SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
Pursuant to Rule 13a-16 or 15d-16 of
The Securities Exchange Act of 1934
Date of Report: October 20, 2004
NOVA Chemicals Corporation
1000, Seventh Avenue S.W., Calgary, Alberta, Canada, T2P 5L5
------------------------------------------------------------
(Address of principal executive offices)
Commission File Number: 1-13064
Indicate by check mark whether the registrant files or will file annual
reports under cover Form 20-F or Form 40-F.
Form 20-F Form 40-F X
---- ----
Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes No X
----- ----
If "Yes" is marked, indicate below the file number assigned to the
registrant in connection with Rule 12g3-2(b): 82- N/A .
A copy of the Registrant's:
(a) interim financial statements for the third quarter, three months
ended September 30, 2004;
(b) auditors' comfort letter related to the interim financial
statements; and
(c) updated detailed interest and asset coverage calculations related
to the interim financial statements
are furnished herewith and are incorporated by reference into the following
Registration Statements:
Registration Statement on Form S-8 #33-47673
Registration Statement on Form S-8 #333-520
Registration Statement on Form S-8 #333-9076
Registration Statement on Form S-8 #333-9078
Registration Statement on Form S-8 #33-86218
Registration Statement on Form S-8 #33-77308
Registration Statement on Form S-8 #333-11280
Registration Statement on Form S-8 #333-12910
Registration Statement on Form S-8 #333-101793
Registration Statement on Form S-8 #333-109424
Registration Statement on Form F-9 #333-13824
A copy of the Registrant's:
(d) section 302 certification of principal executive officer;
(e) section 302 certification of principal financial officer;
(f) certification of principal executive officer pursuant to 18
U.S.C. ss. 1350; and
(g) certification of principal financial officer pursuant to 18
U.S.C. ss. 1350
are furnished herewith.
Controls and Procedures
(a) Evaluation of disclosure controls and procedures. Our chief
executive officer and our chief financial officer, after
evaluating the effectiveness of the company's "disclosure
controls and procedures" (as defined in the Securities Exchange
Act of 1934 Rules 13a-15(e) and 15d-15(e)) as of the end of the
period covered by this report, have concluded that our disclosure
controls and procedures were adequate and designed to ensure that
material information relating to us and our consolidated
subsidiaries would be made known to them by others within those
entities.
(b) Changes in internal controls. There were no significant changes
in our internal control over financial reporting that occurred
during our last fiscal quarter that has materially affected, or
is reasonably likely to materially affect, our internal control
over financial reporting.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
NOVA Chemicals Corporation
/s/ Jack S. Mustoe
--------------------------------------------
Jack S. Mustoe
Senior Vice-President Legal & General Counsel
and Corporate Secretary
Date: October 20, 2004
EXHIBITS
--------
Attached hereto are:
(a) the interim financial statements of NOVA Chemicals Corporation
for the third quarter, three months ended September 30, 2004;
(b) auditors' comfort letter;
(c) updated detailed interest and asset coverage calculations related
to the interim financial statements;
(d) section 302 certification of principal executive officer;
(e) section 302 certification of principal financial officer;
(f) certification of principal executive officer pursuant to 18
U.S.C. ss. 1350; and
(g) certification of principal financial officer pursuant to 18
U.S.C. ss. 1350.
Exhibit (a)
NOVA Chemicals: Results Strengthen
PITTSBURGH--(BUSINESS WIRE)--Oct. 20, 2004--NOVA Chemicals
Corporation (NYSE:NCX) (TSX:NCX)
NOVA Chemicals will host a conference call today, Wednesday, Oct.
20, 2004, for investors and analysts at 1 p.m. EDT (11 a.m. MDT; 10
a.m. PDT). Media are welcome to join this call in a "listen only"
mode. The dial in number for this call is (416) 405-9328. The replay
number is (416) 695-5800 (Reservation No. 3099681). The live call is
also available on the Internet at www.vcall.com.
All financial information is in U.S. dollars unless otherwise
indicated.
NOVA Chemicals Corporation (NOVA Chemicals) reported net income to
common shareholders of $56 million ($0.60 per share diluted) for the
third quarter of 2004. This compares to net income to common
shareholders of $27 million ($0.30 per share diluted) in the second
quarter of 2004.
In the third quarter of 2003, NOVA Chemicals reported a net loss
to common shareholders of $65 million ($0.75 per share diluted). Net
income to common shareholders in the third quarter of 2004 rose $121
million compared to the third quarter of 2003.
"Net income from our Olefins/Polyolefins and Styrenics businesses
was up sharply from $36 million in the second quarter to $68 million
in the third quarter, despite higher feedstock costs. We experienced
stronger demand in all of our markets and hit an all-time quarter
high for polyethylene volume in a period that is normally limited by
summer slowdowns," said Jeff Lipton, NOVA Chemicals' President and
Chief Executive Officer.
"We closed the quarter with a strong cash position, even with
increases in working capital and the repurchase of 2.2 million shares
for $72 million. As we enter the fourth quarter, volume remains
strong, additional price increases are being implemented and our share
repurchase program remains on track."
The Olefins/Polyolefins business reported net income of $78
million in the third quarter, $19 million higher than the second
quarter. Polyethylene sales volumes were up, prices increased and
contributions from co-products remained strong.
The Styrenics business reported a net loss of $10 million in the
third quarter, versus a second quarter net loss of $23 million. Both
North American and European polymer results improved as prices
outpaced rising feedstock costs. Styrene monomer margins held steady
on slightly higher volumes despite the flow-through of much higher
benzene costs.
Corporate items reduced net income by $11 million in the third
quarter of 2004. This included a $21 million (after-tax)
mark-to-market charge resulting from the impact of NOVA Chemicals'
stock price appreciation on cash settled stock-based compensation
plans. This charge was somewhat offset by a $10 million after-tax gain
related to an income tax settlement.
-0-
NOVA Chemicals Highlights
(unaudited, millions of U.S. dollars except per share amounts and as
noted)
------------------------ -----------------
Three Months Ended Nine Months Ended
------------------------- -----------------
Sept. 30 June 30 Sept. 30 Sept. 30 Sept. 30
2004 2004 2003 2004 2003
-------- ------- -------- -------- --------
Net income (loss)
Olefins/Polyolefins $ 78 $ 59 $ (8) $ 172 $ (9)
Styrenics (10) (23) (39) (53) (98)
Corporate and other(1) (11) (7) (11) (21) 106
------ ------ ------- ------ -------
Operated business income
(loss) 57 29 (58) 98 (1)
Methanex - - - - 37
Preferred securities
dividends and
distributions(2) (1) (2) (7) (8) (22)
------ ------ ------- ------ -------
Net income (loss) to
common shareholders $ 56 $ 27 $ (65) $ 90 $ 14
------ ------ ------- ------ -------
------ ------ ------- ------ -------
Earnings (loss) per common
share
Basic $ 0.64 $ 0.31 $ (0.75) $ 1.03 $ 0.16
Diluted $ 0.60 $ 0.30 $ (0.75) $ 0.98 $ 0.16
Weighted-average common
shares outstanding
(millions)(3)
Basic 87 88 87 87 87
Diluted 96 97 87 96 88
Revenue $1,379 $1,238 $ 967 $3,743 $ 2,908
EBITDA(4) $ 164 $ 153 $ 20 $ 438 $ 142
Depreciation and
amortization $ 68 $ 77 $ 76 $ 225 $ 220
Funds from operations $ 141 $ 126 $ 4 $ 359 $ 85
Capital expenditures (net) $ 60 $ 39 $ 35 $ 142 $ 78
Average capital
employed(5) $3,328 $3,190 $ 3,204 $3,241 $ 3,214
After-tax return on
capital employed(6) 9.1 % 5.8 % (5.1)% 6.2 % 2.2%
Return on average common
equity(7) 16.9 % 8.7 % (21.7)% 9.4 % (11.7)%
(1) In the third quarter of 2004, NOVA Chemicals began classifying
mark-to-market amounts related to stock based compensation
liabilities in the corporate accounts to more clearly present our
operating performance and be consistent with a change in the way
results are reported to senior management. All prior periods have
been restated accordingly. See table on page 11.
(2) On Mar. 1, 2004, NOVA Chemicals redeemed $383 million of preferred
securities.
(3) Weighted average of common shares outstanding during the period
used to calculate the earning (loss) per share. See page 8,
footnote 5 for more information.
(4) Net income before income taxes, other gains and losses, earnings
from equity investment in affiliates, interest expense and
depreciation and amortization. This consolidated EBITDA for the
third quarter of 2004 includes EBITDA of $200 million from the
Olefins/Polyefins and Styrenics businesses less $36 million
related to the corporate items described in footnote 1 above. See
Consolidated Statement of Income and Supplemental Measures on page
10.
(5) Average capital employed equals cash expended on plant, property
and equipment (less accumulated depreciation and amortization) and
working capital, and excludes assets under construction and
investments. Amounts are converted to U.S. dollars using
quarter-end exchange rates. See Supplemental Measures on page 10.
(6) After-tax return on capital employed equals NOVA Chemicals' net
income plus after-tax interest expense (annualized) divided by
average capital employed. See Supplemental Measures on page 10.
(7) Return on average common equity equals annualized net income to
common shareholders divided by average common equity.
OLEFINS/POLYOLEFINS BUSINESS
Financial Highlights
(unaudited, millions of
U.S. dollars except as
noted) Three Months Ended Nine Months Ended
------------------------- -----------------
Sept. 30 June 30 Sept. 30 Sept. 30 Sept. 30
2004 2004 2003 2004 2003
-------- ------- -------- -------- --------
Revenue(1) $ 824 $ 785 $ 603 $2,318 $1,868
Operating income $ 137 $ 109 $ 7 $ 311 $ 45
Depreciation and
amortization 40 48 48 139 137
------ ------ ------ ------ ------
EBITDA(2) $ 177 $ 157 $ 55 $ 450 $ 182
Net income (loss)(3) $ 78 $ 59 $ (8) $ 172 $ (9)
Capital expenditures (net) $ 31 $ 12 $ 22 $ 66 $ 45
Average capital
employed(4) $1,942 $1,854 $1,892 $1,895 $1,885
After-tax return on
capital employed(5) 18.0 % 14.6 % 0.2 % 14.0 % 1.2 %
(1) Before intersegment eliminations.
(2) Net income (loss) before income taxes, other gains and losses,
interest expense and depreciation and amortization. See
Supplemental Measures on page 10.
(3) Before dividends and distributions on preferred securities.
(4) Average capital employed equals cash expended on plant, property
and equipment (less accumulated depreciation and amortization) and
working capital and excludes assets under construction. Amounts
are converted to U.S. dollars using quarter-end exchange rates.
(5) After-tax return on capital employed equals net income plus
after-tax interest expense (annualized) divided by average capital
employed.
Operating Highlights
Average Benchmark Prices(1)
(U.S. dollars per pound,
unless otherwise noted) Three Month Average Nine Month Average
------------------------- -------------------
Sept. 30 June 30 Sept. 30 Sept. 30 Sept. 30
2004 2004 2003 2004 2003
-------- ------- -------- --------- ---------
Ethylene(2) $ 0.33 $ 0.31 $ 0.28 $ 0.32 $ 0.29
Polyethylene - linear
low-density butene
liner(3) $ 0.48 $ 0.45 $ 0.39 $ 0.46 $ 0.43
Polyethylene - weighted-
average benchmark(4) $ 0.49 $ 0.46 $ 0.42 $ 0.47 $ 0.46
NYMEX natural gas
(dollars per mmBTU)(5) $ 5.84 $ 5.97 $ 5.10 $ 5.83 $ 5.73
WTI crude oil (dollars
per barrel) $43.88 $38.32 $30.20 $39.11 $30.99
(1) Average benchmark prices do not necessarily reflect actual prices
realized by NOVA Chemicals or any other petrochemical company.
(2) Source: Chemical Market Associates, Inc. (CMAI) USGC Net
Transaction Price. Includes estimate of $0.34 for the month of
September 2004.
(3) Source: Townsend Polymer Services Information (TPSI). TPSI's
benchmark polyethylene prices received a one-time downward,
non-market adjustment beginning in July 2003. The linear
low-density butene liner price was reduced by 5 cents per pound.
Months prior to July 2003 have not been restated by TPSI.
(4) Benchmark prices weighted according to NOVA Chemicals' sales
volume mix in North America. Source for benchmark prices: TPSI.
(5) Source: NYMEX Henry Hub 3-Day Average Close.
Polyethylene Sales Volumes
(millions of pounds) Three Months Ended Nine Months Ended
------------------------- -----------------
Sept. 30 June 30 Sept. 30 Sept. 30 Sept. 30
2004 2004 2003 2004 2003
-------- ------- -------- -------- --------
NOVAPOL(R)
Linear low-density
polyethylene 329 329 307 962 892
Low-density polyethylene 82 76 60 232 188
High-density
polyethylene 115 109 95 332 294
SCLAIR(R)
Linear low-density and
high-density
polyethylene 118 108 128 358 374
Advanced SCLAIRTECH(TM)
Linear low-density and
high-density
polyethylene 198 202 140 573 435
-------- ------- -------- -------- --------
Total 842 824 730 2,457 2,183
-------- ------- -------- -------- --------
-------- ------- -------- -------- --------
--------------------------------
NOVAPOL(R) is a registered trademark of NOVA Brands Ltd.;
authorized use.
SCLAIR(R) is a registered trademark of NOVA Chemicals Corporation
in Canada and of NOVA Chemicals (International) S.A. elsewhere;
authorized use.
Advanced SCLAIRTECH(TM) is a trademark of NOVA Chemicals.
Review of Operations
Olefins/Polyolefins
Third Quarter 2004
The Olefins/Polyolefins business reported net income of $78
million in the third quarter of 2004, compared to net income of $59
million in the second quarter of 2004. Strong polymer demand enabled
price increases and margin expansion. Continued strong co-product
contributions, primarily from our Corunna, Ontario flexi-cracker,
largely offset rising feedstock costs.
Feedstocks and Ethylene
Average NYMEX natural gas prices were down 2% from the second
quarter and average WTI crude oil prices were up 15%.
Our Joffre, Alberta ethane-based crackers' cash-cost advantage
averaged approximately 10 cents per pound for the quarter over typical
ethane-based U.S. Gulf Coast (USGC) ethylene plants. The increase in
the Alberta Advantage from 5 cents per pound in the second quarter was
driven by higher ethane prices on the U.S. Gulf Coast and declining
natural gas prices in Alberta.
Third party ethylene sales volumes were down versus the second
quarter, as Alberta-based customers modified order patterns.
Polyethylene
Third quarter weighted-average benchmark polyethylene prices were
up about 3 cents per pound from the second quarter of 2004. A 4 cents
per pound polyethylene price increase in North America announced July
1, was fully implemented by the end of the third quarter. Additional
price increases of 5 cents per pound were announced for Sept. 1 and 6
cents per pound for Oct. 1, 2004.
Total polyethylene sales volumes for the third quarter were up 2%
from the second quarter, and up 15% from the third quarter of 2003,
setting a new record. North American volumes were up 3% from the
second quarter, and international volumes were flat. International
sales represented 15% of NOVA Chemicals' total polyethylene sales
volume this quarter.
Advanced SCLAIRTECH(TM) Polyethylene
The Advanced SCLAIRTECH polyethylene plant, at Joffre, Alberta,
sold 198 million pounds of Advanced SCLAIRTECH polyethylene in the
third quarter of 2004 and sales of higher-margin performance grades,
including new rotational molding and thin wall injection molding
products, represented approximately 35% of plant capacity.
Third Quarter 2004 versus Third Quarter 2003
Net income of $78 million in the third quarter of 2004 was up from
a net loss of $8 million in the third quarter of 2003, primarily due
to strong industry operating rates driving up polyethylene margins, as
well as stronger co-product contributions. As reported by The American
Plastics Council (APC), industry operating rates for polyethylene in
North America improved from 83% in the third quarter of 2003 to 97% in
the third quarter of 2004. Effective industry operating rates for
ethylene in the United States, as reported by Chemical Market
Associates, Inc. (CMAI), for the third quarter of 2004 were 95%, up
from 88% in the third quarter of 2003.
First Nine Months of 2004 versus First Nine Months of 2003
Net income of $172 million in the first nine months of 2004 was up
from a net loss of $9 million in the first nine months of 2003. EBITDA
was also $268 million higher during the same period, due to strong
industry operating rates driving improvement in polyethylene margins,
as well as stronger co-product contributions. During the first nine
months of 2004, APC reported that North American industry operating
rates for polyethylene improved to 93%, up from 84% for the same
period in 2003. CMAI reported effective industry operating rates for
ethylene in the United States for the first nine months of 2004 of 95%
versus 87% for the same period in 2003.
Our ability to implement announced price increases depends on many
factors that may be beyond our control, including market conditions,
the supply/demand balance for each particular product and feedstock
costs. Successful price increases, when realized, are typically phased
in over several months, vary by product or market, and can be reduced
in magnitude during the anticipated implementation period. See
Forward-Looking Information on page 12.
-0-
STYRENICS BUSINESS
Financial Highlights
(unaudited, millions of U.S. dollars except as noted)
Three Months Ended Nine Months Ended
------------------------- -----------------
Sept. 30 June 30 Sept. 30 Sept. 30 Sept. 30
2004 2004 2003 2004 2003
-------- ------- -------- -------- --------
Revenue(1) $ 641 $ 518 $ 414 $1,633 $1,175
Operating loss $ (5) $ (20) $ (47) $ (44) $ (108)
Depreciation and
amortization 28 29 28 86 83
------ ------ ------ ------ ------
EBITDA(2) $ 23 $ 9 $ (19) $ 42 $ (25)
Net loss(3) $ (10) $ (23) $ (39) $ (53) $ (98)
Capital expenditures (net) $ 29 $ 27 $ 13 $ 76 $ 33
Average capital
employed(4) $1,405 $1,351 $1,308 $1,366 $1,318
After-tax return on
capital employed(5) (0.4)% (4.2)% (9.4)% (2.7)% (7.1)%
(1) Before intersegment eliminations.
(2) Net income (loss) before income taxes, other gains and losses,
interest expense and depreciation and amortization. See
Supplemental Measures on page 10.
(3) Before dividends and distributions on preferred securities.
(4) Average capital employed equals cash expended on plant, property
and equipment (less accumulated depreciation and amortization) and
working capital and excludes assets under construction. Amounts
are converted to U.S. dollars using quarter-end exchange rates.
(5) After-tax return on capital employed equals net income (loss) plus
after-tax interest expense (annualized) divided by average capital
employed.
Operating Highlights
Average Benchmark Prices(1)
(U.S. dollars per pound, Three Month Average Nine Month Average
unless otherwise noted)
------------------------- -------------------
Sept. 30 June 30 Sept. 30 Sept. 30 Sept. 30
2004 2004 2003 2004 2003
-------- ------- -------- -------- ----------
Styrene monomer(2) $0.66 $0.53 $0.40 $0.55 $0.41
Polystyrene - weighted-
average benchmark(3) $0.77 $0.65 $0.52 $0.67 $0.55
Benzene (dollars per
gallon)(2) $3.62 $2.41 $1.41 $2.64 $1.56
(1) Average benchmark prices do not necessarily reflect actual prices
realized by NOVA Chemicals or any other petrochemical company.
(2) Source: CMAI Contract Market. A 10 cents per gallon change in the
cost of benzene results in about a 1 cents per pound change in the
variable cost of producing styrene monomer.
(3) Benchmark prices weighted according to NOVA Chemicals' polystyrene
sales volume mix in North America and Europe. Includes solid and
expandable polystyrene, but excludes high performance styrenic
polymers. Source for benchmark prices: CMAI.
Styrenics Sales Volumes
(millions of pounds) Three Months Ended Nine Months Ended
------------------------- -----------------
Sept. 30 June 30 Sept. 30 Sept. 30 Sept. 30
2004 2004 2003 2004 2003
-------- ------- -------- -------- --------
Styrene monomer(1) 431 407 353 1,272 963
Solid and expandable
polystyrene 565 563 551 1,683 1,588
High performance styrenics
(including DYLARK(R) resins) 59 66 69 182 197
-------- ------- -------- -------- --------
Total 1,055 1,036 973 3,137 2,748
-------- ------- -------- -------- --------
-------- ------- -------- -------- --------
(1) Third-party sales only.
---------------------------
DYLARK(R) is a registered trademark of NOVA Chemicals Inc.
Review of Operations
Styrenics
Third Quarter 2004
The Styrenics business reported a net loss of $10 million in the
third quarter, compared to a net loss of $23 million in the second
quarter of 2004. Polymer margins improved in North America and Europe,
as price increases more than offset the flow-through of higher
feedstock costs. Average realized prices and margins increased across
all polymer businesses in North America and Europe.
Third-party styrene monomer sales volume was up 6% from the second
quarter, driven by improving global demand. North American and
European polymer volumes were essentially flat over the second
quarter.
Styrene Monomer
The USGC third quarter average spot price for styrene was 57 cents
per pound, up from the second quarter average price of 41 cents per
pound. Average third quarter benchmark contract pricing was 66 cents
per pound, up from the second quarter price of 53 cents per pound.
Feedstock costs continued to increase through the third quarter
and the benzene benchmark rose to an average of $3.62 per gallon, up
from the second quarter average of $2.41 per gallon. Benzene remains
extremely tight and prices continue to be very high as a percentage of
crude oil. The contract benzene price reached an all-time high of
$3.95 per gallon for September, and spot prices also reached new
all-time highs.
NOVA Chemicals announced price increases for North American
styrene monomer of 7 cents per pound effective July 1, 2004; 15 cents
per pound effective Aug. 1, 2004; 5 cents per pound effective Sept. 1,
2004; and 2 cents per pound effective Oct. 1, 2004.
In Europe, the third quarter average price for styrene monomer was
59 cents per pound, up from the second quarter price of 46 cents per
pound.
Solid Polystyrene (SPS)
The weighted-average North American SPS benchmark price increased
from the second quarter by 12 cents per pound. SPS margins expanded in
North America and Europe during the third quarter as prices rose
faster than feedstock flow-through costs.
NOVA Chemicals announced a price increase for North American SPS
of 3 cents per pound effective July 1, 2004; 4 cents per pound
effective Aug. 1, 2004; 12 cents per pound effective Aug. 16, 2004;
and 8 cents per pound effective Sept. 15, 2004.
NOVA Chemicals announced European SPS price increases of 6 cents
per pound effective July 1, 2004; 8 cents per pound effective Aug. 1,
2004; 8 cents per pound effective Sept. 1, 2004; and 5.5 cents per
pound effective Oct. 1, 2004.
Expandable Polystyrene (EPS)
EPS margins expanded during the third quarter in North America and
Europe as prices rose faster than feedstock flow-through costs.
NOVA Chemicals announced North American EPS price increases of 3
cents per pound effective July 1, 2004; 4 cents per pound effective
Aug. 1, 2004; 10 cents per pound effective Aug. 16, 2004; 8 cents per
pound effective Sept. 1, 2004; and 5 cents per pound effective Nov. 1,
2004.
NOVA Chemicals announced European EPS price increases of 5 cents
per pound effective July 1, 2004; 9 cents per pound effective Aug. 1,
2004; 8 cents per pound effective Sept. 1, 2004; 3 cents per pound
effective Oct. 1, 2004; and 2.5 cents per pound effective Nov. 1,
2004.
Third Quarter 2004 versus Third Quarter 2003
The Styrenics business had a net loss of $10 million in the third
quarter of 2004, compared to a net loss of $39 million in the third
quarter of 2003, primarily due to the expansion of margins in all of
our polymer businesses in North America and Europe as prices outpaced
rising feedstock costs.
First Nine Months of 2004 versus First Nine Months of 2003
The net loss of $53 million in the first nine months of 2004
improved from the net loss of $98 million in the first nine months of
2003, primarily due to the expansion of margins in all of our polymer
businesses in North America and Europe as prices outpaced rising
feedstock costs. Volume increased 14% over this period.
Our ability to implement announced price increases depends on many
factors that may be beyond our control, including market conditions,
the supply/demand balance for each particular product and feedstock
costs. Successful price increases, when realized, are typically phased
in over several months, vary by product or market, and can be reduced
in magnitude during the anticipated implementation period. See
Forward-Looking Information on page 12.
-0-
Liquidity and Capital Resources
Capitalization
(unaudited, millions of U.S. dollars except Sept. 30 June 30 Dec. 31
as noted) 2004 2004 2003
--------- ------- -------
Current debt(1) $ 100 $ - $ -
Long-term debt(2) 1,406 1,493 1,101
Less: cash and cash equivalents (233) (257) (212)
------ ------ ------
Total debt net of cash and cash equivalents 1,273 1,236 889
------ ------ ------
Shareholders' equity
9.50% preferred securities - - 210
9.04% preferred securities - - 173
Retractable preferred shares(3),(4) 198 198 198
------ ------ ------
198 198 581
Common share equity(5),(6),(7),(8),(9) 1,346 1,282 1,309
------ ------ ------
Total shareholders' equity 1,544 1,480 1,890
------ ------ ------
Total capitalization(10) $2,817 $2,716 $2,779
------ ------ ------
------ ------ ------
(1) A total of $100 million of 7% 10-year notes are due in September
2005.
(2) On Jan. 13, 2004, NOVA Chemicals issued $400 million of 6.5%
senior notes due 2012. Maturity dates for NOVA Chemicals' Current
and Long-term debt range from September 2005 to August 2028. The
2005 maturities total $103 million.
(3) Preferred shares of a subsidiary, paying dividends of 2%, which
are exchangeable into NOVA Chemicals' common shares.
(4) A total of 8,500,000 common shares (plus preferred shares if the
market value of such common shares is less than $198 million) have
been reserved for future issue under the terms of the retractable
preferred share agreement.
(5) Common shares outstanding at Oct. 15, 2004 were 86,431,167 (Sept.
30, 2004 - 86,396,602; June 30, 2004 - 87,758,083; Dec. 31, 2003 -
87,099,781).
(6) A total of 7,239,236 stock options were outstanding to officers
and employees on Sept. 30, 2004 to purchase common shares of NOVA
Chemicals. A total of 1,939,437 common shares were reserved but
unallocated. A total of 13 million common shares were initially
reserved for issuance under the Option Plan.
(7) A total of 47,800 shares were reserved for the Directors' Share
Compensation Plan.
(8) In May 2002, NOVA Chemicals' shareholders reconfirmed a
shareholder rights plan where one right was issued for each
outstanding common share. The plan expires May 2009.
(9) For the three months ended Sept. 30, 2004, 2,197,500 shares were
repurchased and 836,019 shares were issued upon the exercise of
stock options. For the three months ended June 30, 2004, 337,879
shares were issued upon the exercise of stock options. For the
three months ended March 31, 2004, 320,423 shares were issued upon
the exercise of stock options.
(10) Total capitalization reflects shareholders' equity and total debt
net of cash and cash equivalents (see Supplemental Measures on
page 10).
Senior Debt Ratings(1)
Senior Unsecured Debt
---------------------------------
DBRS BBB (low) (stable)
Fitch Ratings BB+ (stable)
Moody's Ba2 (negative)
Standard & Poor's BB+ (negative)
(1) Credit ratings are not recommendations to purchase, hold or sell
securities and do not comment on market price or suitability for a
particular investor. There is no assurance that any rating will
remain in effect for any given period of time or that any rating
will not be revised or withdrawn entirely by a rating agency in
the future.
Coverage Ratios
Twelve Months Ended
------------------------------------------
Sept. 30 June 30 Sept. 30
2004 2004 2003
-------------- -------------- ------------
Net debt to total
capitalization(1) 45.2% 45.5% 37.7%
Interest coverage on long- 2.3x 0.7x 0.3x
term debt(2)
Net tangible asset coverage 2.0x 2.0x 2.7x
on long-term debt(3)
(1) See Supplemental Measures on page 10.
(2) Interest coverage on long-term debt is equal to net income before
interest expense on long-term debt and income taxes, for the last
four quarters, divided by annual interest requirements on
long-term debt.
(3) Net tangible asset coverage on long-term debt is equal to total
assets (excluding deferred tax assets) less liabilities (excluding
long-term debt) divided by long-term debt.
Funds Flow and Changes in Cash and Debt
The following table shows major sources and uses of cash.
(unaudited, millions of U.S. Three Months Ended Nine Months Ended
dollars)
Sept. 30 Sept. 30
2004 2004
------------------- -----------------
Operating income $ 96 $ 213
Add back - depreciation and
amortization 68 225
---------- ----------
EBITDA(1) 164 438
Interest (25) (70)
Other gains and losses 12 13
Current tax expense and other (10) (22)
---------- ----------
Funds from operations 141 359
Operating working capital
increase (56) (154)
---------- ----------
Cash from operations 85 205
Asset sale proceeds 19 19
Capital expenditures (60) (142)
Project advances from third
parties 3 9
Turnaround costs and other
assets (4) (8)
Dividends paid (8) (29)
Common shares issued 13 25
Common shares repurchased (72) (72)
Preferred securities redemption - (383)
Foreign exchange and other (13) (8)
---------- ----------
Total change in cash and debt $ (37) $ (384)
---------- ----------
---------- ----------
Increase (decrease) in cash $ (24) $ 21
Increase in debt (13) (405)
---------- ----------
Total change in cash and debt $ (37) $ (384)
---------- ----------
---------- ----------
(1) Net income before income taxes, other gains and losses, earnings
from equity investment in affiliates, interest expense and
depreciation and amortization. See Consolidated Statement of
Income and Supplemental Measures on page 10.
NOVA Chemicals' net debt to total capitalization ratio was 45.2%
at Sept. 30, 2004. Cash on hand at the end of the third quarter was
$233 million, down from $257 million at the end of the second quarter
of 2004. During the third quarter, $72 million of cash was used to
repurchase 2.2 million common shares.
NOVA Chemicals' funds from operations were $141 million for the
third quarter of 2004, up $15 million from the second quarter of 2004
due to improved earnings during the quarter.
Operating working capital increased by $56 million in the third
quarter of 2004, related primarily to price increases and inventory
builds associated with a maintenance turnaround at our Corunna crude
unit. NOVA Chemicals assesses its working capital management
effectiveness through a Cash Flow Cycle Time (CFCT) measure. CFCT
measures working capital from operations in terms of the number of
days sales (calculated as working capital from operations divided by
average daily sales). This metric helps determine which portion of
changes in working capital result from factors other than price
movements. CFCT was 33 days as of Sept. 30, 2004, above our target
range of 25 to 30 days, and up from 29 days as of June 30, 2004, due
to higher inventories and as a result of the scheduled maintenance at
Corunna.
During the third quarter, NOVA Chemicals received $19 million from
the sale of its 100% interest in an ethylene delivery system in
Alberta. The gain of $19 million was deferred and will be amortized
over the life of an operating lease of the system. Capital
expenditures were $57 million (after third-party project advances) in
the third quarter of 2004, compared to $36 million in the second
quarter of 2004 and $35 million in the third quarter of 2003.
Selling, general and administrative expenses (SG&A) increased by
$21 million from the second quarter of 2004. SG&A was also up $32
million from the third quarter of 2003, and $60 million for the first
nine months of 2004 versus the first nine months of 2003. These
increases were primarily due to NOVA Chemicals' stock appreciation and
the $52 million pre-tax impact on the mark-to-market liability of our
stock-based compensation plans.
Depreciation and amortization declined $9 million in the third
quarter of 2004 versus the second quarter due to our second Joffre
ethylene plant being fully depreciated. Despite this decline,
depreciation for the first nine months of 2004 was up slightly from
the first nine months of 2003 due to the appreciation of the Canadian
dollar and euro.
Financing
NOVA Chemicals has a $300 million revolving credit facility,
expiring April 1, 2007. NOVA Chemicals continues to comply with all
financial covenants under the facility. As of Oct. 19, 2004, NOVA
Chemicals has utilized $53 million of the revolving credit facility in
the form of operating letters of credit.
During the third quarter of 2004, NOVA Chemicals increased the
capacity of its accounts receivable securitization program from $200
million to $250 million. As of Sept. 30, 2004, the amount of
receivables sold under this program was $226 million, compared to $200
million as of June 30, 2004.
Normal Course Issuer Bid
On July 21, 2004, NOVA Chemicals announced a share repurchase
program for up to approximately 7.5 million common shares. As of Oct.
19, 2004, 2.2 million common shares have been repurchased at an
average price of $43.29 Cdn.
FIFO Impact
NOVA Chemicals uses the first-in, first-out (FIFO) method of
valuing inventory. Most of NOVA Chemicals' competitors use the
last-in, first-out (LIFO) method. Because we use FIFO, a portion of
the second quarter feedstock purchases flowed through the income
statement in the third quarter. Benzene and crude oil prices continued
to increase through the third quarter and natural gas prices fell
slightly. Third quarter average NYMEX natural gas pricing was lower
than the second quarter average price by $0.13 per mmBTU and WTI crude
was higher by $5.56 per bbl. Benchmark benzene prices continued to
rise, starting the quarter at $2.60 per gallon and ending the quarter
at $3.95 per gallon. We estimate that net income would have been about
$42 million lower in the third quarter had NOVA Chemicals used the
LIFO method of accounting.
Feedstock Derivative Positions
NOVA Chemicals maintains a derivatives program to manage its
feedstock costs. The loss from natural gas and crude oil positions
realized in the third quarter of 2004 was $3 million after-tax ($2
million gain after-tax in the first half of the year).
In addition, NOVA Chemicals is required to record on its balance
sheet the market value of any outstanding feedstock positions that do
not qualify for hedge accounting treatment. The gain or loss resulting
from changes in the market value of positions is recorded through
earnings each period. NOVA Chemicals has recorded $11 million of
mark-to-market after-tax gains on outstanding feedstock derivative
positions since Jan. 1, 2004 (a $5 million gain in the first quarter,
a $1 million gain in the second quarter, and a $5 million gain in the
third quarter of 2004). This is in addition to the realized loss
reported above, bringing the total year-to-date gain to $10 million
after-tax.
Supplemental Measures
In addition to providing measures in accordance with Canadian
GAAP, NOVA Chemicals presents certain supplemental measures. These are
EBITDA (defined below), average capital employed (defined on page 2)
and after-tax return on capital employed (defined on page 2). It also
includes net debt to total capitalization (see page 8), with net debt
and total capitalization defined to be net of cash and cash
equivalents in accordance with the debt covenants for its $300 million
revolving credit facility. These measures do not have any standardized
meaning prescribed by GAAP and are therefore unlikely to be comparable
to similar measures presented by other companies.
EBITDA
This measure is provided to assist investors in determining the
ability of NOVA Chemicals to generate cash from operations. EBITDA can
be determined from the Consolidated Statement of Income by adding back
income taxes, interest expense, other gains and losses, earnings from
equity investment in affiliates and depreciation and amortization.
Segment EBITDA is determined as segment operating income or loss
before depreciation and amortization.
Corporate and other
A listing of after-tax corporate and other items for the periods
presented is as follows:
-0-
Three Months Ended Nine Months Ended
------------------------- -----------------
(unaudited, millions of Sept. 30 June 30 Sept. 30 Sept. 30 Sept. 30
U.S. dollars) 2004 2004 2003 2004 2003
Stock based
compensation(1) $(21) $(7) $ (1) $(31) $ (1)
Restructuring(2) - - (10) - (10)
IRS settlement 10 - - 10 -
Bayport charge(3) - - - - (8)
Gain on sale of
investments:
Methanex(4) - - - - 61
Fort Saskatchewan
Ethylene Storage(5) - - - - 64
-------- ------- -------- -------- -------
$(11) $(7) $(11) $(21) $106
---- --- ---- ---- ----
---- --- ---- ---- ----
(1) NOVA Chemicals has two cash settled stock-based incentive
compensation plans that are marked-to-market with changes in the
value of the common stock price. The market price on Sept. 30,
2004, was $38.70.
(2) In 2003, NOVA Chemicals announced the shutdown of its oldest,
highest-cost polyethylene production line at the St. Claire River
site in Ontario, Canada.
(3) NOVA Chemicals had an explosion, which resulted in a fire at its
Bayport, Texas styrene monomer manufacturing facility and as a
result incurred a charge of $13 million before-tax ($8 million
after-tax) primarily related to the amount of property damage not
covered by insurance.
(4) In the second quarter of 2003, NOVA Chemicals sold its interest in
Methanex Corporation, resulting in a gain of $29 million ($61
million after-tax) . A future income tax recovery of $32 million
was recorded to reverse income taxes provided for on Methanex
related equity earnings in prior periods. NOVA Chemicals has no
remaining equity interest in Methanex.
(5) In the second quarter of 2003, NOVA Chemicals sold its interest in
the Fort Saskatchewan Ethylene Storage Facility, resulting in a
gain of $76 million ($64 million after-tax).
NOVA Chemicals' share price on the New York Stock Exchange (NYSE)
increased to U.S. $38.70 at Sept. 30, 2004 from U.S. $28.93 at June
30, 2004. NOVA Chemicals' share value increased 34% for the quarter
ending Sept. 30, 2004 on the NYSE and 26% on the Toronto Stock
Exchange (TSX), while peer chemical companies' share values increased
12% on average and the S&P Chemicals Index increased 2%. The S&P/TSX
Composite Index was up 1% and the S&P 500 was down 2% in the third
quarter. As of Oct. 19, 2004, NOVA Chemicals' share price was U.S.
$37.33, down 3.5% from Sept. 30, 2004. The S&P Chemicals Index was
down 2% in the same period.
In the third quarter, approximately 64% of trading in NOVA
Chemicals' shares took place on the TSX and 36% of trading took place
in the U.S.
-0-
% of % of
Third quarter trading volumes Millions of Shares float trading
-------------------------------- ------------------ --------- --------
Toronto Stock Exchange 21.1 24 64
Consolidated U.S. Trading
Volumes 11.8 14 36
------------------ --------- --------
Total 32.9 38 100
------------------ --------- --------
------------------ --------- --------
----------------------------------------------------------------------
INVESTOR INFORMATION
For inquiries on stock-related Transfer Agents and Registrars
matters including dividend CIBC Mellon Trust Company
payments, stock transfers and 600 The Dome Tower
address changes, contact 333 Seventh Avenue S.W.
NOVA Chemicals toll-free at Calgary, Alberta, Canada T2P 2Z1
1-800-661-8686 or e-mail to
shareholders@novachem.com. Phone: (403) 232-2400/
1-800-387-0825
Contact Information Fax: (403) 264-2100
Phone: (403) 750-3600 (Canada) or Internet: www.cibcmellon.ca
(412) 490-4000 (United States) E-Mail: inquiries@cibcmellon.ca
Internet: www.novachemicals.com
E-Mail: invest@novachem.com Share Information
NOVA Chemicals' trading symbol on
NOVA Chemicals Corporation the New York and Toronto Stock
1000 Seventh Avenue S.W. Exchanges is NCX. On the TSX, NOVA
P.O. Box 2518 Chemicals is listed and traded in
Calgary, Alberta, Canada T2P 5C6 both Canadian and U.S. dollars.
The U.S. dollar trading symbol
If you would like to receive a on the TSX is NCX.U.
shareholder information package,
please contact us at
(403) 750-3600 or (412) 490-4000
or via e-mail at
publications@novachem.com.
We file additional information relating to NOVA Chemicals, including
our Annual Information Form (AIF), with Canadian securities
administrators. This information can be accessed through the System
for Electronic Document Analysis and Retrieval (SEDAR), at
www.sedar.com.
----------------------------------------------------------------------
Forward-Looking Information
The information in this news release contains forward-looking
statements with respect to NOVA Chemicals, its subsidiaries and
affiliated companies. By their nature, these forward-looking
statements involve risks and uncertainties that could cause actual
results to differ materially from those contemplated by the
forward-looking statements. These risks and uncertainties include:
commodity chemicals price levels (which depend, among other things, on
supply and demand for these products, capacity utilization and
substitution rates between these products and competing products);
feedstock availability and prices; operating costs; terms and
availability of financing; technology developments; currency exchange
rate fluctuations; starting up and operating facilities using new
technology; realizing synergy and cost savings targets; meeting time
and budget targets for significant capital investments; avoiding
unplanned facility shutdowns; safety, health and environmental risks
associated with the operation of chemical plants and marketing of
chemical products, including transportation of these products; public
perception of chemicals and chemical end-use products; the impact of
competition; changes in customer demand; changes in, or the
introduction of new laws and regulations relating to NOVA Chemicals'
business, including environmental, competition and employment laws;
loss of the services of any of NOVA Chemicals' executive officers;
uncertainties associated with the North American, European and Asian
economies; and other risks detailed from time to time in the publicly
filed disclosure documents and securities commissions reports of NOVA
Chemicals and its subsidiaries or affiliated companies.
Implementation of announced price increases depends on many factors,
including market conditions, the supply/demand balance for each
particular product and feedstock costs. Price increases have varying
degrees of success. They are typically phased in and can differ by
product or market. There can be no assurances that any announced price
increases will be successful or will be realized within the
anticipated time frame. In addition, benchmark price indices sometimes
lag price increase announcements due to the timing of publication.
CHANGES IN NET INCOME TO COMMON SHAREHOLDERS
(unaudited, millions of U.S. dollars)
Q3 2004 First Nine Months
Compared with 2004 Compared
----------------- With First Nine
Q2 2004 Q3 2003 Months 2003
-------- -------- ----------------
Higher net unit margins $ 34 $139 $ 256
Higher (lower) sales volumes (2) 22 86
---- ---- -------
Higher gross margin(1) 32 161 342
Higher research and development - - (1)
Higher selling, general and
administrative (21) (32) (60)
Lower restructuring charges - 15 15
(Higher) lower depreciation and
amortization 9 8 (5)
(Higher) lower interest expense (2) (2) 2
Lower equity earnings in Methanex - - (39)
Higher (lower) other gains and
losses 9 12 (79)
(Higher) lower income tax expense
(Note 4 to the Consolidated
Financial Statements) 1 (47) (113)
Lower preferred securities
dividends and distributions 1 6 14
---- ---- -------
Increase in net income to common
shareholders $ 29 $121 $ 76
---- ---- -------
---- ---- -------
(1) Revenue less feedstock and operating costs.
FINANCIAL STATEMENTS
Consolidated Statement of Income (Loss)
(unaudited, millions of U.S. dollars except per share amounts)
Three Months Ended Nine Months Ended
------------------------- -----------------
Sept. 30 June 30 Sept. 30 Sept. 30 Sept. 30
2004 2004 2003 2004 2003
-------- ------- -------- -------- --------
Revenue $1,379 $1,238 $ 967 $3,743 $2,908
------ ------ ------ ------ ------
Feedstock and operating
costs 1,124 1,015 873 3,080 2,587
Research and development 11 11 11 34 33
Selling, general and
administrative 80 59 48 191 131
Restructuring charges - - 15 - 15
Depreciation and
amortization 68 77 76 225 220
------ ------ ------ ------ ------
1,283 1,162 1,023 3,530 2,986
------ ------ ------ ------ ------
Operating income (loss) 96 76 (56) 213 (78)
------ ------ ------ ------ ------
Interest expense (net) (25) (23) (23) (70) (72)
Earnings from equity
investment in affiliates - - - - 39
Other gains and losses 12 3 - 13 92
------ ------ ------ ------ ------
(13) (20) (23) (57) 59
------ ------ ------ ------ ------
Income (loss) before
income taxes 83 56 (79) 156 (19)
Income tax (expense)
recovery (Note 4) (26) (27) 21 (58) 55
------ ------ ------ ------ ------
Net income (loss) 57 29 (58) 98 36
Preferred securities
dividends and
distributions (1) (2) (7) (8) (22)
------ ------ ------ ------ ------
Net income (loss) to
common shareholders $ 56 $ 27 $ (65) $ 90 $ 14
------ ------ ------ ------ ------
------ ------ ------ ------ ------
Earnings (loss) per share
(Note 5)
- basic $ 0.64 $ 0.31 $(0.75) $ 1.03 $ 0.16
- diluted $ 0.60 $ 0.30 $(0.75) $ 0.98 $ 0.16
Notes to the Consolidated Financial Statements appear on pages 16
to 20.
Consolidated Statement of Reinvested Earnings
(unaudited, millions of U.S. dollars)
Three Months Ended Nine Months Ended
------------------------- -----------------
Sept. 30 June 30 Sept. 30 Sept. 30 Sept. 30
2004 2004 2003 2004 2003
-------- ------- -------- -------- --------
Reinvested earnings,
beginning of period $597 $577 $677 $ 584 $605
Change in accounting
policy (Note 1) - - - (7) 5
Net income (loss) 57 29 (58) 98 36
Common share dividends (7) (7) (6) (21) (18)
Preferred securities
dividends and
distributions (1) (2) (7) (8) (22)
Common share and stock
option repurchase (net) (59) - - (59) -
---- ---- ---- ----- ----
Reinvested earnings, end
of period $587 $597 $606 $ 587 $606
---- ---- ---- ----- ----
---- ---- ---- ----- ----
Consolidated Balance Sheet
(millions of U.S. dollars) Sept. 30, 2004 Dec. 31, 2003
(unaudited)
-------------- -------------
Assets
Current assets
Cash and cash equivalents $ 233 $ 212
Receivables 488 316
Inventories 575 392
------ ------
1,296 920
Investments and other assets 153 157
Plant, property and equipment, net 3,308 3,336
------ ------
$4,757 $4,413
------ ------
------ ------
Liabilities and Shareholders' Equity
Current liabilities
Accounts payable and accrued
liabilities $ 728 $ 587
Long-term debt due within one year 100 -
------ ------
828 587
Long-term debt 1,406 1,101
Future income taxes 639 586
Deferred credits 340 249
------ ------
3,213 2,523
------ ------
Shareholders' equity
Preferred securities - 383
Retractable preferred shares 198 198
Common equity
Common shares 504 493
Contributed surplus (Note 1) 9 -
Cumulative translation adjustment 246 232
Reinvested earnings 587 584
------ ------
1,544 1,890
------ ------
$4,757 $4,413
------ ------
------ ------
Notes to the Consolidated Financial Statements appear on pages 16
to 20.
Consolidated Statement of Cash Flows
(unaudited, millions of U.S. dollars)
Three Months Ended Nine Months Ended
------------------------- -----------------
Sept. 30 June 30 Sept. 30 Sept. 30 Sept. 30
2004 2004 2003 2004 2003
-------- ------- -------- -------- --------
Operating activities
Net income (loss) $ 57 $ 29 $ (58) $ 98 $ 36
Depreciation and
amortization 68 77 76 225 220
Future income tax
expense (recovery) 15 19 (23) 33 (63)
Earnings from equity
investment in
affiliates - - - - (39)
Dividends received - - - - 14
Asset write down - - 9 - 9
Gain on asset sales - - - - (92)
Stock option expense 1 1 - 3 -
---- ---- ----- ------ -----
Funds from operations 141 126 4 359 85
Changes in non-cash
working capital (56) (42) 13 (154) (97)
---- ---- ----- ------ -----
Cash from (used in)
operations 85 84 17 205 (12)
---- ---- ----- ------ -----
Investing activities
Proceeds on asset sales 19 - - 19 564
Plant, property and
equipment net
additions (60) (39) (35) (142) (78)
Turnaround costs, long-
term
investments and other
assets (4) 1 (6) (8) (55)
Changes in non-cash
working capital - - (2) - 10
---- ---- ----- ------ -----
(45) (38) (43) (131) 441
---- ---- ----- ------ -----
Financing activities
Decrease in current bank
loans - - - - (3)
Long-term debt
Additions - - - 400 -
Repayments - - (151) - (152)
Changes in revolving
debt - - (2) - (2)
Preferred securities
redeemed - - - (383) -
Preferred securities
dividends and
distributions (1) (2) (7) (8) (22)
Common shares issued 13 7 3 25 6
Common share repurchase (72) - - (72) -
Stock option repurchase (1) - - (1) -
Common share dividends (7) (7) (6) (21) (18)
Project advances from
third parties 3 3 - 9 -
Changes in non-cash
working capital 1 2 1 (2) -
---- ---- ----- ------ -----
(64) 3 (162) (53) (191)
---- ---- ----- ------ -----
Increase (decrease) in
cash (24) 49 (188) 21 238
Cash and cash equivalents,
beginning
of period 257 208 440 212 14
---- ---- ----- ------ -----
Cash and cash equivalents,
end
of period $233 $257 $ 252 $ 233 $ 252
---- ---- ----- ------ -----
---- ---- ----- ------ -----
Cash tax payments
(refunds) $ (5) $ 8 $ (15) $ 6 $ (32)
---- ---- ----- ------ -----
---- ---- ----- ------ -----
Cash interest payments $ 34 $ 17 $ 27 $ 73 $ 78
---- ---- ----- ------ -----
---- ---- ----- ------ -----
Notes to the Consolidated Financial Statements appear on pages 16
to 20.
Notes to Consolidated Financial Statements
(unaudited; millions of U.S. dollars unless otherwise noted)
These interim consolidated financial statements do not include all
of the disclosures included in NOVA Chemicals' annual Consolidated
Financial Statements. Accordingly, these interim consolidated
financial statements should be read in conjunction with the
Consolidated Financial Statements for the year ended Dec. 31, 2003.
Certain comparative amounts have been reclassified to conform with the
current period's presentation.
1. Significant Accounting Policies
These interim Consolidated Financial Statements have been prepared
in accordance with Canadian GAAP, using the same accounting policies
as set out in Note 2 to the Consolidated Financial Statements for the
year ended Dec. 31, 2003, on pages 53 to 57 of the 2003 Annual Report,
except as noted below.
Changes in Accounting Policies Required by Canadian GAAP
A. Stock Option Plan
Effective Jan. 1, 2004, Canadian GAAP requires the fair value of
options to be expensed over their vesting period. Prior to Jan. 1,
2004, NOVA Chemicals followed the intrinsic-value approach, where the
granting and exercising of stock options are accounted for as equity
transactions and no amounts are expensed.
NOVA Chemicals adopted the new accounting policy on a retroactive
basis with no restatement of prior periods. Accordingly, on Jan. 1,
2004, retained earnings was reduced and contributed surplus was
increased by $7 million to account for the stock option expense that
would have been charged to earnings (loss) in 2002 and 2003 with
respect to all stock options granted since Jan. 1, 2002. NOVA
Chemicals uses the Black-Scholes option valuation model to calculate
the fair value of stock options at the date of grant. In the first
nine months of 2004, compensationexpense related to stock options was
$3 million after-tax, which serve to increase contributed surplus.
Effective Jan. 1, 2004, NOVA Chemicals also changed its accounting
policy with respect to stock options for U.S. GAAP reporting, to be
consistent with Canadian GAAP.
Had NOVA Chemicals expensed the fair value of stock options in
prior periods, the following pro forma amounts would have resulted:
-0-
Three Months Ended Nine Months Ended
Sept. 30 Sept. 30
2003 2003
------------------ -----------------
Net income
As reported $ (58) $ 36
Pro forma $ (58) $ 34
Earnings per share - basic and
diluted
As reported $(0.75) $0.16
Pro forma $(0.75) $0.13
The weighted-average assumptions used to estimate the fair value of
stock options granted since Jan. 1, 2002, based on the Black-Scholes
option valuation model are as follows:
Three and Nine Months Ended
-------------------------------
Sept. 30 Sept. 30
2004 2003
--------------- ---------------
Risk-free interest rate % 3.68 3.82
Expected volatility % 37.3 37.8
Expected life years 3.4 3.3
Expected dividend yield % 1.20 1.21
Grant date fair value $ 6.56 6.39
B. Valuing Derivatives
Effective Jan. 1, 2004, NOVA Chemicals adopted a new Canadian
accounting policy that requires all derivative positions, except those
that qualify for hedge accounting treatment, to be marked-to-market at
each period end with any resulting gains or losses recorded in
earnings (loss).
NOVA Chemicals adopted the new accounting policy on a prospective
basis. In accordance with the transitional provisions of the new
accounting policy, unrealized gains and losses that existed on Jan. 1,
2004 have been deferred on the consolidated balance sheet. These
amounts will be recognized in income over the remaining term to
maturity. In the first nine months of 2004, $11 million of unrealized
after-tax gains on derivatives have been recorded in earnings,
representing the increase in market value since Jan. 1, 2004.
-0-
2. Pensions and Other Post-Retirement Benefits
Components of Three Months Ended Nine Months Ended
Net Periodic Sept. 30 Sept. 30
Benefit Cost
for Defined
Benefit Plans
------------------------------------------ ---------------------------
Pension Other Pension Other
Benefits Benefits Benefits Benefits
------------- ------------- ------------- -------------
(millions of
U.S. dollars) 2004 2003 2004 2003 2004 2003 2004 2003
----- ----- ----- ----- ----- ----- ----- -----
Current
service cost $ 6 $ 5 $ - $ - $ 18 $ 15 $ 2 $ -
Interest cost
on projected
benefit
obligations 9 7 1 1 25 23 3 3
Expected
return on
plan assets (8) (7) - - (22) (19) - -
Amortization
of transition
asset (1) (1) - - (3) (3) 1 -
Amortization
of prior
service costs 1 1 - - 1 1 - -
Recognized net
actuarial
loss 1 1 1 - 3 3 1 -
----- ----- ----- ----- ----- ----- ----- -----
Net periodic
benefit cost $ 8 $ 6 $ 2 $ 1 $ 22 $ 20 $ 7 $ 3
----- ----- ----- ----- ----- ----- ----- -----
----- ----- ----- ----- ----- ----- ----- -----
The expected long-term rate of return on plan assets is 7.3% in
2004.
Employer Contributions
In the 2003 Annual Report, NOVA Chemicals disclosed that it
expected to contribute $27 million to its defined benefit pension
plans in 2004. As of Sept. 30, 2004, $22 million has been contributed,
and the company expects to contribute an additional $5 million over
the remainder of the year.
As of Sept. 30, 2004, NOVA Chemicals has contributed $5 million to
its defined contribution plans and is expected to contribute an
additional $2 million over the remainder of 2004.
-0-
3. Interest Expense
Components of Interest Expense
----------------------------------------------------------------------
Three Months Ended Nine Months Ended
------------------------- ------------------
Sept. 30 June 30 Sept. 30 Sept. 30 Sept. 30
2004 2004 2003 2004 2003
-------- ------- -------- -------- ---------
Interest on long-term
debt $ 25 $ 23 $ 23 $ 69 $ 68
Interest on
securitizations and
other 2 1 1 6 6
---- ---- ---- ---- ----
Gross interest expense 27 24 24 75 74
Interest capitalized
during plant
construction - (1) - (1) -
Interest income (2) - (1) (4) (2)
---- ---- ---- ---- ----
Interest expense (net) $ 25 $ 23 $ 23 $ 70 $ 72
---- ---- ---- ---- ----
---- ---- ---- ---- ----
4. Income Taxes
Three Months Ended Nine Months Ended
-------------------------- -----------------
Sept. 30 June 30 Sept. 30 Sept. 30 Sept. 30
2004 2004 2003 2004 2003
-------- -------- -------- -------- --------
Income (loss) before
income taxes $ 83 $ 56 $ (79) $ 156 $ (19)
Statutory income tax rate 33.87 % 33.87 % 36.74 % 33.87 % 36.74 %
------- ------- ------- ------- -------
Computed income tax
expense (recovery) $ 28 $ 19 $ (29) $ 53 $ (7)
Increase (decrease) in
taxes resulting from:
Manufacturing and
processing
deduction - - - - (2)
Lower effective tax
rate on
earnings from equity
investment in
affiliates - - - - (12)
Lower tax rates
on other gains (2) - - (2) (56)
Additional cost-of-
service income
taxes (1) - 2 2 4 6
Foreign tax rates (2) 4 4 2 16
Income tax rate
adjustment(2) - - - (7) -
Other 2 2 2 8 -
------- ------- ------- ------- -------
Income tax expense
(recovery) $ 26 $ 27 $ (21) $ 58 $ (55)
------- ------- ------- ------- -------
------- ------- ------- ------- -------
(1) Income taxes on the Joffre, Alberta second ethylene plant were
recoverable from customers until June 30, 2004 and were recorded
on the flow-through rather than liability method. Subsequent to
June 30, 2004, income taxes are being recorded on the liability
method.
(2) In the first quarter of 2004, the Alberta Government substantively
enacted a tax rate reduction, which reduced income tax accruals
for future tax liabilities by $7 million. This one-time benefit
has been recorded in the first quarter of 2004 through a reduction
of income tax expense.
5. Earnings (Loss) Per Share
(shares in Three Months Ended
millions)
---------------------------------------------
Sept. 30 June 30 Sept. 30
2004 2004 2003
-------------- -------------- ---------------
Basic Diluted Basic Diluted Basic Diluted
Net income (loss) to
common shareholders $ 56 $ 56 $ 27 $ 27 $ (65) $ (65)
Preferred dividends - 1 - 2 - -
----- ----- ----- ----- ------ ------
Net income (loss) for
EPS calculation $ 56 $ 57 $ 27 $ 29 $ (65) $ (65)
----- ----- ----- ----- ------ ------
----- ----- ----- ----- ------ ------
Weighted-average
common shares
outstanding 87.2 87.2 87.6 87.6 86.8 86.8
Add back effect of
dilutive securities:
Stock options - 2.7 - 2.0 - -
Retractable preferred
shares - 6.0 - 7.3 - -
----- ----- ----- ----- ------ ------
Weighted-average
common shares for
EPS calculations 87.2 95.9 87.6 96.9 86.8 86.8
----- ----- ----- ----- ------ ------
Earnings (loss) per
common share $0.64 $0.60 $0.31 $0.30 $(0.75) $(0.75)
----- ----- ----- ----- ------ ------
----- ----- ----- ----- ------ ------
Nine Months Ended
-----------------------------
Sept. 30 Sept. 30
2004 2003
-------------- --------------
Basic Diluted Basic Diluted
Net income (loss) to common shareholders $ 90 $ 90 $ 14 $ 14
Preferred dividends - 4 - -
----- ----- ----- -----
Net income (loss) for EPS calculation $ 90 $ 94 $ 14 $ 14
----- ----- ----- -----
----- ----- ----- -----
Weighted-average common shares
outstanding 87.4 87.4 86.8 86.8
Add back effect of dilutive securities:
Stock options - 2.2 - 0.7
Retractable preferred shares - 6.9 - -
----- ----- ----- -----
Weighted-average common shares for EPS
calculations 87.4 96.5 86.8 87.5
----- ----- ----- -----
Earnings (loss) per common share $1.03 $0.98 $0.16 $0.16
----- ----- ----- -----
----- ----- ----- -----
No retractable preferred shares or stock options have been
excluded from the computation of diluted earnings per share for the
quarters ended Sept. 30 and June 30, 2004. A total of 17.6 million
common shares were excluded in the quarter ended Sept. 30, 2003, as
their impact would not have been dilutive.
Options become dilutive when the market price is higher than the
strike price and NOVA Chemicals is profitable. The amount of dilution
will vary with the stock price. The retractable preferred shares are
only dilutive if our earnings per share is greater than the preferred
share dividend divided by the number of shares issued on conversion.
At today's common share price and LIBOR rate, these shares become
dilutive whenever earnings are greater than approximately $0.26 per
share per quarter.
6. Segmented Information
NOVA Chemicals operates its business under the following principal
business segments:
Three Months Ended Nine Months Ended
------------------------- ------------------
Sept. 30 June 30 Sept. 30 Sept. 30 Sept. 30
2004 2004 2003 2004 2003
-------- ------- -------- -------- ---------
Revenue
Olefins/Polyolefins $ 824 $ 785 $603 $2,318 $1,868
Styrenics 641 518 414 1,633 1,175
Intersegment
eliminations (86) (65) (50) (208) (135)
------ ------ ---- ------ ------
$1,379 $1,238 $967 $3,743 $2,908
------ ------ ---- ------ ------
------ ------ ---- ------ ------
Operating income (loss)
Olefins/Polyolefins $ 137 $ 109 $ 7 $ 311 $ 45
Styrenics (5) (20) (47) (44) (108)
Corporate and other (36) (13) (16) (54) (15)
------ ------ ---- ------ ------
$ 96 $ 76 $(56) $ 213 $ (78)
------ ------ ---- ------ ------
------ ------ ---- ------ ------
Net income (loss)(1)
Olefins/Polyolefins $ 78 $ 59 $ (8) $ 172 $ (9)
Styrenics (10) (23) (39) (53) (98)
Investment in Methanex - - - - 37
Corporate and other (11) (7) (11) (21) 106
------ ------ ---- ------ ------
$ 57 $ 29 $(58) $ 98 $ 36
------ ------ ---- ------ ------
------ ------ ---- ------ ------
(1) Before preferred securities dividends and distributions.
Sept. 30 Dec. 31
2004 2003
-------------- -------------
Assets
Olefins/Polyolefins $2,346 $2,246
Styrenics 2,005 1,767
Corporate and other(1) 406 400
-------------- -------------
$4,757 $4,413
-------------- -------------
-------------- -------------
(1) Amounts include all cash and cash equivalents.
7. Reconciliation to United States Accounting Principles
Three Months Ended Nine Months Ended
------------------------- -----------------
Sept. 30 June 30 Sept. 30 Sept. 30 Sept. 30
2004 2004 2003 2004 2003
-------- ------- -------- -------- --------
Net income (loss) in
accordance with Canadian
GAAP $ 57 $ 29 $ (58) $ 98 $ 36
Add (deduct) adjustments
for:
Foreign exchange
hedging(1) - - - - 3
Other hedging and
derivative activity(1) (2) 3 (1) 2 (13)
Equity in earnings of
affiliates - - - - (1)
Inventory costing(2) 1 - - 3 (1)
Start-up costs(3) 4 1 1 2 3
Preferred securities
distributions(4) - - (5) (4) (17)
Other - - 1 - 1
Change in accounting
policy(5) - - - (7) 5
Other gains - - - - 42
Future income taxes(8) - 7 - - -
----- ----- ------ ----- -----
Net income (loss) in
accordance with U.S. GAAP $ 60 $ 40 $ (62) $ 94 $ 58
----- ----- ------ ----- -----
----- ----- ------ ----- -----
Earnings (loss) per share
- basic $0.68 $0.44 $(0.74) $1.03 $0.61
----- ----- ------ ----- -----
----- ----- ------ ----- -----
Earnings (loss) per share
- diluted $0.63 $0.41 $(0.74) $0.98 $0.60
----- ----- ------ ----- -----
----- ----- ------ ----- -----
Three Months Ended Nine Months Ended
------------------------- -----------------
Sept. 30 June 30 Sept. 30 Sept. 30 Sept. 30
2004 2004 2003 2004 2003
-------- ------- -------- -------- --------
Comprehensive income
(loss) (6)
Net income (loss) in
accordance with U.S. GAAP $60 $40 $(62) $94 $58
Change in fair value of
cash flow hedging
instruments(1) - - - - 4
Equity in affiliates
comprehensive income - - - - (3)
Cumulative translation
adjustment(9) 75 (36) 10 14 239
-------- ------- -------- -------- --------
Comprehensive income
(loss) in accordance with
U.S. GAAP $135 $4 $(52) $108 $298
-------- ------- -------- -------- --------
-------- ------- -------- -------- --------
Nine Months Ended
------------------------
Sept. 30 Sept. 30
2004 2003
------------ -----------
Accumulated other comprehensive income(6)
Cumulative translation adjustment(9) $225 $109
Minimum pension liability(7) (4) (1)
------------ -----------
$221 $108
------------ -----------
------------ -----------
Sept. 30 Dec. 31
2004 2003
----------- ------------
Balance sheet in accordance with U.S. GAAP
Current assets(1), (2) $ 1,324 $ 959
Investments and other assets(3),(7) 144 157
Plant, property and equipment, net 3,283 3,311
Current liabilities(1) (806) (585)
Long-term -- preferred securities(4) - (383)
-- other long-term debt(1) (1,419) (1,122)
Deferred credits(1),(7) (975) (829)
Retractable preferred shares (198) (198)
------- -------
Common equity $ 1,353 $ 1,310
------- -------
------- -------
(1) On Jan. 1, 2001, NOVA Chemicals adopted (for U.S. GAAP purposes)
Statement of Financial Accounting Standards (SFAS) No. 133,
"Accounting for Derivative Instruments and Hedging Activities," as
amended. SFAS No. 133 requires the recognition of all derivatives
on the balance sheet at fair value. Derivatives that do not
qualify for preferential hedge accounting treatment must be
adjusted to fair value through income. If the derivative does
qualify, changes in the fair value of the derivative will either
be offset against the change in fair value of the hedged item and
reported in earnings, or recognized in other comprehensive income
until the hedged item is recognized in earnings. On Jan. 1, 2004,
NOVA Chemicals adopted a new Canadian GAAP guideline for recording
the fair value of derivatives. This guideline harmonizes Canadian
and U.S. GAAP, however, due to the differing implementation dates,
timing differences continue to exist.
(2) U.S. GAAP requires an allocation of fixed production overhead to
inventory. Canadian GAAP allows these costs to be expensed during
the period.
(3) U.S. GAAP requires that all costs (except interest on constructed
assets) associated with start-up activities be expensed as
incurred rather than deferred, as under Canadian GAAP.
(4) Under U.S. GAAP distributions on the preferred securities are
recorded as interest expense. The preferred securities were
redeemed by NOVA Chemicals on Mar. 1, 2004.
(5) On Jan. 1, 2003, the company adopted SFAS No. 143 "Accounting for
Asset Retirement Obligations." This standard and the CICA
standard, also adopted on Jan. 1, 2003, are essentially the same.
On Jan. 1, 2004, NOVA Chemicals adopted the CICA standard for
expensing of stock options (as discussed in Note 1). This standard
was also adopted for U.S. GAAP on that date. Under U.S. GAAP, the
cumulative effect of adopting a new standard is reflected in net
income in the period of adoption, whereas under Canadian GAAP it
is reflected as a charge or credit to reinvested earnings.
(6) U.S. GAAP requires the presentation of a separate statement of
comprehensive income (loss) and accumulated other comprehensive
income. This statement is not required under Canadian GAAP.
Comprehensive income (loss) includes certain changes in equity
during the period that are not in net income.
(7) U.S. GAAP requires that an additional minimum pension liability be
recorded through comprehensive income (loss) when the unfunded
accumulated benefit obligation is greater than the accrued pension
liability or if there is a prepaid pension asset.
(8) U.S. GAAP future income taxes are not adjusted for changes in tax
rates until they are enacted, whereas Canadian GAAP requires
adjustment when rate changes are substantively enacted.
(9) Gains (losses) resulting from translation of self-sustaining
foreign operations are recorded in other comprehensive income
until there is a realized reduction in the investment.
CONTACT: NOVA Chemicals Corporation
Investor Relations: Beth Eckenrode, 412-490-4331
Media Relations: Greg Wilkinson, 412-490-4166
Exhibit (b)
October 20, 2004
British Columbia Securities Commission
Alberta Securities Commission
Saskatchewan Financial Services Commission
Manitoba Securities Commission
Ontario Securities Commission
L'Autorite des marches financiers du Quebec
Office of the Administrator, Securities Administration Branch, New Brunswick
Nova Scotia Securities Commission
Registrar of Securities, Prince Edward Island
Securities Commission of Newfoundland and Labrador
Register of Securities, Government of Northwest Territories
Register of Securities, Government of Yukon Territory
Register of Securities, Government of Nunavut
Dear Sirs/Mesdames:
Re: NOVA Chemicals Corporation (the "Corporation")
We are the auditors of the Corporation and under date of February 12, 2004
we reported on the following consolidated financial statements of the
Corporation incorporated by reference in the amended and restated short form
shelf prospectus dated August 20, 2001 relating to the sale and issue of up to
US $500,000,000 of Debt Securities of the Corporation (the "Shelf Prospectus"):
Consolidated balance sheets as at December 31, 2003, 2002, and 2001; and
Consolidated statements of income (loss) and reinvested earnings and cash
flows for each of the years in the three-year period ended December
31, 2003.
The Shelf Prospectus also incorporates by reference the following unaudited
interim consolidated financial statements of the Corporation (the "Unaudited
Interim Financial Statements"):
Consolidated balance sheet as at September 30, 2004;
Consolidated statements of income (loss), reinvested earnings and cash
flows for the three-month and nine-month periods ended September 30,
2004 and 2003 and for the three-month period ended June 30, 2004.
-2-
We have not audited any financial statements of the Corporation as at any
date or for any period subsequent to December 31, 2003. Although we have
performed an audit for the year ended December 31, 2003, the purpose and
therefore the scope of the audit was to enable us to express our opinion on the
consolidated financial statements as at December 31, 2003 and for the year then
ended, but not on the consolidated financial statements for any interim period
within that year. Therefore, we are unable to and do not express an opinion on
the above-mentioned Unaudited Interim Financial Statements, or on the financial
position, results of operations or cash flows as at any date or for any period
subsequent to December 31, 2003.
We have, however, performed a review of the Unaudited Interim Financial
Statements of the Corporation as at September 30, 2004 and for the three-month
and nine-month periods ended September 30, 2004 and 2003 and for the three-month
period ended June 30, 2004. We performed our review in accordance with Canadian
generally accepted standards for a review of interim financial statements by an
entity's auditor. Such an interim review consists principally of applying
analytical procedures to financial data, and making enquiries of, and having
discussions with, persons responsible for financial and accounting matters. An
interim review is substantially less in scope than an audit, whose objective is
the expression of an opinion regarding the financial statements. An interim
review does not provide assurance that we would become aware of any or all
significant matters that might be identified in an audit.
Based on our review, we are not aware of any material modification that
needs to be made for these Unaudited Interim Financial Statements to be in
accordance with Canadian generally accepted accounting principles.
This letter is provided solely for the purpose of assisting the securities
regulatory authorities to which it is addressed in discharging their
responsibilities and should not be used for any other purpose. Any use that a
third party makes of this letter, or any reliance or decisions made based on it,
are the responsibility of such third parties. We accept no responsibility for
loss or damages, if any, suffered by any third party as a result of decisions
made or actions taken based on this letter.
Yours very truly,
/s/ Ernst & Young LLP
-----------------------
Chartered Accountants
Exhibit (c)
NOVA CHEMICALS CORPORATION
COVERAGE RATIOS (1)
(unaudited)
Actual
------
Interest coverage on long-term debt for the twelve months ended September 30, 2004 (2) 2.3x
Net tangible asset coverage on long-term debt as at September 30, 2004 (3) 2.0x
Notes:
(1) Calculated in accordance with Canadian securities law disclosure
requirements.
(2) Interest coverage on long-term debt is equal to net income (loss)
before interest expense on long-term debt and income taxes, for the
preceding 12 months, divided by annual interest requirements on
long-term debt.
(3) Net tangible asset coverage on long-term debt is equal to total assets
(excluding future tax assets) less liabilities (excluding long-term
debt) divided by long-term debt.
(4) See attached for detailed calculation of the above coverage ratios.
For purposes of calculating these financial ratios, long-term debt includes
the long-term debt installments due within one year.
NOVA CHEMICALS CORPORATION
COVERAGE RATIOS
September 30, 2004
(MILLIONS OF U.S. DOLLARS)
(unaudited)
INTEREST COVERAGE ON LONG-TERM DEBT FOR THE TWELVE MONTHS ENDED
September 30, 2004
NET INCOME $ 90
INTEREST EXPENSE 87
INCOME TAXES (RECOVERY) 52
-------------
$ 229
=============
ANNUAL INTEREST REQUIREMENT $ 98
=============
INTEREST COVERAGE ON LONG-TERM DEBT 2.3x
=============
Interest coverage on long-term debt is equal to net income (loss) before
interest expense on long-term debt and income taxes, for the preceding 12
months, divided by annual interest requirements on long-term debt.
NET TANGIBLE ASSET COVERAGE ON LONG-TERM DEBT AT September 30, 2004
TOTAL ASSETS $4,757
TOTAL LIABILITIES (3,213)
EXCLUDE CURRENT PORTION LONG-TERM DEBT --
EXCLUDE LONG-TERM DEBT 1,506
--------------
NET TANGIBLE ASSETS $3,050
==============
LONG-TERM DEBT INCLUDING CURRENT PORTION $1,506
==============
NET TANGIBLE ASSET COVERAGE ON LONG-TERM DEBT 2.0x
==============
Net tangible asset coverage on long-term debt is equal to total assets
(excluding future tax assets) less liabilities (excluding long-term debt)
divided by long-term debt.
Exhibit (d)
CERTIFICATIONS
I, Jeffrey M. Lipton, certify that:
1. I have reviewed this report on Form 6-K of NOVA Chemicals Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during
the period in which this report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this
report based on such evaluation; and
c) disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the period
covered by the report that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of the registrant's board
of directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant's
ability to record, process, summarize and report financial
information; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal control over financial reporting.
/s/ Jeffrey M. Lipton
-----------------------------------------------
Jeffrey M. Lipton
October 20, 2004 Chief Executive Officer
(Principal Executive Officer)
Exhibit (e)
I, Larry A. MacDonald, certify that:
1. I have reviewed this report on Form 6-K of NOVA Chemicals Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during
the period in which this report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this
report based on such evaluation; and
c) disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the period
covered by the report that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of the registrant's board
of directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant's
ability to record, process, summarize and report financial
information; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal control over financial reporting.
/s/ Larry A. MacDonald
---------------------------------------------
Larry A. MacDonald
October 20, 2004 Chief Financial Officer
(Principal Financial Officer)
EXHIBIT (f)
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350
In connection with the accompanying quarterly report on Form 6-K of NOVA
Chemicals Corporation for the quarter ended September 30, 2004 (the "Report"),
I, Jeffrey M. Lipton, Chief Executive Officer of NOVA Chemicals Corporation,
hereby certify pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of
the Sarbanes-Oxley Act of 2002, that:
(1) such Report fully complies with the requirements of section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) the information contained in such Report fairly presents, in all
material respects, the financial condition and results of operations
of NOVA Chemicals Corporation.
This written statement is being furnished to the Securities and Exchange
Commission as an exhibit to such Form 6-K.
/s/ Jeffrey M. Lipton
-----------------------------------------
Jeffrey M. Lipton
October 20, 2004 Chief Executive Officer
EXHIBIT (g)
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350
In connection with the accompanying quarterly report on Form 6-K of NOVA
Chemicals Corporation for the quarter ended September 30, 2004 (the "Report"),
I, Larry A. MacDonald, Chief Financial Officer of NOVA Chemicals Corporation,
hereby certify pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of
the Sarbanes-Oxley Act of 2002, that:
(1) such Report fully complies with the requirements of section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) the information contained in such Report fairly presents, in all
material respects, the financial condition and results of operations
of NOVA Chemicals Corporation.
This written statement is being furnished to the Securities and Exchange
Commission as an exhibit to such Form 6-K.
/s/ Larry A. MacDonald
------------------------------------------------
Larry A. MacDonald
October 20, 2004 Chief Financial Officer