Peter Wijnbergen President & CEOQ3 2016 HIGHLIGHTS Adjusted earnings of $0.67 per diluted share, a...

October 28, 2016

To Our Shareholders,

I am pleased to report our best quarter in over three years, reflecting market conditions

that continue to be very favourable for Norbord. Supported by consistent operating

performance at our mills and strong North American OSB prices, we generated Adjusted

EBITDA of $114 million and Adjusted earnings of $0.67 per diluted share during the

quarter. US single family housing starts are trending toward a 10% year-over-year

increase for 2016 and housing economists expect similar improvement again in 2017. We

reported another solid result from our European business despite the volatility related to

currency fluctuations and our Asian exports are up over last year.

Contributing to these strong results were realized benefits from last year’s merger with

Ainsworth as we hit our target of $45 million in annualized synergies within just 18

months of closing the transaction. In addition to these synergies, the merger is enabling

us to avoid an estimated $35 million in capital cash outlays we would otherwise incur for

current and future debottlenecking and manufacturing cost reduction initiatives. I thank

all our employees for their hard work as we’ve seamlessly integrated the two companies

and quickly delivered on our synergies commitment.

My disappointment this quarter is our safety performance. We experienced two serious

incidents that impacted everyone in our company, particularly our mill operating teams.

We know that safety and operating performance go hand in hand and remain focused on

achieving world-class safety performance.

Looking ahead, the fundamental dynamics in all the markets which affect our business

remain positive. North American OSB demand continues to grow and OSB prices remain

at levels that are 16% above this time last year, even as we move into the seasonally

slower winter building period. Our European business is resilient in the face of post-

“Brexit” referendum uncertainty.

With rapidly improving free cash flow, Norbord is in a solid financial position. In the

near term, our capital priorities include investing in our mills and optimizing our debt

profile. At our mills, our biggest priority is the Inverness, Scotland expansion which is on

track for completion in record time. Regarding our balance sheet, we intend to

permanently reduce debt by repaying our $200 million 2017 bonds when they come due

next February. This will bring us into targeted more comfortable leverage range and take

$15 million off our annual interest payments.

Finally, we also announced today an agreement with Louisiana-Pacific under which we

will exchange our OSB mill in Val-d’Or, Quebec for their OSB mill in Chambord,

Peter Wijnbergen

President & CEO

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Quebec. Both mills have been curtailed for a number of years, and this swap will better

align our portfolio of northern mills with our business strategy. The Chambord mill is

38% larger and located in the biggest timber-producing region in Quebec. While market

conditions do not support an immediate restart of Chambord, the asset is in good

condition and is located closer to key markets, representing a better competitive

opportunity for Norbord.

As always, we thank our shareholders for their investment in and support for Norbord.

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 “expect,” “suggest,”

“support,” “believe,” “should,” “potential,” “likely,” “continue,” “forecast,” “plan,” “indicate,”

“consider,” “future,” 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 2015 Management’s Discussion and Analysis

dated January 27, 2016 and Q3 2016 Management’s Discussion and Analysis dated October 27, 2016.

Norbord defines Adjusted EBITDA as earnings (loss) determined in accordance with International

Financial Reporting Standards (IFRS) before finance costs, income taxes, depreciation and amortization,

and other unusual or non-recurring items, and Adjusted earnings (loss) as earnings (loss) determined in

accordance with IFRS before unusual or non-recurring items and using a normalized income tax rate.

Adjusted EBITDA and Adjusted earnings (loss) are non-IFRS financial measures, do not have any

standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures

presented by other companies. See the Non-IFRS Financial Measures section in Norbord’s 2015

Management’s Discussion and Analysis dated January 27, 2016 and Q3 2016 Management’s Discussion

and Analysis dated October 27, 2016 for a quantitative reconciliation of Adjusted EBITDA and Adjusted

earnings (loss) to earnings (the most directly comparable IFRS measure).

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News Release

NORBORD REPORTS THIRD QUARTER 2016 RESULTS; DECLARES QUARTERLY DIVIDEND

Note: Financial references in US dollars unless otherwise indicated.

Q3 2016 HIGHLIGHTS

Adjusted earnings of $0.67 per diluted share, a $0.72 improvement over Q3 2015

Adjusted EBITDA of $114 million, a more than threefold increase over Q3 2015

Merger synergies target of $45 million (cumulative, annualized) now fully captured

North Central average benchmark OSB price up 48% year-over-year

North American manufacturing costs decreased 3% year-to-date

Declared quarterly dividend of CAD $0.10 per share to shareholders of record on December 1,

2016

TORONTO, ON (October 28, 2016) – Norbord Inc. (TSX and NYSE: OSB) today reported Adjusted

EBITDA of $114 million for the third quarter of 2016 versus $30 million in the third quarter of 2015 and

$94 million in the second quarter of 2016. The improvement versus both comparative periods is primarily

due to higher North American oriented strand board (OSB) prices. North American operations generated

Adjusted EBITDA of $106 million in the quarter compared to $22 million in the same quarter last year

and $85 million in the prior quarter. European operations delivered Adjusted EBITDA of $10 million

compared to $11 million in both comparative quarters.

“Our financial performance continued to improve in the third quarter as North American benchmark OSB

prices strengthened further,” said Peter Wijnbergen, Norbord’s President and CEO. “Norbord generated

Adjusted EBITDA of $114 million, marking the seventh consecutive quarter of improvement. As we

enter the seasonally slower winter building period, North American benchmark OSB prices remain well

above where they were this time last year as US housing starts, particularly single-family, continue to

recover and drive increasing OSB demand.”

“In Europe, our panel business delivered another $10 million of Adjusted EBITDA despite the political

uncertainty following the Brexit referendum in the UK. While the devaluation of the Pound Sterling

following the referendum will remain a currency translation headwind in the near term, the underlying

fundamentals of our European business remain favourable. In fact, our year-to-date European EBITDA is

11% ahead of last year, and 22% ahead in Pound Sterling terms.”

“Finally, I’m pleased that we have delivered the full $45 million of annualized synergies from our merger

with Ainsworth ahead of schedule. These synergies have resulted from reduced corporate overhead costs,

optimization of sales and logistics, procurement savings and the sharing of operational best practices. In

addition to these synergies, the merger is enabling us to avoid an estimated $35 million in capital cash

outlays.”

Norbord recorded Adjusted earnings of $58 million or $0.67 per diluted share ($0.68 per basic share) in

the current quarter compared to an Adjusted loss of $4 million or $0.05 per share in the same quarter last

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year and Adjusted earnings of $42 million or $0.49 per share in the prior quarter. Adjusted earnings/loss

exclude non-recurring items and use a normalized income tax rate:

$ millions Q3-

2016

Q2-

2016

Q3-

2015

YTD

2016

YTD

2015

Earnings (loss) 55 44 (9) 122 (69)

Adjusted for:

Merger transaction costs - - - - 8

Costs to achieve merger synergies 4 2 - 7 4

Costs related to High Level fire - 1 - 1 -

Cost on early debt extinguishment - - - - 49

Reported income tax expense (recovery) 19 10 3 32 (33)

Adjusted pre-tax earnings (loss) 78 57 (6) 162 (41)

Income tax (expense) recovery at statutory rate (20) (15) 2 (42) 11

Adjusted earnings (loss) 58 42 (4) 120 (30)

Market Conditions

In North America, year-to-date US housing starts were up 4% versus the same period last year. Single-

family starts, which use approximately three times more OSB than multi-family, increased by 9% and

single-family permits were 8% higher. The seasonally-adjusted annualized rate was 1.05 million in

September with permits at 1.23 million. The consensus forecast from US housing economists is for

approximately 1.20 million starts in 2016, an 8% year-over-year improvement.

North American benchmark OSB prices increased significantly in the third quarter versus both the same

quarter last year and the previous quarter as new home construction activity and OSB demand continued

to improve. OSB prices continued to rise through July before leveling out in August and September. The

North Central benchmark price averaged $301 per thousand square feet (Msf) (7/16-inch basis) for the

quarter. The spread between the North Central and the South East and Western Canada regions (where

65% of Norbord’s operating capacity is located) increased to approximately $40 from approximately $20

in the previous quarter on the seasonal demand variations between regions. The table below summarizes

benchmark OSB prices ($ per Msf, 7/16-inch basis) by region for the relevant quarters:

North American

region

% of Norbord’s

operating capacity Q3-2016

Q2-2016

Q3-2015

North Central 16% 301 264 204

South East 33% 256 245 176

Western Canada 32% 265 242 158

In Europe, panel demand remains strong in the Company’s core UK and German markets but prices in US

dollar terms were impacted by the significant devaluation of the Pound Sterling following the “Brexit”

referendum. In local currency terms, quarter-over-quarter, average prices for OSB, particleboard and

medium density fibreboard (MDF) were modestly higher in the UK while continental OSB prices were

modestly lower. Year-over-year was the opposite, with average panel prices lower in the UK and OSB

prices higher on the continent.

Performance

Norbord’s North American OSB shipments increased 4% year-over-year but were 2% lower quarter-over-

quarter due to lower productivity. Norbord’s operating North American OSB mills produced at 95% of

stated capacity (excluding the two curtailed mills in Huguley, Alabama and Val-d’Or, Quebec) compared

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to 92% in the same quarter last year and 96% in the prior quarter. Both shipments and capacity utilization

increased year-over-year primarily due to fewer maintenance shuts and production curtailments. One of

Norbord’s North American mills achieved a quarterly production record.

Norbord’s North American OSB cash production costs per unit (before mill profit share) decreased 3%

year-to-date due to higher volume, lower resin and energy prices, improved raw material usages and the

weaker Canadian dollar. Cash production costs increased 2% versus the prior quarter and 1% versus the

same quarter last year primarily due to higher supplies and maintenance costs, with lower volume and

higher resin and energy prices also having some impact quarter-over-quarter.

In Europe, Norbord’s shipments were 3% lower than the same quarter last year and 5% lower than the

prior quarter. The European mills produced at 99% of stated capacity in the quarter, unchanged from the

same quarter last year and compared to 104% in the prior quarter. Both shipments and capacity utilization

decreased quarter-over-quarter due to lost production days following a fatality at the Cowie, Scotland

mill. Two of Norbord’s European mills achieved a quarterly production record.

Norbord’s mills delivered Margin Improvement Program (MIP) gains of $10 million year-to-date from

improved productivity and lower raw material use as well as merger synergies and returns on recent

capital investments. MIP gains are measured relative to the prior year at constant prices and exchange

rates.

As of the third quarter of 2016, Norbord has captured $45 million in cumulative (annual run rate)

synergies from the merger, within 18 months of closing. Of this amount, $36 million has been realized

and the remaining $9 million is expected to be realized in future quarters from synergy initiatives already

executed. In addition to these synergies, the merger is enabling the Company to avoid significant capital

cash outlays it would otherwise have to incur. Norbord estimates this capital cost avoidance at $35

million, which includes utilizing formerly idle assets throughout the Company. As the merger synergies

target has now been fully realized, Norbord will continue to report progress on continuous improvement

initiatives through MIP.

In January 2016, the Board of Directors approved a $135 million investment over the next two years to

modernize and expand the Company’s Inverness, Scotland OSB mill. During the quarter, the unused

second press from the Grande Prairie, Alberta mill was moved to Inverness. Norbord expects the new line

to start up in the second half of 2017, with no disruption to existing production capacity in the interim.

Capital investments year-to-date were $63 million (including $19 million related to the Inverness project)

compared to $43 million in the first nine months of last year. Norbord’s 2016 regular capital expenditure

budget is $75 million. In addition, the Company expects to spend $45 million on the Inverness project in

2016.

Operating working capital was $156 million at quarter-end compared to $145 million at the end of the

same quarter last year and $163 million at the end of the prior quarter. Working capital increased year-

over-year primarily due to the impact of higher North American OSB prices on accounts receivable and

the insurance receivable related to the High Level, Alberta fire. Working capital decreased quarter-over-

quarter primarily due to the timing of payments and accruals as well as partial collections on the

insurance receivable related to the High Level fire.

Due to improved Adjusted EBITDA this year, cash generated from operations for the first nine months of

2016 was $183 million compared with $32 million of cash consumed in the same period of 2015.

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At quarter-end, Norbord had unutilized liquidity of $420 million, consisting of $74 million in cash and

$346 million in unused credit lines. The Company’s tangible net worth was $848 million and net debt to

total capitalization on a book basis was 45%. Both ratios remain well within bank covenants.

Norbord has $200 million senior secured notes that are due in February 2017, which the Company intends

to permanently repay at maturity using cash on hand, cash generated from operations and if necessary, by

drawing upon the accounts receivable securitization program.

Quebec Mill Exchange

Norbord also announced today that is has reached an agreement with Louisiana-Pacific Corporation (LP)

(NYSE: LPX) to exchange OSB mills in Quebec. Norbord will swap ownership of its mill in Val-d’Or,

Quebec for LP’s OSB mill in Chambord, Quebec. Both mills have been curtailed for a number of years.

Please see the separate press release dated October 28, 2016 for further details.

Dividend

The Board of Directors declared a quarterly dividend of CAD $0.10 per common share, payable on

December 21, 2016 to shareholders of record on December 1, 2016.

Norbord’s dividends are declared in Canadian dollars. Registered and beneficial shareholders may opt to

receive their dividends in either Canadian dollars or the US dollar equivalent. Unless they request the US

dollar equivalent, shareholders will continue to receive dividends in Canadian dollars. The US dollar

equivalent of the dividend will be based on the Bank of Canada noon exchange rate on the record date or,

if the record date falls on a weekend or holiday, on the Bank of Canada noon exchange rate of the

preceding business day.

Registered shareholders wishing to receive the US dollar dividend equivalent should contact Norbord’s

transfer agent, CST Trust Company, by phone at 1-800-387-0825 or by email at

[email protected]. Beneficial shareholders (i.e., those holding their Norbord shares with their

brokerage) should contact the broker with whom their shares are held.

Norbord’s variable dividend policy targets the payment to shareholders of a portion of free cash flow

based upon the Company's financial position, results of operations, cash flow, capital requirements and

restrictions under the Company's revolving bank lines, as well as the market outlook for the Company’s

principal products and broader market and economic conditions, among other factors. The Board retains

the discretion to amend the Company's dividend policy in any manner and at any time as it may deem

necessary or appropriate in the future. For these reasons, as well as others, the Board in its sole discretion

can decide to increase, maintain, decrease, suspend or discontinue the payment of cash dividends in the

future.

Normal Course Issuer Bid

Norbord also announced today that the Toronto Stock Exchange (TSX) has accepted its notice of

intention to renew its normal course issuer bid in accordance with TSX rules. Under the bid, Norbord

may purchase up to 4,280,997 of its common shares, representing 5% of the Company’s issued and

outstanding common shares of 85,619,946 as of October 20, 2016, pursuant to TSX rules.

Purchases under the bid may commence on November 3, 2016, and will terminate on the earlier of

November 2, 2017, the date Norbord completes its purchases pursuant to the notice of intention to make a

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mailto:[email protected]

normal course issuer bid filed with the TSX or the date of notice by Norbord of termination of the bid.

Purchases will be made on the open market by Norbord through the facilities of the TSX, the New York

Stock Exchange or Canadian or US alternative trading systems, if eligible, in accordance with the

requirements of the TSX and applicable securities laws. The price that Norbord will pay for any such

common shares will be the market price of such shares at the time of acquisition. Common shares

purchased under the bid will be cancelled. Norbord’s average daily trading volume on the TSX during

the last six calendar months was 156,497 common shares. Daily purchases of common shares will not

exceed 39,124 subject to the Company’s ability to make “block” purchases under the rules of the TSX.

Norbord did not acquire any common shares in the past 12 months.

Norbord believes that the market price of its common shares at certain times may be attractive and that

the purchase of these common shares from time to time would be an appropriate use of Norbord’s funds

in light of potential benefits to remaining shareholders.

From time to time, when Norbord does not possess material non-public information about itself or its

securities, it may enter into an automatic purchase plan with its broker to allow for the purchase of

common shares at times when Norbord ordinarily would not be active in the market due to its own

internal trading blackout periods, insider trading rules or otherwise. Any such plans entered into with

Norbord’s broker will be adopted in accordance with applicable Canadian securities laws.

Additional Information

Norbord’s Q3 2016 letter to shareholders, news release, management’s discussion and analysis,

consolidated unaudited interim financial statements and notes to the financial statements have been filed

on SEDAR (www.sedar.com), EDGAR (www.sec.gov) and are available in the investor section of the

Company’s website at www.norbord.com. Shareholders may receive a hard copy of Norbord’s audited

annual financial statements free of charge upon request. The Company has also made available on its

website presentation materials containing certain historical and forward-looking information relating to

Norbord, including materials that contain additional information about the Company’s financial results.

Shareholders are encouraged to read this material.

Conference Call

Norbord will hold a conference call for analysts and institutional investors on Friday, October 28, 2016 at

11:00 a.m. ET. The call will be broadcast live over the Internet via www.norbord.com and

www.newswire.ca. An accompanying presentation will be available in the “Investors/Conference Call”

section of the Norbord website prior to the start of the call. A replay number will be available

approximately one hour after completion of the call and will be accessible until November 26, 2016 by

dialing 1-888-203-1112 or 647-436-0148. The passcode is 2666510. Audio playback and a written

transcript will be available on the Norbord website.

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http://www.norbord.com/

http://www.newswire.ca/

Norbord Profile

Norbord Inc. is a leading global manufacturer of wood-based panels and the world’s largest producer of

oriented strand board (OSB). In addition to OSB, Norbord manufactures particleboard, medium density

fibreboard and related value-added products. Norbord has assets of approximately $1.7 billion and

employs approximately 2,600 people at 17 plant locations in the United States, Canada and Europe.

Norbord is a publicly traded company listed on the Toronto Stock Exchange and New York Stock

Exchange under the symbol “OSB”.

-end-

Contact:

Heather Colpitts

Senior Manager, Corporate Affairs

Tel. (416) 365-0705

[email protected]

This news release contains 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 “expect,” “believe,”

“forecast,” “likely,” “support,” “target,” “consider,” “continue,” “suggest,” “intend,” “should,” “appear,” “would,” “will,” “will not,”

“plan,” “can,” “may,” 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: assumptions in connection with the economic and financial conditions in the US, Europe, Canada and globally; risks inherent to product concentration and cyclicality; effects of competition and product pricing pressures; risks inherent to customer dependence; effects of variations

in the price and availability of manufacturing inputs; risks inherent to a capital intensive industry; ability to realize synergies; and other risks

and factors described from time to time in filings with Canadian securities regulatory authorities.

Except as required by applicable law, Norbord does not undertake to update any forward-looking statements, whether written or oral, that may

be made from time to time by, or on behalf of, the Company, 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

January 27, 2016 Annual Information Form and the cautionary statement contained in the “Forward-Looking Statements” section of the 2015

Management’s Discussion and Analysis dated January 27, 2016 and Q3 2016 Management’s Discussion and Analysis dated October 27, 2016.

Norbord defines Adjusted EBITDA as earnings (loss) determined in accordance with International Financial Reporting Standards (IFRS) before

finance costs, income taxes, depreciation and amortization, and other unusual or non-recurring items, and Adjusted earnings (loss) as earnings (loss) determined in accordance with IFRS before unusual or non-recurring items and using a normalized income tax rate. Adjusted EBITDA and

Adjusted earnings (loss) are non-IFRS financial measures, do not have any standardized meaning prescribed by IFRS and are therefore unlikely

to be comparable to similar measures presented by other companies. See the Non-IFRS Financial Measures section in Norbord’s 2015 Management’s Discussion and Analysis dated January 27, 2016 and Q3 2016 Management’s Discussion and Analysis dated October 27, 2016

for a quantitative reconciliation of Adjusted EBITDA and Adjusted earnings (loss) to earnings (the most directly comparable IFRS measure).

8

Some of the statements included in this MD&A constitute forward-looking statements that are based on various assumptions and are subject to various risks. See the cautionary statement contained in the Forward-Looking Statements section.

OCTOBER 27, 2016

Management’s Discussion and Analysis

INTRODUCTION

The Management’s Discussion and Analysis (MD&A) provides a review of the significant developments that impacted Norbord’s performance during the period. The information in this section should be read in conjunction with the unaudited condensed consolidated interim financial statements for the period ended September 24, 2016 and the audited annual financial statements and annual MD&A in the 2015 Annual Report.

In this MD&A, “Norbord” or the “Company” means Norbord Inc. and all of its consolidated subsidiaries and affiliates, unless the context implies otherwise. “Brookfield” means Brookfield Asset Management Inc., or any of its consolidated subsidiaries and affiliates, which are related parties by virtue of a controlling equity interest in the Company.

Annual financial data provided has been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (the IASB) and interim financial data has been prepared in accordance with International Accounting Standard (IAS) 34, Interim Financial Reporting. Additional information on Norbord, including the Company’s annual information form and other documents publicly filed by the Company, is available on the Company’s website at www.norbord.com, the System for Electronic Document Analysis and Retrieval (SEDAR) administered by the Canadian Securities Administrators (the CSA) at www.sedar.com and on the Electronic Data Gathering, Analysis and Retrieval System (EDGAR) section of the US Securities and Exchange Commission (the SEC) website at www.sec.gov/edgar/searchedgar/companysearch.html. All financial references in the MD&A are stated in US dollars, unless otherwise noted.

Some of the statements included or incorporated by reference in this MD&A constitute forward-looking statements within the meaning of applicable securities legislation. Forward-looking statements are based on various assumptions and are subject to various risks. See the cautionary statement contained in the Forward-Looking Statements section.

The Company has prepared this MD&A with reference to National Instrument 51-102 – Continuous Disclosure Obligations of the CSA. The Company is an eligible issuer under the Multijurisdictional Disclosure System (MJDS) and complies with the US reporting requirements by filing its Canadian disclosure documents with the SEC. As a MJDS issuer, the Company is permitted to prepare this MD&A in accordance with the disclosure requirements of Canada, whose requirements are different from those of the United States.

This MD&A provides financial and operating results for the three month and nine month periods ended September 24, 2016 and additional disclosure of material information up to and including the date of issue, being October 27, 2016.

Adjusted EBITDA, Adjusted earnings (loss), Adjusted earnings (loss) per share, cash provided by operating activities per share, operating working capital, total working capital, capital employed, return on capital employed (ROCE), return on equity (ROE), net debt for financial covenant purposes, tangible net worth, net debt to capitalization, book basis, and net debt to capitalization, market basis, are non-IFRS financial

9


measures described in the Non-IFRS Financial Measures section. Non-IFRS financial measures do not have any standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other companies. Where appropriate, a quantitative reconciliation of the non-IFRS financial measure to the most directly comparable IFRS measure is also provided.

BUSINESS OVERVIEW & STRATEGY

Norbord is a leading global manufacturer of wood-based panels with 17 plant locations in the United States (US), Canada and Europe. After the completion of the merger with Ainsworth Lumber Co. Ltd. (Ainsworth) on March 31, 2015, Norbord became the largest global producer of oriented strand board (OSB) with annual capacity of 8 billion square feet (Bsf) (3/8-inch basis). In North America, Norbord owns 13 OSB production facilities located in the Southern region of the US, Western Canada, Quebec, Ontario and Minnesota. In Europe, the Company operates an OSB production facility, two particleboard mills and one medium density fibreboard (MDF) mill in the United Kingdom (UK) and one OSB production facility in Belgium and is the UK’s largest panel producer. The Company reports its operations in two geographic segments, North America and Europe with approximately 80% of its panel production capacity in North America and 20% in Europe. Norbord’s business strategy is focused entirely on the wood-based panels sector – in particular OSB – in North America, Europe and Asia.

OSB Accounts for 90% of Norbord’s Business .

Production Capacity by Product NA = North America

EU = Europe

Norbord’s financial goal is to achieve top-quartile ROCE among North American forest products companies over the business cycle.

Protecting the balance sheet is an important element of Norbord’s financing strategy. Management believes that its record of superior operational performance, disciplined capital allocation and prudent balance sheet management will enable it to access public and private capital markets (subject to financial market conditions). At period-end, Norbord had unutilized liquidity of $420 million, comprising $74 million in cash, $221 million in unutilized revolving bank lines and $125 million undrawn under its accounts receivable securitization program. The Company has $200 million senior secured notes that are due in February 2017, which the Company intends to permanently repay at maturity using cash on hand, cash generated from operations and if necessary, by drawing upon the accounts receivable securitization program. MERGER WITH AINSWORTH

On March 31, 2015, Norbord completed its merger with Ainsworth (the Merger). The Merger created the largest global OSB producer and brought together Norbord’s manufacturing cost leadership with Ainsworth’s track record of innovation in product development. It also allows Norbord to better serve the Company’s North American customers as well as gain access to small but growing Asian markets.

OSB (NA), 80%

OSB (EU), 10%

Particleboard (EU), 6%

MDF (EU), 4%

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As of the third quarter of 2016, Norbord has captured $45 million in cumulative (annual run rate) synergies from the Merger, within 18 months of closing. Of this amount, $36 million has been realized within the past 18 months and the remaining $9 million is expected to be realized in future quarters from synergy initiatives already executed. These synergies have resulted from reduced corporate overhead costs, optimization of sales and logistics, procurement savings, the sharing of operational best practices and implementing best practices related to operating working capital management such as optimizing inventory levels and customer/supplier payment terms. Since the Merger, the Company has incurred one-time costs of $14 million to achieve these synergies, of which $7 million was incurred in 2015 and $7 million to-date in 2016. In addition to these synergies, the Merger is enabling the Company to avoid significant capital cash outlays it would otherwise have had to incur. Norbord estimates this capital cost avoidance at $35 million, which includes utilizing formerly idle assets throughout the Company. As the Merger synergies target has now been fully realized, the Company will continue to report progress on continuous improvement initiatives through the Margin Improvement Program (MIP). QUEBEC MILL EXCHANGE

Subsequent to quarter-end, the Company reached an agreement with Louisiana-Pacific Corporation (LP) to exchange OSB mills in the province of Quebec. Norbord will swap ownership of its mill in Val-d’Or for LP’s mill in Chambord. Production at both mills has been curtailed for a number of years. The non-monetary asset exchange transaction is expected to close in November 2016. The Chambord mill has a stated capacity of 470 million square feet (3⁄8-inch basis) and the Val-d’Or mill has a stated capacity of 340 million square feet (3⁄8-inch basis).

HIGH LEVEL FIRE

On May 4, 2016, a fire started in the wood yard of the High Level, Alberta mill. Production was halted immediately while the fire was brought under control. The mill has an annual stated production capacity of 860 million square feet (3⁄8-inch basis) and has been ramping up toward full production since resuming operations in late 2013. The fire destroyed a portion of the mill’s log inventory. The mill returned to production approximately three weeks later. To date, the Company has recognized the following amounts: (US $ millions)

Write-off of log inventory destroyed by the fire $ (7)

Costs of fighting and site restoration (6)Insurance recovery for the reimbursement of the lost log inventory, fire fighting costs and

site restoration 12

Costs related to High Level fire, net (1)

Insurance recovery for business interruption 2

Net insurance claim recovery to-date $ 1

At quarter-end, $8 million of insurance proceeds for property damage had been received and $6 million is included in accounts receivable. Subsequent to quarter-end, a further installment of insurance proceeds of $3 million was received. The insurance claim is ongoing. SUMMARY

North American OSB demand continues to improve, driven by a gradual rebound in new home construction and continued growth in repair and remodel and industrial markets. Year-to-date US housing starts were up 4% compared to 2015, with single-family starts 9% higher. The North Central benchmark price averaged $301 per Msf (7⁄16-inch basis) for the quarter, up 14% against the previous quarter and up 48% against the same quarter last year. Norbord’s North American third quarter capacity utilization was in line with the prior

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quarter and improved versus the same quarter last year, primarily due to fewer maintenance shutdown days and production curtailments.

Norbord’s European panel business continues to generate steady financial results despite the unexpected outcome of the “Brexit” referendum (UK withdrawal from the European Union), as demand in the Company’s core markets in the UK and Germany remains strong. The European mills third quarter capacity utilization was lower than the prior quarter primarily due to lost production days following a fatality at the Cowie, Scotland mill, but in line with the same quarter last year as improved productivity was offset by the lost production days.

Norbord generated operating income of $87 million in the third quarter of 2016, up from $67 million in the second quarter of 2016 and $8 million in the third quarter of 2015. Year-to-date, Norbord generated operating income of $193 million, up from an operating loss of $2 million in the same period of 2015. Norbord recorded earnings of $55 million ($0.64 per basic and diluted share) in the third quarter of 2016 versus earnings of $44 million ($0.51 per basic and diluted share) in the second quarter of 2016 and a loss of $9 million ($0.11 loss per basic and diluted share) in the third quarter of 2015. Year-to-date, Norbord recorded earnings of $122 million ($1.43 per basic share and $1.42 per diluted share), up from a loss of $69 million ($0.81 loss per basic and diluted share) in the same period of 2015.

Excluding the impact of non-recurring items (which includes costs related to the $315 million senior secured notes due 2017 of Ainsworth (Ainsworth Notes), which were redeemed prior to maturity in the second quarter of 2015) and using a normalized Canadian statutory tax rate, Norbord recorded Adjusted earnings of $58 million ($0.68 per basic share and $0.67 per diluted share) in the third quarter of 2016 compared to Adjusted earnings of $42 million ($0.49 per basic and diluted share) in the second quarter of 2016 and an Adjusted loss of $4 million ($0.05 loss per basic and diluted share) in the third quarter of 2015. Year-to-date, Norbord recorded Adjusted earnings of $120 million ($1.40 per basic share and $1.39 per diluted share) versus an Adjusted loss of $30 million ($0.35 loss per basic and diluted share) in the same period of 2015.

The following table reconciles Adjusted earnings (loss) to the most directly comparable IFRS measure:

Q3 Q2 Q3 9 mos 9 mos(US $ millions) 2016 2016 2015 2016 2015

Earnings (loss) $ 55 $ 44 $ (9) $ 122 $ (69)Add: Merger transaction costs - - - - 8 Add: Severance costs related to Merger - - - - 2 Add: Other costs incurred to achieve Merger synergies 4 2 - 7 2 Add: Costs related to High Level fire - 1 - 1 -Add: Costs on early debt extinguishment - - - - 25 Add: Foreign exchange loss on Ainsworth Notes - - - - 28 Less: Gain on derivative financial instrument on

Ainsworth Notes - - - - (4)Add: Reported income tax expense (recovery) 19 10 3 32 (33)Adjusted pre-tax earnings (loss) 78 57 (6) 162 (41)Less: Income tax (expense) recovery at statutory rate(1) (20) (15) 2 (42) 11

Adjusted earnings (loss) $ 58 $ 42 $ (4) $ 120 $ (30) (1) Represents Canadian combined federal and provincial statutory rate.

Against the market and operating backdrop described above, Norbord generated Adjusted EBITDA of $114 million in the third quarter of 2016 versus $94 million in the second quarter of 2016 and $30 million in the third quarter of 2015. Year-to-date, Norbord generated Adjusted EBITDA of $269 million versus $65 million in the same period of 2015. On the controllable side of the business, Norbord generated $10 million of MIP gains in the first nine months of 2016, measured relative to 2015 at constant prices and exchange rates, primarily from lower raw material usages and higher productivity.

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The following table reconciles Adjusted EBITDA to the most directly comparable IFRS measure:

Q3 Q2 Q3 9 mos 9 mos (US $ millions) 2016 2016 2015 2016 2015

Earnings (loss) $ 55 $ 44 $ (9) $ 122 $ (69)Add: Finance costs 13 13 14 39 41 Add: Depreciation and amortization 23 24 22 68 65 Add: Income tax expense (recovery) 19 10 3 32 (33)Add: Merger transaction costs - - - - 8 Add: Costs related to High Level fire - 1 - 1 - Add: Severance costs related to Merger - - - - 2 Add: Other costs incurred to achieve Merger synergies 4 2 - 7 2 Add: Costs on early debt extinguishment - - - - 25 Add: Foreign exchange loss on Ainsworth Notes - - - - 28 Less: Gain on derivative financial instrument on

Ainsworth Notes - - - - (4)

Adjusted EBITDA $ 114 $ 94 $ 30 $ 269 $ 65

Home construction activity, particularly in the US, influences OSB demand and pricing. With 80% of the Company’s panel capacity located in North America, fluctuations in North American OSB demand and prices significantly affect Norbord’s results. Year-to-date, approximately 55% of Norbord’s North American OSB sales volume went into the new home construction sector. The remainder went into repair and remodelling, light commercial construction, industrial applications and export markets. Management believes this diversification provides opportunities to maximize profitability while limiting the Company’s relative exposure to the new home construction segment during periods of soft housing activity. As the US housing market recovery progresses, management expects Norbord's shipment volume to the new home construction sector will continue to grow.

North America OSB demand is primarily driven by home construction activity. The long-term fundamentals that support North American housing activity such as new household formations and replacement of housing stock are forecasted by US housing economists to be strong. Norbord’s European operations and Asian exports are exposed to different market dynamics relative to North America and this has provided meaningful market and geographic diversification for the Company. Combined with Norbord’s strong financial liquidity and solid customer partnerships, the Company believes it is well positioned to benefit from the continuing recovery in the US housing markets and growing demand in the its core European and Asian markets.

On the input cost side, fluctuations in raw material input prices significantly impact operating costs. Wood fibre, resin, wax and energy account for approximately 65% of Norbord's OSB cash production costs. The prices for these commodities are determined by economic and market conditions. In the third quarter of 2016, resin prices were up slightly relative to the prior quarter but still lower than the same quarter last year. Resin used in the OSB manufacturing process is a petrochemical product, therefore its price is expected to remain around these lower levels as long as global oil prices remain under pressure. Norbord will continue to pursue aggressive MIP initiatives to reduce raw material usages and improve productivity to offset potentially higher uncontrollable costs.

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SUMMARY OF FINANCIAL AND OPERATING HIGHLIGHTS

(US $ millions, except per share information, unless otherwise noted)

Q3 Q2 Q3 9 mos 9 mos 2016 2016 2015 2016 2015

KEY PERFORMANCE METRICS Return on capital employed (ROCE)(1) 32% 26% 8% 26% 6% Return on equity (ROE)(1) 41% 31% (3)% 29% (7)%Cash provided by (used for) operating activities 97 83 23 183 (32)Per Common Share Earnings (loss), basic(2) 0.64 0.51 (0.11) 1.43 (0.81)Adjusted earnings (loss), basic (1,3) 0.68 0.49 (0.05) 1.40 (0.36)Cash provided by (used for) operating activities(1) 1.13 0.97 0.27 2.14 (0.38)Dividends declared(4) 0.10 0.10 0.10 0.30 0.60 SALES AND EARNINGS Sales 453 447 378 1,284 1,094 Operating income (loss) 87 67 8 193 (2)Adjusted EBITDA(1) 114 94 30 269 65 Earnings (loss) 55 44 (9) 122 (69)Adjusted earnings (loss)(1) 58 42 (4) 120 (30)Total assets 1,718 1,654 1,653 Long-term debt(5) 746 745 744 Net debt for financial covenant purposes(1) 705 751 758 Net debt to capitalization, market basis(1) 29% 31% 32% Net debt to capitalization, book basis(1) 45% 48% 51%

KEY STATISTICS Shipments (MMsf–3⁄8") North America 1,463 1,487 1,409 4,287 4,038 Europe 438 459 453 1,332 1,315 Indicative Average OSB Price North Central ($/Msf–7⁄16") 301 264 204 264 197 South East ($/Msf–7⁄16") 256 245 176 239 175 Western Canada ($/Msf–7⁄16") 265 242 158 233 156 Europe (€/m3)(6) 235 237 220 234 223

(1) Non-IFRS measure; see Non-IFRS Financial Measures section. (2) Basic and diluted earnings (loss) per share are the same except diluted earnings per share for 9 months 2016 is $1.42. (3) Basic and diluted Adjusted earnings (loss) per share are the same except diluted Adjusted earnings per share for Q3 2016 is $0.67 and for the 9 months

2016 is $1.39. (4) Dividends declared per share stated in Canadian dollars. (5) Includes current and non-current long-term debt. (6) European indicative average OSB price represents the gross delivered price to the largest continental market.

Sales Total sales in the quarter were $453 million, compared to $447 million in the previous quarter and $378 million in the same quarter last year. Year-to-date, sales were $1,284 million versus $1,094 million in the same period of 2015. Quarter-over-quarter, total sales increased by $6 million or 1%. In North America, sales increased by 5% due to higher OSB prices that were partially offset by 2% lower shipment volumes. In Europe, sales decreased by 10% primarily due to the translation impact of the weaker Pound Sterling versus the US dollar, as 5% lower shipment volumes were offset by higher average prices. Year-over-year, sales increased by $75 million or 20%. In North America, sales increased by 38% due to significantly higher OSB prices and 4% higher shipment volumes. In Europe, sales decreased by 18% primarily due to the translation impact of the weaker Pound Sterling versus the US dollar, as 3% lower shipment volumes were offset by higher average prices. Year-to-date, sales increased by $190 million or 17%. In North America, sales increased by 30% due to higher OSB prices and 6% higher shipment volumes. In Europe, sales decreased by

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10% due to the translation impact of the weaker Pound Sterling versus the US dollar partially offset by 1% higher shipment volumes.

Markets

In North America, demand from US housing continues to improve. Year-to-date, US housing starts were up 4% versus the same period in 2015. Single-family starts (which use approximately three times more OSB than multi-family) increased by 9% and single-family permits were 8% higher. The seasonally-adjusted annualized rate was 1.05 million in September with permits at 1.23 million. The consensus forecast from US housing economists stands at approximately 1.20 million starts in 2016, which suggests an 8% improvement over last year. Despite the significant rebound in new home construction since the low of 0.55 million in 2009, US housing starts remain below the long-term annual average of 1.5 million.

North American benchmark OSB prices increased significantly in the third quarter of 2016 versus both the previous quarter and the same quarter last year as new home construction activity and OSB demand continued to improve. OSB prices continued to rise through July before leveling out in August and September. The North Central benchmark price averaged $301 per Msf (7⁄16-inch basis) for the quarter, and the spread between North Central and the South East and Western Canadian regions (where 65% of Norbord’s North American capacity is located) increased to approximately $40 (from approximately $20 in the previous quarter) on seasonal demand variations between regions. The table below summarizes benchmark OSB prices by region for the relevant quarters:

% of Norbord’s estimated Q3 2016 Q2 2016 Q3 2015 North American Region annual operating capacity(1) ($/Msf-7/16”) ($/Msf-7/16”) ($/Msf-7/16”)

North Central 16% $ 301 $ 264 $ 204 South East 33% 256 245 176 Western Canada 32% 265 242 158

(1) Excludes Val-d’Or, Quebec and Huguley, Alabama mills currently curtailed which represents 12% of estimated annual capacity.

In Europe, panel demand remains strong in the Company’s core UK and German markets but reported prices in US dollar terms were impacted by the significant devaluation of the Pound Sterling following the “Brexit” referendum. In local currency terms, quarter-over-quarter, average prices for OSB, particleboard and MDF were modestly higher in the UK while continental OSB prices were modestly lower. Year-over-year was the opposite, with average panel prices modestly lower in the UK and OSB prices modestly higher on the continent.

Historically, the UK has been a net importer of panel products and Norbord is the largest domestic producer. A weaker Pound Sterling relative to the Euro is advantageous to Norbord’s primarily UK-based operations as it improves sales opportunities within the UK and supports Norbord’s export program into the continent. The Pound Sterling averaged 1.18 during the third quarter of 2016, compared to an average of 1.13 in the previous quarter and 1.40 in the same quarter last year.

Operating Results

Q3 Q2 Q3 9 mos 9 mos Adjusted EBITDA (US $ millions) 2016 2016 2015 2016 2015

North America $ 106 $ 85 $ 22 $ 244 $ 44 Europe 10 11 11 31 28 Unallocated (2) (2) (3) (6) (7)

Total $ 114 $ 94 $ 30 $ 269 $ 65

Norbord generated Adjusted EBITDA of $114 million in the third quarter of 2016, compared to $94 million in the second quarter of 2016 and $30 million in the third quarter of 2015. Adjusted EBITDA was $269 million year-to-date compared to $65 million in the same period of 2015. The higher Adjusted EBITDA versus all comparative periods was primarily due to significantly higher North American OSB prices.

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Adjusted EBITDA Variance The components of the Adjusted EBITDA change are summarized in the variance table below:

(US $ millions)

Q3 2016vs.

Q2 2016

Q3 2016vs.

Q3 2015

9 mos 2016 vs.

9 mos 2015

Adjusted EBITDA – current period $ 114 $ 114 $ 269Adjusted EBITDA – comparative period 94 30 65

Variance 20 84 204

Mill nets(1) 23 87 169 Volume(2) (5) (1) 17 Key input prices(3) (3) 5 19 Key input usage(3) - 1 10 Mill profit share and bonus - (3) (7)Other operating costs and foreign exchange(4) 5 (5) (4)Total $ 20 $ 84 $ 204 (1) The mill nets variance represents the estimated impact of change in realized pricing across all products. Mill nets are calculated as sales (net of outbound

freight costs) divided by shipment volume. (2) The volume variance represents the impact of shipment volume changes across all products. (3) The key inputs include fibre, resin, wax and energy. (4) The other operating costs and foreign exchange category covers all remaining variances including labour and benefits, and maintenance.

North America Norbord’s North American operations generated $106 million in Adjusted EBITDA in the third quarter of 2016 versus $85 million in the second quarter of 2016 and $22 million in the third quarter of 2015. Year-to-date, North American operations generated $244 million versus $44 million in the same period last year. Quarter-over-quarter, the increase in Adjusted EBITDA of $21 million is primarily due to higher OSB prices partially offset by lower shipment volumes, higher supplies and maintenance costs and higher resin and energy prices. Year-over-year, the increase in Adjusted EBITDA of $84 million is primarily due to higher OSB prices, lower resin prices and improved raw material usages which more than offset higher supplies and maintenance costs and higher profit share costs attributed to higher earnings. Year-to-date, the increase in Adjusted EBITDA of $200 million is primarily due to higher OSB prices as well as higher shipment volumes, lower resin and energy prices, improved raw material usages and the foreign exchange benefit of a weaker Canadian dollar with a partial offset from higher supplies and maintenance costs and higher profit share costs attributed to higher earnings.

Norbord’s North American OSB cash production costs per unit (excluding mill profit share) increased by 2% versus the second quarter of 2016 and 1% versus the third quarter of 2015 but decreased 3% year-to-date. Quarter-over-quarter, unit costs increased as a result of higher supplies and maintenance costs, lower volume and higher resin and energy prices. Year-over-year, the higher unit cost was primarily driven by higher supplies and maintenance costs partially offset by lower resin prices and improved raw material usages. Year-to-date, unit costs were lower as a result of higher production volume, lower resin and energy prices, improved raw material usages and the foreign exchange benefit of a weaker Canadian dollar, partially offset by higher supplies and maintenance costs.

Production has remained indefinitely suspended at the Huguley, Alabama mill since the first quarter of 2009, and at the Val-d’Or, Quebec mill since the third quarter of 2012. Norbord does not currently expect to restart its curtailed mill in Val-d’Or, Quebec in 2016, but will continue to monitor market conditions. As previously announced, Norbord continues to rebuild the press line at the curtailed Huguley, Alabama mill to prepare it for future restart. The Company has not set a restart date and will only do so when it is sufficiently clear that customers require more product. These two mills represent 12% of Norbord’s annual estimated capacity in North America.

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Excluding the indefinitely curtailed mills (Huguley, Alabama and Val-d’Or, Quebec), Norbord’s operating mills produced at 95% of their stated capacity in the third quarter of 2016 compared to 96% in the second quarter of 2016 and 92% in the third quarter of 2015. During the quarter, one of Norbord’s North American mills achieved a quarterly production record. Quarter-over-quarter, capacity utilization was in line due to the loss of approximately three weeks of production in the second quarter due to the High Level fire and lower productivity in the third quarter. Year-over-year, capacity utilization increased due primarily to fewer maintenance shutdown days and production curtailments.

Europe Norbord’s European operations generated $10 million in Adjusted EBITDA in the third quarter of 2016, down from $11 million in both the second quarter of 2016 and the third quarter of 2015. Year-to-date, European operations generated $31 million in Adjusted EBITDA versus $28 million in 2015. Quarter-over-quarter, Adjusted EBITDA decreased by $1 million as a result of the translation impact of a weaker Pound Sterling, with lower shipment volumes and higher resin and energy prices offset by higher average panel prices. Year-over-year, Adjusted EBITDA decreased by $1 million due to the translation impact of a weaker Pound Sterling with lower shipment volumes offset by the lower resin and energy prices. Year-to-date, Adjusted EBITDA increased by $3 million despite the negative translation impact of a weaker Pound Sterling as lower resin and energy prices and improved raw material usages were only partially offset by lower panel prices.

The European mills produced at 99% of stated capacity in the quarter compared to 104% in the second quarter of 2016 and 99% in the third quarter of 2015. During the quarter, two of Norbord’s European mills achieved a quarterly production record. Quarter-over-quarter, capacity utilization decreased due to lost production days following a fatality at the Cowie, Scotland mill. Year-over-year, capacity utilization was in line as improved productivity was offset by the lost production days.

Margin Improvement Program (MIP) Margin improvement is a key operating focus for the Company. The Company realized MIP gains, measured relative to 2015 at constant prices and exchange rates, of $10 million in the first nine months of 2016. Contributions to MIP included improved productivity and raw material usage reduction initiatives. Merger synergies and returns on the Company’s recent capital investments (such as fines screening technology) also contributed to the MIP gains.

FINANCE COSTS, COSTS ON AINSWORTH NOTES, DEPRECIATION AND AMORTIZATION, AND

INCOME TAX


Finance costs $ (13) $ (13) $ (14) $ (39) $ (41)Foreign exchange loss on Ainsworth Notes - - - - (28)Gain on derivative financial instrument on

Ainsworth Notes - - - - 4 Costs on early extinguishment of Ainsworth Notes - - - - (25)Depreciation and amortization (23) (24) (22) (68) (65)Income tax (expense) recovery (19) (10) (3) (32) 33

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Finance Costs Finance costs include interest expense on long-term debt and program fees on the accounts receivable securitization, and are consistent across all comparative periods.

Foreign Exchange Loss on Ainsworth Notes The Ainsworth Notes were denominated in US dollars and Ainsworth’s functional currency was Canadian dollars prior to the Merger. As a result, upon revaluation to Canadian dollars, Ainsworth recorded foreign exchange losses due to the strengthening of the US dollar. In the second quarter of 2015, these notes were redeemed prior to maturity.

Gain on Derivative Financial Instrument and Costs on Early Extinguishment of Ainsworth Notes The Ainsworth Notes contained an embedded call option and this derivative was recorded initially at fair value with subsequent revaluation gains and losses recorded in earnings. This derivative was extinguished when the Ainsworth Notes were redeemed prior to maturity.

Depreciation and Amortization The Company uses the units-of-production method to depreciate its production equipment and fluctuations in depreciation expense reflect relative changes in production levels by mill. Amortization expense is in line with the prior year.

Income Tax

A tax expense of $19 million was recorded on pre-tax income of $74 million in the third quarter of 2016. Year-to-date, a tax expense of $32 million was recorded on pre-tax income of $154 million. The effective tax rate differs from the statutory rate principally due to rate differences on foreign activities, fluctuations in relative currency values and the recognition of certain income tax recoveries.

LIQUIDITY AND CAPITAL RESOURCES

(US $ millions, except per share information, unless otherwise noted) Q3 Q2 Q3 9 mos 9 mos

2016 2016 2015 2016 2015

Cash provided by (used for) operating activities $ 97 $ 83 $ 23 $ 183 $ (32)Cash provided by (used for) operating activities per

share

1.13

0.97

0.27

2.14 (0.38)Operating working capital 156 163 145 Total working capital 229 174 147 Investment in property, plant and equipment &

intangible assets

29

23

15

63

43 Net debt to capitalization, market basis 29% 31% 32% Net debt to capitalization, book basis 45% 48% 51%

At period-end, the Company had unutilized liquidity of $420 million, comprising $74 million in cash, $221 million in revolving bank lines and $125 million undrawn under its accounts receivable securitization program, which the Company believes is sufficient to fund expected short-term cash requirements.

Senior Secured Notes Due 2017 The Company’s $200 million senior secured notes due February 2017 bear an interest rate that varies with the Company’s credit ratings. The interest rate has been 7.70% since August 15, 2013. The Company intends to permanently repay these notes at maturity using cash on hand, cash generated from operations and if necessary, by drawing upon the accounts receivable securitization program.

Senior Secured Notes Due 2020

The Company’s $240 million senior secured notes due December 2020 bear an interest rate of 5.375%.

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Senior Secured Notes Due 2023 The Company’s $315 million senior secured notes due April 2023 bear an interest rate of 6.25%.

Revolving Bank Lines The Company has an aggregate commitment of $245 million under committed revolving bank lines which bears interest at money market rates plus a margin that varies with the Company’s credit rating. During the year, the Company amended these bank lines to reset the tangible net worth covenant to $500 million and extend the maturity date to May 2019. 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 the holders of the 2017, 2020 and 2023 senior secured notes.

The bank lines contain two quarterly financial covenants: minimum tangible net worth of $500 million and maximum net debt to capitalization, book basis, of 65%. For the purposes of the tangible net worth calculation, the following adjustments have been made as at period-end:

the IFRS transitional adjustments to shareholders’ equity of $21 million at January 1, 2011 are added back;

changes to other comprehensive income subsequent to January 1, 2011 is excluded;

intangible assets (other than timber rights and software acquisition and development costs) are excluded; and

the impact of the change in functional currency of Ainsworth on shareholders’ equity of $155 million is excluded.

Net debt for financial covenant purposes includes total debt, principal amount excluding any drawings on the accounts receivable securitization program, less cash, plus letters of credit issued and any bank advances. At period-end, the Company’s tangible net worth was $848 million and net debt for financial covenant purposes was $705 million. Net debt to capitalization, book basis, was 45%. The Company was in compliance with the financial covenants at period-end.

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

(US $ millions) Sep 24, 2016 Dec 31, 2015

Long-term debt, principal value $ 755 $ 755 Add: Other long-term debt - 30 Less: Cash (74) (9)Net debt 681 776 Less: Other long-term debt - (30)Add: Letters of credit 24 5 Net debt for financial covenant purposes 705 751 Shareholders' equity 593 519 Less: Intangible assets(1) - (18)Add: Other comprehensive income movement(2) 79 47 Add: Impact of Ainsworth changing functional currencies 155 155 Add: IFRS transitional adjustments 21 21 Tangible net worth for financial covenant purposes 848 724

Total capitalization $ 1,553 $ 1,475 Net debt to capitalization, market basis 29% 32% Net debt to capitalization, book basis 45% 51%

(1) Timber rights and software development costs were excluded from the definition of intangible assets when the bank lines were renewed in June 2016. (2) Cumulative subsequent to January 1, 2011.

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Accounts Receivable Securitization The Company has a $125 million multi-currency accounts receivable securitization program with a third-party trust sponsored by a highly rated Canadian financial institution. The program is revolving and has an evergreen commitment subject to termination on 12 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. However, the asset de-recognition criteria under IFRS have not been met and the transferred accounts receivable remain recorded as an asset.

At period-end, Norbord had transferred but continued to recognize $142 million in trade accounts receivable and the Company did not have any drawings relating to this program. The level of trade accounts receivable transferred under the program fluctuates with the level of shipment volumes, product prices and foreign exchange rates. The amount Norbord chooses to draw under the program at any point in time depends on the level of accounts receivable transferred, timing of cash settlements and fluctuates with the Company’s cash requirements. Any drawings are presented as other long-term debt on the balance sheet and are excluded from the net debt to capitalization calculation for financial covenant purposes. The utilization charge, which is based on money market rates plus a margin, and other program fees are recorded as finance costs. Year-to-date, the utilization charge on drawings ranged from 1.5% to 2.1%.

The securitization program contains no financial covenants. However, the program is subject to minimum credit rating requirements. The Company must maintain a long-term issuer credit rating of at least single B(mid) or the equivalent. As at October 27, 2016, Norbord’s ratings were BB (DBRS), BB- (Standard & Poor’s Ratings Services) and Ba2 (Moody’s Investors Service).

Other Liquidity and Capital Resources Operating working capital, consisting of accounts receivable, inventory and prepaids less accounts payable and accrued liabilities, was $156 million at period-end compared to $163 million at the end of the prior quarter and $145 million at September 26, 2015. The Company aims to continuously minimize the amount of capital held as operating working capital and takes actions to manage it at minimal levels.

Quarter-over-quarter, operating working capital decreased by $7 million primarily due to higher accounts payable and accrued liabilities and lower accounts receivable partially offset by higher prepaids. Higher accounts payable and accrued liabilities is due to the timing of payments, higher interest accrual due to the timing of coupon payments on the senior secured notes and higher mill profit share accruals. Lower accounts receivable is attributable to partial collections on the insurance receivable related to the High Level fire and the timing of commodity tax refunds. Higher prepaids is primarily due to payment of annual insurance premiums during the quarter.

Year-over-year, operating working capital increased by $11 million primarily due to higher accounts receivable and higher inventory. Higher accounts receivable is mainly attributable to higher North American OSB prices and the remaining insurance receivable on the High Level fire. Higher inventory is a result of higher operating and maintenance supplies due to the timing of maintenance shuts.

Total working capital, which includes operating working capital plus cash and income tax receivable less bank advances and tax payable, was $229 million as at the end of the third quarter of 2016, compared to $174 million at June 25, 2016 and $147 million at September 26, 2015. Quarter-over-quarter, the increase is primarily attributed to higher cash partially offset by the lower operating working capital. Year-over-year, the increase is primarily attributed to higher cash and higher operating working capital.

Operating activities generated $97 million of cash or $1.13 per share in the third quarter of 2016, compared to $83 million or $0.97 per share generated in the prior quarter and $23 million or $0.27 per share generated in the third quarter of 2015. Year-to-date, operating activities provided $183 million of cash or $2.14 per share

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compared to $32 million or $0.38 per share consumed in the prior period. The higher generation of cash versus the comparative periods is mainly attributed to the higher Adjusted EBITDA in the current period.

INVESTMENTS AND DIVESTITURES

Investments Investment in property, plant and equipment and intangible assets was $29 million in the third quarter of 2016 compared to $23 million in the second quarter and $15 million in the third quarter of 2015. The increase versus the prior quarters is primarily attributable to the Inverness project (described below).

Norbord’s 2016 investment in property, plant and equipment and intangible assets is expected to be $75 million (excluding the Inverness project, described below). The investment plan for the current year includes further process debottlenecking and manufacturing cost reduction projects under the Company’s multi-year capital reinvestment strategy. These investments will be funded with cash on hand, cash generated from operations and, if necessary, drawings under the Company’s accounts receivable securitization program or committed revolving bank lines.

Inverness Project In January 2016, the Board of Directors approved the investment of $135 million over the next two years to modernize and expand the Company’s Inverness, Scotland OSB mill. On-site construction work commenced in the second quarter of 2016 and work was completed to move the unused second press from the Grande Prairie, Alberta mill during the current quarter. Norbord expects the new line to start up in the second half of 2017, with no disruption to existing production capacity in the interim. Capital spending is expected to be $45 million in 2016, of which $19 million has been incurred year-to-date. The investment will be funded with cash on hand, cash generated from operations and, if necessary, drawings under the Company’s accounts receivable securitization program or committed revolving bank lines.

CAPITALIZATION

At October 27, 2016, there were 85.6 million common shares outstanding. In addition, 2.1 million stock options were outstanding, of which 65% were fully vested.

Dividends Norbord’s variable dividend policy targets the payment to shareholders of a portion of free cash flow based upon the Company’s financial position, results of operations, cash flow, capital requirements and restrictions under the Company’s revolving bank lines, as well as the market outlook for the Company’s principal products and broader market and economic conditions, among other factors. Under this policy, the Board of Directors (the Board) has declared the following dividends and has adjusted the level twice to maintain flexibility in the Company’s capital structure as well as to fund growth and other attractive capital investment opportunities:

(in CAD $) Quarterly dividend declared

per common share

Q2-2013 to Q4-2014 $ 0.60 Q1-2015 & Q2-2015 0.25 Q3-2015 to Q3-2016 0.10

The Board retains the discretion to amend the Company’s dividend policy in any manner and at any time as it may deem necessary or appropriate in the future. For these reasons, as well as others, the Board in its sole discretion can decide to increase, maintain, decrease, suspend or discontinue the payment of cash dividends in the future.

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FINANCIAL INSTRUMENTS

The Company utilizes various derivative financial instruments to manage risk and make better use of capital. The fair values of these instruments are reflected on the Company’s balance sheet and are disclosed in note 12 to the condensed consolidated interim financial statements.

TRANSACTIONS WITH RELATED PARTIES

In the normal course of operations, the Company enters into various transactions with related parties which have been measured at the exchange amounts and are recognized in the consolidated financial statements. The following transactions have occurred between the Company and its related parties during the quarter.

The Company periodically engages the services of Brookfield for various financial, real estate and other business advisory services. Year-to-date, the fees for services rendered were less than $1 million (2015 – less than $1 million).

Sales to Asian markets are handled by Interex Forest Products Ltd. (Interex), a cooperative sales company over which Norbord, as a 25% shareholder, has significant influence. Year-to-date, net sales of $40 million (2015 – $36 million) were made to Interex. At period-end, $4 million (December 31, 2015 – $3 million) due from Interex was included in Accounts receivable.

SELECTED QUARTERLY INFORMATION

2016 2015 2014

(US $ millions, except per share information, unless otherwise noted) Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4

KEY PERFORMANCE METRICS Return on capital employed (ROCE)(1) 32% 26% 18% 15% 8% 5% 4% 4%Return on equity (ROE)(1) 41% 31% 16% 11% (3)% (9)% (10)% (8)%Cash provided by (used for) operating activities 97 83 3 56 23 (3) (52) 9 Cash provided by (used for) operating activities

per share(1) 1.13 0.97 0.04 0.66 0.27 (0.04) (0.61) 0.11 SALES AND EARNINGS Sales 453 447 384 415 378 365 351 372 Operating income (loss) 87 67 39 33 8 (4) (6) (9)Adjusted EBITDA(1) 114 94 61 57 30 19 16 14 Earnings (loss) 55 44 23 13 (9) (23) (37) (26)Adjusted earnings (loss)(1) 58 42 20 16 (4) (12) (14) (16)PER COMMON SHARE EARNINGS Earnings (loss), basic and diluted 0.64 0.51 0.27 0.15 (0.11) (0.27) (0.43) (0.30)Adjusted earnings (loss), basic(1,2) 0.68 0.49 0.23 0.19 (0.05) (0.14) (0.16) (0.18)Dividends declared(3) 0.10 0.10 0.10 0.10 0.10 0.25 0.25 0.60 KEY STATISTICS Shipments (MMsf–3⁄8") North America 1,463 1,487 1,337 1,459 1,409 1,375 1,254 1,312 Europe 438 459 435 425 453 438 424 401Indicative Average OSB Price North Central ($/Msf–7⁄16") 301 264 226 242 204 193 193 216 South East ($/Msf–7⁄16") 256 245 215 221 176 174 175 181 Western Canada ($/Msf–7⁄16") 265 242 191 204 158 152 159 172 Europe (€/m3)(4) 235 237 230 226 220 218 232 248

(1) Non-IFRS measure; see Non-IFRS Financial Measures section. (2) Basic and diluted Adjusted earnings (loss) per share are the same except diluted Adjusted earnings per share for Q3 2016 is $0.67.

(3) Dividends declared per share stated in Canadian dollars. (4) European indicative average OSB price represents the gross delivered price to the largest continental market.

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Quarterly results are impacted by seasonal factors such as weather and building activity. Market demand varies seasonally, as homebuilding activity and repair and remodelling work – the principal end uses of Norbord’s products – are generally stronger in the spring and summer months. Adverse weather can also limit access to logging areas, which can affect the supply of fibre to Norbord’s operations. OSB shipment volumes and prices are affected by these factors as well as by global supply and demand conditions.

Operating working capital is typically built up in the first quarter of the year due primarily to log inventory purchases in the northern regions of North America and Europe. This inventory is generally consumed in the spring and summer months.

The demand for and the price of OSB in North America are significant variables affecting the comparability of Norbord’s results over the past eight quarters. Fluctuations in earnings during that time mirror fluctuations in the demand for and the price of OSB in North America. The Company estimates that the annualized impact on Adjusted EBITDA of a $10 per Msf (7/16-inch basis) change in the North American OSB price, when all operations (including the indefinitely curtailed Huguley, Alabama and Val-d’Or, Quebec mills) are running at full capacity, is approximately $58 million. Regional pricing variations, particularly in the Southern US and Western Canada, make the North Central benchmark price a useful, albeit imperfect, proxy for overall North American OSB pricing. Similarly in Europe, regional pricing variations, relative foreign exchange rates and product mix also make the European OSB indicative price a useful, albeit imperfect, proxy for overall European OSB pricing. Further, premiums obtained on value-added products, the pricing lag effect of maintaining an order file, and volume and trade discounts cause realized prices to differ from the benchmarks for both North America and Europe.

Global commodity prices affect the prices of key raw material inputs, primarily wood fibre, resin, wax and energy which had been increasing as the broader US economic recovery gained traction. However, prices for resin, a petroleum-based product, started trending down along with oil prices in the fourth quarter of 2014, reversing a decade-long upward trend. In the current quarter, the downward trend halted and there was a slight increase in resin prices. The Company expects to continue to benefit from lower resin prices as long as global oil prices remain under pressure.

Norbord has exposure to the Canadian dollar related to certain Canadian dollar denominated manufacturing costs as approximately 37% of its panel production capacity is located in Canada. The Company estimates that the favourable impact of a one-cent (US) decrease in the value of the Canadian dollar would positively impact annual Adjusted EBITDA by approximately $3 million when all six of Norbord’s Canadian OSB mills operate at capacity.

Items not related to ongoing business operations that had a significant impact on quarterly results include:

Merger Transaction Costs − Included in the second quarter of 2015 is $1 million ($0.01 per basic and diluted share) of transaction costs related to the Merger. Included in the first quarter of 2015 is $7 million ($0.08 per basic and diluted share) of transaction costs related to the Merger. Included in the fourth quarter of 2014 is $9 million ($0.11 per basic and diluted share) of transaction costs related to the Merger.

Severance Costs Related to Merger − Included in the second quarter of 2015 is $2 million ($0.02 per basic and diluted share) of severance costs incurred to achieve synergies from the Merger.

Other Costs Incurred to Achieve Merger Synergies − Included in the third quarter of 2016 is $4 million ($0.05 per basic and diluted share) of other costs incurred to achieve synergies from the Merger, including consulting and professional fees, and costs expensed to dismantle certain idle equipment at the Grande Prairie, Alberta mill which will be put to use in Inverness, Scotland. Included in the second quarter of 2016 is $2 million ($0.02 per basic and diluted share) of similar costs. Included in the first quarter of 2016 is $1 million ($0.01 per basic and diluted share) of other costs incurred to achieve synergies from the Merger including consulting and professional fees. Included in the fourth quarter of 2015 is $3 million ($0.03 per basic and diluted share) and in the second quarter of 2015 is $1 million ($0.01 per basic and diluted share) of

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similar costs. Included in the first quarter of 2015 is $1 million ($0.01 per basic and diluted share) of costs associated with the immediate vesting of certain Ainsworth stock options upon closing of the Merger.

Costs on Early Debt Extinguishment − Included in the second quarter of 2015 is a $13 million ($0.15 per basic and diluted share) premium paid on the early redemption of the Ainsworth Notes, an $11 million ($0.13 per basic and diluted share) write-off of the related financial instrument on the call options embedded in the Ainsworth Notes and a related $1 million ($0.01 per basic and diluted share) write-off of net unamortized debt issue costs.

Income Taxes − Included in the fourth quarter of 2014 is a $7 million ($0.08 per basic and diluted share) income tax recovery comprised of: (i) the recognition and utilization of certain tax assets that offset taxes previously expensed; and (ii) the recognition of previously unrecognized deferred tax assets as a result of reassessments of probability of future recovery of these assets.

Foreign Exchange Loss on Ainsworth Notes – Included in the first quarter of 2015 is a $28 million ($0.33 per basic and diluted share) foreign exchange loss due to the revaluation of the Ainsworth Notes to Canadian dollars since the Ainsworth Notes were denominated in US dollars and Ainsworth’s functional currency was Canadian dollars prior to the Merger. Included in the fourth quarter of 2014 is an $11 million ($0.13 per basic and diluted share) foreign exchange revaluation loss.

Gain (Loss) on Derivative Financial Instrument on Ainsworth Notes – Included in the first quarter of 2015 is a $4 million ($0.05 per basic and diluted share) revaluation gain on the embedded call option contained in the Ainsworth Notes. This derivative was extinguished when the Ainsworth Notes were redeemed early. Included in the fourth quarter of 2014 is a $2 million ($0.02 per basic and diluted share) revaluation loss.

FUTURE CHANGES IN ACCOUNTING POLICIES

In addition to the future changes in accounting policies discussed in the Company’s 2015 annual MD&A, below are new accounting policies issued in 2016. (i) Income Taxes In January 2016, the IASB issued amendments to clarify the requirements for recognizing deferred tax assets on unrealized losses. The amendments clarify the accounting for deferred tax where an asset is measured at fair value and that fair value is below the asset’s tax base. They also clarify certain other aspects of accounting for deferred tax assets. The amendments are effective for the year ending January 1, 2017 and the Company does not expect these amendments to have a significant impact on its financial statements.

(ii) Cash Flow Statement Disclosure In January 2016, the IASB issued an amendment to IAS 7, Statement of Cash Flows, introducing additional disclosure requirements for liabilities arising from financing activities. The amendments are effective for the year ending January 1, 2017 and the Company does not expect this amendment to have a significant impact on its financial statements. (iii) Share-Based Payment In June 2016, the IASB issued an amendment to IFRS 2, Share-based Payment, clarifying the accounting for certain types of share-based payment transactions. The amendments provide requirements on accounting for the effects of vesting and non-vesting conditions of cash-settled share-based payments, withholding tax obligations for share-based payments with a net settlement feature, and when a modification to the terms of a share-based payment changes the classification of the transaction from cash-settled to equity-settled. The amendments are effective for the year beginning on or after January 1, 2018 and the Company is currently assessing the impact of this amendment on its financial statements.

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SIGNIFICANT ACCOUNTING POLICIES, JUDGEMENTS AND ESTIMATES

Management has selected appropriate accounting policies and made certain estimates and judgements that affect the reported amounts and other disclosures in the financial statements. These accounting policies, estimates and judgements are described in the 2015 audited annual financial statements of the Company.

INTERNAL CONTROLS OVER FINANCIAL REPORTING AND DISCLOSURE CONTROLS AND

PROCEDURES

There were no changes in the Company’s internal controls over financial reporting and disclosure controls and procedures during the three months ended September 24, 2016 that have materially affected, or are reasonably likely to materially affect, its internal controls over financial reporting.

NON-IFRS FINANCIAL MEASURES

The following non-IFRS financial measures have been used in this MD&A. Non-IFRS financial measures do not have any standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other companies. Each non-IFRS financial measure is defined below. Where appropriate, a quantitative reconciliation of the non-IFRS financial measure to the most directly comparable IFRS measure is provided.

Adjusted earnings (loss) is defined as earnings (loss) determined in accordance with IFRS before unusual or non-recurring items and using a normalized income tax rate. Non-recurring items include costs related to the Merger, foreign exchange on the Ainsworth Notes and fair value movements on the financial instrument associated with the Ainsworth Notes and costs on early debt extinguishment. The actual income tax (expense) recovery is (added back) deducted and a tax (expense) recovery calculated at the Canadian combined federal and provincial statutory rate is (deducted) added. Adjusted earnings (loss) per share is Adjusted earnings (loss) divided by the weighted average number of common shares outstanding.

The following table reconciles Adjusted earnings (loss) to the most directly comparable IFRS measure:

Q3 Q2 Q3 9 mos 9 mos(US $ millions) 2016 2016 2015 2016 2015

Earnings (loss) $ 55 $ 44 $ (9) $ 122 $ (69)Add: Merger transaction costs - - - - 8 Add: Severance costs related to Merger - - - - 2 Add: Other costs incurred to achieve Merger synergies 4 2 - 7 2 Add: Costs related to High Level fire - 1 - 1 -Add: Costs on early debt extinguishment - - - - 25 Add: Foreign exchange loss on Ainsworth Notes - - - - 28 Less: Gain on derivative financial instrument on

Ainsworth Notes - - - - (4)Add: Reported income tax expense (recovery) 19 10 3 32 (33)Adjusted pre-tax earnings (loss) 78 57 (6) 162 (41)Less: Income tax (expense) recovery at statutory rate(1) (20) (15) 2 (42) 11

Adjusted earnings (loss) $ 58 $ 42 $ (4) $ 120 $ (30) (1) Represents Canadian combined federal and provincial statutory rate.

Adjusted EBITDA is defined as earnings (loss) determined in accordance with IFRS before finance costs, income taxes, depreciation and amortization, and other unusual or non-recurring items. Non-recurring items include costs related to the Merger, foreign exchange on the Ainsworth Notes and fair value movements on the financial instrument associated with the Ainsworth Notes and costs on early debt extinguishment. As Norbord operates in a cyclical commodity business, Norbord interprets Adjusted EBITDA over the business cycle as a useful indicator of the Company’s ability to incur and service debt and meet capital expenditure requirements. In addition, Norbord views Adjusted EBITDA as a measure of gross profit and interprets Adjusted EBITDA trends as indicators of relative operating performance.

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The following table reconciles Adjusted EBITDA to the most directly comparable IFRS measure:


Earnings (loss) $ 55 $ 44 $ (9) $ 122 $ (69)Add: Finance costs 13 13 14 39 41 Add: Depreciation and amortization 23 24 22 68 65 Add: Income tax expense (recovery) 19 10 3 32 (33)Add: Merger transaction costs - - - - 8 Add: Costs related to High Level fire - 1 - 1 - Add: Severance costs related to Merger - - - - 2 Add: Other costs incurred to achieve Merger synergies 4 2 - 7 2 Add: Costs on early debt extinguishment - - - - 25 Add: Foreign exchange loss on Ainsworth Notes - - - - 28 Less: Gain on derivative financial instrument on

Ainsworth Notes - - - - (4)

Adjusted EBITDA $114 $ 94 $ 30 $ 269 $ 65

Operating working capital is defined as accounts receivable plus inventory, prepaids less accounts payable and accrued liabilities. Operating working capital is a measure of the investment in accounts receivable, inventory, prepaids, accounts payable and accrued liabilities required to support operations. The Company aims to minimize its investment in operating working capital; however, the amount will vary with seasonality and sales expansions and contractions.

(US $ millions) Sep 24, 2016 Jun 25, 2016 Dec 31, 2015 Sep 26, 2015

Accounts receivable $ 160 $ 166 $ 135 $ 153 Inventory 189 188 181 185 Prepaids 13 7 10 14 Accounts payable and accrued liabilities (206) (198) (201) (207)

Operating working capital $ 156 $ 163 $ 125 $ 145

Total working capital is operating working capital plus cash and tax receivable less bank advances, if any and tax payable.


Operating working capital $ 156 $ 163 $ 125 $ 145 Cash 74 12 9 2 Tax receivable - 1 2 1 Tax payable (1) (2) (2) (1)

Total working capital $ 229 $ 174 $ 134 $ 147

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Capital employed is defined as the sum of property, plant and equipment, intangible assets and operating working capital. Capital employed is a measure of the total investment in a business in terms of property, plant and equipment, intangible assets and operating working capital.


Property, plant and equipment $ 1,240 $ 1,239 $ 1,260 $ 1,264 Intangible assets 21 20 18 13 Accounts receivable 160 166 135 153 Prepaids 13 7 10 14 Inventory 189 188 181 185 Accounts payable and accrued liabilities (206) (198) (201) (207)Capital employed $ 1,417 $ 1,422 $ 1,403 $ 1,422

ROCE (return on capital employed) is Adjusted EBITDA divided by average capital employed. ROCE is a measurement of financial performance, focusing on cash generation and the effective use of capital. As Norbord operates in a cyclical commodity business, it monitors ROCE over the cycle as a useful means of comparing businesses in terms of efficiency of management. Norbord targets top-quartile ROCE among North American forest products companies over the business cycle.

ROE (return on equity) is Adjusted earnings (loss) divided by common shareholders’ equity. ROE is a measure that allows common shareholders to determine how effectively their invested capital is being employed. As Norbord operates in a cyclical commodity business, it looks at ROE over the business cycle and targets top-quartile performance among North American forest products companies.

Cash provided by (used for) operating activities per share is calculated as cash provided by (used for) operating activities as determined under IFRS, divided by the weighted average number of common shares outstanding.

Net debt is the principal value of long-term debt, including the current portion, other long-term debt and bank advances, if any, less cash. Net debt for financial covenant purposes is Net debt excluding other long-term debt and including letters of credit outstanding. Net debt is a useful indicator of a company’s debt position. Net debt comprises:


Long-term debt, principal value $ 755 $ 755 $ 755 $ 755 Add: Other long-term debt - - 30 44 Less: Cash (74) (12) (9) (2)Net debt 681 743 776 797 Less: Other long-term debt - - (30) (44)Add: Letters of credit 24 8 5 5

Net debt for financial covenant purposes $ 705 $ 751 $ 751 $ 758

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Tangible net worth consists of shareholders’ equity including certain adjustments. A minimum tangible net worth is one of two financial covenants contained in the Company’s committed bank lines. For financial covenant purposes, effective January 1, 2011, tangible net worth excludes all IFRS transitional adjustments and all movement in cumulative other comprehensive income subsequent to January 1, 2011 (includes those movements related to the translation of Ainsworth in prior periods).


Shareholders’ equity $ 593 $ 553 $ 519 $ 520 Less: Intangible assets(1) - - (18) (13)Add: Other comprehensive income movement(2) 79 70 47 39 Add: Impact of Ainsworth changing functional

currencies 155 155 155 155 Add: IFRS transitional adjustments 21 21 21 21

Tangible net worth $ 848 $ 799 $ 724 $ 722 (1) Timber rights and software development costs were excluded from the definition of intangible assets when the bank lines were renewed in June 2016. (2) Cumulative subsequent to January 1, 2011.

Net debt to capitalization, book basis, is net debt for financial covenant purposes divided by the sum of net debt for financial covenant purposes and tangible net worth. Net debt to capitalization on a book basis is a measure of a company’s relative debt position. Norbord interprets this measure as an indicator of the relative strength and flexibility of its balance sheet. In addition, a maximum net debt to capitalization, book basis, is one of two financial covenants contained in the Company’s committed bank lines.

Net debt to capitalization, market basis, is net debt for financial covenant purposes divided by the sum of net debt for financial covenant purposes and market capitalization. Market capitalization is the number of common shares outstanding at period-end multiplied by the trailing 12-month average per share market price. Net debt to capitalization, market basis, is a key measure of a company’s relative debt position and Norbord interprets this measure as an indicator of the relative strength and flexibility of its balance sheet. While the Company considers both book and market basis metrics, it believes the market basis to be superior to the book basis in measuring the true strength and flexibility of its balance sheet.

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FORWARD-LOOKING STATEMENTS

This document includes forward-looking statements, as defined by applicable securities legislation. Often, but not always, forward-looking statements can be identified by the use of words such as “believes,” “expects,” “targets,” “outlook,” “scheduled,” “estimates,” “forecasts,” “aims,” “predicts,” “plans,” “projects,” “anticipates,” “intends” or variations of such words and phrases or negative versions thereof or statements that certain actions, events or results “may,” “could,” “would,” “should,” “might” or “will” be taken, occur or be achieved. 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.

Examples of such statements include, but are not limited to, comments with respect to: (1) outlook for the markets for products; (2) expectations regarding future product pricing; (3) outlook for operations; (4) expectations regarding mill capacity; (5) objectives; (6) strategies to achieve those objectives; (7) expected financial results including the expected results of the MIP; (8) sensitivity to changes in product prices, such as the price of OSB; (9) sensitivity to changes in foreign exchange rates; (10) sensitivity to key input prices, such as the price of fibre, resin, wax and energy; (11) expectations regarding compliance with environmental regulations; (12) expectations regarding income tax rates; (13) expectations regarding contingent liabilities and guarantees, including the outcome of pending litigation; (14) expectations regarding the amount, timing and benefits of capital investments; (15) expectations regarding the amount and timing of dividend payments; and (16) historical, forecasted and other forward-looking information published by third parties such as the US Census Bureau and Forest Economic Advisors, LLC (FEA) which we may refer to but have not independently verified; (17) the integration of the Ainsworth operations; and (18) the ability of the combined Company to realize synergies.

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. These factors include, but are not limited to: (1) assumptions in connection with the economic and financial conditions in the US, Europe, Canada and globally; (2) risks inherent to product concentration and cyclicality; (3) effects of competition and product pricing pressures; (4) risks inherent to customer dependence; (5) effects of variations in the price and availability of manufacturing inputs, including continued access to fibre resources at competitive prices; (6) availability of rail services and port facilities; (7) various events that could disrupt operations, including natural or catastrophic events and ongoing relations with employees; (8) impact of changes to, or non-compliance with, environmental regulations; (9) impact of any product liability claims in excess of insurance coverage; (10) risks inherent to a capital intensive industry; (11) impact of future outcomes of tax exposures; and (12) effects of currency exposures and exchange rate fluctuations.

The above list of important factors affecting forward-looking information is not exhaustive. Additional factors are noted elsewhere, and reference should be made to the other risks discussed in filings with Canadian and US securities regulatory authorities. Except as required by applicable law, Norbord does not undertake to update any forward-looking statements, whether written or oral, that may be made from time to time by, or on behalf of, the Company, 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.

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Interim Consolidated Balance Sheets

(Unaudited)

(US $ millions)

Note

Sep 24, 2016

Dec 31, 2015

Assets Current assets Cash $ 74 $ 9 Accounts receivable 3 160 135 Tax receivable - 2 Inventory 4 189 181 Prepaids 13 10 436 337

Non-current assets Property, plant and equipment 1,240 1,260 Intangible assets 21 18 Deferred income tax assets 5 5 Other assets 5 16 15 1,282 1,298

$ 1,718 $ 1,635 Liabilities and shareholders’ equity Current liabilities Accounts payable and accrued liabilities $ 206 $ 201 Tax payable 1 2 Current portion of long-term debt 6 200 - 407 203

Non-current liabilities Long-term debt 6 546 745 Other long-term debt 3 - 30 Other liabilities 7 43 31 Deferred income tax liabilities 129 107 718 913 Shareholders’ equity 8 593 519

$ 1,718 $ 1,635

(See accompanying notes)

Commitments and Contingencies (note 13)

Subsequent Event (note 17)

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Interim Consolidated Statements of Earnings

(Unaudited)

Periods ended Sep 24 and Sep 26 (US $ millions, except per share information)

Note

Q3 2016

Q3 2015

9 mos 2016

9 mos 2015

Sales 15 $ 453 $ 378 $ 1,284 $ 1,094 Cost of sales 9 (340) (345) (1,015) (1,022)General and administrative expenses (3) (3) (8) (9)Depreciation and amortization 15 (23) (22) (68) (65)Operating income (loss) 87 8 193 (2) Non-operating (expense) income:

Finance costs (13) (14) (39) (41)Costs on early debt extinguishment - - - (25)Foreign exchange loss on Ainsworth Notes - - - (28)Gain on derivative financial instrument on

Ainsworth Notes - - - 4 Merger transaction costs 1 - - - (8)Severance costs related to Merger 1 - - - (2)

Earnings (loss) before income tax 74 (6) 154 (102)Income tax (expense) recovery (19) (3) (32) 33

Earnings (loss) $ 55 $ (9) $ 122 $ (69)

Earnings (loss) per common share 10 Basic $ 0.64 $ (0.11) $ 1.43 $ (0.81) Diluted 0.64 (0.11) 1.42 (0.81)


Interim Consolidated Statements of Comprehensive Income

(Unaudited)

Periods ended Sep 24 and Sep 26 (US $ millions)

Q3 2016

Q3 2015

9 mos 2016

9 mos 2015

Earnings (loss) $ 55 $ (9) $ 122 $ (69)Other comprehensive (loss) income, net of tax Items that will not be reclassified to earnings: Actuarial gain (loss) on post-employment obligation 1 - (11) 4 Items that may be reclassified subsequently to earnings: Foreign currency translation loss on foreign operations (10) (11) (21) (44)

Net loss on Euro cash flow hedge - (1) - - Other comprehensive loss, net of tax (9) (12) (32) (40)

Comprehensive income (loss) $ 46 $ (21) $ 90 $ (109)


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Interim Consolidated Statements of Changes in Shareholders’ Equity

(Unaudited)


Note

Q3 2016

Q3 2015

9 mos 2016

9 mos 2015

Share capital Balance, beginning of period $ 1,337 $ 1,334 $ 1,334 $ 1,331 Issue of common shares upon exercise of options and Dividend Reinvestment Plan 8 1 - 4 3 Balance, end of period $ 1,338 $ 1,334 $ 1,338 $ 1,334 Merger reserve Balance, beginning and end of period 8 $ (96) $ (96) $ (96) $ (96)Contributed surplus Balance, beginning of period $ 10 $ 10 $ 10 $ 9 Stock-based compensation 8 - - - 1 Balance, end of period $ 10 $ 10 $ 10 $ 10 Retained deficit Balance, beginning of period $ (505) $ (551) $ (559) $ (463)Earnings (loss) 55 (9) 122 (69)Common share dividends (7) (6) (20) (34)Balance, end of period(i) $ (457) $ (566) $ (457) $ (566)Accumulated other comprehensive loss Balance, beginning of period $ (193) $ (150) $ (170) $ (122)Other comprehensive loss (9) (12) (32) (40)Balance, end of period 8 $ (202) $ (162) $ (202) $ (162)

Shareholders’ equity $ 593 $ 520 $ 593 $ 520


(i) Retained deficit comprised of: Deficit arising on cashless exercise of warrants in 2013 $ (263) $ (263)All other retained deficit (194) (303)

$ (457) $ (566)

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Interim Consolidated Statements of Cash Flows

(Unaudited)


Note

Q3 2016

Q3 2015

9 mos 2016

9 mos 2015

CASH PROVIDED BY (USED FOR): Operating activities Earnings (loss) $ 55 $ (9) $ 122 $ (69)Items not affecting cash: Depreciation and amortization 23 22 68 65 Deferred income tax 19 2 29 (32) Gain on derivative financial instrument on

Ainsworth Notes - - - (4) Foreign exchange loss on Ainsworth Notes - - - 28 Other items 11 5 (1) 14 13 102 14 233 1 Net change in non-cash operating working capital

balances 11 (5) 7 (51) (34)Net change in tax payable (receivable) - 2 1 1 97 23 183 (32)Investing activities Investment in property, plant and equipment (24) (13) (58) (41)Investment in intangible assets (2) (1) (5) (3) (26) (14) (63) (44)Financing activities Common share dividends paid (7) (6) (20) (34)Accounts receivable securitization (repayments)

drawings, net 3 - (6) (30) 44 Issue of common shares - - 2 1 Issuance of debt - - - 315 Debt issue costs - - - (6)Repayment of debt - - - (315)Premium on early debt extinguishment - - - (13) (7) (12) (48) (8)Foreign exchange revaluation on cash (2) (5) (7) (6)Cash Increase (decrease) during period 62 (8) 65 (90)Balance, beginning of period 12 10 9 92

Balance, end of period $ 74 $ 2 $ 74 $ 2

(See accompanying notes, including note 11 for supplemental cash flow information)

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Notes to the Interim Consolidated Financial Statements (in US $, unless otherwise noted)

In these notes, “Norbord” and the “Company” means Norbord Inc. and all of its consolidated subsidiaries and affiliates, unless the context implies otherwise. “Brookfield” means Brookfield Asset Management Inc., or any of its consolidated subsidiaries and affiliates, which are related parties by virtue of a controlling equity interest in the Company.

NOTE 1. NATURE AND DESCRIPTION OF THE COMPANY

Norbord is an international producer of wood-based panels with 17 plant locations in the United States, Europe and Canada. Norbord is a publicly traded company listed on the Toronto Stock Exchange (TSX) and also began trading on the New York Stock Exchange (NYSE) on February 19, 2016. The ticker symbol on both exchanges is “OSB”. The Company is incorporated under the Canada Business Corporations Act and is headquartered in Toronto, Ontario, Canada.

On March 31, 2015, Norbord completed a merger (the Merger) with Ainsworth Lumber Co. Ltd. (Ainsworth).

Prior to the completion of the Merger, Brookfield controlled approximately 52% and 55% of the outstanding common shares of the Company and Ainsworth, respectively. Subsequent to the Merger, Brookfield controls approximately 53% of the outstanding common shares of the Company.

NOTE 2. SIGNIFICANT ACCOUNTING POLICIES

(a) Statement of Compliance These condensed consolidated interim financial statements (interim financial statements) have been prepared in accordance with International Accounting Standard (IAS) 34, Interim Financial Reporting on a basis consistent with the accounting policies the Company disclosed in its audited consolidated financial statements as at, and for the year ended, December 31, 2015. These interim financial statements do not contain all of the disclosures that are required in annual financial statements prepared under International Financial Reporting Standards (IFRS) and should be read in conjunction with the Company’s 2015 audited annual financial statements which include information necessary or useful to understanding the Company’s business and financial statement presentation. The Company’s interim results are not necessarily indicative of its results for a full year. These interim financial statements were authorized for issuance by the Board of Directors of the Company on October 27, 2016. (b) Basis of Presentation These interim financial statements include the accounts of the Company and all of its wholly-owned subsidiaries.

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(c) Future Changes in Accounting Policies In addition to the future changes in accounting policies disclosed in the Company’s 2015 audited annual financial statements, below are new accounting policies issued in 2016:

(i) Income Taxes In January 2016, the International Accounting Standards Board (IASB) issued amendments to clarify the requirements for recognizing deferred tax assets on unrealized losses. The amendments clarify the accounting for deferred tax where an asset is measured at fair value and that fair value is below the asset’s tax base. They also clarify certain other aspects of accounting for deferred tax assets. The amendments are effective for the year beginning on or after January 1, 2017. The Company does not expect these amendments to have a significant impact on its financial statements. (ii) Cash Flow Statement Disclosure In January 2016, the IASB issued an amendment to IAS 7, Statement of Cash Flows, introducing additional disclosure requirements for liabilities arising from financing activities. The amendments are effective for the year beginning on or after January 1, 2017. The Company does not expect this amendment to have a significant impact on its financial statements. (iii) Share-Based Payment In June 2016, the IASB issued an amendment to IFRS 2, Share-based Payment, clarifying the accounting for certain types of share-based payment transactions. The amendments provide requirements on accounting for the effects of vesting and non-vesting conditions of cash-settled share-based payments, withholding tax obligations for share-based payments with a net settlement feature, and when a modification to the terms of a share-based payment changes the classification of the transaction from cash-settled to equity-settled. The amendments are effective for the year beginning on or after January 1, 2018. The Company is currently assessing the impact of these amendments on its financial statements.

NOTE 3. ACCOUNTS RECEIVABLE

The Company has a $125 million multi-currency accounts receivable securitization program with a third-party trust sponsored by a highly rated Canadian financial institution. The program is revolving and has an evergreen commitment subject to termination on 12 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. However, the asset de-recognition criteria under IFRS have not been met and the transferred accounts receivable remain recorded as an asset.

At period-end, Norbord had transferred but continued to recognize $142 million (December 31, 2015 – $122 million) in trade accounts receivable, and Norbord recorded no drawings as other long-term debt (December 31, 2015 – $30 million) relating to this financing program. The level of trade accounts receivable transferred under the program fluctuates with the level of shipment volumes, product prices and foreign exchange rates. The amount Norbord chooses to draw under the program at any point in time depends on the level of accounts receivable transferred, timing of cash settlements and fluctuates with the Company’s cash requirements. Any drawings are presented as other long-term debt on the balance sheet and are excluded from the net debt to capitalization calculation for financial covenant purposes (note 6). The utilization charge, which is based on money market rates plus a margin, and other program fees are recorded as finance costs. Year-to-date, the utilization charge on drawings ranged from 1.5% to 2.1%.

The securitization program contains no financial covenants; however, the program is subject to minimum credit-rating requirements. The Company must maintain a long-term issuer credit rating of at least single B (mid) or the equivalent. As at October 27, 2016, Norbord’s ratings were BB (DBRS), BB- (Standard & Poor’s Ratings Services) and Ba2 (Moody’s Investors Service).

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NOTE 4. INVENTORY


Raw materials $ 52 $ 52 Finished goods 66 65 Operating and maintenance supplies 71 64 $ 189 $ 181

At period-end, the provision to reflect inventories at the lower of cost and net realizable value was less than $1 million (December 31, 2015 – less than $1 million).

NOTE 5. OTHER ASSETS


Investment tax credit receivable $ 15 $ 13 Other 1 2

$ 16 $ 15

NOTE 6. LONG-TERM DEBT


Principal value 7.7% senior secured notes due February 2017 $ 200 $ 200 5.375% senior secured notes due December 2020 240 240 6.25% senior secured notes due April 2023 315 315 755 755 Less: Debt issue costs (9) (10)Less: Current portion (200) -

$ 546 $ 745

Revolving Bank Lines The Company has an aggregate commitment of $245 million under committed revolving bank lines which bears interest at money market rates plus a margin that varies with the Company’s credit rating. The maturity date of the total aggregate commitment is May 2019. 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 2017, 2020 and 2023 senior secured notes.

At period-end, none of the revolving bank lines were drawn as cash, $24 million (December 31, 2015 – $5 million) was utilized for letters of credit and $221 million (December 31, 2015 – $240 million) was available to support short-term liquidity requirements.

The revolving bank lines contain two quarterly financial covenants: minimum tangible net worth of $500 million and maximum net debt to capitalization, book basis, of 65%. The Company was in compliance with the financial covenants at period-end.

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NOTE 7. OTHER LIABILITIES


Defined benefit pension obligation $ 34 $ 23 Accrued employee benefits 6 5 Reforestation obligation 2 3 Other 1 -

$ 43 $ 31

NOTE 8. SHAREHOLDERS’ EQUITY

Share Capital

9 mos 2016

Shares

(millions) Amount

(US $ millions)

Common shares outstanding, beginning of period 85.4 $ 1,334 Issuance of common shares upon exercise of options and Dividend Reinvestment Plan

0.2 4

Common shares outstanding, end of period 85.6 $ 1,338

Stock Options Year-to-date, no stock options were granted (2015 – 0.2 million stock options) under the Company’s stock option plan. Year-to-date, stock option expense of $1 million (2015 – $1 million) was recorded with a corresponding increase in contributed surplus. Year-to-date, 0.2 million common shares (2015 – 0.1 million common shares) were issued as a result of options exercised under the stock option plan for total proceeds of $2 million (2015 – $1 million).

Dividend Reinvestment Plan Year-to-date, less than $1 million of dividends were reinvested in common shares (2015 – less than $1 million).

Merger Reserve On March 31, 2015, the Company and Ainsworth completed an arrangement under which the Company acquired all of the outstanding common shares of Ainsworth in an all-share transaction. The merger reserve represents the difference between the fair value of the Norbord common shares on the date of issuance, and the book value of Ainsworth’s net assets exchanged upon closing of the Merger.

Accumulated Other Comprehensive Loss


Foreign currency translation loss on investment in foreign operations, net of tax of $(4) (Dec 31, 2015 – $(10)) $ (151) $ (130) Net loss on hedge of net investment in foreign operations, net of tax of $3 (Dec 31, 2015 – $3)

(8) (8)

Actuarial loss on post-employment obligation, net of tax of $12 (Dec 31, 2015 – $11)

(43) (32)

Accumulated other comprehensive loss, net of tax $ (202) $ (170)

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NOTE 9. HIGH LEVEL FIRE

On May 4, 2016, a fire started in the wood yard of the High Level, Alberta mill. Production was halted immediately while the fire was brought under control. The fire destroyed a portion of the mill’s log inventory. The Company incurred costs to control the fire and restore the mill. The mill returned to production approximately three weeks later. The Company has insurance coverage for property damage and business interruption. Year-to-date, the following amounts were recognized in cost of sales related to the fire:

(US $ millions)

Write-off of log inventory destroyed by the fire $ (7)

Costs of fire fighting and site restoration (6)

Insurance recovery for the reimbursement of the lost log inventory, fire fighting costs and site restoration 12

Insurance claim deductible, net (1)

Insurance recovery for business interruption 2

Net insurance claim recoverable $ 1

At period-end, $8 million of insurance proceeds for property damage had been received and $6 million is included in accounts receivable. Subsequent to period-end, a further installment of insurance proceeds of $3 million was received. The insurance claim is ongoing.

NOTE 10. EARNINGS PER COMMON SHARE

(US $ millions, except share and per share information, unless otherwise noted) Q3 2016 Q3 2015 9 mos 2016 9 mos 2015

Earnings (loss) available to common shareholders $ 55 $ (9) $ 122 $ (69)Common shares (millions): Weighted average number of common shares outstanding(1) 85.6 85.4 85.5 85.3 Stock options(2) 0.6 - 0.6 -

Diluted number of common shares 86.2 85.4 86.1 85.3

Earnings (loss) per common share: Basic $ 0.64 $ (0.11) $ 1.43 $ (0.81) Diluted 0.64 (0.11) 1.42 (0.81)

(1) For 2015, includes 31.8 million Norbord common shares issued upon closing of the Merger to give effect to the Merger as if Norbord and Ainsworth had always been combined.

(2) Applicable if dilutive and when the weighted average daily closing share price for the period was greater than the exercise price for stock options. At period-end, there were 1.5 million stock options (Sep 26, 2015 – 2.0 million) that were not taken into account in the calculation of diluted earnings per share because their effect was anti-dilutive.

NOTE 11. SUPPLEMENTAL CASH FLOW INFORMATION

Other items comprises: (US $ millions) Q3 2016 Q3 2015 9 mos 2016 9 mos 2015

Stock-based compensation $ 1 $ - $ 1 $ 1 Pension funding (greater) less than expense (2) - (3) 2 Interest paid less than interest expense 5 4 4 7 Amortization of debt issue costs 1 1 2 1 High Level insurance claim deductible - - 1 - Early debt extinguishment payments - - - 25 Unrealized foreign exchange (gain) loss - (4) 2 (8)Other - (2) 7 (15)

$ 5 $ (1) $ 14 $ 13

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

(US $ millions) Q3 2016 Q3 2015 9 mos 2016 9 mos 2015

Cash (used for) provided by: Accounts receivable $ 3 $ 2 $ (33) $ (34) Prepaids (5) (5) (2) 3 Inventory (1) (1) (4) 5 Accounts payable and accrued liabilities (2) 11 (12) (8)

$ (5) $ 7 $ (51) $ (34)

Cash interest and income taxes comprise:

(US $ millions) Q3 2016 Q3 2015 9 mos 2016 9 mos 2015

Cash interest paid $ 8 $ 8 $ 33 $ 31 Cash income taxes (recovered) paid, net - (2) 1 (4)

NOTE 12. FINANCIAL INSTRUMENTS

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


Financial Instrument Category Net Book

Value Fair

Value Net Book

Value Fair

Value

Financial assets: Cash Fair value through profit or loss $ 74 $ 74 $ 9 $ 9 Accounts receivable Loans and receivables 160 160 135 135

$ 234 $ 234 $ 144 $ 144

Financial liabilities: Accounts payable and accrued liabilities Other financial liabilities $ 206 $ 206 $ 201 $ 201 Long-term debt(1) Other financial liabilities 755 793 755 760 Other long-term debt Other financial liabilities - - 30 30 Other liabilities Other financial liabilities 43 43 31 31

$ 1,004 $ 1,042 $ 1,017 $ 1,022 (1) Principal value of Long-term debt

Derivative Financial Instruments Canadian dollar monetary hedge At period-end, the Company had foreign currency contracts representing a notional amount of CAD $23 million (December 31, 2015 – CAD $1 million) in place to buy Canadian dollars and sell US dollars with a maturity of October 2016. The fair value of these contracts at period-end is an unrealized loss of less than $1 million (December 31, 2015 – an unrealized gain of less than $1 million); the carrying value of the derivative instrument is equivalent to the unrealized loss at period-end. During the quarter, realized losses on the Company’s matured hedges were less than $1 million (2015 – less than $1 million realized gains). Year-to-date, realized gains on the Company’s matured hedges were $1 million (2015 – $1 million).

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Derivative instruments are measured at fair value as determined using valuation techniques under Level 2 of the fair value hierarchy. The fair values of over-the-counter derivative financial instruments are based on broker quotes or observable market rates. Those quotes are tested for reasonableness by discounting expected future cash flows using market interest and exchange rates for a similar instrument at the measurement date. Fair values reflect the credit risk of the instrument for the Company and counterparty when appropriate. 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. COMMITMENTS AND CONTINGENCIES

The Company has provided certain guarantees, commitments and indemnifications, including those related to former businesses. The maximum amounts from many of these items cannot be reasonably estimated at this time. However, in certain circumstances, the Company has recourse against other parties to mitigate the risk of loss. In the normal course of its business activities, the Company is subject to claims and legal actions that may be made against its customers, suppliers and others. While the final outcome with respect to actions outstanding or pending as at period-end cannot be predicted with certainty, the Company believes the resolution will not have a material effect on the Company’s financial position, financial performance, or cash flows.

The Company has entered into various contractual commitments as follows:

Payments Due by Period

(US $ millions) Less than 1 year 1-5 years Thereafter Total

Purchase obligations $ 72 $ 49 $ - $ 121 Operating leases 4 6 3 13 Reforestation obligations - 1 1 2

$ 76 $ 56 $ 4 $ 136

Purchase obligations relate to the purchase of property, plant and equipment and long-term purchase contracts with minimum fixed payment amounts, of which $35 million relates to the Inverness expansion project. All contracts are at market prices and on normal business terms.

NOTE 14. RELATED PARTY TRANSACTIONS

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

Norbord periodically engages the services of Brookfield for various financial, real estate and other business advisory services. During the quarter, the fees for services rendered were less than $1 million (2015 – less than $1 million). Year-to-date, the fees for services rendered were less than $1 million (2015 – less than $1 million).

Sales to Asian markets are handled by Interex Forest Products Ltd. (Interex), a cooperative sales company over which Norbord, as a 25% shareholder, has significant influence. During the quarter, net sales of $16 million (2015 – $15 million) were made to Interex. Year-to-date, net sales of $40 million (2015 – $36 million) were made to Interex. At period-end, $4 million (December 31, 2015 – $3 million) due from Interex was included in accounts receivable.

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NOTE 15. GEOGRAPHIC SEGMENTS

Norbord operates principally in North America and Europe. Sales by geographic segment are determined based on the origin of shipment.

Q3 2016

(US $ millions) North America Europe Unallocated Total

Sales $ 356 $ 97 $ - $ 453 EBITDA(1) 103 10 (3) 110 Depreciation and amortization 19 4 - 23 Investment in property, plant and equipment 11 16 - 27

Q3 2015


Sales $ 258 $ 120 $ - $ 378 EBITDA(1) 22 11 (3) 30 Depreciation and amortization 19 3 - 22 Investment in property, plant and equipment 9 4 - 13

9 mos 2016


Sales $ 975 $ 309 $ - $ 1,284 EBITDA(1) 238 31 (8) 261 Depreciation and amortization 57 11 - 68 Investment in property, plant and equipment 33 26 - 59 Property, plant and equipment 1,109 131 - 1,240 9 mos 2015


Sales $ 749 $ 345 $ - $ 1,094 EBITDA(1) 44 28 (68) 4 Depreciation and amortization 54 11 - 65 Investment in property, plant and equipment 31 8 - 39Property, plant and equipment(2) 1,139 121 - 1,260

(1) EBITDA is a non-IFRS financial measure, which the Company defines as earnings (loss) before finance costs, income tax, and depreciation and amortization. Non-IFRS financial measures do not have any standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other companies.

(2) Balance as at December 31, 2015.

NOTE 16. PRIOR PERIOD COMPARATIVES

Certain 2015 figures have been reclassified to conform with the current period’s presentation.

NOTE 17. SUBSEQUENT EVENT

Subsequent to quarter-end, the Company reached an agreement with Louisiana-Pacific Corporation (LP) to exchange OSB mills in the province of Quebec. Norbord will swap ownership of its mill in Val-d’Or for LP’s mill in Chambord. Production at both mills has been curtailed for a number of years. The non-monetary asset exchange transaction is expected to close in November 2016.

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Peter Wijnbergen President & CEOQ3 2016 HIGHLIGHTS Adjusted earnings of $0.67 per diluted share, a...

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