Norbord Reports Second Quarter 2010 Results

Note: Financial references in US dollars unless otherwise indicated

Q2 2010 HIGHLIGHTS

    
    -   Achieved positive EBITDA of $71 million, a $62 million improvement
        vs. Q1 2010
    -   Recorded positive earnings of $37 million, EPS of $0.85
    -   Increased North American OSB shipments 35% vs. Q1 2010
    -   Extended maturity of bank lines and added seventh bank to group
    -   Finalized new A/R securitization program
    -   Achieved VPP Star safety certification at Guntown MS mill
    

TORONTO, July 22, 2010 /CNW/ - Norbord Inc. (TSX: NBD, NBD.WT) today reported positive earnings of $37 million or $0.85 per share in the second quarter of 2010, a significant improvement from losses of $5 million or $0.12 per share in the prior quarter and $18 million or $0.42 per share in the same quarter last year.

Norbord recorded EBITDA of $71 million in Q2 2010 compared to $9 million in Q1 2010 and negative $2 million in Q2 2009. North American operations generated EBITDA of $63 million in Q2 2010, an improvement of $55 million and $69 million compared to Q1 2010 and Q2 2009 respectively. Norbord's European operations generated EBITDA of $10 million in Q2 2010, compared to $5 million and $4 million recorded in Q1 2010 and Q2 2009 respectively.

"I am pleased to report very strong second quarter earnings," said Barrie Shineton, President and CEO. "All our operating mills ran full out this quarter and we benefitted from the run-up in North American OSB prices. As we have said for some time, the recovery in both US housing starts and OSB demand is fragile. Economic news continues to be mixed, however a housing recovery is taking hold and we remain confident that our financial performance will continue to improve on the prior year."

Market Conditions

North Central benchmark OSB prices ranged from $195 to $395 and averaged $295 in the second quarter. In the South East region, where over half of Norbord's North American capacity is located, prices averaged $277.

Expert forecasts for 2010 US housing starts range from 0.6 million to 0.7 million, well below the historical average of 1.5 million. News relating to housing activity has been mixed and Norbord expects this uncertainty will continue through the remainder of the year. However, actual year-to-date housing starts were 14% higher than last year and Norbord's second quarter North American OSB sales volume to its three core market segments increased 35% over the first quarter of 2010.

In the UK, year-to-date housing starts improved more than 75% over last year supporting stronger panel demand. On the continent German housing starts were up a more modest 3%. European OSB prices improved 14% quarter-over-quarter due to high plywood prices, lower imports from the US and stronger demand. Particleboard and MDF prices increased by 4% quarter-over-quarter.

Performance

Norbord's operating North American OSB mills ran at approximately 100% of their capacity in the second quarter compared to 85% in the prior quarter and 80% in the same quarter last year. Norbord's two indefinitely closed mills in Texas and Alabama have not operated since the first quarter of 2009 and represent 20% of the Company's North American OSB capacity. All of Norbord's European mills operated at full capacity in the quarter versus 90% in the first quarter of 2010 and 75% in the second quarter of 2009. As market and economic conditions warrant, Norbord expects to curtail production when necessary to conserve cash, manage inventory and maximize operating results.

Norbord's North American OSB production cash costs per unit decreased 4% versus the prior quarter on improved operating performance. Cash costs increased 11% versus the same quarter last year as higher fibre and resin prices more than offset the benefit of higher production volumes.

At the end of the second quarter, Norbord had cash and cash equivalents of $74 million and revolving bank lines were undrawn. The Company's tangible net worth was $360 million and net debt to total capitalization, book basis, was 51%.

Capital investments totaled $5 million in the second quarter. Norbord's 2010 capital investment program will be limited to essential capital projects and is expected to be $15 million, unless market conditions warrant investments at a higher level.

Developments

During the quarter, Norbord entered into an $85 million accounts receivable securitization program with a third party trust sponsored by a highly rated Canadian bank to replace the existing program. The new program has an evergreen commitment subject to termination on twelve months notice. The facility contains no financial covenants and is subject to a minimum credit rating requirement of single B (mid) or the equivalent.

Subsequent to quarter-end, Norbord increased its committed revolving bank lines from $205 million to $245 million by adding a seventh lender to its bank group and extended the maturity date to May 2013. Coincident with these amendments, Norbord cancelled its $50 million debt facility with Brookfield. Pro forma for these changes, Norbord had unused liquidity of $311 million at the end of the second quarter.

Norbord announced today that it has extended the expiry date of its small shareholder selling program to August 30, 2010. The program gives registered or beneficial holders of 99 or fewer Common Shares the opportunity to sell all of their Common Shares without incurring commission charges. Additional information concerning this program can be obtained by contacting the Company's transfer agent - CIBC Mellon Trust Company by telephone at 416.643.5500 or toll-free at 1.800.387.0825, or through e-mail to inquiries@cibcmellon.com - or Norbord at 416.643.8830 or 1.888.667.2673.

Norbord announces that it intends to apply to the Toronto Stock Exchange (TSX) for approval to conduct a normal course issuer bid for up to 5% of its Common Shares in accordance with TSX rules. The normal course issuer bid will be subject to TSX acceptance. Full details of the bid will be announced upon receipt of TSX consent.

Additional Information

Norbord's Q2 2010 letter to shareholders, news release, management's discussion & analysis, consolidated unaudited financial statements and notes to the financial statements have been filed on SEDAR (www.sedar.com) and are available in the investor section of the Company's website at www.norbord.com. Shareholders are encouraged to read this material.

Conference Call

Norbord will hold a conference call for analysts and institutional investors on Thursday, July 22, 2010 at 11:00 a.m. ET. The call will be broadcast live over the Internet via www.norbord.com and www.newswire.ca. A replay number will be available approximately one hour after completion of the call and accessible until August 20, 2010 by dialing 1.888.203.1112 or 647.436.0148. The passcode is 3444670. Audio playback and a written transcript will be available on the Norbord website.

Norbord Profile

Norbord Inc. is an international producer of wood-based panels with assets of $1.0 billion, employing approximately 1,950 people at 14 plant locations in the United States, Europe and Canada. Norbord is one of the world's largest producers of oriented strand board (OSB). In addition to OSB, Norbord manufactures particleboard, medium density fibreboard (MDF) and related value-added products. Norbord is a publicly traded company listed on the Toronto Stock Exchange under the symbols NBD and NBD.WT.

This news release contains forward-looking statements, as defined in applicable legislation, including statements related to our strategy, projects, plans, future financial or operating performance and other statements that express management's expectations or estimates of future performance. Often, but not always, words such as "will," "forecasts," "expects," "expected," "intends to," "estimates," "may," "believes," and other expressions which are predictions of or indicate future events, trends or prospects and which do not relate to historical matters identify forward-looking statements. Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Norbord to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.

Although Norbord believes it has a reasonable basis for making these forward-looking statements, readers are cautioned not to place undue reliance on such forward-looking information. By its nature, forward-looking information involves numerous assumptions, inherent risks and uncertainties, both general and specific, which contribute to the possibility that the predictions, forecasts and other forward-looking statements will not occur. Factors that could cause actual results to differ materially from those contemplated or implied by forward-looking statements include: general economic conditions; risks inherent with product concentration; effects of competition and product pricing pressures; risks inherent with customer dependence; effects of variations in the price and availability of manufacturing inputs; risks inherent with a capital intensive industry; and other risks and factors described from time to time in filings with Canadian securities regulatory authorities.

Except as required by applicable laws, Norbord does not undertake to update any forward-looking statements, whether as a result of new information, future events or otherwise, or to publicly update or revise the above list of factors affecting this information. See the "Caution Regarding Forward-Looking Information" statement in the March 3, 2010 Annual Information Form and the cautionary statement contained in the "Forward-Looking Statements" section of the 2009 Management's Discussion and Analysis dated January 29, 2010 and Q2 2010 Management's Discussion and Analysis dated July 22, 2010.

July 22, 2010

To our Shareholders,

My previous shareholder letter suggested that Norbord would realize improved second quarter results and that 2010 overall would be a better year. This quarter, I am pleased to report our strongest financial performance since 2006. Norbord's positive EBITDA of $71 million in the second quarter is a $62 million improvement over the first quarter and an even bigger gain on the prior year. I am also pleased that our bottom line earnings of $37 million and earnings per share of $0.85 have exceeded industry analysts' expectations.

This good result was largely influenced by several unique supply and demand factors that played out in North America in the lead up to the second quarter.

    
    -   Housing demand bounced along the bottom at historically low levels
        late last year. In light of this low demand, Norbord continued the
        indefinite curtailment of two mills and other North American
        producers also curtailed their capacity.
    -   Wholesalers, distributors, and retailers of OSB reduced inventories
        to very low levels as they focused on their own working capital
        initiatives.
    -   Unusually wet and cold weather in the first quarter, particularly in
        the US South, restricted access to forests and curtailed log
        deliveries to mills.
    

These developments limited the speed of the supply response to both the spring ramp-up in construction activity and a year-over-year improvement in actual housing starts. All of Norbord's operating mills ran at capacity during the quarter. However, overall demand outstripped the ability of both producers and distributors of OSB to increase supply. This resulted in surging North American OSB prices that peaked at over $300 in May before retreating to more sustainable levels by quarter-end. Fortunately, Norbord's operations were well positioned in the second quarter to capture the full benefit of this stronger market.

Our European operations also had a stronger quarter, delivering EBITDA that was double the first quarter's result. All European panel prices moved higher with OSB prices improving by almost 15%. Our European mills also produced at capacity this quarter and the benefit of these stronger prices was reflected in our financial results.

In our press release and disclosure documents you will find a reference to the steps we have taken to further improve Norbord's liquidity. Our bank lines have been extended by two years and are now committed to us until the middle of 2013. A seventh lender has joined our bank group increasing our bank line commitments to $245 million. And finally, a new A/R securitization program has been put in place that provides us with additional flexibility. The cash flow from the second quarter has improved our financial ratios and we have taken the opportunity to fully pay down our bank lines. With a comfortable balance sheet and $74 million of cash in the bank at quarter-end, Norbord is well positioned to support its operations as they continue to focus on productivity gains and new margin improvement initiatives.

Media reports on the housing recovery continue to be mixed and the June housing numbers did not meet economists' expectations. Yet the situation is improving for most home builders. Actual US housing starts and building permits are up almost 15% over last year and new home inventories are at their lowest level in 40 years. In our UK market housing starts are up over 75% so far this year. Although progress in both Europe and North America is likely to be slow and uneven, I do believe a housing recovery is underway. And I continue to be encouraged by the longer-term demographic realities of immigration, new household formations and replacement homes that must eventually push US housing demand back above the long-term average of 1.5 million starts.

In the meantime, Norbord has the right customer strategy, our mills are running well and our financial house is in order. We've delivered a strong result this quarter and are well positioned to benefit from the housing market recovery that is taking hold. I remain confident Norbord's financial performance will continue to improve.

I look forward to reporting on our progress later this year.

(signed)

J. Barrie Shineton

President & CEO

This letter includes forward-looking statements, as defined by applicable securities legislation including statements related to our strategy, projects, plans, future financial or operating performance and other statements that express management's expectations or estimates of future performance. Often, but not always, forward-looking statements can be identified by the use of words such as "would," "expect," "positioned," "when," "if," "should," "must," "believe," "view," "when," or variations of such words and phrases or statements that certain actions "may," "could," "must," "would," "might," or "will" be undertaken, occur or be achieved. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of Norbord to be materially different from any future results, performance or achievement expressed or implied by the forward-looking statements. See the cautionary language in the Forward-Looking Statements section of the 2009 Management's Discussion and Analysis dated January 29, 2010 and Q2 2010 Management's Discussion and Analysis dated July 22, 2010.

    
    Consolidated Statements of Earnings

    -------------------------------------------------------------------------
    (unaudited)
    Quarters ended June 26 and
     June 27 (US $ millions,
     except per share                    Q2         Q2      6 mos      6 mos
     information)                      2010       2009       2010       2009
    -------------------------------------------------------------------------
    Net sales                      $    278   $    174   $    462   $    330
    -------------------------------------------------------------------------
    Earnings before interest,
     income tax,
     depreciation and
     foreign exchange loss               71         (2)        80        (16)

    Interest expense                     (9)        (9)       (17)       (17)
    Interest and other income             1          -          1          -
    Foreign exchange loss                 -          -          -         (2)
    -------------------------------------------------------------------------
    Earnings before income tax and
     depreciation                        63        (11)        64        (35)

    Depreciation                        (12)       (12)       (22)       (27)
    Income tax (expense) recovery       (14)         5        (10)        22
    -------------------------------------------------------------------------
    Earnings                       $     37   $    (18)  $     32   $    (40)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Earnings per common share
     (note 9)
      Basic                        $   0.85   $  (0.42)  $   0.74   $  (0.94)
      Diluted                          0.81      (0.42)      0.69      (0.94)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (See accompanying notes)



    Consolidated Statements of Cash Flows

    -------------------------------------------------------------------------
    (unaudited)
    Quarters ended June 26 and           Q2         Q2      6 mos      6 mos
     June 27 (US $ millions)           2010       2009       2010       2009
    -------------------------------------------------------------------------

    Cash provided by (used for):
    Operating Activities
    Earnings                       $     37   $    (18)  $     32   $    (40)
    Items not affecting cash:
      Depreciation                       12         12         22         27
      Future income taxes                14         (5)        10        (22)
    Other items                           -          3          1          3
    -------------------------------------------------------------------------
                                         63         (8)        65        (32)

    Net change in non-cash
     operating working
     capital (note 10)                   15         35        (42)       (46)
    Net change in tax receivable         (3)        12         54         12
    -------------------------------------------------------------------------
                                         75         39         77        (66)
    -------------------------------------------------------------------------
    Investing Activities
    Investment in property, plant
     and equipment                       (5)        (3)        (6)        (8)
    Realized net investment hedge
     gain (note 12)                       8          4          9          6
    Other                                (2)        (1)        (2)         -
    -------------------------------------------------------------------------
                                          1          -          1         (2)
    -------------------------------------------------------------------------
    Financing Activities
    Revolving bank lines repaid
     (note 6)                           (18)       (39)       (27)       (24)
    Brookfield debt facility repaid       -          -          -        (35)
    Issue of common shares, net           2          -          2         97
    Issue of warrants, net                -          -          -         21
    -------------------------------------------------------------------------
                                        (16)       (39)       (25)        59
    -------------------------------------------------------------------------
    Increase (decrease) in cash
     and cash equivalents          $     60   $      -   $     53   $     (9)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Cash and cash equivalents,
     beginning of period           $     14   $     11   $     21   $     20
    Cash and cash equivalents, end
     of period (note 10)                 74         11         74         11
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (See accompanying notes)



    Consolidated Balance Sheets

    -------------------------------------------------------------------------
                                                           Jun 26     Dec 31
                                                             2010       2009
    (US $ millions)                                    (unaudited)
    -------------------------------------------------------------------------
    Assets
    Current assets:
    Cash and cash equivalents                            $     74   $     21
    Accounts receivable (note 3)                               54         27
    Tax receivable                                              3         57
    Inventory (note 4)                                         88         71
    -------------------------------------------------------------------------
                                                              219        176

    Property, plant and equipment                             825        860
    Other assets (note 5)                                      14          7
    -------------------------------------------------------------------------
                                                         $  1,058   $  1,043
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Liabilities and Shareholders' Equity
    Current liabilities:
    Accounts payable and accrued liabilities             $    145   $    140

    Long-term debt (note 6)                                   446        471
    Other liabilities (note 7)                                  5          9
    Future income taxes                                       102         89
    Shareholders' equity (note 8)                             360        334
    -------------------------------------------------------------------------
                                                         $  1,058   $  1,043
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (See accompanying notes)



    Consolidated Statements of Changes in Shareholders' Equity and
    Comprehensive Income

    -------------------------------------------------------------------------
    (unaudited)
    Quarters ended June 26 and           Q2         Q2      6 mos      6 mos
     June 27 (US $ millions)           2010       2009       2010       2009
    -------------------------------------------------------------------------

    CONSOLIDATED STATEMENTS OF
     CHANGES IN SHAREHOLDERS'
     EQUITY
    Share Capital
    Balance, beginning of period   $    335   $    335   $    335   $    238
    Issue of common shares, net
     (note 8)                             5          -          5         97
    -------------------------------------------------------------------------
    Balance, end of period         $    340   $    335   $    340   $    335
    -------------------------------------------------------------------------

    Contributed Surplus
    Balance, beginning of period   $     39   $     38   $     39   $     17
    Issue of warrants, net                -          -          -         21
    Stock based compensation              1          -          1          -
    -------------------------------------------------------------------------
    Balance, end of period         $     40   $     38   $     40   $     38
    -------------------------------------------------------------------------

    Retained Earnings
    Balance, beginning of period   $    (37)  $      4   $    (32)  $     26
    Earnings                             37        (18)        32        (40)
    -------------------------------------------------------------------------
    Balance, end of period         $      -   $    (14)  $      -   $    (14)
    -------------------------------------------------------------------------

    Accumulated Other Comprehensive
     Loss
    Balance, beginning of period   $    (15)  $    (14)  $     (8)  $    (13)
    Other comprehensive (loss)
     income                              (5)         3        (12)         2
    -------------------------------------------------------------------------
    Balance, end of period         $    (20)  $    (11)  $    (20)  $    (11)
    -------------------------------------------------------------------------
    Shareholders' equity           $    360   $    348   $    360   $    348
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    CONSOLIDATED STATEMENTS OF
     COMPREHENSIVE INCOME
     (LOSS)
    Earnings                       $     37   $    (18)  $     32   $    (40)
    Other comprehensive (loss)
     income
    Foreign currency translation         (3)        (1)        (8)        (1)
    Future income taxes                  (2)         4         (4)         3
    -------------------------------------------------------------------------
                                         (5)         3        (12)         2
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Comprehensive income (loss)    $     32   $     15   $     20   $    (38)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (See accompanying notes)



    Notes to the Consolidated Financial Statements

    (unaudited)
    (in US $, unless otherwise noted)

    NOTE 1. ACCOUNTING POLICIES

    Basis of Presentation

    The accompanying unaudited interim consolidated financial statements have
    been prepared in accordance with the requirements of the Canadian
    Institute of Chartered Accountants ("CICA") Handbook Section 1751,
    Interim Financial Statements. The interim financial statements should be
    read in conjunction with the most recently issued annual consolidated
    financial statements included in the 2009 Annual Report of Norbord Inc.
    ("the Company"), which includes information and note disclosure necessary
    or useful to understanding the Company's business and financial statement
    presentation. In particular, the Company's significant accounting
    policies and practices were presented in Note 1 to the annual
    consolidated financial statements, and have been consistently applied in
    the preparation of these interim financial statements.

    The interim financial statements are unaudited. Financial information in
    the interim consolidated financial statements, reflects information that
    is, in the opinion of management, necessary to present a fair statement
    of results for the interim periods in accordance with Canadian generally
    accepted accounting principles ("GAAP"). Certain prior period amounts
    have been reclassified to conform to the current period's presentation.

    The consolidated financial statements include the accounts of the Company
    and all of its subsidiaries including an interest in a joint venture
    which has been proportionately consolidated.


    NOTE 2. FUTURE CHANGES IN ACCOUNTING POLICIES

    International Financial Reporting Standards (IFRS)

    In February 2008, the Accounting Standards Board (AcSB) confirmed that
    International Financial Reporting Standards (IFRS) will replace Canadian
    GAAP for publicly accountable enterprises for financial periods beginning
    on or after January 1, 2011.

    Business Combinations

    In January 2009, the CICA issued Handbook Section 1582, Business
    Combinations, which requires that all assets and liabilities of an
    acquired business will be recorded at fair value at acquisition.
    Obligations for contingent considerations and contingencies will also be
    recorded at fair value at the acquisition date. The standard also states
    that acquisition-related costs will be expensed as incurred and that
    restructuring charges will be expensed in periods after the acquisition
    date. The new standard applies prospectively to business combinations for
    which the acquisition date is on or after the beginning of the first
    annual reporting period on or following January 1, 2011. The Company will
    assess the impact of this new standard at the time of any applicable
    acquisitions.

    Consolidations and Non-Controlling Interests

    In January 2009, the CICA issued Handbook Section 1601, Consolidations,
    and Section 1602, Non-Controlling Interests. Section 1601 establishes
    standards for the preparation of consolidated financial statements.
    Section 1602 establishes standards for accounting for a non-controlling
    interest in a subsidiary in consolidated financial statements subsequent
    to a business combination. These standards apply to interim and annual
    consolidated financial statements relating to fiscal years beginning on
    or after January 1, 2011. The Company is currently assessing the impact
    of this new standard on its financial statements.


    NOTE 3. ACCOUNTS RECEIVABLE

    On June 16, 2010, the Company entered into an $85 million securitization
    program to sell its receivables to a third party trust sponsored by a
    highly rated Canadian financial institution, to replace the existing
    program. The new program has an evergreen commitment subject to
    termination on twelve months notice. Under the program, Norbord has
    transferred substantially all of its present and future trade accounts
    receivable to the trust, on a fully serviced basis, for proceeds
    consisting of cash and deferred purchase price. At period end, Norbord
    recorded cash proceeds of $59 million (2009 - $62 million) relating to
    this program.

    The new program contains no financial covenants however the program is
    subject to minimum credit-ratings requirements. The Company must maintain
    a long-term issuer credit rating of at least single B (mid) or the
    equivalent. As at July 21, 2010, Norbord's ratings were BB (DBRS), BB-
    (Standard & Poor's Ratings Services) and Ba3 (Moody's Investors Service).


    NOTE 4. INVENTORY

    -------------------------------------------------------------------------
    (US $ millions)                                        Jun 26     Dec 31
                                                             2010       2009
    -------------------------------------------------------------------------
    Raw materials                                        $     19   $     13
    Finished goods                                             44         33
    Operating and maintenance supplies                         25         25
    -------------------------------------------------------------------------
                                                         $     88   $     71
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    At period end, the provision to reflect inventories at the lower of cost
    and net realizable value was nil (2009 - $1 million).

    The amount of inventory recognized as an expense was as follows:

    -------------------------------------------------------------------------
    Quarters ended June 26 and           Q2         Q2      6 mos      6 mos
     June 27 (US $ millions)           2010       2009       2010       2009
    -------------------------------------------------------------------------
    Cost of inventories            $    194   $    161   $    360   $    315
    Depreciation on property,
     plant & equipment                   12         12         22         27
    -------------------------------------------------------------------------
                                   $    206   $    173   $    382   $    342
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    NOTE 5. OTHER ASSETS

    -------------------------------------------------------------------------
                                                           Jun 26     Dec 31
    (US $ millions)                                          2010       2009
    -------------------------------------------------------------------------
    Unrealized net investment hedge gains (note 12)      $      7   $      2
    Unrealized interest rate swap gains (note 12)               5          4
    Other                                                       2          1
    -------------------------------------------------------------------------
                                                         $     14   $      7
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The unrealized net investment hedge gains and unrealized interest rate
    swap gains are offset by unrealized losses on the underlying exposures
    being hedged.


    NOTE 6. LONG-TERM DEBT

    -------------------------------------------------------------------------
                                                           Jun 26     Dec 31
    (US $ millions)                                          2010       2009
    -------------------------------------------------------------------------
    Principal value
    7 1/4% debentures due 2012                           $    240   $    240
    Senior notes due 2017                                     200        200
    Revolving bank lines                                        -         27
    -------------------------------------------------------------------------
                                                              440        467
    Debt issue costs                                           (4)        (6)
    Deferred interest rate swap gains                           5          6
    Unrealized interest rate swap gains (note 5)                5          4
    -------------------------------------------------------------------------
                                                         $    446   $    471
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Revolving Bank Lines

    In July 2010, the Company increased its committed revolving bank lines
    from $205 million to $245 million and extended the maturity to May 2013.
    Coincident with these amendments, the Company cancelled the $50 million
    Brookfield debt facility which was undrawn. The bank lines bear interest
    at money market rates plus a margin that varies with the Company's credit
    rating. The bank lines are secured by a first lien on the Company's North
    American OSB inventory and property, plant and equipment. This lien is
    shared pari passu with holders of the 2012 debentures and 2017 senior
    notes. At period end, the amount of revolving bank lines drawn as cash
    was nil, $8 million was utilized for letters of credit, and $197 million
    was available to support short-term liquidity requirements.

    The bank lines contain two quarterly financial covenants; minimum
    tangible net worth of $250 million and maximum net debt to total
    capitalization, book basis of 65%. Effective January 1, 2011, the maximum
    net debt to total capitalization, book basis covenant reduces to 60%. Net
    debt includes total debt less cash and cash equivalents plus letters of
    credit issued. At period end, the Company's tangible net worth was
    $360 million and net debt for financial covenant purposes was
    $374 million. Net debt to total capitalization, book basis, was 51%.

    Interest Rate Swaps

    At period end, the Company had outstanding interest rate swaps of
    $115 million (2009 - $115 million). The terms of these swaps correspond
    to the terms of the underlying hedged debt. The unrealized interest rate
    swap gains are offset by unrealized losses on the underlying exposures
    being hedged.


    NOTE 7. OTHER LIABILITIES

    -------------------------------------------------------------------------
                                                           Jun 26     Dec 31
    (US $ millions)                                          2010       2009
    -------------------------------------------------------------------------
    Accrued employee benefits                            $      2   $      6
    Other liabilities                                           3          3
    -------------------------------------------------------------------------
                                                         $      5   $      9
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    NOTE 8. SHAREHOLDERS' EQUITY

    Warrants

    Year-to-date, less than 0.1 million common shares were issued as a result
    of warrants exercised for proceeds of less than $1 million (2009 - nil).

    Stock Options

    In the first quarter, 0.5 million options were granted under the stock
    option plan (2009 - 1 million). Stock option expense of $1 million was
    recorded against contributed surplus (2009 - less than $1 million).
    Year-to-date, 0.3 million common shares were issued as a result of
    options exercised under the stock option plan for proceeds of $2 million
    (2009 - less than $1 million).


    NOTE 9. EARNINGS PER COMMON SHARE

    -------------------------------------------------------------------------
    Quarters ended June 26 and
     June 27 (US $ millions,
     except per share                    Q2         Q2      6 mos      6 mos
     information)                      2010       2009       2010       2009
    -------------------------------------------------------------------------
    Earnings available to common
     shareholders                  $     37   $    (18)  $     32   $    (40)
    -------------------------------------------------------------------------

    Common shares (millions):
      Weighted average number
       of common shares
       outstanding                     43.5       43.2       43.4       42.7
      Stock options(1)                  0.4          -        0.4          -
      Warrants(1)                       1.9          -        2.3          -
    -------------------------------------------------------------------------
    Diluted number of common shares    45.8       43.2       46.1       42.7
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Earnings per common share:
      Basic                        $   0.85   $  (0.42)  $   0.74   $  (0.94)
      Diluted                          0.81      (0.42)      0.69      (0.94)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Applicable when there are positive earnings available to shareholders
        and when the weighted average share price for the period was greater
        than the exercise price for vested stock options and warrants.


    NOTE 10. SUPPLEMENTAL CASH FLOW INFORMATION

    The net change in non-cash operating working capital balance comprises:

    -------------------------------------------------------------------------
    Quarters ended June 26 and           Q2         Q2      6 mos      6 mos
     June 27 (US $ millions)           2010       2009       2010       2009
    -------------------------------------------------------------------------
    Cash provided by (used for):
      Accounts receivable          $    (12)  $     10   $    (32)  $    (22)
      Inventory                           4         10        (19)        (7)
      Accounts payable and accrued
       liabilities                       23         15          9        (17)
    -------------------------------------------------------------------------
                                   $     15   $     35   $    (42)  $    (46)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Cash and cash equivalents comprise:

    -------------------------------------------------------------------------
                                                           Jun 26     Jun 27
    (US $ millions)                                          2010       2009
    -------------------------------------------------------------------------
    Cash                                                 $     74   $      4
    Cash equivalents                                            -          7
    -------------------------------------------------------------------------
                                                         $     74   $     11
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    NOTE 11. CAPITAL MANAGEMENT

    Norbord's capital structure at period end consisted of the following:

    -------------------------------------------------------------------------
                                                           Jun 26     Dec 31
    (US $ millions)                                          2010       2009
    -------------------------------------------------------------------------
    Long-term debt, principal value                      $    440   $    467
    Less: Cash and cash equivalents                           (74)       (21)
    -------------------------------------------------------------------------
    Net debt                                                  366        446
    Add: Letters of credit                                      8          8
    -------------------------------------------------------------------------
    Net debt for financial covenant purposes                  374        454
    -------------------------------------------------------------------------

    Shareholders' equity                                      360        334
    -------------------------------------------------------------------------
    Tangible net worth                                        360        334
    -------------------------------------------------------------------------

    Total capitalization                                 $    734   $    788
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Net debt to capitalization, book basis                    51%        58%
    Net debt to capitalization, market basis                  37%        48%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    NOTE 12. FINANCIAL INSTRUMENTS

    Non-Derivative Financial Instruments

    The net book values and fair values of non-derivative financial
    instruments were as follows:

    -------------------------------------------------------------------------
                                                   Jun 26 2010   Dec 31 2009
    -------------------------------------------------------------------------
                                                    Net           Net
                            Financial Instrument   Book   Fair   Book   Fair
    (US $ millions)            Classification     Value  Value  Value  Value
    -------------------------------------------------------------------------
    Financial Assets:
      Cash and cash
       equivalents            Held-for-trading    $  74  $  74  $  21  $  21
      Accounts receivable  Loans and receivables     54     54     27     27
      Tax receivable       Loans and receivables      3      3     57     57
    -------------------------------------------------------------------------
                                                  $ 131  $ 131  $ 105  $ 105
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Financial Liabilities:
      Accounts payable
       and accrued
       liabilities           Other liabilities    $ 145  $ 145  $ 140  $ 140
      Long-term debt         Other liabilities      446    440    471    474
    -------------------------------------------------------------------------
                                                  $ 591  $ 585  $ 611  $ 614
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Derivative Financial Instruments

    Information about derivative financial instruments was as follows:

    -------------------------------------------------------------------------
                                     Jun 26 2010                 Dec 31 2009
    -------------------------------------------------------------------------
    (US $ millions,                   Unrealized                  Unrealized
     unless                                 Gain                        Gain
     otherwise                         at Period                   at Period
     noted)           Notional Value       End(1) Notional Value       End(1)
    -------------------------------------------------------------------------
    Currency hedges:
      Net investment
        UK             (pnds stlg)42          $3   (pnds stlg)56          $1
        Belgium             (euro)25           4        (euro)40           1
      Monetary position
        UK             (pnds stlg)14           -               -           -
        Belgium             (euro)15           -               -           -
        Canadian              CAD $8           -          CAD $9           -
    Interest rate hedges:
      Interest rate swaps      $ 115           5               -           4
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) The carrying values of the derivative financial instruments are
        equivalent to the unrealized gain at period end.

    The gains and losses recognized on the Company's matured currency hedges
    were:

    -------------------------------------------------------------------------
    Quarters ended June 26 and           Q2         Q2      6 mos      6 mos
     June 27 (US $ millions)           2010       2009       2010       2009
    -------------------------------------------------------------------------
    Realized gain (loss) on
     currency hedges:
      Net investment
        UK                         $      3   $      9   $      4   $     12
        Belgium                           5         (5)         5         (6)
      Monetary position
        Canadian                          -          1          -          1
    -------------------------------------------------------------------------
                                   $      8   $      5   $      9   $      7
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Realized and unrealized gains and losses on derivative financial
    instruments are offset by realized and unrealized losses and gains on the
    underlying exposures being hedged.


    NOTE 13. RELATED PARTY TRANSACTIONS

    In the normal course of operations, the Company enters into various
    transactions on market terms with related parties which have been
    measured at exchange value and recognized in the consolidated financial
    statements. The following transactions have occurred between the Company
    and Brookfield during the normal course of business.

    Secondary Offering

    On March 30, 2010, upon completion of the secondary offering of Norbord's
    common shares, Brookfield's ownership decreased from approximately 73% to
    52% of common shares outstanding.

    Other

    During the quarter the Company provided certain administrative services
    to Brookfield or its affiliates which was charged on a cost recovery
    basis. In addition, the Company periodically engaged the services of
    Brookfield or its affiliates for various financial, real estate and other
    business advisory services. Year-to-date, the fees for these services
    were less than $1 million (2009 - less than $1 million) and were charged
    at market rates.


    NOTE 14. GEOGRAPHIC SEGMENTS

    The Company has a single reportable segment. The Company operates
    principally in North America and Europe. Net sales by geographic segment
    are determined based on the origin of shipment and therefore include
    export sales.

    -------------------------------------------------------------------------
                                                                     Q2 2010
    -------------------------------------------------------------------------
    Quarter ended June 26
     (US $ millions)          North America     Europe Unallocated     Total
    -------------------------------------------------------------------------
    Net sales                      $    192   $     86   $      -   $    278
    EBITDA(1)                            63         10         (2)        71
    Depreciation                          8          4          -         12
    Investment in property,
     plant and equipment                  4          1          -          5
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
                                                                     Q2 2009
    -------------------------------------------------------------------------
    Quarter ended June 27
     (US $ millions)          North America     Europe Unallocated     Total
    -------------------------------------------------------------------------
    Net sales                      $    101   $     73   $      -   $    174
    EBITDA(1)                            (6)         4          -         (2)
    Depreciation                          8          4          -         12
    Investment in property,
     plant and equipment                  3          -          -          3
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
                                                                  6 mos 2010
    -------------------------------------------------------------------------
    6 months ended June 26
     (US $ millions)          North America     Europe Unallocated     Total
    -------------------------------------------------------------------------
    Net sales                      $    301   $    161   $      -   $    462
    EBITDA(1)                            71         15         (6)        80
    Depreciation                         14          8          -         22
    Property, plant and
     equipment                          656        167          2        825
    Investment in property,
     plant and equipment                  5          1          -          6
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
                                                                  6 mos 2009
    -------------------------------------------------------------------------
    6 months ended June 27
     (US $ millions)          North America     Europe Unallocated     Total
    -------------------------------------------------------------------------
    Net sales                      $    186   $    144   $      -   $    330
    EBITDA(1)                           (18)         5         (3)       (16)
    Depreciation                         18          9          -         27
    Property, plant and
     equipment                          675        202          3        880
    Investment in property,
     plant and equipment                  8          -          -          8
    -------------------------------------------------------------------------
    (1) EBITDA is earnings before interest, income tax, depreciation, and
        foreign exchange loss.
    

SOURCE Norbord Inc.

For further information: For further information: Robin Lampard, Senior Vice President & Chief Financial Officer, Tel. (416) 365-0705, info@norbord.com


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