilities. Upon adoption, we did not have any non-financial assets or liabilities that were recognized or measured at fair value on a recurring basis, therefore there was no impact on our results of operations.

Intercompany Transactions

We make loans to, and borrow from, our parent corporations from time to time at prevailing market interest rates. As of October 4, 2009 and September 28, 2008, BMCA Holdings Corporation owed us $56.4 and $56.3 million, including interest of $1.1 and $1.0 million, respectively, and we owed BMCA Holdings Corporation $52.8 and $52.8 million, respectively, with no unpaid interest. Interest income on our loans to BMCA Holdings Corporation amounted to $0.6 and $0.9 million during the third quarter ended October 4, 2009 and September 28, 2008, respectively, and $1.8 and $2.7 million during the nine-month periods ended October 4, 2009 and September 28, 2008, respectively. Interest expense on our loans from BMCA Holdings Corporation amounted to $0.6 and $0.8 million during the third quarter ended October 4, 2009 and September 28, 2008, respectively, and $1.7 and $2.6 million during the nine-month periods ended October 4, 2009 and September 28, 2008, respectively. Loans payable to/receivable from our parent corporations are due on demand and provide each party with the right of offset of its related obligation to the other party and are subject to limitations as outlined in the Senior Secured Credit Facilities and the Senior Notes. Under the terms of the Senior Secured Revolving Credit Facilities and the indenture governing

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our Senior Notes at October 4, 2009, we could repay demand loans to our parent corporation amounting to $52.8 million, subject to certain conditions.

We 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, together with its subsidiaries, is referred to as ISP, an affiliate, to provide us with certain management services. Based on services provided to us in 2009 under the Management Agreement, the aggregate amount payable to ISP Management Company, Inc. under the Management Agreement for 2009, inclusive of the services provided to G-I Holdings, is not yet available; however, it is currently estimated to be similar to the $7.3 million paid in 2008. We do not expect any changes to the Management Agreement to have a material impact on our results of operations.

We and our subsidiaries purchased a substantial portion of our headlap roofing granules, colored roofing granules and algae-resistant granules, on a purchase order basis, from ISP Minerals Inc., which we refer to as ISP Minerals, an affiliate of BMCA and of ISP. The amount of mineral products purchased each year on this basis is based on current demand and is not subject to minimum purchase requirements. For the third quarter ended October 4, 2009 and September 28, 2008, we and our subsidiaries purchased $17.2 and $13.7 million, respectively, of roofing granules under this arrangement, and for the nine-month periods ended October 4, 2009 and September 28, 2008, we and our subsidiaries purchased $40.7 and $33.2 million, respectively, of roofing granules under this arrangement.

In addition to the granules products we purchased under the above-referenced purchase order basis, the balance of our granules purchased from ISP Minerals is purchased under a contract expiring in 2013. The amount of mineral products purchased each year under the contract is based on current demand and is not subject to minimum purchase requirements. Under the contract, for the third quarter ended October 4, 2009 and September 28, 2008, we purchased $23.4 and $24.2 million of roofing granules, respectively, and for the nine-month periods ended October 4, 2009 and September 28, 2008, we purchased $55.4 and $66.1 million of roofing granules, respectively.

In February 2009 and March 2009, after giving effect to the most restrictive of the aforementioned debt covenant restrictions, we declared and paid cash dividends of $5.0 and $5.0 million, respectively, to our parent corporation. In August 2008 and October 2008, we declared and paid cash dividends of $2.5 and $5.0 million, respectively, to our parent corporation.

Included in noncurrent assets as a tax receivable from parent corporation on our consolidated balance sheet is $8.4 million at December 31, 2008, representing amounts paid in excess of amounts due to G-I Holdings with respect to 2006 under the Tax Sharing Agreement. We utilized the remaining receivable balance at December 31, 2008 during our first quarter of 2009. Included in current liabilities as a payable to related parties on our consolidated balance sheet at October 4, 2009 is $1.9 million, which represents a tax payable due to G-I Holdings under the Tax Sharing Agreement.

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These amounts are included in the net payable to related parties/parent corporations in our consolidated statements of cash flows.

Contingencies

See Note 13 to Consolidated Financial Statements for information regarding contingencies.

Economic Outlook

We do not believe that inflation has had a material effect on our results of operations during the first nine months of 2009. However, we cannot assure you that our business will not be affected by inflation in the future, or by increases in the cost of energy and asphalt purchases used in our manufacturing process principally due to fluctuating oil prices.

The prices of energy and crude oil continued to increase during the third quarter of 2009, including the price of asphalt and other petroleum-based raw materials, as compared to the second quarter of 2009. For the first nine months of 2009, energy and crude oil prices have sharply declined over the first nine months of 2008. The decline in the first nine months of 2009 as compared to the first nine months of 2008 was primarily due to, in our opinion, the current uncertain worldwide economic conditions, which has resulted in weaker demand. The decline in crude oil prices in 2009 caused a significant decline in the price of asphalt and other petroleum-based raw materials. Due to the strength of our manufacturing operations, which allows us to use many types of asphalt, together with our ability to secure alternative sources of supply, we do not anticipate that any potential disruption in the supply of asphalt will have a material impact on future net sales, although no assurances can be provided in that regard. We will attempt to pass on future cost increases from suppliers as needed; however, no assurances can be provided that these price increases will be accepted in the marketplace.

Contractual Obligations

There have been no significant changes to our contractual obligations during the third quarter ended October 4, 2009. For a further discussion on our contractual obligations related to minimum purchase obligations reference is made to Management’s Discussion and Analysis of Financial Condition and Results of Operations “Contractual Obligations” in our 2008 Form 10-K.

New Accounting Pronouncements

See Note 2 to Consolidated Financial Statements for a discussion regarding accounting standards adopted and not yet adopted during the nine months ended October 4, 2009.

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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
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Other Matters

In October 2009, our indirect parent formed a wholly-owned captive insurance subsidiary, which we refer to as the Captive, to provide insurance coverage to us and our subsidiaries and other affiliated entities effective November 2009. The Captive insures the deductible portion of our general insurance and residential product warranty obligations.

In November 2009, we reached an agreement in principal to settle a lawsuit pursuant to which the defendant will be paying us $24.0 million during our fourth quarter ending December 31, 2009. Accordingly, we have not recognized the $24.0 million settlement in our accompanying consolidated financial statements at October 4, 2009.

On November 17, 2009, we requested a letter of credit be issued of approximately $133.8 million under the terms of the Senior Secured Revolving Credit Facility. This letter of credit was issued to provide credit enhancement for the obligations of G-I Holdings under the Eighth Amended Joint Plan of Reorganization.

* * *

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” 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.

BUILDING MATERIALS CORPORATION OF AMERICA

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES

ABOUT MARKET RISK

Reference is made to Management’s Discussion and Analysis of Financial Condition and Results of Operations in the 2008 Form 10-K for a discussion of “Market-Sensitive Instruments and Risk Management.” There were no material changes in such information as of October 4, 2009. See Note 7 to the Consolidated Financial Statements.

Item 4T. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures: Our management, under the supervision and with the participation of the Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, our disclosure controls and procedures are effective in recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by us in the reports filed, furnished or submitted under the Exchange Act. Our Chief Executive Officer and Chief Financial Officer also concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosures.

Changes in Internal Control over Financial 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 evaluation during the third quarter of fiscal year 2009 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

BUILDING MATERIALS CORPORATION OF AMERICA

PART II

OTHER INFORMATION

Item 1. Legal Proceedings

There were no material changes to the legal proceedings identified in the Annual Report on Form 10-K for the year ended December 31, 2008, other than the Contingencies and Subsequent Events disclosures. See Notes 13 and 14 to the consolidated financial statements in Part I.

Item 5. Other Information

Samuel J. Heyman passed away on November 7, 2009. His wife, Ronnie F. Heyman, is now the beneficial owner (as defined in Rule 13d-3 of the Exchange Act) of 100% of the capital stock of G Holdings. Beneficial ownership (as defined in Rule 13d-3 of the Exchange Act) of 100% of the shares of our Class A Common Stock owned by BMCA Holdings Corporation, an indirect wholly-owned subsidiary of G Holdings, is attributed to Mrs. Heyman.

Item 6. Exhibits

Exhibit
Number		Description
10.1		Amendment No. 2 to the Revolving Credit Agreement, dated as of September 11, 2009, among Building Materials Corporation of America, BMCA Acquisition Inc. and ELKCORP, as borrowers and Deutsche Bank AG New York Branch, as administrative agent for the Lenders.

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

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

BUILDING MATERIALS CORP OF AMERICA 10-Q