6-K 1 cover.htm Filed by Filing Services Canada Inc.  403-717-3898

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


Form 6-K


REPORT OF FOREIGN ISSUER PURSUANT TO RULES 13a-15 AND 15d-16 UNDER THE SECURITIES EXCHANGE ACT OF 1934


For the month of October, 2004


Commission File Number: 001-14568


IPSCO INC.

(Exact name of registrant as specified in its charter)


P.O. Box 1670, Regina, Saskatchewan, Canada, S4P 3C7

 (Address of principal executive offices)


Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.


Form 20-F ____

Form 40-F   x   



Indicated by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101 (b) (1). _____


Note:  Regulation S-T Rule 101 (b) (1) only permits the submission in paper of a Form 6-K if submitted solely to provide an attached annual report to security holders.


Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101 (b) (7): _____


Note:  Regulation S-T Rule 101 (b) (7) only permits the submission in paper of a Form 6-K if submitted to furnish a report or other document that the registrant foreign private issuer must furnish and make public under the laws of the jurisdiction in which the registrant is incorporated, domiciled or legally organized (the registrant's "home country"), or under the rules of the home country exchange on which the registrant's securities are traded, as long as the report or other document is not a press release, is not required to be and has not been distributed to the registrant's security holder, and, if discussing a material event, has already been the subject of a Form 6-K submission or other Commission filing on EDGAR.  


Indicated by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2 (b) under the Securities Exchange Act of 1934.


Yes

[   ]

No

[ x ]


If "Yes" is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2 (b):  82-_____.

 

 

Exhibit Index

 

Exhibit #

Description

Page #'s

I

News Release - IPSCO Announces Cash Dividends

1

II

Consolidated Statement of Operations (unaudited); Consolidated Statements of Cash Flows (unaudited); Consolidated Statements of Financial Position (unaudited); Notes to Consolidated Interim Financial Statements (unaudited); Tons shipped (unaudited); Non-GAAP Financial Measures (unaudited).

1-6

 

 


SIGNATURE


Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


IPSCO Inc.

Date: October 29, 2004


By: s/George Valentine

_______________________

George Valentine

Vice President, General Counsel

and Corporate Secretary


 

 

 

EXHIBIT I

 

 

 

[pr1002.jpg]                                                                                                                                                                     News Release

 

 

For Release October 29, 2004, 6:00 am EDST


IPSCO REPORTS CONTINUED STRONG EARNINGS IN THIRD QUARTER

RESULTS ARE REPORTED IN U.S. DOLLARS


[Lisle, Illinois] [October 29, 2004] -- IPSCO Inc. (NYSE/TSX: IPS) today announced quarterly earnings attributable to common shareholders of $144.5 million, or $2.76 per diluted share for the quarter ending September 30, 2004. This is a new record for the Company. The quarter results include a $20.8 million, or $0.39 per diluted share, reduction of a tax valuation allowance. These results compare to a net loss of $0.04 per diluted share in the third quarter of 2003 and net earnings of $1.22 per diluted share in the second quarter of 2004.


Net income attributable to common shareholders was $242.2 million for the first nine months of 2004, or $4.49 per diluted share, including the previously mentioned tax valuation allowance adjustment. This compares to a net loss of $5.2 million, or $0.11 per diluted share, for the first nine months of 2003.


Sales for the quarter set a new record at $641.9 million, up $306.9 million or 92% over the same period last year. Price, volume and mix all contributed to this growth. Year over year third quarter cost of production increased markedly due to the cost of scrap, which was up over 70%. The impact of increased scrap costs on gross margin this year, however, was effectively neutralized through a scrap surcharge. Steel mill product sales of $411.3 million were 121% higher than the third quarter of 2003 and tubular product sales of $230.6 million were 55% higher. Third quarter sales were up $93.6 million, or 17%, over the second quarter of 2004. Year to date sales totaled $1.7 billion, an increase of 83% over the first nine months of 2003.  


"IPSCO's strong operating results are being driven by demand in North America for plate steel and for oil and gas tubular products. In recent quarters, demand for steel mill production has exceeded capacity. This appears to be an industry-wide reality. IPSCO has just finalized the allocation of its steel production for the fourth quarter and expects that its operating results in the fourth quarter will exceed those of the third. Additionally, IPSCO has recently increased plate prices and will shortly allocate its capacity for the first quarter of 2005," said David Sutherland, the Company's President and Chief Executive Officer. "Although it is difficult to project too far into the future, the significant increase in order backlog at many of our major original equipment manufacturer customers, coupled with strength in oil and gas, suggests that these robust market conditions will continue beyond the first quarter of 2005."


1






Given the strong cash flow experienced by the Company in its current quarter and the near term positive outlook, IPSCO expects its cash position to exceed debt by the end of 2005. IPSCO is currently involved in a disciplined process to evaluate cash uses, including capital investment opportunities, debt retirement, share repurchase or dividend increases. The recently announced decisions to increase the common share dividend and to redeem the subordinated debt are initial outcomes of this process. IPSCO has no plans to build new steel mills in North America given the current relative balance of supply and demand. However, the Company will continue to round out the capacity opportunities inherent in the existing mills and also to investigate value-added downstream opportunities and other means of increasing shareholder value including further dividend increases.


IPSCO has scheduled the live webcast of its third quarter 2004 results conference call at 10:00 AM EDT on Friday, October 29, 2004. During the call IPSCO President and CEO, David Sutherland and Senior Vice President and CFO, Vicki Avril will discuss IPSCO Inc.'s third quarter results.


Persons wishing to listen to the webcast may access it through the Company's web site at http://www.ipsco.com. The conference call, including the question and answer portion, will also be archived on IPSCO's web site for three months.

 

For further information on IPSCO, please visit the Company's web site.


This news release contains forward-looking information with respect to IPSCO's operations and beliefs. Actual results may differ from these forward-looking statements due to numerous factors, including, but not limited to, weather conditions affecting the oil patch; drilling rig availability; demand for oil and gas; supply, demand and price for scrap metal and other raw materials; supply, demand and price for electricity and natural gas; demand and prices for products produced by IPSCO; general economic conditions and changes in financial markets. These and other factors are outlined in IPSCO's regulatory filings with the Canadian securities regulators (at www.sedar.com) and the Securities and Exchange Commission, including those in IPSCO's Annual Report for 2003, its MD&A, particularly as discussed under the heading "Business Risks and Uncertainties," its Annual Information Form, and its Form 40-F.

Company Contact:
Vicki Avril
Senior Vice President and Chief Financial Officer
Tel. 630-810-4769
Release # 04-41


#  #  #


2

CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) 

Exhibit II - Page 1

  

 (thousands of United States Dollars except for share, per share and ton data)

  
     

For the Three Months Ended 

     For the Nine Months Ended  
      September 30     September 30     June 30     September 30     September 30  
      2004     2003     2004     2004     2003  
            (restated)                 (restated)  
Plate and Coil Tons Produced (thousands)   826.7     772.6     813.6     2,431.7     2,200.8  
      Finished Tons Shipped (thousands)     844.1     817.3     884.2     2,665.4     2,240.3  
                                 
                                 

Sales

   $ 641,863   $ 334,974   $ 548,275   $ 1,673,046   $ 913,053  
Cost of sales                                
      Manufacturing and raw material     403,874     293,615     394,374     1,182,515     800,970  
      Amortization of capital assets     19,224     15,007     20,188     57,933     44,818  
      423,098     308,622     414,562     1,240,448     845,788  
Gross income   218,765     26,352     133,713     432,598     67,265  
Selling, research and administration   14,942     14,642     15,210     45,898     40,699  
Operating income   203,823     11,710     118,503     386,700     26,566  
Other expenses (income):                              
       Interest on long-term debt   8,692     9,210     8,640     26,680     21,234  
       Net interest income   (693)     (370)     (406)     (1,797)     (744)  
       Other   -     (677)     -     -     (677)  
       Foreign exchange gain   (5,959)     (1,013)     (396)     (6,189)     (5,712)  
Income Before Income Taxes   201,783     4,560     110,665     368,006     12,465  
Income Tax Expense   55,864     3,192     42,051     119,026     8,722  
Net Income   145,919     1,368     68,614     248,980     3,743  
Dividends on Preferred Shares, including part VI.I tax   -     1,598     786     2,461     4,631  
Interest on Subordinated Notes, net of income tax   1,442     1,443     1,442     4,327     4,329  
Net Income (Loss) Attributable to Common Shareholders $ 144,477   $ (1,673)   $ 66,386   $ 242,192   $ (5,217)  
      Earnings (Loss) Per Common Share - Basic $ 2.99   $ (0.04)   $ 1.38   $ 5.04   $ (0.11)  
  - Diluted $ 2.76   $ (0.04)   $ 1.22   $ 4.49   $ (0.11)  

Denominator for Basic Earnings per Common Share (thousands)

 48,364     47,668     47,965     48,065     47,667  
Denominator for Diluted Earnings per Common Share (thousands)   52,801     47,668     56,274     55,413     47,667  
                                 
                                 
                                 
                                 
                                 
                                 

 CONSOLIDATED STATEMENTS OF RETAINED EARNINGS (unaudited)

  

 (thousands of United States Dollars) 

  
      For the Three Months Ended      For the Nine Months Ended  
      September 30     September 30     June 30     September 30     September 30  
      2004     2003     2004     2004     2003  
Retained Earnings at Beginning of Period, as previously reported $ 596,309   $ 486,238   $ 531,694   $ 487,924   $ 494,599  
Cumulative effect of change in accounting policy   -     11,464     -     14,250     10,027  
Retained Earnings at Beginning of Period, as restated   596,309     497,702     531,694     502,174     504,626  
Net Income   145,919     1,368     68,614     248,980     3,743  
Dividends on Preferred Shares, including part VI.I tax   -     (1,598)     (786)     (2,461)     (4,631)  
Interest on Subordinated Notes, net of income tax   (1,442)     (1,443)     (1,442)     (4,327)     (4,329)  
Dividends on Common Shares   (1,894)     (1,754)     (1,771)     (5,474)     (5,134)  
      Retained Earnings at End of Period   $ 738,892   $ 494,275   $ 596,309   $ 738,892   $ 494,275  

CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) 

     Exhibit II - Page 2  

 (thousands of United States Dollars)

  
   For the Three Months Ended     For the Nine Months Ended  
  September 30   September 30    June 30     September 30     September 30  
   2004   2003   2004     2004     2003  
        (restated)                 (restated)  
            Cash Derived From (Applied To)                              
            Operating Activities                              
            Working capital provided by operations                              
            Net income $ 145,919   $ 1,368   $ 68,614   $ 248,980   $ 3,743  
            Amortization of capital assets   19,224     15,007     20,188     57,933     44,818  
            Amortization of deferred charges   312     344     309     953     883  
            Deferred pension expense   (144)     41     (1,771)     (1,087)     1,136  
            Future income taxes   12,760     7,079     32,523     57,209     9,816  
    178,071     23,839     119,863     363,988     60,396  
            Changes in working capital                              
            Accounts receivable, less allowances   (23,030)     (15,554)     (24,817)     (99,357)     (14,039)  
            Income taxes recoverable   26,235     (1,375)     3,544     33,054     (8,043)  
            Inventories   (72,399)     11,166     (12,599)     (89,790)     5,439  
            Other   78     460     220     116     826  
            Accounts payable and accrued charges   18,054     12,789     (7,766)     35,483     30,461  
    (51,062)     7,486     (41,418)     (120,494)     14,644  
    127,009     31,325     78,445     243,494     75,040  
            Financing Activities                              
            Common share dividends   (1,894)     (1,754)     (1,771)     (5,474)     (5,134)  
            Common shares issued pursuant to share option plan   7,821     137     3,469     11,843     137  
            Preferred share dividends   -     (1,479)     (1,498)     (3,053)     (4,327)  
            Retirement of preferred shares   -     -     (108,996)     (108,996)     -  
            Subordinated notes interest   (4,250)     (4,250)     -     (8,500)     (8,500)  
            Issue of long-term debt   -     -     -     -     264,600  
            Repayment of long-term debt   -     -     (34,286)     (34,286)     (225,586)  
    1,677     (7,346)     (143,082)     (148,466)     21,190  
            Investing Activities                              
            Expenditures for capital assets   (8,716)     (2,556)     (4,559)     (21,892)     (10,193)  
            Change in mortgage receivable   (278)     -     1,717     (4,412)     -  
            Proceeds on sale of assets held for sale   -     1,022     -     -     2,054  
    (8,994)     (1,534)     (2,842)     (26,304)     (8,139)  
            Effect of exchange rate changes on cash and cash equivalents   (2,590)     (69)     (2,946)     (308)     (1,944)  
            Increase (decrease) in Cash and Cash Equivalents   117,102     22,376     (70,425)     68,416     86,147  
            Cash and Cash Equivalents at Beginning of Period   82,881     86,630     153,306     131,567     22,859  
            Cash and Cash Equivalents at End of Period $ 199,983   $ 109,006   $ 82,881   $ 199,983   $ 109,006  

 

 
 CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (unaudited) 

Exhibit II -Page 3

  

 (thousands of United States Dollars) 

  
    September 30     September 30     December 31  
    2004     2003     2003  
          (restated)     (restated)  
Current Assets                  
   Cash and cash equivalents $ 199,983   $ 109,006   $ 131,567  
   Accounts receivable, less allowances   279,792     171,587     177,925  
   Recoverable income taxes   -     15,215     33,054  
   Inventories   380,033     266,710     286,159  
   Future income taxes   42,752     18,391     17,764  
   Other   2,812     2,198     2,833  
    905,372     583,107     649,302  
Non-Current Assets                  
   Capital and other   1,105,989     1,134,212     1,132,371  
   Future income taxes   89,004     150,820     149,430  
    1,194,993     1,285,032     1,281,801  
Total Assets $ 2,100,365   $ 1,868,139   $ 1,931,103  
                   
                   
Current Liabilities                  
   Accounts payable and accrued charges $ 198,643   $ 150,450   $ 163,895  
   Current portion of long-term debt   14,286     34,286     34,286  
    212,929     184,736     198,181  
Long-Term Liabilities                  
   Long-term debt   389,123     398,130     401,244  
   Future income taxes   227,404     165,020     182,864  
    616,527     563,150     584,108  
Shareholders' Equity                  
   Preferred shares   -     98,654     98,695  
   Common shares   366,600     351,569     354,095  
   Subordinated notes   102,125     102,125     104,250  
   Retained earnings   738,892     494,275     502,174  
   Cumulative translation adjustment   63,292     73,630     89,600  
    1,270,909     1,120,253     1,148,814  
Total Liabilities and Shareholders' Equity $ 2,100,365   $ 1,868,139   $ 1,931,103  

 

 

NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS (unaudited)

Exhibit II - Page 4

(thousands of United States Dollars)

1.
  		 The accompanying unaudited consolidated interim financial statements have been prepared in accordance with Canadian generally accepted accounting principles and should be read in conjunction with the consolidated financial statements included in IPSCO Inc.'s (the "Company") Annual Report for the year ended December 31, 2003. This consolidated financial information reflects all adjustments (consisting of normal recurring accruals) which are, in the opinion of management, necessary for fair presentation of the consolidated financial statements for the periods shown. The results of operations of any interim period are not necessarily indicative of the results that may be expected for a full fiscal year.

Effective January 1, 2004, the Company adopted the provisions of the Canadian Institute of Chartered Accountants Handbook Section 3063 "Impairment of Long-lived Assets", Section 3110 "Asset Retirement Obligations" and Section 3475 "Disposal of Long-lived Assets and Discontinued Operations". Adoption of these new accounting standards did not have a significant effect on the Company's financial position or results of operations as of September 30, 2004 or for the three or nine months ended September 30, 2004.

 
2.
  		 Effective April 1, 2004, the Company changed its method of accounting for the costs of major overhauls and repairs. Under the new method the cost of major overhauls and repairs which are not capitalized are expensed as incurred. Previously the non-capital estimated cost of such overhauls and repairs was accrued on a straight-line basis between the major overhauls and repairs with actual costs charged to the accrual as incurred. The Company believes the new method more appropriately recognizes such costs in the period incurred.

The accounting change has been applied retroactively with restatement of prior periods. The impact of the change on financial position as of September 30 and December 31, 2003 is as follows:

 
    September 30     December 31  
    2003     2003  
   

Increase (decrease)

  
   Recoverable income taxes $ (4,703)   $ (3,699)  
   Future income taxes - current asset   (4,740)     (5,212)  
   Accounts payable and accrued charges   (22,440)     (25,056)  
   Future income taxes - long-term liability   673     1,221  
   Retained earnings   11,813     14,250  
   Cumulative translation adjustment   511     674  
             
   The impact on net income and earnings per share in previously reported periods is as follows:            
    For the Three     For the Nine  
    Months Ended     Months Ended  
    September 30     September 30  
    2003     2003  
   Net loss attributable to common shareholders, as previously reported $ (2,022)   $ (7,003)  
   Adjustment   349     1,786  
   Net loss attributable to common shareholders, as restated $ (1,673)   $ (5,217)  
             
             
   Loss Per Common Share - Basic, as previously reported $ (0.04)   $ (0.15)  
   Adjustment   -     0.04  
   Loss Per Common Share - Basic, as restated $ (0.04)   $ (0.11)  
             
             
   Loss Per Common Share - Diluted, as previously reported   (0.04)     (0.15)  
   Adjustment   -     0.04  
   Loss Per Common Share - Diluted, as restated $ (0.04)   $ (0.11)  
3.
  		 Effective January 1, 2004, the Company changed the estimated useful life of certain major machinery and equipment from 25 to 20 years. This change has been applied prospectively and the impact for the three months and nine months ended September 30, 2004 was to increase amortization expense by approximately $3.8 million and $11.3 million ($.06 and $.16 per basic share or $.06 and $.14 per diluted share), respectively.
4.
  		 During the quarter ended September 30, 2004, the Company reduced its estimated annual effective income tax rate to 32.3% from the 38% utilized in the first half of 2004. The rate change is principally the result of reduction of the valuation allowance that had been provided on United States net operating losses in prior periods. Due to the Company's strong earnings performance in 2004, the United States net operating loss carryforwards are being realized and the valuation allowance is being reduced. The change in the effective rate reduced income tax expense by approximately $20.8 million and increased per share earnings ($.43 per basic share and $.39 per diluted share) for the three months ended September 30, 2004, including $9.4 million ($.20 per basic share and $.17 per diluted share) representing the catch-up effect for the first six months of 2004. On a per share basis, the change in effective rate increased earnings by $.43 per basic share and $.37 per diluted share for the nine months ended September 30, 2004.

During the quarter ended June 30, 2003, the Company increased its annual estimated effective income tax rate to 70% due to a decision not to recognize tax benefits on projected 2003 operating losses in the United States until they were realized at a future date.

 
5. Pension cost attributable to the Company's pension plans is as follows:

 

   

For the Three Months Ended 

     For the Nine Months Ended  
    September 30     September 30     June 30     September 30     September 30  
    2004     2003     2004     2004     2003  
Defined benefit plans $ 2,386   $ 2,088   $ 2,183   $ 7,015   $ 6,215  
Defined contribution plans   913     846     910     2,707     2,395  
  $ 3,299   $ 2,934   $ 3,093   $ 9,722   $ 8,610  

 

6.
  		 Under the terms of the Company's agreement for sale and leaseback of certain of the Montpelier Steelworks production equipment, the Company has guaranteed the residual value of the equipment at the end of the 15 year lease term in 2015 to be $37.5 million.

 

 
7.
  		 The Company has restricted shares and performance units which vest at the end of one to three years based on continued employment or continued employment and achievement of certain Company performance objectives. Restricted shares are entitled to dividends declared on common shares during the vesting period and, upon vesting, performance units are entitled to an amount equal to dividends declared during the vesting period. The fair value of the grants is being amortized to compensation expense over the vesting period.
Compensation expense of $366, $127 and $121 has been recorded in the three month periods ended September 30 and June 30, 2004, and September 30, 2003. Compensation expense of $659 and $121 has been recorded in the nine month periods ended September 30, 2004 and 2003, respectively.

Exhibit II - Page 5

The following table summarizes information on share capital and related matters at September 30, 2004:

 

  Outstanding   Vested  
Common shares 48,833,963      
Common shares - year-to-date weighted average 48,064,968      
Common share stock options 2,124,282   2,112,614  
Restricted shares 181,504   -  
Performance units 133,135   -  

The Company issued 530,035, 224,684 and 3,000 common shares in the quarters ended September 30, 2004, June 30, 2004 and September 30, 2003, respectively, as a result of option exercises. In addition, the Company issued 84,847, 15,740 and 86,917 shares of restricted stock in the same respective quarters.

 

During the quarter ended June 30, 2004, the Company redeemed all outstanding preferred shares at their face value.

 
8.
  		 The Company is organized and managed as a single business segment, being steel products, and the Company is viewed as a single operating segment by the chief operating decision maker for the purposes of resource allocation and assessing performance.

Financial information on the Company's geographic areas follows. Sales are allocated to the country in which the third party customer receives the product.

 
   

For the Three Months Ended

  For the Nine Months Ended  
    September 30     September 30     June 30     September 30     September 30  
    2004     2003     2004     2004     2003  
Sales                              
   Canada $ 199,105   $ 127,412   $ 128,519   $ 536,059   $ 345,993  
   United States   442,758     207,562     419,756     1,136,987     567,060  
  $ 641,863   $ 334,974   $ 548,275   $ 1,673,046   $ 913,053  
                               
                               
              September 30     September 30     December 31  
             

 2004

    

2003

     2003  
Capital Assets                              
   Canada             $ 206,547   $ 200,244   $ 200,854  
   United States               871,586     917,890     908,564  
              $ 1,078,133   $ 1,118,134   $ 1,109,418  
                               
                               
    For the Three Months Ended       For the Nine Months Ended  
    September 30     September 30     June 30     September 30     September 30  
    2004     2003     2004     2004     2003  
Sales information by product group is as follows:                              
   Steel mill products $ 411,331   $ 186,195   $ 349,604   $ 1,030,047   $ 527,663  
   Tubular products   230,532     148,779     198,671     642,999     385,390  
  $ 641,863   $ 334,974   $ 548,275   $ 1,673,046   $ 913,053  
9.
  		 The Company's pro forma disclosure of net income and earnings per share using the Black-Scholes option pricing model for determining the compensation expense related to employee stock options follows. For purposes of the pro forma disclosures the estimated fair value of the options is amortized over the options' vesting period. The following pro forma information is based on restated results, as described in note 2.
   

For the Three Months Ended 

    

For the Nine Months Ended

  
    September 30     September 30     June 30     September 30     September 30  
    2004     2003     2004     2004     2003  
                               
                               
Pro forma net income $ 145,916   $ 1,348   $ 68,612   $ 248,971   $ 3,558  
                               
                               
Pro forma net income (loss) attributable                              
   to common shareholders $ 144,474   $ (1,693)   $ 66,384   $ 242,183   $ (5,402)  
                               
                               
Pro forma earnings (loss) per common share:                              
   Basic $ 2.99   $ (0.04)   $ 1.38   $ 5.04   $ (0.11)  
   Diluted $ 2.76   $ (0.04)   $ 1.22   $ 4.49   $ (0.11)  

10. Certain prior period amounts have been reclassified to conform with the current presentation.

 TONS SHIPPED (unaudited)

          

Exhibit II - Page 6

  

 (thousands)
 

For the Three Months Ended 

  

For the Nine Months Ended

  
  September 30   September 30   June 30   September 30   September 30  
  2004   2003   2004   2004   2003  
   Discrete Plate and Coil 453.0   411.2   458.8   1,359.8   1,124.3  
   Cut Plate 133.7   143.6   158.8   448.7   428.1  
   Total Steel Mill Products 586.7   554.8   617.6   1,808.5   1,552.4  
   Energy Tubulars 148.5   169.0   117.7   479.6   417.7  
   Large Diameter Tubulars 46.9   29.5   71.9   156.9   87.2  
   Non-Energy Tubulars 62.0   64.0   77.0   220.4   183.0  
   Total Tubular Products 257.4   262.5   266.6   856.9   687.9  
   Total Shipments 844.1   817.3   884.2   2,665.4   2,240.3  

 

NON-GAAP FINANCIAL MEASURES (unaudited)

(thousands of United States Dollars except for per ton data)

EBITDA is defined as earnings before interest expense, income taxes and amortization. EBITDA does not represent, and should not be considered as an alternative to net income or cash flows from operating activities, each as determined in accordance with GAAP. Moreover, EBITDA does not necessarily indicate whether cash flow activities will be sufficient for items such as working capital or debt service or to react to industry changes or changes in the economy in general. We believe that EBITDA and ratios based on EBITDA are measures commonly used to evaluate a company's performance and its performance relative to its financial obligations. Because our method for calculating EBITDA may differ from other companies' methods, the EBITDA measures presented by us may not be comparable to similarly titled measures reported by other companies. Therefore, in evaluating EBITDA data, investors should consider, among other factors: the non-GAAP nature of EBITDA data; the GAAP financial statement amounts; actual cash flows and results of operations; the actual availability of funds for debt service, capital expenditures and working capital; and the comparability of our EBITDA data to similarly titled measures reported by other companies.

Operating income per ton is defined as operating income divided by finished tons shipped. We believe that operating income per ton is a commonly used measure of performance, however, our method of calculation may differ from other companies' methods.

   For the Three Months Ended      For the Nine Months Ended  
  September 30     September 30     June 30     September 30     September 30  
  2004     2003     2004     2004     2003  
                               
                               
The following is a reconciliation of cash derived from (applied to) operating activities to EBITDA (Canadian and U.S. GAAP):  
                               
                               
   Cash derived from (applied to) operating activities $ 127,009   $ 31,326   $ 78,445   $ 243,494   $ 75,040  
   Changes in working capital   51,062     (7,487)     41,418     120,494     (14,644)  
   Current income tax expense (benefit)   43,104     (3,887)     9,528     61,817     (1,094)  
   Interest expense, net   7,999     8,840     8,234     24,883     20,490  
   Other   (168)     (385)     1,462     134     (2,019)  
   EBITDA (Canadian GAAP)   229,006     28,407     139,087     450,822     77,773  
   US GAAP adjustments relating to:                              
      Sale and leaseback   3,471     3,471     3,471     10,413     10,413  
      Natural gas hedge   (259)     (366)     112     (474)     (634)  
   EBITDA (US GAAP) $ 232,218   $ 31,512   $ 142,670   $ 460,761   $ 87,552  
                               
                               
Operating Income Per Ton $ 241   $ 14   $ 134   $ 145   $ 12  
Annualized Return on Common Shareholders' Equity   53%     -1%     27%     31%     -1%