**United StatesSecurities and Exchange Commission**

**Washington,D.C. 20549**

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**FORM 10-Q**

**x**                              QuarterlyReport Pursuant to Section 13 or 15(d) of the Securities ExchangeAct of 1934

**or**

**o**                                 TransitionReport Pursuant to Section 13 or 15(d) of the Securities ExchangeAct of 1934

**Forthe transition period from             to            **

**CommissionFile Number:             **

**IPSCO Inc.**

(Exact name of registrantas specified in its charter)

**CANADA**

(State or otherjurisdiction of incorporation or organization)

**98-0077354**

(I.R.S. EmployerIdentification No.)

**650 Warrenville Road,Suite 500, Lisle, Illinois 60532Telephone: (630)-810-4800**

(Address and telephonenumber of principal executive offices)

Indicate by check markwhether the registrant (1) has filed all reports required to be filed by Section 13or 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 suchreports), and (2) has been subject to such filing requirements for thepast 90 days.

x Yes   o No

Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated filer,or a non-accelerated filer. See definition of “accelerated filer and largeaccelerated filer” in Rule 12b-2 of the Exchange Act.

| Large accelerated filer x | Accelerated filer o | Non-accelerated filer o |
|--------------------------------|--------------------------|------------------------------|

 

Indicate by check markwhether the registrant is a shell company (as defined in Rule 12b-2of the Exchange Act).

o Yes   x No

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCYPROCEEDINGS DURING THE PRECEEDING FIVE YEARS:

Indicate by check markwhether the registrant has filed all documents and reports to be filed bySections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequentto the distribution of securities under a plan confirmed by a court.

o Yes   o No

Thenumber of shares of common stock outstanding as of July 31, 2006 is 47,185,923.

 

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**IPSCOInc.Form 10-Q, June 30, 2006Table of Contents**
| Part I   Financial  Information |   | 2                                                                                                                                                             |   |
|------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| Item  1                                        |   | Financial  Statements                                                                                                                                         |   | 2 |   |
|                                           |   | Consolidated Statements of Income and Comprehensive  Income for the three- and six-month periods ended June 30, 2006 and  June 30, 2005 (unaudited) |   | 2 |   |
|                                           |   | Consolidated Statements of Retained Earnings for the  three- and six-month periods ended June 30, 2006 and June 30, 2005  (unaudited)               |   | 2 |   |
|                                           |   | Consolidated Statements of Cash Flows for the three- and  six-month periods ended June 30, 2006 and June 30, 2005 (unaudited)                       |   | 3 |   |
|                                           |   | Consolidated Balance Sheets as of June 30, 2006  (unaudited) and December 31, 2005                                                                  |   | 4 |   |
|                                           |   | Notes to Consolidated Interim Financial Statements  (unaudited)                                                                                               |   | 5 |   |
| Item 2                                         |   | Management’s Discussion and Analysis of Financial  Condition and Results of Operations                                                                   |   | 23 |   |
| Item 3                                         |   | Quantitative and Qualitative Disclosures About Market  Risk                                                                                                   |   | 26 |   |
| Item 4                                         |   | Controls and Procedures                                                                                                                                       |   | 27 |   |
| Part II   Other  Information    |   | 28                                                                                                                                                            |   |
| Item  1                                        |   | Legal  Proceedings                                                                                                                                            |   | 28 |   |
| Item 1A                                        |   | Risk Factors                                                                                                                                                  |   | 28 |   |
| Item 2                                         |   | Unregistered Sales of Equity Securities and Use of  Proceeds                                                                                                  |   | 28 |   |
| Item 3                                         |   | Defaults Upon Senior Securities                                                                                                                               |   | 28 |   |
| Item 4                                         |   | Submission of Matters to a Vote of Security Holders                                                                                                           |   | 28 |   |
| Item  5                                        |   | Other  Information                                                                                                                                            |   | 29 |   |
| Item 6                                         |   | Exhibits                                                                                                                                                      |   | 29 |   |
| Signatures                                     |   | 30                                                                                                                                                            |   |

 

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**PART I—FINANCIAL INFORMATION**

**Item 1.**                        FinancialStatements.

**IPSCOInc.CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (unaudited)**(thousandsof United States Dollars except for per share and ton data)

| ** **                                                    | ** **    | **For the Three Months Ended** | ** ** | **For the Six Months Ended** | ** ** |
|---------------------------------------------------------------|---------------|----------------------------------------------------|------------|--------------------------------------------------|------------|
| ** **                                                    | ** **    | **June 30**                                   | ** ** | **June 30**                                 | ** ** | **June 30** | ** ** | **June 30** | ** ** |
| ** **                                                    | ** **    | **2006**                                           | ** ** | **2005**                                         | ** ** | **2006** | ** ** | **2005** | ** ** |
| Plate and Coil  Tons Produced (thousands)                     |          | 952.5                                              |       | 857.7                                            |       | 1,848.1 |   | 1,675.2 |   |
| Finished Tons Shipped (thousands)                             |          | 1,001.0                                            |       | 803.5                                            |       | 2,006.4 |   | 1,659.3 |   |
|                                                          |          |                                               |       |                                             |       |   |   |   |   |
| Sales                                                         |          | $                                                  | 893,558    |                                             | $          | 687,674 |   | $ | 1,796,454 |   | $ | 1,454,412 |   |
| Cost of sales                                                 |          | 632,007                                            |       | 457,321                                          |       | 1,255,436 |   | 956,472 |   |
| Gross income                                                  |          | 261,551                                            |       | 230,353                                          |       | 541,018 |   | 497,940 |   |
| Selling, general  and administration                          |          | 18,694                                             |       | 16,141                                           |       | 51,080 |   | 34,478 |   |
| Operating income                                              |          | 242,857                                            |       | 214,212                                          |       | 489,938 |   | 463,462 |   |
| Other expenses (income):                                      |          |                                               |       |                                             |       |   |   |   |   |
| Interest on long-term debt                                    |          | 5,708                                              |       | 9,675                                            |       | 11,541 |   | 20,403 |   |
| Net interest income                                           |          | (8,208                                             | )          | (3,240                                           | )          | (15,223 | ) | (6,023 | ) |
| Loss on early extinguishment of debt                          |          | —                                             |       | 10,249                                           |       | — |   | 10,249 |   |
| Foreign exchange gain                                         |          | (5,083                                             | )          | (759                                             | )          | (3,759 | ) | (1,153 | ) |
| Other                                                         |          | (106                                               | )          | 80                                               |       | (218 | ) | (15 | ) |
| Income Before  Income Taxes                                   |          | 250,546                                            |       | 198,207                                          |       | 497,597 |   | 440,001 |   |
| Income Tax  Expense                                           |          | 94,178                                             |       | 71,354                                           |       | 190,528 |   | 158,380 |   |
| Net Income                                                    |          | 156,368                                            |       | 126,853                                          |       | 307,069 |   | 281,621 |   |
| Cumulative translation adjustment                             |          | 29,234                                             |       | (3,681                                           | )          | 30,460 |   | (1,722 | ) |
| Fair value of derivatives, net of tax                         |          | (2,286                                             | )          | (956                                             | )          | (7,684 | ) | 3,085 |   |
| Comprehensive  income                                         |          | $                                                  | 183,316    |                                             | $          | 122,216 |   | $ | 329,845 |   | $ | 282,984 |   |
| Earnings per  Common Share                                    | —Basic   |                                               | $          | 3.28                                             |       | $ | 2.60 |   | $ | 6.43 |   | $ | 5.71 |   |
|                                                          | —Diluted |                                               | $          | 3.25                                             |       | $ | 2.57 |   | $ | 6.36 |   | $ | 5.64 |   |
| Dividends Declared per  Common Share  (Canadian dollars) |          | $                                                  | 0.20       |                                             | $          | 0.14 |   | $ | 0.38 |   | $ | 0.26 |   |

 

**IPSCOInc.CONSOLIDATED STATEMENTS OF RETAINED EARNINGS (unaudited)**(thousandsof United States Dollars)

| ** **                                | ** ** | **For the Three Months Ended** | ** ** | **For the Six Months Ended** | ** ** |
|-------------------------------------------|------------|----------------------------------------------------|------------|--------------------------------------------------|------------|
| ** **                                | ** ** | **June 30**                                   | ** ** | **June 30**                                 | ** ** | **June 30** | ** ** | **June 30** | ** ** |
| ** **                                | ** ** | **2006**                                           | ** ** | **2005**                                         | ** ** | **2006** | ** ** | **2005** | ** ** |
| Retained Earnings  at Beginning of Period |       | $                                                  | 1,484,910  |                                             | $          | 1,021,299 |   | $ | 1,341,659 |   | $ | 884,859 |   |
| Net Income                                |       | 156,368                                            |       | 126,853                                          |       | 307,069 |   | 281,621 |   |
| Common Share Repurchase                   |       | (75,096                                            | )          | (83,698                                          | )          | (75,096 | ) | (97,068 | ) |
| Dividends on Common Shares                |       | (8,488                                             | )          | (5,496                                           | )          | (15,938 | ) | (10,454 | ) |
| Retained Earnings at End  of Period       |       | $                                                  | 1,557,694  |                                             | $          | 1,058,958 |   | $ | 1,557,694 |   | $ | 1,058,958 |   |

 

2

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**IPSCOInc.CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)**(thousands of United States Dollars)

| ** **                                                                         | ** ** | **For the Three Months Ended** | ** ** | **For the Six Months Ended** | ** ** |
|------------------------------------------------------------------------------------|------------|----------------------------------------------------|------------|--------------------------------------------------|------------|
| ** **                                                                         | ** ** | **June 30**                                   | ** ** | **June 30**                                 | ** ** | **June 30** | ** ** | **June 30** | ** ** |
| ** **                                                                         | ** ** | **2006**                                           | ** ** | **2005**                                         | ** ** | **2006** | ** ** | **2005** | ** ** |
| Operating Activities                                                               |       |                                               |       |                                             |       |   |   |   |   |
| Net income                                                                         |       | $                                                  | 156,368    |                                             | $          | 126,853 |   | $ | 307,069 |   | $ | 281,621 |   |
| Adjustments to reconcile  net income to net cash flows   from operating activities |       |                                               |       |                                             |       |   |   |   |   |
| Loss on early extinguishment of debt                                               |       | —                                             |       | 10,249                                           |       | — |   | 10,249 |   |
| Unrealized foreign exchange gain                                                   |       | —                                             |       | (1,939                                           | )          | — |   | (1,939 | ) |
| Stock-based compensation                                                           |       | 411                                                |       | 523                                              |       | 1,648 |   | 981 |   |
| Depreciation of capital assets                                                     |       | 13,212                                             |       | 20,288                                           |       | 33,295 |   | 40,090 |   |
| Amortization of deferred charges                                                   |       | 538                                                |       | 505                                              |       | 999 |   | 875 |   |
| Deferred income taxes                                                              |       | (6,937                                             | )          | 4,833                                            |       | (6,133 | ) | 44,422 |   |
| Changes in operating  assets and liabilities                                       |       |                                               |       |                                             |       |   |   |   |   |
| Accounts receivable, less allowances                                               |       | 11,596                                             |       | 59,922                                           |       | (1,129 | ) | 85,448 |   |
| Inventories                                                                        |       | (88,958                                            | )          | (60,921                                          | )          | (132,314 | ) | (54,505 | ) |
| Other                                                                              |       | 1,299                                              |       | 1,562                                            |       | 2,734 |   | 4,142 |   |
| Accounts payable and accrued charges                                               |       | (3,227                                             | )          | (29,780                                          | )          | (30,935 | ) | (68,274 | ) |
| Change in deferred pension liability                                               |       | (265                                               | )          | (747                                             | )          | (443 | ) | 345 |   |
| Income taxes payable                                                               |       | (66,802                                            | )          | 48,484                                           |       | (37,450 | ) | (12,366 | ) |
| Net cash provided  by operations                                                   |       | 17,235                                             |       | 179,832                                          |       | 137,341 |   | 331,089 |   |
| Investing  Activities                                                              |       |                                               |       |                                             |       |   |   |   |   |
| Expenditures for capital assets                                                    |       | (11,811                                            | )          | (8,813                                           | )          | (42,410 | ) | (22,171 | ) |
| Proceeds from mortgage receivable, net                                             |       | 735                                                |       | 370                                              |       | 971 |   | 1,827 |   |
| Investments                                                                        |       | 330                                                |       | 71                                               |       | — |   | (99 | ) |
| Net cash used for  investing activities                                            |       | (10,746                                            | )          | (8,372                                           | )          | (41,439 | ) | (20,443 | ) |
| Financing  Activities                                                              |       |                                               |       |                                             |       |   |   |   |   |
| Common share dividends                                                             |       | (8,488                                             | )          | (5,496                                           | )          | (15,938 | ) | (10,454 | ) |
| Common shares issued pursuant to share   option plan                               |       | 5,036                                              |       | 5,494                                            |       | 5,483 |   | 16,423 |   |
| Common share repurchase                                                            |       | (85,500                                            | )          | (104,896                                         | )          | (85,500 | ) | (121,157 | ) |
| Repayment of long-term debt                                                        |       | —                                             |       | (123,248                                         | )          | (4,991 | ) | (127,837 | ) |
| Net cash used for  financing activities                                            |       | (88,952                                            | )          | (228,146                                         | )          | (100,946 | ) | (243,025 | ) |
| Effect of  exchange rate changes on cash and cash   equivalents                    |       | 21,131                                             |       | (935                                             | )          | 23,972 |   | 1,506 |   |
| Increase  (decrease) in Cash and Cash Equivalents                                  |       | (61,332                                            | )          | (57,621                                          | )          | 18,928 |   | 69,127 |   |
| Cash and Cash  Equivalents at Beginning of   Period                                |       | 663,324                                            |       | 481,522                                          |       | 583,064 |   | 354,774 |   |
| Cash and Cash  Equivalents at End of Period                                        |       | $                                                  | 601,992    |                                             | $          | 423,901 |   | $ | 601,992 |   | $ | 423,901 |   |

 

3

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**IPSCO Inc.CONSOLIDATED BALANCE SHEETS (unaudited)**(thousandsof United States Dollars)

| ** **                                       | ** ** | **June 30** | ** ** | **December 31** | ** ** |
|--------------------------------------------------|------------|------------------|------------|----------------------|------------|
| ** **                                       | ** ** | **2006**         | ** ** | **2005**             | ** ** |
| Current Assets                                   |       |             |       |                 |       |
| Cash and cash equivalents                        |       | $                | 601,992    |                 | $          | 583,064 |   |
| Accounts receivable, less allowances             |       | 377,223          |       | 388,943              |       |
| Inventories                                      |       | 661,215          |       | 506,237              |       |
| Deferred income taxes                            |       | 36,332           |       | 30,227               |       |
| Other                                            |       | 6,087            |       | 8,615                |       |
|                                             |       | 1,682,849        |       | 1,517,086            |       |
| Non-Current Assets                               |       |             |       |                 |       |
| Capital assets                                   |       | 1,063,720        |       | 1,056,186            |       |
| Other                                            |       | 59,974           |       | 65,747               |       |
|                                             |       | 1,123,694        |       | 1,121,933            |       |
| Total Assets                                     |       | $                | 2,806,543  |                 | $          | 2,639,019 |   |
| Current  Liabilities                             |       |             |       |                 |       |
| Accounts payable and accrued charges             |       | $                | 280,571    |                 | $          | 303,589 |   |
| Income and other taxes payable                   |       | 4,284            |       | 41,073               |       |
| Current portion of long-term debt                |       | 21,015           |       | 4,114                |       |
|                                             |       | 305,870          |       | 348,776              |       |
| Long-Term Liabilities                            |       |             |       |                 |       |
| Long-term debt                                   |       | 291,162          |       | 313,053              |       |
| Other                                            |       | 44,538           |       | 44,584               |       |
| Deferred income taxes                            |       | 188,890          |       | 191,973              |       |
|                                             |       | 524,590          |       | 549,610              |       |
| Shareholders’ Equity                        |       |             |       |                 |       |
| Common shares                                    |       | 414,110          |       | 419,272              |       |
| Contributed surplus                              |       | 17,349           |       | 15,548               |       |
| Retained earnings                                |       | 1,557,694        |       | 1,341,659            |       |
| Accumulated other comprehensive loss             |       | (13,070          | )          | (35,846              | )          |
|                                             |       | 1,976,083        |       | 1,740,633            |       |
| Total Liabilities and  Shareholders’ Equity |       | $                | 2,806,543  |                 | $          | 2,639,019 |   |

 

4

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**IPSCO Inc.NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS (unaudited)**(thousands of United States Dollars)

1.                 Effectivewith the fourth quarter of 2005, the Company prepares its financial statementsin accordance with the generally accepted accounting principles (GAAP) of theUnited States. A reconciliation of the differences between GAAP in Canada andthe United States as they apply to the Company is provided in note 9.

These unaudited consolidated financial statementsshould be read in the context of the consolidated financial statements andnotes thereto filed with the Securities and Exchange Commission in the Company’s2005 Annual Report on Form 10-K. In the opinion of the Company, theinformation furnished herein reflects all known accruals and adjustmentsnecessary for a fair statement of the results for the periods reported herein.All such adjustments are of a normal recurring nature. These interim resultsare not necessarily indicative of expected results for the year.

In July 2006, the Financial Accounting StandardsBoard (FASB) issued FASB Interpretation No. 48, *Accounting for Uncertainty in**Income Taxes-an Interpretation of FASB Statement No. 109*(FIN 48), which clarifies the accounting for uncertainty in tax positions. Thisinterpretation requires that the Company recognize in their financialstatements, the impact of a tax position, if that position is more likely thannot of being sustained on audit, based on the technical merits of the position.This interpretation is effective for fiscal years beginning after December 15,2006, with the cumulative effect of the change in accounting principle recordedas an adjustment to opening retained earnings. The Company has not yetdetermined the impact this interpretation will have on the financial statements.

2.                 Inventories

| ** **      | ** ** | **June 30** | ** ** | **December 31** | ** ** |
|-----------------|------------|------------------|------------|----------------------|------------|
| ** **      | ** ** | **2006**         | ** ** | **2005**             | ** ** |
| Finished goods  |       | $                | 201,807    |                 |       | $ | 148,650 |   |   |
| Work-in-process |       | 250,921          |       |                 | 190,860    |   |   |
| Raw materials   |       | 117,296          |       |                 | 99,706     |   |   |
| Supplies        |       | 91,191           |       |                 | 67,021     |   |   |
|            |       | $                | 661,215    |                 |       | $ | 506,237 |   |   |

 

3.                 Pension cost attributableto the Company’s pension plans is as follows:

| ** **                                           | ** ** | **For the Three Months Ended** | ** ** | **For the Six Months Ended** | ** ** |
|------------------------------------------------------|------------|----------------------------------------------------|------------|--------------------------------------------------|------------|
| ** **                                           | ** ** | **June 30**                                   | ** ** | **June 30**                                 | ** ** | **June 30** | ** ** | **June 30** | ** ** |
| ** **                                           | ** ** | **2006**                                           | ** ** | **2005**                                         | ** ** | **2006** | ** ** | **2005** | ** ** |
| Defined benefit plans                                |       |                                               |       |                                             |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Service cost                                         |       |                                               | $          | 2,118                                            |       |   |   | $ | 1,232 |   |   |   | $ | 4,177 |   |   |   | $ | 2,837 |   |   |
| Interest cost                                        |       |                                               | 3,257      |                                             |       |   | 2,360 |   |   |   | 6,423 |   |   |   | 5,434 |   |   |
| Expected return on plan assets                       |       |                                               | (3,293     | )                                                |       |   | (2,206 | ) |   |   | (6,494 | ) |   |   | (5,079 | ) |   |
| Amortization of gains, losses and past service costs |       |                                               | 1,597      |                                             |       |   | 723 |   |   |   | 3,149 |   |   |   | 1,664 |   |   |
|                                                 |       |                                               | 3,679      |                                             |       |   | 2,109 |   |   |   | 7,255 |   |   |   | 4,856 |   |   |
| Defined  contribution plans                          |       |                                               | 1,135      |                                             |       |   | 947 |   |   |   | 2,785 |   |   |   | 2,241 |   |   |
|                                                 |       |                                               | $          | 4,814                                            |       |   |   | $ | 3,056 |   |   |   | $ | 10,040 |   |   |   | $ | 7,097 |   |   |

 

5

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4.                 Basicearnings per share is calculated by dividing net income available to commonshareholders by the weighted average number of common shares outstanding.Diluted earnings per share is calculated by dividing net income by the weightedaverage shares outstanding plus share equivalents that would arise from theexercise of share options, deferred share units, restricted shares andperformance units. The per share amounts disclosed are based on the following:

| ** **                                              | ** ** | **For the Three Months Ended** | ** ** | **For the Six Months Ended** | ** ** |
|---------------------------------------------------------|------------|----------------------------------------------------|------------|--------------------------------------------------|------------|
| ** **                                              | ** ** | **June 30**                                   | ** ** | **June 30**                                 | ** ** | **June 30** | ** ** | **June 30** | ** ** |
| ** **                                              | ** ** | **2006**                                           | ** ** | **2005**                                         | ** ** | **2006** | ** ** | **2005** | ** ** |
| Numerator for  basic and diluted earnings per share     |       | $                                                  | 156,368    |                                             | $          | 126,853 |   | $ | 307,069 |   | $ | 281,621 |   |
|                                                    |       |                                               |       |                                             |       |   |   |   |   |
| Common shares  outstanding—January 1          |       | 48,051,619                                         |       | 49,737,180                                       |       | 48,051,619 |   | 49,737,180 |   |
| Non-vested  restricted shares                           |       | (210,003                                           | )          | (171,504                                         | )          | (210,003 | ) | (171,504 | ) |
| Weighted average  impact of shares issued (repurchased) |       | (212,150                                           | )          | (744,803                                         | )          | (100,798 | ) | (259,814 | ) |
| Denominator for  basic earnings per share               |       | 47,629,466                                         |       | 48,820,873                                       |       | 47,740,818 |   | 49,305,862 |   |
| Adjustment for  share options                           |       | 96,231                                             |       | 207,471                                          |       | 100,900 |   | 301,953 |   |
| Adjustment for deferred  share units                    |       | 118,257                                            |       | 108,865                                          |       | 117,418 |   | 107,161 |   |
| Adjustment for  restricted shares                       |       | 126,693                                            |       | 144,066                                          |       | 129,639 |   | 144,147 |   |
| Adjustment for  performance units                       |       | 181,991                                            |       | 108,628                                          |       | 181,802 |   | 104,532 |   |
| Denominator for diluted  earnings per share             |       | 48,152,638                                         |       | 49,389,903                                       |       | 48,270,577 |   | 49,963,655 |   |
|                                                         |            |                                                    |            |                                                  |            |  |  |  |  |  |  |  |  |

 

5.                 Effective January 1,2006, the Company adopted SFAS No. 123 (revised, Share-Based Payment (SFAS 123(R))using the modified prospective approach. Prior to the adoption of SFAS 123(R)the Company accounted for share based awards in accordance with FASB Statement No. 123,Accounting for Stock Based Compensation. Under the modified prospectiveapproach, SFAS 123(R) applies to new awards and to awards outstanding on January 1,2006 that are subsequently modified, repurchased or cancelled. Under themodified prospective approach, compensation cost recognized in the firstquarter 2006 includes compensation cost for all share based payments grantedprior to, but not yet vested as of January 1, 2006, based on thegrant-date fair value estimated in accordance with the original provisions of SFAS 123,and compensation cost for all share based payments granted subsequent to January 1,2006, based on the grant-date fair value estimated in accordance withprovisions of SFAS 123(R). The impact of adopting SFAS 123(R) was notmaterial to the financial statements.

The Company has a shareoption plan under which common shares are reserved for directors, officers andemployees. As of June 30, 2006 and June 30, 2005, shares available forfuture grants are 736,694 and 863,819, respectively. The restricted shares andperformance units vest at the end of three years based on continued employmentand achievement of certain Company performance objectives. Restricted sharesare entitled to dividends declared on common shares during the vesting periodand, upon vesting, performance units are entitled to an amount equal todividends declared during the vesting period. The fair value of the grants isbeing amortized to compensation expense over the vesting period. For thequarters ended June 30, 2006 and June 30, 2005 compensation expenseof $1,298 and $540 has been recorded, respectively. Compensation expense of$9,234 and $1,037 has been recorded in the six month periods ended June 30,2006 and June 30, 2005, respectively.

6

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*Share Options*

Thefollowing is the continuity of granted options outstanding with weightedaverage exercise price in Canadian dollars:

| ** **                      | ** ** | **For the Three Months Ended** | ** ** | **For the Three Months Ended** | ** ** |
|---------------------------------|------------|----------------------------------------------------|------------|----------------------------------------------------|------------|
| ** **                      | ** ** | **June 30, 2006**                        | ** ** | **June 30, 2005**                        | ** ** |
| ** **                      | ** ** | ** **                                         | ** ** | **Weighted**                                       | ** ** | ** ** | ** ** | **Weighted** | ** ** |
| ** **                      | ** ** | **Number of**                                 | ** ** | **Average**                                        | ** ** | **Number of** | ** ** | **Average** | ** ** |
| ** **                      | ** ** | **Shares**                                         | ** ** | **Exercise Price**                            | ** ** | **Shares** | ** ** | **Exercise Price** | ** ** |
| Balance at  beginning of period |       | 153,625                                            |       |                                               | 23.41      |   |   | 670,970 |   |   | 24.69 |   |   |
| Options exercised               |       | (3,000                                             | )          |                                               | 21.70      |   |   | (301,800 | ) |   | 22.71 |   |   |
| Balance at end of period        |       | 150,625                                            |       |                                               | 23.44      |   |   | 369,170 |   |   | 26.30 |   |   |

 

| ** **                      | ** ** | **For the Six Months Ended** | ** ** | **For the Six Months Ended** | ** ** |
|---------------------------------|------------|--------------------------------------------------|------------|--------------------------------------------------|------------|
| ** **                      | ** ** | **June 30, 2006**                      | ** ** | **June 30, 2005**                      | ** ** |
| ** **                      | ** ** | ** **                                       | ** ** | **Weighted**                                     | ** ** | ** ** | ** ** | **Weighted** | ** ** |
| ** **                      | ** ** | **Number of**                               | ** ** | **Average**                                      | ** ** | **Number of** | ** ** | **Average** | ** ** |
| ** **                      | ** ** | **Shares**                                       | ** ** | **Exercise Price**                          | ** ** | **Shares** | ** ** | **Exercise Price** | ** ** |
| Balance at  beginning of period |       | 175,025                                          |       |                                             | 23.50      |   |   | 1,205,065 |   |   | 24.90 |   |   |
| Options exercised               |       | (24,400                                          | )          |                                             | 23.86      |   |   | (835,895 | ) |   | 24.29 |   |   |
| Balance at end of period        |       | 150,625                                          |       |                                             | 23.44      |   |   | 369,170 |   |   | 26.30 |   |   |

 

The June 30, 2006 weighted average remaining contractuallife of the outstanding options is 4.6 years.

Intrinsic value for stockoptions is defined as the difference between the current market value and thegrant price. The total intrinsic value of the outstanding and exerciseableoptions at June 30, 2006 is CDN $12.6 million. The totalintrinsic value of options exercised during the quarters ended June 30,2006 and 2005 was CDN $0.3 million and CDN $11.7 million,respectively. The total intrinsic value of options exercised for the six monthsended June 30, 2006 and 2005 was CDN $2.1 million and CDN $31.5 million,respectively.

*Performance Units*

The following is the continuity of performance unitsoutstanding:

| ** **                                               | ** ** | **For the Three Months Ended** | ** ** | **For the Six Months Ended** | ** ** |
|----------------------------------------------------------|------------|----------------------------------------------------|------------|--------------------------------------------------|------------|
| ** **                                               | ** ** | **June 30**                                   | ** ** | **June 30**                                 | ** ** | **June 30** | ** ** | **June 30** | ** ** |
| ** **                                               | ** ** | **2006**                                           | ** ** | **2005**                                         | ** ** | **2006** | ** ** | **2005** | ** ** |
| Balance at  beginning of period                          |       |                                               | 242,941    |                                             |       |   | 133,985 |   |   |   | 242,766 |   |   |   | 133,985 |   |   |
| Performance units  granted                               |       |                                               | 9,600      |                                             |       |   | 12,000 |   |   |   | 10,400 |   |   |   | 12,000 |   |   |
| Performance units  converted to common shares on vesting |       |                                               | (46,865    | )                                                |       |   | — |   |   |   | (46,865 | ) |   |   | — |   |   |
| Performance units  paid in cash on vesting               |       |                                               | (17,930    | )                                                |       |   | — |   |   |   | (18,555 | ) |   |   | — |   |   |
| Balance at end of period                                 |       |                                               | 187,746    |                                             |       |   | 145,985 |   |   |   | 187,746 |   |   |   | 145,985 |   |   |

 

As of June 30, 2006 the weighted average grantdate fair value of the outstanding performance units is CDN $56.35.

The total fair value ofperformance units which vested during the three and six months ended June 30,2006 was $6.2 million.

7

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*Restricted Shares*

Thefollowing is the continuity of restricted shares outstanding:

| ** **                              | ** ** | **For the Three Months Ended** | ** ** | **For the Six Months Ended** | ** ** |
|-----------------------------------------|------------|----------------------------------------------------|------------|--------------------------------------------------|------------|
| ** **                              | ** ** | **June 30**                                   | ** ** | **June 30**                                 | ** ** | **June 30** | ** ** | **June 30** | ** ** |
| ** **                              | ** ** | **2006**                                           | ** ** | **2005**                                         | ** ** | **2006** | ** ** | **2005** | ** ** |
| Balance at  beginning and end of period |       |                                               | 210,003    |                                             |       |   | 171,504 |   |   |   | 210,003 |   |   |   | 171,504 |   |   |
|                                         |            |                                                    |            |                                                  |            |  |  |  |  |  |  |  |  |  |  |  |  |

 

The June 30, 2006 weighted average grant datefair value of the restricted shares is CDN $30.70.

At June 30, 2006, there was $14.1 million ofunrecognized compensation cost related to share-based payments which isexpected to to be recognized over the weighted-average vesting period of 2 years.

In March 2005, the Company filed a normal courseissuer bid which entitled the Company to acquire approximately 4.2 millionof its common shares between March 16, 2005 and March 15, 2006. Allpurchases were made on the open market at the market price at the time of thepurchase. All shares purchased under the bid were cancelled. During the quarterended June 30, 2005, 2,199,400 common shares were purchased for $104.8 million.

In May 2006, the Company filed a normal courseissuer bid which entitled the Company to acquire up to 4.7 million of itscommon shares between May 9, 2006 and May 8, 2007. All purchases weremade on the open market at the market price at the time of the purchase. Allshares purchased under the bid were cancelled. During the quarter ended June 30,2006, 934,700 common shares were purchased for $85.5 million.

6.                 During thequarter ended June 30, 2006, the Company decreased its annual effectiveincome tax rate from 39% to 38.3% as a result of tax law changes in Canada. Thechange in the effective rate reduced income tax expense for the three monthsended June 30, 2006 by $3.5 million ($0.07 per diluted share). The37.6% effective tax rate for the quarter ended June 30, 2006 as comparedto the 36% effective tax rate for the quarter ended June 30, 2005 reflectsthe Company’s full utilization of its net U.S. operating losses and continuedprofitability.

8

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7.                 TheCompany is organized and managed as a single business segment, being steelproducts, and the Company is viewed as a single operating segment by the chiefoperating decision maker for the purposes of resource allocation and assessingperformance. 

Financialinformation on the Company’s geographic areas follows. Sales are allocated tothe country in which the third party customer receives the product.

| ** **    | ** ** | **For the Three Months Ended** | ** ** | **For the Six Months Ended** | ** ** |
|---------------|------------|----------------------------------------------------|------------|--------------------------------------------------|------------|
| ** **    | ** ** | **June 30**                                   | ** ** | **June 30**                                 | ** ** | **June 30** | ** ** | **June 30** | ** ** |
| ** **    | ** ** | **2006**                                           | ** ** | **2005**                                         | ** ** | **2006** | ** ** | **2005** | ** ** |
| Sales         |       |                                               |       |                                             |       |   |   |   |   |
| Canada        |       | $                                                  | 219,585    |                                             | $          | 171,715 |   | $ | 560,418 |   | $ | 417,224 |   |
| United States |       | 673,973                                            |       | 515,959                                          |       | 1,236,036 |   | 1,037,188 |   |
|          |       | $                                                  | 893,558    |                                             | $          | 687,674 |   | $ | 1,796,454 |   | $ | 1,454,412 |   |

 

| ** **     | ** ** | **June 30** | ** ** | **December 31** | ** ** |
|----------------|------------|------------------|------------|----------------------|------------|
| ** **     | ** ** | **2006**         | ** ** | **2005**             | ** ** |
| Capital Assets | ** ** | ** **       | ** ** | ** **           | ** ** |
| Canada         |       | $                | 222,766    |                 | $          | 213,621 |   |
| United States  |       | 840,954          |       | 842,565              |       |
|           |       | $                | 1,063,720  |                 | $          | 1,056,186 |   |

 

| ** **                                         | ** ** | **For the Three Months Ended** | ** ** | **For the Six Months Ended** | ** ** |
|----------------------------------------------------|------------|----------------------------------------------------|------------|--------------------------------------------------|------------|
| ** **                                         | ** ** | **June 30**                                   | ** ** | **June 30**                                 | ** ** | **June 30** | ** ** | **June 30** | ** ** |
| ** **                                         | ** ** | **2006**                                           | ** ** | **2005**                                         | ** ** | **2006** | ** ** | **2005** | ** ** |
| Sales information  by product group is as follows: |       |                                               |       |                                             |       |   |   |   |   |
| Steel mill products                                |       | $                                                  | 552,855    |                                             | $          | 449,865 |   | $ | 1,057,068 |   | $ | 950,354 |   |
| Tubular products                                   |       | 340,703                                            |       | 237,809                                          |       | 739,386 |   | 504,058 |   |
|                                               |       | $                                                  | 893,558    |                                             | $          | 687,674 |   | $ | 1,796,454 |   | $ | 1,454,412 |   |

 

Tubular productsales volume in the first and second quarters can be negatively impacted byweather conditions in Western Canada.

8.                 ConsolidatingFinancial Statements

The following information presents the condensedconsolidating balance sheets as at June 30, 2006 and December 31,2005, and the condensed consolidating statements of income and cash flows forthe three- and six-months ended June 30, 2006 and 2005. The condensedconsolidating financial statements present the accounts of IPSCO Inc. (“Parent”),and its Guarantor and Non-Guarantor subsidiaries, as defined in the indenturedated as of June 18, 2003 to the IPSCO Inc. 83¤4%Senior Notes due 2013 (“the Notes”) which were issued on June 18, 2003.The Notes are fully and unconditionally guaranteed, on a joint and severalbasis, by the Guarantor subsidiaries. The Guarantor subsidiaries, all of whichare wholly-owned by IPSCO Inc., are IPSCO Saskatchewan Inc., IPSCORecycling Inc., IPSCO Enterprises Inc., IPSCO Minnesota Inc.,IPSCO Texas Inc., IPSCO Tubulars Inc., IPSCO Steel Inc., andIPSCO Steel (Alabama) Inc. Non-Guarantor subsidiaries are IPSCO Direct Inc.,Western Steel Limited, General Scrap Partnership, IPSCO Sales Inc., IPSCOConstruction Inc. and General Scrap Inc.

9

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IPSCO Inc.Condensed Consolidating Statements of IncomeThree Months Ended June 30, 2006(thousands of United States dollars)

| ** **                             | ** ** | ** ** | ** ** | **Guarantor**    | ** ** | **Non-Guarantor** | ** ** | ** **       | ** ** | **Consolidated** | ** ** |
|----------------------------------------|------------|------------|------------|------------------|------------|-------------------|------------|------------------|------------|------------------|------------|
| ** **                             | ** ** | **Parent** | ** ** | **Subsidiaries** | ** ** | **Subsidiaries**  | ** ** | **Eliminations** | ** ** | **Total**        | ** ** |
| Sales                                  |       | $          | 157,218    |             | $          | 813,636           |       | $                | 142,251    |             | $          | (219,547 | ) | $ | 893,558 |   |
| Cost of sales                          |       | 139,358    |       | 594,448          |       | 124,252           |       | (226,051         | )          | 632,007          |       |
| Gross income                           |       | 17,860     |       | 219,188          |       | 17,999            |       | 6,504            |       | 261,551          |       |
| Selling, general and administration    |       | (395       | )          | 19,093           |       | (4                | )          | —           |       | 18,694           |       |
| Operating income                       |       | 18,255     |       | 200,095          |       | 18,003            |       | 6,504            |       | 242,857          |       |
| Other expenses (income)                |       |       |       |             |       |              |       |             |       |             |       |
| Interest on long-term debt             |       | 4,024      |       | 2,680            |       | —            |       | (996             | )          | 5,708            |       |
| Other interest (income) expense,   net |       | (2,457     | )          | (5,216           | )          | (535              | )          | —           |       | (8,208           | )          |
| Foreign exchange loss (gain)           |       | (339       | )          | (4,681           | )          | (63               | )          | —           |       | (5,083           | )          |
| Intercompany interest/dividend         |       | 1,787      |       | (1,851           | )          | 64                |       | —           |       | —           |       |
| Equity income                          |       | (154,423   | )          | (9,823           | )          | —            |       | 164,140          |       | (106             | )          |
| Other (income) expense                 |       | (6,814     | )          | —           |       | —            |       | 6,814            |       | —           |       |
| Income (loss) before income taxes      |       | 176,477    |       | 218,986          |       | 18,537            |       | (163,454         | )          | 250,546          |       |
| Income taxes                           |       | 20,109     |       | 66,915           |       | 6,932             |       | 222              |       | 94,178           |       |
| NET INCOME (LOSS)                      |       | $          | 156,368    |             | $          | 152,071           |       | $                | 11,605     |             | $          | (163,676 | ) | $ | 156,368 |   |

 

IPSCO Inc.Condensed Consolidating Statements of IncomeSix Months Ended June 30, 2006(thousands of United States dollars)

| ** **                             | ** ** | ** ** | ** ** | **Guarantor**    | ** ** | **Non-Guarantor** | ** ** | ** **       | ** ** | **Consolidated** | ** ** |
|----------------------------------------|------------|------------|------------|------------------|------------|-------------------|------------|------------------|------------|------------------|------------|
| ** **                             | ** ** | **Parent** | ** ** | **Subsidiaries** | ** ** | **Subsidiaries**  | ** ** | **Eliminations** | ** ** | **Total**        | ** ** |
| Sales                                  |       | $          | 386,877    |             | $          | 1,612,018         |       | $                | 279,937    |             | $          | (482,378 | ) | $ | 1,796,454 |   |
| Cost of sales                          |       | 340,969    |       | 1,164,298        |       | 244,944           |       | (494,775         | )          | 1,255,436        |       |
| Gross income                           |       | 45,908     |       | 447,720          |       | 34,993            |       | 12,397           |       | 541,018          |       |
| Selling, general and administration    |       | 17,071     |       | 34,118           |       | (109              | )          | —           |       | 51,080           |       |
| Operating income                       |       | 28,837     |       | 413,602          |       | 35,102            |       | 12,397           |       | 489,938          |       |
| Other expenses (income)                |       |       |       |             |       |              |       |             |       |             |       |
| Interest on long-term debt             |       | 8,047      |       | 5,376            |       | —            |       | (1,882           | )          | 11,541           |       |
| Other interest (income) expense,   net |       | (3,682     | )          | (10,796          | )          | (745              | )          | —           |       | (15,223          | )          |
| Foreign exchange loss (gain)           |       | 754        |       | (4,468           | )          | (45               | )          | —           |       | (3,759           | )          |
| Intercompany interest/dividend         |       | 3,669      |       | (2,647           | )          | (130              | )          | (892             | )          | —           |       |
| Equity income                          |       | (302,523   | )          | (18,773          | )          | —            |       | 321,078          |       | (218             | )          |
| Other (income) expense                 |       | (13,389    | )          | (891             | )          | —            |       | 14,280           |       | —           |       |
| Income (loss) before income taxes      |       | 335,961    |       | 445,801          |       | 36,022            |       | (320,187         | )          | 497,597          |       |
| Income taxes                           |       | 28,892     |       | 147,816          |       | 13,475            |       | 345              |       | 190,528          |       |
| NET INCOME (LOSS)                      |       | $          | 307,069    |             | $          | 297,985           |       | $                | 22,547     |             | $          | (320,532 | ) | $ | 307,069 |   |

 

10

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IPSCO Inc.Condensed Consolidating Statements of IncomeThree Months Ended June 30, 2005(thousands of United States dollars)

| ** **                             | ** ** | ** ** | ** ** | **Guarantor**    | ** ** | **Non-Guarantor** | ** ** | ** **       | ** ** | **Consolidated** | ** ** |
|----------------------------------------|------------|------------|------------|------------------|------------|-------------------|------------|------------------|------------|------------------|------------|
| ** **                             | ** ** | **Parent** | ** ** | **Subsidiaries** | ** ** | **Subsidiaries**  | ** ** | **Eliminations** | ** ** | **Total**        | ** ** |
| Sales                                  |       | $          | 126,132    |             | $          | 688,431           |       | $                | 58,292     |             | $          | (185,181 | ) | $ | 687,674 |   |
| Cost of sales                          |       | 121,186    |       | 475,576          |       | 51,914            |       | (191,355         | )          | 457,321          |       |
| Gross income                           |       | 4,946      |       | 212,855          |       | 6,378             |       | 6,174            |       | 230,353          |       |
| Selling, general and administration    |       | 4,666      |       | 11,773           |       | 68                |       | (366             | )          | 16,141           |       |
| Operating income                       |       | 280        |       | 201,082          |       | 6,310             |       | 6,540            |       | 214,212          |       |
| Other expenses  (income)               |       |       |       |             |       |              |       |             |       |             |       |
| Interest on long-term debt             |       | 6,917      |       | 2,758            |       | —            |       | —           |       | 9,675            |       |
| Other interest (income) expense,   net |       | (160       | )          | (2,943           | )          | (137              | )          | —           |       | (3,240           | )          |
| Loss on early extinguishment of   debt |       | 10,249     |       | —           |       | —            |       | —           |       | 10,249           |       |
| Foreign exchange loss (gain)           |       | (5,563     | )          | 4,800            |       | 4                 |       | —           |       | (759             | )          |
| Intercompany interest/dividend         |       | (1,986     | )          | 1,719            |       | (561              | )          | 828              |       | —           |       |
| Equity income                          |       | (130,921   | )          | (3,786           | )          | —            |       | 134,787          |       | 80               |       |
| Other (income) expense                 |       | (5,068     | )          | (1,137           | )          | (7                | )          | 6,212            |       | —           |       |
| Income (loss) before income taxes      |       | 126,812    |       | 199,671          |       | 7,011             |       | (135,287         | )          | 198,207          |       |
| Income taxes                           |       | (41        | )          | 68,399           |       | 2,876             |       | 120              |       | 71,354           |       |
| NET INCOME (LOSS)                      |       | $          | 126,853    |             | $          | 131,272           |       | $                | 4,135      |             | $          | (135,407 | ) | $ | 126,853 |   |

 

IPSCO Inc.Condensed Consolidating Statements of IncomeSix Months Ended June 30, 2005(thousands of United States dollars)

| ** **                             | ** ** | ** ** | ** ** | **Guarantor**    | ** ** | **Non-Guarantor** | ** ** | ** **       | ** ** | **Consolidated** | ** ** |
|----------------------------------------|------------|------------|------------|------------------|------------|-------------------|------------|------------------|------------|------------------|------------|
| ** **                             | ** ** | **Parent** | ** ** | **Subsidiaries** | ** ** | **Subsidiaries**  | ** ** | **Eliminations** | ** ** | **Total**        | ** ** |
| Sales                                  |       | $          | 305,515    |             | $          | 1,414,615         |       | $                | 114,099    |             | $          | (379,817 | ) | $ | 1,454,412 |   |
| Cost of sales                          |       | 290,716    |       | 981,480          |       | 100,605           |       | (416,329         | )          | 956,472          |       |
| Gross income                           |       | 14,799     |       | 433,135          |       | 13,494            |       | 36,512           |       | 497,940          |       |
| Selling, general and administration    |       | 11,044     |       | 24,098           |       | 68                |       | (732             | )          | 34,478           |       |
| Operating income                       |       | 3,755      |       | 409,037          |       | 13,426            |       | 37,244           |       | 463,462          |       |
| Other expenses  (income)               |       |       |       |             |       |              |       |             |       |             |       |
| Interest on long-term debt             |       | 14,874     |       | 5,529            |       | —            |       | —           |       | 20,403           |       |
| Other interest (income) expense,   net |       | (388       | )          | (5,311           | )          | (324              | )          | —           |       | (6,023           | )          |
| Loss on early extinguishment of   debt |       | 10,249     |       | —           |       | —            |       | —           |       | 10,249           |       |
| Foreign exchange loss (gain)           |       | (7,946     | )          | 6,787            |       | 6                 |       | —           |       | (1,153           | )          |
| Intercompany interest/dividend         |       | (2,284     | )          | 3,837            |       | (1,553            | )          | —           |       | —           |       |
| Equity income                          |       | (284,184   | )          | (8,380           | )          | —            |       | 292,549          |       | (15              | )          |
| Other (income) expense                 |       | (10,043    | )          | (2,322           | )          | (13               | )          | 12,378           |       | —           |       |
| Income (loss) before income taxes      |       | 283,477    |       | 408,897          |       | 15,310            |       | (267,683         | )          | 440,001          |       |
| Income taxes                           |       | 1,856      |       | 141,149          |       | 6,120             |       | 9,255            |       | 158,380          |       |
| NET INCOME (LOSS)                      |       | $          | 281,621    |             | $          | 267,748           |       | $                | 9,190      |             | $          | (276,938 | ) | $ | 281,621 |   |

 

11

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IPSCO Inc.Condensed Consolidating Statements of Cash FlowsThree Months Ended June 30, 2006(thousands of United States dollars)

| ** **                                                    | ** ** | ** ** | ** ** | **Guarantor**    | ** ** | **Non-Guarantor** | ** ** | ** **       | ** ** | **Consolidated** | ** ** |
|---------------------------------------------------------------|------------|------------|------------|------------------|------------|-------------------|------------|------------------|------------|------------------|------------|
| ** **                                                    | ** ** | **Parent** | ** ** | **Subsidiaries** | ** ** | **Subsidiaries**  | ** ** | **Eliminations** | ** ** | **Total**        | ** ** |
| Operating  activities                                         |       |       |       |             |       |              |       |             |       |             |       |
| Net income (loss)                                             |       | $          | 156,368    |             | $          | 152,071           |       | $                | 11,605     |             | $          | (163,676 | ) | $ | 156,368 |   |
| Non-cash adjustments                                          |       | (141,712   | )          | (18,163          | )          | 2,515             |       | 164,584          |       | 7,224            |       |
| Change in operating assets and liabilities                    |       | (86,213    | )          | (88,027          | )          | 27,907            |       | (24              | )          | (146,357         | )          |
| Net cash provided by (used for) operating activities          |       | (71,557    | )          | 45,881           |       | 42,027            |       | 884              |       | 17,235           |       |
| Investing activities                                          |       |       |       |             |       |              |       |             |       |             |       |
| Expenditures for capital assets                               |       | (2,900     | )          | (10,556          | )          | 2,642             |       | (997             | )          | (11,811          | )          |
| Proceeds from mortgage receivable, net                        |       | —     |       | 971              |       | (236              | )          | —           |       | 735              |       |
| Other investing activities                                    |       | —     |       | 330              |       | —            |       | —           |       | 330              |       |
| Net cash provided by (used for) investing activities          |       | (2,900     | )          | (9,255           | )          | 2,406             |       | (997             | )          | (10,746          | )          |
| Financing activities                                          |       |       |       |             |       |              |       |             |       |             |       |
| Common share dividends                                        |       | (8,488     | )          | 13,992           |       | (13,992           | )          | —           |       | (8,488           | )          |
| Common shares issued pursuant to share option plan            |       | 5,036      |       | —           |       | —            |       | —           |       | 5,036            |       |
| Common share repurchase                                       |       | (85,500    | )          | —           |       | —            |       | —           |       | (85,500          | )          |
| Repayment of long-term debt                                   |       | —     |       | —           |       | —            |       | —           |       | —           |       |
| Net cash provided by (used for) financing activities          |       | (88,952    | )          | 13,992           |       | (13,992           | )          | —           |       | (88,952          | )          |
| Effect of exchange rate changes on cash and cash  equivalents |       | 7,173      |       | 14,896           |       | (1,051            | )          | 113              |       | 21,131           |       |
| INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS              |       | (156,236   | )          | 65,514           |       | 29,390            |       | —           |       | (61,332          | )          |
| CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD              |       | 269,459    |       | 372,604          |       | 21,261            |       | —           |       | 663,324          |       |
| CASH AND CASH  EQUIVALENTS AT END OF PERIOD                   |       | $          | 113,223    |             | $          | 438,118           |       | $                | 50,651     |             | $          | — |   | $ | 601,992 |   |

 

12

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IPSCO Inc.Condensed Consolidating Statements of Cash FlowsSix Months Ended June 30, 2006(thousands of United States dollars)

| ** **                                                    | ** ** | ** ** | ** ** | **Guarantor**    | ** ** | **Non-Guarantor** | ** ** | ** **       | ** ** | **Consolidated** | ** ** |
|---------------------------------------------------------------|------------|------------|------------|------------------|------------|-------------------|------------|------------------|------------|------------------|------------|
| ** **                                                    | ** ** | **Parent** | ** ** | **Subsidiaries** | ** ** | **Subsidiaries**  | ** ** | **Eliminations** | ** ** | **Total**        | ** ** |
| Operating  activities                                         |       |       |       |             |       |              |       |             |       |             |       |
| Net income (loss)                                             |       | $          | 307,069    |             | $          | 297,985           |       | $                | 22,547     |             | $          | (320,532 | ) | $ | 307,069 |   |
| Non-cash adjustments                                          |       | (283,057   | )          | (15,644          | )          | 6,868             |       | 321,642          |       | 29,809           |       |
| Change in operating assets and liabilities                    |       | 123,732    |       | (352,493         | )          | 28,488            |       | 736              |       | (199,537         | )          |
| Net cash provided by (used for) operating activities          |       | 147,744    |       | (70,152          | )          | 57,903            |       | 1,846            |       | 137,341          |       |
| Investing  activities                                         |       |       |       |             |       |              |       |             |       |             |       |
| Expenditures for capital assets                               |       | (5,855     | )          | (33,418          | )          | (1,255            | )          | (1,882           | )          | (42,410          | )          |
| Proceeds from mortgage receivable, net                        |       | —     |       | 971              |       | —            |       | —           |       | 971              |       |
| Net cash used for investing   activities                      |       | (5,855     | )          | (32,447          | )          | (1,255            | )          | (1,882           | )          | (41,439          | )          |
| Financing activities                                          |       |       |       |             |       |              |       |             |       |             |       |
| Common share dividends                                        |       | (15,938    | )          | 13,992           |       | (13,992           | )          | —           |       | (15,938          | )          |
| Common shares issued pursuant to share option plan            |       | 5,483      |       | —           |       | —            |       | —           |       | 5,483            |       |
| Common share repurchase                                       |       | (85,500    | )          | —           |       | —            |       | —           |       | (85,500          | )          |
| Repayment of long-term debt                                   |       | —     |       | (4,991           | )          | —            |       | —           |       | (4,991           | )          |
| Net cash provided by (used for) financing activities          |       | (95,955    | )          | 9,001            |       | (13,992           | )          | —           |       | (100,946         | )          |
| Effect of exchange rate changes on cash and cash  equivalents |       | 9,923      |       | 17,117           |       | (3,104            | )          | 36               |       | 23,972           |       |
| INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS              |       | 55,857     |       | (76,481          | )          | 39,552            |       | —           |       | 18,928           |       |
| CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD              |       | 57,366     |       | 514,599          |       | 11,099            |       | —           |       | 583,064          |       |
| CASH AND CASH  EQUIVALENTS AT END OF PERIOD                   |       | $          | 113,223    |             | $          | 438,118           |       | $                | 50,651     |             | $          | — |   | $ | 601,992 |   |

 

13

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IPSCO Inc.Condensed Consolidating Statements of Cash FlowsThree Months Ended June 30, 2005(thousands of United States dollars)

| ** **                                                    | ** ** | ** ** | ** ** | **Guarantor**    | ** ** | **Non-Guarantor** | ** ** | ** **       | ** ** | **Consolidated** | ** ** |
|---------------------------------------------------------------|------------|------------|------------|------------------|------------|-------------------|------------|------------------|------------|------------------|------------|
| ** **                                                    | ** ** | **Parent** | ** ** | **Subsidiaries** | ** ** | **Subsidiaries**  | ** ** | **Eliminations** | ** ** | **Total**        | ** ** |
| Operating  activities                                         |       |       |       |             |       |              |       |             |       |             |       |
| Net income (loss)                                             |       | $          | 126,853    |             | $          | 131,272           |       | $                | 4,135      |             | $          | (135,407 | ) | $ | 126,853 |   |
| Non-cash adjustments                                          |       | (136,364   | )          | 17,592           |       | 18,324            |       | 134,907          |       | 34,459           |       |
| Change in operating assets and liabilities                    |       | 194,228    |       | (171,492         | )          | (4,803            | )          | 587              |       | 18,520           |       |
| Net cash provided by (used for) operating activities          |       | 184,717    |       | (22,628          | )          | 17,656            |       | 87               |       | 179,832          |       |
| Investing activities                                          |       |       |       |             |       |              |       |             |       |             |       |
| Expenditures for capital assets                               |       | 5,441      |       | (15,113          | )          | 859               |       | —           |       | (8,813           | )          |
| Proceeds from mortgage receivable, net                        |       | —     |       | 326              |       | 44                |       | —           |       | 370              |       |
| Other investing activities                                    |       | —     |       | 71               |       | —            |       | —           |       | 71               |       |
| Net cash provided by (used for) investing activities          |       | 5,441      |       | (14,716          | )          | 903               |       | —           |       | (8,372           | )          |
| Financing activities                                          |       |       |       |             |       |              |       |             |       |             |       |
| Common share dividends                                        |       | (5,496     | )          | 12,429           |       | (12,429           | )          | —           |       | (5,496           | )          |
| Common shares issued pursuant to share option plan            |       | 5,494      |       | —           |       | —            |       | —           |       | 5,494            |       |
| Common share repurchase                                       |       | (104,896   | )          | —           |       | —            |       | —           |       | (104,896         | )          |
| Issue (repayment) of long-term debt                           |       | (123,248   | )          | —           |       | —            |       | —           |       | (123,248         | )          |
| Net cash provided by (used for) financing activities          |       | (228,146   | )          | 12,429           |       | (12,429           | )          | —           |       | (228,146         | )          |
| Effect of exchange rate changes on cash and cash  equivalents |       | 10,192     |       | 5,027            |       | (16,067           | )          | (87              | )          | (935             | )          |
| INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS              |       | (27,796    | )          | (19,888          | )          | (9,937            | )          | —           |       | (57,621          | )          |
| CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD              |       | 42,287     |       | 410,275          |       | 28,960            |       | —           |       | 481,522          |       |
| CASH AND CASH  EQUIVALENTS AT END OF PERIOD                   |       | $          | 14,491     |             | $          | 390,387           |       | $                | 19,023     |             | $          | — |   | $ | 423,901 |   |

 

14

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IPSCO Inc.Condensed Consolidating Statements of Cash FlowsSix Months Ended June 30, 2005(thousands of United States dollars)

| ** **                                                    | ** ** | ** ** | ** ** | **Guarantor**    | ** ** | **Non-Guarantor** | ** ** | ** **       | ** ** | **Consolidated** | ** ** |
|---------------------------------------------------------------|------------|------------|------------|------------------|------------|-------------------|------------|------------------|------------|------------------|------------|
| ** **                                                    | ** ** | **Parent** | ** ** | **Subsidiaries** | ** ** | **Subsidiaries**  | ** ** | **Eliminations** | ** ** | **Total**        | ** ** |
| Operating  activities                                         |       |       |       |             |       |              |       |             |       |             |       |
| Net income (loss)                                             |       | $          | 281,621    |             | $          | 267,748           |       | $                | 9,190      |             | $          | (276,938 | ) | $ | 281,621 |   |
| Non-cash adjustments                                          |       | (285,929   | )          | 60,223           |       | 18,581            |       | 301,803          |       | 94,678           |       |
| Change in operating assets and liabilities                    |       | 228,428    |       | (229,558         | )          | (20,635           | )          | (23,445          | )          | (45,210          | )          |
| Net cash provided by operating activities                     |       | 224,120    |       | 98,413           |       | 7,136             |       | 1,420            |       | 331,089          |       |
| Investing activities                                          |       |       |       |             |       |              |       |             |       |             |       |
| Expenditures for capital assets                               |       | (673       | )          | (20,978          | )          | (520              | )          | —           |       | (22,171          | )          |
| Proceeds from mortgage receivable, net                        |       | —     |       | 1,864            |       | (37               | )          | —           |       | 1,827            |       |
| Other investing activities                                    |       | —     |       | (99              | )          | —            |       | —           |       | (99              | )          |
| Net cash used for investing activities                        |       | (673       | )          | (19,213          | )          | (557              | )          | —           |       | (20,443          | )          |
| Financing activities                                          |       |       |       |             |       |              |       |             |       |             |       |
| Common share dividends                                        |       | (10,454    | )          | 12,429           |       | (12,429           | )          | —           |       | (10,454          | )          |
| Common shares issued pursuant to share option plan            |       | 16,423     |       | —           |       | —            |       | —           |       | 16,423           |       |
| Common share repurchase                                       |       | (121,157   | )          | —           |       | —            |       | —           |       | (121,157         | )          |
| Issue (repayment) of long-termdebt                            |       | (123,248   | )          | (4,589           | )          | —            |       | —           |       | (127,837         | )          |
| Net cash provided by (used for) financing activities          |       | (238,436   | )          | 7,840            |       | (12,429           | )          | —           |       | (243,025         | )          |
| Effect of exchange rate changes on cash and cash  equivalents |       | 15,203     |       | (1,438           | )          | (10,839           | )          | (1,420           | )          | 1,506            |       |
| INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS              |       | 214        |       | 85,602           |       | (16,689           | )          | —           |       | 69,127           |       |
| CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD              |       | 14,277     |       | 304,785          |       | 35,712            |       | —           |       | 354,774          |       |
| CASH AND CASH  EQUIVALENTS AT END OF PERIOD                   |       | $          | 14,491     |             | $          | 390,387           |       | $                | 19,023     |             | $          | — |   | $ | 423,901 |   |

 

15

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IPSCO Inc.Condensed Consolidating Balance SheetsAs at June 30, 2006(thousands of United States dollars)

| ** **                                       | ** ** | ** ** | ** ** | **Guarantor**    | ** ** | **Non-Guarantor** | ** ** | ** **       | ** ** | **Consolidated** | ** ** |
|--------------------------------------------------|------------|------------|------------|------------------|------------|-------------------|------------|------------------|------------|------------------|------------|
| ** **                                       | ** ** | **Parent** | ** ** | **Subsidiaries** | ** ** | **Subsidiaries**  | ** ** | **Eliminations** | ** ** | **Total**        | ** ** |
| CURRENT ASSETS                                   |       |       |       |             |       |              |       |             |       |             |       |
| Cash and cash equivalents                        |       | $          | 113,223    |             | $          | 438,118           |       | $                | 50,651     |             | $          | — |   | $ | 601,992 |   |
| Accounts receivable, less   allowances           |       | (32,417    | )          | 387,733          |       | 21,907            |       | —           |       | 377,223          |       |
| Inventories                                      |       | 224,648    |       | 438,145          |       | 13,604            |       | (15,182          | )          | 661,215          |       |
| Deferred income taxes                            |       | 27,043     |       | 5,100            |       | 4,189             |       | —           |       | 36,332           |       |
| Other                                            |       | 3,443      |       | 2,174            |       | 470               |       | —           |       | 6,087            |       |
|                                             |       | 335,940    |       | 1,271,270        |       | 90,821            |       | (15,182          | )          | 1,682,849        |       |
| NON-CURRENT ASSETS                               |       |       |       |             |       |              |       |             |       |             |       |
| Capital assets                                   |       | 138,225    |       | 895,149          |       | 26,347            |       | 3,999            |       | 1,063,720        |       |
| Other                                            |       | 1,800,338  |       | 88,025           |       | 1,566             |       | (1,829,955       | )          | 59,974           |       |
|                                             |       | 1,938,563  |       | 983,174          |       | 27,913            |       | (1,825,956       | )          | 1,123,694        |       |
| TOTAL ASSETS                                     |       | $          | 2,274,503  |             | $          | 2,254,444         |       | $                | 118,734    |             | $          | (1,841,138 | ) | $ | 2,806,543 |   |
|                                             |       |       |       |             |       |              |       |             |       |             |       |
| CURRENT  LIABILITIES                             |       |       |       |             |       |              |       |             |       |             |       |
| Accounts payable and accrued charges             |       | $          | 52,983     |             | $          | 220,742           |       | $                | 6,846      |             | $          | — |   | $ | 280,571 |   |
| Income and other taxes payable                   |       | (2,049     | )          | (7,095           | )          | 13,428            |       | —           |       | 4,284            |       |
| Current portion of long-term debt                |       | 14,715     |       | 6,300            |       | —            |       | —           |       | 21,015           |       |
|                                             |       | 65,649     |       | 219,947          |       | 20,274            |       | —           |       | 305,870          |       |
| LONG-TERM LIABILITIES                            |       |       |       |             |       |              |       |             |       |             |       |
| Long-term debt                                   |       | 153,854    |       | 137,308          |       | —            |       | —           |       | 291,162          |       |
| Other                                            |       | 16,947     |       | 27,591           |       | —            |       | —           |       | 44,538           |       |
| Deferred income taxes                            |       | 61,970     |       | 103,181          |       | 28,425            |       | (4,686           | )          | 188,890          |       |
|                                             |       | 232,771    |       | 268,080          |       | 28,425            |       | (4,686           | )          | 524,590          |       |
| SHAREHOLDERS’ EQUITY                        |       | 1,976,083  |       | 1,766,417        |       | 70,035            |       | (1,836,452       | )          | 1,976,083        |       |
|                                             |       |       |       |             |       |              |       |             |       |             |       |
| TOTAL LIABILITIES  AND SHAREHOLDERS’ EQUITY |       | $          | 2,274,503  |             | $          | 2,254,444         |       | $                | 118,734    |             | $          | (1,841,138 | ) | $ | 2,806,543 |   |

 

16

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IPSCO Inc.Condensed Consolidating Balance SheetsAs at December 31, 2005(thousands of United States dollars)

| ** **                                       | ** ** | ** ** | ** ** | **Guarantor**    | ** ** | **Non-Guarantor** | ** ** | ** **       | ** ** | **Consolidated** | ** ** |
|--------------------------------------------------|------------|------------|------------|------------------|------------|-------------------|------------|------------------|------------|------------------|------------|
| ** **                                       | ** ** | **Parent** | ** ** | **Subsidiaries** | ** ** | **Subsidiaries**  | ** ** | **Eliminations** | ** ** | **Total**        | ** ** |
| CURRENT ASSETS                                   |       |       |       |             |       |              |       |             |       |             |       |
| Cash and cash equivalents                        |       | $          | 57,366     |             | $          | 514,599           |       | $                | 11,099     |             | $          | — |   | $ | 583,064 |   |
| Accounts receivable, less   allowances           |       | 173,594    |       | 178,538          |       | 36,811            |       | —           |       | 388,943          |       |
| Inventories                                      |       | 144,730    |       | 363,974          |       | 11,594            |       | (14,061          | )          | 506,237          |       |
| Deferred income taxes                            |       | 25,169     |       | 4,651            |       | 407               |       | —           |       | 30,227           |       |
| Other                                            |       | 5,156      |       | 2,410            |       | 1,049             |       | —           |       | 8,615            |       |
|                                             |       | 406,015    |       | 1,064,172        |       | 60,960            |       | (14,061          | )          | 1,517,086        |       |
| NON-CURRENT ASSETS                               |       |       |       |             |       |              |       |             |       |             |       |
| Capital assets                                   |       | 138,449    |       | 894,130          |       | 22,086            |       | 1,521            |       | 1,056,186        |       |
| Other                                            |       | 1,470,677  |       | 104,284          |       | 3,182             |       | (1,512,396       | )          | 65,747           |       |
|                                             |       | 1,609,126  |       | 998,414          |       | 25,268            |       | (1,510,875       | )          | 1,121,933        |       |
| TOTAL ASSETS                                     |       | $          | 2,015,141  |             | $          | 2,062,586         |       | $                | 86,228     |             | $          | (1,524,936 | ) | $ | 2,639,019 |   |
|                                             |       |       |       |             |       |              |       |             |       |             |       |
| CURRENT  LIABILITIES                             |       |       |       |             |       |              |       |             |       |             |       |
| Accounts payable and accrued charges             |       | $          | 53,428     |             | $          | 246,843           |       | $                | 3,318      |             | $          | — |   | $ | 303,589 |   |
| Income and other taxes payable                   |       | (11,794    | )          | 50,668           |       | 2,199             |       | —           |       | 41,073           |       |
| Current portion of long-term debt                |       | —     |       | 4,114            |       | —            |       | —           |       | 4,114            |       |
|                                             |       | 41,634     |       | 301,625          |       | 5,517             |       | —           |       | 348,776          |       |
|                                             |       |       |       |             |       |              |       |             |       |             |       |
| LONG-TERM  LIABILITIES                           |       |       |       |             |       |              |       |             |       |             |       |
| Long-term debt                                   |       | 168,569    |       | 144,484          |       | —            |       | —           |       | 313,053          |       |
| Other                                            |       | 16,966     |       | 27,618           |       | —            |       | —           |       | 44,584           |       |
| Deferred income taxes                            |       | 47,339     |       | 127,623          |       | 21,843            |       | (4,832           | )          | 191,973          |       |
|                                             |       | 232,874    |       | 299,725          |       | 21,843            |       | (4,832           | )          | 549,610          |       |
| SHAREHOLDERS’ EQUITY                        |       | 1,740,633  |       | 1,461,236        |       | 58,868            |       | (1,520,104       | )          | 1,740,633        |       |
|                                             |       |       |       |             |       |              |       |             |       |             |       |
| TOTAL LIABILITIES  AND SHAREHOLDERS’ EQUITY |       | $          | 2,015,141  |             | $          | 2,062,586         |       | $                | 86,228     |             | $          | (1,524,936 | ) | $ | 2,639,019 |   |

 

17

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9.                 Differencesbetween United States and Canadian generally accepted accounting principles

Reconciliation of the lineitems of the consolidated statements of income and cash flows and theconsolidated balance sheets from U.S. GAAP to Canadian GAAP follows.Information on the nature of these adjustments is provided in Note 21 to theCompany’s 2005 consolidated financial statements.

**CONSOLIDATED STATEMENTS OFINCOME**(thousands of United StatesDollars except for per share and ton data)

| ** **                                                             | ** **    | **For the Three Months Ended June 30, 2006** | ** ** | **For the Three Months Ended June 30, 2005** | ** ** |
|------------------------------------------------------------------------|---------------|---------------------------------------------------------------------------------|------------|---------------------------------------------------------------------------------|------------|
| ** **                                                             | ** **    | **U.S. GAAP**                                                              | ** ** | **Ref**                                                                         | ** ** | **Amount** | ** ** | **Canadian  GAAP** | ** ** | **U.S. GAAP** | ** ** | **Ref** | ** ** | **Amount** | ** ** | **Canadian  GAAP** | ** ** |
| Plate and Coil Tons Produced (thousands)                               |          | 952.5                                                                           |       |                                                                            |       |   |   |   |   | 952.5 |   | 857.7 |   |   |   |   |   |   |   | 857.7 |   |
| Finished Tons Shipped (thousands)                                      |          | 1,001.0                                                                         |       |                                                                            |       |   |   |   |   | 1,001.0 |   | 803.5 |   |   |   |   |   |   |   | 803.5 |   |
| Sales                                                                  |          | $                                                                               | 893,558    |                                                                            |       | a) |   |   | $ | (31,315 | ) | $ | 862,243 |   | $ | 687,674 |   |   | a) |   |   | $ | (20,962 | ) | $ | 666,712 |   |
| Cost of sales                                                          |          | 632,007                                                                         |       |                                                                            | a)         |   |   | (31,315 | ) | 603,490 |   | 457,321 |   |   | a) |   |   | (20,962 | ) | 439,322 |   |
|                                                                   |          |                                                                            |       |                                                                            | b)         |   |   | 1,247 |   |   |   |   |   |   | b) |   |   | 1,248 |   |   |   |
|                                                                   |          |                                                                            |       |                                                                            | c)         |   |   | (107 | ) |   |   |   |   |   | c) |   |   | 80 |   |   |   |
|                                                                   |          |                                                                            |       |                                                                            | d)         |   |   | 1,658 |   |   |   |   |   |   | d) |   |   | 1,635 |   |   |   |
|                                                                   |          | 632,007                                                                         |       |                                                                            |       |   |   | (28,517 | ) | 603,490 |   | 457,321 |   |   |   |   |   | (17,999 | ) | 439,322 |   |
| Gross income                                                           |          | 261,551                                                                         |       |                                                                            |       |   |   | (2,798 | ) | 258,753 |   | 230,353 |   |   |   |   |   | (2,963 | ) | 227,390 |   |
| Selling, general and administration                                    |          | 18,694                                                                          |       |                                                                            |       |   |   |   |   | 18,694 |   | 16,141 |   |   |   |   |   |   |   | 16,141 |   |
| Operating income                                                       |          | 242,857                                                                         |       |                                                                            |       |   |   | (2,798 | ) | 240,059 |   | 214,212 |   |   |   |   |   | (2,963 | ) | 211,249 |   |
| Other expenses (income):                                               |          |                                                                            |       |                                                                            |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest on long-term debt                                             |          | 5,708                                                                           |       |                                                                            | b)         |   |   | (2,103 | ) | 3,605 |   | 9,675 |   |   | b) |   |   | (2,179 | ) | 7,496 |   |
| Net interest income                                                    |          | (8,208                                                                          | )          |                                                                            |       |   |   |   |   | (8,208 | ) | (3,240 | ) |   |   |   |   |   |   | (3,240 | ) |
| Foreign exchange loss (gain)                                           |          | (5,083                                                                          | )          |                                                                            |       |   |   |   |   | (5,083 | ) | (759 | ) |   |   |   |   |   |   | (759 | ) |
| Other (income) expenses                                                |          | (106                                                                            | )          |                                                                            | c)         |   |   | 106 |   | — |   | 80 |   |   | c) |   |   | (80 | ) | — |   |
| Loss on early extinguishment of debt                                   |          | —                                                                          |       |                                                                            |       |   |   |   |   | — |   | 10,249 |   |   |   |   |   |   |   | 10,249 |   |
| Income before income taxes and cumulative effect of  accounting change |          | 250,546                                                                         |       |                                                                            |       |   |   | (801 | ) | 249,745 |   | 198,207 |   |   |   |   |   | (704 | ) | 197,503 |   |
| Income tax expense                                                     |          | 94,178                                                                          |       |                                                                            | b)         |   |   | 321 |   | 93,879 |   | 71,354 |   |   | b) |   |   | 335 |   | 71,101 |   |
|                                                                   |          |                                                                            |       |                                                                            | d)         |   |   | (620 | ) |   |   |   |   |   | d) |   |   | (588 | ) |   |   |
| Net Income                                                             |          | $                                                                               | 156,368    |                                                                            |       |   |   |   | $ | (502 | ) | $ | 155,866 |   | $ | 126,853 |   |   |   |   |   | $ | (451 | ) | $ | 126,402 |   |
| Earnings Per Common Share                                              | —Basic   |                                                                            | $          | 3.28                                                                            |       |   |   |   |   |   |   | $ | 3.27 |   | $ | 2.60 |   |   |   |   |   |   |   | $ | 2.59 |   |
|                                                                   | —Diluted |                                                                            | $          | 3.25                                                                            |       |   |   |   |   |   |   | $ | 3.24 |   | $ | 2.57 |   |   |   |   |   |   |   | $ | 2.56 |   |

----

             a) Freight invoiced to customers

            b) 2000 sale-leaseback transaction

             c) Joint venture

            d) Amortization of difference in amountscapitalized

             e) Translation of convenience

               f) Capitalization of interest

             g) Capitalization of commissioning costs

            h) Derivatives

               i) Minimum pension liability

                j) Change in accounting policy

 

18

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| ** **                                                             | ** **    | **For the Six Months Ended June 30, 2006** | ** ** | **For the Six Months Ended June 30, 2005** | ** ** |
|------------------------------------------------------------------------|---------------|-------------------------------------------------------------------------------|------------|-------------------------------------------------------------------------------|------------|
| ** **                                                             | ** **    | **U.S. GAAP**                                                            | ** ** | **Ref**                                                                       | ** ** | **Amount** | ** ** | **Canadian  GAAP** | ** ** | **U.S. GAAP** | ** ** | **Ref** | ** ** | **Amount** | ** ** | **Canadian  GAAP** | ** ** |
| Plate and Coil Tons Produced (thousands)                               |          | 1,848.1                                                                       |       |                                                                          |       |   |   |   |   | 1,848.1 |   | 1,675.2 |   |   |   |   |   |   |   | 1,675.2 |   |
| Finished Tons Shipped (thousands)                                      |          | 2,006.4                                                                       |       |                                                                          |       |   |   |   |   | 2,006.4 |   | 1,659.3 |   |   |   |   |   |   |   | 1,659.3 |   |
| Sales                                                                  |          | $                                                                             | 1,796,454  |                                                                          |       | a) |   |   | $ | (58,798 | ) | $ | 1,737,656 |   | $ | 1,454,412 |   |   | a) |   |   | $ | (41,703 | ) | $ | 1,412,709 |   |
| Cost of sales                                                          |          | 1,255,436                                                                     |       |                                                                          | a)         |   |   | (58,798 | ) | 1,205,890 |   | 956,472 |   |   | a) |   |   | (41,703 | ) | 920,514 |   |
|                                                                   |          |                                                                          |       |                                                                          | b)         |   |   | 2,494 |   |   |   |   |   |   | b) |   |   | 2,495 |   |   |   |
|                                                                   |          |                                                                          |       |                                                                          | c)         |   |   | (219 | ) |   |   |   |   |   | c) |   |   | (20 | ) |   |   |
|                                                                   |          |                                                                          |       |                                                                          | d)         |   |   | 6,977 |   |   |   |   |   |   | d) |   |   | 3,270 |   |   |   |
|                                                                   |          | 1,255,436                                                                     |       |                                                                          |       |   |   | (49,546 | ) | 1,205,890 |   | 956,472 |   |   |   |   |   | (35,958 | ) | 920,514 |   |
| Gross income                                                           |          | 541,018                                                                       |       |                                                                          |       |   |   | (9,252 | ) | 531,766 |   | 497,940 |   |   |   |   |   | (5,745 | ) | 492,195 |   |
| Selling, general and administration                                    |          | 51,080                                                                        |       |                                                                          |       |   |   |   |   | 51,080 |   | 34,478 |   |   |   |   |   |   |   | 34,478 |   |
| Operating income                                                       |          | 489,938                                                                       |       |                                                                          |       |   |   | (9,252 | ) | 480,686 |   | 463,462 |   |   |   |   |   | (5,745 | ) | 457,717 |   |
| Other expenses (income):                                               |          |                                                                          |       |                                                                          |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest on long-term debt                                             |          | 11,541                                                                        |       |                                                                          | b)         |   |   | (4,221 | ) | 7,320 |   | 20,403 |   |   | b) |   |   | (4,373 | ) | 16,030 |   |
| Net interest income                                                    |          | (15,223                                                                       | )          |                                                                          |       |   |   |   |   | (15,223 | ) | (6,023 | ) |   | c) |   |   | 5 |   | (6,018 | ) |
| Foreign exchange loss (gain)                                           |          | (3,759                                                                        | )          |                                                                          |       |   |   |   |   | (3,759 | ) | (1,153 | ) |   |   |   |   |   |   | (1,153 | ) |
| Other (income) expenses                                                |          | (218                                                                          | )          |                                                                          | c)         |   |   | 218 |   | — |   | (15 | ) |   | c) |   |   | 15 |   | — |   |
| Loss on early extinguishment of debt                                   |          | —                                                                        |       |                                                                          |       |   |   |   |   | — |   | 10,249 |   |   |   |   |   |   |   | 10,249 |   |
| Income before income taxes and cumulative effect of  accounting change |          | 497,597                                                                       |       |                                                                          |       |   |   | (5,249 | ) | 492,348 |   | 440,001 |   |   |   |   |   | (1,392 | ) | 438,609 |   |
| Income tax expense                                                     |          | 190,528                                                                       |       |                                                                          | b)         |   |   | 660 |   | 188,494 |   | 158,380 |   |   | b) |   |   | 676 |   | 157,879 |   |
|                                                                   |          |                                                                          |       |                                                                          | d)         |   |   | (2,694 | ) |   |   |   |   |   | d) |   |   | (1,177 | ) |   |   |
| Net Income                                                             |          | $                                                                             | 307,069    |                                                                          |       |   |   |   | $ | (3,215 | ) | $ | 303,854 |   | $ | 281,621 |   |   |   |   |   | $ | (891 | ) | $ | 280,730 |   |
| Earnings Per Common Share                                              | —Basic   |                                                                          | $          | 6.43                                                                          |       |   |   |   |   |   |   | $ | 6.36 |   | $ | 5.71 |   |   |   |   |   |   |   | $ | 5.69 |   |
|                                                                   | —Diluted |                                                                          | $          | 6.36                                                                          |       |   |   |   |   |   |   | $ | 6.29 |   | $ | 5.64 |   |   |   |   |   |   |   | $ | 5.62 |   |

 

19

----

**CONSOLIDATEDSTATEMENTS OF CASH FLOWS (unaudited)**(thousands of United StatesDollars)

|                                                                                  | ** ** | **For the Three Months Ended June 30, 2006** | ** ** | **For the Three Months Ended June 30, 2005** | ** ** |
|----------------------------------------------------------------------------------|------------|---------------------------------------------------------------------------------|------------|---------------------------------------------------------------------------------|------------|
| ** **                                                                       | ** ** | **U.S. GAAP**                                                              | ** ** | **Ref**                                                                         | ** ** | **Amount** | ** ** | **Canadian  GAAP** | ** ** | **U.S. GAAP** | ** ** | **Ref** | ** ** | **Amount** | ** ** | **Canadian  GAAP** | ** ** |
| Operating Activities                                                             |       |                                                                            |       |                                                                            |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net income                                                                       |       | $                                                                               | 156,368    |                                                                            |       |   |   |   | $ | (502 | ) | $ | 155,866 |   | $ | 126,853 |   |   |   |   |   | $ | (451 | ) | $ | 126,402 |   |
| Adjustments to reconcile net income to  net cash flows from operating activities |       |                                                                            |       |                                                                            |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Depreciation of capital assets                                                   |       | 13,212                                                                          |       |                                                                            | b)         |   |   | (2,223 | ) | 12,690 |   | 20,288 |   |   | b) |   |   | (2,223 | ) | 19,662 |   |
|                                                                                  |       |                                                                            |       |                                                                            | c)         |   |   | 43 |   |   |   |   |   |   | c) |   |   | (38 | ) |   |   |
|                                                                             |       |                                                                            |       |                                                                            | d)         |   |   | 1,658 |   |   |   |   |   |   | d) |   |   | 1,635 |   |   |   |
| Amortization of deferred charges                                                 |       | 538                                                                             |       |                                                                            |       |   |   |   |   | 538 |   | 505 |   |   |   |   |   |   |   | 505 |   |
| Stock based compensation                                                         |       | 411                                                                             |       |                                                                            |       |   |   |   |   | 411 |   | 523 |   |   |   |   |   |   |   | 523 |   |
| Deferred income taxes                                                            |       | (6,937                                                                          | )          |                                                                            | b)         |   |   | 321 |   | (7,236 | ) | 4,833 |   |   | b) |   |   | 335 |   | 4,580 |   |
|                                                                             |       |                                                                            |       |                                                                            | d)         |   |   | (620 | ) |   |   |   |   |   | d) |   |   | (588 | ) |   |   |
| Unrealized foreign exchange gain                                                 |       | —                                                                          |       |                                                                            |       |   |   |   |   | — |   | (1,939 | ) |   |   |   |   |   |   | (1,939 | ) |
| Loss on early extinguishment of debt                                             |       | —                                                                          |       |                                                                            |       |   |   |   |   | — |   | 10,249 |   |   |   |   |   |   |   | 10,249 |   |
| Changes in operating assets and  liabilities                                     |       |                                                                            |       |                                                                            |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Accounts receivable                                                              |       | 11,596                                                                          |       |                                                                            | c)         |   |   | 95 |   | 11,691 |   | 59,922 |   |   | c) |   |   | (124 | ) | 59,798 |   |
| Inventories                                                                      |       | (88,958                                                                         | )          |                                                                            | c)         |   |   | 20 |   | (88,938 | ) | (60,921 | ) |   | c) |   |   | (15 | ) | (60,936 | ) |
| Other current assets                                                             |       | 1,299                                                                           |       |                                                                            | c)         |   |   | 39 |   | 1,338 |   | 1,562 |   |   |   |   |   |   |   | 1,562 |   |
| Accounts payable and accrued charges                                             |       | (3,227                                                                          | )          |                                                                            | b)         |   |   | 1,366 |   | (1,941 | ) | (29,780 | ) |   | b) |   |   | 1,292 |   | (28,329 | ) |
|                                                                             |       |                                                                            |       |                                                                            | c)         |   |   | (80 | ) |   |   |   |   |   | c) |   |   | 159 |   |   |   |
| Change in deferred pension liability                                             |       | (265                                                                            | )          |                                                                            |       |   |   |   |   | (265 | ) | (747 | ) |   |   |   |   |   |   | (747 | ) |
| Income and other taxes payable                                                   |       | (66,802                                                                         | )          |                                                                            | c)         |   |   | — |   | (66,802 | ) | 48,484 |   |   | c) |   |   | (155 | ) | 48,329 |   |
| Net cash provided by operations                                                  |       | 17,235                                                                          |       |                                                                            |       |   |   | 117 |   | 17,352 |   | 179,832 |   |   |   |   |   | (173 | ) | 179,659 |   |
| Investing Activities                                                             |       |                                                                            |       |                                                                            |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Expenditures for capital assets, net of  litigation settlement                   |       | (11,811                                                                         | )          |                                                                            | c)         |   |   | 154 |   | (11,657 | ) | (8,813 | ) |   | c) |   |   | (46 | ) | (8,859 | ) |
| Proceeds from mortgage receivable, net                                           |       | 735                                                                             |       |                                                                            |       |   |   |   |   | 735 |   | 370 |   |   |   |   |   |   |   | 370 |   |
| Investments                                                                      |       | 330                                                                             |       |                                                                            | c)         |   |   | (330 | ) | — |   | 71 |   |   | c) |   |   | (71 | ) | — |   |
| Net cash used for investing activities                                           |       | (10,746                                                                         | )          |                                                                            |       |   |   | (176 | ) | (10,922 | ) | (8,372 | ) |   |   |   |   | (117 | ) | (8,489 | ) |
| Financing Activities                                                             |       |                                                                            |       |                                                                            |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Common shares issued pursuant to share option plan                               |       | 5,036                                                                           |       |                                                                            |       |   |   |   |   | 5,036 |   | 5,494 |   |   |   |   |   |   |   | 5,494 |   |
| Common share dividends                                                           |       | (8,488                                                                          | )          |                                                                            |       |   |   |   |   | (8,488 | ) | (5,496 | ) |   |   |   |   |   |   | (5,496 | ) |
| Common share repurchase                                                          |       | (85,500                                                                         | )          |                                                                            |       |   |   |   |   | (85,500 | ) | (104,896 | ) |   |   |   |   |   |   | (104,896 | ) |
| Repayment of long-term debt                                                      |       | —                                                                          |       |                                                                            |       |   |   |   |   | — |   | (123,248 | ) |   |   |   |   |   |   | (123,248 | ) |
| Net cash (used for) provided by financing activities                             |       | (88,952                                                                         | )          |                                                                            |       |   |   | — |   | (88,952 | ) | (228,146 | ) |   |   |   |   | — |   | (228,146 | ) |
| Effect of exchange rate changes on cash  and cash equivalents                    |       | 21,131                                                                          |       |                                                                            |       |   |   |   |   | 21,131 |   | (935 | ) |   |   |   |   |   |   | (935 | ) |
| Increase in Cash and Cash Equivalents                                            |       | (61,332                                                                         | )          |                                                                            |       |   |   | (59 | ) | (61,391 | ) | (57,621 | ) |   |   |   |   | (290 | ) | (57,911 | ) |
| Cash and Cash Equivalents at Beginning  of Period                                |       | 663,324                                                                         |       |                                                                            | c)         |   |   | 210 |   | 663,534 |   | 481,522 |   |   | c) |   |   | 612 |   | 482,134 |   |
| Cash and Cash  Equivalents at End of Period                                      |       | $                                                                               | 601,992    |                                                                            |       |   |   |   | $ | 151 |   | $ | 602,143 |   | $ | 423,901 |   |   |   |   |   | $ | 322 |   | $ | 424,223 |   |
|                                                                             |       |                                                                            |       |                                                                            |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                             |       |                                                                            |       |                                                                            |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

 

20

----

 

| ** **                                                                       | ** ** | **For the Six Months Ended June 30, 2006** | ** ** | **For the Six Months Ended June 30, 2005** | ** ** |
|----------------------------------------------------------------------------------|------------|-------------------------------------------------------------------------------|------------|-------------------------------------------------------------------------------|------------|
| ** **                                                                       | ** ** | **U.S. GAAP**                                                            | ** ** | **Ref**                                                                       | ** ** | **Amount** | ** ** | **Canadian  GAAP** | ** ** | **U.S. GAAP** | ** ** | **Ref** | ** ** | **Amount** | ** ** | **Canadian  GAAP** | ** ** |
| Operating Activities                                                             |       |                                                                          |       |                                                                          |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net income                                                                       |       | $                                                                             | 307,069    |                                                                          |       |   |   |   | $ | (3,215 | ) | $ | 303,854 |   | $ | 281,621 |   |   |   |   |   | $ | (891 | ) | $ | 280,730 |   |
| Adjustments  to reconcile net income to net cash flows from operating activities |       |                                                                          |       |                                                                          |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Depreciation of capital assets                                                   |       | 33,295                                                                        |       |                                                                          | b)         |   |   | (4,447 | ) | 35,909 |   | 40,090 |   |   | b) |   |   | (4,447 | ) | 38,913 |   |
|                                                                             |       |                                                                          |       |                                                                          | c)         |   |   | 84 |   |   |   |   |   |   | d) |   |   | 3,270 |   |   |   |
|                                                                             |       |                                                                          |       |                                                                          | d)         |   |   | 6,977 |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Amortization of deferred charges                                                 |       | 999                                                                           |       |                                                                          |       |   |   |   |   | 999 |   | 875 |   |   |   |   |   |   |   | 875 |   |
| Stock based compensation                                                         |       | 1,648                                                                         |       |                                                                          |       |   |   |   |   | 1,648 |   | 981 |   |   |   |   |   |   |   | 981 |   |
| Deferred income taxes                                                            |       | (6,133                                                                        | )          |                                                                          | b)         |   |   | 660 |   | (8,167 | ) | 44,422 |   |   | b) |   |   | 676 |   | 43,921 |   |
|                                                                             |       |                                                                          |       |                                                                          | d)         |   |   | (2,694 | ) |   |   |   |   |   | d) |   |   | (1,177 | ) |   |   |
| Unrealized foreign exchange gain                                                 |       | —                                                                        |       |                                                                          |       |   |   |   |   | — |   | (1,939 | ) |   |   |   |   |   |   | (1,939 | ) |
| Loss on early extinguishment of debt                                             |       | —                                                                        |       |                                                                          |       |   |   |   |   | — |   | 10,249 |   |   |   |   |   |   |   | 10,249 |   |
| Changes  in operating assets and liabilities                                     |       |                                                                          |       |                                                                          |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Accounts receivable                                                              |       | (1,129                                                                        | )          |                                                                          | c)         |   |   | (199 | ) | (1,328 | ) | 85,448 |   |   | c) |   |   | 31 |   | 85,479 |   |
| Inventories                                                                      |       | (132,314                                                                      | )          |                                                                          | c)         |   |   | (47 | ) | (132,361 | ) | (54,505 | ) |   | c) |   |   | 17 |   | (54,488 | ) |
| Other current assets                                                             |       | 2,734                                                                         |       |                                                                          | c)         |   |   | 39 |   | 2,773 |   | 4,142 |   |   |   |   |   |   |   | 4,142 |   |
| Accounts payable and accrued charges                                             |       | (30,935                                                                       | )          |                                                                          | b)         |   |   | (2,272 | ) | (33,177 | ) | (68,274 | ) |   | b) |   |   | (2,020 | ) | (70,328 | ) |
|                                                                             |       |                                                                          |       |                                                                          | c)         |   |   | 30 |   |   |   |   |   |   | c) |   |   | (34 | ) |   |   |
| Change in deferred pension liability                                             |       | (443                                                                          | )          |                                                                          |       |   |   |   |   | (443 | ) | 345 |   |   |   |   |   |   |   | 345 |   |
| Income and other taxes payable                                                   |       | (37,450                                                                       | )          |                                                                          |       |   |   |   |   | (37,450 | ) | (12,366 | ) |   |   |   |   |   |   | (12,366 | ) |
| Net cash provided by operations                                                  |       | 137,341                                                                       |       |                                                                          |       |   |   | (5,084 | ) | 132,257 |   | 331,089 |   |   |   |   |   | (4,575 | ) | 326,514 |   |
| Investing Activities                                                             |       |                                                                          |       |                                                                          |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Expenditures for capital assets, net of litigation  settlement                   |       | (42,410                                                                       | )          |                                                                          | c)         |   |   | 100 |   | (42,310 | ) | (22,171 | ) |   | c) |   |   | (94 | ) | (22,265 | ) |
| Proceeds from mortgage receivable, net                                           |       | 971                                                                           |       |                                                                          |       |   |   |   |   | 971 |   | 1,827 |   |   |   |   |   |   |   | 1,827 |   |
| Investments                                                                      |       | —                                                                        |       |                                                                          |       |   |   |   |   | — |   | (99 | ) |   | c) |   |   | 99 |   | — |   |
| Net cash used for investing activities                                           |       | (41,439                                                                       | )          |                                                                          |       |   |   | 100 |   | (41,339 | ) | (20,443 | ) |   |   |   |   | 5 |   | (20,438 | ) |
| Financing Activities                                                             |       |                                                                          |       |                                                                          |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Common shares issued pursuant to share option plan                               |       | 5,483                                                                         |       |                                                                          |       |   |   |   |   | 5,483 |   | 16,423 |   |   |   |   |   |   |   | 16,423 |   |
| Common share dividends                                                           |       | (15,938                                                                       | )          |                                                                          |       |   |   |   |   | (15,938 | ) | (10,454 | ) |   |   |   |   |   |   | (10,454 | ) |
| Common share repurchase                                                          |       | (85,500                                                                       | )          |                                                                          |       |   |   |   |   | (85,500 | ) | (121,157 | ) |   |   |   |   |   |   | (121,157 | ) |
| Repayment of long-term debt                                                      |       | (4,991                                                                        | )          |                                                                          | b)         |   |   | 4,991 |   | — |   | (127,837 | ) |   | b) |   |   | 4,589 |   | (123,248 | ) |
| Net cash (used for) provided by financing activities                             |       | (100,946                                                                      | )          |                                                                          |       |   |   | 4,991 |   | (95,955 | ) | (243,025 | ) |   |   |   |   | 4,589 |   | (238,436 | ) |
| Effect of exchange rate changes on cash and cash  equivalents                    |       | 23,972                                                                        |       |                                                                          |       |   |   |   |   | 23,972 |   | 1,506 |   |   |   |   |   |   |   | 1,506 |   |
| Increase in Cash and Cash Equivalents                                            |       | 18,928                                                                        |       |                                                                          |       |   |   | 7 |   | 18,935 |   | 69,127 |   |   |   |   |   | 19 |   | 69,146 |   |
| Cash and Cash Equivalents at Beginning of Period                                 |       | 583,064                                                                       |       |                                                                          | c)         |   |   | 144 |   | 583,208 |   | 354,774 |   |   | c) |   |   | 303 |   | 355,077 |   |
| Cash and Cash  Equivalents at End of Period                                      |       | $                                                                             | 601,992    |                                                                          |       |   |   |   | $ | 151 |   | $ | 602,143 |   | $ | 423,901 |   |   |   |   |   | $ | 322 |   | $ | 424,223 |   |

 

21

----

**CONSOLIDATEDBALANCE SHEETS (unaudited)**(thousands of United StatesDollars)

|                                                  | ** ** | **June 30, 2006** | ** ** | **December 31, 2005** | ** ** |
|--------------------------------------------------|------------|-----------------------------|------------|---------------------------------|------------|
| ** **                                       | ** ** | **U.S. GAAP**          | ** ** | **Ref**                         | ** ** | **Amount** | ** ** | **Canadian  GAAP** | ** ** | **U.S. GAAP** | ** ** | **Ref** | ** ** | **Amount** | ** ** | **Canadian  GAAP** | ** ** |
| Current Assets                                   |       |                        |       |                            |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash and cash equivalents                        |       | $                           | 601,992    |                            |       | c) |   |   | $ | 151 |   | $ | 602,143 |   | $ | 583,064 |   |   | c) |   |   | $ | 144 |   | $ | 583,208 |   |
| Accounts receivable, less allowances             |       | 377,223                     |       |                            | c)         |   |   | 686 |   | 375,537 |   | 388,943 |   |   | c) |   |   | 222 |   | 377,324 |   |
|                                             |       |                        |       |                            | h)         |   |   | (2,372 | ) |   |   |   |   |   | h) |   |   | (11,841 | ) |   |   |
| Inventories                                      |       | 661,215                     |       |                            | c)         |   |   | 198 |   | 661,413 |   | 506,237 |   |   | c) |   |   | 150 |   | 506,387 |   |
| Future income taxes                              |       | 36,332                      |       |                            |       |   |   |   |   | 36,332 |   | 30,227 |   |   |   |   |   |   |   | 30,227 |   |
| Other                                            |       | 6,087                       |       |                            | c)         |   |   | 7 |   | 6,094 |   | 8,615 |   |   | c) |   |   | 22 |   | 8,637 |   |
|                                             |       | 1,682,849                   |       |                            |       |   |   | (1,330 | ) | 1,681,519 |   | 1,517,086 |   |   |   |   |   | (11,303 | ) | 1,505,783 |   |
|                                             |       |                        |       |                            |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Non-Current Assets                               |       |                        |       |                            |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Capital assets                                   |       | 1,063,720                   |       |                            | b)         |   |   | (108,357 | ) | 1,070,597 |   | 1,056,186 |   |   | b) |   |   | (112,804 | ) | 1,065,558 |   |
|                                                  |       |                        |       |                            | c)         |   |   | 2,604 |   |   |   |   |   |   | c) |   |   | 2,569 |   |   |   |
|                                             |       |                        |       |                            | d)         |   |   | (13,505 | ) |   |   |   |   |   | d) |   |   | (6,528 | ) |   |   |
|                                                  |       |                        |       |                            | f)         |   |   | 13,902 |   |   |   |   |   |   | f) |   |   | 13,902 |   |   |   |
|                                             |       |                        |       |                            | g)         |   |   | 112,233 |   |   |   |   |   |   | g) |   |   | 112,233 |   |   |   |
| Other                                            |       | 59,974                      |       |                            | c)         |   |   | (3,284 | ) | 63,798 |   | 65,747 |   |   | c) |   |   | (2,776 | ) | 70,033 |   |
|                                             |       |                        |       |                            | i)         |   |   | 7,108 |   |   |   |   |   |   | i) |   |   | 7,062 |   |   |   |
|                                                  |       | 1,123,694                   |       |                            |       |   |   | 10,701 |   | 1,134,395 |   | 1,121,933 |   |   |   |   |   | 13,658 |   | 1,135,591 |   |
|                                             |       |                        |       |                            |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total Assets                                     |       | $                           | 2,806,543  |                            |       |   |   |   | $ | 9,371 |   | $ | 2,815,914 |   | $ | 2,639,019 |   |   |   |   |   | $ | 2,355 |   | $ | 2,641,374 |   |
|                                             |       |                        |       |                            |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Current Liabilities                              |       |                        |       |                            |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Accounts payable and accrued charges             |       | $                           | 280,571    |                            |       | b) |   |   | $ | (8,873 | ) | $ | 269,614 |   | $ | 303,589 |   |   | b) |   |   | $ | (6,602 | ) | $ | 297,318 |   |
|                                                  |       |                        |       |                            | c)         |   |   | 362 |   |   |   |   |   |   | c) |   |   | 331 |   |   |   |
|                                             |       |                        |       |                            | h)         |   |   | (2,446 | ) |   |   |   |   |   |   |   |   |   |   |   |   |
| Income and other taxes payable                   |       | 4,284                       |       |                            |       |   |   |   |   | 4,284 |   | 41,073 |   |   |   |   |   |   |   | 41,073 |   |
| Current portion of long-term debt                |       | 21,015                      |       |                            | b)         |   |   | (6,300 | ) | 14,715 |   | 4,114 |   |   | b) |   |   | (4,114 | ) | — |   |
|                                                  |       | 305,870                     |       |                            |       |   |   | (17,257 | ) | 288,613 |   | 348,776 |   |   |   |   |   | (10,385 | ) | 338,391 |   |
|                                                  |       |                        |       |                            |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Long-Term Liabilities                            |       |                        |       |                            |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Long-term debt                                   |       | 291,162                     |       |                            | b)         |   |   | (109,307 | ) | 181,855 |   | 313,053 |   |   | b) |   |   | (116,483 | ) | 196,570 |   |
| Other                                            |       | 44,538                      |       |                            | i)         |   |   | (44,538 | ) | — |   | 44,584 |   |   | i) |   |   | (44,584 | ) | — |   |
| Future income taxes                              |       | 188,890                     |       |                            | b)         |   |   | 5,950 |   | 253,766 |   | 191,973 |   |   | b) |   |   | 5,290 |   | 254,652 |   |
|                                             |       |                        |       |                            | d)         |   |   | (5,545 | ) |   |   |   |   |   | d) |   |   | (2,851 | ) |   |   |
|                                                  |       |                        |       |                            | f)         |   |   | 5,172 |   |   |   |   |   |   | f) |   |   | 5,172 |   |   |   |
|                                             |       |                        |       |                            | g)         |   |   | 41,751 |   |   |   |   |   |   | g) |   |   | 41,751 |   |   |   |
|                                                  |       |                        |       |                            | h)         |   |   | (115 | ) |   |   |   |   |   | h) |   |   | (4,346 | ) |   |   |
|                                             |       |                        |       |                            | i)         |   |   | 17,663 |   |   |   |   |   |   | i) |   |   | 17,663 |   |   |   |
|                                                  |       | 524,590                     |       |                            |       |   |   | (88,969 | ) | 435,621 |   | 549,610 |   |   |   |   |   | (98,388 | ) | 451,222 |   |
| Shareholders’ Equity                        |       |                        |       |                            |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Common shares                                    |       | 414,110                     |       |                            | e)         |   |   | (40,733 | ) | 373,377 |   | 419,272 |   |   | e) |   |   | (40,733 | ) | 378,539 |   |
| Contributed surplus                              |       | 17,349                      |       |                            |       |   |   |   |   | 17,349 |   | 15,548 |   |   |   |   |   |   |   | 15,548 |   |
| Retained earnings                                |       | 1,557,694                   |       |                            | b)         |   |   | 10,177 |   | 1,591,423 |   | 1,341,659 |   |   | b) |   |   | 9,110 |   | 1,378,603 |   |
|                                             |       |                        |       |                            | d)         |   |   | (7,960 | ) |   |   |   |   |   | d) |   |   | (3,678 | ) |   |   |
|                                                  |       |                        |       |                            | e)         |   |   | (47,700 | ) |   |   |   |   |   | e) |   |   | (47,700 | ) |   |   |
|                                             |       |                        |       |                            | f)         |   |   | 8,730 |   |   |   |   |   |   | f) |   |   | 8,730 |   |   |   |
|                                                  |       |                        |       |                            | g)         |   |   | 70,482 |   |   |   |   |   |   | g) |   |   | 70,482 |   |   |   |
| Accumulated other comprehensive loss             |       | (13,070                     | )          |                            | e)         |   |   | 88,433 |   | 109,531 |   | (35,846 | ) |   | e) |   |   | 88,433 |   | 79,071 |   |
| Cumulative translation adjustment                |       |                        |       |                            | h)         |   |   | 185 |   |   |   |   |   |   | h) |   |   | (7,495 | ) |   |   |
|                                             |       |                        |       |                            | i)         |   |   | 33,983 |   |   |   |   |   |   | i) |   |   | 33,979 |   |   |   |
|                                                  |       | 1,976,083                   |       |                            |       |   |   | 115,597 |   | 2,091,680 |   | 1,740,633 |   |   |   |   |   | 111,128 |   | 1,851,761 |   |
|                                                  |       |                        |       |                            |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total Liabilities  and Shareholders’ Equity |       | $                           | 2,806,543  |                            |       |   |   |   | $ | 9,371 |   | $ | 2,815,914 |   | $ | 2,639,019 |   |   |   |   |   | $ | 2,355 |   | $ | 2,641,374 |   |
|                                             |       |                        |       |                            |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

 

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**Item 2.**                        Management’sDiscussion and Analysis of Financial Condition and Results of Operations.

**Forward-Looking Statements**

Statements made in thisreport that are not statements of historical fact are “forward-lookingstatements” within the meaning of Section 21E of the Securities ExchangeAct of 1934, as amended (the “Exchange Act”). Forward-looking statementsinclude, without limitation, any statements that may project, indicate or implyfuture results, events, performance or achievements and can be identified by the use offorward-looking words such as “believes,” “expects,” “may,” “will,” “should,” “seeks,”“approximately,” “intends,” “plans,” “estimates” or “anticipates” or thenegative of these terms or other comparable words, or by discussions of strategy,plans or intentions.

Forward-lookinginformation reflects management’s current views of future events and financialperformance that involve a number of risks and uncertainties. The factors thatcould cause actual results to differ materially include, but are not limitedto, the following: (1) general economic conditions; (2) changes infinancial markets; (3) political conditions and developments, includingconflict in the Middle East and the war on terrorism; (4) changes in thesupply and demand for steel and our specific steel products; (5) the levelof demand outside of North America for steel and steel products; (6) equipmentperformance at our manufacturing facilities; (7) the occurrence of anymaterial lawsuits; (8) the availability of capital; (9) our abilityto properly and efficiently staff our manufacturing facilities; (10) domesticand international competitive factors, including the level of steel importsinto the Canadian and U.S. markets; (11) economic conditions in steel exportingnations; (12) trade sanction activities and the enforcement of trade sanctionremedies; (13) supply and demand for scrap steel and iron, alloys and other rawmaterials; (14) supply,****demand andpricing for the electricity and natural gas that we use; (15) changes inenvironmental and other regulations, including regulations arising from theCanadian Parliament’s ratification of the Kyoto Protocol, and the magnitude offuture environmental expenditures; (16) inherent uncertainties in thedevelopment and performance of new or modified equipment or technologies; (17)North American interest rates; and (18) exchange rates.

This list is notexhaustive of the factors that may impact our forward-looking statements. Theseand other factors should be considered carefully and users should not placeundue reliance on our forward-looking statements. As a result of the foregoingand other factors, no assurance can be given as to any such future results,levels of activity or achievements and neither we nor any other person assumesresponsibility for the accuracy and completeness of these forward-lookingstatements.

We refer you to thesections captioned “Statement Regarding Forward-Looking Information” and “RiskFactors” in our Annual Report on Form 10-K for the year ended December 31,2005, incorporated herein by reference, for a more detailed discussion of someof the many factors, variables, risks, and uncertainties that could causeactual results to differ materially from those we may have expected oranticipated. We caution that any forward-looking statement reflects only ourreasonable belief at the time the statement is made. The Company undertakes noobligation to publicly update forward-looking statements, whether as a resultof new information, future events or otherwise. You are advised, however, toconsult any further disclosures the Company makes on related subjects as may bedetailed in our other filings made from time to time with the Securities andExchange Commission.

**General**

The following discussionand analysis presents factors which affected the Company’s consolidated resultsof operations for the three-month and six-month periods ended June 30,2006 and June 30, 2005, and the Company’s consolidated financial positionat June 30, 2006. We continue to operate and report our business as asingle business segment. The following information should be read inconjunction with the Consolidated Financial Statements and Notes theretoincluded in this Form10-Q and in the Company’s Form 10-K forthe year-ended December 31, 2005. As used in this report, IPSCO Inc. andits subsidiaries, unless otherwise specified, are collectively referred to as “IPSCO”or the “Company”, and unless the context otherwise requires, the terms “we”, “us”,“our” and similar references refer to the Company.

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**Overview: Second Quarter Operating Results 2006 vs.2005**

Second quarter 2006 sales werea second quarter record $893.6 million, $205.9 million or 30% higherthan the $687.7 million reported in the second quarter of 2005. Steel millproduct revenue of $552.9 million increased $103.0 million over thesecond quarter 2005 as steel mill product volumes reached a new quarterlyrecord of 702,000 tons, 21% higher than the second quarter 2005. Inaddition, the average price per ton of steel mill product increased $11 per tonor 1% from the prior year. Tubular product sales of $340.7 millionincreased $102.9 million or 43% from the same quarter last year, driven byhigher sales volumes in large diameter pipe, increased shipments in energy andnon energy tubular shipments in the United States and higher average tubularproduct pricing.

IPSCO shipped a secondquarter record 1,001,000 tons of finished products, up 198,000 tonsor 25% from the 803,000 tons reported last year. Steel mill products hadrecord shipments in the second quarter of 702,000 tons, 122,000 tonsor 21% more than the prior year. Second quarter 2006 tubular product shipmentswere 299,000 tons, 75,000 tons or 34% higher compared to last year’ssecond quarter. Energy tubular shipments were 180,000 tons, an increase of24,000 tons from the same period last year. Large diameter pipe shipmentswere 57,000 tons, up 44,000 tons from second quarter of 2005.

Gross income of $261.6 millionfor the second quarter of 2006 was $31.2 million higher than the sameperiod last year due to the significant increases in volumes. As a percent ofsales, gross margin declined from 33% in the second quarter of 2005 to 29% forthe second quarter of 2006. Margin declines were due to higher costs for steeland tubular product raw material inputs and higher conversion costs which werepartially offset by higher average product pricing of $37 per ton or 4%.

The average per ton costof scrap consumed in the second quarter of 2006 increased 18% from the secondquarter of 2005. Aggregate conversion costs for the three steelworks were 3%higher than the same period last year due to increases in alloys, energy costs,and labor and maintenance expense. IPSCO supplies the majority of steel inputneeded to make our tubular products. Any additional coil needed for tubularproduction is purchased externally. The increase in the cost of steel produced,as well as the increase in the cost of purchased coil, increased averagetubular costs. The average cost per ton of all products sold increased to $631per ton, $62 per ton higher than the same quarter last year.

Plate and coil tonsproduced in the second quarter of 2006 were a record 952,000 tons comparedto 858,000 tons in second quarter of 2005. Volume increases over thesecond quarter of 2005 were due to  steelmill production efficiencies. Operating income per ton in the second quarterwas $243 per ton compared to $267 per ton in the prior period due to thefactors previously discussed.

Selling, general andadministration expenses were $18.7 million during the second quarter of2006, as compared to $16.1 million during the same period in 2005, anincrease of $2.6 million, or 16%, driven by higher outside professionalfees. Selling, general and administrative expenses represented 2.1% of salescompared to 2.3% in 2005.

Interest expense onlong-term debt was $5.7 million, down 41% from $9.7 million in thesecond quarter of 2005. The lower interest expense for the quarter is theresult of significant reduction in long-term debt during 2005 from scheduledpayments, redemptions and open market purchases. In the second quarter of 2005,IPSCO prepaid $100 million of debt and incurred $10.2 million of debtretirement expense and premiums. Interest income increased $5.0 million to$8.2 million due to higher average cash balances and higher interest ratescompared to the prior period.

Changes in the Canadian toU.S. dollar exchange rate can impact reported earnings. The second quarter 2006foreign exchange gain was $5.1 million compared to a gain in 2005 of $0.8 million.

In the second quarter, theestimate of the 2006 annual effective tax rate was reduced to 38.3%, resultingin an effective tax rate for the quarter of 37.6%. The second quarter tax rate,compared to the prior year’s rate of 36%, reflects the full utilization of netU.S. operating losses, continued profitability, and certain tax law changes inCanada. The current quarter effective tax rate decreased net earnings by $0.08per diluted share as compared to the second quarter of 2005.

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Net income for the secondquarter of 2006 was $156.4 million or $3.25 per diluted share compared to$126.9 million or $2.57 per diluted share during second quarter of 2005.Net income increased in the second quarter compared with the second quarter of2005 due to higher volumes, higher selling prices, decreased interest expenses,higher interest income, higher foreign exchange gains and the absence of debtextinguishment expense. Earnings per diluted share in the second quarter of2006 were reduced by $0.08 as compared to the prior year due to the impact ofthe higher effective tax rate. In addition, earnings per diluted sharebenefited by $0.12 compared to the prior year due to the impact of the sharerepurchase efforts in 2005 and 2006. The denominator used in the earnings pershare calculation was 48.2 million shares in the second quarter of 2006versus 49.4 million shares in the second quarter of 2005.

**First Half Operating Results 2006 vs. 2005**

Sales were $1.8 billion,$342.0 million or 24% higher than the $1.5 billion reported in thefirst half of 2005. Average selling price increased to $895 per ton in thefirst half of 2006 compared to $877 per ton in the first half of 2005, whiletotal tons shipped increased 21%.

For the first half of2006, IPSCO shipped 2,006,000 tons of finished products, up 347,000 tonsfrom the 1,659,000 tons reported last year. Steel mill products hadshipments in the first half of 1,360,000 tons, 162,000 tons or 14%more than the prior year. Tubular products had shipments in the first half of646,000 tons, 185,000 tons or 40% higher compared to last year.Energy tubular shipments were 389,000 tons, up 49,000 tons from thesame period last year. Large diameter pipe shipments were 136,000 tons, up120,000 tons from the first half of 2005.

Plate and coil tonsproduced in the first half of 2006 were 1,848,000 tons compared to1,675,000 tons in the first half of 2005. During the first half of 2006,the average utilization rates of all operating facilities in the steel millsand tubular mills were approximately 96% and 84%, respectively, compared to 94%and 68% in the prior year.

Gross income of $541.0 millionfor the first half of 2006 was $43.1 million higher than the same periodlast year. Year-to-date gross margin declined from 34% to 30% due to increasesin input and conversion costs.

Selling, general andadministration expenses were $51.1 million during the first half of 2006,as compared to $34.5 million during the same period in 2005, an increaseof $16.6 million, or 48%. The impact of share price appreciation andadoption of FAS 123(R) increased administration expenses by $9.5 millioncompared to the prior year. Year-over-year, outside professional fees increased$2.6 million. Selling, general and administrative expenses represented 2.8%of sales compared to 2.4% in 2005.

Operating income per tonin the first half of 2006 was $244 per ton compared to $279 per ton in theprior period compared due to the factors previously discussed.

Interest expense onlong-term debt was $11.5 million, down 43% from $20.4 million in thefirst half of 2005. This reduction in the first half of 2006 compared to thefirst half of 2005 is the result of the reduction in long-term debt during 2005and 2006 from scheduled payments, redemptions and open market purchases.Interest income increased $9.2 million to $15.2 million due to higheraverage cash balances and interest rate increases compared to the prior period.

Our annual effectiveincome tax rate was 38.3% for the first half of 2006 versus 36% in the firsthalf of 2005 as previously referenced.

**Outlook**

Continued strong demandfor steel mill products is expected for the balance of 2006. IPSCO’s steel millcapacity is fully committed through the third quarter of this year, and weanticipate similar demand when we open the fourth quarter order book.Operations are expected to maintain strong performance, as scheduledmaintenance outages are minimal during the remainder of the year.

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We expect energy prices toremain high and therefore continue to drive high drilling activity and demandfor OCTG products. In addition, our large diameter spiral pipe facilities arebooked at full capacity through the third quarter of 2007.

We expect margins to bestable for the last half of the year. Excluding the effects of foreign exchangegains or losses and share price volatility, and assuming an effective tax rateof 38.3%, we forecast third quarter 2006 earnings to be in the range of $3.30to $3.50 per diluted share.

**Financial Position and Liquidity**

Cash at June 30, 2006was $602.0 million, a decrease of $61.3 million in the quarter. Netcash generated by operating activities for the three months ended June 30,2006 was $17.2 million compared to $179.8 million generated byoperating activities for the same period in 2005. This decrease of $162.6 millionwas primarily due to increased tax payments, a smaller reduction in accountsreceivable related to a smaller reduction in sales, and an increase ininventories. Cash invested in inventories was $89.0 million in the secondquarter of 2006 versus $60.9 million in 2005 primarily due to productionin anticipation of strong demand for tubular products in the second half of2006, and higher average inventory costs compared to the prior year.

Depreciation on the cashflow statement is lower than usual as a result of an adjustment betweendepreciation and capital expenditures between the first and second quarters.This adjustment does not affect the income statement. Going forward, we expectdepreciation to run between $18-20 million per quarter depending onthe capitalization of fixed assets.

Capital expenditures inthe second quarter of 2006 were $11.8 million, compared with $8.8 millionin the same period in 2005. In the prior year, capital expenditures focusedprimarily on maintenance projects. In 2006, in addition to maintenanceprojects, IPSCO has approved a number of projects targeted to reduce costs andadd value to our product lines. In February 2006, the Company approved theexpenditure of a total of $45.2 million for the installation of a vacuumdegasser at the Montpelier Steelworks and a coil preparation facility, as wellas other related enhancements to the large diameter spiral pipe mill operationslocated in Regina, Saskatchewan. Capital expenditures are anticipated to total approximately$100 million in 2006.

In May 2006, theCompany announced a new share repurchase program to purchase up to 4.7 millionof our common shares. In the second quarter of 2006, 934,700 common shares wererepurchased totaling $85.5 million versus 2,199,400 common sharespurchased totaling $104.9 million in the same quarter last year under theprevious repurchase program. Part II—Item 2 of this Report providesfurther information regarding share repurchases made over the quarter.

In May 2006, IPSCO’sBoard of Directors approved an 11% increase in the quarterly cash dividend onthe Company’s common shares from CDN $0.18 to $0.20 per share, paid on June 30,2006 to shareholders of record on June 15, 2006. On July 27, 2006,IPSCO’s Board of Directors declared a CDN $0.20 per share cash dividend on theCompany’s common shares, payable September 29, 2006 to shareholders ofrecord on September 15, 2006.

**Item 3.**                        Quantitativeand Qualitative Disclosures About Market Risk.

We are exposed to variousmarket risks, including commodity price risk, foreign currency risk andinterest rate risk. To help manage the volatility related to these risks, fromtime to time we enter into various derivative contracts, the majority of whichare settled in cash. Such settlements have not had a significant effect on ourliquidity in the past, nor are they expected to be significant in the future.We do not use derivatives for speculative or trading purposes.

**Commodity Price Risk**

IPSCO manages a portion ofour exposure to price risk related to natural gas purchases by using derivativefinancial instruments. Changes in the market value of these derivativeinstruments have a high correlation to changes in the spot price of naturalgas. Gains and losses from the use of these instruments are deferred inaccumulated other comprehensive losson the consolidated balance sheets and recognized into production costs in thesame period as the 

26

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underlyingtransaction. At June 30, 2006, accumulated other comprehensive lossincludes $0.2 million in unrealized net-of-tax losses****for the fairvalue of these instruments. A sensitivity analysis indicates that the reductionin the fair value of these instruments at June 30, 2006, due tohypothetical declines of 10% and 25% in market prices of natural gas at thattime would be $3.8 million and $9.5 million,respectively (June 30, 2005—$3.1 million and $7.5 million,respectively). Any resulting changes in fair value would be recorded asadjustments to other comprehensive income, net of tax. Because these instrumentsare hedges, these hypothetical losses would be offset by the benefit of lowerprices paid for the natural gas used in the normal production cycle.

**Interest Rate Risk**

IPSCO’s outstanding debtis fixed rate debt and IPSCO’s investment practice is to invest in highlyliquid money market funds or securities with short remaining maturities. As aresult, changes in interest rates are not expected to have a significant impacton the value of these investments. As such, future changes in interest rates arenot expected to impact interest expense or the value of cash equivalentinvestments. IPSCO does not engage in interest swaps to manage interest rateexposure.

**Foreign Currency Risk**

IPSCO is subject to theimpact of changes in exchange rates on revenues and operating costs, firmcommitments for capital expenditures and existing assets or liabilities(including certain inter-company balances), particularly changes in the valueof the U.S. dollar versus the Canadian dollar. At June 30, 2006, therewere no foreign exchange contracts outstanding.

**Item 4.**                        Controlsand Procedures.

**Evaluation of Disclosure Controls and Procedures**

Management, under thesupervision of the President and Chief Executive Officer and Senior VicePresident and Chief Financial Officer, has evaluated the effectiveness of theCompany’s disclosure controls and procedures as of June 30, 2006. Based onsuch evaluation, IPSCO’s President and Chief Executive Officer and Senior VicePresident and Chief Financial Officer have concluded that the disclosurecontrols and procedures were effective as of June 30, 2006, and that therehave been no significant changes in such controls and procedures, or in otherfactors, that could significantly affect these controls subsequent to theirevaluation date.

**Changes in Internal Control**

There were no changes inour internal control over financial reporting during the quarter ended June 30,2006 that have materially affected, or are reasonably likely to materiallyaffect, the Company’s internal control over financial reporting.

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**PART II—OTHER INFORMATION**

**Item 1.**                        LegalProceedings.

There have been nomaterial changes in legal proceedings since the issuance of the Company’s Form 10-Kfor the year ended December 31, 2005.

**Item 1A.**                RiskFactors.

There have been nomaterial changes in the risk factors provided in Item 1A of Part 1 ofthe Company’s Form 10-K for the year ended December 31, 2005.

**Item 2.**                        UnregisteredSales of Equity Securities and Use of Proceeds.

**Company Purchasesof Equity Securities**

In May 2006,IPSCO filed a normal course issuer bid (the “Bid”) with Canadian regulators torepurchase, by way of open market purchases on the TSX and NYSE, up to 4.7 millionof our common shares between May 9, 2006 and May 8, 2007. During thequarter ended June 30, 2006 we made the following purchases:

| ** **        | ** ** | **(a) Total Number of  Shares (or Units)  Purchased** | ** ** | **(b) Average Price  Paid per Share  (or Unit)** | ** ** | **(c) Total Number of   Shares (or Units)  Purchased as  Part of Publicly  Announced Plans  or Programs** | ** ** | **(d) Maximum Number  (or Approximate Dollar  Value) of Shares (or  Units) that May Yet be  Purchased Under the  Plans or Programs** | ** ** |
|-------------------|------------|--------------------------------------------------------------------------------|------------|---------------------------------------------------------------------------|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|
| **Period:**       |       |                                                                           |       |                                                                      |       |                                                                                                                                                             |       |                                                                                                                                                                                                            |       |
| April 1 - 30 |       | —                                                                         |       | —                                                                    |       | —                                                                                                                                                           |       | 4,700,000                                                                                                                                                                                                       |       |
| May 1 - 31   |       | 214,000                                                                        |       | $                                                                         | 92.08      | (1)                                                                                                                                                              | 214,000    |                                                                                                                                                                                                            | 4,486,000  |   |
| June 1 - 30  |       | 720,700                                                                        |       | $                                                                         | 91.30      | (2)                                                                                                                                                              | 934,700    |                                                                                                                                                                                                            | 3,765,300  |   |

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(1)                These repurchaseswere made pursuant to the Bid at an average price of CDN $102.16 per share(including commissions and fees). The average price noted above was convertedfrom Canadian to U.S. dollars using the Bank of Canada average exchange rate ineffect for May 2006 of 1.1095.

(2)                These repurchaseswere made pursuant to the Bid at an average price of CDN $101.69 per share(including commissions and fees). The average price noted above was convertedfrom Canadian to U.S. dollars using the Bank of Canada average exchange rate ineffect for June 2006 of 1.1138.

**Item 3.**                        DefaultsUpon Senior Securities.

None.

**Item 4.**                        Submissionof Matters to a Vote of Security Holders.

The annual and special meeting of the shareholders ofthe Company (the “Meeting”) was held on May 4, 2006. Of the 48,073,018 sharesentitled to be voted at the Meeting, 35,254,660 shares (or 73%) wererepresented at the Meeting in person or by proxy.

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The individuals listedbelow were re-elected (for a term of one year) as directors of the Company:

| Michael A. Grandin  |   | Richard G. Sim           |
|---------------------|--------|--------------------------|
| Juanita A.  Hinshaw |   | David S. Sutherland      |
| Burton M. Joyce     |   | Roger E. Tetrault        |
| Jack D. Michaels    |   | Gordon G. Thiessen, O.C. |
| Bernard M. Michel   |   | D. Murray Wallace        |
| Allan S. Olson      |   | John B. Zaozirny, Q.C.   |
| Arthur R. Price     |   |                     |

 

The shareholders electedthe above-noted slate of directors as follows:

| Number of shares voted FOR:  35,186,475 |
|-----------------------------------------|
| Number of shares  voted AGAINST: 0      |
| Number of shares  WITHELD: 62,385       |
| Number of shares  INVALID: 5,800        |
| Number of NON  VOTES: 0                 |

 

Theappointment of Ernst & Young LLP as the Company’s independent registeredpublic accounting firm was ratified by the shareholders as follows:

| Number of shares voted FOR:  35,184,157 |
|-----------------------------------------|
| Number of shares  voted AGAINST: 0      |
| Number of shares  WITHELD: 70,503       |
| Number of shares  INVALID: 0            |
| Number of NON  VOTES: 0                 |

 

The shareholders approvedthe Annual Incentive Plan for Senior Officers as follows:

| Number of shares voted FOR:  34,937,220  |
|------------------------------------------|
| Number of shares  voted AGAINST: 317,440 |
| Number of shares  WITHELD: 0             |
| Number of shares  INVALID: 0             |
| Number of NON  VOTES: 0                  |

 

**Item 5.**                        OtherInformation.

None.

**Item 6.**                        Exhibits.

| 31.1 |   | Certification of President and Chief Executive  Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.              |
|------|--------|--------------------------------------------------------------------------------------------------------------------------------------|
| 31.2 |   | Certification of Senior Vice President and Chief  Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of  2002. |
| 32.1 |   | Certification Pursuant to Section 906 of the Sarbanes-Oxley  Act of 2002.                                                       |

 

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Pursuant to the requirements of the SecuritiesExchange Act of 1934, the registrant has duly caused this report to be signed on its behalf bythe undersigned thereunto duly authorized.
|                            | **IPSCO INC.**(Registrant) |
|----------------------------|----------------------------|
| Date: August 1,  2006 | **By:**                    | **/s/ DAVID S. SUTHERLAND** |
|                       |                       | David S. Sutherland |
|                       | * *                   | *President and Chief Executive Officer* |
| Date: August 1,  2006 | **By:**                    | **/s/ VICKI L. AVRIL** |
|                       |                       | Vicki L. Avril |
|                       | * *                   | *Senior Vice President and Chief Financial Officer* |

 

30

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