Ipsco Inc. announced that due to continued strong operating earnings, it expects to eliminate the valuation allowance related to net operating losses in the United States.

Elimination of the allowance will occur in the third quarter of 2004 with the earnings impact being recognized in the third and fourth quarters. This will result in an effective annual income tax rate reduction of more than 5 percentage points from the 38% rate utilized in the first half of the year, adding a one-time contribution to 2004 annual earnings of approximately $0.60 per diluted share. This increase in earnings was not included in the company’s September 20, 2004 guidance.

The valuation allowance was originally recorded in accordance with Canadian and U.S. Generally Accepted Accounting Principles (GAAP). Ipsco has grown substantially in the United States since the start of the 1990s, with two new steel mills starting operation in 1997 and 2001. Construction difficulties at Montpelier contributed to start-up production problems and delayed market entry, which significantly contributed to the United States operating losses. Those losses, combined with the lack of earnings history in the United States, required Ipsco to recognize a valuation allowance against deferred tax benefits which were recognized on the United States net operating losses. Now that Ipsco has achieved strong earnings performance in the United States, the allowance is no longer necessary, as the net operating loss carry-forwards are being utilized.

"This marks a turning point in Ipsco's history where the lingering challenges of new construction and the introduction of new capacity to a new market are behind us. Ipsco in a short period of time has become the largest plate manufacturer in North America with a cost structure that is globally competitive," said David Sutherland, Ipsco's President and CEO.