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 have a 75% ownership interest in a Brazilian facility.

To serve these markets, we operate in three segments: Oriented Strand Board (OSB), Siding, and Engineered Wood Products (EWP).

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. In the first quarter of 2009, the U.S. Department of Census reported that actual single and multi-family housing starts were about 49% lower than the first quarter of 2008. We believe that the reduced level of building is due to the increase in the inventory of homes for sale coupled with a much more restrictive mortgage market. Additionally, the current recession and related job losses, the reduction in home values and the large amount of variable rate mortgages that have reset at higher rates of interest has increased the number of foreclosures, which add to the stock of homes for sale. Building activity is unlikely to improve until the number of homes available for sale is reduced, foreclosure activity subsidies, the level of unemployment stabilizes and housing prices stop declining.

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 or increase or decrease in the future.

For additional factors affecting our results, refer to the Management Discussion and Analysis overview contained in our Annual Report on Form 10-K for the year ended December 31, 2008 and to "About Forward-Looking Statements" and "Risk Factors" in this report.

CRITICAL ACCOUNTING POLICIES AND SIGNIFICANT ESTIMATES

Presented in Note 1 of the Notes to the financial statements included in LP's Annual Report on Form 10-K for the year ended December 31, 2008 is a discussion of our significant accounting policies and significant accounting estimates and judgments. The discussion of each of the policies and estimates outlines the specific accounting treatment related to each of these accounting areas.

Accounting Policies

There are several policies that we have adopted and implemented from among acceptable alternatives that could lead to different financial results had another policy been chosen:

Inventory valuation. We use the LIFO (last-in, first-out) method for some of our log inventories with the remaining inventories valued at FIFO (first-in, first-out) or average cost. Our inventories would have been approximately $1.8 million higher if the LIFO inventories were valued at average cost as of March 31, 2009.

Property, plant and equipment. We principally use the units of production method of depreciation for machinery and equipment. This method amortizes the cost of machinery and equipment over the estimated units that will be produced during its estimated useful life.

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 2009, these significant accounting estimates and judgments include:

Auction Rate Securities: Auction-rate securities represent interests in collateralized debt obligations, a portion of which are supported by pools of residential and commercial mortgages, credit linked notes and bank trust-preferred notes. Liquidity for these auction-rate securities is typically provided by an auction process that resets the applicable interest rate at pre-determined intervals, usually every 7, 28, 35 or 90 days. Because of the short interest rate reset period, we have historically recorded auction rate securities in current available-for-sale securities. As of March 31, 2009, auction-rate securities that we hold had experienced multiple failed auctions as the amount of securities for sale exceeded the amount of purchase orders. Consequently, we have classified $11.4 million ($151.8 million, par value) of auction rate securities as long-term available-for-sale securities.

Our estimates of the valuation of our current holdings of auction rate securities are based upon our evaluation of the structure of our auction rate securities and current market estimates of fair value, including fair value estimates from issuing banks. In accordance with EITF 03-1 and FSP FAS 115-1 and 124- 1, "The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments," we review several factors to determine whether a loss is other-than-temporary. These factors include but are not limited to: (i) the length of time a security is in an unrealized loss position, (ii) the extent to which fair value is less than cost, (iii) the financial condition and near term prospects of the issuer, and (iv) our intent and ability to hold the security for a period of time sufficient to allow for any anticipated recovery in fair value. Due to the numerous variables associated with these judgments, both the precision and reliability of the resulting estimates of the related valuation allowance are subject to substantial uncertainties. We regularly monitor our estimated exposure to these investments and, as additional information becomes known, may change our estimates significantly.

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 analyses 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 March 31, 2009, we excluded from our estimates approximately $1.2 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. 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, on assets held and used, impairments are recognized when the book values exceed our estimate of the undiscounted future net cash flows associated with the affected assets. The key assumptions in estimating these cash flows include future production volumes and pricing of commodity or specialty products and future estimates of expenses to be incurred. 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. These prices are estimated from information gathered from industry research firms, research reports published by investment analysts and other published forecasts. Our estimates of expenses are based upon our long-range internal planning models and our expectation that we will continue to reduce product costs that will offset inflationary impacts.

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 March 31, 2009, we had established valuation allowances against certain deferred tax assets, primarily related to state and foreign carryovers of net operating losses, credits and foreign capital loss. We have not established valuation allowances against other deferred tax assets based upon expected future taxable income and/or tax strategies planned to mitigate the risk of impairment of these assets. 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 some 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 15 of the Notes to the financial statements included in Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2008.

Workers' Compensation. We are self-insured for workers' compensation in most U.S. states. 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.

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-Q, we disclose continuing earnings before interest expense, taxes, depreciation and amortization ("EBITDA from continuing operations") which is a non-GAAP financial measure. EBITDA from continuing operations is not a substitute for the GAAP measure of net income or operating cash flows or other GAAP measures of operating performance or liquidity.

(Dollar amounts in millions)                   OSB       Siding     EWP       Other       Corporate       Total
Quarter Ended March 31, 2009
Sales                                        $  72.3     $  73.8   $ 30.0     $ 28.5     $        -      $ 204.6

Depreciation and amortization                    7.2         4.7      3.0        3.2             1.0        19.1
Cost of sales and selling and
administative                                   86.8        67.0     36.0       23.8            18.1       231.7
(Gain) loss on sale or impairment of long
lived assets                                      -           -        -          -              0.1         0.1
Other operating credits and charges, net          -           -        -          -             (3.8 )      (3.8 )

Total operating costs                           94.0        71.7     39.0       27.0            15.4       247.1

Income (loss) from operations                  (21.7 )       2.1     (9.0 )      1.5           (15.4 )     (42.5 )
Total non-operating income (expense)                                                            (4.3 )      (4.3 )
Income (loss) before income taxes and
equity in earnings of unconsolidated
affiliates                                     (21.7 )       2.1     (9.0 )      1.5           (19.7 )     (46.8 )
Provision (benefit) for income taxes                                                           (19.2 )     (19.2 )
Equity in (income) loss of unconsolidated
affiliates                                       2.5                  0.2       (0.1 )                       2.6

Income (loss) from continuing operations     $ (24.2 )   $   2.1   $ (9.2 )   $  1.6     $      (0.5 )   $ (30.2 )

Reconciliation of loss from continuing
operations to EBITDA from continuing
operations
Income (loss) from continuing operations     $ (24.2 )   $   2.1   $ (9.2 )   $  1.6     $      (0.5 )   $ (30.2 )
Income tax expense                                -           -        -          -            (19.2 )     (19.2 )
Interest expense, net of capitalized
interest                                          -           -        -          -             11.8        11.8
Depreciation and amortization                    7.2         4.7      3.0        3.2             1.0        19.1

EBITDA from continuing operations            $ (17.0 )   $   6.8   $ (6.2 )   $  4.8     $      (6.9 )   $ (18.5 )

Quarter Ended March 31, 2008
Sales                                        $ 159.0     $ 107.1   $ 60.5     $ 22.8     $        -      $ 349.4

Depreciation and amortization                   14.1         5.8      3.9        1.4             1.4        26.6
Cost of sales and selling and
administative                                  201.7       101.0     64.4       23.0            22.8       412.9
(Gain) loss on sale or impairment of long
lived assets                                                                                    (0.4 )      (0.4 )
Other operating credits and charges, net                                                        (4.0 )      (4.0 )

Total operating costs                          215.8       106.8     68.3       24.4            19.8       435.1

Loss from operations                           (56.8 )       0.3     (7.8 )     (1.6 )         (19.8 )     (85.7 )
Total non-operating income (expense)                                                            10.2        10.2
Income (loss) before income taxes and
equity in earnings of unconsolidated
affiliates                                     (56.8 )       0.3     (7.8 )     (1.6 )          (9.6 )     (75.5 )
Provision (benefit) for income taxes                                                           (35.9 )     (35.9 )
Equity in (income) loss of unconsolidated
affiliates                                       5.3                  0.3        0.7                         6.3

Income (loss) from continuing operations     $ (62.1 )   $   0.3   $ (8.1 )   $ (2.3 )   $      26.3     $ (45.9 )

Reconciliation of loss from continuing
operations to EBITDA from continuing
operations
Income (loss) from continuing operations     $ (62.1 )   $   0.3   $ (8.1 )   $ (2.3 )   $      26.3     $ (45.9 )
Income tax expense                                                                             (35.9 )     (35.9 )
Interest expense, net of capitalized
interest                                                                                        11.2        11.2
Depreciation and amortization                   14.1         5.8      3.9        1.4             1.4        26.6

EBITDA from continuing operations            $ (48.0 )   $   6.1   $ (4.2 )   $ (0.9 )   $       3.0     $ (44.0 )

(Dollar amounts in millions, except per share amounts)

Our net loss for the first quarter of 2009 was $30.4 million, or $0.30 per diluted share, on sales of $204.6 million, compared to a net loss for the first quarter of 2008 of $46.4 million, or $0.45 per diluted share, on sales of $349.4 million. For the first quarter of 2009, loss from continuing operations was $30.2 million, or $0.29 per diluted share, compared to a loss from continuing operations of $45.9 million, or $0.44 per diluted share, for the first quarter of 2008.

Our results of operations for each of our segments are discussed below as well as for the "other" category, which comprises products that are not individually significant.

OSB

Our OSB segment manufactures and distributes commodity and value-added OSB
structural panels.

Segment sales, losses, depreciation, amortization and cost of timber harvested
and EBITDA from continuing operations for this segment are as follows:



                                                                 Quarter Ended March 31,
                                                              2009         2008        Change
Net sales                                                   $   72.3      $ 159.0         (55 %)
Operating losses                                            $  (24.2 )    $ (62.1 )        61 %
Depreciation, amortization and cost of timber harvested     $    7.2      $  14.1          49 %
EBITDA from continuing operations                           $  (17.0 )    $ (48.0 )        65 %

Percent changes in average sales prices and unit shipments for the quarter ended March 31, 2009 compared to the quarter ended March 31, 2008 are as follows:

                                      Quarter Ended March 31,
                                         2009 versus 2008
                                     Average Net        Unit
                                    Selling Price     Shipments
                    Commodity OSB              14 %         (59 %)

OSB prices increased for the first quarter of 2009 as compared to the corresponding periods of 2008. The weakened price as compared to cycle average pricing is due to dramatically lower demand for housing. The increase in selling price favorably impacted net sales and operating losses by approximately $8 million for the quarter as compared to the corresponding period of 2008. As compared to the corresponding period of 2008, the decline in sales volume was primarily due dramatically reduced housing starts. To balance supply and demand, we indefinitely curtailed four of our twelve OSB mills as well as other production curtailments at our other mills.

Compared to the first quarter of 2008, the primary factors, along with the increased sales prices, for decreased operating losses were reductions on operating costs due to reduced sales volumes, lower prices on petroleum based products used in manufacturing and a decrease in our Canadian dollar denominated manufacturing costs. The Canadian dollar has weakened significantly since the first quarter 2008, which causes our Canadian production costs stated in U.S. dollars to decrease.

SIDING

Our siding segment produces and markets wood-based siding and related accessories and interior hardboard products, together with commodity OSB products from one mill.

                                                                 Quarter Ended March 31,
                                                                2009        2008      Change
Net sales                                                     $   73.8    $  107.1       (31 %)
Operating profits                                                  2.1         0.3       600 %
Depreciation, amortization and cost of timber harvested            4.7         5.8        19 %
EBITDA from continuing operations                                  6.8         6.1        11 %

Sales in this segment by product line are as follows:

                                                          Quarter Ended March 31,
                                                         2009        2008     Change
 SmartSide Siding                                      $   51.5    $   70.6      (27 %)
 Commodity OSB                                              7.1         9.3      (24 %)
 Canexel siding and other hardboard related products       15.2        27.2      (44 %)

 Total                                                 $   73.8    $  107.1      (31 %)

Percent changes in average sales prices and unit shipments for the quarter ended March 31, 2009 compared to the quarter ended March 31, 2008 are as follows:

                                                        Quarter Ended March 31,
                                                            2009 versus 2008
                                                       Average Net         Unit
                                                      Selling Price      Shipments
SmartSide Siding                                                  2 %          (29 %)
Commodity OSB                                                    16 %          (34 %)
Canexel siding and other hardboard related products             (18 %)         (31 %)

For the first quarter of 2009 compared to the corresponding period in 2008, sales volumes declined significantly in both our SmartSide and Canexel siding lines due to dramatically reduced housing starts in both the US and Canada. Sales prices in our SmartSide siding product line for the quarter ended March 31, 2009 as compared to the corresponding periods of 2008 changed due to product mix with specific product prices remaining generally constant. In our Canexel product line, sales prices decreased in the first quarter as compared to the corresponding period of last year due to the impact of the weakening Canadian dollar as a majority of these sales are made in Canada. . . .