##### 



File No. 33-52214 FORM 6-K SECURITIES AND EXCHANGE COMMISSION   Report of Foreign Issuer
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934 For the month of July, 2004 Norbord Inc. 
  Suite 500, 1 Toronto Street
Toronto, Ontario Canada M5C 2W4 
  Indicate by check mark whether the registrant files or will file annual
reports under cover Form 20-F or Form 40-F. Form 20-F o  Form 40-F þ Indicate by check mark whether the registrant by furnishing the
information contained in this Form is also thereby furnishing the information
to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act
of 1934. Yes þ  No o If Yes is marked, indicate below the file number assigned to the
registrant in connection with Rule 12g3-2(b):
82-3173 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized. Norbord Inc.(Registrant)Date: July 29th, 2004
    
    /s/ Lynne TaylorLynne TaylorAssistant Corporate Secretary




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##### 



Form 6K continued...  Exhibits Press Release and Financial Statements to Shareholders for the six months
ending June 26th, 2004, together with Certification of Interim Financials by
each of the President and CFO of Norbord Inc.




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##### 



Norbord Reports Highest Ever Quarterly Results  
    
    Net income of $127 million or 84¢/share  
    
    Free cash flow of $237 million or $1.58/share  
    
    Annualized Return on Equity  41%  
    
    Net debt reduced to $243 million or 29% of total capitalization Note: Financial references in US dollars unless otherwise noted. TORONTO, ON (July 30, 2004) Norbord Inc. (TSX:NBD), previously Nexfor Inc.,
today reported the highest quarterly results in its history. Second quarter
net income was $127 million or $0.84 per share compared to breakeven in the
comparable quarter last year. On a quarter over quarter basis, net income was 60% higher, production records
were set at eight of Norbords nine North American OSB mills, and margins were
the highest in the Companys history. Barrie Shineton, Norbords President and CEO, said: Norbords performance is a
result of our recent acquisitions and our newly developed capacity that is now
on stream. We expect 2004 and 2005 will remain very favourable, driven by
continued strong housing starts, our low-cost manufacturing position and our
on-going margin improvement program. This is an exciting time for Norbord as
our debt to capitalization ratio continues to be rapidly reduced with the
substantial cash flow being generated in the business. Net income for the first six months of the year was $208 million or $1.38 per
share compared to close to breakeven for the first six months last year. When
adjusted for the distribution of            Fraser Papers, Norbords net income for
the first six months would have been $214 million or $1.43 per share. Other 2nd Quarter 2004 Highlights  
    
    Shareholders approved plan to distribute Fraser Papers business effective June 30, 2004.  
    
    Announced agreement to acquire OSB/particleboard mill in Belgium.  
    
    Announced redemption of outstanding $180 million debenture.  
    
    Increased North American OSB production 8% year-to-date over last year.  
    
    Set production records at 8 of 9 North American OSB mills.  
    
    Generated $18 million in panelboard margin improvements year-to-date.  
    
    Held cash manufacturing costs at 2003 level. Norbord Inc.
    
    Telephone Number:Suite 500
    
    (416) 365-07051 Toronto Street
    
    Fax (416) 365-3292Toronto, Ontario
    
    www.norbord.comM5C 2W4
 3




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##### 



Developments On June 22, 2004 the Companys shareholders approved a plan to distribute the
Fraser Papers paper and timberlands business to common shareholders, resulting
in the creation of a new public company listed on the Toronto Stock Exchange.
The distribution was formally completed on June 30, 2004. Concurrent with the
distribution, the Nexfor name was changed to Norbord. Shares of Fraser Papers
and Norbord began trading on July 5, 2004 for normal settlement. Also on June 22, 2004, Norbord announced it would acquire an OSB/particleboard
operation at Genk, Belgium at a cost of approximately 50 million Euros ($60
million). The acquisition, which is expected to close in the third quarter,
will position Norbord as the second largest producer of OSB in Europe with a
20% market share. The Genk mill will expand Norbords presence in key markets
in Benelux, Germany and Scandinavia. On June 17, Norbord announced it would redeem all $180 million of its
outstanding 6.875% debentures due November 15, 2005. The redemption was
completed July 16, 2004 using cash generated from operations. Performance During the second quarter, Norbord generated free cash flow of $237 million, or
$1.58 per share. Net debt stood at $243 million, representing 29% of total
capitalization, after reflecting the Fraser Papers distribution. Capital
spending during the second quarter was $11 million, and return on equity was
41%. Cash manufacturing costs were maintained at 2003 levels as a result of margin
improvements of $18 million year-to-date. The margin improvements offset the
negative impact of rising costs of energy and wood. Norbords North American OSB production was up nearly 8% over the first quarter
of 2004 as well as over the second quarter of 2003. Production records were
set at eight of Norbords OSB operations. The production increases exclude
Norbords acquisition in the first quarter of 2004 of the remaining 50% of its
Bemidji, MN mill. North American OSB markets remained exceptionally strong during the second
quarter, with benchmark North Central prices reaching $520 per Msf (7/16 inch
basis) before receding in June. Although severe wet weather has hampered
construction activity in the US South and Midwest, North American housing
starts continue to be robust. North American industrial panel markets also
strengthened during the period. In Europe, Norbords performance continued to improve due to significantly
stronger OSB markets. With continued growth in demand, OSB prices were more
than 50% higher during the first six months of 2004 compared to the same period
in 2003. Dividend The Board of Directors declared a quarterly dividend of CAD $0.10 per common
share, payable on September 21, 2004 to shareholders of record on September 1,
2004. Common shareholders of Norbord may participate in Norbords Dividend
Reinvestment Plan. Norbord Profile Norbord is an international producer of wood based panels with 2,700 employees
and 15 operations in the United States, Canada and Europe. The Company has
assets and sales in excess of $1 billion, and is one of the worlds largest
producers of oriented strand board (OSB). Norbord is listed on the Toronto 4




---



##### 



Stock Exchange (NBD:TSX). More information on Norbord can be found on its web
site at www.norbord.com. Conference Call Norbord will hold a conference call for investors on Friday, July 30, at 10:00
am EDT. The call will be broadcast live (audio) over the Internet via
www.norbord.com and www.newswire.ca. A replay will be available one hour
following termination of the call until August 27, 2004 by dialing
416-695-5800 or 1-800-408-3053. The pass code is 3079079. Audio playback will
be available on the Norbord website. - 30 - Contact: Charles Gordon
Vice President, Corporate Affairs
(416) 643  8836charles.gordon@norbord.com 5




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##### 



MANAGEMENTS DISCUSSION AND ANALYSIS July 30, 2004 EBITDA, EBITDA margin, operating earnings, ROCE, ROE, net debt, free cash flow,
book value per share, capital employed and net debt to total capitalization are
non-GAAP measures described in the Definitions section. Non-GAAP measures do
not have any standardized meaning prescribed by GAAP and are therefore unlikely
to be comparable to similar measures presented by other companies. There are no
directly comparable GAAP measures to any of these measures. A quantitative
reconciliation of each non-GAAP measure to the nearest comparable GAAP measure
is provided at the end of the Managements Discussion and Analysis. Distribution of Fraser Papers On June 30, 2004, subsequent to period end, the Company completed the $500
million distribution of its paper and timberlands business (Fraser Papers) to
its common shareholders. Concurrent with the distribution, the Nexfor name
was changed to Norbord. Shares of Norbord and Fraser Papers began trading on
July 5, 2004 for normal settlement. In accordance with the relevant Canadian accounting standards, the assets,
liabilities, net sales, expenses and cash flows relating to Fraser Papers are
included in the consolidated financial statements as continuing operations for
the periods presented. Fraser Papers will report its financial results
separately from Norbord starting in the third quarter. The assets,
liabilities, net sales, expenses and cash flows relating to Fraser Papers will
be reclassified as discontinued operations on Norbords statements at that
time. In addition to the consolidated financial statements, pro forma
consolidated financial statements have been presented as if the distribution
had occurred on June 26, 2004. These pro forma consolidated financial
statements recast the consolidated statements of earnings and cash flows in the
discontinued operations format. In addition, the pro forma consolidated
balance sheet presents the Norbord balance sheet, post distribution. Following the distribution, Norbord holds an $83 million note payable from
Fraser Papers. The note has a term of 12 months, can be extended for 6 months
at Fraser Papers option and bears interest at Libor + 3%. In addition,
Norbord continues to guarantee certain obligations of Fraser Papers having a
notional value of approximately $100 million. Fraser Papers has committed to
use its best efforts to remove Norbord from these guarantees and has agreed to
provide letters of credit or other acceptable collateral to secure any
guarantees outstanding 18 months after the distribution. As security for these
ongoing financial commitments to Fraser Papers, Norbord will have the right, at
any time, to require Fraser Papers to provide a fixed first charge security
interest over Fraser Papers timberlands and manufacturing facilities.
Norbord will continue to provide certain administrative services to Fraser
Papers for a fee on an interim basis. Operating Results Net sales were $695 million, 58% higher than the second quarter of 2003, driven
by higher OSB prices in North America and Europe combined with record OSB
production.
The acquisition of the remaining 50% of the Bemidji, MN OSB mill on March 26,
2004 accounted for $21 million of the increase. Net sales for the first six months of 2004 were up $433 million from the
comparable period in 2003, with higher OSB prices accounting for the majority
of the increase. 6




---



##### 



Record North American OSB production, up 8% compared to the
same period in 2003, excluding the Bemidji acquisition, accounted for $43
million of the increase. Earnings before interest, taxes and depreciation (EBITDA) was $243 million in
the second quarter of 2004, up $86 million from the first quarter. Panels
contributed $74 million of the increase, on the strength of OSB prices and
improved production volumes. For the six-month period, EBITDA was $400
million, with Panels accounting for $388 million of the total. Depreciation expense was $32 million in the quarter, $62 million year-to-date,
in line with the prior year. Following the distribution of Fraser Papers,
depreciation expense is expected to be approximately $20 million per quarter,
excluding the impact of future capital investments. Pre-tax cash return on capital employed (ROCE), on an annualized basis,
averaged 62% in the second quarter of 2004, compared to 43% in the first
quarter of 2004 and 15% in the second quarter of 2003. The Panels segment
drove the improved ROCE, with an annualized rate of 97% in the second quarter.
Year-to-date, return on common equity (ROE) was 41% on an annualized basis. Liquidity and Capital Resources In the second quarter of 2004, cash flow from operations generated $248
million. First quarter 2004 cash flow from operations was $27 million. The
significant positive variance is due mainly to higher OSB earnings and a
reduction in operating working capital. Pro forma cash flow from operations
for the six-month period is $322 million. Total operating working capital at
June 26, 2004 was $179 million compared to $221 million at March
27, 2004. Pro forma operating working capital at June 26, 2004 is $35 million. Driven by higher OSB earnings, free cash flow totaled $237 million or $1.58 per
share in the second quarter of 2004, up sharply from $23 million in the same
period of 2003. Pro forma free cash flow for the six-month period was $307
million or $2.05 per share. During the first quarter of 2004, a convertible subordinated debenture of
Canfor Corporation, with a face value of CAD $78 million, was sold for proceeds
of $60 million (CAD $78 million), net of expenses. Capital investments were
$11 million in the three-month period ended June 26, 2004, up $6 million from
the preceding quarter. Cash dividends of $12 million in the second quarter of 2004 were $5 million
higher than in the second quarter of 2003 reflecting a significant reduction in
shares issued under the Dividend Reinvestment Plan (DRIP). Common shares
outstanding at June 26, 2004 totaled 150.5 million. Norbords net debt stood at $214 million at June 26, 2004, representing 16% of
total capitalization. Pro forma, net debt was $243. Strong cash flow has
allowed the net debt to total capitalization of Norbord to be reduced
significantly from 35% at December 31, 2003. Pro forma net debt to total
capitalization is 29% at June 30, 2004. 7




---



##### 



Subsequent to quarter end, the Company renegotiated its 3-year committed
unsecured revolving bank lines and reduced the total commitment to $208 million
while extending the term an additional year to May 2007. At June 26, 2004, $13
million of these lines were utilized, with the balance available to support
short-term liquidity requirements. The Board of Directors approved a share repurchase program in October 2003
whereby the Company may purchase on the open market up to 7.4 million common
shares, representing approximately 5% of the total shares outstanding. To date,
no shares have been repurchased under this program. Margin Improvements The Margin Improvement Program (MIP) delivered $46 million to date in 2004
relative to 2003 measured at constant prices and exchange rates. Approximately
$18 million relates to the Panels business and $28 million relates to Fraser
Papers. Norbord is on track to deliver targeted MIP of $26 million for the
year. Acquisition  OSB and Particleboard Mill at Genk Belgium During the second quarter, Norbord announced it would acquire OSB and
particleboard assets located at Genk, Belgium at a cost of approximately 50
million Euros ($60 million). The acquisition, which is expected to close in
the third quarter, will position Norbord as the second largest producer of OSB
in Europe with a 20% market share. The Genk mill will expand Norbords
presence in key markets in Benelux, Germany and Scandinavia. Acquisition  50% of the Bemidji, MN OSB Mill On March 26, 2004, Norbord acquired an additional 50% interest in the Bemidji,
MN OSB mill, bringing its ownership interest to 100%. The cost of the
acquisition was $34 million, net of cash balances acquired. The acquisition
increased Norbords total OSB capacity by 6% to 4,020 MMsf-3/8. Capital Investments Capital investments totaled $11 million in the second quarter of 2004 or 34% of
depreciation. For the first six months of 2004, capital investments were $17
million, down $1 million from the same period in 2003. For the full year 2004,
capital requirements are expected to total approximately $50 million and will
be funded with cash generated from operations. Approximately 40% of the 2004
capital program will be for sustaining maintenance and environmental
requirements. The 2004 capital plan includes about half of the costs associated with the $26
million project at the Jefferson, TX OSB mill to install a new energy system.
The new system
will improve the mills competitive cost position by reducing fuel, operating
and maintenance costs. The need to replace the equipment was identified during
the due diligence process prior to the April 2002 acquisition of the mill.
Scheduled completion is mid-2005. Redemption 6.875% Debentures, Due 2005 On July 16, 2004, the Company redeemed the remaining $180 million of 6.875%
debentures due 2005. Norbord will record a third quarter 2004 pre-tax charge
of $9 million for call premiums net of associated interest rate swap gains.
The redemption 8




---



##### 



was funded with cash generated from operations. During the
first quarter of 2004, the Company repurchased and cancelled $20 million of
these debentures and unwound associated interest rate swaps. The premium paid
on repurchase was offset by the recognition of gains on the interest rate
swaps. Defined Benefit Pension Plans The majority of the Companys defined benefit pension plans related to Fraser
Papers and accordingly, Norbord anticipates 2004 net pension expense and
employer contributions will be materially lower than the $31 million and $27
million, respectively, recorded in 2003. The 2003 amounts were higher than
previous years as they included a one-time charge of $12 million and funding of
$8 million related to the productivity improvement plan at Fraser Papers
Edmundston-Madawaska facility. Differences between assumptions and actual
experience could materially affect Norbords future plan assets, accrued
benefit obligations, pension expense, and pension contributions. Change in Accounting Policy Effective January 1, 2004, the Company adopted the new accounting
recommendations of the Canadian Institute of Chartered Accountants for the
recognition and disclosure of obligations associated with the retirement of
tangible long-lived assets. This change in accounting policy has been effected
retroactively with prior periods restated to reflect the impact of the change.
The cumulative effect of the change was a decrease of 2003 opening retained
earnings of $3 million. The change in policy did not have a material impact on
earnings in 2004 and 2003. The Companys asset retirement obligations of $5 million relate to closure
costs for landfills at Fraser Papers. These obligations will be the sole
responsibility of Fraser Papers going forward. Business Segments At June 26, 2004, the Company had three reportable segments:  i.
    
    Panels, comprised principally of OSB, MDF and particleboard
operations;ii.
    
    Paper, comprised of the paper, pulp, and sawmill operations; andiii.
    
    Timber, comprised of woodland operations. Following the distribution of Fraser Papers, which took place subsequent to
period end, the Company will have a single reportable segment  Panels. Panels The Panel segment comprises 10 OSB mills, 2 MDF (medium density fibreboard)
plants, 2 particleboard plants, 1 I-joist mill, 1 hardwood plywood mill, 2
laminating operations, and a furniture plant. The operations are located in
Canada, the United
States and the United Kingdom. Panels accounted for 63% of Norbords total net
sales in the second quarter of 2004 compared to 51% in the same period in 2003. 9




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##### 



Q2
    
    Q1
    
    Q2
    
    6 mos
    
    6 mos(In millions of US dollars)
    
    2004
    
    2004
    
    2003
    
    2004
    
    2003Net sales
    
    
    439
    
    
    
    348
    
    
    
    224
    
    
    
    787
    
    
    
    415EBITDA
    
    
    231
    
    
    
    157
    
    
    
    59
    
    
    
    388
    
    
    
    90Depreciation
    
    
    20
    
    
    
    19
    
    
    
    19
    
    
    
    39
    
    
    
    37Capital investments
    
    
    10
    
    
    
    5
    
    
    
    6
    
    
    
    15
    
    
    
    10
 Panels generated EBITDA of $231 million for the second quarter of 2004. This
is close to a 50% improvement over a record first quarter of $157 million in
EBITDA and almost four times the EBITDA earned in the same quarter of the
previous year. OSB prices in North America once again set a record in the
quarter and were the principle driver in the improvement. Year-to-date EBITDA
of $388 million is more than four times greater than the $90 million in EBITDA
generated over the same period in 2003. EBITDA margins were 53% for the
quarter compared to 26% for the second quarter of 2003 and 45% for the first
quarter of 2004. Year-to-date EBITDA margin for 2004 is 49%, more than twice
the 22% for the same period last year. U.S. housing starts averaged 1.93 million units for the first half of 2004, on
a seasonally adjusted basis. That is an increase of 10% over the 1.74 millions
units during the same period last year. Low interest rates and favorable
demographics continue to drive the demand for housing. North Central OSB benchmark pricing averaged $437 per Msf (7/16-inch basis) for
the second quarter of 2004, more than double the $215 average during the same
period last year and up 3% over the first quarter average of $423. Prices rose
early in the quarter hitting a record high of $520 at the end of April before
declining and ending the quarter at $300. Production at the North American OSB mills increased 15% over the same quarter
last year. Of the improvement, 7% is attributable to the acquisition of the
additional 50% of the Bemidji, MN, mill not previously owned. The mill was
acquired just before the end of the first quarter of 2004. Production costs
for OSB, net of employee profit sharing, have remained consistent with the
previous year and quarter, despite rising energy, resin and fibre costs. With the strong demand for I-joists, the mill at Juniper, NB, has increased
production 35% year-over-year and recently announced the addition of a
third operating shift. European OSB markets continue to be strong, with mill nets 50% higher than the
same period in the prior year. Increased production of OSB and the significant
OSB price improvement have been the primary drivers in improving EBITDA for the
European operations. Paper and Timber The Paper and Timber segments comprise Fraser Papers which was distributed to
shareholders. 10




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##### 



The Paper segment comprises 17 paper machines at four locations, two market
pulp facilities, and four sawmills. Products include uncoated freesheet,
groundwood paper, paperboard, towel, hardwood pulp and softwood lumber. The Timber segment includes freehold lands in Maine (97,000 hectares) and New
Brunswick (310,000 hectares) and crown licenses in New Brunswick.
Approximately 50% of the Timber segments sales are directed to third parties,
the remainder is consumed internally. All the fibre for Norbords panel
operations is purchased on the open market. Together, Paper and Timber accounted for 37% of the Companys net sales in the
second quarter of 2004, compared to 49% in the same period of 2003. PAPER Q2
    
    Q1
    
    Q2
    
    6 mos
    
    6 mos(In millions of US dollars)
    
    2004
    
    2004
    
    2003
    
    2004
    
    2003Net sales
    
    
    248
    
    
    
    209
    
    
    
    210
    
    
    
    457
    
    
    
    401EBITDA (1)
    
    
    9
    
    
    
    (3
    )
    
    
    (1
    )
    
    
    6
    
    
    
    (3
    )Depreciation
    
    
    12
    
    
    
    10
    
    
    
    11
    
    
    
    22
    
    
    
    22Capital investments
    
    
    1
    
    
    
    1
    
    
    
    4
    
    
    
    2
    
    
    
    7
 (1) Excluding restructuring charge of $21 in Q2 2003. TIMBER Q2
    
    Q1
    
    Q2
    
    6 mos
    
    6 mos(In millions of US dollars)
    
    2004
    
    2004
    
    2003
    
    2004
    
    2003Net sales
    
    
    13
    
    
    
    25
    
    
    
    9
    
    
    
    38
    
    
    
    29EBITDA
    
    
    3
    
    
    
    3
    
    
    
    1
    
    
    
    6
    
    
    
    5Depreciation
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    1
    
    
    
    1Capital investments
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    1
 Paper operations generated EBITDA of $9 million in the second quarter compared
to a loss of $3 million in the first quarter. Second quarter results were
positively impacted by stronger demand and pricing for both lumber and paper.
While no market related downtime was taken at any of the Paper and Timber
operations in the quarter, scheduled maintenance downtime was taken at the
Berlin-Gorham mill. Paper price increases were announced by Fraser Papers on
several of its products during the second quarter. It is anticipated that these
increases will be fully implemented in the third quarter. While there are
encouraging signs that markets are strengthening for U.S. paper producers,
higher energy and fibre costs are negatively impacting profitability. U.S. uncoated freesheet demand improved in the second quarter, reflecting
general economic growth. Prices for commodity grades of uncoated freesheet
improved as price increases by major producers appear to have been accepted in
the marketplace. Reported prices for 50 lb offset rolls averaged $652 per ton in the second
quarter, up 11




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##### 



11% from the first quarter average price of $587 per ton.
Approximately two-thirds of Fraser Papers total paper capacity is uncoated
freesheet. Demand improved for groundwood papers in the first quarter and was
coupled with a reduction of groundwood imports. Hardwood pulp list prices in North America increased to $567 per tonne for the
second quarter, up from $518 per tonne in the first quarter of 2004. Pulp
pricing is increasing on both hardwood and softwood grades, however, the
traditional premium that softwood pulp commanded over hardwood kraft pulp has
increased. Weaker supply/demand fundamentals for hardwood grades is attributed
to new capacity in South America and Asia. Lumber prices (Eastern Boston SPF 2 x 4) averaged $483 per MFBM in the second
quarter of 2004, up $67 or 16% from the first quarter of 2004. Lumber markets
improved as a result of strong housing demand. Timber operations generated consistent EBITDA results for 2004 as compared to
2003, with EBITDA of $3 million for the second quarter and $6 million
year-to-date. The Paper and Timber operations remain focused on aggressive measures to
control costs and improve margins. The restructuring at the East Papers
complex, initiated in 2003, is largely complete and the cost saving target of
$21 million on an annualized basis has been substantially realized. Operating
with the reduced work force and cost structure, the East Papers complex
achieved record production during the quarter. The foregoing contains a review of developments that impacted on Norbords
performance during the second quarter of 2004. Forward-looking statements and
estimates are also discussed. Such comments will be affected by, and involve,
known and unknown risks and uncertainties, which may cause the actual results
of the Company to be materially different from those expressed or implied. 12




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##### 



Definitions EBITDAis earnings from continuing operations before interest, taxes,
depreciation and amortization. As there is no generally accepted method of
calculating EBITDA, the measures as calculated by Norbord may not be comparable
to similar titled measures reported by other companies. EBITDA is presented as
a useful indicator of a companys ability to meet debt service and capital
expenditure requirements. Norbord interprets EBITDA trends as an indicator of
relative operating performance. EBITDA margin(%) is EBITDA as a percentage of net sales. Operating earningsis earnings from continuing operations before interest and
taxes. ROCE(return on capital employed) is annualized EBITDA divided by capital
employed. ROE(return on common equity) is earnings available to common shareholders
(earnings less preferred share dividend) divided by common shareholders
equity. Net debtis long-term debt including the current portion and bank advances,
less cash and short-term notes. Free cash flowis defined as cash provided by operating activities less total
capital investments (additions to property, plant and equipment). Book value per shareis common shareholders equity divided by common shares
outstanding. Capital employedis the sum of property, plant and equipment, operating working
capital (accounts receivable plus inventory less accounts payable) and other
assets. Net debt to total capitalizationis net debt divided by the sum of net debt and
shareholders equity. EBITDA Pro Forma2nd Qtr
    
    1st Qtr
    
    2nd Qtr
    
    6 Mths
    
    6 Mths
    
    6 Mths(In millions of US dollars)
    
    2004
    
    2004
    
    2003
    
    2004
    
    2003
    
    2004Earnings
    
    $
    127
    
    
    $
    81
    
    
    $
    
    
    
    $
    208
    
    
    $
    1
    
    
    $
    208Less: Earnings from discontinued
operations
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    2
    
    
    
    6Add: Interest expense
    
    
    9
    
    
    
    8
    
    
    
    10
    
    
    
    17
    
    
    
    19
    
    
    
    17Less: Interest and other income
    
    
    (1
    )
    
    
    (1
    )
    
    
    (2
    )
    
    
    (2
    )
    
    
    (3
    )
    
    
    (2
    )Add: Income tax
    
    
    76
    
    
    
    39
    
    
    
    (2
    )
    
    
    115
    
    
    
    (8
    )
    
    
    118Add: Depreciation
    
    
    32
    
    
    
    30
    
    
    
    30
    
    
    
    62
    
    
    
    60
    
    
    
    39EBITDA
    
    
    243
    
    
    
    157
    
    
    
    38
    
    
    
    400
    
    
    
    71
    
    
    
    386Restructuring charge
    
    
    
    
    
    
    
    
    
    
    21
    
    
    
    
    
    
    
    21
    
    
    
    EBITDA excluding restructuring charge
    
    $
    243
    
    
    $
    157
    
    
    $
    59
    
    
    $
    400
    
    
    $
    92
    
    
    $
    386
 13




---



##### 



Operating earnings Pro Forma2nd Qtr
    
    1st Qtr
    
    2nd Qtr
    
    6 Mths
    
    6 Mths
    
    6 Mths(In millions of US dollars)
    
    2004
    
    2004
    
    2003
    
    2004
    
    2003
    
    2004Earnings
    
    $
    127
    
    
    $
    81
    
    
    $
    
    
    
    $
    208
    
    
    $
    1
    
    
    $
    208Less: Earnings from discontinued
operations
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    2
    
    
    
    6Add: Interest expense
    
    
    9
    
    
    
    8
    
    
    
    10
    
    
    
    17
    
    
    
    19
    
    
    
    17Less: Interest and other income
    
    
    (1
    )
    
    
    (1
    )
    
    
    (2
    )
    
    
    (2
    )
    
    
    (3
    )
    
    
    (2
    )Add: Income tax
    
    
    76
    
    
    
    39
    
    
    
    (2
    )
    
    
    115
    
    
    
    (8
    )
    
    
    118Operating earnings
    
    
    211
    
    
    
    127
    
    
    
    8
    
    
    
    338
    
    
    
    11
    
    
    
    347Restructuring charge
    
    
    
    
    
    
    
    
    
    
    21
    
    
    
    
    
    
    
    21
    
    
    
    Operating earnings excluding
restructuring charge
    
    $
    211
    
    
    $
    127
    
    
    $
    29
    
    
    $
    338
    
    
    $
    32
    
    
    $
    347
 Capital employed Pro FormaJun 26
    
    Mar 27
    
    Dec 31
    
    Jun 26(In millions of US dollars)
    
    2004
    
    2004
    
    2003
    
    2004Property, plant and equipment
    
    $
    1,348
    
    
    $
    1,369
    
    
    $
    1,363
    
    
    $
    840Accounts receivable
    
    
    281
    
    
    
    290
    
    
    
    226
    
    
    
    152Inventory
    
    
    202
    
    
    
    221
    
    
    
    181
    
    
    
    72Accounts payable and accrued liabilities
    
    
    (304
    )
    
    
    (290
    )
    
    
    (312
    )
    
    
    (189
    )Other assets
    
    
    18
    
    
    
    20
    
    
    
    21
    
    
    
    73Capital employed
    
    $
    1,545
    
    
    $
    1,610
    
    
    $
    1,479
    
    
    $
    948
 Net debt Pro FormaJun 26
    
    Mar 27
    
    Dec 31
    
    Jun 26(In millions of US dollars)
    
    2004
    
    2004
    
    2003
    
    2004Long-term debt
    
    $
    632
    
    
    $
    632
    
    
    $
    658
    
    
    $
    631Current portion of long-term debt
    
    
    1
    
    
    
    1
    
    
    
    2
    
    
    
    1Cash and short-term notes
    
    
    (419
    )
    
    
    (187
    )
    
    
    (177
    )
    
    
    (389
    )Net debt
    
    $
    214
    
    
    $
    446
    
    
    $
    483
    
    
    $
    243
 Free cash flow Pro Forma2nd Qtr
    
    1st Qtr
    
    2nd Qtr
    
    6 Mths
    
    6 Mths
    
    6 Mths(In millions of US dollars)
    
    2004
    
    2004
    
    2003
    
    2004
    
    2003
    
    2004Cash provided by operating activities
    
    $
    248
    
    
    $
    27
    
    
    $
    34
    
    
    $
    275
    
    
    $
    (3
    )
    
    $
    322Capital investments
    
    
    (11
    )
    
    
    (6
    )
    
    
    (11
    )
    
    
    (17
    )
    
    
    (18
    )
    
    
    (15
    )Free cash flow
    
    $
    237
    
    
    $
    21
    
    
    $
    23
    
    
    $
    258
    
    
    $
    (21
    )
    
    $
    307
 14




---



##### 



NORBORD INC.
CONSOLIDATED STATEMENTS OF EARNINGS AND RETAINED EARNINGS (unaudited) Three Months Ended
    
    Six Months EndedPro FormaJun 26
    
    Jun 28
    
    Jun 26
    
    Jun 28
    
    Jun 26(In millions of US dollars, except per share information)
    
    2004
    
    2003
    
    2004
    
    2003
    
    2004(note 2)EarningsNet sales
    
    $
    695
    
    
    $
    439
    
    
    $
    1,264
    
    
    $
    831
    
    
    $
    787Earnings from continuing operations before interest,
taxes, depreciation and restructuring charge
    
    
    243
    
    
    
    59
    
    
    
    400
    
    
    
    92
    
    
    
    386Restructuring charge (note 11)
    
    
    
    
    
    
    (21
    )
    
    
    
    
    
    
    (21
    )
    
    
    Interest and other income
    
    
    1
    
    
    
    2
    
    
    
    2
    
    
    
    3
    
    
    
    2Interest expense
    
    
    (9
    )
    
    
    (10
    )
    
    
    (17
    )
    
    
    (19
    )
    
    
    (17
    )Earnings from continuing operations before
depreciation and taxes
    
    
    235
    
    
    
    30
    
    
    
    385
    
    
    
    55
    
    
    
    371Depreciation
    
    
    (32
    )
    
    
    (30
    )
    
    
    (62
    )
    
    
    (60
    )
    
    
    (39
    )Income tax (note 8)
    
    
    (76
    )
    
    
    2
    
    
    
    (115
    )
    
    
    8
    
    
    
    (118
    )Earnings from continuing operations
    
    
    127
    
    
    
    2
    
    
    
    208
    
    
    
    3
    
    
    
    214Earnings from discontinued operations (note 10)
    
    
    
    
    
    
    (2
    )
    
    
    
    
    
    
    (2
    )
    
    
    (6
    )Earnings
    
    $
    127
    
    
    $
    
    
    
    $
    208
    
    
    $
    1
    
    
    $
    208Earnings from continuing operations per common share- Basic
    
    $
    0.85
    
    
    $
    0.01
    
    
    $
    1.39
    
    
    $
    0.01
    
    
    $
    1.44- Diluted
    
    $
    0.84
    
    
    $
    0.01
    
    
    $
    1.38
    
    
    $
    0.01
    
    
    $
    1.43Earnings per common share- Basic
    
    $
    0.85
    
    
    $
    
    
    
    $
    1.39
    
    
    $
    
    
    
    $
    1.39- Diluted
    
    $
    0.84
    
    
    $
    
    
    
    $
    1.38
    
    
    $
    
    
    
    $
    1.38Retained EarningsBalance, beginning of period
    
    $
    315
    
    
    $
    156
    
    
    $
    245
    
    
    $
    167
    
    
    $
    245Impact of change in accounting policy (note 3)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3
    )
    
    
    Revised balance, beginning of period
    
    
    315
    
    
    
    156
    
    
    
    245
    
    
    
    164
    
    
    
    245Earnings
    
    
    127
    
    
    
    
    
    
    
    208
    
    
    
    1
    
    
    
    208Preferred share dividends
    
    
    (1
    )
    
    
    (1
    )
    
    
    (1
    )
    
    
    (1
    )
    
    
    (1
    )Common share dividends
    
    
    (11
    )
    
    
    (11
    )
    
    
    (22
    )
    
    
    (20
    )
    
    
    (22
    )Balance, end of period
    
    $
    430
    
    
    $
    144
    
    
    $
    430
    
    
    $
    144
    
    
    $
    430
 15




---



##### 



(See accompanying notes) 16




---



##### 



NORBORD INC.
CONSOLIDATED BALANCE SHEETS (unaudited) Pro FormaJun 26
    
    Dec 31
    
    Jun 26(In millions of US dollars)
    
    2004
    
    2003
    
    2004(restated - note 3)
    
    (note 2)ASSETSCurrent assets:Cash and short-term notes
    
    $
    419
    
    
    $
    177
    
    
    $
    389Short-term investment (note 4)
    
    
    
    
    
    
    60
    
    
    
    Accounts receivable
    
    
    281
    
    
    
    226
    
    
    
    152Inventory
    
    
    202
    
    
    
    181
    
    
    
    72Future income taxes
    
    
    20
    
    
    
    15
    
    
    
    11922
    
    
    
    659
    
    
    
    624Property, plant and equipment
    
    
    1,348
    
    
    
    1,363
    
    
    
    840Other assets
    
    
    18
    
    
    
    21
    
    
    
    73$
    2,288
    
    
    $
    2,043
    
    
    $
    1,537LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable and accrued liabilities
    
    $
    304
    
    
    $
    312
    
    
    $
    189Current portion of long-term debt
    
    
    1
    
    
    
    2
    
    
    
    1305
    
    
    
    314
    
    
    
    190Long-term debt (note 5)
    
    
    632
    
    
    
    658
    
    
    
    631Other liabilities
    
    
    99
    
    
    
    107
    
    
    
    39Future income taxes
    
    
    160
    
    
    
    71
    
    
    
    89Shareholders equity
    
    
    1,092
    
    
    
    893
    
    
    
    588$
    2,288
    
    
    $
    2,043
    
    
    $
    1,537
  (See accompanying notes) 17




---



##### 



NORBORD INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) Three Months Ended
    
    Six Months EndedPro FormaJun 26
    
    Jun 28
    
    Jun 26
    
    Jun 28
    
    Jun 26(In millions of US dollars)
    
    2004
    
    2003
    
    2004
    
    2003
    
    2004(note 2)CASH PROVIDED BY (USED FOR):Operating ActivitiesEarnings from continuing operations
    
    $
    127
    
    
    $
    2
    
    
    $
    208
    
    
    $
    3
    
    
    $
    214Items not affecting cash:Depreciation
    
    
    32
    
    
    
    30
    
    
    
    62
    
    
    
    60
    
    
    
    39Future income taxes (note 8)
    
    
    54
    
    
    
    (3
    )
    
    
    92
    
    
    
    (11
    )
    
    
    94Other items
    
    
    (5
    )
    
    
    4
    
    
    
    (7
    )
    
    
    (1
    )
    
    
    (4
    )208
    
    
    
    33
    
    
    
    355
    
    
    
    51
    
    
    
    343Net change in non-cash working capital balances
    
    
    40
    
    
    
    1
    
    
    
    (80
    )
    
    
    (54
    )
    
    
    (21
    )248
    
    
    
    34
    
    
    
    275
    
    
    
    (3
    )
    
    
    322Investing ActivitiesCapital investments
    
    
    (11
    )
    
    
    (11
    )
    
    
    (17
    )
    
    
    (18
    )
    
    
    (15
    )Sale of short-term investment (note 4)
    
    
    
    
    
    
    
    
    
    
    60
    
    
    
    
    
    
    
    60Acquisitions and other (note 9)
    
    
    (3
    )
    
    
    1
    
    
    
    (40
    )
    
    
    1
    
    
    
    (40
    )(14
    )
    
    
    (10
    )
    
    
    3
    
    
    
    (17
    )
    
    
    5Financing ActivitiesRepurchase of 6.875% debentures (note 5)
    
    
    
    
    
    
    
    
    
    
    (20
    )
    
    
    
    
    
    
    (20
    )Other debt incurred, (repaid) net
    
    
    
    
    
    
    (43
    )
    
    
    (8
    )
    
    
    (2
    )
    
    
    (8
    )Dividends
    
    
    (12
    )
    
    
    (7
    )
    
    
    (23
    )
    
    
    (13
    )
    
    
    (23
    )Realized interest rate swap gain (note 5)
    
    
    
    
    
    
    23
    
    
    
    
    
    
    
    23
    
    
    
    Issue of common shares (note 6)
    
    
    10
    
    
    
    
    
    
    
    15
    
    
    
    
    
    
    
    15(2
    )
    
    
    (27
    )
    
    
    (36
    )
    
    
    8
    
    
    
    (36
    )Increase (decrease) in cash and short-term notes
from continuing operations
    
    
    232
    
    
    
    (3
    )
    
    
    242
    
    
    
    (12
    )
    
    
    291Increase (decrease) in cash from discontinued
operations (note 10)
    
    
    
    
    
    
    4
    
    
    
    
    
    
    
    
    
    
    
    (49
    )Increase (decrease) in cash and short-term notes
    
    $
    232
    
    
    $
    1
    
    
    $
    242
    
    
    $
    (12
    )
    
    $
    242
  (See accompanying notes) 18




---



##### 



NORBORD INC. SHIPMENTS (unaudited) Three Months Ended
    
    Six Months EndedJun 26
    
    Jun 28
    
    Jun 26
    
    Jun 282004
    
    2003
    
    2004
    
    2003PanelsOSB (MMsf-3/8)
    
    
    950
    
    
    
    858
    
    
    
    1,786
    
    
    
    1,633MDF (MMsf-3/8)
    
    
    143
    
    
    
    126
    
    
    
    289
    
    
    
    263Particleboard (MMsf-3/8)
    
    
    143
    
    
    
    154
    
    
    
    298
    
    
    
    317Plywood (MMsf-3/8)
    
    
    23
    
    
    
    20
    
    
    
    42
    
    
    
    41I-joist (MMlf)
    
    
    16
    
    
    
    11
    
    
    
    27
    
    
    
    18PaperUncoated freesheet (000 tonnes)
    
    
    123
    
    
    
    114
    
    
    
    238
    
    
    
    219Groundwood paper (000 tonnes)
    
    
    42
    
    
    
    43
    
    
    
    81
    
    
    
    85Paperboard (000 tonnes)
    
    
    14
    
    
    
    14
    
    
    
    26
    
    
    
    27Towel (000 tonnes)
    
    
    8
    
    
    
    7
    
    
    
    16
    
    
    
    14Pulp (000 tonnes)
    
    
    84
    
    
    
    75
    
    
    
    153
    
    
    
    137Lumber (MMfbm)
    
    
    109
    
    
    
    107
    
    
    
    200
    
    
    
    207TimberTimber (000
m3)
    
    
    338
    
    
    
    206
    
    
    
    1,151
    
    
    
    973Discontinued Operations(note 10)Lumber (MMfbm)
    
    
    
    
    
    
    62
    
    
    
    
    
    
    
    118
 (See accompanying notes) 19




---



##### 



Note 1  Basis of Presentation These interim consolidated financial statements have been prepared in
accordance with Canadian generally accepted accounting principles using the
same accounting policies and methods as the most recent audited financial
statements. These interim financial statements should be read in conjunction
with the annual audited financial statements for the year ended December 31,
2003. On June 30, 2004, the Company completed the distribution of its paper and
timberlands business (Fraser Papers) to its common shareholders (note 2).
Concurrent with this distribution, Nexfor Inc. was renamed Norbord Inc.
(Norbord). Note 2  Distribution of Fraser Papers On June 30, 2004, subsequent to period end, the Company completed the
distribution of its paper and timberlands business (Fraser Papers) to its
common shareholders. In accordance with the relevant Canadian accounting
standards, the assets, liabilities, net sales, expenses and cash flows relating
to Fraser Papers are included in the consolidated financial statements as
continuing operations for the periods presented. In the third quarter, the
assets, liabilities, net sales, expenses and cash flows relating to Fraser
Papers will be reclassified as discontinued operations. The pro forma consolidated financial statements have been presented as if the
distribution had occurred on June 26, 2004. Accordingly, they reflect a note
payable from Fraser Papers having a face value of $83 million (the Note). The
Note has a term of 12 months, can be extended for 6 months at Fraser Papers
option and bears interest at Libor + 3%. Third party fees, costs and expenses
relating to the distribution were $4. These costs were charged to
shareholders equity in the pro forma financial statements. Note
3 - Change in Accounting Policy Effective January 1, 2004, Norbord adopted the new accounting recommendations
of the Canadian Institute of Chartered Accountants for the recognition and
disclosure of obligations associated with the retirement of tangible long-lived
assets. This change in accounting policy has been effected retroactively with
prior periods restated to reflect the impact of the change. The cumulative
effect of the change was a decrease of 2003 opening retained earnings of $3.
In addition, as at December 31, 2003, the change resulted in an increase in
property, plant and equipment of $1, an increase in other liabilities of $5,
and a decrease in future income taxes of $1. The change in policy did not
materially impact earnings in 2004 and 2003. The Companys asset retirement obligations of $5 relate to closure costs for
landfills at Fraser Papers. Revisions to the liability could occur due to
changes in the estimated costs or timing of closures or possible new
regulations affecting these closures. In addition to the asset retirement
obligations discussed above, Norbord may have other obligations in the event of
a permanent plant shutdown. However, these plant assets have indeterminate
lives and, therefore, the associated asset retirement obligations are not
reasonably estimable and liabilities cannot be established. Note
4 - Short-term Investment Short-term investment represents a convertible subordinated debenture of
Canfor Corporation. The debenture has a face value of CAD$78 and bears interest
at 6.25%. On January 5, 2004 this investment was sold for proceeds of $60
(CAD$78), net of expenses. Note 5  Long-term Debt 20




---



##### 



NORBORD INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (In millions of US dollars, except per share information) During the quarter, the Company announced it will redeem all $180 of its
outstanding 6.875% debentures due 2005. The redemption occurred on July 16,
2004 using cash generated from operations. During the first quarter of 2004,
the Company repurchased and cancelled $20 of these debentures and unwound a
corresponding amount of interest rate swaps. The premium paid on repurchase
was offset by the recognition of gains on the interest rate swaps. Subsequent to quarter end, the Company renegotiated its 3-year committed
unsecured revolving bank lines and reduced the total commitment to $208 million
while extending the term an additional year to May 2007. At June 26, 2004, $13
of these lines were utilized with the balance available to support short-term
liquidity requirements. During 2003, the Company realized a gain of $23 in respect of $375 of
interest rate swaps. These gains are being deferred and amortized over the
remaining term of the debt against which these swaps were designated as hedges.
These swaps were replaced with new swaps of $375 that effectively convert a
portion of the Companys interest expense from fixed rates to floating rates.
The terms of the swaps correspond with the terms of the underlying debt issues. Note 6  Shareholders Equity During the quarter 1,512,000 shares (six-month period  2,328,000 shares) were
issued as a result of options exercised under the stock option plan for
proceeds of $10 (six-month period - $15). 21




---



##### 



Note 7 Earnings per Common Share Earnings per common share are calculated as follows: Three Months Ended
    
    Six Months EndedPro FormaJun 26
    
    Jun 28
    
    Jun 26
    
    Jun 28
    
    Jun 262004
    
    2003
    
    2004
    
    2003
    
    2004(note 2)Earnings from continuing operations
available to common shareholders:Earnings from continuing operations
    
    $
    127
    
    
    $
    2
    
    
    $
    208
    
    
    $
    3
    
    
    $
    214Less: Preferred share dividends
    
    
    (1
    )
    
    
    (1
    )
    
    
    (1
    )
    
    
    (1
    )
    
    
    (1
    )$
    126
    
    
    $
    1
    
    
    $
    207
    
    
    $
    2
    
    
    $
    213Earnings available to common shareholders:Earnings
    
    $
    127
    
    
    $
    
    
    
    $
    208
    
    
    $
    1
    
    
    $
    208Less: Preferred share dividends
    
    
    (1
    )
    
    
    (1
    )
    
    
    (1
    )
    
    
    (1
    )
    
    
    (1
    )$
    126
    
    
    $
    (1
    )
    
    $
    207
    
    
    $
    
    
    
    $
    207Common shares (millions):Weighted average number of common shares
outstanding
    
    
    149.7
    
    
    
    144.9
    
    
    
    149.1
    
    
    
    144.4
    
    
    
    149.1Stock options
    
    
    1.3
    
    
    
    
    
    
    
    1.2
    
    
    
    0.1
    
    
    
    1.2Diluted number of common shares
    
    
    151.0
    
    
    
    144.9
    
    
    
    150.3
    
    
    
    144.5
    
    
    
    150.3Earnings from continuing operations per
common share:Basic
    
    $
    0.85
    
    
    $
    0.01
    
    
    $
    1.39
    
    
    $
    0.01
    
    
    $
    1.44Diluted
    
    $
    0.84
    
    
    $
    0.01
    
    
    $
    1.38
    
    
    $
    0.01
    
    
    $
    1.43Earnings per common share:Basic
    
    $
    0.85
    
    
    $
    
    
    
    $
    1.39
    
    
    $
    
    
    
    $
    1.39Diluted
    
    $
    0.84
    
    
    $
    
    
    
    $
    1.38
    
    
    $
    
    
    
    $
    1.38
 Stock options issued under the Companys stock option plan were included in the
calculation of diluted number of common shares to the extent the exercise price
of those options was less than the average market price of the Companys common
shares during the period. 22




---



##### 



NORBORD INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (In millions of US dollars, except per share information) Note 8  Income Taxes Interim income tax expense (recovery) from continuing operations is calculated
based on expected annual effective tax rates. Three Months Ended
    
    Six Months EndedPro FormaJun 26
    
    Jun 28
    
    Jun 26
    
    Jun 28
    
    Jun 262004
    
    2003
    
    2004
    
    2003
    
    2004(notes 2)Current tax expense
    
    $
    22
    
    
    $
    1
    
    
    $
    23
    
    
    $
    3
    
    
    $
    24Future income tax expense
(recovery)
    
    
    54
    
    
    
    (3
    )
    
    
    92
    
    
    
    (11
    )
    
    
    94Income tax expense (recovery)
    
    $
    76
    
    
    $
    (2
    )
    
    $
    115
    
    
    $
    (8
    )
    
    $
    118
 Note 9  Acquisitions During the quarter, the Company announced it would acquire the OSB and
particleboard assets of Agglo NV at Genk, Belgium at a cost of approximately 50
million Euros ($60 million). The acquisition is expected to close in the third
quarter. In March 2004, Norbord acquired a 50% interest in Northwood Panelboard Company
(Northwood), bringing Norbords ownership interest to 100%. Northwood operates
an oriented strand board plant at Bemidji, Minnesota. The allocation of the
purchase price, net of cash acquired of $2, is as follows: Working capital
    
    $
    6Property, plant and equipment
    
    
    28$
    34
 Note 10  Discontinued Operations Pro forma financial statements have been presented as if the distribution of
Fraser Papers (note 2) had occurred on June 26, 2004. Accordingly, they
reflect the net sales, expenses and cash flows relating to Fraser Papers in the
discontinued operations format. During the fourth quarter of 2003, the Company sold two sawmills located in
Quebec. For financial reporting purposes, the results of those operations were
reclassified as discontinued operations. For the three month period ended June
28, 2003 net sales from discontinued operations was $11 (six-month period -
$22) and pre-tax loss was $2 (six-month period - $2). 23




---



##### 



Note 11  Restructuring Charge During 2003, a productivity improvement plan was implemented at the Paper
operations in New Brunswick and Maine. The productivity plan reduced the
workforce by 20%. The workforce reduction was completed early in 2004 through
a combination of voluntary retirements and layoffs. The total cost of the
productivity improvement plan was $26. Note 12  Segmented Information At June 26, 2004, Norbord had three reportable segments:  i)
    
    Panels, comprised principally of the OSB, MDF and particleboard
operations;ii)
    
    Paper, comprised of the paper, pulp, and sawmill operations; andiii)
    
    Timber, comprised of woodland operations. Subsequent to quarter end, Norbord distributed its paper and timberlands
business to its common shareholders (note 2). Following the completion of the
distribution in the third quarter, the Company will have a single reportable
segment  Panels. Norbord operates principally in Canada, the United States and the United
Kingdom. Inter-
    
    ConsolidatedPanels
    
    Paper
    
    Timber
    
    segment
    
    TotalThree months ended Jun 26, 2004Net sales
    
    $
    439
    
    
    $
    248
    
    
    $
    13
    
    
    $
    (5
    )
    
    $
    695Less: Cost of sales
    
    
    (208
    )
    
    
    (239
    )
    
    
    (10
    )
    
    
    5
    
    
    
    (452
    )Earnings from continuing operations
before interest, taxes and
depreciation
    
    
    231
    
    
    
    9
    
    
    
    3
    
    
    
    
    
    
    
    243Depreciation
    
    
    (20
    )
    
    
    (12
    )
    
    
    
    
    
    
    
    
    
    
    (32
    )Operating earnings
    
    $
    211
    
    
    $
    (3
    )
    
    $
    3
    
    
    $
    
    
    
    $
    211Capital investments
    
    $
    10
    
    
    $
    1
    
    
    $
    
    
    
    
    
    
    
    $
    11Three months ended Jun 28, 2003Net sales
    
    $
    224
    
    
    $
    210
    
    
    $
    9
    
    
    $
    (4
    )
    
    $
    439Less: Cost of sales
    
    
    (165
    )
    
    
    (211
    )
    
    
    (8
    )
    
    
    4
    
    
    
    (380
    )Earnings from continuing operations
before interest, taxes, depreciation
and restructuring charge
    
    
    59
    
    
    
    (1
    )
    
    
    1
    
    
    
    
    
    
    
    59Depreciation
    
    
    (19
    )
    
    
    (11
    )
    
    
    
    
    
    
    
    
    
    
    (30
    )Restructuring charge
    
    
    
    
    
    
    (21
    )
    
    
    
    
    
    
    
    
    
    
    (21
    )Operating earnings
    
    $
    40
    
    
    $
    (33
    )
    
    $
    1
    
    
    $
    
    
    
    $
    8Capital investments
    
    $
    6
    
    
    $
    4
    
    
    $
    1
    
    
    
    
    
    
    $
    11
 24




---



##### 



NORBORD INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (In millions of US dollars, except per share information) Inter-
    
    ConsolidatedPanels
    
    Paper
    
    Timber
    
    segment
    
    TotalSix months ended June 26, 2004Net sales
    
    $
    787
    
    
    $
    457
    
    
    $
    38
    
    
    $
    (18
    )
    
    $
    1,264Less: Cost of sales
    
    
    (399
    )
    
    
    (451
    )
    
    
    (32
    )
    
    
    18
    
    
    
    (864
    )Earnings from continuing operations
before interest, taxes and depreciation
    
    
    388
    
    
    
    6
    
    
    
    6
    
    
    
    
    
    
    
    400Depreciation
    
    
    (39
    )
    
    
    (22
    )
    
    
    (1
    )
    
    
    
    
    
    
    (62
    )Operating earnings
    
    $
    349
    
    
    $
    (16
    )
    
    $
    5
    
    
    $
    
    
    
    $
    338Capital investments
    
    $
    15
    
    
    $
    2
    
    
    $
    
    
    
    
    
    
    
    $
    17Six months ended June 28, 2003Net sales
    
    $
    415
    
    
    $
    401
    
    
    $
    29
    
    
    $
    (14
    )
    
    $
    831Less: Cost of sales
    
    
    (325
    )
    
    
    (404
    )
    
    
    (24
    )
    
    
    14
    
    
    
    (739
    )Earnings from continuing operations
before interest, taxes, depreciation and
restructuring charge
    
    
    90
    
    
    
    (3
    )
    
    
    5
    
    
    
    
    
    
    
    92Depreciation
    
    
    (37
    )
    
    
    (22
    )
    
    
    (1
    )
    
    
    
    
    
    
    (60
    )Restructuring charge
    
    
    
    
    
    
    (21
    )
    
    
    
    
    
    
    
    
    
    
    (21
    )Operating earnings
    
    $
    53
    
    
    $
    (46
    )
    
    $
    4
    
    
    $
    
    
    
    $
    11Capital investments
    
    $
    10
    
    
    $
    7
    
    
    $
    1
    
    
    
    
    
    
    $
    18
 Note 13  Comparative Figures Certain comparative figures have been reclassified to conform to current
periods presentation. 25




---



##### 



Subsequent to period end, the Company completed the distribution of its paper
and timberlands business (Fraser Papers) to its common shareholders.
Concurrent with this distribution, Nexfor Inc. was renamed Norbord Inc. In the
third quarter, the results of Fraser Papers will be reclassified as
discontinued operations, in accordance with the relevant Canadian accounting
standards for presentation and disclosure of discontinued operations. The following schedules present certain historical information showing the
distributed business in the discontinued operations format. In addition, a pro
forma balance sheet as at June 26, 2004 has been presented as if the
distribution had occurred on June 26, 2004. These schedules have been included
for information purposes only. 26




---



##### 



NORBORD INC.
SUPPLEMENTAL INFORMATION PRO FORMA CONSOLIDATED STATEMENTS OF EARNINGS (unaudited)
    
    Three Months Ended(In millions of US dollars, except per
    
    Jun 26
    
    Mar 27
    
    Dec 31
    
    Sep 27
    
    Jun 28
    
    Mar 29share information)
    
    2004
    
    2004
    
    2003
    
    2003
    
    2003
    
    2003EarningsNet Sales
    
    $
    439
    
    
    $
    348
    
    
    $
    346
    
    
    $
    303
    
    
    $
    224
    
    
    $
    191Earnings from continuing operations
before interest, taxes and depreciation
    
    
    231
    
    
    
    155
    
    
    
    156
    
    
    
    124
    
    
    
    56
    
    
    
    29Interest and other income
    
    
    1
    
    
    
    1
    
    
    
    2
    
    
    
    
    
    
    
    2
    
    
    
    1Interest expense
    
    
    (9
    )
    
    
    (8
    )
    
    
    (8
    )
    
    
    (10
    )
    
    
    (10
    )
    
    
    (9
    )Earnings from continuing operations
before depreciation and taxes
    
    
    223
    
    
    
    148
    
    
    
    150
    
    
    
    114
    
    
    
    48
    
    
    
    21Depreciation
    
    
    (20
    )
    
    
    (19
    )
    
    
    (20
    )
    
    
    (19
    )
    
    
    (19
    )
    
    
    (18
    )Income Tax
    
    
    (76
    )
    
    
    (42
    )
    
    
    (53
    )
    
    
    (32
    )
    
    
    (9
    )
    
    
    3Earnings from continuing operations
    
    
    127
    
    
    
    87
    
    
    
    77
    
    
    
    63
    
    
    
    20
    
    
    
    6Earnings from discontinued operations
    
    
    
    
    
    
    (6
    )
    
    
    (6
    )
    
    
    (9
    )
    
    
    (20
    )
    
    
    (5
    )Earnings
    
    $
    127
    
    
    $
    81
    
    
    $
    71
    
    
    $
    54
    
    
    $
    
    
    
    $
    1Earnings from continuing operations
per common share- Basic
    
    $
    0.85
    
    
    $
    0.59
    
    
    $
    0.52
    
    
    $
    0.42
    
    
    $
    0.13
    
    
    $
    0.04- Diluted
    
    $
    0.84
    
    
    $
    0.59
    
    
    $
    0.52
    
    
    $
    0.42
    
    
    $
    0.13
    
    
    $
    0.04Earnings per common share- Basic
    
    $
    0.85
    
    
    $
    0.54
    
    
    $
    0.48
    
    
    $
    0.37
    
    
    $
    
    
    
    $
    - Diluted
    
    $
    0.84
    
    
    $
    0.54
    
    
    $
    0.48
    
    
    $
    0.37
    
    
    $
    
    
    
    $
    
 27




---



##### 



(NORBORD LOGO) PRO FORMA CONSOLIDATED BALANCE SHEET (unaudited) Pro FormaAdjustmentsPro FormaJun 26
    
    Fraser
    Consolidated(In millions of US dollars)
    
    2004
    
    Papers
    Balance Sheet(notes a, b and c)AssetsCurrent assets:Cash and short-term notes
    
    $
    419
    
    
    $
    (30
    )
    
    $
    389Accounts receivable
    
    
    281
    
    
    
    (129
    )
    
    
    152Inventory
    
    
    202
    
    
    
    (130
    )
    
    
    72Future income taxes
    
    
    20
    
    
    
    (9
    )
    
    
    11922
    
    
    
    (298
    )
    
    
    624Property, plant and equipment
    
    
    1,348
    
    
    
    (508
    )
    
    
    840Other assets
    
    
    18
    
    
    
    55
    
    
    
    73$
    2,288
    
    
    $
    (751
    )
    
    $
    1,537Liabilities and Shareholders EquityCurrent liabilities:Accounts payable and accrued liabilities
    
    $
    304
    
    
    $
    (115
    )
    
    $
    189Current portion of long-term debt
    
    
    1
    
    
    
    
    
    
    
    1305
    
    
    
    (115
    )
    
    
    190Long-term debt
    
    
    632
    
    
    
    (1
    )
    
    
    631Other liabilities
    
    
    99
    
    
    
    (60
    )
    
    
    39Future income taxes
    
    
    160
    
    
    
    (71
    )
    
    
    89Shareholders equity
    
    
    1,092
    
    
    
    (504
    )
    
    
    588$
    2,288
    
    
    $
    (751
    )
    
    $
    1,537
 Pro Forma Adjustments This pro forma consolidated balance sheet gives effect to the following items:  a.
    
    The distribution of Fraser Papers as if it had occurred on June 26,
2004.b.
    
    Upon distribution of Fraser Papers, Norbord took back a note
payable having a face value of $83 million (the Note). The value of
the Note was determined as the amount by which the net assets
distributed exceeded $500. The Note has a term of 12 months, can be
extended for 6 months at Fraser Papers option and bears interest at
Libor +3%. This note has been included in other assets in the pro
forma adjustments above.c.
    
    Third party fees, costs and expenses relating to the distribution
were $4. These costs were charged to shareholders equity in the pro
forma adjustments above. 1




---



##### 



(NORBORD LOGO) CANADIAN INTERIM FINANCIAL STATEMENT CERTIFICATION FORM 52-109F2T CERTIFICATION OF INTERIM FILINGS I, J. Barrie Shineton, President & Chief Executive Officer of Norbord Inc.,
certify that:  1.
    
    I have reviewed the interim filings (as this term is defined in
Multilateral Instrument 52-109 Certification of Disclosure in Issuers
Annual and Interim Filings)of Norbord Inc. (the issuer) for the interim
period ending June 26th, 2004;2.
    
    Based on my knowledge, the interim filings do not contain any untrue
statement of a material fact or omit to state a material fact required to
be stated or that is necessary to make a statement not misleading in light
of the circumstances under which it was made, with respect to the period
covered by the interim filings; and3.
    
    Based on my knowledge, the interim financial statements together with the
other financial information included in the interim filings fairly present
in all material respects the financial condition, results of operations
and cash flows of the issuer, as of the date and for the periods presented
in the interim filings. Date: July 29th, 2004 /s/ J. Barrie Shineton




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##### 



(NORBORD LOGO) CANADIAN INTERIM FINANCIAL STATEMENT CERTIFICATION FORM 52-109F2T CERTIFICATION OF INTERIM FILINGS I, John C. Tremayne, Executive Vice-President & Chief Financial Officer of
Norbord Inc., certify that:  1.
    
    I have reviewed the interim filings (as this term is defined in
Multilateral Instrument 52-109 Certification of Disclosure in Issuers
Annual and Interim Filings)of Norbord Inc. (the issuer) for the interim
period ending June 26th, 2004;2.
    
    Based on my knowledge, the interim filings do not contain any untrue
statement of a material fact or omit to state a material fact required to
be stated or that is necessary to make a statement not misleading in light
of the circumstances under which it was made, with respect to the period
covered by the interim filings; and3.
    
    Based on my knowledge, the interim financial statements together with the
other financial information included in the interim filings fairly present
in all material respects the financial condition, results of operations
and cash flows of the issuer, as of the date and for the periods presented
in the interim filings. Date: July 29th, 2004 /s/ John C. Tremayne