UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.  20549

FORM 10-Q

(Mark One)

Commission File Number 33-81808

BUILDING MATERIALS CORPORATION OF AMERICA

(Exact name of registrant as specified in its charter)

(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):

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.

ADDITIONAL REGISTRANTS

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Part I - FINANCIAL INFORMATION

Item 1 - FINANCIAL STATEMENTS

BUILDING MATERIALS CORPORATION OF AMERICA

CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

(Dollars in Thousands)

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

3

BUILDING MATERIALS CORPORATION OF AMERICA

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except per share amounts)

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

4

BUILDING MATERIALS CORPORATION OF AMERICA

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(Dollars in thousands)

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

(Continued on the following page)

5

BUILDING MATERIALS CORPORATION OF AMERICA

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

(Dollars in thousands)

* 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.

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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

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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

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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.

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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.

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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.

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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:

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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:

Note 5.  Inventories

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

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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:

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.

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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

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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

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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:

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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:

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.

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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:

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:

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.

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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:

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.

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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:

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.

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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:

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.

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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:

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

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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

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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.

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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.

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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

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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.

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BUILDING MATERIALS CORPORATION OF AMERICA

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