Off Balance Sheet Arrangements:

The Houston cut-to-length facility (temper mill) sale and leaseback was completed in 2001. The arranger was LaSalle National Leasing Corporation and net proceeds received were $15.0 million through two tranches of $10.0 million on July 1, 2001 and $5 million on September 1, 2001. We have the option, but not the obligation, to purchase the leased equipment after seven years at $4.2 million or 7.5 years at the greater of $3.0 million or fair market value.

Other Long-Term Commitments:

We have entered into long-term electricity and natural gas supply agreements for the Regina, Montpelier and Mobile Steelworks, as well as service contracts to provide maintenance and logistics support to those steelworks.

Sources and Uses of Cash:

Cash provided by operating activities in 2006 was $434.2 million compared to $641.9 million in 2005, a decrease of $207.7 million. The reduction was due to higher inventories and lower payables, which were partially offset by increased income.

Cash generated by financing activities was $525.1 million in 2006 compared to a use of cash of $365.0 million in 2005.

On December 1, 2006, we completed the acquisition of NSG for $1.43 billion. In connection with the NSG acquisition on December 1, 2006 the Company entered into $1.1 billion of financing credit facilities which included a $750.0 million syndicated credit facility (five year $250.0 million term loan facility and $500.0 million revolving credit facility) and a 364 day $350.0 million bridge loan. It is expected that the $350.0 million bridge loan will be refinanced with the issuance of other indebtedness in 2007. During 2005, we redeemed all $71.4 million of our 7.32% Series B Senior Notes; purchased for cancellation on the open market, $56.0 million of the 8.75% Unsecured notes due June 1, 2013 and retired all CDN $100.0 million of the 7.80% Canadian Debentures due December 1, 2006.

In May 2006, we announced a share repurchase program, or “normal course issuer bid” to purchase up to 4.7 million of our common shares. Under the program, shares are repurchased in the open market at the market price at the time of purchase and are immediately cancelled upon settlement. In March 2005, we announced a similar Share Repurchase Program, to repurchase up to 4.2 million of our common shares. During 2006, we repurchased 934,700 shares for a total of US $85.5 million. During 2005, we repurchased 2,754,100 shares for a total of $132.9 million.

Dividends to holders of common shares were $32.6 million in 2006 compared to $22.8 million the prior year, resulting from an increase in the annual dividend to CDN $0.78 per share, the change in common shares outstanding due to shares issued pursuant to our share option plan and repurchases made pursuant to the normal course issuer bid. Cash received for 93,505 shares that were issued pursuant to the Company’s share option plan totaled $5.4 million in 2006 versus $21.1 million in 2005 for 1,030,040 options. As of December 31, 2006, there were 47,213,592 common shares issued and outstanding. In 2006, the quarterly cash dividend was increased from CDN $0.16 per share to CDN $0.20 per share with increases of CDN $0.02 per share approved in both February and March.

Capital Investments:

Total capital expenditures for 2006 were $101.1 million, an increase of $34.3 million over spending in 2005. Capital expenditures in 2006 for strategic, maintenance and compliance projects were $64.0 million and $37.0 million respectively.

Liquidity:

The principal indicators of our liquidity are our cash position and amounts available under our $750 million syndicated credit facility (revolving credit and term loan facility).

On December 1, 2006 in connection with the $1.1 billion financing entered into as part of the NSG acquisition, we replaced our existing committed $150 million revolving term facility (expiring November 19, 2007) with a committed unsecured revolving credit facility of $500 million (expiring December 2, 2011). The amount available is the total committed amount less direct borrowings and outstanding letters of credit. As of December 31, 2006, letters of credit of $30.2 million and short-term borrowings of $45 million were outstanding against the revolving credit facility resulting in $424.8 million of availability.

We have the right to request that our lenders under the $750 million syndicated credit facility increase the commitments under the revolving credit facility and/or add one or more incremental term loan facilities from time to time by up to a maximum aggregate amount of $500 million.

Principal financial covenants under the $750 million syndicated credit facility (which includes the revolving credit facility) require:

•                    consolidated indebtedness to capitalization ratio of not greater than 0.60:1.00 subject to debt rating of at least BBB- and Baa3 from S&P and Moody’s, respectively, in each case with at least stable outlook. Step-downs of 0.05:1:00 per annum occur if rating levels of BBB- and Baa3 are not maintained

•                    maintenance on a rolling four quarter basis of a consolidated interest coverage ratio of not less than 2.00:1.00 for measurement period ending on or after March 31, 2007

•                    dividends and purchase, redemptions, retirements and acquisition of our equity must be less than $500 million plus 50% of net income after January 1, 2007 plus net proceeds of any equity offering

The $750 million syndicated credit facility is also subject to other customary covenants and events of default. Non-compliance with any of the above covenants could result in accelerated payment of the related debt and termination of the revolving credit facility. We were in compliance with all covenants at December 31, 2006.

During 2006, our cash position decreased by $548.7 million to $34.4 million while the working capital ratio decreased from 4.3:1.0 to 3.4:1.0 primarily as a result of the NSG acquisition.

At December 31, 2006, the committed cost to complete in-process capital projects was $119.6 million. At the end of 2005, this amount was $26.7 million.

We expect that we will be able to finance future expenditures from our cash position, cash from operations and our credit facilities. We may also consider operating lease financing as well as additional debt or equity financing as may be appropriate.

From time to time, we make use of foreign currency contracts to manage our foreign exchange risks. At December 31, 2006 there were no foreign exchange contracts outstanding. We have entered into swap agreements to hedge the cost of purchasing natural gas through October 31, 2009. As of December 31, 2006, the unrealized loss under these contracts was $4.6 million compared to an unrealized gain of $11.8 million at the end of 2005.