News Release · • Reduced North American unit manufacturing costs by 9% quarter-over-quarter and 7% year- ... Norbord does not intend to provide interim operational updates unless

News Release

NORBORD REPORTS SECOND QUARTER 2020 EARNINGS; DECLARES QUARTERLY DIVIDEND

Note: Financial references in US dollars unless otherwise indicated.

Q2 2020 HIGHLIGHTS

• Adjusted EBITDA of $84 million and Adjusted earnings of $0.38 per diluted share

• Reduced North American unit manufacturing costs by 9% quarter-over-quarter and 7% year-

over-year

• Extended maturity of committed revolving bank lines to May 2022 and increased aggregate

commitment from $245 million to $300 million

• Liquidity of $378 million at quarter-end

• Declared quarterly variable dividend of C $0.30 per share for shareholders of record on

September 1, 2020

• Resuming limited production at Line 1 of Cordele, Georgia OSB mill to respond to stronger than

expected demand

TORONTO, ON (August 5, 2020) – Norbord Inc. (TSX and NYSE: OSB) today reported Adjusted

EBITDA of $84 million for the second quarter of 2020 compared to $75 million in the first quarter of 2020

and $36 million in the second quarter of 2019. The quarter-over-quarter increase was primarily due to lower

manufacturing costs, partially offset by lower shipment volumes, while the year-over-year increase was

primarily due to higher realized North American oriented strand board (OSB) prices, as well as lower

manufacturing costs, partially offset by lower shipment volumes. North American operations generated

Adjusted EBITDA of $84 million compared to $68 million in the first quarter of 2020 and $18 million in

the second quarter of 2019, and European operations delivered Adjusted EBITDA of $2 million compared

to $10 million in the prior quarter and $21 million in the same quarter last year.

“The second quarter of 2020 started slowly as it overlapped with the significant pullback in economic

activity that occurred during the early stages of the COVID-19 pandemic. However, we ultimately saw

improving demand through the quarter that led to better than expected results. Our Adjusted EBITDA

represented our best performance in seven quarters, more than doubling from year-ago levels and improving

12% from the prior quarter,” said Peter Wijnbergen, Norbord’s President & CEO. “Further, I am

particularly pleased with our company’s ability to drive down costs while continuing to work safely within

the strict protocols required by the pandemic.”

“Subsequent to the strong finish to the second quarter, customer demand has continued to increase well

ahead of expectations, despite ongoing concern about the impact of COVID-19 on the broader economy.

At Norbord, we have always been committed to producing what we can sell and what our customers need.

A limited restart of Cordele Line 1 is the only option available to us to provide additional volume to our

customers in the near term. Though these recent developments give us reason for optimism, it is unclear

whether the worst of the pandemic is behind us, therefore we will maintain our approach of planning for

the worst but being prepared for better. We will remain vigilant and will continue to focus on the health

and safety of our employees as well as managing the business to be resilient and flexible.”

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Norbord recorded Adjusted earnings of $31 million or $0.38 per share (basic and diluted) versus Adjusted

earnings of $21 million or $0.26 per share (basic and diluted) in the first quarter of 2020 and an Adjusted

loss of $8 million or $0.10 per share (basic and diluted) in the second quarter of 2019. Earnings in the

current quarter include a $16 million non-cash impairment loss related to idle production assets at the

Grande Prairie, Alberta mill. Adjusted earnings (loss) exclude non-recurring or other items and use a

normalized income tax rate:

$ millions

Q2

2020

Q1

2020

Q2

2019

6 mos

2020

6 mos

2019

Earnings (loss) 18 20 (14) 38 (13)

Adjusted for:

Impairment of assets 16 - - 16 -

Loss on disposal of assets 3 - 1 3 1

Stock-based compensation and related costs 2 - 1 2 2

Costs on early extinguishment of 2020 Notes - - 10 - 10

Costs related to 100 Mile House indefinite curtailment - - 2 - 2

Reported income tax expense (recovery) 3 8 (10) 11 (15)

Adjusted pre-tax earnings (loss) 42 28 (10) 70 (13)

Income tax (expense) recovery at statutory rate(1) (11) (7) 2 (18) 3

Adjusted earnings (loss)(2) 31 21 (8) 52 (10) (1) Represents Canadian combined federal and provincial statutory rate.

(2) Non-IFRS measure.

COVID-19 Update

During the first quarter, in response to the significant market uncertainty from the COVID-19 pandemic,

Norbord adjusted its operating configuration by employing a flexible operating strategy to match production

with reduced customer demand. After initially reducing operating mill capacity by approximately 35% for

the month of April, market demand improved sufficiently in the second quarter to allow Norbord to

substantially resume production across its North American and European mills. (See the Performance

section below for details of Norbord’s second quarter capacity utilization.)

Responding to Stronger Than Expected Rebound in North American OSB Demand

Subsequent to quarter-end, the rebound in North American OSB demand has accelerated, and in response,

Norbord will resume production in August on a limited operating schedule on Line 1 of its two-line Cordele,

Georgia OSB mill. The line was indefinitely curtailed in November 2019 due to poor market conditions

and lower-than-anticipated OSB demand and had previously been running on a reduced operating schedule

from September to November 2019.

Given the uncertainty around the depth and duration of the economic impact of COVID-19 combined with

the inherent seasonality of OSB demand, going forward the Company will incorporate Cordele Line 1 into

the flexible operating strategy employed since the early stages of the pandemic. The objective of this new

operating strategy is to create the flexibility to adjust production up and down to better align with demand.

The customer demand situation remains fluid, and the Company’s ability to continue to operate any of its

mills could be influenced by factors outside Norbord’s control, therefore additional operating adjustments

or curtailment may be necessary. Norbord does not intend to provide interim operational updates unless

there is a significant change in the Company’s flexible operating strategy.

The Cordele, Georgia mill has two production lines and a total stated annual production capacity of 1,040

million square feet (MMsf) (3/8-inch basis), of which 440 MMsf (3/8-inch basis) is attributed to Line 1.

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Cordele Line 2 has continued to operate during the indefinite curtailment of Line 1. Norbord is hiring

approximately 25 employees at the mill in connection with the limited restart of Line 1.

Liquidity and Capital Allocation

The robust cash flow generated during the quarter allowed Norbord to fully pay down its credit facility

drawings, ending the quarter with strong liquidity of $378 million, which includes the previously announced

$55 million increase in the revolving bank lines aggregate commitment. The Company believes its available

liquidity is sufficient to fund expected short-term cash requirements and has comfortable headroom against

the financial covenants governing access to its committed credit facilities. Core long-term bond debt totals

$665 million, with no maturities until 2023.

Norbord continues to defer a number of non-critical capital projects in response to COVID-19 uncertainty

and previously reduced its 2020 capital expenditures budget from $100 million to $75 million. The

minimum annual investment required to maintain the Company’s existing assets is approximately $35

million.

To prioritize preserving financial flexibility, Norbord did not repurchase any shares under its Normal

Course Issuer Bid (NCIB) during the second quarter. To-date, Norbord has repurchased a total of 1.2 million

shares under its current NCIB at a cost of $27 million.

Market Conditions

In North America, US new home construction activity, the single largest driver of OSB demand, pulled

back in the month of April in response to the economic impact of COVID-19. The seasonally adjusted

annualized rate of US housing starts was 934,000 units in April, but improved to 1.19 million in June, only

slightly behind the 1.24 million pace in June 2019. The pace of single-family starts, which use

approximately three times more OSB than multifamily starts, improved similarly. The pace of permits (the

more forward-looking indicator) was 1.07 million units in April, but improved to 1.24 million in June,

almost in line with the 1.27 million pace in June 2019. The 2020 consensus forecast from US housing

economists is approximately 1.21 million starts, or about 6% below 2019 levels, but forecasts have been

increasing in response to the stronger than expected rebound in homebuilding activity following the initial

COVID-19 impact. Throughout the ongoing pandemic, demand from the repair-and-remodeling sector has

strengthened and has provided a partial offset to the lower homebuilding activity in April.

Reflecting the uneven pace of demand throughout the quarter, North American benchmark OSB prices

decreased in April before increasing in May and June. Average benchmark prices were largely in line with

the prior quarter and reflected regional differences in the impact of COVID-19 but were significantly higher

than the same quarter last year. The table below summarizes average benchmark prices ($ per Msf, 7/16-

inch basis) by region for the relevant periods:

In Europe, UK panel demand pulled back significantly in the first half of the quarter as government

directives required many of the Company’s UK customers to close operations in late March. As restrictions

in the UK eased and many of the Company's UK customers restarted operations, panel demand gradually

recovered in the back half of the quarter. Continental demand, particularly in Germany, remained resilient

North American region

% of Norbord’s

operating capacity Q2 2020 Q1 2020 Q2 2019

North Central 15% 270 271 188

South East 36% 262 251 186

Western Canada 29% 224 255 153

3

throughout the quarter. In local currency terms, average panel prices were down 3% quarter-over-quarter

and 16% year-over-year.

Performance

In North America, second quarter shipments were down 4% quarter-over-quarter and 12% year-over-year.

Excluding the Chambord, Quebec mill, Norbord’s North American mills produced at 74% of available

capacity in the second quarter of 2020 compared to 79% in the first quarter and 88% in the second quarter

of 2019. Norbord’s second quarter North American OSB cash production costs per unit (excluding mill

profit share and freight costs) decreased by 9% compared to the prior quarter and 7% compared to the same

quarter last year.

In Europe, second quarter shipments were down 19% quarter-over quarter and 15% year-over-year,

reflecting significant curtailments across the Company’s UK mills in response to reduced customer demand.

Norbord’s European mills produced at 70% of stated capacity in the second quarter of 2020, compared to

93% in the first quarter and 91% in the second quarter of 2019.

The Company generated net Margin Improvement Program (MIP) gains of $34 million year-to-date due to

improved mill productivity and lower controllable manufacturing and overhead costs.

Investment in property, plant and equipment and intangible assets was $14 million in the second quarter

($39 million year-to-date), including $2 million ($39 million project-to-date) in the Inverness phase 2

project. There was no investment ($53 million project-to-date) in the Chambord mill rebuild project during

the quarter as Quebec construction sites were declared non-essential during COVID-19. The Company has

not yet made a restart decision for the Chambord mill, and will only do so when it is sufficiently clear that

customers require the production from this mill.

At quarter-end, the Company had unutilized liquidity of $378 million, comprising $20 million in cash and

cash equivalents, $291 million in revolving bank lines and $67 million in available drawings under its

accounts receivable securitization program. Operating working capital was $152 million, seasonally lower

compared to $197 million at the prior quarter-end and modestly lower than $162 million at the same quarter-

end last year. The Company’s tangible net worth was $1,001 million and net debt to capitalization on a

book basis was 40%, with both values well within bank covenants.

Dividend

The Board of Directors declared a quarterly variable dividend of C $0.30 per common share, payable on

September 21, 2020 to shareholders of record on September 1, 2020. Consistent with Norbord’s variable

dividend policy and historically balanced approach to capital allocation, the dividend is being increased

from the prior quarter’s level of C $0.05 per common share to reflect the Company’s strong financial results

and improving end-market demand. The Company continues to focus on balance sheet flexibility given the

economic uncertainty from the ongoing COVID-19 pandemic. Any dividends reinvested on September 22,

2020 under the Company’s Dividend Reinvestment Plan will be used by the transfer agent to purchase

common shares on the open market.

Norbord’s dividends are declared in Canadian dollars, however shareholders may opt to receive their

dividends in the US dollar equivalent. Details regarding this option are available on Norbord’s website at

https://www.norbord.com/investors/shareholder-information/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

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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.

Additional Information

Norbord’s Q2 2020 news release, management’s discussion and analysis, consolidated unaudited 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 Wednesday, August 5, 2020

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 September 4, 2020 by dialing 1-888-203-

1112 or 647-436-0148 (passcode 1503897 and pin 7824). Audio playback and a written transcript will be

available on the Norbord website.

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 $1.8 billion and employs

approximately 2,400 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-

5

http://www.norbord.com/

http://www.newswire.ca/

Contact:

Robert B. Winslow, CFA

Vice President, Investor Relations & Corporate Development

Tel. (416) 777-4426

[email protected]

or

Heather Colpitts

Director, Corporate Affairs

Tel. (416) 643-8838

[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 “set up,” “on track,” “expect,”

“estimate,” “forecast,” “target,” “outlook,” “schedule,” “represent,” “continue,” “intend,” “should,” “would,” “could,” “will,” “can,”

“might,” “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. These factors include, but are not limited to: (1) developments related to COVID-19 or any other plague, epidemic, pandemic,

outbreak of infectious disease or any other public health crisis, including health and safety measures instituted to protect the Company’s employees,

government-imposed restrictions or other restrictions that may apply to the Company’s employees and/or operations (including quarantine), the

impact on customer demand, supply and distribution and other factors; (2) assumptions in connection with the economic and financial conditions

in the US, Europe, Canada and globally; (3) risks inherent to product concentration and cyclicality; (4) effects of competition and product pricing

pressures; (5) risks inherent to customer dependence; (6) effects of variations in the price and availability of manufacturing inputs, including

continued access to fibre resources at competitive prices and the impact of third-party certification standards; (7) availability of transportation

services, including truck and rail services, and port facilities; (8) various events that could disrupt operations, including natural, man-made or

catastrophic events and ongoing relations with employees; (9) impact of changes to, or non-compliance with, environmental or other regulations;

(10) government restrictions, standards or regulations intended to reduce greenhouse gas emissions; (11) impact of weather and climate change

on Norbord’s operations or the operations or demand of its suppliers and customers; (12) impact of any product liability claims in excess of

insurance coverage; (13) risks inherent to a capital intensive industry; (14) impact of future outcomes of tax exposures; (15) potential future

changes in tax laws, including tax rates; (16) effects of currency exposures and exchange rate fluctuations; (17) future operating costs; (18)

availability of financing, bank lines, securitization programs and/or other means of liquidity; (19) impact of future cross-border trade rulings or

agreements; (20) implementation of important strategic initiatives and identification, completion and integration of acquisitions; (21) ability to

implement new or upgraded information technology infrastructure; (22) impact of information technology service disruptions or failures; and (23)

changes in government policy and regulation.

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. See the “Forward-Looking Statements” section in the February 4, 2020 Annual Information Form and the cautionary

statement contained in the “Forward-Looking Statements” section of the 2019 Management’s Discussion and Analysis dated February 4, 2020

and Q2 2020 Management’s Discussion and Analysis dated August 4, 2020.

In evaluating the Company’s business, management uses non-International Financial Reporting Standards (IFRS) financial measures which, in

management’s view, are important supplemental measures of the Company’s performance and believes that they are frequently used by investors,

securities analysts and other interested persons in the evaluation of Norbord and other similar companies. In this news release, the following non-

IFRS financial measures have been used: Adjusted EBITDA, Adjusted earnings (loss), Adjusted earnings (loss) per share, operating working

capital, tangible net worth, and net debt to capitalization, book basis. Norbord defines Adjusted EBITDA as earnings (loss) determined in

accordance with IFRS before finance costs, interest income, income taxes, depreciation, amortization and non-recurring or other items; Adjusted

earnings (loss) as earnings (loss) determined in accordance with IFRS before non-recurring or other items and using a normalized income tax

rate; Adjusted earnings (loss) per share is Adjusted earnings (loss) divided by the weighted average number of common shares outstanding (on a

basic or diluted basis, as specified); operating working capital as accounts receivable plus inventory and prepaids less accounts payable and

accrued liabilities; tangible net worth as shareholders’ equity including certain adjustments; net debt to capitalization, book basis as net debt for

financial covenant purposes divided by the sum of net debt for financial covenant purposes and tangible net worth; net debt for financial covenant

purposes as net debt excluding other long-term debt and including other liabilities classified as debt for financial covenant purposes, letters of

credit and guarantees outstanding, and any bank advances; and net debt as the principal value of long-term debt, including the current portion,

other long-term debt and bank advances, if any, less cash and cash equivalents. Non-IFRS financial measures do not have any standardized meaning

6

prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other companies that may have different financing

and capital structures, and/or tax rates. See “Non-IFRS Financial Measures” in Norbord’s 2019 Management’s Discussion and Analysis dated

February 4, 2020 and Q2 2020 Management’s Discussion and Analysis dated August 4, 2020 for a quantitative reconciliation of these non-IFRS

financial measures to the most directly comparable IFRS measure.

7

AUGUST 4, 2020

Management’s Discussion and Analysis

INTRODUCTIONThis Management’s Discussion and Analysis (MD&A) provides a review of the significant developments that impactedNorbord’s performance during the period. The information in this section should be read in conjunction with the unauditedcondensed consolidated interim financial statements (interim financial statements) for the period ended July 4, 2020 and theaudited consolidated financial statements and annual MD&A in the 2019 annual report.

In this MD&A, “Norbord” or “the Company” means Norbord Inc. and all of its consolidated subsidiaries and affiliates, unlessthe context implies otherwise. “Brookfield” means Brookfield Asset Management Inc. or any of its consolidated subsidiariesand affiliates, a related party by virtue of holding a significant equity interest in the Company.

Annual financial data provided within 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 preparedin accordance with International Accounting Standard (IAS) 34, Interim Financial Reporting. Additional information onNorbord, including the Company’s annual information form and other documents publicly filed by the Company, is availableon 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 atwww.sec.gov/edgar.shtml.

Some of the statements included or incorporated by reference in this MD&A constitute forward-looking statements withinthe meaning of applicable securities legislation. Forward-looking statements are based on various assumptions and are subjectto 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 Obligationsof the CSA. The Company is an eligible issuer under the Multijurisdictional Disclosure System (MJDS) and complies withthe US reporting requirements by filing its Canadian disclosure documents with the SEC. As an MJDS issuer, the Companyis permitted to prepare this MD&A in accordance with the disclosure requirements of the CSA, whose requirements aredifferent from those of the SEC.

This MD&A provides financial and operating results for the three month and six month periods ended July 4, 2020 andadditional disclosure of material information up to and including August 4, 2020. All financial references in the MD&A arestated in US dollars unless otherwise noted.

In evaluating the Company’s business, management uses non-IFRS financial measures which, in management’s view, areimportant supplemental measures of the Company’s performance and believes that they are frequently used by investors,securities analysts and other interested persons in the evaluation of Norbord and other similar companies. In this MD&A, thefollowing non-IFRS financial measures have been used: Adjusted EBITDA, Adjusted earnings (loss), Adjusted earnings (loss)per share, cash provided by (used for) operating activities per share, operating working capital, total working capital, capitalemployed, return on capital employed (ROCE), return on equity (ROE), net debt, net debt for financial covenant purposes,

8

tangible net worth, net debt to capitalization, book basis, and net debt to capitalization, market basis. These non-IFRS financialmeasures are described in the Non-IFRS Financial Measures section. Non-IFRS financial measures do not have anystandardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by othercompanies that may have different financing and capital structures, and/or tax rates. Where appropriate, a quantitativereconciliation of the non-IFRS financial measure to the most directly comparable IFRS measure is also provided.

BUSINESS OVERVIEW & STRATEGYNorbord is a leading global manufacturer of wood-based panels with 17 mills in the United States (US), Canada and Europe.Norbord is the largest global producer of oriented strand board (OSB) with annual capacity of 9 billion square feet (Bsf) (3⁄8-inch basis). In North America, Norbord owns 13 OSB mills located in the Southern region of the US, Western Canada, Quebec,Ontario and Minnesota. In Europe, the Company operates one OSB mill, two particleboard production facilities and onemedium density fibreboard (MDF) production facility in the United Kingdom (UK) and one OSB mill in Belgium, and is theUK’s largest panel producer. The Company reports its operations in two geographic segments, North America and Europe,with 79% of its panel production capacity in North America and 21% in Europe.

Norbord’s business strategy is focused entirely on the wood-based panels sector – in particular OSB – in North America,Europe and Asia. Norbord’s financial goal is to achieve top-quartile ROCE among North American forest products companiesover the business cycle. Since 2002, Norbord's ROCE has averaged 24% annually.

Maintaining balance sheet flexibility is an important element of Norbord’s financing strategy. Management believes that itsrecord of superior operational performance, disciplined capital allocation and prudent balance sheet management will enableit to access public and private capital markets (subject to financial market conditions). At July 4, 2020, Norbord had unutilizedavailable liquidity of $378 million, comprising $20 million in cash and cash equivalents, $291 million in revolving bank linesand $67 million in available drawings under its accounts receivable securitization program. The Company’s tangible net worthwas $1,001 million and net debt to total capitalization on a book basis was 40%, with both ratios well within bank covenants.

COVID-19 UPDATE During the first quarter, in response to the significant market uncertainty from the COVID-19 pandemic, Norbord adjustedits operating configuration by employing a flexible operating strategy to match production with reduced customer demand.After initially reducing operating mill capacity by approximately 35% for the month of April, market demand improvedsufficiently in the second quarter to allow Norbord to substantially resume production across its North American and Europeanmills.

SUMMARY OF SECOND QUARTER 2020The economic impact of the COVID-19 pandemic negatively impacted Norbord's second quarter results, particularly in April.North American benchmark OSB prices decreased through April, then increased through May and June as customer demandrebounded. The North Central price averaged $270 per thousand square feet (Msf) (7/16-inch basis) for the quarter, in linewith the previous quarter and up 44% against the same quarter last year. South East and Western Canada benchmark OSBprices had similar year-over-year increases. In April, at the height of the initial wave of the pandemic, the seasonally adjustedannualized rate of US housing starts averaged only 934,000, down significantly from the pace of 1.60 million in January andFebruary. As the quarter progressed, starts improved to a pace of 1.19 million in June. As a result, Norbord’s second quarterNorth American shipments were only down 4% quarter-over-quarter. Quarterly shipments were down 12% year-over-yearand year-to-date shipments were down 9% primarily due to the COVID-19 impact in April and the indefinite curtailments ofthe 100 Mile House, British Columbia mill and Line 1 at the Cordele, Georgia mill in 2019.

The economic impact of COVID-19 was more pronounced in Norbord's European segment. Many of Norbord's UK customershad to close their operations in response to the pandemic in the first half of the quarter and the Company's UK operationscurtailed production in response to this lower demand. During the second half of the quarter, as these customers re-openedtheir operations, demand improved. Norbord’s European segment quarterly Adjusted EBITDA decreased $8 million versus

9

the prior quarter and $19 million versus the same quarter last year primarily due to lower shipment volumes, as well as lowerprices year-over-year. Shipments were down 19% quarter-over-quarter and 15% year-over-year.

Norbord generated operating income of $31 million in the second quarter of 2020, versus $40 million in the prior quarter andan operating loss of $2 million in the same quarter last year. Year-to-date, Norbord generated operating income of $71 millionversus $4 million in the same period last year. Norbord generated Adjusted EBITDA of $84 million in the second quarter of2020 versus $75 million in the prior quarter and $36 million in the same quarter last year. Year-to-date, Norbord generatedAdjusted EBITDA of $159 million versus $78 million in the same period last year. The quarter-over-quarter increase wasprimarily due to lower labour, maintenance and overhead costs, lower input prices and usages, improved productivity, andthe benefit of a weaker Canadian dollar relative to the US dollar, partially offset by lower shipment volumes. The increaseagainst all prior year comparative periods was primarily due to higher North American OSB prices as well as lower labourand maintenance costs, and lower input prices, partially offset by lower shipment volumes.

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

(US $ millions) Q2 2020 Q1 2020 Q2 2019 6 mos 2020 6 mos 2019

Earnings (loss) $ 18 $ 20 $ (14) $ 38 $ (13)Add: Finance costs 10 12 12 22 23Less: Interest income — — — — (1)Add: Costs on early extinguishment of 2020 Notes — — 10 — 10Add: Depreciation and amortization 32 35 34 67 69Add: Income tax expense (recovery) 3 8 (10) 11 (15)EBITDA 63 75 32 138 73Add: Impairment of assets 16 — — 16 —Add: Loss on disposal of assets 3 — 1 3 1Add: Stock-based compensation and related costs 2 — 1 2 2Add: Costs related to 100 Mile House indefinite curtailment — — 2 — 2Adjusted EBITDA(1) $ 84 $ 75 $ 36 $ 159 $ 78

(1) Non-IFRS measure; see Non-IFRS Financial Measures section.

Norbord recorded earnings of $18 million ($0.22 per basic and diluted share) in the second quarter of 2020, unchanged fromthe first quarter of 2020 and up from a loss of $14 million ($0.17 per basic and diluted share) in the second quarter of 2019.Year-to-date, Norbord recorded earnings of $38 million ($0.47 per basic and diluted share) versus a loss of $13 million ($0.16per basic and diluted share) in the same period last year. Excluding the impact of non-recurring or other items and using anormalized Canadian statutory tax rate, Norbord recorded Adjusted earnings of $31 million ($0.38 per basic and diluted share)in the second quarter of 2020, compared to $21 million ($0.26 per basic and diluted share) in the first quarter of 2020 and anAdjusted loss of $8 million ($0.10 per basic and diluted share) in the second quarter of 2019. Year-to-date, Norbord recordedAdjusted earnings of $52 million ($0.64 per basic and diluted share), compared to an Adjusted loss of $10 million ($0.12 perbasic and diluted share). The fluctuations in Adjusted earnings versus all comparative periods were driven primarily by thefluctuations in Adjusted EBITDA, as discussed above.

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


Earnings (loss) $ 18 $ 20 $ (14) $ 38 $ (13)Add: Impairment of assets 16 — — 16 —Add: Loss on disposal of assets 3 — 1 3 1Add: Stock-based compensation and related costs 2 — 1 2 2Add: Costs on early extinguishment of 2020 Notes — — 10 — 10Add: Costs related to 100 Mile House indefinite curtailment — — 2 — 2Add: Reported income tax expense (recovery) 3 8 (10) 11 (15)Adjusted pre-tax earnings (loss) 42 28 (10) 70 (13)Less: Income tax (expense) recovery at statutory rate(1) (11) (7) 2 (18) 3Adjusted earnings (loss)(2) $ 31 $ 21 $ (8) $ 52 $ (10)

(1) Represents Canadian combined federal and provincial statutory rate.(2) Non-IFRS measure; see Non-IFRS Financial Measures section.

Home construction activity, particularly in the US, influences OSB demand and pricing. Fluctuations in North American OSBdemand and prices significantly affect Norbord’s results given 79% of the Company’s panel production capacity is located inNorth America. For the last four quarters, approximately 50% of Norbord’s North American OSB sales volume went into thenew home construction sector, approximately 25% went into specialty applications (which include industrial and exportmarkets), and approximately 25% went into repair-and-remodelling. Management believes this diversification providesopportunities to maximize profitability while limiting the Company’s relative exposure to the new home construction segmentduring periods of soft housing activity.

The long-term fundamentals, such as new household formation and replacement of housing stock, underpin demand for newhomes in the US, the largest market for the Company’s products. Norbord’s European operations and Asian exports are exposedto different market dynamics relative to North America and this has provided meaningful market and geographic diversificationfor the Company. Combined with Norbord’s strong financial liquidity and solid customer partnerships, the Company believesit is well positioned through the cycle.

Fluctuations in the prices the Company pays for raw material inputs significantly impacts operating costs. Wood fibre, resin,wax and energy account for approximately 60% of Norbord's OSB cash production costs. The prices for these commoditiesare determined by economic and market conditions. Resin used in the OSB manufacturing process is a petrochemical product,and therefore its price typically follows global oil prices. Global resin prices have been trending downward since the fourthquarter of 2018. Norbord continues to pursue aggressive Margin Improvement Program (MIP) initiatives to reduce raw materialusages and improve productivity to offset potentially higher uncontrollable costs. Year-to-date, Norbord generated $34 millionin MIP gains.

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SUMMARY OF FINANCIAL AND OPERATING HIGHLIGHTS

(US $ millions, except per share information, unless otherwise noted) Q2 2020 Q1 2020 Q2 2019 6 mos 2020 6 mos 2019

SALES AND EARNINGSSales 421 467 447 888 923Operating income (loss) 31 40 (2) 71 4Adjusted EBITDA(1) 84 75 36 159 78Earnings (loss) 18 20 (14) 38 (13)Adjusted earnings (loss)(1) 31 21 (8) 52 (10)PER COMMON SHARE EARNINGSEarnings (loss), basic 0.22 0.25 (0.17) 0.47 (0.16)Earnings (loss), diluted 0.22 0.25 (0.17) 0.47 (0.16)Adjusted earnings (loss), basic(1) 0.38 0.26 (0.10) 0.64 (0.12)Adjusted earnings (loss), diluted(1) 0.38 0.26 (0.10) 0.64 (0.12)Dividends declared(2) 0.05 0.20 0.40 0.25 0.80BALANCE SHEETTotal assets 1,785 1,904 2,207Long-term debt(3) 657 677 896Net debt for financial covenant purposes(1) 655 665 601Net debt to capitalization, market basis(1) 26% 26% 20%Net debt to capitalization, book basis(1) 40% 40% 36%KEY STATISTICSShipments (MMsf–3/8”)North America 1,400 1,459 1,587 2,859 3,156Europe 402 499 474 901 995Indicative average OSB price ($/Msf–7/16”, unless otherwise indicated)North Central 270 271 188 271 200South East 262 251 186 256 192Western Canada 224 255 153 240 156Europe (€/m3)(4) 251 241 285 246 286KEY PERFORMANCE METRICSReturn on capital employed (ROCE)(1) 21% 18% 9 % 20% 10%Return on equity (ROE)(1) 17% 11% (4)% 14% (2)%Cash provided by (used for) operating activities 125 39 36 164 (61)Cash provided by (used for) operating activities per share(1) 1.55 0.48 0.44 2.02 (0.74)

(1) Non-IFRS measure; see Non-IFRS Financial Measures section.(2) Dividends declared per share stated in Canadian dollars.(3) Includes current and non-current long-term debt.(4) European indicative average OSB price represents the gross delivered price to the largest continental market.

SalesTotal sales in the quarter were $421 million, compared to $467 million in the first quarter of 2020 and $447 million in thesecond quarter of 2019. Quarter-over-quarter, total sales decreased by $46 million or 10%. In North America, sales decreasedby 5% primarily due to a 4% decrease in shipment volumes. In Europe, sales decreased by 25% primarily due to a 19%decrease in shipment volumes as well as lower average panel prices. Year-over-year, total sales decreased by $26 million or6%. In North America, sales increased by 4% due to higher realized OSB prices, partially offset by a 12% decrease in shipmentvolumes. In Europe, sales were 30% lower due to lower average panel prices and a 15% decrease in shipment volumes.

Year-to-date, total sales were $888 million, compared to $923 million in the same period last year, a decrease of $35 millionor 4%. In North America, sales increased by 4% due to higher realized OSB prices, partially offset by a 9% decrease in

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shipment volumes. In Europe, sales decreased by 23% due to lower average panel prices and a 9% decrease in shipmentvolumes.

MarketsIn North America, US new home construction activity, the single largest driver of OSB demand, pulled back in the month ofApril in response to the economic impact of COVID-19. The seasonally adjusted annualized rate of US housing starts was934,000 units in April, but improved to 1.19 million in June, only slightly behind the 1.24 million pace in June 2019. Thepace of single-family starts, which use approximately three times more OSB than multifamily starts, improved similarly. Thepace of permits (the more forward-looking indicator) was 1.07 million units in April, but improved to 1.24 million in June,almost in line with the 1.27 million pace in June 2019. The 2020 consensus forecast from US housing economists isapproximately 1.21 million starts, or about 6% below 2019 levels but forecasts have been increasing in response to the strongerthan expected rebound in homebuilding activity following the initial COVID-19 impact. Throughout the ongoing pandemic,demand from the repair-and-remodelling sector has strengthened and has provided a partial offset to the lower homebuildingactivity in April.

Reflecting the uneven pace of demand throughout the quarter, North American benchmark OSB prices decreased in Aprilbefore increasing in May and June. Average benchmark prices were largely in line with the prior quarter and reflected regionaldifferences in the impact of COVID-19, but were significantly higher than the same quarter last year. The table belowsummarizes average benchmark OSB prices by region for the relevant quarters:

North American Region

% of Norbord’sEstimated

Annual OperatingCapacity(1)

Q2 2020($/Msf-7/16”)

Q1 2020($/Msf-7/16”)

Q2 2019($/Msf-7/16”)

North Central 15% $ 270 $ 271 $ 188South East 36% 262 251 186Western Canada 29% 224 255 153

(1) Based on the annual capacity figures as at December 31, 2019 and exclude the indefinitely curtailed Chambord, Quebec mill, which represents 7% of estimated annualcapacity.

In Europe, UK panel demand pulled back significantly in the first half of the quarter as government directives required manyof the Company’s UK customers to close operations in late March. As restrictions in the UK eased and many of the Company'sUK customers restarted operations, panel demand gradually recovered in the back half of the quarter. Continental demand,particularly in Germany, remained resilient throughout the quarter. In local currency terms, average panel prices were down3% quarter-over-quarter and 16% year-over-year.

Historically, the UK has been a net importer of panel products and Norbord is the largest domestic producer. A weaker PoundSterling relative to the Euro is advantageous to Norbord’s primarily UK-based operations as it improves sales opportunitieswithin the UK and supports Norbord’s export program into the continent. During the second quarter of 2020, the Pound Sterlingranged from 1.15 to 1.09, averaging 1.13 against the Euro, compared to 1.16 in the prior quarter and 1.14 in the same quarterlast year.

Operating Results

Adjusted EBITDA(1) (US $ millions) Q2 2020 Q1 2020 Q2 2019 6 mos 2020 6 mos 2019

North America $ 84 $ 68 $ 18 $ 152 $ 41Europe 2 10 21 12 42Unallocated (2) (3) (3) (5) (5)Total $ 84 $ 75 $ 36 $ 159 $ 78


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

(US $ millions)Q2 2020 vs.

Q1 2020Q2 2020 vs.

Q2 20196 mos 2020 vs.

6 mos 2019

Adjusted EBITDA – current period $ 84 $ 84 $ 159Adjusted EBITDA – comparative period 75 36 78Variance 9 48 81Mill nets(1) (4) 50 81Volume(2) (17) (23) (28)Key input prices(3) 5 6 15Key input usage(3) 5 — (4)Mill profit share and bonus — (3) (2)Other operating costs and foreign exchange(4) 20 18 19Total $ 9 $ 48 $ 81

(1) The mill nets variance represents the estimated impact of changes in realized pricing across all products. Mill nets are calculated as sales (net of outbound freight costs)divided by shipment volumes.

(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 AmericaNorbord’s North American operations generated $84 million in Adjusted EBITDA in the second quarter of 2020, an increaseof $16 million from $68 million in the first quarter of 2020 and an increase of $66 million from $18 million in the secondquarter of 2019. Year-to-date, North American operations generated $152 million in Adjusted EBITDA, an increase of $111million from $41 million in the same period last year. The quarter-over-quarter increase was primarily due to improvedproductivity and raw material usages, lower raw material and energy prices, lower labour, maintenance and overhead costs,and the benefit of a weaker Canadian dollar relative to the US dollar, partially offset by lower shipment volume. The year-over-year increase was primarily attributed to higher realized OSB prices, as well as lower raw material and energy prices,improved productivity, and the benefit of a weaker Canadian dollar relative to the US dollar, partially offset by lower shipmentvolume. Year-to-date, the increase was primarily attributed to higher realized OSB prices, as well as lower raw material andenergy prices, improved productivity, lower labour and maintenance, and lower overhead costs, partially offset by lowershipment volumes and higher raw material usages.

Norbord’s second quarter North American OSB cash production costs per unit (excluding mill profit share and freight costs)decreased by 9% compared to the first quarter of 2020, 7% compared to the second quarter of 2019 and 5% year-to-date.Quarter-over-quarter, unit costs decreased primarily due to improved productivity and raw material usages, lower raw materialand energy prices, and lower labour, maintenance and overhead costs. Year-over-year, unit costs were lower primarily due tolower raw material and energy prices and improved productivity, partially offset by the unit cost impact of lower productionvolume. Year-to-date, unit costs were lower primarily due to lower raw material and energy prices, improved productivity andthe timing of annual maintenance shuts, partially offset by the unit cost impact of lower production volume and higher rawmaterial usages.

Production remains indefinitely curtailed at the Chambord, Quebec mill since the third quarter of 2008. In 2018, the Boardof Directors approved a $71 million investment to rebuild and prepare the mill for an eventual restart when warranted bycustomer demand (see Chambord Rebuild Project). A restart decision has not yet been made, and Norbord will continue tomonitor market conditions. Production also remained indefinitely curtailed at the 100 Mile House mill and Cordele Line 1during the quarter. These three lines represent 18% of Norbord’s estimated annual capacity in North America. Subsequent toquarter-end, Norbord announced that it would resume production in August on a limited operating schedule on Cordele Line1 in response to the stronger than expected rebound in North American OSB demand.

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Excluding the Chambord mill, Norbord’s mills produced at 74% of available capacity in the second quarter of 2020 comparedto 79% in the first quarter of 2020 and 88% in the second quarter of 2019. The quarter-over-quarter and year-over-year decreasesin capacity utilization (which is based on fiscal days in each period) were due to the curtailments taken to match productionvolume with reduced customer demand, partially offset by improved productivity. The year-over-year decrease was also dueto the 2019 indefinite curtailments of 100 Mile House and Cordele Line 1.

Impairment of Assets During the quarter, the Company recorded a non-cash impairment loss of $16 million relating to idle production assets at theGrande Prairie, Alberta mill. These assets were deemed to be surplus following a review of the likelihood of their future usebased on factors including relevant operating plans, raw material availability and the limited potential for redeployment ofthese assets.

EuropeNorbord’s European operations generated $2 million in Adjusted EBITDA in the second quarter of 2020, a decrease of$8 million versus the first quarter of 2020 and $19 million versus the same quarter last year. Year-to-date, European operationsgenerated $12 million, a decrease of $30 million versus the same period last year. Quarter-over-quarter, the decrease wasprimarily due to lower shipment volumes, partially offset by improved energy usages. Year-over-year and year-to-date, thedecrease was primarily due to lower shipment volumes and average panel prices, partially offset by lower raw material prices,lower labour and maintenance costs, and improved productivity and raw material usages.

The European mills produced at 70% of stated capacity in the second quarter of 2020, compared to 93% in the first quarterof 2020 and 91% in the second quarter of 2019. Capacity utilization was lower versus both comparative periods primarilydue to curtailments taken at the UK mills in response to reduced customer demand, partially offset by the continued ramp-upof the Inverness, Scotland mill, which started up in the fourth quarter of 2017.

Margin Improvement Program (MIP)The Company generated net MIP gains of $34 million year-to-date due to improved mill productivity and lower controllablemanufacturing and overhead costs. MIP is measured relative to the prior year at constant prices and exchange rates.

FINANCE COSTS, DEPRECIATION AND AMORTIZATION, AND INCOME TAX


Finance costs $ (10) $ (12) $ (12) $ (22) $ (23)Interest income — — — — 1Depreciation and amortization (32) (35) (34) (67) (69)Income tax (expense) recovery (3) (8) 10 (11) 15

Finance CostsFinance costs in the second quarter of 2020 and the first six months of 2020 were lower against all comparative periodsprimarily due to lower drawings under the accounts receivable securitization program (see Accounts Receivable Securitization).

Depreciation and AmortizationThe Company uses the units-of-production method to depreciate its production equipment. Fluctuations in depreciation expensereflect relative changes in production levels by mill.

Income TaxA tax expense of $3 million was recorded in the second quarter of 2020 on pre-tax earnings of $21 million. The effective taxrate differs from the Canadian statutory rate principally due to rate differences on foreign activities, fluctuations in relativecurrency values and the recognition of certain non-recurring income tax recoveries.

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LIQUIDITY AND CAPITAL RESOURCES

(US $ millions, except per share information, unless otherwise noted) Q2 2020 Q1 2020 Q2 2019 6 mos 2020 6 mos 2019

Cash provided by (used for) operating activities $ 125 $ 39 $ 36 $ 164 $ (61)Cash provided by (used for) operating activities per share(1) 1.55 0.48 0.44 2.02 (0.74)Operating working capital(1) 152 197 162Total working capital(1) 183 266 548Additions to property, plant and equipment and intangible assets 14 25 30 39 60Net debt to capitalization, market basis(1) 26% 26% 20%Net debt to capitalization, book basis(1) 40% 40% 36%


At quarter-end, the Company had unutilized available liquidity of $378 million, comprising $20 million in cash and cashequivalents, $291 million in revolving bank lines (which includes the $55 million increase in the aggregate commitment,described below) and $67 million in available drawings under its accounts receivable securitization program, which theCompany believes is sufficient to fund expected short-term cash requirements.

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

Senior Secured Notes Due 2027The Company's $350 million senior secured notes due July 2027 bear an interest rate of 5.75%.

Revolving Bank LinesIn May 2020, the Company completed an amendment to its committed revolving bank lines to extend the maturity date fromMay 2021 to May 2022 and to increase the aggregate commitment from $245 million to $300 million. The facility bearsinterest at money market rates plus a margin that varies with the Company’s credit rating. The bank lines are secured by afirst lien on the Company’s North American OSB inventory and property, plant and equipment. This lien is shared pari passuwith the holders of the 2023 and 2027 senior secured notes.

At period-end, none (December 31, 2019 – none) of the revolving bank lines were drawn as cash and $9 million (December 31,2019 – $8 million) was utilized for letters of credit and guarantees.

The bank lines contain two quarterly financial covenants: minimum tangible net worth of $500 million and maximum netdebt to total capitalization, book basis, of 65%. For the purposes of the tangible net worth calculation, the following adjustmentshave 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 are excluded;● impairment of assets charge for 2018 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 accountsreceivable securitization program, less cash and cash equivalents, plus other liabilities classified as debt for financial covenantpurposes, letters of credit and guarantees issued, and any bank advances. At period-end, the Company’s tangible net worthwas $1,001 million and net debt for financial covenant purposes was $655 million. Net debt to total capitalization, book basis,was 40%. The Company was in compliance with the financial covenants at period-end.

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

(US $ millions) Jul 4, 2020 Dec 31, 2019

Long-term debt, principal value $ 665 $ 665Add: Other long-term debt — 68Less: Cash and cash equivalents (20) (20)Net debt 645 713Less: Other long-term debt — (68)Add: Other liabilities classified as debt for financial covenant purposes 1 2Add: Letters of credit and guarantees 9 8Net debt for financial covenant purposes $ 655 $ 655Shareholders’ equity $ 686 $ 704Add: 2018 impairment of assets (net of tax) 59 59Add: Other comprehensive income change(1) 80 60Add: Impact of Ainsworth changing functional currencies 155 155Add: IFRS transitional adjustments 21 21Tangible net worth for financial covenant purposes $ 1,001 $ 999Total capitalization $ 1,656 $ 1,654Net debt to capitalization, market basis 26% 24%Net debt to capitalization, book basis 40% 40%

(1) Cumulative subsequent to January 1, 2011.

Accounts Receivable SecuritizationThe Company has the ability to draw up to $125 million under a multi-currency accounts receivable securitization programwith a third-party trust sponsored by a highly rated Canadian financial institution. The program is revolving and has anevergreen commitment subject to termination on 12 months’ notice. Under the program, the Company has transferredsubstantially all of its present and future trade accounts receivable to the trust on a fully serviced basis for proceeds consistingof cash and deferred purchase price. However, the asset derecognition criteria under IFRS have not been met and the transferredaccounts receivable remain recorded as an asset.

At period-end, the Company had transferred but continued to recognize $122 million in trade accounts receivable, and recordeddrawings of nil as other long-term debt relating to this financing program. The level of accounts receivable transferred underthe program fluctuates with the level of shipment volumes, product prices and foreign exchange rates. The amount the Companyis able to draw under the program at any point in time depends on the level of accounts receivable transferred, concentrationlimits and credit enhancement ratios. At period-end, the maximum available drawings under the program were $67 million.The amount the Company chooses to draw under the program will fluctuate with the Company’s cash requirements at thatpoint in time. Any drawings are presented as other long-term debt on the balance sheet and are excluded from the net debt tocapitalization calculation for financial covenant purposes. The utilization charge, which is based on money market rates plusa margin, and other program fees are recorded as finance costs. Year-to-date, the utilization charges on drawings ranged from1.6% to 2.8% (2019 - 1.6% to 4.1%).

The securitization program contains no financial covenants. However, the program is subject to minimum credit ratingrequirements. The Company must maintain a long-term issuer credit rating of at least single B(mid) or the equivalent. As atAugust 4, 2020, the Company's ratings were BB (Standard & Poor’s Ratings Services) and Ba1 (Moody’s Investors Service),both with a stable outlook.

Other Liquidity and Capital ResourcesOperating working capital, consisting of accounts receivable, inventory and prepaids less accounts payable and accruedliabilities, was $152 million at period-end, compared to $197 million at April 4, 2020 and $162 million at July 6, 2019. The

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Company aims to minimize the amount of capital held as operating working capital and continues to manage it at minimallevels.

Quarter-over-quarter, operating working capital decreased by $45 million primarily due to lower inventory attributed to theusual seasonal drawdown of log inventory in the northern mills in North America as well as lower finished goods inventoryin both North America and Europe.

Year-over-year, operating working capital decreased by $10 million primarily due to lower inventory, partially offset by loweraccounts payable and accrued liabilities both attributable due to the two lines indefinitely curtailed in the second half of 2019.Lower accounts payable and accrued liabilities was also impacted by lower accrued capital expenditures and the timing ofpayments.

Total working capital, which includes operating working capital plus cash and cash equivalents and taxes receivable less bankadvances and taxes payable, was $183 million at period-end, compared to $266 million at April 4, 2020 and $548 million atJuly 6, 2019. The quarter-over-quarter decrease is primarily due to the lower operating working capital balance, taxes receivableand cash balance. The year-over-year decrease is primarily due to the lower cash balance as the cash proceeds from the 2027Notes issued in June was used to redeem early the 2020 Notes in July, and lower taxes receivable.

Operating activities generated $125 million of cash or $1.55 per share in the second quarter of 2020, $39 million or $0.48 pershare in the first quarter of 2020 and $36 million or $0.44 per share consumed in the second quarter of 2019. The highergeneration of cash versus the prior quarter was mainly attributed to the seasonal investment in operating working capital inthe first quarter. The higher generation of cash year-over-year was mainly attributed to higher earnings in the current quarterand income tax instalments paid in the second quarter of 2019.

INVESTMENTSInvestment in property, plant and equipment and intangible assets was $14 million in the second quarter of 2020, $25 millionin the first quarter of 2020 and $30 million in the second quarter of 2019. The fluctuation versus the comparative periods wasprimarily attributable to the timing of executing on various capital projects and reduction in budgeted spend.

As part of Norbord's COVID-19 Response Plan, Norbord’s budgeted 2020 investment in property, plant and equipment hasbeen further reduced from $100 million to $75 million for maintenance of business projects and projects focused on reducingmanufacturing costs across the Company’s mills, as well as a portion of the Chambord mill rebuild and Inverness phase 2projects (both described below). It also includes investments to support the Company’s strategy to increase the production ofspecialty products for industrial applications and exports. These investments will be funded with cash on hand, cash generatedfrom operations and, if necessary, drawings under the Company’s accounts receivable securitization program or committedrevolving bank lines.

Inverness ProjectDuring the first phase of the project, the Company invested $147 million to modernize and expand its Inverness OSB mill,including moving the unused second press from the Grande Prairie, Alberta mill. The project was substantially completed andthe new line started up in the fourth quarter of 2017, with no disruption to existing production capacity, and the mill's statedcapacity was increased from 395 to 720 MMsf (3/8-inch basis). The new finishing end was installed in 2018 and commissionedduring the first quarter of 2019.

In January 2019, the Board of Directors approved a $46 million (£35 million) second phase investment to further expandcapacity at the Inverness mill by 225 MMsf (3/8-inch basis) (200,000 cubic metres) through the addition of a second woodroom and dryer. This project is expected to be completed by the end of 2020 and is consistent with the Company’s strategyof growing its European OSB capacity to serve continued substitution growth in its key markets. During the first six monthsof 2020, $11 million was invested ($39 million project-to-date), with $2 million invested during the quarter.

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Chambord Rebuild ProjectProduction has remained curtailed at the Chambord mill since the third quarter of 2008. The Company believes North AmericanOSB demand will continue to grow over the long-term. In order to support this anticipated growth and enhance the competitiveposition of the Company’s overall manufacturing operations, Norbord is investing $71 million to rebuild and prepare the millfor an eventual restart. The Company has not yet made a restart decision, however, and will only do so when it is sufficientlyclear that customers require the production from this mill. The project involves replacing the dryers and investing in the wood-handling and finishing end areas to streamline the mill’s manufacturing process and reduce costs, as well as upgrades to processand personal safety systems, electrical systems and environmental equipment that will bring the mill up to current standardsafter more than a decade of curtailment. The government of Quebec is investing up to C $4.8 million (US $3.6 million) in theproject; to-date, less than C $1 million has been received. Further, the Company’s investment will qualify for Canadianinvestment tax credits and Quebec’s rebate program for large electricity users which will reduce cash income taxes andelectricity costs, respectively, once the mill is operational. During the first six months of 2020, $2 million was invested ($53million project-to-date). There was no investment during the quarter as Quebec construction sites were declared non-essentialduring COVID-19.

CAPITALIZATIONAt August 4, 2020, there were 80.7 million common shares outstanding. In addition, 1.6 million stock options were outstanding,of which 55% were fully vested.

Normal Course Issuer BidIn October 2019, Norbord renewed its normal course issuer bid (NCIB) in accordance with TSX rules. Under the bid, Norbordmay purchase up to 4,083,429, representing 5% of the Company’s issued and outstanding common shares of 81,668,583 asof October 22, 2019, pursuant to TSX rules. Daily purchases of common shares may not exceed 72,970 subject to the Company’sability to make "block" purchases under the rules of the TSX. In response to the COVID-19 pandemic, the TSX had temporarilydoubled the daily purchase limit under all NCIBs such that Norbord was permitted to purchase up to 145,940 shares per dayuntil June 30, 2020. During the first quarter of 2020, 1.0 million shares were purchased under this bid at a cost of $22 million.However, to preserve financial flexibility given the uncertainty surrounding the short- and medium-term outlook, the Companyminimized share repurchases starting in early March and suspended all repurchases since the start of its first quarter blackoutperiod. Common shares purchased under the bid were cancelled. Norbord has repurchased a total of 1.2 million shares to-date under its current bid at a cost of $27 million.

Norbord believed that the market price of its common shares was attractive as they were trading significantly below replacementcost and management's view of intrinsic value and that the purchase of these common shares was an appropriate use of theCompany’s funds in light of potential benefits to remaining shareholders.

Purchases were made on the open market by Norbord through the facilities of the TSX, the NYSE or Canadian or US alternativetrading systems, if eligible, in accordance with the requirements of the TSX and applicable securities laws. The price thatNorbord paid for any such common shares was the market price of such shares at the time of acquisition.

DividendsNorbord’s variable dividend policy targets the payment to shareholders of a portion of free cash flow based upon the Company’sfinancial position, results of operations, cash flow, capital requirements and restrictions under the Company’s revolving banklines, as well as the market outlook for the Company’s principal products and broader market and economic conditions, amongother factors. Under this policy, the Board of Directors has declared the following dividends:

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(C $)Quarterly Dividend Declared

per Common Share

Q2 2013 to Q4 2014 $ 0.60Q1 2015 & Q2 2015 0.25Q3 2015 to Q1 2017 0.10Q2 2017 0.30Q3 2017 0.50Q4 2017 to Q2 2018 0.60Q3 2018 4.50Q4 2018 0.60Q1 2019 to Q3 2019 0.40Q4 2019 to Q1 2020 0.20Q2 2020 0.05

The Board retains the discretion to amend the Company’s dividend policy in any manner and at any time as it may deemnecessary 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.

Under Norbord’s variable dividend policy, $15 million (2019 – $49 million) was paid out during the first six months of 2020primarily using cash on hand.

FINANCIAL INSTRUMENTSThe Company utilizes various derivative financial instruments to manage risk and make better use of capital. The fair valuesof these instruments are reflected on the Company’s balance sheet and are disclosed in note 13 to the interim financial statements.

TRANSACTIONS WITH RELATED PARTIESIn the normal course of operations, the Company enters into various transactions with related parties which have been measuredat exchange value and recognized in the interim financial statements. The following transactions have occurred between theCompany and its related parties during the quarter:

BrookfieldAs of August 4, 2020, Brookfield held approximately 43% of the common shares outstanding. The Company periodicallyengages the services of Brookfield and its affiliates for various financial, real estate and other business services. During thequarter and year-to-date, the fees for services rendered were less than $1 million (2019 – less than $1 million).

OtherSales 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 and year-to-date, net sales of $15 million (2019 –$17 million) and $28 million (2019 – $35 million) were made to Interex. At period-end, $2 million (December 31, 2019 –$4 million) due from Interex was included in accounts receivable. At period-end, the investment in Interex was less than$1 million (December 31, 2019 – less than $1 million).

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SELECTED QUARTERLY INFORMATION

2020 2019 2018

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

SALES AND EARNINGSSales 421 467 373 435 447 476 501 640Operating income (loss) 31 40 (8) (12) (2) 6 (46) 175Adjusted EBITDA(1) 84 75 27 33 36 42 70 211Earnings (loss) 18 20 (12) (17) (14) 1 (28) 130Adjusted earnings (loss)(1) 31 21 (11) (9) (8) (2) 26 123PER COMMON SHARE EARNINGSEarnings (loss), basic 0.22 0.25 (0.15) (0.21) (0.17) 0.01 (0.32) 1.50Earnings (loss), diluted 0.22 0.25 (0.15) (0.21) (0.17) 0.01 (0.32) 1.49Adjusted earnings (loss), basic(1) 0.38 0.26 (0.13) (0.11) (0.10) (0.02) 0.30 1.42Adjusted earnings (loss), diluted(1) 0.38 0.26 (0.13) (0.11) (0.10) (0.02) 0.30 1.41Dividends declared(2) 0.05 0.20 0.20 0.40 0.40 0.40 0.60 4.50BALANCE SHEETTotal assets 1,785 1,904 1,921 1,862 2,207 1,942 1,942 2,130Long-term debt(3) 657 677 657 656 896 550 550 549Net debt for financial covenantpurposes(1) 655 665 655 675 601 564 435 377

Net debt to capitalization, marketbasis(1) 26% 26% 24% 25% 20% 17% 13% 10%

Net debt to capitalization, bookbasis(1) 40% 40% 40% 40% 36% 34% 28% 23%

KEY STATISTICSShipments (MMsf–3/8”)North America 1,400 1,459 1,335 1,654 1,587 1,569 1,602 1,687Europe 402 499 396 440 474 521 452 467Indicative average OSB price ($/Msf–7/16”, unless otherwise indicated)North Central 270 271 223 217 188 211 243 363South East 262 251 199 168 186 197 203 305Western Canada 224 255 190 164 153 160 184 281Europe (€/m3)(4) 251 241 247 269 285 287 299 305KEY PERFORMANCE METRICSReturn on capital employed(ROCE)(1) 21% 18% 7% 8% 9% 10% 17% 51%

Return on equity (ROE)(1) 17% 11% (6)% (5)% (4)% (1)% 10% 44%Cash provided by (used for)operating activities 125 39 28 52 36 (97) 126 228

Cash provided by (used for)operating activities per share(1) 1.55 0.48 0.34 0.64 0.44 (1.18) 1.46 2.63

(1) Non-IFRS measure; see Non-IFRS Financial Measures section.(2) Dividends declared per share stated in Canadian dollars.(3) Includes current and non-current long term debt.(4) European indicative average OSB price represents the gross delivered price to the largest continental market.

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 OSB – are generally stronger in thespring and summer months. Adverse weather can also limit access to logging areas, which can affect the supply of fibre to

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Norbord’s operations. OSB shipment volumes and prices are affected by these factors as well as by global supply and demandconditions.

Operating working capital is typically built up in the first quarter of the year primarily due to log inventory purchases in thenorthern regions of North America. 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’sresults over the past eight quarters. Fluctuations in earnings during that time mirror fluctuations in the demand for and theprice 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 realized North American OSB price, when operations are running at full capacity, isapproximately $64 million or $0.79 per basic share (approximately $47 million or $0.58 per basic share based on the last 12months of production). Regional pricing variations, particularly in the Southern US and Western Canada, make theNorth Central benchmark price a useful, albeit imperfect, proxy for overall North American OSB pricing. Similarly in Europe,regional pricing variations and product mix also make the European OSB indicative price a useful, albeit imperfect, proxyfor overall European OSB pricing. The Company estimates that the annualized impact on Adjusted EBITDA of a €10 per000m3 change in the realized European OSB price, when operations are running at full capacity, is approximately $11 millionor $0.14 per basic share. Further, premiums obtained on value-added products, the pricing lag effect of maintaining an orderfile, 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. Prices forresin, a petroleum-based product, generally follow global oil prices and have been trending downwards since the fourth quarterof 2018.

Norbord has significant exposure to the Canadian dollar with approximately 37% of its global (47% of North American) panelproduction capacity located in Canada. The Company estimates that the favourable impact of a one-cent (US) decrease in thevalue of the Canadian dollar would positively impact annual Adjusted EBITDA by approximately $6 million when all six ofNorbord’s Canadian OSB mills operate at full capacity. Norbord also has exposure to the Euro as all but one of the Company’sEuropean production facilities are located in the UK and export sales to the continent are denominated in Euros. The Companyestimates that the favourable impact of a one-pence (UK) decrease in the value of the Euro would positively impact annualAdjusted EBITDA by less than $1 million when all UK production facilities operate at full capacity.

Items that are not related to ongoing business operations and/or non-cash that had a significant impact on quarterly resultsinclude:

Impairment of Assets – Included in the second quarter of 2020 is a $16 million ($0.20 per basic and diluted share) non-cashpre-tax loss related to an impairment charge at the Company's Grande Prairie mill (see Impairment of Assets in the OperatingResults section). Included in the third quarter of 2019 is a $10 million ($0.12 per basic and diluted share) non-cash pre-taxloss related to an impairment charge at the Company’s Cordele mill. Included in the fourth quarter of 2018 is an $80 million($0.93 per basic and $0.92 per diluted share) non-cash pre-tax loss related to an impairment charge at the Company’s 100Mile House mill.

Loss on Disposal of Assets – Included in the second quarter of 2020 is a $3 million ($0.04 per basic and diluted share) non-cash loss related to obsolete operating and maintenance supplies and on the disposal of obsolete production equipment. Includedin the fourth quarters of 2019 and 2018 is a $2 million ($0.02 per basic and diluted share) non-cash loss related to obsoleteoperating and maintenance supplies. Included in the second quarter of 2019 is a $1 million ($0.01 per basic and diluted share)non-cash loss on the disposal of production equipment based on capital projects completed during the quarter.

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Stock-based Compensation and Related Costs – Included in the second quarter of 2020 and third quarter of 2018 is $2 million($0.02 per basic and diluted share) of stock-based compensation and related revaluation costs. Included in the fourth, secondand first quarters of 2019, and second quarter of 2018 is $1 million ($0.01 per basic and diluted share) of similar costs.

Costs on Early Debt Extinguishment – Included in the second quarter of 2019 is a $9 million ($0.11 per basic and dilutedshare) premium paid on the early extinguishment of the senior secured notes due 2020 and a related $1 million ($0.01 perbasic and diluted share) non-cash write-off of net unamortized debt issue costs.

Costs related to 100 Mile House Indefinite Curtailment – Included in the second quarter of 2019 is $2 million ($0.02 perbasic and diluted share) of severance and other related costs resulting from the indefinite curtailment of the 100 Mile Housemill in August 2019.


(US $ millions)Q2

2020Q1

2020Q4

2019Q3

2019Q2

2019Q1

2019Q4

2018Q3

2018

Earnings (loss) $ 18 $ 20 $ (12) $ (17) $ (14) $ 1 $ (28) $ 130Add: Impairment of assets 16 — — 10 — — 80 —Add: Loss on disposal of assets 3 — 2 — 1 — 2 —Add: Stock-based compensation and relatedcosts 2 — 1 — 1 1 — 2

Add: Costs on early extinguishment of 2020Notes — — — — 10 — — —

Add: Costs related to 100 Mile House indefinite curtailment — — — — 2 — — —Add: Reported income tax expense (recovery) 3 8 (6) (6) (10) (5) (26) 37Adjusted pre-tax earnings (loss) 42 28 (15) (13) (10) (3) 28 169Less: Income tax (expense) recovery at statutory rate(1) (11) (7) 4 4 2 1 (2) (46)Adjusted earnings (loss) $ 31 $ 21 $ (11) $ (9) $ (8) $ (2) $ 26 $ 123

(1) Represents Canadian combined federal and provincial statutory rate of 26%. Q3 of 2018 were based on a rate of 27% and a true up for the full year rate of 26% was reflectedin Q4.

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(US $ millions)Q2

2020Q1

2020Q4

2019Q3

2019Q2

2019Q1

2019Q4

2018Q3

2018

Earnings (loss) $ 18 $ 20 $ (12) $ (17) $ (14) $ 1 $ (28) $ 130Add: Finance costs 10 12 11 11 12 11 9 10Less: Interest income — — (1) — — (1) (1) (2)Add: Costs on early extinguishment of 2020Notes — — — — 10 — — —

Add: Depreciation and amortization 32 35 32 35 34 35 34 34Add: Income tax expense (recovery) 3 8 (6) (6) (10) (5) (26) 37EBITDA 63 75 24 23 32 41 (12) 209Add: Impairment of assets 16 — — 10 — — 80 —Add: Loss on disposal of assets 3 — 2 — 1 — 2 —Add: Stock-based compensation and relatedcosts 2 — 1 — 1 1 — 2

Add: Costs related to 100 Mile House indefinite curtailment — — — — 2 — — —

Adjusted EBITDA(1) $ 84 $ 75 $ 27 $ 33 $ 36 $ 42 $ 70 $ 211(1) Non-IFRS measure; see Non-IFRS Financial Measures section.

CHANGES IN ACCOUNTING POLICIES(i) Financial Instruments

In September 2019, the IASB issued amendments to IFRS 9 with regards to the interest rate benchmark reform.These amendments provide targeted relief for financial instruments qualifying for hedge accounting to addressuncertainties related to the ongoing reform of interbank offered rates. The amendments became effective for theCompany on January 1, 2020 and did not have any impact on its interim financial statements.

FUTURE CHANGES IN ACCOUNTING POLICIES(i) Property, Plant and Equipment

In May 2020, the IASB issued amendments to IAS 16 with regards to sale proceeds before property, plant andequipment is available for intended use. These amendments include the requirement to recognize in earnings anyproceeds and related costs from selling items produced while an asset is being prepared for its intended use, andclarify the requirement to capitalize costs of testing whether an asset is functioning properly. The amendments areeffective on January 1, 2022. The Company is currently assessing the impact of these amendments on its financialstatements.

SIGNIFICANT ACCOUNTING POLICIES, JUDGEMENTS AND ESTIMATESManagement has selected appropriate accounting policies and made certain estimates and assumptions that affect the reportedamounts and other disclosure in the interim financial statements. These accounting policies, judgements and estimates aredescribed in the 2019 audited financial statements of the Company or in the section above.

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RISKS AND UNCERTAINTIESIn addition to those risks and uncertainties described in Norbord’s annual MD&A and included in the 2019 annual reportavailable on Norbord’s website, SEDAR and EDGAR, Norbord’s results may be impacted by risks associated with COVID-19and the related global reduction in commerce and substantial volatility in stock markets and commodity prices. Health andsafety measures instituted to protect Norbord’s employees, voluntary changes and government-imposed restrictions that mayapply to Norbord’s operations, and the impact of COVID-19 on customer demand, supply and distribution and other factorsmay result in a decrease of liquidity, cash flow and/or the valuation of Norbord’s long-lived assets, and Norbord may be unableto achieve its expected returns.

INTERNAL CONTROLS OVER FINANCIAL REPORTING AND DISCLOSURE CONTROLS ANDPROCEDURESThere have been no changes in Norbord’s internal controls over financial reporting and disclosure controls and proceduresduring the three months ended July 4, 2020 that have materially affected, or are reasonably likely to materially affect, itsinternal controls over financial reporting and its disclosure controls and procedures. In addition, there was no material impactto Norbord’s internal controls over financial reporting or disclosure controls and procedures as a result of any remote workingarrangements in response to the COVID-19 pandemic.

NON-IFRS FINANCIAL MEASURESThe following non-IFRS financial measures have been used in this MD&A. Non-IFRS financial measures do not have anystandardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by othercompanies. 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 non-recurring or other itemsand using a normalized income tax rate. Non-recurring items include the impairment of assets charge, costs related to theindefinite curtailment of the 100 Mile House mill and costs on early extinguishment of the 2020 Notes. Other items includenon-cash losses on disposal of assets, and stock-based compensation and related revaluation costs. The actual income tax expenseis added back and a tax expense calculated at the Canadian combined federal and provincial statutory rate is deducted. Adjustedearnings (loss) per share is Adjusted earnings (loss) divided by the weighted average number of common shares outstanding(on a basic or diluted basis, as specified).



Earnings (loss) $ 18 $ 20 $ (14) $ 38 $ (13)Add: Impairment of assets 16 — — 16 —Add: Loss on disposal of assets 3 — 1 3 1Add: Stock-based compensation and related costs 2 — 1 2 2Add: Costs on early extinguishment of 2020 Notes — — 10 — 10Add: Costs related to 100 Mile House indefinite curtailment — — 2 — 2Add: Reported income tax expense (recovery) 3 8 (10) 11 (15)Adjusted pre-tax earnings (loss) 42 28 (10) 70 (13)Less: Income tax (expense) recovery at statutory rate(1) (11) (7) 2 (18) 3Adjusted earnings (loss) $ 31 $ 21 $ (8) $ 52 $ (10)

(1) Represents Canadian combined federal and provincial statutory rate.

Adjusted EBITDA is defined as earnings (loss) determined in accordance with IFRS before finance costs, interest income,income taxes, depreciation, amortization and other non-recurring or other items. Non-recurring items include the impairment

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of assets charge, costs related to the indefinite curtailment of the 100 Mile House mill and costs on early extinguishment of the2020 Notes. Other items include non-cash losses on disposal of assets, and stock-based compensation and related revaluationcosts. As Norbord operates in a cyclical commodity business, Norbord interprets Adjusted EBITDA over the cycle as a usefulindicator of the Company’s ability to incur and service debt and meet capital expenditure requirements. In addition, Norbordviews Adjusted EBITDA as a measure of gross profit and interprets Adjusted EBITDA trends as indicators of relative operatingperformance.



Earnings (loss) $ 18 $ 20 $ (14) $ 38 $ (13)Add: Finance costs 10 12 12 22 23Less: Interest income — — — — (1)Add: Costs on early extinguishment of 2020 Notes — — 10 — 10Add: Depreciation and amortization 32 35 34 67 69Add: Income tax expense (recovery) 3 8 (10) 11 (15)EBITDA(1) 63 75 32 138 73Add: Impairment of assets 16 — — 16 —Add: Loss on disposal of assets 3 — 1 3 1Add: Stock-based compensation and related costs 2 — 1 2 2Add: Costs related to 100 Mile House indefinite curtailment — — 2 — 2Adjusted EBITDA $ 84 $ 75 $ 36 $ 159 $ 78

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The following tables reconcile Adjusted EBITDA per geographic segment to EBITDA:

Q2 2020(US $ millions) North America Europe Unallocated Total

EBITDA(1) $ 65 $ 2 $ (4) $ 63Add: Impairment of assets 16 — — 16Add: Loss on disposal of assets 3 — — 3Add: Stock-based compensation and related costs — — 2 2Adjusted EBITDA $ 84 $ 2 $ (2) $ 84


EBITDA(1) and Adjusted EBITDA $ 68 $ 10 $ (3) $ 75


EBITDA(1) $ 15 $ 21 $ (4) $ 32Add: Loss on disposal of assets 1 — — 1Add: Stock-based compensation and related costs — — 1 1Add: Costs related to 100 Mile House indefinitecurtailment 2 — — 2

Adjusted EBITDA $ 18 $ 21 $ (3) $ 36

6 mos 2020(US $ millions) North America Europe Unallocated Total

EBITDA(1) $ 133 $ 12 $ (7) $ 138Add: Impairment of assets 16 — — 16Add: Loss on disposal of assets 3 — — 3Add: Stock-based compensation and related costs — — 2 2Adjusted EBITDA $ 152 $ 12 $ (5) $ 159

6 mos 2019(US $ millions) North America Europe Unallocated Total

EBITDA(1) $ 38 $ 42 $ (7) $ 73Add: Loss on disposal of assets 1 — — 1Add: Stock-based compensation and related costs — — 2 2Add: Costs related to 100 Mile House indefinitecurtailment 2 — — 2

Adjusted EBITDA $ 41 $ 42 $ (5) $ 78(1) EBITDA is defined as earnings before finance costs, interest income, income tax, depreciation and amortization, and costs on early extinguishment of 2020 Notes.

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

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(US $ millions) Jul 4, 2020 Apr 4, 2020 Dec 31, 2019 Jul 6, 2019

Accounts receivable $ 137 $ 142 $ 136 $ 136Inventory 208 253 230 234Prepaids 8 10 13 12Accounts payable and accrued liabilities (201) (208) (259) (220)Operating working capital $ 152 $ 197 $ 120 $ 162

Total working capital is operating working capital plus cash and cash equivalents and taxes receivable less bank advances, ifany, and taxes payable.


Operating working capital $ 152 $ 197 $ 120 $ 162Cash and cash equivalents 20 30 20 315Taxes receivable 12 40 63 71Taxes payable (1) (1) (1) —Total working capital $ 183 $ 266 $ 202 $ 548

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 assetsand operating working capital.


Property, plant and equipment $ 1,367 $ 1,397 $ 1,427 $ 1,410Intangible assets 20 19 21 19Accounts receivable 137 142 136 136Inventory 208 253 230 234Prepaids 8 10 13 12Accounts payable and accrued liabilities (201) (208) (259) (220)Capital employed $ 1,539 $ 1,613 $ 1,568 $ 1,591

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

ROE (return on equity) is Adjusted earnings (loss) divided by common shareholders’ equity adjusted for the 2018 net impairmentof assets charge. ROE is a measure that allows common shareholders to determine how effectively their invested capital is beingemployed. As Norbord operates in a cyclical commodity business, it looks at ROE over the cycle and targets top-quartileperformance among North American forest products companies.


Shareholders' equity $ 686 $ 666 $ 704 $ 749Add: 2018 impairment of assets (net of tax) 59 59 59 59Shareholders' equity for ROE $ 745 $ 725 $ 763 $ 808

Cash provided by (used for) operating activities per share is calculated as cash provided by (used for) operating activitiesas 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 and cash equivalents. Net debt for financial covenant purposes is net debt excluding other long-term debt andincluding other liabilities classified as debt for financial covenant purposes, letters of credit and guarantees outstanding, andany bank advances. Net debt is a useful indicator of a company’s debt position. Net debt comprises:

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Long-term debt, principal value $ 665 $ 685 $ 665 $ 905Add: Other long-term debt — 95 68 82Less: Cash and cash equivalents (20) (30) (20) (315)Net debt 645 750 713 672Less: Other long-term debt — (95) (68) (82)Add: Other liabilities classified as debt for financial

covenant purposes 1 2 2 2Add: Letters of credit and guarantees 9 8 8 9Net debt for financial covenant purposes $ 655 $ 665 $ 655 $ 601

Tangible net worth consists of shareholders’ equity including certain adjustments. A minimum tangible net worth is one of twofinancial covenants contained in the Company’s committed bank lines. For financial covenant purposes, tangible net worthexcludes the 2018 net impairment of assets charge, all IFRS transitional adjustments and all movement in cumulative othercomprehensive income subsequent to January 1, 2011 (includes those movements related to the translation of Ainsworth in priorperiods).


Shareholders’ equity $ 686 $ 666 $ 704 $ 749Add: 2018 impairment of assets (net of tax) 59 59 59 59Add: Other comprehensive income movement(1) 80 85 60 85Add: Impact of Ainsworth changing functional currencies 155 155 155 155Add: IFRS transitional adjustments 21 21 21 21Tangible net worth $ 1,001 $ 986 $ 999 $ 1,069

(1) 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 financialcovenant purposes and tangible net worth. Net debt to capitalization on a book basis is a measure of a company’s relative debtposition. 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 banklines.

Net debt to capitalization, market basis, is net debt for financial covenant purposes divided by the sum of net debt for financialcovenant purposes and market capitalization. Market capitalization is the number of common shares outstanding at period-endmultiplied by the trailing 12-month average per share market price (in Canadian dollars) of $30.94 for the second quarter of2020, $32.66 for the first quarter of 2020 and $38.39 for the second quarter of 2019. Net debt to capitalization, market basis, isa key measure of a company’s relative debt position and Norbord interprets this measure as an indicator of the relative strengthand flexibility of its balance sheet. While the Company considers both book and market basis metrics, it believes the marketbasis to be superior to the book basis in measuring the true strength and flexibility of its balance sheet.

FORWARD-LOOKING STATEMENTSThis 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 “set up,” “on track,” “believes,” “expects,” “targets,”“outlook,” “scheduled,” “estimates,” “represents,” “forecasts,” “aims,” “predicts,” “plans,” “projects,” “anticipates,”“intends,” “supports,” “continues,” “suggests,” “considers,” “pro forma,” “potential,” “future” or variations of such wordsand phrases, or negative versions thereof, or statements that certain actions, events or results “can,” “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 materiallydifferent from any future results, performance or achievements expressed or implied by the forward-looking statements.

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Examples of such statements include, but are not limited to, comments with respect to: (1) outlook for the markets for products,including North American and European OSB demand; (2) expectations regarding future product pricing; (3) outlook foroperations; (4) expectations regarding mill capacity; (5) objectives; (6) strategies to achieve those objectives; (7) expectedfinancial results including the expected results of the MIP; (8) sensitivity to changes in product prices, such as the price ofOSB; (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 incometax 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 andtiming of dividend payments; (16) historical, forecasted and other forward-looking information published by third partiessuch as the US Census Bureau, FEA (Forest Economic Advisors, LLC), APA-The Engineered Wood Association, Office forNational Statistics and EUROCONSTRUCT which the Company may refer to but has not independently verified; and (17)plans implemented in response to COVID-19 and its impact on Norbord.

Although Norbord believes it has a reasonable basis for making these forward-looking statements, readers are cautioned notto place undue reliance on such forward-looking information. By its nature, forward-looking information involves numerousassumptions, 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) developmentsrelated to COVID-19 or any other plague, epidemic, pandemic, outbreak of infectious disease or any other public health crisis,including health and safety measures instituted to protect the Company's employees, government-imposed restrictions or otherrestrictions that may apply to the Company's employees and/or operations (including quarantine), the impact on customerdemand, supply and distribution and other factors; (2) assumptions in connection with the economic and financial conditionsin the US, Canada, Europe and globally; (3) risks inherent to product concentration and cyclicality; (4) effects of competitionand product pricing pressures; (5) risks inherent to customer dependence; (6) effects of variations in the price and availabilityof manufacturing inputs, including continued access to fibre resources at competitive prices, and the impact of third-partycertification standards; (7) availability of transportation services, including truck and rail services, and port facilities; (8)various events that could disrupt operations, including natural, man-made or catastrophic events and ongoing relations withemployees; (9) impact of changes to, or non-compliance with, environmental or other regulations; (10) government restrictions,standards or regulations intended to reduce greenhouse gas emissions; (11) impact of weather and climate change on Norbord’soperations or the operations or demand of its suppliers and customers; (12) impact of any product liability claims in excessof insurance coverage; (13) risks inherent to a capital intensive industry; (14) impact of future outcomes of tax exposures;(15) potential future changes in tax laws, including tax rates; (16) effects of currency exposures and exchange rate fluctuations;(17) future operating costs; (18) availability of financing, bank lines securitization programs and/or other means of liquidity;(19) impact of future cross border trade rulings or agreements; (20) implementation of important strategic initiatives andidentification, completion and integration of acquisitions; (21) ability to implement new or upgraded information technologyinfrastructure; (22) impact of information technology service disruptions or failures; and (23) changes in government policyand regulation.

The above list of important factors affecting forward-looking information is not exhaustive. Additional factors are notedelsewhere, and reference should be made to the other risks discussed in filings with Canadian and United States securitiesregulatory authorities. Except as required by applicable law, Norbord does not undertake to update any forward-lookingstatements, whether written or oral, that may be made from time to time by, or on behalf of, the Company, whether as a resultof 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 Jul 4, 2020 Dec 31, 2019

Assets Current assets

Cash and cash equivalents $ 20 $ 20

Accounts receivable 3 137 136

Taxes receivable 12 63

Inventory 4 208 230

Prepaids 8 13

385 462Non-current assets

Property, plant and equipment 7, 16 1,367 1,427

Intangible assets 20 21

Deferred income tax assets 1 2

Other assets 12 9

1,400 1,459

$ 1,785 $ 1,921

Liabilities and shareholders’ equityCurrent liabilities

Accounts payable and accrued liabilities $ 201 $ 259

Taxes payable 1 1

202 260Non-current liabilities

Long-term debt 5 657 657

Other long-term debt 3 — 68

Other liabilities 6 41 40

Deferred income tax liabilities 199 192

897 957

Shareholders’ equity 686 704

$ 1,785 $ 1,921

(See accompanying notes)

Commitments and Contingencies (note 14)

Subsequent Event (note 3)

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Interim Consolidated Statements of Earnings (Loss)

(Unaudited) Periods ended Jul 4 and Jul 6 (US $ millions, except per share information) Note Q2 2020 Q2 2019 6 mos 2020 6 mos 2019

Sales 16 $ 421 $ 447 $ 888 $ 923Cost of sales (335) (408) (724) (840)

General and administrative expenses (4) (4) (7) (7)

Depreciation and amortization 16 (32) (34) (67) (69)

Loss on disposal of assets (3) (1) (3) (1)

Impairment of assets 9 (16) — (16) —

Costs related to 100 Mile House indefinite curtailment — (2) — (2)

Operating income (loss) 31 (2) 71 4Non-operating items:

Finance costs (10) (12) (22) (23)

Interest income — — — 1

Costs on early extinguishment of 2020 Notes — (10) — (10)

Earnings (loss) before income tax 21 (24) 49 (28)Income tax (expense) recovery 10 (3) 10 (11) 15

Earnings (loss) $ 18 $ (14) $ 38 $ (13)

Earnings (loss) per common share 11 Basic and diluted $ 0.22 $ (0.17) $ 0.47 $ (0.16)


Interim Consolidated Statements of Comprehensive Income (Loss)

(Unaudited) Periods ended Jul 4 and Jul 6 (US $ millions) Q2 2020 Q2 2019 6 mos 2020 6 mos 2019

Earnings (loss) $ 18 $ (14) $ 38 $ (13)

Other comprehensive income (loss), net of tax

Items that will not be reclassified to earnings:

Actuarial loss on post-employment obligations (5) (4) (1) (5)

Items that may be reclassified subsequently to earnings:

Foreign currency translation gain (loss) on foreign operations 10 (12) (19) (6)

Other comprehensive income (loss), net of tax 5 (16) (20) (11)

Comprehensive income (loss) $ 23 $ (30) $ 18 $ (24)


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Interim Consolidated Statements of Changes in Shareholders’ Equity

(Unaudited) Periods ended Jul 4 and Jul 6 (US $ millions) Note Q2 2020 Q2 2019 6 mos 2020 6 mos 2019

Share capital 8

Balance, beginning of period $ 1,264 $ 1,280 $ 1,278 $ 1,280

Issue of common shares upon exercise of options — — 1 —

Common shares repurchased and cancelled — — (15) (24)

Common shares repurchased and cancelled under ASPP — — — 24

Balance, end of period $ 1,264 $ 1,280 $ 1,264 $ 1,280

Merger reserve 8 $ (96) $ (96) $ (96) $ (96)

Contributed surplus 8 $ 4 $ 4 $ 4 $ 4

Retained deficit

Balance, beginning of period $ (298) $ (193) $ (299) $ (168)

Earnings (loss) 18 (14) 38 (13)

Common share dividends (3) (24) (15) (49)

Common shares repurchased and cancelled 8 — — (7) (19)

Common shares repurchased and cancelled under ASPP 8 — — — 18

Balance, end of period(i) $ (283) $ (231) $ (283) $ (231)

Accumulated other comprehensive loss

Balance, beginning of period $ (208) $ (192) $ (183) $ (197)

Other comprehensive income (loss) 5 (16) (20) (11)

Balance, end of period 8 $ (203) $ (208) $ (203) $ (208)

Shareholders’ equity $ 686 $ 749 $ 686 $ 749


(i) Retained deficit comprised of:

Deficit arising on cashless exercise of warrants in 2013 $ (263) $ (263)

All other retained (deficit) earnings (20) 32

$ (283) $ (231)

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Interim Consolidated Statements of Cash Flows

(Unaudited) Periods ended Jul 4 and Jul 6 (US $ millions) Note Q2 2020 Q2 2019 6 mos 2020 6 mos 2019

CASH PROVIDED BY (USED FOR): Operating activities Earnings (loss) $ 18 $ (14) $ 38 $ (13)

Items not affecting cash:

Depreciation and amortization 16 32 34 67 69

Deferred income tax 10 (24) 11 7 32

Impairment of assets 9 16 — 16 —

Costs related to 100 Mile House indefinite curtailment — 2 — 2

Costs on early extinguishment of 2020 Notes — 10 — 10

Loss on disposal of assets, net 3 1 3 1

Other items 12 4 (11) 8 7

49 33 139 108Net change in non-cash operating working capital balances 12 46 39 (23) (72)

Net change in taxes receivable and taxes payable 30 (36) 48 (97)

125 36 164 (61)

Investing activities Investment in property, plant and equipment (15) (37) (44) (77)

Investment in intangible assets (1) (1) (2) (1)

(16) (38) (46) (78)

Financing activities Accounts receivable securitization (repayments) drawings 3 (95) 2 (68) 82

Revolving bank lines repayments (20) — — —

Issuance of debt — 350 — 350

Common share dividends paid (3) (24) (15) (49)

Debt issuance costs (1) (4) (1) (4)

Issue of common shares 8 — — 1 —

Repurchase of common shares 8 — — (22) (43)

Repayment of lease obligations 7 (3) (3) (6) (6)

(122) 321 (111) 330

Foreign exchange revaluation on cash and cash equivalents held 3 (6) (7) (4)

Cash and cash equivalents (Decrease) increase during period (10) 313 — 187

Balance, beginning of period 30 2 20 128

Balance, end of period $ 20 $ 315 $ 20 $ 315

(See accompanying notes, including note 12 for supplemental cash flow information)

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

In these unaudited condensed consolidated interim financial statements (interim financial statements) notes, “Norbord” means Norbord Inc. and all of its consolidated subsidiaries and affiliates, and “Company” means Norbord Inc. as a separate corporation, 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 holding a significant equity interest in the Company.

NOTE 1. NATURE AND DESCRIPTION OF THE COMPANY

Norbord is an international producer of wood-based panels with 17 mills in the United States, Canada and Europe. Norbord is a publicly traded company listed on the Toronto Stock Exchange (TSX) and the New York Stock Exchange (NYSE). 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.

At period-end, Brookfield's interest was approximately 43% of the outstanding common shares of the Company.

NOTE 2. SIGNIFICANT ACCOUNTING POLICIES

(a) Statement of Compliance These 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 Norbord disclosed in its audited consolidated financial statements as at, and for the year ended December 31, 2019 unless noted otherwise in note 2(c). 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) as issued by the International Accounting Standards Board (IASB) and should be read in conjunction with Norbord’s 2019 audited annual financial statements which include information necessary or useful to understanding Norbord’s business and financial statement presentation. Norbord’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 August 4, 2020.

(b) Basis of Presentation These interim financial statements include the accounts of the Company and all of its wholly-owned subsidiaries.

(c) Changes in Accounting Policies

(i) Financial Instruments In September 2019, the IASB issued amendments to IFRS 9 with regards to the interest rate benchmark reform. These amendments provide targeted relief for financial instruments qualifying for hedge accounting to address uncertainties related to the ongoing reform of interbank offered rates. The amendments became effective for the Company on January 1, 2020 and did not have any impact on its interim financial statements.

(d) Future Changes in Accounting Policies

(i) Property, Plant and Equipment

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In May 2020, the IASB issued amendments to IAS 16 with regards to sale proceeds before property, plant and equipment is available for intended use. These amendments include the requirement to recognize in earnings any proceeds and related costs from selling items produced while an asset is being prepared for its intended use, and clarify the requirement to capitalize costs of testing whether an asset is functioning properly. The amendments are effective on January 1, 2022. The Company is currently assessing the impact of these amendments on its financial statements.

NOTE 3. ACCOUNTS RECEIVABLE

The Company has the ability to draw up to $125 million under a 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, the Company 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 derecognition criteria under IFRS have not been met and the transferred accounts receivable remain recorded as an asset.

At period-end, the Company had transferred but continued to recognize $122 million (December 31, 2019 – $110 million) in trade accounts receivable, and the Company recorded nil drawings as other long-term debt (December 31, 2019 – $68 million) relating to this financing program. The level of accounts receivable transferred under the program fluctuates with the level of shipment volumes, product prices and foreign exchange rates. The amount the Company is able to draw under the program at any point in time depends on the level of accounts receivable transferred and timing of cash settlements, concentration limits and enhancement ratios. At period-end, the maximum available drawings under the program was $67 million. The amount the Company chooses to draw under the program will fluctuate with the Company’s cash requirements at that point in time. Any drawings are presented as other long-term debt on the balance sheet and are excluded from the net debt to total capitalization calculation for financial covenant purposes (note 5). 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 charges on drawings ranged from 1.6% to 2.8% (2019 – 1.6% to 4.1%).

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 August 4, 2020, the Company’s ratings were BB (Standard & Poor’s Ratings Services) and Ba1 (Moody’s Investors Service).

NOTE 4. INVENTORY

(US $ millions)

Jul 4, 2020 Dec 31, 2019

Raw materials $ 59 $ 62Finished goods 65 81

Operating and maintenance supplies 84 87

$ 208 $ 230

At period-end, the provision to reflect inventories at the lower of cost and net realizable value was $19 million (December 31, 2019 – $18 million).

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NOTE 5. LONG-TERM DEBT


Principal value 6.25% senior secured notes due April 2023 $ 315 $ 315

5.75% senior secured notes due July 2027 350 350

665 665Less: Unamortized debt issue costs (8) (8)

$ 657 $ 657

Revolving Bank Lines In May 2020, the Company completed an amendment to its committed revolving bank lines to extend the maturity date of the total aggregate commitment from May 2021 to May 2022 and to increase the aggregate commitment from $245 million to $300 million. The facility bears interest at money market rates plus a margin that varies with the Company’s credit rating. The bank lines are secured by a first lien on the Company’s North American OSB inventory and property, plant and equipment. This lien is shared pari passu with holders of the 2023 and 2027 senior secured notes.

At period-end, none (December 31, 2019 – none) of the revolving bank lines were drawn as cash, $9 million (December 31, 2019 – $8 million) was utilized for letters of credit and guarantees and $291 million (December 31, 2019 – $237 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 total capitalization, book basis, of 65%. The Company was in compliance with the financial covenants at period-end.

NOTE 6. OTHER LIABILITIES


Defined benefit pension obligations $ 20 $ 16Lease obligations 12 12

Accrued employee benefits 5 6

Reforestation obligations 4 4

Unrealized monetary hedge loss — 1

Other — 1

$ 41 $ 40

NOTE 7. LEASES

During the quarter and year-to-date, $1 million (2019 – less than $1 million) and $2 million (2019 – $1 million), respectively, of payments related to short-term leases was included in cost of sales. During the quarter and year-to-date, finance costs include less than $1 million (2019 – less than $1 million) related to lease liabilities.

During the quarter and year-to-date, total cash outflows related to all leases were $4 million (2019 – $3 million) and $8 million (2019 – $7 million), respectively.

Leases of certain production equipment contain residual value guarantees of the right-of-use assets at the end of the contract term. At period-end, the expected amount payable under these residual value guarantees was less than $1 million (2019 – less than $1 million).

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NOTE 8. SHAREHOLDERS’ EQUITY

Share Capital

6 mos 2020 6 mos 2019

Shares

(millions) Amount

(US $ millions) Shares

(millions) Amount

(US $ millions)

Common shares outstanding, beginning of period 81.5 $ 1,278 81.7 $ 1,280Issuance of common shares upon exercise of options 0.1 1 — —

Reverse accrual for shares repurchased and/or cancelled in 2019 — — 1.6 24

Shares repurchased in 2018 and cancelled in 2019 — — (0.2) (2)

Shares repurchased and cancelled in 2020 and 2019 (1.0) (15) (1.4) (22)

Common shares outstanding, end of period 80.6 $ 1,264 81.7 $ 1,280

Normal Course Issuer Bid Program (NCIB) In October 2019, the Company renewed its NCIB in accordance with TSX rules. Under the NCIB, the Company may purchase up to 4,083,429 of its common shares, representing 5% of Norbord’s issued and outstanding common shares of 81,668,583 as of October 22, 2019, pursuant to TSX rules. Daily purchases of common shares may not exceed 72,970 shares subject to the Company’s ability to make “block” purchases under the rules of the TSX. In response to the COVID-19 pandemic, the TSX had temporarily doubled the daily purchase limit such that Norbord was permitted to purchase up to 145,940 shares per day until June 30, 2020. In December 2019, the Company entered into an automatic share purchase plan (ASPP) in order to facilitate the repurchase of its common shares under its NCIB during the regularly scheduled quarterly trading blackout period. During the first quarter of 2020, the Company repurchased and cancelled 0.1 million common shares under the ASPP for a total cost of $2 million, $1 million of which represents a reduction in share capital and the remaining $1 million was charged to retained earnings. During the first quarter of 2020, after expiry of the ASPP, the Company also repurchased and cancelled an additional 0.9 million common shares under the current NCIB program for a total cost of $20 million. Of the total cost, $14 million represents a reduction in share capital and the remaining $6 million was charged to retained earnings. There were no shares repurchased in the second quarter of 2020. Under its prior NCIB that commenced on November 5, 2018 and expired on November 4, 2019, the Company previously sought and received approval from the TSX to purchase up to 5,191,965 of its common shares, representing 10% of Norbord’s public float of 51,919,654 as of October 22, 2018, pursuant to TSX rules. Daily purchases of common shares could not exceed 79,704 subject to the Company’s ability to make “block” purchases under the rules of the TSX. The Company had exhausted its prior NCIB limit.

During the first quarter of 2019, the Company repurchased and cancelled 1.4 million common shares under the prior ASPP for a total cost of $39 million. Of the total cost, $22 million represented a reduction in share capital and the remaining $17 million was charged to retained earnings. During the first quarter of 2019, 0.2 million shares purchased and accrued for in 2018 were also cancelled. Total cost relating to these shares was $4 million, of which $2 million represented a reduction in share capital and the remaining $2 million was charged to retained earnings. Purchases were made on the open market by the Company through the facilities of the TSX, the NYSE or Canadian or US alternative trading systems, if eligible, in accordance with the requirements of the TSX and applicable securities laws. The price that the Company paid for any such common shares was the market price of such shares at the time of acquisition.

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Merger Reserve On March 31, 2015, the Company and Ainsworth Lumber Co. Ltd. (Ainsworth) completed an arrangement under which the Company acquired all of the outstanding common shares of Ainsworth in an all-share transaction. The Company elected not to account for this transaction as a business combination under IFRS 3, Business Combinations, as the transaction represented a combination of entities under common control of Brookfield. Accordingly, the book values of the two entities were combined and no adjustments were made to reflect fair values or to recognize any new assets or liabilities of either entity. The merger reserve represents the difference between the fair value of the Norbord common shares on the date of issuance as consideration and the book value of Ainsworth’s net assets exchanged.

Stock Options Year-to-date, no stock options were granted (2019 – no stock options) and stock option expense of less than $1 million was recorded with a corresponding increase in contributed surplus (2019 – less than $1 million). Year-to-date, 0.1 million common shares (2019 – less than 0.1 million common shares) were issued as a result of options exercised under the stock option plan for total cash proceeds of $1 million (2019 – less than $1 million) in addition to less than $1 million (2019 – less than $1 million) representing the vested amount of stock options transferred from contributed surplus.

Accumulated Other Comprehensive Loss


Foreign currency translation loss on foreign operations, net of tax of $(3) (December 31, 2019 – $(4)) $ (164) $ (145)

Net loss on hedge of net investment in foreign operations, net of tax of $3 (December 31, 2019 – $3) (8) (8)

Actuarial loss on defined benefit pension obligations, net of tax of $10 (December 31, 2019 – $9) (31) (30)

Accumulated other comprehensive loss, net of tax $ (203) $ (183)

NOTE 9. IMPAIRMENT OF ASSETS

During the quarter, the Company recorded a non-cash impairment loss of $16 million related to idle production assets at the Grande Prairie, Alberta mill. These assets were deemed to be surplus following a review of the likelihood of their future use based on factors including relevant operating plans, raw material availability and the limited potential for redeployment of these assets.

NOTE 10. INCOME TAX

Income tax (expense) recovery recognized in the statement of earnings comprises the following:

(US $ millions)

Q2 2020 Q2 2019 6 mos 2020 6 mos 2019

Current income tax (expense) recovery $ (27) $ 21 $ (4) $ 47Deferred income tax recovery (expense) 24 (11) (7) (32)

$ (3) $ 10 $ (11) $ 15

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NOTE 11. EARNINGS (LOSS) PER COMMON SHARE

(US $ millions, except share and per share information, unless otherwise noted) Q2 2020 Q2 2019 6 mos 2020 6 mos 2019

Earnings (loss) available to common shareholders $ 18 $ (14) $ 38 $ (13)

Common shares (millions): Weighted average number of common shares outstanding 80.6 81.7 81.1 81.9

Dilutive stock options(1) 0.1 — — —

Diluted number of common shares 80.7 81.7 81.1 81.9

Earnings (loss) per common share: Basic and diluted $ 0.22 $ (0.17) $ 0.47 $ (0.16)

(1) Applicable if dilutive and when the weighted average daily closing share price for the period was greater than the exercise price for stock options. For the quarter and year-to-date period, there were stock options of 1.5 million and 1.1 million, respectively, (quarter and year-to-date ended July 6, 2019 – 0.7 million) that were not taken into account in the calculation of diluted earnings per share because their effect was anti-dilutive.

NOTE 12. SUPPLEMENTAL CASH FLOW INFORMATION

Other items comprise:

(US $ millions) Q2 2020 Q2 2019 6 mos 2020 6 mos 2019

Stock-based compensation $ 3 $ 1 $ 3 $ 2Pension funding greater than expense (1) (1) (1) (2)

Cash interest paid (greater) less than interest expense — (8) (1) 1

Amortization of debt issue costs 1 — 1 1

Unrealized loss on outstanding currency forwards — (3) — —

Unrealized foreign exchange loss on translation of monetary balances 1 — 6 4

Other — — — 1

$ 4 $ (11) $ 8 $ 7

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


Cash provided by (used for): Accounts receivable $ 7 $ 37 $ (9) $ 8

Prepaids 2 (2) 5 —

Inventory 43 25 16 (14)

Accounts payable and accrued liabilities (6) (21) (35) (66)

$ 46 $ 39 $ (23) $ (72)

Cash interest and income taxes comprises:


Cash interest paid $ (11) $ (19) $ (24) $ (20)Cash interest received — — — 1

Cash income taxes paid — (16) (1) (66)

Cash income taxes received 3 — 45 15

40

The net change in financial liabilities arising from financing activities comprises:


Long-term debt $ — $ 346 $ — $ 346

Other long-term debt (95) 2 (68) 82

Revolving bank lines (20) — — —

Net (decrease) increase in financial liabilities $ (115) $ 348 $ (68) $ 428

Cash and non-cash movements of changes in financial liabilities arising from financing activities comprises:


Cash movements:

Accounts receivable securitization (repayments) drawings $ (95) $ 2 $ (68) $ 82

Revolving bank lines repayments (20) — — —

Issuance of debt — 350 — 350

Debt issuance costs (1) (4) (1) (4)

(116) 348 (69) 428

Non-cash movements:

Amortization of debt issue costs 1 — 1 1

Debt issuance costs — — — (1)

1 — 1 —

Net (decrease) increase in financial liabilities $ (115) $ 348 $ (68) $ 428

NOTE 13. FINANCIAL INSTRUMENTS

Non-Derivative Financial Instruments

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

Jul 4, 2020 Dec 31, 2019

(US $ millions)

Financial Instrument Category

Net BookValue

Fair Value

Net BookValue

FairValue

Financial assets:

Cash and cash equivalents Fair value through profit or loss $ 20 $ 20 $ 20 $ 20

Accounts receivable Amortised cost 137 137 136 136

Other assets(1) Amortised cost 2 2 1 1

$ 159 $ 159 $ 157 $ 157

Financial liabilities:

Accounts payable and accrued liabilities Amortised cost $ 201 $ 201 $ 259 $ 259

Long-term debt(2) Amortised cost 665 690 665 702

Other long-term debt Amortised cost — — 68 68

Other liabilities(1) Amortised cost 9 9 12 12

$ 875 $ 900 $ 1,004 $ 1,041

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(1) Excludes lease obligations and defined benefit pension asset and obligations scoped out of IFRS 9, Financial instruments (note 6).

(2) Principal value of long-term debt excluding debt issue costs of $8 million (2019 – $8 million) (note 5).

The carrying values of the Company's non-derivative financial instruments approximate fair value, except where disclosed below. As at July 4, 2020, the provision for doubtful accounts was less than $1 million (December 31, 2019 – less than $1 million).

Derivative Financial Instruments Canadian Dollar Monetary Hedge At period-end, the Company had foreign currency forward contracts representing a notional amount of C $2 million (December 31, 2019 – C $52 million) in place to buy Canadian dollars and sell US dollars with maturities in July 2020 (December 31, 2019 – buy US dollars and sell Canadian dollars). The fair value of these contracts at period-end is an unrealized gain of less than $1 million (December 31, 2019 – an unrealized loss of $1 million); the carrying value of the derivative instrument is equivalent to the unrealized gain at period-end. During the quarter, net realized gains on the Company's matured hedges were less than $1 million (2019 – net realized losses of $1 million). Year-to-date, net realized gains on the Company's matured hedges were $2 million (2019 – less than $1 million). Euro Cash Flow Hedge At period-end, the Company had no foreign currency options (December 31, 2019 – €30 million notional amount) in place to buy Pounds Sterling and sell Euros. The fair value of these contracts at period-end is nil (December 31, 2019 – less than $1 million). During the quarter, net realized losses on the Company's matured hedges were nil (2019 – less than $1 million). Year-to-date, net realized losses on the Company's matured hedges were less than $1 million (2019 – less than $1 million).

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 and are recorded in earnings as they occur.

NOTE 14. 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 by 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 commitments as follows:

Payments Due by Period

(US $ millions)

Less than 1 Year

1–5 Years

Thereafter

Total

Purchase commitments $ 26 $ 30 $ 39 $ 95Lease obligations 8 10 4 22

Reforestation obligations 1 2 1 4

$ 35 $ 42 $ 44 $ 121

Purchase commitments relate to the purchase of property, plant and equipment and long-term purchase contracts with minimum fixed payment amounts.

42

NOTE 15. 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 interim financial statements. The following transactions have occurred between Norbord and its related parties during the normal course of business.

Brookfield Norbord periodically engages the services of Brookfield and its affiliates for various financial, real estate and other business services. During the quarter and year-to-date, the fees for services rendered were less than $1 million (2019 – less than $1 million).

Other 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 and year-to-date, net sales of $15 million (2019 – $17 million) and $28 million (2019 – $35 million), respectively, were made to Interex. At period-end, $2 million (December 31, 2019 – $4 million) due from Interex was included in accounts receivable. At period-end, the investment in Interex was less than $1 million (December 31, 2019 – less than $1 million) and is included in other assets.

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NOTE 16. GEOGRAPHIC SEGMENTS

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

Q2 2020

(US $ millions) North America Europe Unallocated Total

Sales $ 330 $ 91 $ — $ 421EBITDA(1) 65 2 (4) 63Depreciation and amortization 26 6 — 32

Additions to property, plant and equipment 10 3 — 13

Q2 2019

(US $ millions) North America Europe Unallocated

Total

Sales $ 317 $ 130 $ — $ 447EBITDA(1) 15 21 (4) 32

Depreciation and amortization 28 6 — 34


6 mos 2020


Total

Sales $ 676 $ 212 $ — $ 888EBITDA(1) 133 12 (7) 138Depreciation and amortization 55 12 — 67Additions to property, plant and equipment 23 14 — 37

Property, plant and equipment 1,099 268 — 1,367

6 mos 2019


Total

Sales $ 647 $ 276 $ — $ 923EBITDA(1) 38 42 (7) 73

Depreciation and amortization 56 13 — 69


Property, plant and equipment(2) 1,147 280 — 1,427 (1) EBITDA is a non-IFRS financial measure, which the Company uses to assess segment performance and operating results. The Company defines EBITDA as earnings before

finance costs, interest income, income tax, depreciation and amortization, and costs on early extinguishment of debt. 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, 2019.

NOTE 17. IMPACT OF COVID-19

During the second quarter, the ongoing COVID-19 pandemic negatively impacted demand for the Company's products in both North America and Europe, particularly in April, and the Company curtailed operations to match its production with this reduced customer demand. As the pandemic's severity and duration remains uncertain, the Company's business, financial results and financial condition could be negatively impacted in the future. The Company could experience other future impacts as a result of COVID-19, including, but not limited to, the carrying values of the Company's property, plant and equipment, the measurement of the assets and obligations under its defined benefit pension plans, its estimate of the annual effective tax rate for the year, and its allowance for expected credit losses. At this time, the Company is unable to estimate with a reasonable degree of confidence the extent of the impact of the COVID-19 pandemic on the Company’s future operating financial performance.

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Documents

News Release · • Reduced North American unit manufacturing costs by 9% quarter-over-quarter and 7% year- ... Norbord does not intend to provide interim operational updates unless