Edgar Filing: LOUISIANA-PACIFIC CORP

LPX 12.31.2011 10K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_____________________________

FORM 10-K

Annual Report Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934



For the fiscal year ended		Commission File Number
December 31, 2011		1-7107

_____________________________

Louisiana-Pacific Corporation

(Exact name of registrant as specified in its charter)



Delaware		93-0609074
(State of Incorporation)		(I.R.S. Employer Identification No.)

414 Union Street, Suite 2000 Nashville, TN 37219		615-986-5600
(Address of principal executive offices)		Registrant’s telephone number (including area code)

Securities registered pursuant to Section 12(b) of the Act:



Title of Each Class		Name of Each Exchange on Which Registered
Common Stock, $1 par value		New York Stock Exchange
Preferred Stock Purchase Rights		New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

_____________________________

Indicate by check mark if the registrant is a well-known seasoned issuer as defined in Rule 405 of the Securities Act. Yes ý No ¨

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No ý

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý No ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨

Indicate by check mark if the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of “accelerated filer,” “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (Check one):

Large accelerated filer ý Accelerated filer ¨ Non-accelerated filer ¨ Smaller reporting company ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes ¨ No ý

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter: $1,029,379,000

Indicate the number of shares outstanding of each of the registrant’s classes of common stock as of the latest practicable date: 137,139,941 shares of Common Stock, $1 par value, outstanding as of February 29, 2012.

Documents Incorporated by Reference

Definitive Proxy Statement for 2011 Annual Meeting: Part III

Except as otherwise specified and unless the context otherwise requires, references to “LP”, the “Company”, “we”, “us”, and “our” refer to Louisiana-Pacific Corporation and its subsidiaries.

ABOUT FORWARD-LOOKING STATEMENTS

Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 provide a “safe harbor” for forward-looking statements to encourage companies to provide prospective information about their businesses and other matters as long as those statements are identified as forward-looking and are accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those discussed in the statements. This report contains, and other reports and documents filed by us with the Securities and Exchange Commission may contain, forward-looking statements. These statements are or will be based upon the beliefs and assumptions of, and on information available to, our management.

The following statements are or may constitute forward-looking statements: (1) statements preceded by, followed by or that include words like “may,” “will,” “could,” “should,” “believe,” “expect,” “anticipate,” “intend,” “plan,” “estimate,” “potential,” “continue” or “future” or the negative or other variations thereof and (2) other statements regarding matters that are not historical facts, including without limitation, plans for product development, forecasts of future costs and expenditures, possible outcomes of legal proceedings, capacity expansion and other growth initiatives and the adequacy of reserves for loss contingencies.

Factors that could cause actual results to differ materially from those expressed or implied by the forward-looking statements include, but are not limited to the following:


•	changes in general economic conditions;


•	changes in the cost and availability of capital;


•	changes in the level of home construction activity;


•	changes in competitive conditions and prices for our products;


•	changes in the relationship between supply of and demand for building products;


•	changes in the relationship between supply of and demand for raw materials, including wood fiber and resins, used in manufacturing our products;


•	changes in the cost of and availability of energy, primarily natural gas, electricity and diesel fuel;


•	changes in other significant operating expenses;


•	changes in exchange rates between the U.S. dollar and other currencies, particularly the Canadian dollar, Australian dollar, EURO, Brazilian real and the Chilean peso;


•	changes in general and industry-specific environmental laws and regulations;


•	changes in tax laws, and interpretations thereof;


•	changes in circumstances giving rise to environmental liabilities or expenditures;


•	the resolution of existing and future product-related litigation and other legal proceedings; and


•	acts of public authorities, war, civil unrest, natural disasters, fire, floods, earthquakes, inclement weather and other matters beyond our control.

In addition to the foregoing and any risks and uncertainties specifically identified in the text surrounding forward-looking statements, any statements in the reports and other documents filed by us with the Commission that warn of risks or uncertainties associated with future results, events or circumstances identify important factors that could cause actual results, events and circumstances to differ materially from those reflected in the forward-looking statements.

ABOUT THIRD-PARTY INFORMATION

In this report, we rely on and refer to information regarding industry data obtained from market research, publicly available information, industry publications, U.S. government sources and other third parties. Although we believe the information is reliable, we cannot guarantee the accuracy or completeness of the information and have not independently verified it.

PART I


ITEM 1.	Business

General

Our company, founded in 1973 and headquartered in Nashville, Tennessee, is a leading manufacturer of building products. As of December 31, 2011, we had approximately 3,900 employees. We currently own 21 modern, strategically located facilities in the U.S. and Canada. We also own two facilities in Chile and one facility in Brazil. We also operate three facilities through joint ventures, for which we are the exclusive provider of product distribution for North America. Additionally, we participate in a joint venture operation that produces cellulose insulation in multiple facilities. Our focus is on delivering innovative, high-quality commodity and specialty building products to retail, wholesale, home building and industrial customers. Our products are used primarily in new home construction, repair and remodeling, and manufactured housing.

Business Segments

We operate in four segments: North America Oriented Strand Board (OSB); Siding; Engineered Wood Products (EWP); and South America. In general, our businesses are affected by the level of housing starts; the level of home repairs; the availability and cost of financing; changes in industry capacity; changes in the prices we pay for raw materials and energy; changes in foreign exchange rates (primarily the Canadian dollar); and other operating costs.

OSB

Our OSB segment manufactures and distributes OSB structural panel products.

OSB is an innovative, affordable and environmentally smart product made from wood strands arranged in layers and bonded with resin. OSB serves many of the same uses as plywood, including roof decking, sidewall sheathing and floor underlayment, but can be produced at a significantly lower cost. In the past decade, land use regulations, endangered species and environmental concerns have resulted in reduced supplies and higher costs for domestic timber, causing many plywood mills to close or divert their production to other uses. OSB has replaced most of the volume lost from these mills. It is estimated for 2011 that OSB accounted for approximately 57% of the structural panel consumption in North America with plywood accounting for the remainder. We estimate that the overall North American structural panel market (based upon 2011 housing starts) was 26.7 billion square feet with the OSB market comprising an estimated 15.3 billion square feet of this market. Based upon our production in 2011 of 3.3 billion square feet (including our joint venture OSB mill with Canfor Corporation and OSB produced in our siding segment), we estimate that we account for 22% of the North American OSB market and 12% of the overall North American structural panel market. We believe we have the largest installed capacity and are one of the most efficient producers of OSB in North America.

Siding

Our siding offerings fall into two categories: SmartSide^® siding products and related accessories; and Canexel siding and accessory products. Our SmartSide^® products consist of a full line of wood-based sidings, trim, soffit and fascia. These products have quality and performance characteristics similar to solid wood at more attractive prices due to lower raw material and production costs. Our Canexel siding and accessory product offerings include a number of mainly pre-finished lap, panel and trim products in a variety of patterns and textures.

Additionally, as market demand warrants, amounts of commodity OSB are produced and sold in this segment.

Engineered Wood Products

Our Engineered Wood Products (EWP) segment manufactures and distributes laminated veneer lumber (LVL), I-Joists, laminated strand lumber (LSL) (which began production in the first half of 2008) and other related products. This segment also includes the sale of I-Joist and LVL products produced by our joint venture with AbitibiBowater or under a contract manufacturing arrangement. We believe that in North America we are one of the top three producers (including our joint venture production) of I-Joists, LVL and LSL. A plywood mill associated with our LVL operations in British Columbia is also included in this segment.

We believe that our engineered I-joists, which are used primarily in residential and commercial flooring and roofing systems and other structural applications, are stronger, lighter and straighter than conventional lumber joists.

Our LVL and LSL are high-grade, value-added structural products used in applications where extra strength and quality is required, such as headers and beams. It is also used, together with OSB and lumber, in the manufacture of engineered I-joists.

South America

Our South American segment manufactures and distributes OSB and siding products in South America and certain export markets. This segment also distributes and sells related products to augment the transition to wood frame construction. We believe we are the only producer of OSB in South America.

Other Products

Our other products category includes our decorative moulding and our joint venture that produces cellulose insulation. Additionally, our other products category includes our remaining timber and timberlands, and other minor products, services and closed operations.

Sales, Marketing and Distribution

Our sales and marketing efforts are primarily focused on traditional two-step distribution, professional building products dealers, home centers, third-party wholesale buying groups and other retailers. The wholesale distribution channel includes a variety of specialized and broad-line wholesale distributors and dealers focused primarily on the supply of products for use by professional builders and contractors. The retail distribution channel includes large retail chains catering to the do-it-yourself (DIY) and repair and remodeling markets as well as smaller independent retailers.

Customers

We seek to maintain a broad customer base and a balanced approach to national distribution through both wholesale and retail channels. In 2011, our top 10 customers accounted for approximately 48% of our sales. Because a significant portion of our sales are from OSB, a commodity product sold primarily on the basis of price and availability, we are not dependent on any one customer. Our principal customers include the following:


•	Wholesale distribution companies, which supply building materials to retailers on a regional, state or local basis;


•	Two-step distributors, who provide building materials to smaller retailers, contractors and others;


•	Building materials professional dealers, that specialize in sales to professional builders, remodeling firms and trade contractors that are involved in residential home construction and light commercial building;


•	Retail home centers, that provide access to consumer markets with a broad selection of home improvement materials and increasingly serve professional builders, remodelers and trade contractors; and


•	Manufactured housing and shed producers, who design, construct and distribute prefabricated residential and light commercial structures, including fully manufactured, modular and panelized structures, for consumer and professional markets.

Seasonality

Our business is subject to seasonal variances, with demand for many of our products tending to be greater during the building season, which generally occurs in the second and third quarters in North America and the fourth and first quarters in South America. From time to time, we engage in promotional activities designed to stimulate demand for our products, such as reducing our selling prices and providing extended payment terms, particularly at times when demand is otherwise relatively soft. We do this in an effort to better balance our inventory levels with demand, manage the logistics of our product shipments, allow our production facilities to run efficiently, be competitive, and/or obtain initial orders from customers.

Competitors / Competition

The building products industry is highly competitive. We compete internationally with several thousand forest and building products firms, ranging from very large, fully integrated firms to smaller enterprises that may manufacture only one or a few items. We also compete less directly with firms that manufacture substitutes for wood building products. Some competitors have substantially greater financial and other resources than we do that could, in some instances, give them a competitive advantage over us.

In terms of our commodity OSB, we compete based upon price, quality and availability of products. In terms of our specialty products, including EWP, siding and various value added OSB products, we compete based upon price, quality, and availability of products as well as performance features offered.

Raw Materials

Wood fiber is the primary raw material used in most of our operations, and the primary source of wood fiber is timber. The primary end-markets for timber harvested in the U.S. are manufacturers who supply: (1) the housing market, where it is used in the construction of new housing and the repair and remodeling of existing housing; (2) the pulp and paper market; (3) commercial and industrial markets; (4) export markets; and (5) emerging biomass energy production markets. The supply of timber is limited by access to timber and by the availability of timberlands. The availability of timberlands, in turn, is limited by several factors, including forest management policies, alternate uses of land, and loss to urban or suburban real estate development.

In Canada, we harvest enough timber annually under long-term harvest rights with various Canadian governments and other third parties to support our Canadian production facilities.

We purchase approximately 76% of our wood fiber requirements on the open market, through either private cutting contracts or purchased wood arrangements. Our remaining wood fiber requirements (24%) are fulfilled through government contracts, principally in Canada. Because wood fiber is subject to commodity pricing, the cost of various types of timber that we purchase in the market has at times fluctuated greatly due to weather, governmental, economic or other industry conditions. However, our mills are generally located in areas that are in close proximity to large and diverse supplies of timber. Our mills generally have the ability to procure wood fiber at competitive prices from third-party sources.

In addition to wood fiber, we use a significant quantity of various resins in our manufacturing processes. Resin product costs are influenced by changes in the prices of raw materials used to produce resin, primarily petroleum products, as well as competing demand for resin products. Currently, we purchase the majority of our resin from three major suppliers and believe our relationships with those suppliers to be good. However there can be no assurance that pricing or availability of resins will not be impacted based upon competing demand.

While the majority of our energy requirements are generated at our plants through the conversion of wood waste, we also purchase substantial amounts of energy in our operations, primarily electricity and natural gas. Energy prices have experienced significant volatility in recent years, particularly in deregulated markets. We attempt to mitigate our exposure to energy price changes through the selective use of long-term supply agreements.

Environmental Compliance

Our operations are subject to many environmental laws and regulations governing, among other things, discharges of pollutants and other emissions on or into land, water and air, the disposal of hazardous substances or other contaminants, the remediation of contamination and the restoration and reforestation of timberlands. In addition, certain environmental laws and regulations impose liability and responsibility on present and former owners, operators or users of facilities and sites for contamination at such facilities and sites without regard to causation or knowledge of contamination. Compliance with environmental laws and regulations can significantly increase the costs of our operations and otherwise result in significant costs and expenses. In some cases, plant closures can result in more onerous compliance requirements becoming applicable to a facility or a site. Violations of environmental laws and regulations can subject us to additional costs and expenses, including defense costs and

expenses and civil and criminal penalties. We cannot assure you that the environmental laws and regulations to which we are subject will not become more stringent, or be more stringently implemented or enforced, in the future.

Our policy is to comply fully with all applicable environmental laws and regulations. We devote significant management attention to achieving full compliance. In addition, from time to time, we undertake construction projects for environmental control equipment or incur other environmental costs that extend an asset’s useful life, improve its efficiency or improve the marketability of certain properties.

Additional information concerning environmental matters is set forth under item 3, Legal Proceedings, and in Note 18 of the Notes to the financial statements included in item 8 of this report.

Employees

We employ approximately 3,900 people, about 1,000 of whom are members of unions, primarily in Canada. We consider our relationship with our employees generally to be good. As of December 31, 2011, we were operating under an expired collective bargaining agreement at one forestry operation in Canada. While we do not currently anticipate any work stoppage, there can be no assurance that work stoppages will not occur.

Available Information

We file annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements and other information with the Securities and Exchange Commission (“SEC”). Our SEC filings are available to the public over the Internet at the SEC’s website at http://www.sec.gov. You may also read and copy any document we file at the SEC’s public reference room at 100 F Street, NE., Washington, D.C. 20549. You may obtain information on the operation of the SEC’s public reference room in Washington, D.C. by calling the SEC at 1-800-SEC-0330.

In addition, we will make available our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act through our internet website at http://www.lpcorp.com as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.

Segment and Price Trend Data

The following table sets forth, for each of the last three years: (1) our production volumes; (2) the estimated average wholesale price of OSB sold in the United States; and (3) our logs procured by source. In addition, information concerning our: (1) consolidated net sales by business segment; (2) consolidated profit (loss) by business segment; (3) identifiable assets by segment; (4) depreciation, amortization and cost of timber harvested; (5) capital expenditures; and (6) geographic segment information is included at Note 24 of the Notes to the financial statements included in item 8 of this report and information concerning our sales by product line is included in item 7 of this report.

Product Information Summary

For Years Ended December 31

(Dollar amounts in millions, except per unit)



	2011			2010			2009
PRODUCTION VOLUMES⁽¹⁾
OSB,³/8” basis, million square feet⁽²⁾	3,311			3,207			2,741
South America OSB, million cubic meters	379			382			269
Wood-based siding,³/8” basis, million square feet	774			756			707
Engineered I-joists, million lineal feet	56			66			60
Laminated veneer lumber and laminated strand lumber, thousand cubic feet	6,339			5,859			4,757
COMMODITY PRODUCT PRICE TRENDS⁽³⁾
OSB, MSF, ⁷/16” span rating (North Central price)	$	186		$	220		$	163
% LOGS BY SOURCES⁽⁴⁾
Private cutting contracts	8		%	10		%	13		%
Government contracts	24		%	27		%	21		%
Purchased logs	68		%	63		%	66		%
Total volumes—million board feet	1,342			1,135			833

_______________


⁽¹⁾	Includes purchases of products from our joint ventures or purchased under contract manufacturing arrangements.


⁽²⁾	Includes production at both our commodity and specialty mills in North America.


⁽³⁾	Prices represent yearly averages stated in dollars per thousand square feet (MSF). Source: Random Lengths.


⁽⁴⁾	Stated as a percentage of total log volume.


ITEM 1A.	Risk Factors

You should be aware that the occurrence of any of the events described in this Risk Factors section and elsewhere in this report or in any other of our filings with the SEC could have a material adverse effect on our business, financial position, results of operations and cash flows. In evaluating us, you should consider carefully, among other things, the risks described below and the matters described in “About Forward-Looking Statements.”

Cyclical industry conditions and commodity pricing have and may continue to adversely affect our financial condition and results of operations. Our operating results reflect the general cyclical pattern of the building products industry. Demand for our products correlates to a significant degree to the level of residential construction activity in North America, which historically has been characterized by significant cyclicality. This cyclicality is influenced by a number of factors, including the supply of new and existing homes on the market, with existing home supply currently being greater than normal, the level of unemployment, which is currently higher than normal, longer-term interest rates, which are currently at relatively low levels, and mortgage foreclosure rates which are currently higher than normal. The cyclicality is also influenced by the availability of mortgage financing, which is currently more restrictive than normal and which could be adversely affected by the implementation of one or more proposals to eliminate or reduce the mortgage market roles of or levels of support for government-sponsored enterprises such as Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation. A significant increase in longer-term interest rates, a prolonged decline in the availability of mortgage financing, or the occurrence of other events that reduce levels of residential construction activity could have a material adverse effect on our financial condition, results of operations and cash flows. Our primary product, OSB, and a significant portion of our raw materials are globally traded commodity products. In addition, our products are subject to competition from manufacturers worldwide. Historical prices for our products have been volatile, and we, like other participants in the building products industry, have limited influence over the timing and extent of price changes for our products. Product pricing is significantly affected by the relationship between supply and demand in the building products industry. Product supply is influenced primarily by fluctuations in available manufacturing capacity. Demand is affected by the state of the economy in general and a variety of other factors. The level of new residential construction activity and home repair and remodeling activity primarily affects the demand for our building products. Demand is also subject to fluctuations due to changes in economic conditions, interest rates, population growth, weather conditions and other factors. We are not able to predict with certainty market conditions and selling prices for our products. In this competitive environment with so many variables for which we do not control, we cannot assure you that prices for our products will not decline from current levels. A prolonged and severe weakness in the markets for one or more of our principal products, particularly OSB, could seriously harm our financial condition and results of operations and our ability to satisfy our cash requirements, including the payment of interest and principal on our debt.

We have a high degree of product concentration. OSB accounted for about 47%, 51% and 45% of our North American sales in 2011, 2010 and 2009 and we expect OSB sales to continue to account for a substantial portion of our revenues and profits in the future. Concentration of our business in the OSB market further increases our sensitivity to commodity pricing and price volatility. In this competitive environment with so many variables for which we do not control, we cannot assure you that pricing for OSB or our other products will not decline from current levels.

Intense competition in the building products industry could prevent us from increasing or sustaining our net sales and profitability. The markets for our products are highly competitive. Our competitors range from very large, fully integrated forest and building products firms to smaller firms that may manufacture only one or a few types of products. We also compete less directly with firms that manufacture substitutes for wood building products. Many of our competitors have greater financial and other resources than we do, and certain of the mills operated by our competitors may be lower-cost producers than the mills operated by us.

Our results of operations may be harmed by potential shortages of raw materials and increases in raw material costs. The most significant raw material used in our operations is wood fiber. We currently obtain about 76% of our wood fiber requirements in the open market. Wood fiber is subject to commodity pricing, which

fluctuates on the basis of market factors over which we have no control. In addition, the cost of various types of wood fiber that we purchase in the market has at times fluctuated greatly because of governmental, economic or industry conditions, and may be affected by increased demand resulting from initiatives to increase the use of biomass materials in the production of heat, power, biobased products and biofuels. In addition to wood fiber, we also use a significant quantity of various resins in our manufacturing processes. Resin product costs are influenced by changes in the prices or availability of raw materials used to produce resins, primarily petroleum products, as well as demand for and availability of resin products. Selling prices of our products have not always increased in response to raw material cost increases. We are unable to determine to what extent, if any, we will be able to pass any future raw material cost increases through to our customers through product price increases. Our inability to pass increased costs through to our customers could have a material adverse effect on our financial condition, results of operations and cash flows.

Many of the Canadian forestlands from which we obtain wood fiber also are subject to the constitutionally protected treaty or common-law rights of the aboriginal peoples of Canada. Most of British Columbia is not covered by treaties and, as a result, the claims of British Columbia’s aboriginal peoples relating to forest resources are largely unresolved, although many aboriginal groups are actively engaged in treaty discussions with the governments of British Columbia and Canada. Final or interim resolution of claims brought by aboriginal groups are expected to result in additional restrictions on the sale or harvest of timber and may increase operating costs and affect timber supply and prices in Canada.

We depend on our senior management team and other key employees, and significant attrition within our management team could adversely affect our business. Our success depends in part on our ability to attract, retain and motivate senior management and other key employees. Achieving this objective may be difficult due to many factors, including fluctuations in global economic and industry conditions, competitors’ hiring practices, cost reduction activities, and the effectiveness of our compensation programs. Competition for qualified personnel can be very intense. We must continue to recruit, retain and motivate senior management and other key employees sufficient to maintain our current business and support our future projects. Cost-cutting measures that have reduced compensation make us vulnerable to attrition among our current senior management team and other key employees, and may make it difficult for us to hire additional senior managers and other key employees. A loss of any such personnel, or the inability to recruit and retain qualified personnel in the future, could have an adverse effect on our business, financial condition and results of operations.

Our operations require substantial capital. Capital expenditures for expansion or replacement of existing facilities or equipment or to comply with future changes in environmental laws and regulations may be substantial. Although we maintain our production equipment with regular periodic and scheduled maintenance, we cannot assure you that key pieces of equipment in our various production processes will not need to be repaired or replaced or that we will not incur significant additional costs associated with environmental compliance. The costs of repairing or replacing such equipment and the associated downtime of the affected production line could have a material adverse effect on our financial condition, results of operations and cash flow. If for any reason we are unable to provide for our operating needs, capital expenditures and other cash requirements on economic terms, we could experience a material adverse effect on our business, financial condition, results of operations and cash flows.

Our pension and health care costs are subject to numerous factors which could cause these costs to change. We have defined benefit pension plans covering substantially all U.S. and Canadian employees. We provide retiree health care benefits to certain of our U.S. salaried and certain hourly employees. Our pension costs are dependent upon numerous pension plan provisions that are subject to interpretations and factors resulting from actual plan experience and assumptions of future experience. Pension plan assets are primarily made up of equity and fixed income investments. Fluctuations in actual equity market returns; changes in general interest rates and changes in the number of retirees may result in increased pension costs in future periods. Likewise, changes in assumptions regarding current discount rates and expected rates of return on plan assets could also increase pension and health care costs. Although we froze our U.S. defined benefit plan in January 2010 in terms of future service credits, we continue to be subject to market risk on pension plan assets as well as discount rates on long-term obligations. Significant adverse changes in the factors affecting our pension and health care costs could adversely affect our cash flows, financial condition and results of operations.

Our pension plans are currently underfunded, and over time we will be required to make cash payments to the plans, reducing the cash available for our business. We record a liability associated with our pension plans equal to the excess of the benefit obligation over the fair value of plan assets. The benefit liability recorded under the provisions of Accounting Standards Codification (ASC) 715, “Compensation—Retirement Benefits,” at December 31, 2011 was $92.2 million. Although we expect to have no obligation to fund our plans in 2012, we continually reassess the amount and timing of any discretionary contributions. Regardless of whether we make a discretionary contribution in 2012, over the next several years we may make contributions to the plans that are likely to be material. The amount of such contributions will depend upon a number of factors, principally the actual earnings and changes in values of plan assets and changes in interest rates.

A portion of our operations are conducted by joint ventures that we cannot operate solely for our benefit. We conduct a portion of our operations through joint ventures. In joint ventures we share ownership and management of a company with one or more parties who may or may not have the same goals, strategies, priorities or resources as we do. In general, joint ventures are intended to be operated for the benefit of all co-owners, rather than for our exclusive benefit. Operating a business as a joint venture often requires additional organizational formalities as well as time-consuming procedures for sharing information and making decisions. In joint ventures, we are required to pay more attention to our relationship with our co-owners as well as with the joint venture, and if a co-owner changes, our relationship may be adversely affected. In addition, the benefits from a successful joint venture are shared among the co-owners, so that we do not receive all the benefits from our joint ventures.

We depend on third parties for transportation services and increases in costs and the availability of transportation could materially and adversely affect our business and operations. Our business depends on the transportation of a large number of products, both domestically and internationally. We rely primarily on third parties for transportation of the products we manufacture and/or distribute as well as for delivery of our raw materials. In particular, a significant portion of the goods we manufacture and raw materials we use are transported by railroad or trucks, which are highly regulated. If any of our third-party transportation providers were to fail to deliver the goods we manufacture or distribute in a timely manner, we may be unable to sell those products at full value or at all. Similarly, if any of these providers were to fail to deliver raw materials to us in a timely manner, we may be unable to manufacture our products in response to customer demand. In addition, if any of these third parties were to cease operations or cease doing business with us, we may be unable to replace them at reasonable cost. Any failure of a third-party transportation provider to deliver raw materials or finished products in a timely manner could harm our reputation, negatively affect our customer relationships and have a material adverse effect on our financial condition and results of operation. In addition, an increase in transportation rates or fuel surcharges could materially and adversely affect our sales and profitability.

We are subject to significant environmental regulation and environmental compliance expenditures and liabilities. Our businesses are subject to many environmental laws and regulations, particularly with respect to discharges of pollutants and other emissions on or into land, water and air, and the disposal and remediation of hazardous substances or other contaminants and the restoration and reforestation of timberlands. Compliance with these laws and regulations is a significant factor in our business. We have incurred and expect to continue to incur significant expenditures to comply with applicable environmental laws and regulations. Moreover, some or all of the environmental laws and regulations to which we are subject could become more stringent in the future. Our failure to comply with applicable environmental laws and regulations and permit requirements could result in civil or criminal fines or penalties or enforcement actions, including regulatory or judicial orders enjoining or curtailing operations or requiring corrective measures, installation of pollution control equipment or remedial actions.

Some environmental laws and regulations impose liability and responsibility on present and former owners, operators or users of facilities and sites for contamination at such facilities and sites without regard to causation or knowledge of contamination. In addition, we occasionally evaluate various alternatives with respect to our facilities, including possible dispositions or closures. Investigations undertaken in connection with these activities may lead to discoveries of contamination that must be remediated, and closures of facilities may trigger compliance requirements that are not applicable to operating facilities. Consequently, we cannot assure you that existing or future circumstances or developments with respect to contamination will not require significant expenditures by us.

We are involved in various environmental matters, product liability and other legal proceedings. The outcome of these matters and proceedings and the magnitude of related costs and liabilities are subject to uncertainties. The conduct of our business involves the use of hazardous substances and the generation of contaminants and pollutants. In addition, the end-users of many of our products are members of the general public. We currently are and from time to time in the future will be involved in a number of environmental matters and legal proceedings, including legal proceedings involving anti-trust, warranty or non-warranty product liability claims, negligence and other claims, including claims for wrongful death, personal injury and property damage alleged to have arisen out of the use by others of our or our predecessors’ products or the release by us or our predecessors of hazardous substances. Environmental matters and legal matters and proceedings, including class action settlements relating to certain of our products, have in the past caused and in the future may cause us to incur substantial costs. We have established contingency reserves in our consolidated financial statements with respect to the estimated costs of existing environmental matters and legal proceedings to the extent that our management has determined that such costs are both probable and reasonably estimable as to amount. However, such reserves are based upon various estimates and assumptions relating to future events and circumstances, all of which are subject to inherent uncertainties. We regularly monitor our estimated exposure to environmental and litigation loss contingencies and, as additional information becomes known, may change our estimates significantly. However, no estimate of the range of any such change can be made at this time. We may incur costs in respect of existing and future environmental matters and legal proceedings as to which no contingency reserves have been established. We cannot assure you that we will have sufficient resources available to satisfy the related costs and expenses associated with these matters and proceedings.

Settlements of tax exposures may exceed the amounts we have established for known estimated tax exposures. We maintain reserves for known estimated tax exposures in federal, state and international jurisdictions and uncertain tax positions. Significant income tax exposures may include potential challenges to intercompany pricing and loans, the treatment of financing, acquisition and disposition transactions, the use of hybrid entities and other matters. These exposures are settled primarily through the closure of audits with the taxing jurisdictions and, on occasion, through the judicial process, either of which may produce a result inconsistent with past estimates. We believe that we have established appropriate reserves for estimated exposures; however, if actual results differ materially from our estimates we could experience a material adverse effect on our financial condition, results of operations and cash flows. In addition, our deferred tax liabilities include substantial amounts related to installment sales of timber lands in 1997, 1998 and 2003 for which we have previously monetized most of the installment receivable. As a result of these monetizations, we will be required to fund these liabilities from sources other than such installments, potentially including such tax loss and credit carryovers as may then be available.

Fluctuations in foreign currency exchange rates could result in currency exchange losses and reductions in stockholder’s equity. A significant portion of our operations are conducted through foreign subsidiaries. The functional currency for our Canadian subsidiary is the U.S. dollar. The financial statements of this foreign subsidiary are remeasured into U.S. dollars using the historical exchange rate for property, plant and equipment, timber and timberlands, equity and certain other non-monetary assets and liabilities and related depreciation and amortization on these assets and liabilities. These transaction gains or losses are recorded in foreign exchange gains (losses) in the income statement. The functional currency of our Chilean subsidiary is the Chilean peso and the functional currency in our Brazil subsidiary is the Brazilian real. Translation adjustments, which are based upon the exchange rate at the balance sheet date for assets and liabilities and the weighted average rate for the income statement, are recorded in the Accumulated Comprehensive Income (Loss) section of Stockholders’ Equity. Therefore, changes in the Canadian dollar, the Chilean peso or the Brazilian real relative to the U.S. dollar may have a material adverse effect on our financial condition and results of operations.

Our ability to service our indebtedness, to refinance our indebtedness or to fund our other liquidity needs is subject to various risks. Our ability to make scheduled payments on and to refinance our indebtedness depends on and is subject to our financial and operating performance, which in turn is affected by general and regional economic, financial, competitive, business and other factors, including the availability of financing in the banking and capital markets as well as the other risks described herein. In particular, demand for our products correlates to a significant degree to the level of residential construction activity in North America, which historically has been

characterized by significant cyclicality. Over the last several years, housing starts remained below “normal” levels. This reduced level of building was caused, in part, by an increase in the inventory of homes for sale, a more restrictive mortgage market and a slowed economy. There can be no assurance as to when, or if the housing market, will rebound to “normal levels”. We have experienced significant losses from operations and significant net cash used in operating activities in recent periods. Accordingly, we cannot assure you that our business will generate sufficient cash flows from operations or that future borrowings will be available to us in an amount sufficient to enable us to service our debt, to refinance our debt or to fund our other liquidity needs. If we are unable to service our debt obligations or to fund our other liquidity needs, we could be forced to curtail our operations, reorganize our capital structure or liquidate some or all of our assets in a manner that could cause the holders of our securities to experience a partial or total loss of their investment in us.

We have not independently verified the results of third-party research or confirmed assumptions or judgments upon which it may be based, and the forecasted and other forward-looking information contained therein is subject to inherent uncertainties. We refer in this report and other documents that we file with the SEC to historical, forecasted and other forward-looking information published by sources such as RISI, FEA, Random Lengths and the U.S. Census Bureau that we believe to be reliable. However, we have not independently verified this information and, with respect to the forecasted and forward-looking information, have not independently confirmed the assumptions and judgments upon which it is based. Forecasted and other forward looking information is necessarily based on assumptions regarding future occurrences, events, conditions and circumstances and subjective judgments relating to various matters, and is subject to inherent uncertainties. Actual results may differ materially from the results expressed or implied by, or based upon, such forecasted and forward-looking information.


ITEM 1B.	Unresolved Staff Comments

None.

ITEM 2. Properties

Information regarding our principal properties and facilities is set forth in the following tables. Information regarding production capacities is based on normal operating rates and normal production mixes under current market conditions, taking into account known constraints such as log supply. Market conditions, fluctuations in log supply, and the nature of current orders may cause actual production rates and mixes to vary significantly from the production rates and mixes shown.

ORIENTED STRAND BOARD

Oriented Strand Board Panel Plants ¹

10 plants—4,955 million square feet annual capacity, ³/8” basis



	Square feet in millions
Carthage, TX	500
Chambord, Quebec, Canada²	470
Dawson Creek, British Columbia, Canada²	380
Hanceville, AL	410
Jasper, TX	475
Maniwaki, Quebec, Canada	650
Roxboro, NC	500
Sagola, MI	410
Swan Valley, Manitoba, Canada	410
Thomasville, AL²	750

SIDING

Siding and Specialty Plants

6 plants—1,320 million square feet annual capacity, ³/8” basis



	Square feet in millions
Newberry, MI	150
Hayward, WI³	475
Tomahawk, WI	140
Two Harbors, MN	155
Roaring River, NC	300
East River, Nova Scotia, Canada	100

ENGINEERED WOOD PRODUCTS

I-joist Plants⁴

1 plant—80 million lineal feet annual capacity



1 to 3 shifts per day, 5 days per week	Lineal feet in millions
Red Bluff, CA	80

LVL Plants

2 plants—9,400 thousand cubic feet annual capacity



	Cubic feet in thousands
Golden, BC, Canada	4,800
Wilmington, NC	4,600

LSL Plant

1 plant—7,000 thousand cubic feet annual capacity



	Cubic feet in thousands
Houlton, ME	7,000

SOUTH AMERICAN OPERATIONS

3 plants—680 million square feet annual capacity. ³/8” basis



	Square feet in millions
Panguipulli, Chile	130
Lautaro, Chile	160
Ponta Grossa, Brazil	390

OTHER⁵

Plastic Mouldings Plant

1 plant—300 million lineal feet annual capacity



	Lineal feet in millions
Middlebury, IN	300

_______________


¹	In addition to the plants described, our 50/50 joint venture with Canfor Corporation owns and operates a plant in Ft. St. John, British Columbia, Canada, that has an annual production capacity of 820 million square feet of OSB.


²	Facility indefinitely curtailed as of December 31, 2011.


³	The Hayward, WI siding facility produces both commodity OSB and OSB siding.


⁴	In addition to the plant described, our 50/50 joint venture with AbitibiBowater owns and operates a plant in St. Prime, Quebec, Canada and a plant in La Rouche, Quebec, Canada. The combined annual production capacity of these facilities is 140 million lineal feet.


⁵	The above table does not reflect the 9 cellulose insulation facilities that are operated by U.S. GreenFiber, LLC, our 50/50 joint venture with Casella Waste Systems.

CANADIAN TIMBERLAND LICENSE AGREEMENTS



Location	Acres
British Columbia	9,200,000
Manitoba	8,900,000
Nova Scotia	900,000
Quebec	27,600,000
Total timberlands under license agreements in Canada	46,600,000

We also have timber-cutting rights on 31,126 acres on government and privately owned timberlands in the U.S.

Our Canadian subsidiary has arrangements with four Canadian provincial governments which give our subsidiary the right to harvest a volume of wood off public land from defined forest areas under supply and forest management agreements, long-term pulpwood agreements, and various other timber licenses. The acreage noted above is the gross amount of the licenses and is not reflective of the amount of timber acreage that we currently manage. We also obtain wood from private parties in certain cases where the provincial governments require us to obtain logs from private parties prior to harvesting from the licenses to meet our raw materials needs. The timberland licenses above do not include the timber we have under license associated with our joint venture OSB mill with Canfor Corporation located in British Columbia.

ITEM 3. Legal Proceedings

Certain environmental matters and legal proceedings are discussed below.

ENVIRONMENTAL MATTERS

We are involved in a number of environmental proceedings and activities, and may be wholly or partially responsible for known or unknown contamination existing at a number of other sites at which we have conducted operations or disposed of wastes. Based on the information currently available, management believes that any fines, penalties or other costs or losses resulting from these matters will not have a material adverse effect on our financial position, results of operations, cash flows or liquidity.

ARS LITIGATION

On July 31, 2009, LP filed suit in the United States District Court for the Northern District of California captioned, Louisiana Pacific Corporation v. Money Market 1 Institutional Investment Dealer; Merrill Lynch & Co.,

Inc.; Merrill Lynch, Pierce, Fenner & Smith Incorporated; and Deutsche Bank Securities Inc. (Civil Action No.09cv3529). Merrill Lynch caused this case to be transferred to the United States District Court for the Southern District of New York (Civil Action No. 09 MD 2030) where Merrill Lynch had multiple similar cases pending as a result of a Multi-District Litigation Panel ruling. This matter arose out of LP's acquisition of certain ARS structured and underwritten by Merrill Lynch and Deutsche Bank with an approximate par value of $145.9 million. In the lawsuit, LP alleges that the defendants made misrepresentations and omissions of material facts in connection with the issuance of and the auctions for the ARS which constitute a violation of both state and federal securities laws, as well as common law fraud. LP seeks recovery of compensatory damages, rescission of the purchase of the securities at par value, consequential damages, punitive damages, attorneys' fees and any other damages the court deems appropriate under the circumstances.

On February 15, 2012, the Court granted Merrill Lynch's motion to dismiss the case against Merrill Lynch. LP plans to appeal that decision at an appropriate time. The case against Deutsche Bank remains in the Northern District of California. The case against Money Market 1 remains in the Northern District of California, but has been automatically stayed as a result of Money Market 1 filing for bankruptcy protection under Chapter 7 of the United States Bankruptcy Code.

OTHER PROCEEDINGS

LP is party to other legal proceedings. Based on the information currently available, LP believes that the resolution of such proceedings will not have a material adverse effect on its financial position, results of operations, cash flows or liquidity.

CONTINGENCY RESERVES

We maintain reserves for the estimated cost of the legal and environmental matters referred to above. However, as with any estimate, there is uncertainty of predicting the outcomes of claims and litigation and environmental investigations and remediation efforts that could cause actual costs to vary materially from current estimates. Due to various uncertainties, we cannot predict to what degree actual payments will exceed the recorded liabilities related to these matters. However, it is possible that, in either the near term or the longer term, revised estimates or actual payments will significantly exceed the recorded liabilities.

For information regarding our financial statement reserves for the estimated costs of the environmental and legal matters referred to above, see Note 18 of the Notes to financial statements included in item 8 in this report.

ITEM 4. Mine Safety Disclosures

N/A

PART II


ITEM 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

The common stock of LP is listed on the New York Stock Exchange with the ticker symbol “LPX.” The Dow-Jones newspaper quotations symbol for the common stock is “LaPac.” Information regarding the high and low sales prices for the common stock for each quarter of the last two years is as follows:



	1ST QTR		2ND QTR		3RD QTR		4TH QTR
HIGH AND LOW STOCK PRICES
2011 High	$	11.57	$	10.66	$	8.50	$	8.21
Low	$	9.26	$	7.25	$	5.10	$	4.63
2010 High	$	9.20	$	13.44	$	8.46	$	10.09
Low	$	6.87	$	6.48	$	6.25	$	7.40

As of February 7, 2012, there were approximately 8,763 holders of record of our common stock. No dividends were paid in 2011 or 2010. Our ability to pay dividends in the future is subject to limitations set forth in the agreement governing our bank credit facilities and the indenture governing our Senior Notes due in 2017.

ISSUER PURCHASES OF EQUITY SECURITIES

None.

PERFORMANCE GRAPH

The following graph compares the total cumulative return to investors, including dividends paid (assuming reinvestment of dividends) and appreciation or depreciation in stock price, from an investment in LP Common Stock for the period December 31, 2006 through December 31, 2011, to the total cumulative return to investors from the Standard & Poor’s 500 Stock Index and the Standard & Poor’s Paper and Forest Products Index for the same period. Stockholders are cautioned that the graph shows the returns to investors only as of the dates noted and may not be representative of the returns for any other past or future period.



	Dec-06		Dec-07		Dec-08		Dec-09		Dec-10		Dec-11
LOUISIANA-PACIFIC CORPORATION	$	100	$	66	$	8	$	34	$	47	$	40
S&P 500 INDEX	$	100	$	105	$	66	$	84	$	97	$	99
PAPER & FOREST PRODUCTS	$	100	$	104	$	42	$	82	$	87	$	99

ITEM 6. Selected Financial Data



Dollar amounts in millions, except per share	2011			2010⁽²⁾			2009			2008			2007⁽¹⁾
Year ended December 31	2011			2010⁽²⁾			2009			2008			2007⁽¹⁾
SUMMARY INCOME STATEMENT DATA
Net sales	$	1,356.9		$	1,383.6		$	1,061.0		$	1,379.2		$	1,708.1
Income (loss) from continuing operations before cumulative effect of change in accounting principle	(171.9		)	(32.2		)	(116.5		)	(563.1		)	(151.7		)
Income (loss) from discontinued operations	(9.2		)	(6.4		)	(5.3		)	(13.7		)	(24.6		)
Net income (loss)	(181.1		)	(38.6		)	(121.8		)	(576.8		)	(176.3		)
Net loss attributed to Louisiana-Pacific Corporation	(181.3		)	(39.0		)	(120.9		)	(576.6		)	(176.3		)
Income (loss) from continuing operations before cumulative effect of change in accounting principle per share—basic	$	(1.29	)	$	(0.25	)	$	(1.06	)	$	(5.47	)	$	(1.46	)
Net income (loss) per share—basic	$	(1.36	)	$	(0.30	)	$	(1.11	)	$	(5.60	)	$	(1.70	)
Income (loss) from continuing operations before cumulative effect of change in accounting principle per share—diluted	$	(1.29	)	$	(0.25	)	$	(1.06	)	$	(5.47	)	$	(1.46	)
Net income (loss) per share—diluted	$	(1.36	)	$	(0.30	)	$	(1.11	)	$	(5.60	)	$	(1.70	)
Average shares of common stock outstanding (millions)
Basic	133.2			129.1			108.5			102.9			103.7
Diluted	133.2			129.1			108.5			102.9			103.7
Cash dividends declared per common share	$	—		$	—		$	—		$	0.30		$	0.60
SUMMARY BALANCE SHEET INFORMATION
Total assets	$	2,139.9		$	2,410.6		$	2,620.3		$	2,601.6		$	3,648.5
Long-term debt, excluding current portion	$	715.9		$	714.5		$	706.3		$	841.3		$	854.5
Contingency reserves, excluding current portion	$	17.2		$	25.9		$	30.8		$	30.5		$	15.8
Stockholders’ equity	$	1,000.9		$	1,217.8		$	1,253.5		$	1,224.2		$	1,860.5

_______________


¹	As of January 1, 2007, LP adopted FASB Staff Position AUG AIR-1, “Accounting for Planned Major Maintenance Activities” (FSP AUG AIR-1) and Financial Accounting Standards Board (FASB) Interpretation No. 48, “Accounting for Uncertainty in Income Taxes—an Interpretation of FASB Statement No. 109” (FIN 48).


²	As of January 1, 2010, LP adopted guidance codified under ASC Topic 860, “Transfers and Servicing” (ASC 860) which eliminated the concept of a qualifying special-purpose entity (QSPE) for accounting purposes.

ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

OVERVIEW

General

Our products are used primarily in new home construction, repair and remodeling, and manufactured housing. We also market and sell our products in light industrial and commercial construction and we have a modest export business. Our manufacturing facilities are primarily located in the U.S. and Canada, but we also operate two facilities in Chile and one facility in Brazil.

To serve these markets, we operate in four segments: North America Oriented Strand Board (OSB); Siding; Engineered Wood Products (EWP); and South America. OSB is the most significant segment, accounting for 40% of continuing sales in 2011, 44% in 2010 and 39% in 2009.

OSB is sold as a commodity for which sales prices fluctuate daily based on market factors over which we have little or no control. We cannot predict whether the prices of our products will remain at current levels, increase or decrease in the future.

During 2011, we continued to experience low demand for all of our products. The overall housing market improved slightly from the severe weakness experienced in 2010, but single family housing starts, which significantly affect demand for our products, fell 9% from 2010 levels. The market channel continued to experience numerous site closures and location consolidations. Continued high unemployment, disruption in the credit markets and the continuing overall economic pessimism adversely affected the sales of our products.

Factors Affecting Our Results

Revenues and Operating Costs.

We derive our revenues from sales of our products. The unit volumes of products sold and the prices at which sales are made determine the amount of our revenues. These volumes and prices are affected by the overall level of demand for, and supply of, products of the type we sell and comparable or substitute products, and by competitive conditions.

Our operating results reflect the relationship between the amount of our revenues and our costs of production and other operating costs and expenses. Our costs of production are affected by, among other factors, costs of raw materials (primarily wood fiber and various petroleum-based resins) and energy costs, which in turn are affected by the overall market supply of and demand for these manufacturing inputs.

Demand for Building Products

Demand for our products correlates to a significant degree to the level of residential construction activity in North America, which historically has been characterized by significant cyclicality. This activity can be further delineated into three areas: (1) new home construction; (2) repair and remodeling; and (3) manufactured housing.

New Home Construction. Demand for our products correlates to a significant degree to the level of new home construction activity in North America, which historically has been characterized by significant cyclicality. The U.S. Census Bureau reported that actual single and multi-family housing starts in 2011 were about 4% higher than 2010, which were about 6% higher than such housing starts in 2009. However when comparing 2011 housing starts to the average of the last ten years as reported by the U.S. Census Bureau, 2011 housing starts were about 55% lower than that average. As reported by the U.S. Census Bureau, single family housing starts in 2011 were 9% lower than such housing starts in 2010 and the lowest level reported in the last 50 years. We believe that the reduced level of building is due to the increase in unemployment, delayed household formations due to the poor economy, foreclosure activity and a much more restrictive mortgage market. Building activity is unlikely to improve until the level of employment increases, foreclosure activity subsides and housing prices stop declining.

While near term residential construction is constrained in the U.S., positive long-term fundamentals exist.

Increased immigration, the changing age distribution of the population, the high number of adults living with their parents and historically low interest rates are expected to lead to more household formations. The chart below, which is based on data published by U.S. Census Bureau, provides a graphical summary of new housing starts for single and multi-family in the U.S. showing actual and rolling five and ten year averages for housing starts in thousands.

Repair and Remodeling. Demand for building materials to support home improvement projects is largely tied to the size and age of the existing housing stock in North America and consumer confidence. In this regard, the 1970s and 1980s had some of the highest levels of building activity. This puts these homes at an age of approximately 30-40 years, which has been shown to be consistent with the highest per home expenditure rate on repair and remodeling. With the rise in the number and scale of home improvement stores in North America, individuals now have ready and convenient access to obtain the building materials needed for repair and remodeling, as well as increased access to installation services. Although this market weakened in 2009, 2010 and 2011 due to reduced home sales and reduced financing to fund repair and remodeling expenditures, it did not decline as significantly as new home construction activity.

Manufactured Housing. Over the last several years, manufactured housing has suffered. There are several factors that have led to the decline in the number of manufactured housing units produced, including a lack of available financing, increased ability of potential customers to purchase site-built starter homes and financial difficulties at some of the larger manufactured housing producers.

Supply of Building Products

OSB is a commodity product, and it is, along with all of our products, subject to competition from manufacturers worldwide. Product supply is influenced primarily by fluctuations in available manufacturing capacity and imports. According to FEA (Forest Economic Advisors, LLC), total North American OSB annual production capacity is projected to increase by approximately 2.2 billion square feet in the period from 2012 to 2016 while plywood production capacity is projected to decrease by 100 million square feet for the same period. According to FEA, OSB accounted for approximately 64% of North American structural panel production capacity in 2011, with plywood accounting for the remainder. Going forward, it is expected that OSB will continue to capture market share from plywood. FEA forecasts, as of December 2011, that OSB will comprise approximately 66% of the

structural panel market by 2016. The chart below, which is based on data and forecasts published by FEA, depicts past and forecasted North America structural wood production capacities in billions of square feet.

Putting Demand and Supply Together

As noted above, demand for building products is influenced by the general economy, demographics and need for housing. In the case of OSB, generally, lower demand coupled with higher production capacity will result in lower pricing. The chart below, as calculated by FEA (as of December 2011), shows the demand capacity (demand divided by supply) for OSB in 2008 through 2011 as well as FEA’s forecast through 2016 based upon estimated future demand and supply.

Product Pricing.

Historical prices for our products have been volatile, and we, like other participants in the building products industry, have limited influence over the timing and extent of price changes for our products. The estimated average North Central wholesale price for OSB (per thousand square feet 7/16” basis) from 2005 through 2011, as published by Random Lengths, an industry publication, is presented below. FEA’s forecast (as of December 2011) for average North Central wholesale pricing for OSB (per thousand square feet 7/16” basis) through 2016 is also shown.

CRITICAL ACCOUNTING POLICIES AND SIGNIFICANT ESTIMATES

A discussion of our significant accounting policies and significant accounting estimates and judgments is presented in Note 1 of the Notes to the financial statements in item 8 of this report. Throughout the preparation of the financial statements, we employ significant judgments in the application of accounting principles and methods. These judgments are primarily related to the assumptions used to arrive at various estimates. For 2011, these significant accounting estimates and judgments include:

Legal Contingencies. Our estimates of loss contingencies for legal proceedings are based on various judgments and assumptions regarding the potential resolution or disposition of the underlying claims and associated costs. In making judgments and assumptions regarding legal contingencies for ongoing class action settlements, we consider, among other things, discernible trends in the rate of claims asserted and related damage estimates and information obtained through consultation with statisticians and economists, including statistical analysis of potential outcomes based on experience to date and the experience of third parties who have been subject to product-related claims judged to be comparable. Due to the numerous variables associated with these judgments and assumptions, both the precision and reliability of the resulting estimates of the related loss contingencies are subject to substantial uncertainties. We regularly monitor our estimated exposure to these contingencies and, as additional information becomes known, may change our estimates significantly.

Environmental Contingencies. Our estimates of loss contingencies for environmental matters are based on various judgments and assumptions. These estimates typically reflect judgments and assumptions relating to the probable nature, magnitude and timing of required investigation, remediation and/or monitoring activities and the probable cost of these activities, and in some cases reflect judgments and assumptions relating to the obligation or willingness and ability of third parties to bear a proportionate or allocated share of the cost of these activities, including third parties who purchased assets from us subject to environmental liabilities. We consider the ability of third parties to pay their apportioned cost when developing our estimates. In making these judgments and assumptions related to the development of our loss contingencies, we consider, among other things, the activity to date at particular sites, information obtained through consultation with applicable regulatory authorities and third-party consultants and contractors and our historical experience at other sites that are judged to be comparable. Due to the numerous variables associated with these judgments and assumptions, and the effects of changes in governmental regulation and environmental technologies, both the precision and reliability of the resulting estimates of the related contingencies are subject to substantial uncertainties. We regularly monitor our estimated exposure to environmental loss contingencies and, as additional information becomes known, may change our estimates significantly. At December 31, 2011, we excluded from our estimates approximately $1.8 million of potential environmental liabilities that we estimate will be allocated to third parties pursuant to existing and anticipated future cost sharing arrangements.

Impairment of Long-Lived Assets. We review the long-lived assets held and used by us (primarily property, plant and equipment and timber and timberlands) for impairment when events or changes in circumstances indicate that the carrying amount of assets may not be recoverable. We consider the necessity of undertaking such a review at least quarterly, and also when certain events or changes in circumstances occur. Events and changes in circumstances that may necessitate such a review include, but are not limited to: a significant decrease in the market price of a long-lived asset or group of long-lived assets; a significant adverse change in the extent or manner in which a long-lived asset or group of long-lived assets is being used or in its physical condition; a significant adverse change in legal factors or in the business climate that could affect the value of a long-lived asset or group of long-lived assets, including an adverse action or assessment by a regulator; an accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of a long-lived asset or group of long-lived assets; current-period operating or cash flow loss combined with a history of operating or cash flow losses or a projection or forecast that demonstrates continuing losses associated with the use of a long-lived asset or group of long-lived assets; and current expectation that, more likely than not, a long-lived asset or group of long-lived assets will be sold or otherwise disposed of significantly before the end of its previously estimated useful life. Identifying these events and changes in circumstances, and assessing their impact on the appropriate valuation of the affected assets under accounting principles generally accepted in the U.S., requires us to make judgments, assumptions and estimates.

In general, for assets held and used in our operations, impairments are recognized when the carrying amount of the long-lived asset or groups of long-lived assets is not recoverable and exceeds the fair value of the asset or group of assets. The carrying amount of a long-lived asset or groups of long-lived assets is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the assets or group of assets. The key assumptions in estimating these cash flows relate to future production volumes, pricing of commodity or specialty products and future estimates of expenses to be incurred as reflected in our long-range internal planning models. Our assumptions regarding pricing are based upon the average pricing over the commodity cycle (generally five years) due to the inherent volatility of commodity product pricing, and reflect our assessment of information gathered from industry research firms, research reports published by investment analysts and other published forecasts. Our assumptions regarding expenses reflect our expectation that we will continue to reduce production costs to offset inflationary impacts.

When impairment is indicated for assets held and used in our operations, the book values of the affected assets are written down to their estimated fair value, which is generally based upon discounted future cash flows associated with the affected assets. When impairment is indicated for assets to be disposed of, the book values of the affected assets are written down to their estimated fair value, less estimated selling costs. Consequently, a determination to dispose of particular assets can require us to estimate the net sales proceeds expected to be realized upon such disposition, which may be less than the estimated undiscounted future net cash flows associated with such assets prior to such determination, and thus require an impairment charge. In situations where we have experience in selling assets of a similar nature, we may estimate net sales proceeds on the basis of that experience. In other situations, we hire independent appraisers to estimate net sales proceeds.

Due to the numerous variables associated with our judgments and assumptions relating to the valuation of assets in these circumstances, and the effects of changes in circumstances affecting these valuations, both the precision and reliability of the resulting estimates of the related impairment charges are subject to substantial uncertainties and, as additional information becomes known, we may change our estimates significantly.

Income Taxes. The determination of the provision for income taxes, and the resulting current and deferred tax assets and liabilities, involves significant management judgment, and is based upon information and estimates available to management at the time of such determination. The final income tax liability to any taxing jurisdiction with respect to any calendar year will ultimately be determined long after our financial statements have been published for that year. We maintain reserves for known estimated tax exposures in federal, state and international jurisdictions; however, actual results may differ materially from our estimates.

Judgment is also applied in determining whether deferred tax assets will be realized in full or in part. When we consider it to be more likely than not that all or some portion of a deferred tax asset will not be realized, a valuation allowance is established for the amount of the deferred tax asset that is estimated not to be realizable. As of December 31, 2011, we had established valuation allowances against certain deferred tax assets, primarily related to state and foreign carryovers of net operating losses, credits and capital losses. We have not established valuation allowances against other deferred tax assets based upon tax strategies implemented or deferred tax liabilities which we anticipate to reverse within the carry forward period. Accordingly, changes in facts or circumstances affecting the likelihood of realizing a deferred tax asset could result in the need to record additional valuation allowances.

Pension Plans. Most of our U.S. employees and many of our Canadian employees participate in defined benefit pension plans sponsored by LP. We account for the consequences of our sponsorship of these plans in accordance with accounting principles generally accepted in the U.S., which require us to make actuarial assumptions that are used to calculate the related assets, liabilities and expenses recorded in our financial statements. While we believe we have a reasonable basis for these assumptions, which include assumptions regarding long-term rates of return on plan assets, life expectancies, rates of increase in salary levels, rates at which future values should be discounted to determine present values and other matters, the amounts of our pension related assets, liabilities and expenses recorded in our financial statements would differ if we used other assumptions. See further discussion related to pension plans below under the heading “Defined Benefit Pension Plans” and in Note 13 of the Notes to the financial statements included in item 8 of this report.

Workers’ Compensation. We are self insured for most of our U.S. employees’ workers compensation claims.

We account for these plans in accordance with accounting principles generally accepted in the U.S., which require us to make actuarial assumptions that are used to calculate the related assets, liabilities and expenses recorded in our financial statements. While we believe we have a reasonable basis for these assumptions, which include assumptions regarding rates at which future values should be discounted to determine present values, expected future health care costs and other matters, the amounts of our liabilities and related expenses recorded in our financial statements would differ if we used other assumptions.

Warranty Obligations. Customers are provided with a limited warranty against certain defects associated with our products for periods of up to fifty years. We estimate the costs to be incurred under these warranties and record a liability in the amount of such costs at the time product revenue is recognized. Factors that affect our warranty liability include the historical and anticipated rates of warranty claims and the cost of resolving such. We periodically assess the adequacy of our recorded warranty liability for each product and adjust the amounts as necessary. While we believe we have a reasonable basis for these assumptions, actual warranty costs in the future could differ from our estimates.

NON-GAAP FINANCIAL MEASURES

In evaluating our business, we utilize several non-GAAP financial measures. A non-GAAP financial measure is generally defined by the SEC as one that purports to measure historical or future financial performance, financial position or cash flows, but excludes or includes amounts that would not be so excluded or included under applicable GAAP guidance. In this report on Form 10-K, we disclose earnings (loss) from continuing operations before interest expense, taxes, depreciation and amortization (“EBITDA from continuing operations”) which is a non-GAAP financial measure. Additionally, we disclose Adjusted EBITDA from continuing operations which further adjusts EBITDA from continuing operations to exclude stock based compensation expense, (gain) loss on sales or impairment of long lived assets, other operating charges and credits, other-than-temporary investment impairment, (gain) loss on early debt extinguishment, investment income and realized gain on sale of long-term investments and goodwill impairment. Neither EBITDA from continuing operations nor Adjusted EBITDA from continuing operations is a substitute for the GAAP measure of net income or operating cash flows or for any other GAAP measures of operating performance or liquidity.

We have included EBITDA from continuing operations and Adjusted EBITDA from continuing operations in this report on Form 10-K because we use them as important supplemental measures of our performance and believe that they are frequently used by securities analysts, investors and other interested persons in the evaluation of companies in our industry, some of which present EBITDA when reporting their results. We use EBITDA from continuing operations and Adjusted EBITDA from continuing operations to evaluate our performance as compared to other companies in our industry that have different financing and capital structures and/or tax rates. It should be noted that companies calculate EBITDA and Adjusted EBITDA differently and, therefore, our EBITDA and Adjusted EBITDA measures may not be comparable to EBITDA and Adjusted EBITDA reported by other companies. Our EBITDA and Adjusted EBITDA measures have material limitations as performance measures because they exclude interest expense, income tax (benefit) expense and depreciation and amortization which are necessary to operate our business or which we otherwise incur or experience in connection with the operation of our business.

The following table presents significant items by operating segment and reconciles results from continuing operations to EBITDA from continuing operations and Adjusted EBITDA from continuing operations:



(Dollar amounts in millions)	OSB			Siding		EWP			South America		Other			Corporate			Total
Year Ended December 31, 2011

Sales	$	542.0		$	429.8	$	203.3		$	144.9	$	39.4		$	(2.5	)	$	1,356.9
Depreciation and amortization	36.3			15.5		12.6			11.6		0.8			2.1			78.9
Cost of sales and selling and administrative	554.7			372.3		206.2			121.7		38.7			61.8			1,355.4
Gain (loss) on sales of and impairments of long-lived assets	—			—		—			—		—			73.9			73.9
Other operating credits and charges, net	—			—		—			—		—			(11.2		)	(11.2		)
Total operating costs	591.0			387.8		218.8			133.3		39.5			126.6			1,497.0
Income (loss) from operations	(49.0		)	42.0		(15.5		)	11.6		(0.1		)	(129.1		)	(140.1		)
Total non-operating expense														(44.0		)	(44.0		)
Income (loss) before income taxes and equity in earnings of unconsolidated affiliates	(49.0		)	42.0		(15.5		)	11.6		(0.1		)	(173.1		)	(184.1		)
Benefit for income taxes														(39.1		)	(39.1		)
Equity in (income) loss of unconsolidated affiliates	14.5			—		—			—		12.4			—			26.9
Income (loss) from continuing operations	$	(63.5	)	$	42.0	$	(15.5	)	$	11.6	$	(12.5	)	$	(134.0	)	$	(171.9	)

Reconciliation of loss from continuing operations to EBITDA from continuing operations
Income (loss) from continuing operations	$	(63.5	)	$	42.0	$	(15.5	)	$	11.6	$	(12.5	)	$	(134.0	)	$	(171.9	)
Benefit for income taxes	—			—		—			—		—			(39.1		)	(39.1		)
Interest expense, net of capitalized interest	—			—		—			—		—			56.9			56.9
Depreciation and amortization	36.3			15.5		12.6			11.6		0.8			2.1			78.9
EBITDA from continuing operations	(27.2		)	57.5		(2.9		)	23.2		(11.7		)	(114.1		)	(75.2		)
Stock based compensation expense	0.8			0.5		0.5			—		—			6.0			7.8
Other than temporary asset impairment														14.8			14.8
(Gain) loss on sale or impairment of long-lived assets														73.9			73.9
Other operating credits and charges, net														(11.2		)	(11.2		)
Investment income														(28.7		)	(28.7		)
Adjusted EBITDA from continuing operations	$	(26.4	)	$	58.0	$	(2.4	)	$	23.2	$	(11.7	)	$	(59.3	)	$	(18.6	)



(Dollar amounts in millions)	OSB		Siding		EWP			South America		Other			Corporate			Total
Year Ended December 31, 2010

Sales	$	602.7	$	427.8	$	192.0		$	124.7	$	42.9		$	(6.5	)	$	1,383.6
Depreciation and amortization	37.4		18.1		13.1			10.0		1.1			2.3			82.0
Cost of sales and selling and administrative	537.7		358.4		199.3			107.5		39.2			64.6			1,306.7
Gain (loss) on sales of and impairments of long-lived assets	—		—		—			—		—			2.4			2.4
Other operating credits and charges, net	—		—		—			—		—			0.1			0.1
Total operating costs	575.1		376.5		212.4			117.5		40.3			69.4			1,391.2
Income (loss) from operations	27.6		51.3		(20.4		)	7.2		2.6			(75.9		)	(7.6		)
Total non-operating expense													(40.3		)	(40.3		)
Income (loss) before income taxes and equity in earnings of unconsolidated affiliates	27.6		51.3		(20.4		)	7.2		2.6			(116.2		)	(47.9		)
Benefit for income taxes													(22.1		)	(22.1		)
Equity in (income) loss of unconsolidated affiliates	1.8		—		0.9			—		3.7			—			6.4
Income (loss) from continuing operations	$	25.8	$	51.3	$	(21.3	)	$	7.2	$	(1.1	)	$	(94.1	)	$	(32.2	)

Reconciliation of loss from continuing operations to EBITDA from continuing operations
Income (loss) from continuing operations	$	25.8	$	51.3	$	(21.3	)	$	7.2	$	(1.1	)	$	(94.1	)	$	(32.2	)
Benefit for income taxes	—		—		—			—		—			(22.1		)	(22.1		)
Interest expense, net of capitalized interest	—		—		—			—		—			63.9			63.9
Depreciation and amortization	37.4		18.1		13.1			10.0		1.1			2.3			82.0
EBITDA from continuing operations	63.2		69.4		(8.2		)	17.2		—			(50.0		)	91.6
Stock based compensation expense	1.0		0.6		0.6			—		—			6.6			8.8
(Gain) loss on sale or impairment of long-lived assets													2.4			2.4
Other operating credits and charges, net													0.1			0.1
Other than temporary asset impairment													17.0			17.0
Investment income													(38.4		)	(38.4		)
Adjusted EBITDA from continuing operations	$	64.2	$	70.0	$	(7.6	)	$	17.2	$	—		$	(62.3	)	$	81.5



(Dollar amounts in millions)	OSB			Siding		EWP			South America		Other		Corporate			Total
Year Ended December 31, 2009

Sales	$	408.8		$	379.4	$	157.7		$	79.1	$	37.9	$	(1.9	)	$	1,061.0
Depreciation and amortization	35.2			18.5		12.2			9.4		1.3		3.4			80.0
Cost of sales and selling and administrative	430.6			331.6		177.7			69.3		34.8		71.2			1,115.2
Gain (loss) on sales of and impairments of long-lived assets	—			—		—			—		—		(2.5		)	(2.5		)
Other operating credits and charges, net	—			—		—			—		—		1.6			1.6
Total operating costs	465.8			350.1		189.9			78.7		36.1		73.7			1,194.3
Income (loss) from operations	(57.0		)	29.3		(32.2		)	0.4		1.8		(75.6		)	(133.3		)
Non-operating income (expense)													(36.2		)	(36.2		)
Income (loss) before income taxes and equity in earnings of unconsolidated affiliates	(57.0		)	29.3		(32.2		)	0.4		1.8		(111.8		)	(169.5		)
Benefit for income taxes													(63.4		)	(63.4		)
Equity in (income) loss of unconsolidated affiliates	8.1			—		0.9			—		1.4		—			10.4
Income (loss) from continuing operations	$	(65.1	)	$	29.3	$	(33.1	)	$	0.4	$	0.4	$	(48.4	)	$	(116.5	)
Reconciliation of loss from continuing operations to EBITDA from continuing operations
Income (loss) from continuing operations	$	(65.1	)	$	29.3	$	(33.1	)	$	0.4	$	0.4	$	(48.4	)	$	(116.5	)
Benefit for income taxes	—			—		—			—		—		(63.4		)	(63.4		)
Interest expense, net of capitalized interest	—			—		—			—		—		74.6			74.6
Depreciation and amortization	35.2			18.5		12.2			9.4		1.3		3.4			80.0
EBITDA from continuing operations	$	(29.9	)	$	47.8	$	(20.9	)	$	9.8	$	1.7	$	(33.8	)	$	(25.3	)
Stock based compensation expense	0.7			0.6		0.5			—		—		5.6			7.4
(Gain) loss on sale or impairment of long lived assets													(2.5		)	(2.5		)
Other operating credits and charges, net													1.6			1.6
Other than temporary asset impairment													2.0			2.0
Investment income													(47.7		)	(47.7		)
Early debt extinguishment													20.7			20.7
Adjusted EBITDA from continuing operations	$	(29.2	)	$	48.4	$	(20.4	)	$	9.8	$	1.7	$	(54.1	)	$	(43.8	)

RESULTS OF OPERATIONS

We reported a net loss attributable to LP of $181.3 million ($1.36 per diluted share) in 2011, which was comprised of a loss from continuing operations attributed to LP of $172.1 million ($1.29 per diluted share) and a loss from discontinued operations of $9.2 million ($0.07 per diluted share). This includes $73.9 million of loss on sale or impairment of long-lived assets and compares to a net loss attributable to LP of $39.0 million ($0.30 per diluted share) in 2010, which was comprised of a loss from continuing operations attributed to LP of $32.6 million ($0.25 per diluted share) and a loss from discontinued operations of $6.4 million ($0.05 per diluted share). We reported a net loss attributable to LP of $120.9 million ($1.11 per diluted share) in 2009, which was comprised of loss from continuing operations attributed to LP of $115.6 million ($1.06 per diluted share) and a loss from discontinued operations of $5.3 million ($0.05 per diluted share).

Net sales in 2011 were $1.36 billion, a decrease of 2% from 2010 net sales of $1.38 billion. Net sales in 2010 as compared to 2009 were higher by 30%. Sales in 2011 were negatively impacted by decreases in OSB selling prices relative to 2010, and more positively impacted by increases in OSB selling prices relative to 2009.

Our results of operations for each of our segments are discussed below, as are results of operations for the “other” category which comprises other products that are not individually significant. See Note 24 of the Notes to the financial statements included in item 8 of this report for further information regarding our segments.

OSB

Our OSB segment manufactures and distributes OSB structural panel products in North America and certain export markets. OSB is an innovative, affordable and environmentally smart product made from wood strands arranged in layers and bonded with resin. We believe we are the largest and one of the most efficient producers of OSB in North and South America.

According to FEA, it is estimated for 2011 that OSB accounted for approximately 57% of the structural panel consumption in North America with plywood accounting for the remainder. We estimate that the overall North American structural panel market (based upon 2011 housing starts) was 26.7 billion square feet with the OSB market comprising an estimated 15.3 billion square feet of this market. Based upon our production in 2011 of 3.3 billion square feet (including our joint venture OSB mill with Canfor Corporation as well as OSB produced in our siding segment), we estimate that we account for 22% of the North American OSB market and 12% of the overall North American structural panel market.

To enhance our industry leading position in the OSB business, we plan to: (1) leverage our expertise in OSB to capitalize on new opportunities for revenue growth through new product lines; (2) improve net realizations relative to weighted-average OSB regional pricing; (3) reduce costs and improve throughput and recovery by continuing to focus on efficiency, raw materials cost reductions and logistics; and (4) manage our capacity to meet our customers' expected needs for OSB demand.

OSB is manufactured through the use of wood strands arranged in layers and bonded with resins and wax. Significant cost inputs to produce OSB and approximate breakdown percentages for the year ended December 31, 2011 include wood (31%), resin and wax (22%), labor and burden (16%), utilities (7%) and manufacturing and other (24%).

Segment sales, operating profits (losses) and adjusted EBITDA from continuing operations for this segment were as follows:



Dollar amounts in millions									Increase (decrease)
Year ended December 31,	2011			2010		2009			2011 - 2010		2010 - 2009
Sales	$	542.0		$	602.7	$	408.8		(10	)%	47	%
Operating profits (losses)	$	(63.5	)	$	25.8	$	(65.1	)	(346	)%	140	%
Adjusted EBITDA from continuing operations	$	(26.4	)	$	64.2	$	(29.2	)	(141	)%	320	%

Percent changes in average sales prices and unit shipments for the year ended 2011 compared to 2010 and 2010 compared to 2009 were as follows:



	2011 versus 2010				2010 versus 2009
	Average Net Selling Price		Unit Shipments		Average Net Selling Price		Unit Shipments
OSB	(15	)%	4	%	28	%	15	%

2011 compared to 2010

OSB prices decreased compared to the corresponding period in 2010. The decrease in OSB prices was likely due to weakening of the relationship between supply and demand based upon currently operating facilities across the industry. The decrease in selling prices unfavorably impacted operating results and adjusted EBITDA from continuing operations by approximately $91 million for 2011 as compared to 2010. Sales volumes increased as we continue to move into industrial applications as well as increasing our exports. To continue to balance supply and demand, during 2011, we announced the indefinite curtailment of our Dawson Creek, British Columbia, Canada OSB mill. Including this mill, three of our OSB mills were indefinitely curtailed as of December 31, 2011.

2010 compared to 2009

OSB prices increased compared to the corresponding period of 2009. The increase in OSB prices was likely due to a narrowing of the gap between supply and demand based upon currently operating facilities across the industry, as well as raw material shortages due to weather related issues during the second quarter of 2010. The increase in selling price favorably impacted net sales by approximately $124 million and operating profits and adjusted EBITDA by $107 million for the year as compared to the corresponding period of 2009. As compared to 2009, the increase in sales volume was primarily due to increased demand as well as inventory restocking by our customers after dramatic declines in 2009.

Compared to 2009, the primary factor that led to improved operating results was the increase in commodity OSB sales prices. This increase was offset by an increase in our Canadian dollar denominated manufacturing costs and certain raw materials. The Canadian dollar has strengthened significantly from 2009, which causes our Canadian production costs stated in U.S. dollars to increase.

Siding

Our siding segment produces and markets wood-based siding and related accessories, interior hardboard (exited in mid-2009) and commodity OSB products. We believe that we are a leading wood composite exterior siding producer in North America. We manufacture exterior siding and other cladding products for the residential and commercial building markets. Additionally, we are seeking to optimize our current capacity by extending the hardboard lifecycle through innovative new products and features.

Our strategy is to drive product innovation by utilizing our technological expertise in wood and wood composites to better address the needs of our customers. We intend to increase our product offerings and production capacity of higher margin, value-added products through the addition of lower cost plants or the conversion of OSB plants from commodity structural panel production to OSB-based exterior siding products.

Segment sales, operating profits and adjusted EBITDA from continuing operations for this segment were as follows:



Dollar amounts in millions							Increase (decrease)
Year ended December 31,	2011		2010		2009		2011 – 2010		2010 – 2009
Sales	$	429.8	$	427.8	$	379.4	—	%	13	%
Operating profits	$	42.0	$	51.3	$	29.3	(18	)%	75	%
Adjusted EBITDA from continuing operations	$	58.0	$	70.0	$	48.4	(17	)%	45	%

Sales in this segment by product line were as follows:



Dollar amount in millions							Increase (decrease)
Year ended December 31,	2011		2010		2009		2011 – 2010		2010 – 2009
SmartSide^® siding	$	341.5	$	324.2	$	293.9	5	%	10	%
Commodity OSB	31.5		38.6		28.2		(18	)%	37	%
Canexel siding and other hardboard related products	56.8		65.0		57.3		(13	)%	13	%
Total	$	429.8	$	427.8	$	379.4

Percent changes in average sales prices and unit shipments for the year ended 2011 compared to 2010 and 2010 compared to 2009 are as follows:



	2011 versus 2010				2010 versus 2009
	Average Net Selling Price		Unit Shipments		Average Net Selling Price		Unit Shipments
SmartSide^® siding	3	%	3	%	—	%	11	%
Commodity OSB	(15	)%	(10	)%	32	%	(2	)%
Canexel siding	9	%	(21	)%	9	%	8	%

2011 compared to 2010

Siding sales volumes increased in our SmartSide^® siding line due to continued penetration in several key focus markets, including retail (primarily driven by increases in the repair and remodel markets) and sheds. Sales prices in our SmartSide^® siding product line for 2011 as compared to 2010 increased due to sales price increase announced in the first quarter of 2011.

Sales volumes declined in our Canexel siding lines due to slight weakening in the Canadian housing market and lower shipments to Europe. Sales prices increased in 2011 as compared 2010 due to the impact of the strengthening Canadian dollar as a majority of these sales are made in Canada and changes in product mix.

Sales prices declined for our commodity OSB products as described in the discussion of our OSB segment above. The decrease in selling price unfavorably impacted operating results and adjusted EBITDA from continuing operations by approximately $5 million for 2011 as compared to 2010.

Overall, the decline in operating results for our siding segment for 2011 as compared to 2010 was primarily due to reduced OSB pricing, reduced volumes in our Canexel product line and raw material pricing increases that were partially offset by higher sales prices in both our SmartSide^® and Canexel product lines.

2010 compared to 2009

Sales volumes were higher across SmartSide^® and Canexel siding lines due to slightly improved housing starts as well as increased market penetration in non-traditional markets such as storage sheds. Our Canexel sales volumes increased in 2010 as compared to 2009 due to increases in export sales and continued penetration in Canadian markets. Sales prices in our SmartSide^® siding product line for 2010 as compared to 2009 remained constant. In our Canexel product line, sales prices increased in 2010 as compared to 2009 due to the impact of the strengthening

Canadian dollar as a majority of these sales are made in Canada. Additionally, one of the siding mills in this segment also produces commodity OSB, which in 2010 experienced a significant increase in price on generally flat volumes.

Overall, the improvement in operating results for our siding segment for 2010 compared to 2009 was primarily due to increased sales volume and improved efficiencies in the operations. Additionally, the OSB produced in this segment provided approximately a $9 million improvement in profits as a result of the improvement in OSB price.

Engineered Wood Products

Our EWP segment manufactures and distributes LVL, I-Joists, LSL and other related products. This segment also includes the sale of I-Joist and LVL products produced by our joint venture with AbitibiBowater and under a sales and marketing arrangement with Murphy Plywood. Included in this segment is a plywood mill, which primarily produces plywood as a by-product from the LVL production process.

Our strategy is to strengthen our brand name recognition in the EWP market by enhancing our product mix and quality, providing superior technical support to our customers and leveraging our sales and marketing relationships to cross-sell our EWP products. Additionally, we are seeking to drive costs down by rationalizing our production capacity across geographic areas and improving operating efficiencies in our manufacturing facilities.

Segment sales, operating profits (losses) and adjusted EBITDA from continuing operations for this segment were as follows:



Dollar amount in millions										Increase (decrease)
Year ended December 31,	2011			2010			2009			2011 – 2010		2010 – 2009
Sales	$	203.3		$	192.0		$	157.7		6	%	22	%
Operating losses	$	(15.5	)	$	(21.3	)	$	(33.1	)	27	%	36	%
Adjusted EBITDA from continuing operations	$	(2.4	)	$	(7.6	)	$	(20.4	)	68	%	63	%

Sales in this segment by product line were as follows:



Dollar amount in millions							Increase (decrease)
Year ended December 31,	2011		2010		2009		2011 – 2010		2010 – 2009
LVL / LSL	$	103.3	$	92.2	$	74.0	12	%	25	%
I-joist	62.6		70.4		63.6		(11	)%	11	%
Related products	37.4		29.4		20.1		27	%	46	%
Total	$	203.3	$	192.0	$	157.7

Percent changes in average sales prices and unit shipments for the year ended 2011 compared to 2010 and 2010 compared to 2009 are as follows:



	2011 versus 2010				2010 versus 2009
	Average Net Selling Price		Unit Shipments		Average Net Selling Price		Unit Shipments
LVL/LSL	1	%	9	%	9	%	12	%
I-joist	3	%	(15	)%	6	%	3	%

2011 compared to 2010

Sales volumes increased in LVL/LSL based upon significant increases in exports, while sales volumes declined in I-joist due to lower U.S. and Canadian demand, which more than offset increases in export sales. Net

average selling prices increased in all product lines due to price increases implemented during 2011.

Results of operations for 2011 as compared to the prior year improved due to continued improvements in our LSL facility as well as higher sales volumes of LVL/LSL.

2010 compared to 2009

Sales volumes in both LVL/LSL and I-Joist increased during 2010 as compared to 2009 due to higher housing demand as well as customer inventory increases. Net average selling prices increased in I-Joist and LVL due to price adjustments implemented in the early part of the second quarter of 2010 and, in LVL/LSL, due to changes in product mix.

Results of operations for 2010 as compared to the prior year improved primarily due to continued improvements at our LSL mill and increases in sales price and volumes across all product lines.

South America

Our South America segment manufactures and distributes OSB structural panel and siding products in South America. We operate in two geographic areas of South America, Chile and Brazil.



Dollar amount in millions							Increase (decrease)
Year ended December 31,	2011		2010		2009		2011 – 2010		2010 – 2009
Sales	$	144.9	$	124.7	$	79.1	16	%	58	%
Operating profits	$	11.6	$	7.2	$	0.4	61	%	1,700	%
Adjusted EBITDA from continuing operations	$	23.2	$	17.2	$	9.8	35	%	76	%

Sales in this segment by production location were as follows:



Dollar amount in millions							Increase (decrease)
Year ended December 31,	2011		2010		2009		2011 – 2010		2010 – 2009
Chile	$	89.3	$	79.5	$	46.3	12	%	72	%
Brazil	55.6		45.2		32.8		23	%	38	%
Total	$	144.9	$	124.7	$	79.1

Percent changes in average sales prices and unit shipments for the year ended 2011 compared to 2010 and 2010 compared to 2009 are as follows:



	2011 versus 2010				2010 versus 2009
	Average Net Selling Price		Unit Shipments		Average Net Selling Price		Unit Shipments
Chile	(1	)%	27	%	11	%	2	%
Brazil	8	%	16	%	18	%	24	%

2011 compared to 2010

In our Chilean operations, sales volumes increased due to continued demand associated with rebuilding efforts after the Chilean earthquake as well as continued penetration in local markets. Sales volumes in Brazil increased due to increased penetration in local markets as well as increasing exports to China. Changes in price for both areas were primarily driven by the fluctuation in the exchange rates.

2010 compared to 2009

In our Chilean operations, sales volumes increased due to continued penetration in local markets, as well as

repair efforts after the Chilean earthquake. However, increased imports into Chile put pressure on our selling prices, which was offset by the strengthening Chilean peso. We experienced improvements in our Brazil operations in terms of sales prices, volumes and manufacturing efficiencies.

Other

Our other products category includes our moulding business and our joint venture that produces and sells cellulose insulation. This category also includes our remaining timber and timberlands and other minor products, services and closed operations which are not classified as discontinued operations.

Category sales, operating profits (losses) and adjusted EBITDA from continuing operations for this category were as follows:



Dollar amount in millions									Increase (decrease)
Year ended December 31,	2011			2010			2009		2011 – 2010		2010 – 2009
Sales	$	39.4		$	42.9		$	37.9	(8	)%	13	%
Operating profits (losses)	$	(12.5	)	$	(1.1	)	$	0.4	(1,036	)%	(375	)%
Adjusted EBITDA from continuing operations	$	(11.7	)	$	—		$	1.7

Sales in this category by product line were as follows:



Dollar amount in millions							Increase (decrease)
Year ended December 31,	2011		2010		2009		2011 – 2010		2010 – 2009
Mouldings	$	28.3	$	32.2	$	29.3	(12	)%	10	%
Other	11.1		10.7		8.6		4	%	24	%
Total	$	39.4	$	42.9	$	37.9

2011 compared to 2010

Sales in our moulding business were lower due to decreased activity in the retail markets, with sales in our other operations remaining relatively flat. Included in these results is a $5.6 million goodwill impairment charge recorded on our joint ventures books. Overall, operating results associated with these activities were negatively impacted by the performance of our moulding business and our U.S. Greenfiber joint venture.

2010 compared to 2009

In our moulding business, we experienced an increase in sales due to continued strength in retail markets. In our joint venture that produces and sells cellulose insulation, results of operations were relatively flat with the previous year. Overall, operating results associated with these activities were negatively impacted reductions in carrying costs of our non-operating facilities.

GENERAL CORPORATE AND OTHER EXPENSE, NET

Net general corporate expense was $66.4 million in 2011 as compared to $73.4 million in 2010 and $76.5 million in 2009. General corporate and other expenses primarily consist of corporate overhead such as wages and benefits for corporate personnel, professional fees, insurance, travel costs, non-product specific marketing and other expenses. The decrease in 2011 as compared to 2010 was due to lower accruals under the management incentive program as well as continued cost containment. The decrease in 2010 as compared to 2009 was due to reductions in pension costs associated with the freezing of our U.S. defined benefit pension plans as well as cost containment.

OTHER OPERATING CREDITS AND CHARGES, NET

For a discussion of other operating credits and charges, net, see Notes 1 and 16 of the Notes to the financial

statements included in item 8 of this report.

GAIN (LOSS) ON SALES OF AND IMPAIRMENTS OF LONG-LIVED ASSETS

For a discussion of gain (loss) on sales of and impairments of long-lived assets, see Notes 1 and 17 of the Notes to the financial statements included in item 8 of this report.

NON-OPERATING INCOME (EXPENSE)

In 2011, net non-operating expense was $44.0 million compared to $40.3 million in 2010 and $36.2 million in 2009. Components of non-operating income (expenses) were as follows:



	Year ended December 31,
Dollar amounts in millions	2011			2010			2009
Interest expense	$	(54.4	)	$	(60.8	)	$	(71.7	)
Amortization of debt charges	(2.6		)	(3.1		)	(3.0		)
Capitalized interest	0.1			—			0.1
Interest expense, net of capitalized interest	(56.9		)	(63.9		)	(74.6		)

Investment income	13.3			18.0			26.0
Realized gains from the sales of investments	15.2			19.0			18.7
SERP market adjustments	0.2			1.4			3.0
Investment income	28.7			38.4			47.7

Other than temporary impairment	(14.8		)	(17.0		)	(2.0		)

Foreign currency gains (losses)	(1.0		)	2.2			13.4
Early debt extinguishment	—			—			(20.7		)
Other non-operating expense	(1.0		)	2.2			(7.3		)

Total non-operating income (expense)	$	(44.0	)	$	(40.3	)	$	(36.2	)

EQUITY IN EARNINGS OF UNCONSOLIDATED AFFILIATES

We participate in several joint venture arrangements. These include: (1) a joint venture with Casella Waste Management Systems, Inc. to produce cellulose insulation; (2) a joint venture with Canfor Corporation to construct and operate an OSB mill in British Columbia; and (3) a joint venture with AbitibiBowater Inc. to construct and operate two I-joist facilities in Quebec.

In August 2000, we and Casella Waste Management Systems, Inc., each contributed most of the assets of our respective cellulose insulation operations to a joint venture, U.S. GreenFiber, LLC (GreenFiber). Pursuant to the joint venture agreement, each company owns 50% of GreenFiber. GreenFiber elected to be treated as a partnership for income tax purposes and therefore the entity is not taxed directly. The results of this operation are included within Other Products.

In 2003, we and Canfor Corporation, entered into a joint venture to construct and operate an 820 million square foot OSB facility in British Columbia, Canada. Pursuant to the joint venture agreement, each company owns 50% of the venture, with LP being responsible for all North America sales from this facility. The results of this operation are included in our OSB segment.

In November 2002, we entered into a joint venture with AbitibiBowater Inc. to construct and operate an I-joist

facility in Eastern Canada. Pursuant to the joint venture agreement, each company owns 50% of the venture. Subsequently, the joint venture constructed and commenced operating a second I-joist facility in Eastern Canada. The results of these operations are included in the EWP segment.

DISCONTINUED OPERATIONS

Included in discontinued operations for 2011, 2010 and 2009 are the carrying costs of mills that have been closed and divested and related warranty costs associated with such facilities. These operations include residual losses of mills divested in past years and associated warranty and other liabilities associated with these operations.

2011 compared to 2010

Included in the loss on discontinued operations for 2011 is an increase in our warranty reserves associated with discontinued products of $12.0 million as well as residual costs associated with mills that have been previously discontinued and sold.

2010 compared to 2009

Included in the loss on discontinued operations for 2010 is an increase in our warranty reserves associated with discontinued products of $7.1 million as well as residual costs associated with mills that have been previously discontinued and sold.

INCOME TAXES

We recorded a tax benefit in continuing operations of $39.1 million in 2011, $22.1 million in 2010 and $63.4 million in 2009. For 2011, the primary difference between the U.S. statutory rate of 35% and the effective rate on our continuing operations relates to the effect of foreign tax rates and increases in valuation allowances due to net operating loss carry forwards in various jurisdictions, increases in our reserves related to uncertain tax positions associated with our foreign debt structure and the impact of a non-deductible asset impairment included in Greenfiber's operating results.

For 2010, the primary difference between the U.S. statutory rate of 35% and the effective rate on our continuing operations related to a non-deductible impairment loss related to LP’s equity investment in Greenfiber, state income taxes and the effect of foreign tax rates and the foreign currency translation. For 2009, the primary difference between the U.S. statutory rate of 35% and the effective rate on our continuing operations related to our foreign debt structure, state income taxes and a valuation allowance established on state net operating loss carry forwards.

We paid $0.8 million of cash taxes and received $25.8 million in cash tax refunds in 2011 and expect to receive $3.5 million in related refunds from prior years in 2012.

DEFINED BENEFIT PENSION PLANS

We maintain several qualified and non-qualified defined benefit pension plans in the U.S. and Canada that cover a substantial portion of our employees. The measurement of liabilities related to these plans is based on management’s interpretation of the applicable plan provisions and assumptions related to future events, including expected return on plan assets and rate of compensation increases. The discount rate reflects the rate at which benefits could be effectively settled on the measurement date. The projected payment for each year is discounted using the rates specified by the yield curve. The sum of these discounted payments is the benefit obligation. The discount rate disclosed is the single rate applied to all projected payments that creates an equivalent obligation. Actual pension plan asset investment performance will either reduce or increase unamortized pension losses at the end of any fiscal year, which ultimately affects future pension costs. See Note 13 of the Notes to the financial statements included in item 8 of this report for further information on these plans.

The table below quantifies the approximate impact on our plans, as of December 31, 2011, of a one-half percentage point decrease in our assumptions for discount rate and expected return on assets, holding other assumptions constant:



Dollars in millions
Increase in annual costs for 2012:
Discount rate	$	0.4
Expected long-term rate of return	$	1.4
Increase in projected benefit obligation:
Discount rate	$	19.5

For our U.S. plans, we used a long term rate of return assumption of 7.5% to calculate the 2010 and 2011 net periodic pension costs. For our Canadian plans, we used a long-term rate of return of 4.8% to 6.3% to calculate 2010 and 2011 net periodic pension costs. For 2011, our net periodic pension cost was $5.5 million and we estimate for 2012, our net periodic pension cost will be $6.8 million. This estimate assumes that we will have no curtailment or settlement expenses in 2012. If a settlement or curtailment does occur in 2012, this estimate may change significantly. We estimate in 2012, we will contribute approximately $1 million to our defined benefit pension plans.

LEGAL AND ENVIRONMENTAL MATTERS

For a discussion of legal and environmental matters involving us and the potential impact thereof on our financial position, results of operations and cash flows, see Item 3 in this report as well as Note 18 in the Notes to the financial statements included in item 8 of this report.

Hardboard Siding Settlement Update

The following discussion should be read in conjunction with the discussion of our hardboard siding litigation set forth in Note 18 in the Notes to the financial statements included in item 8 of this report.

Cumulative statistics as of December 31, 2011 under hardboard settlements were as follows:



	December 31, 2011
Completed claims received	87,500
Claims dismissed	14,800
Claims settled	72,700

The average payment amount for settled claims as of December 31, 2011 was approximately $960. Dismissal of claims is typically the result of claims for products not produced by LP or claims that lack sufficient information or documentation after repeated efforts to correct those deficiencies.

LIQUIDITY AND CAPITAL RESOURCES

Overview

Our principal sources of liquidity are existing cash and investment balances, cash generated by our operations and our ability to borrow under such credit facilities as we may have in effect from time to time. We may also from time to time issue and sell equity, debt or hybrid securities or engage in other capital market transactions.

Our principal uses of liquidity are paying the costs and expenses associated with our operations, servicing outstanding indebtedness and making capital expenditures. We may also from time to time prepay or repurchase outstanding indebtedness, acquire assets or businesses that are complementary to our operations. Any such repurchases may be commenced, suspended, discontinued or resumed, and the method or methods of effecting any such repurchases may be changed, at any time or from time to time without prior notice.

Operating Activities

During 2011, we used $40.2 million of cash in operations as compared to generating $47.8 million of cash from operations in 2010. This change was related to increased operating losses, higher inventories and lower tax refunds. During 2011, we received tax refunds of $25.0 million (net of payments). Trade receivables are relatively flat between 2011 and 2010. As of December 31, 2011, our trade receivables balance was 99% current, which is comparable with prior years with no substantial changes in terms of sales. Non-trade receivables decreased by $1.6 million due to lower interest receivables due to principal payments received during 2011. Our trade accounts payable increased by $4.8 million from the prior year primarily due to the increases in inventory and our salary and wages payable declined by $7.4 million due to reduction in expected management incentive payouts. During 2011, we made $2.3 million in contingency payments and $12.9 million in warranty payments.

During 2010, we generated $47.8 million of cash from operations as compared to $60.8 million in 2009. The decrease in cash provided from operations was related to higher inventories and higher pension payments and lower tax refunds, as partially offset by lower operating losses. During 2010, we received tax refunds of $45.7 million (net of payments). Trade receivables increased by $8.8 million due to higher sales in December of 2010 as compared to 2009. As of December 31, 2010, our trade receivables balance was 99% current, which is comparable with prior years with no substantial changes in terms of sales. Non-trade receivables decreased by $1.8 million due to lower interest receivables due to payments received during 2010. Our accounts payable increased from the prior year primarily due to the increases in inventory as well as changes in our funding of our employee benefit programs. During 2010, we made $9.8 million in contingency payments and $14.6 million in warranty payments.

During 2009, we generated $60.8 million of cash from operations as compared to a use of cash of $142.5 million in 2008. The increase in cash provided by operations was related to an intense focus on cash generation as well as lower operating losses. During 2009, due to the depressed new construction market, we curtailed operating production schedules at many of our facilities and reduced inventories throughout our process which allowed us to reduce our inventories by $57.2 million. During 2009, we received tax refunds of $79.3 million (net of payments). Trade receivables increased by $20.0 million due to higher sales in December of 2009 as compared to 2008. As of December 31, 2009, our trade receivables balance was 99% current, which is comparable with prior years with no substantial changes in terms of sales. Our accounts payable increased from the prior year primarily due to the increases in interest payable associated with the debt issued in 2009 and accruals for management incentive programs, with minimal increases in trade payables. During the year, we made $12.9 million in contingency payments and $10.3 million in warranty payments.

Investing Activities

During 2011, we generated $7.7 million in cash from investing activities. Capital expenditures for 2011 were $21.4 million, primarily related to maintenance capital. Additionally, we funded our joint ventures $9.6 million . We received $19.1 million on the sale of investments with maturities in excess of 90 days. We also received $1.3 million on the sale of assets and received $18.3 million in cash no longer required to collaterize certain long-term obligations. Additionally, included in accounts payable is $0.8 million related to capital expenditures that had not yet been paid as of December 31, 2011.

During 2010, we generated $120.3 million in cash from investing activities. Capital expenditures for 2010 were $14.5 million, primarily related to maintenance capital. Additionally, our joint ventures refunded $4.9 million in advances made in past years. We received $21.8 million on the sale of investments with maturities in excess of 90 days. We received $115.1 million in principal payments on our notes receivable from asset sales. We also received $3.3 million on the sale of assets and used $10.3 million in cash to collaterize certain long-term obligations. Additionally, included in accounts payable is $1.2 million related to capital expenditures that had not yet been paid as of December 31, 2010.

During 2009, we generated $125.6 million in cash from investing activities. Capital expenditures for 2009 were $9.6 million, primarily related to maintenance capital. We received $50.3 million on the sale of investments with maturities in excess of 90 days. We also generated $57.5 million in cash from the release of restricted cash related to the resolution of certain litigation matters as well as the refinancing of certain long-term obligations which no longer required cash collateralization. We received $20.0 million in principal payments on our notes receivable from asset sales and $7.8 million on the sale of assets. Additionally, included in accounts payable is $1.2 million related to capital expenditures that had not yet been paid as of December 31, 2009.

Capital expenditures in 2012 are expected not to exceed $30 million related to projects critical for continuing operations.

Financing Activities

In 2011, net cash used in financing activities was $15.7 million. During 2011, we redeemed the 25% non-controlling interest in our Brazilian OSB operation for $24.0 million. In connection with this redemption, we borrowed $10.0 million under a Brazilian export financing facility established to facilitate the redemeption. As part of our ongoing cost reduction activities, we renegotiated our Chilean loan which required us to pay a financing fee of $1.0 million and allowed us to release our restricted cash associated with letters of credit supporting Chilean borrowings and lower the interest rate on this loan. We also paid $0.5 million of financing fees in connection with amendments to our asset-based revolving credit facility.

In 2010, net cash used in financing activities was $174.3 million. During 2010, we repaid $173.7 million in long-term debt which was comprised of $113.4 million of long-term debt associated with our limited recourse notes payable and $60.2 million of Senior Notes due in August of 2010.

In 2009, net cash provided by financing activities was $115.9 million. During 2009, we borrowed $320.5 million in long-term debt which was comprised of $281.3 million from the sale of 375,000 units (discussed below) and $39.0 million of Chilean long-term debt and various other debt and capital lease obligations. We also repaid $318.8 million in long-term debt which included $20.0 million associated with our limited recourse notes payable, $39 million outstanding under a credit facility associated with our Chilean facility, $139.8 million associated with our Senior Notes due in 2010, $95.3 million associated with Senior Secured Notes due in 2017 and $7.6 million associated with an industrial revenue bond. Additionally, we received net proceeds of $132.3 million from the issuance and sale of 20.7 million shares of stock through a public offering and paid $15.8 million in transaction costs associated with the various financing activities.

In March 2009, we issued and sold 375,000 Units consisting of (1) $375 million principal amount at maturity of 13% Senior Secured Notes due 2017 and (2) warrants to purchase 18,395,963 shares of our common stock at an exercise price of $1.39 per share, subject to adjustment in certain circumstances and to mandatory cashless exercise provisions. The units were issued at a discount to the principal amount at maturity of the notes included therein resulting in aggregate gross proceeds of $281.3 million. Simultaneous with the closing of the unit sale, we used a portion of the proceeds to retire $126.6 million aggregate principal amount of our 8.875% Senior Notes due 2010 for $126.0 million. Under the terms of the indenture governing our Senior Secured Notes due in 2017, we were permitted, with the net proceeds of certain equity offerings, to redeem up to 35% of the aggregate principal amount at maturity of such Notes at a redemption price equal to 113% of their accreted value, plus accrued and unpaid interest. In September 2009, we completed a public offering of 20.7 million shares of common stock, which included the exercise of the overallotment option of 2.7 million shares, at a per share price of $6.75, raising $139.7 million before offering costs. In connection with the offering, we paid $7.0 million in underwriting discounts and commissions and approximately $0.4 million in expenses. The net proceeds of the offering were $132.3 million a portion of which were used (in November 2009) to redeem 35% of our Senior Secured Notes due in 2017 ($131.3 million principal amount at maturity) at a price of $858.14 per $1,000 principal amount at maturity or $112.6 million. In connection with this repurchase, we recorded a loss on early debt extinguishment of $21.1 million which included $3.7 million associated with the write-off of the related financing costs.

CREDIT AGREEMENTS

We have a credit facility which provides for a committed asset-based borrowing capacity of up to $100 million, with a $60 million sublimit for U.S. letters of credit and a $10 million sublimit for Canadian letters of credit. The credit facility will end in October 2016.

The availability of credit under the credit facility is subject to a borrowing base, which is calculated based on certain percentages of accounts receivable and inventory and at any given time may limit the amount of borrowings and letters of credit otherwise available under the facility. In addition, the credit facility contains a covenant requiring us to maintain a fixed charge coverage ratio of at least 1.1 to 1.0 at any time that our unused borrowing base capacity after adjustment to exclude certain past due trade payables falls below $15 million. This covenant

effectively precludes us from using all or a portion of the last $15 million of our unused borrowing base capacity, if, before or immediately after such use, we would not satisfy the minimum fixed charge coverage ratio. The credit facility allows us to pledge, as security for our reimbursement obligations in respect of letters of credit issued under the facility, cash collateral in an amount not less than 105% of the of the stated amount of such letters of credit. The above-described preclusion to our utilization of $15 million of the capacity otherwise available under the facility does not apply to such cash collateralized letters of credit. At December 31, 2011, we had $87.3 million of unused borrowing base capacity under the facility and no borrowings outstanding under the facility. Outstanding under this facility at December 31, 2011, were $9.9 million in letters of credit which were collateralized by $10.7 million of cash. Based upon our available cash balances, we do not currently anticipate using this facility except to obtain and maintain letters of credit. At December 31, 2011, our fixed charge coverage ratio was estimated to be 0.2, and we anticipate that our fixed charge coverage ratio will remain below 1.1 to 1.0 for the foreseeable future, and, accordingly we will be subject to the limitation on our ability to fully utilize our adjusted borrowing base capacity as described above during such time. As a result, our ability to obtain and maintain non-cash collateralized letters of credit under this facility may remain constrained to an amount that does not exceed the excess of our adjusted borrowing base over $15 million.

Subject to certain exceptions, obligations under the credit facility are secured by, among other things, a first-priority lien on our present and future receivables, inventory and certain general intangibles, and by a second-priority lien on substantially all of our domestic property, plant and equipment, and are guaranteed by certain of our subsidiaries.

The credit facility contains customary covenants applicable to us and our subsidiaries, other than certain unrestricted subsidiaries, including certain financial covenants as well as restrictions on, among other things, our ability to: incur debt; incur liens; declare or make distributions to our stockholders; make loans and investments; repay debt; enter into mergers, acquisitions and other business combinations; form or acquire subsidiaries; amend or modify our governing documents; enter into hedging arrangements; engage in other businesses other than our business as currently conducted; and enter into transactions with affiliates. The credit facility also contains customary events of default, the occurrence of which could result in the acceleration of our obligation to repay the indebtedness outstanding thereunder.

Obligations under the indenture governing our Senior Secured Notes due 2017 are, in general, secured by a first-priority lien on the collateral that secures obligations under the credit facility on a second-priority basis, and by a second-priority lien on the collateral that secures obligations under the credit facility on a first-priority basis, subject to the terms of an intercreditor agreement, and are guaranteed by the subsidiaries that guarantee obligations under the credit facility.

The indenture contains customary covenants applicable to us and our subsidiaries, other than certain unrestricted subsidiaries, including restrictions on actions and activities that are restricted under the credit facility. The indenture also contains customary events of default, the occurrence of which could result in acceleration of our obligations to repay the indebtedness outstanding thereunder.

As part of our refinancing strategy, LP Chile entered into a term loan agreement with Banco de Credito e Inversiones for UF 943,543.7391 (equivalent to $39 million at the time of inception). The loan agreement has a term of 10 years with semi-annual principal payments beginning in June of 2012. The loan bears interest at UF plus 3.9% per annum, and is secured by a first priority security interest in substantially all of the real property owned by LP Chile. The loan contains various restrictive covenants and requires the maintenance by LP Chile of a debt to equity ratio of less than or equal to 1. If LP Chile is late in making payments, LP Chile will also be required to maintain a ratio of net debt to earnings before interest, taxes, depreciation and amortization (EBITDA) of less than or equal to 2.5 and a ratio of EBITDA to financial costs of at least 3. The loan agreement also contains customary events of default, the occurrence of which could result in acceleration of our obligations to repay the indebtedness outstanding thereunder. Since this loan is denominated in other than U.S. dollars, the balance fluctuates based upon changes in the underlying currency rates. As of December 31, 2011, the balance of this loan was $40.5 million.

OTHER LIQUIDITY MATTERS

As of December 31, 2011, we had $0.7 million ($23.4 million, par value) of principal invested in auction rate

securities (ARS). The ARS held by us are securities with long-term nominal maturities for which the interest rates were historically reset through a Dutch auction each month.

We review our marketable securities routinely for other-than-temporary impairment. The primary factors LP uses to determine if an impairment charge must be recorded because a decline in value of the security is other-than-temporary include (i) whether the fair value of the investment is significantly below its cost basis, (ii) the financial condition of the issuer of the security (including its credit rating), (iii) the length of time that the cost of the security has exceeded its fair value and (iv) LP’s intent and ability to retain the investment for a period of time sufficient to allow for any anticipated recovery in market value.

During 2011, we sold $38.1 million (par value) of our ARS for $19.1 million plus accrued interest. In connection with this transaction, we recorded a gain on sale of securities of $15.2 million, which represents a recovery of losses previously recorded as an Other-than-temporary impairment.

During 2010, we sold $35.3 million (par value) of our ARS for $21.8 million plus accrued interest. In connection with this transaction, we recorded a gain on sale of securities of $19.0 million, which represents a recovery of losses previously recorded as an Other-than-temporary impairment.

During 2009, we sold $55.0 million (par value) of our ARS for $21.5 million plus accrued interest. In connection with this transaction, we recorded a gain on sale of securities of $18.7 million, which represents a recovery of losses previously recorded as an Other-than-temporary impairment.

The estimated market value of our ARS holdings at December 31, 2011 was $0.7 million, which reflects a $22.7 million adjustment to the par value of $23.4 million. We intend to continue to offer our ARS at auction and to consider other options, including alternative buyers and other potential transactions. We do not currently require our ARS to be liquidated in order to fund our day-to-day operations and we are prepared to hold them until maturity, if necessary.

If uncertainties in the credit and capital markets continue, these markets deteriorate further or we experience any ratings downgrades on any investments in our portfolio (including on ARS), we may incur additional impairments to our investment portfolio, which could negatively affect our financial condition, results of operations and cash flow.

Contingency Reserves

Contingency reserves, which represent an estimate of future cash needs for various contingencies (principally, payments for environmental reserves), totaled $21.2 million at December 31, 2011, of which $4.0 million is estimated to be payable within one year. As with all accounting estimates, there is inherent uncertainty concerning the reliability and precision of such estimates. As described above and in Note 18 of the Notes to the financial statements included in item 8 of this report, the amounts ultimately paid in resolving these contingencies could exceed the current reserves by a material amount.

Contractual Obligations

The table below summarizes our contractual obligations as of December 31, 2011 over the next several years. See discussion above concerning provisions that could accelerate the due dates on our long-term debt.



Dollars amounts in millions	Payments due by period
Contractual obligations	2012		2013		2014		2015		2016
Long-term debt¹	$	56.5	$	136.3	$	42.7	$	42.4	$	42.1
Operating leases	2.9		3.0		3.1		3.1		0.6
Purchase obligations²	—		—		—		—		—
Other long-term obligations³	2.0		—		—		—		—
Total contractual cash obligations	$	61.4	$	139.3	$	45.8	$	45.5	$	42.7

_______________


¹	Includes expected interest payments as well as debt maturities.

The majority of our purchase obligations are take-or-pay contracts made in the ordinary course of business related to raw materials and utility contracts. Other significant items included in the above table reflect purchase obligations related to legally binding commitments for capital projects. Purchase orders made in the ordinary course of business are excluded from the above table and are cancelable without significant penalty.

Represents other long-term liability amounts reflected in our consolidated balance sheet that have known payment streams including items such as pension contributions. Current pension funding regulations require LP to contribute $1-$2 million in 2012 to its defined benefit pension plans, and we have included $2 million in the table above. Future years are not estimable due to the large number of factors involved in determining minimum pension funding.


⁴	Uncertain tax positions have been excluded from the above table as it is not reasonably possible to estimate these may need to be paid. As of December 31, 2011, the amount of uncertain tax positions excluded from the above table is $23.5 million.

Other Financing Arrangements

In connection with the sale of southern timber and timberlands in 2003, we received $26 million in cash and $410 million in notes receivable from the purchasers of such timber and timberlands. In order to borrow funds in a cost-effective manner, LP issued $368.7 million of senior debt in 2003 in a private placement to unrelated third parties. Both the notes receivable and notes payable mature in 2018. The notes payable are supported by a bank letter of credit. LP’s reimbursement obligations under the letter of credit are secured by the notes receivable. In general, the creditors under this arrangement have no recourse to LP’s assets, other than the notes receivable. However, under certain circumstances, LP may be liable for certain liabilities (including liabilities associated with the marketing or remarketing of the notes payable and reimbursement obligations, which are fully cash collateralized under the letter of credit supporting the notes payable) in an amount not to exceed 10% of the aggregate principal amount of the notes receivable. LP’s maximum exposure in this regard was approximately $41 million as of December 31, 2011 and December 31, 2010. The notes receivable are classified as long-term “Notes receivable from asset sales” and the notes payable are classified as long-term debt on the financial statements included in item 8 of this report.

In connection with the sales of timberlands in California in 1997 and 1998, we received notes from the purchasers totaling $403.8 million. The notes receivable were monetized through the issuance of notes payable in a private placement secured by the notes. Proceeds from the notes receivable from the purchasers are used to fund payments required for the notes payable. To date, all installments under these notes have been received and the corresponding installments under the notes payable have been paid. The next installment is due in 2012. The notes receivable are classified as "Current portion of Notes receivable from asset sales" and "Long-term notes receivable from asset sales” and the notes payable are classified as the "Current portion of limited recourse notes payable" and long-term debt on the financial statements included in item 8 of this report.

POTENTIAL IMPAIRMENTS

We continue to review several mills and investments for potential impairments. Management currently believes we have adequate support for the carrying value of each of these assets based upon the anticipated cash flows that result from our estimates of future demand, pricing and production costs assuming certain levels of planned capital expenditures. As of December 31, 2011, the undiscounted cash flows for the facilities indefinitely curtailed support the conclusion that no impairment is necessary for those facilities. However, should the markets for our products continue to remain at levels significantly below cycle average pricing or should we decide to invest capital in alternative projects, it is possible that we will be required to record further impairment charges. See Note 3 of the Notes to the financial statements included in item 8 of this report for impairment charges recorded in the periods presented.

We also review from time to time possible dispositions of various assets in light of current and anticipated economic and industry conditions, our strategic plan and other relevant factors. Because a determination to dispose of particular assets can require management to make assumptions regarding the transaction structure of the

disposition and to estimate the net sales proceeds, which may be less than previous estimates of undiscounted future net cash flows, we may be required to record impairment charges in connection with decisions to dispose of assets.

PROSPECTIVE ACCOUNTING PRONOUNCEMENTS

See Note 1 for discussion of prospective accounting pronouncements in the Notes to the financial statements included in item 8 of this report.

ITEM 7A. Quantitative and Qualitative Disclosures about Market Risk

A portion of our outstanding debt bears interest at variable rates and accordingly is sensitive to changes in interest rates. Interest rate changes would result in gains or losses in the market value of our debt portfolio due to differences in market interest rates and the rates at the inception of the debt agreements. Offsetting the variable rate debt are variable rate notes receivable from asset sales. Based upon the balances of the variable rate notes receivable from asset sales and the variable rate debt at December 31, 2011, a 100 basis point interest change would impact pre-tax net income and cash flows by $3.6 million annually.

Our international operations have exposure to foreign currency rate risks, primarily due to fluctuations in the Canadian dollar, Brazilian real and the Chilean peso. Although we have in the past entered into foreign exchange contracts associated with certain of our indebtedness and may continue to enter into foreign exchange contracts associated with major equipment purchases to manage a portion of the foreign currency rate risk, we historically have not entered into material currency rate hedges with respect to our exposure from operations, although we may do so in the future.

Some of our products are sold as commodities and therefore sales prices fluctuate daily based on market factors over which we have little or no control. The most significant commodity product we sell is OSB. Based upon an assumed North America annual production capacity (including our joint venture operation) of 5.0 billion square feet (3/8” basis) or 4.3 billion square feet (7/16” basis), a $1 change in the annual average price per thousand square feet on 7/16” basis would change annual pre-tax profits by approximately $4.3 million. Because of the decline in the housing market and related indefinitely curtailed facilities in our OSB business, expected volumes will be significantly below our capacity.

We historically have not entered into material commodity futures and swaps, although we may do so in the future.

ITEM 8. Financial Statements and Supplementary Data

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

Louisiana-Pacific Corporation

We have audited the accompanying consolidated balance sheets of Louisiana-Pacific Corporation and subsidiaries (the "Company") as of December 31, 2011 and 2010, and the related consolidated statements of income, cash flows, stockholders' equity, and comprehensive income for each of the three years in the period ended December 31, 2011. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Louisiana-Pacific Corporation and subsidiaries as of December 31, 2011 and 2010, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2011, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company's internal control over financial reporting as of December 31, 2011, based on the criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 29, 2012 expressed an unqualified opinion on the Company's internal control over financial reporting.

/s/ DELOITTE & TOUCHE LLP

Nashville, Tennessee

February 29, 2012

Consolidated Balance Sheets

Dollar amounts in millions



	December 31,
	2011			2010
ASSETS
Current assets:
Cash and cash equivalents	$	340.0		$	389.3
Receivables, net of allowance for doubtful accounts of $1.1 million and $1.3 million at December 31, 2011 and December 31, 2010	65.1			66.8
Income tax receivable	3.5			18.7
Inventories	163.6			151.9
Prepaid expenses and other current assets	5.7			5.6
Deferred income taxes	17.0			23.4
Current portion of notes receivable from asset sales	10.0			—
Assets held for sale	51.9			57.9
Total current assets	656.8			713.6
Timber and timberlands	45.5			46.8
Property, plant and equipment, at cost:
Land, land improvements and logging roads, net of road amortization	120.6			125.3
Buildings	265.5			280.2
Machinery and equipment	1,636.5			1,702.2
Construction in progress	5.5			4.8
	2,028.1			2,112.5
Accumulated depreciation	(1,245.9		)	(1,195.4		)
Net property, plant and equipment	782.2			917.1
Notes receivable from asset sales	523.5			533.5
Investments in and advances to affiliates	79.1			110.0
Deferred debt costs	8.9			10.1
Long-term investments	0.7			15.4
Restricted cash	12.9			31.1
Intangible assets, net of amortization	1.4			2.2
Other assets	24.9			24.9
Long-term deferred tax asset	4.0			5.9
Total assets	$	2,139.9		$	2,410.6

See Notes to the Financial Statements.

Consolidated Balance Sheets (Continued) Dollar amounts in millions, except per share

	December 31,
	2011		2010
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt	$	5.3	$	0.2
Current portion of limited recourse notes payable	7.9		—
Accounts payable and accrued liabilities	122.3		127.8
Current portion of contingency reserves	4.0		7.0
Total current liabilities	139.5		135.0
Long-term debt, excluding current portion	715.9		714.5
Deferred income taxes	106.0		164.8
Contingency reserves, excluding current portion	17.2		25.9
Other long-term liabilities	160.4		129.8
Redeemable non-controlling interest	—