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, 2013 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 quarter and nine months of 2014 and 2013 are summarized in the following table:



	Quarter Ended September 30,						Nine Months Ended September 30,
Dollar amounts in millions	2014			2013			2014			2013
Beginning balance	$	24.3		$	21.0		$	29.3		$	21.4
Accrued to expense	3.2			2.4			3.5			6.8
Foreign currency translation	(0.8		)	—			(0.7		)	—
Payments made	(3.0		)	(3.8		)	(8.4		)	(8.6		)
Total warranty reserves	23.7			19.6			23.7			19.6
Current portion of warranty reserves	(12.0		)	(12.0		)	(12.0		)	(12.0		)
Long-term portion of warranty reserves	$	11.7		$	7.6		$	11.7		$	7.6

During the quarter and nine months ended September 30, 2014, LP increased the warranty reserves associated with discontinued composite decking products by $3.0 million. LP continues to monitor warranty and other claims associated with these products and believes as of September 30, 2014 that the reserves associated with these matters are adequate. However, it is possible that additional charges may be required in the future. See Note 19 for further discussion.

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, which was recorded in Other Operating Credits and Charges, Net. 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, 2014 that the reserves associated with these matters are adequate. However, it is possible that additional charges may be required in the future.

LP believes that the warranty reserve balances as of September 30, 2014 are adequate to cover future warranty payments. However, it is possible that additional charges may be required.

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 Consolidated Balance Sheets.