October 28, To Our Shareholders,

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1 Peter Wijnbergen President & CEO 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 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, 1

2 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 Q Management s Discussion and Analysis dated October 27, 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 Q 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). 2

3 News Release NORBORD REPORTS THIRD QUARTER 2016 RESULTS; DECLARES QUARTERLY DIVIDEND Note: Financial references in US dollars unless otherwise indicated. Q HIGHLIGHTS Adjusted earnings of $0.67 per diluted share, a $0.72 improvement over Q Adjusted EBITDA of $114 million, a more than threefold increase over Q 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 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 3

4 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 Q Q Q YTD 2016 YTD 2015 Earnings (loss) (9) 122 (69) Adjusted for: Merger transaction costs Costs to achieve merger synergies Costs related to High Level fire Cost on early debt extinguishment Reported income tax expense (recovery) (33) Adjusted pre-tax earnings (loss) (6) 162 (41) Income tax (expense) recovery at statutory rate (20) (15) 2 (42) 11 Adjusted earnings (loss) (4) 120 (30) Market Conditions In North America, year-to-date US housing starts were up 4% versus the same period last year. Singlefamily 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 % of Norbord s Q Q Q region operating capacity North Central 16% South East 33% Western Canada 32% 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-overquarter 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 4

5 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 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 yearover-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-overquarter 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

6 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, 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 or by at inquiries@canstockta.com. 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 6

7 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 Q 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 ( EDGAR ( and are available in the investor section of the Company s website at 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 and 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 or The passcode is Audio playback and a written transcript will be available on the Norbord website. 7

8 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. Contact: Heather Colpitts Senior Manager, Corporate Affairs Tel. (416) info@norbord.com -end- 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 Q Management s Discussion and Analysis dated October 27, 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 Q 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

9 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 the System for Electronic Document Analysis and Retrieval (SEDAR) administered by the Canadian Securities Administrators (the CSA) at and on the Electronic Data Gathering, Analysis and Retrieval System (EDGAR) section of the US Securities and Exchange Commission (the SEC) website at 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 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, 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

10 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 woodbased 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. Particleboard (EU), 6% OSB (EU), 10% MDF (EU), 4% Production Capacity by Product NA = North America EU = Europe OSB (NA), 80% 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. 10

11 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 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 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 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 ( 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 11

12 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 Year-to-date, Norbord generated operating income of $193 million, up from an operating loss of $2 million in the same period of 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 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 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 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 The following table reconciles Adjusted earnings (loss) to the most directly comparable IFRS measure: Q3 Q2 Q3 9 mos 9 mos (US $ millions) Earnings (loss) $ 55 $ 44 $ (9) $ 122 $ (69) Add: Merger transaction costs Add: Severance costs related to Merger Add: Other costs incurred to achieve Merger synergies Add: Costs related to High Level fire Add: Costs on early debt extinguishment Add: Foreign exchange loss on Ainsworth Notes Less: Gain on derivative financial instrument on Ainsworth Notes (4) Add: Reported income tax expense (recovery) (33) Adjusted pre-tax earnings (loss) (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 Year-to-date, Norbord generated Adjusted EBITDA of $269 million versus $65 million in the same period of 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. 12

13 The following table reconciles Adjusted EBITDA to the most directly comparable IFRS measure: Q3 Q2 Q3 9 mos 9 mos (US $ millions) Earnings (loss) $ 55 $ 44 $ (9) $ 122 $ (69) Add: Finance costs Add: Depreciation and amortization Add: Income tax expense (recovery) (33) Add: Merger transaction costs Add: Costs related to High Level fire Add: Severance costs related to Merger Add: Other costs incurred to achieve Merger synergies Add: Costs on early debt extinguishment Add: Foreign exchange loss on Ainsworth Notes 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. 13

14 SUMMARY OF FINANCIAL AND OPERATING HIGHLIGHTS (US $ millions, except per share information, unless otherwise noted) Q3 Q2 Q3 9 mos 9 mos 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 (32) Per Common Share Earnings (loss), basic (2) (0.11) 1.43 (0.81) Adjusted earnings (loss), basic (1,3) (0.05) 1.40 (0.36) Cash provided by (used for) operating activities (1) (0.38) Dividends declared (4) SALES AND EARNINGS Sales ,284 1,094 Operating income (loss) (2) Adjusted EBITDA (1) Earnings (loss) (9) 122 (69) Adjusted earnings (loss) (1) (4) 120 (30) Total assets 1,718 1,654 1,653 Long-term debt (5) Net debt for financial covenant purposes (1) 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 ,332 1,315 Indicative Average OSB Price North Central ($/Msf 7 16") South East ($/Msf 7 16") Western Canada ($/Msf 7 16") Europe ( /m 3 ) (6) (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 Q 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 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 14

15 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 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 ( 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 $20 in the previous quarter) on seasonal demand variations between regions. The table below summarizes benchmark OSB prices by region for the relevant quarters: % of Norbord s estimated Q Q Q North American Region annual operating capacity (1) ($/Msf-7/16 ) ($/Msf-7/16 ) ($/Msf-7/16 ) North Central 16% $ 301 $ 264 $ 204 South East 33% Western Canada 32% (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) North America $ 106 $ 85 $ 22 $ 244 $ 44 Europe 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 Adjusted EBITDA was $269 million year-to-date compared to $65 million in the same period of The higher Adjusted EBITDA versus all comparative periods was primarily due to significantly higher North American OSB prices. 15

16 Adjusted EBITDA Variance The components of the Adjusted EBITDA change are summarized in the variance table below: (US $ millions) Q vs. Q Q vs. Q mos 2016 vs. 9 mos 2015 Adjusted EBITDA current period $ 114 $ 114 $ 269 Adjusted EBITDA comparative period Variance Mill nets (1) Volume (2) (5) (1) 17 Key input prices (3) (3) 5 19 Key input usage (3) 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 Year-todate, 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. Yearto-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 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. 16