GUARANTEES AND INDEMNIFICATIONS

LP is a party to contracts in which LP agrees to indemnify third parties for certain liabilities that arise out of or relate to the subject matter of the contract. In some cases, this indemnity extends to liabilities arising out of the negligence of the indemnified parties, but usually excludes any liabilities caused by gross negligence or willful misconduct of the indemnified parties. LP cannot estimate the potential amount of future payments under these agreements until events arise that would trigger the liability. See Note 21 of the Notes to the financial statements included in LP’s Annual Report on Form 10-K for the year ended December 31, 2012 for further discussion of LP’s guarantees and indemnifications.

LP provides warranties on the sale of most of its products and records an accrual for estimated future claims. Such accruals are based upon historical experience and management’s estimate of the level of future claims. The activity in warranty reserves for the first nine months of 2013 and 2012 are summarized in the following table:



	Quarter Ended September 30,						Nine Months Ended September 30,
Dollar amounts in millions	2013			2012			2013			2012
Beginning balance	$	21.0		$	26.5		$	21.4		$	30.3
Accrued to expense	0.4			0.4			0.7			0.9
Adjusted to other operating credits and charges	2.0			1.0			6.1			1.0
Payments made	(3.8		)	(4.5		)	(8.6		)	(8.8		)
Total warranty reserves	19.6			23.4			19.6			23.4
Current portion of warranty reserves	(12.0		)	(12.0		)	(12.0		)	(12.0		)
Long-term portion of warranty reserves	$	7.6		$	11.4		$	7.6		$	11.4

LP increased the warranty reserves related to CanExel siding products by $2.0 million and $6.1 million for the third quarter and the first nine months of 2013. The additional reserves reflect revised estimates of future claim payments based upon an increase in Canexel warranty claims related to a specific geographic location and for a specific time period. LP continues to monitor warranty and other claims associated with these products and believes as of September 30, 2013 that the reserves associated with these matters are adequate. However, it is possible that additional charges may be required in the future.

The current portion of the warranty reserve is included in the caption “Accounts payable and accrued liabilities” and the long-term portion is included in the caption “Other long-term liabilities” on LP’s Condensed Consolidated Balance Sheets.