SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------------------
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
Pursuant to Rule 13a-16 or 15d-16
Under The Securities Exchange Act of 1934
For the month of October 2005
Commission File Number: 1-13064
NOVA Chemicals Corporation
1000 Seventh Avenue S.W., Calgary, Alberta, Canada, T2P 5L5
-----------------------------------------------------------
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports
under cover of Form 20-F or Form 40-F.
Form 20-F |_| Form 40-F |X|
Indicate by check mark if the registrant is submitting the Form 6-K in paper as
permitted by Regulation S-T Rule 101(b)(1):
Yes |_| No |X|
Indicate by check mark if the registrant is submitting the Form 6-K in paper as
permitted by Regulation S-T Rule 101(b)(7):
Yes |_| No |X|
Indicate by check mark whether by furnishing the information contained in this
Form, the registrant 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, 2005.
is furnished herewith and is 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:
(b) section 302 certification of principal executive officer;
(c) section 302 certification of principal financial officer;
(d) certification of principal executive officer pursuant to 18 U.S.C. ss.
1350; and
(e) 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. Based on our
management's evaluation (with the participation of our principal
executive officer and principal financial officer), as of September
30, 2005, our principal executive officer and principal financial
officer have concluded that our disclosure controls and procedures (as
defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange
Act of 1934, as amended, (the "Exchange Act")) are effective to ensure
that information required to be disclosed by us in reports that we
file or submit under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in
Securities and Exchange Commission rules and forms.
(b) Changes in internal controls. There were no changes in our internal
control over financial reporting that occurred during our fiscal
quarter ended September 30, 2005 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 19, 2005
EXHIBITS
--------
Attached hereto is:
(a) the interim financial statements of NOVA Chemicals Corporation for the
third quarter, three months ended September 30, 2005;
(b) section 302 certification of principal executive officer;
(c) section 302 certification of principal financial officer;
(d) certification of principal executive officer pursuant to 18 U.S.C. ss.
1350; and
(e) certification of principal financial officer pursuant to 18 U.S.C. ss.
1350.
Exhibit (a)
NOVA Chemicals Q3 Results:
Strong Demand, Tight Supply Driving Price and Margin Improvement
PITTSBURGH--(BUSINESS WIRE)--Oct. 19, 2005--All financial
information is in U.S. dollars unless otherwise indicated.
NOVA Chemicals Corporation (NOVA Chemicals)(NYSE:NCX)(TSX:NCX)
reported a net loss of $105 million ($1.28 per share loss diluted) for
the third quarter of 2005.
Included in the third quarter 2005 loss is the estimated impact of
two unusual events totaling $95 million after-tax ($1.15 per share
loss diluted):
-- Joffre ethane interruption ... $20 million
-- Non-cash write-down primarily due to the European Styrenics
joint venture ... $75 million
This quarter's total net loss compares to a net loss of $25
million ($0.29 per share loss diluted) for the second quarter of 2005.
In the third quarter of 2004, NOVA Chemicals reported net income of
$56 million ($0.60 per share diluted).
"The two hurricanes on the U.S. Gulf Coast created unprecedented
petrochemical and plastic resin production outages in a market that
was already strengthening due to low inventories and very healthy
demand," said Jeff Lipton, NOVA Chemicals' President and CEO. "NOVA
Chemicals continues to implement price increases that began early in
the third quarter; with margins now expanding despite higher feedstock
costs."
Third Quarter Snapshot
Olefins/Polyolefins:
-- Net income of $39 million in Q3 2005 compares to $45 million
in Q2 2005.
-- Polyethylene sales volume was 2% lower than Q2 2005 due to the
continued impact of planned and unplanned outages. The
estimated loss of sales due to maintenance outages negatively
impacted net income by $14 million.
-- Polyethylene prices were up 5%.
-- The sales volume loss due to the Alberta storm that
interrupted ethane production is estimated to have negatively
impacted net income by $20 million in Q3 2005, for a total
impact of $24 million.
Styrenics:
-- Net loss of $59 million in Q3 2005 versus a net loss of $76
million in Q2 2005.
-- North American styrenic polymer prices declined 3% and sales
volumes fell 6% primarily on weaker EPS demand.
-- European styrenic polymer prices declined 3%, while sales
volumes increased 11%
-- Hurricanes Katrina and Rita forced the shutdown of 83% of
North American styrene monomer capacity, resulting in the loss
of more than 600 million pounds of production. Our Bayport, TX
styrene site avoided significant damage.
-- The NOVA Innovene JV in Europe commenced operations on October
1 and took rapid steps to reduce fixed costs.
Corporate:
-- Debt repayment of $81 million; cash position at quarter-end of
$97 million.
-- Preferred shareholders agreed to a removal of the conversion
feature of their shares, reducing potential share dilution by
5.8 million shares. A share buy-back program for up to 7.2
million shares was also announced.
-- A non-cash write-down of $75 million was taken primarily due
to the NOVA Innovene decision to cease EPS production at
Berre, France and permanently shutdown the EPS plant at
Carrington, UK.
NOVA Chemicals will host a conference call today, Wednesday,
October 19, 2005, 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 "listen
only" mode. The dial-in number for this call is (416) 405-9328. The
replay number is (416) 695-5800 (Reservation No. 3155699). The live
call is also available on the Internet at www.vcall.com.
NOVA Chemicals Highlights
(unaudited; millions of U.S. dollars except per share amounts and as
noted)
Three Months Nine Months
Ended Ended
-------------------------- -----------------
Sept. 30 June 30 Sept. 30 Sept. 30 Sept. 30
2005 2005 2004 2005 2004
-------- -------- -------- -------- --------
Net income (loss)(1)
Olefins/Polyolefins $39 $45 $77 $196 $167
Styrenics (59) (76) (10) (156) (56)
Corporate and other(2) (85) 6 (11) (76) (21)
-------- -------- -------- -------- --------
Net income (loss) $(105) $(25) $56 $(36) $90
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Earnings (loss) per common
share
- basic $(1.28) $(0.29) $0.64 $(0.44) $1.03
- diluted $(1.28) $(0.29) $0.60 $(0.44) $0.98
Weighted-average common shares
outstanding (millions)(3)(4)
- basic 82 82 87 83 87
- diluted(5) 82 82 96 83 96
Revenue $1,366 $1,329 $1,379 $4,183 $3,743
EBITDA(6) $59 $75 $164 $376 $438
Depreciation and
amortization $70 $74 $68 $216 $225
Funds from operations $35 $41 $128 $231 $336
Capital expenditures (net) $102 $115 $60 $290 $142
Average capital employed(7) $3,275 $3,354 $3,328 $3,340 $3,241
After-tax return (loss) on
capital employed(8) (10.4)% (0.5)% 9.1% 0.9% 6.2%
Return (loss) on average
common equity(9) (31.6)% (7.2)% 16.9% (3.5)% 9.4%
(1) On Jan. 1, 2005, NOVA Chemicals adopted new Canadian accounting
standards, which require the preferred shares of our subsidiary,
NOVA Chemicals Inc., to be classified as debt. Accordingly, any
dividends associated with these preferred shares are now
classified as interest expense and allocated to our two
businesses, Olefins/Polyolefins and Styrenics. All prior periods
have been restated.
(2) See table on page 13 for a description of all corporate and other
items.
(3) Weighted-average number of common shares outstanding during the
period used to calculate the earnings (loss) per share. See page
20, Note 5 for more information.
(4) For periods where there are losses, diluted shares are the same as
basic shares because losses are not diluted.
(5) During Sept. 2005, the terms of the preferred shares of our
subsidiary, NOVA Chemicals Inc., were amended to remove the
feature allowing the holders, under certain circumstances, to
convert the preferred shares to NOVA Chemicals' common shares.
Accordingly, the preferred shares no longer impact diluted
earnings per share.
(6) Net income before income taxes, other gains and losses, interest
expense and depreciation and amortization. See Consolidated
Statement of Net Income (Loss) and Reinvested Earnings on page 16
and Supplemental Measures on page 12.
(7) 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 12.
(8) After-tax return (loss) on capital employed equals NOVA Chemicals'
net income (loss) plus after-tax interest expense (annualized)
divided by average capital employed. See Supplemental Measures on
page 12.
(9) Return (loss) on average common equity equals annualized net
income (loss) divided by average common equity.
OLEFINS/POLYOLEFINS BUSINESS
Financial Highlights
(unaudited; millions of U.S. Three Months Nine Months
dollars except as noted) Ended Ended
------------------------- -----------------
Sept. 30 June 30 Sept. 30 Sept. 30 Sept. 30
2005 2005 2004 2005 2004
-------- ------- -------- -------- --------
Revenue(1) $878 $851 $824 $2,687 $2,318
Operating income $77 $85 $137 $348 $311
Depreciation and amortization 41 42 40 124 139
-------- ------- -------- -------- --------
EBITDA(2) $118 $127 $177 $472 $450
Net income $39 $45 $77 $196 $167
Capital expenditures (net) $67 $62 $31 $175 $66
Average capital employed(3) $1,980 $2,000 $1,942 $2,010 $1,895
After-tax return on capital
employed(4) 10.0% 11.1% 18.0% 15.0% 14.0%
(1) Before intersegment eliminations.
(2) Net income before income taxes, other gains and losses, interest
expense and depreciation and amortization. See Supplemental
Measures on page 12.
(3) 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.
(4) 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 Three Month Nine Month
otherwise noted) Average Average
----------------------- ---------------
Sept 30 June 30 Sept 30 Sept 30 Sept 30
2005 2005 2004 2005 2004
------- ------- ------- ------- -------
Ethylene(2) $0.41 $0.38 $0.33 $0.40 $0.32
Polyethylene - LLDPE butene
liner(3) $0.54 $0.51 $0.48 $0.55 $0.46
Polyethylene - weighted-average
benchmark(4) $0.58 $0.55 $0.49 $0.58 $0.47
NYMEX natural gas (dollars per
mmBTU)(5) $8.25 $6.80 $5.84 $7.12 $5.83
WTI crude oil (dollars per
barrel) (6) $63.19 $53.17 $43.88 $55.40 $39.11
(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) U.S. Gulf Coast
(USGC) Net Transaction Price.
(3) Linear-Low Density Polyethylene (LLDPE) butene liner. Source:
Townsend Polymer Services Information (TPSI).
(4) Benchmark prices weighted according to NOVA Chemicals' sales
volume mix in North America. Source for benchmark prices: TPSI.
(5) Source: New York Mercantile Exchange (NYMEX) Henry Hub 3-Day
Average Close, values in millions of British Thermal Units
(mmBTU).
(6) Source: NYMEX WTI daily spot-settled price average for calendar
month.
Polyethylene Sales Volumes
(millions of pounds) Three Months Nine Months
Ended Ended
------------------------- -----------------
Sept. 30 June 30 Sept. 30 Sept. 30 Sept. 30
2005 2005 2004 2005 2004
-------- ------- -------- -------- --------
NOVAPOL(R)
Joffre site: LLDPE 301 279 329 890 962
Moore site: LDPE(1) 65 69 82 199 232
Moore site: HDPE(2) 106 100 115 304 332
SCLAIRTECH(TM)
St. Clair site: LLDPE
and HDPE 89 94 118 275 358
Advanced SCLAIRTECH(TM)
Joffre site:
LLDPE and HDPE
Standard Products 26 78 122 198 387
Performance Products 127 105 76 328 186
-------- ------- -------- -------- --------
Total 714 725 842 2,194 2,457
-------- ------- -------- -------- --------
-------- ------- -------- -------- --------
NOVAPOL(R) is a registered trademark of NOVA Brands Ltd.; authorized
use.
SCLAIRTECH(TM) and Advanced SCLAIRTECH(TM) are trademarks of NOVA
Chemicals.
(1) Low-Density Polyethylene (LDPE).
(2) High-Density Polyethylene (HDPE).
(3) Performance Products include SCLAIR(R) and SURPASS(R) resins.
SCLAIR(R) is a registered trademark of NOVA Chemicals Corporation
in Canada and of NOVA Chemicals (International) S.A. elsewhere;
authorized use. SURPASS(R) is a registered trademark of NOVA
Chemicals Corporation in Canada and of NOVA Chemicals
(International) S.A. elsewhere.
Advanced SCLAIRTECH(TM) is a trademark of NOVA Chemicals.
Review of Operations
Olefins/Polyolefins
The Olefins/Polyolefins business reported net income of $39
million in the third quarter of 2005 compared to net income of $45
million in the second quarter of 2005. Polyethylene sales volumes were
2% lower as a result of the ethane feedstock disruption at the Joffre
site and planned maintenance turnarounds. The Joffre site experienced
reduced ethane feed in July and August due to severe weather damage at
third-party ethane plants. Co-product sales volumes were down 13%
primarily due to the planned maintenance turnaround at the Corunna,
Ontario flexi-cracker.
The negative impact to earnings of the planned turnarounds was
approximately $14 million in the third quarter of 2005 and is
projected to be $15-25 million in the fourth quarter, depending on
start-up timing. It is estimated that net income in the third quarter
of 2005 would have been $20 million greater had NOVA Chemicals not
experienced a loss of sales volume due to the June 21 Joffre ethane
feedstock reduction.
In the third quarter of 2004, the Olefins/Polyolefins business
reported net income of $77 million. The year-over-year variance is
primarily attributed to planned and unplanned outages and co-product
sales volume reductions.
Year-to-date, the Olefins/Polyolefins business reported net income
of $196 million compared to $167 million for the first nine months of
2004. The year-over-year variance is primarily due to product price
increases that out paced feedstock costs.
Ethylene and Feedstocks
For the third quarter, Chemical Markets Associates, Inc. (CMAI)
reported effective operating rates for ethylene in the U.S. of 94%
compared to 92% in the second quarter of 2005 and 95% in the third
quarter of 2004.
CMAI benchmark USGC ethylene prices averaged 41 cents per pound in
the third quarter compared to 38 cents per pound in the second
quarter. CMAI reported USGC contract ethylene prices rose 0.5 cents
per pound in July, 3 cents per pound in Aug., and 5 cents per pound in
Sept., resulting in a net transaction contract price of 45.5 cents per
pound in Sept.
The average price of West Texas Intermediate (WTI) crude oil was
up 19% to $63.19 per barrel in the third quarter and the average price
of NYMEX natural gas was up 21% to $8.25 per mmBTU. On Sept. 30, 2005
the closing market price for the NYMEX crude oil contract was $66.24
per barrel and the NYMEX natural gas contract was $13.92 per mmBTU.
The basis differential between the Alberta AECO Daily Index and
Henry Hub Daily Cash natural gas prices averaged $1.90 per mmBTU for
the quarter, up from $1.02 per mmBTU in the second quarter of 2005. At
the end of the quarter, the basis differential was $2.65 per mmBTU.
The widening natural gas basis differential resulted in a calculated
average of 7 cents per pound Alberta Advantage in the third quarter.
NOVA Chemicals realized approximately 6 cents per pound of the Alberta
Advantage due to the negative effect of the ethane supply problems and
reduced production rates.
Polyethylene
NOVA Chemicals' total polyethylene sales volume for the third
quarter was 714 million pounds. Due to the continued impact of the
Joffre ethane outage and the planned maintenance turnarounds, NOVA
Chemicals' North American sales volume was flat compared to the second
quarter.
International volumes declined 30% to 88 million pounds quarter
over quarter, representing 12% of NOVA Chemicals' total polyethylene
sales volume this quarter versus 17% in the previous quarter. In
Sept., when relative margins increased in the U.S., NOVA Chemicals
chose to significantly reduce International sales.
NOVA Chemicals' polyethylene inventories were up from 18 days of
sales on June 30, 2005 to 21 days on Sept. 30, 2005 due to NOVA
Chemicals planned turnarounds. Over the same period, American Plastics
Council (APC) reported North American industry inventories were down
from 39 days of sales to 34 days of sales. APC also reported industry
operating rates for polyethylene in North America at an average of 93%
for July and Aug. but only 76% for Sept. due to the shut downs caused
by the hurricanes. As a result, APC reported third quarter 2005
industry operating rates for polyethylene in North America of 87%,
compared to 88% in the second quarter of 2005 and 97% in the third
quarter of 2004.
Hurricanes Katrina and Rita forced the shutdown of several
Louisiana, Mississippi, and Texas Gulf Coast plants affecting 59% of
North American ethylene capacity and approximately 48% of North
American polyethylene capacity. To date, CMAI estimates the two
hurricanes' combined impact on industry production capacity resulted
in a reduction in ethylene production of approximately 3 billion
pounds and a reduction in polyethylene production of approximately 1.5
billion pounds.
Third quarter weighted-average benchmark polyethylene prices were
up approximately 3 cents per pound from the second quarter of 2005.
NOVA Chemicals began to implement in North America a series of price
increases during the quarter. As of October 15, NOVA Chemicals had
announced price increases totaling 39 cents per pound:
2005 Effective Date Price Increase Announcements
Aug. 1 +6 cpp
Sept. 1 +6 cpp
Sept. 15 +7 cpp (butene copolymer) /
+9 cpp (octene copolymer)
Oct. 1 +5 cpp
Nov. 1 +8 cpp
Nov. 15 +7 cpp
Performance Products
NOVA Chemicals sold 153 million pounds of Advanced SCLAIRTECH
polyethylene in the third quarter, down from 183 million pounds in the
second quarter due to a planned maintenance outage. However, sales of
polyethylene Performance Products, including new SURPASS rotational
molding and thin-wall injection molding resins, increased to 127
million pounds or 60% of plant capacity in the third quarter, up from
105 million pounds or 50% of plant capacity in the second quarter.
Year-over-year, polyethylene Performance Products sales volume has
increased 76% from 186 million pounds to 328 million pounds. As a
result, year-over-year Standard Product sales volume decreased
approximately 50% from 387 million pounds to 198 million pounds.
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 14.
STYRENICS BUSINESS
Financial Highlights
(unaudited; millions of U.S. dollars except as noted)
Three Months Nine Months
Ended Ended
------------------------- -----------------
Sept. 30 June 30 Sept. 30 Sept. 30 Sept. 30
2005 2005 2004 2005 2004
-------- ------- -------- -------- --------
Revenue(1) $525 $540 $641 $1,672 $1,633
Operating loss $(74) $(97) $(5) $(191) $(44)
Depreciation and amortization 29 32 28 92 86
-------- ------- -------- -------- --------
EBITDA(2) $(45) $(65) $23 $(99) $42
NOVA Chemicals' Styrenics $(33) $(39) $20 $(57) $50
European Styrenic
Polymers(3) (12) (26) 3 (42) (8)
-------- ------- -------- -------- --------
Total EBITDA $(45) $(65) $23 $(99) $42
Net loss $(59) $(76) $(10) $(156) $(56)
Capital expenditures (net) $35 $53 $29 $115 $76
Average capital employed(4) $1,360 $1,420 $1,405 $1,407 $1,366
After-tax loss on capital
employed(5) (14.6)% (18.6)% (0.4)% (12.1)% (2.7)%
(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 12.
(3) As of Oct. 1, 2005, European Styrenic Polymers became part of our
European joint venture, NOVA Innovene.
(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 Nine Month
unless otherwise noted) Average Average
------------------------- -----------------
Sept. 30 June 30 Sept. 30 Sept. 30 Sept. 30
2005 2005 2004 2005 2004
-------- ------- -------- -------- --------
Styrene monomer(2) $0.60 $0.61 $0.66 $0.62 $0.55
Polystyrene weighted-average
benchmark(3)
North America $0.87 $0.90 $0.83 $0.89 $0.74
Europe $0.65 $0.67 $0.70 $0.67 $0.59
Benzene (dollars per
gallon)(4) $2.82 $3.06 $3.62 $3.02 $2.64
(1) Average benchmark prices do not necessarily reflect actual prices
realized by NOVA Chemicals or any other petrochemical company.
(2) Source: CMAI Contract Market.
(3) Benchmark prices weighted according to NOVA Chemicals' polystyrene
sales volume mix. Includes solid and expandable polystyrene, but
excludes styrenic performance products. Source for benchmark
prices: CMAI.
(4) A 10 cents per gallon change in the cost of benzene generally
results in about a 1 cent per pound change in the variable cost of
producing styrene monomer. Source of benzene benchmark prices:
CMAI.
Styrenics Sales Volumes
(millions of pounds) Three Months Nine Months
Ended Ended
------------------------- -----------------
Sept. 30 June 30 Sept. 30 Sept. 30 Sept. 30
2005 2005 2004 2005 2004
-------- ------- -------- -------- --------
Styrene monomer(1) 384 396 431 1,207 1,272
Solid and expandable
polystyrene
North America 265 282 337 842 991
Europe 267 240 263 770 797
Performance Products(2) 24 27 24 80 77
-------- ------- -------- -------- --------
Total 940 945 1,055 2,899 3,137
-------- ------- -------- -------- --------
-------- ------- -------- -------- --------
(1) Third-party sales only.
(2) Performance Products includes ARCEL(R), DYLARK(R), ZYLAR(R) and
EPS Silver(R).
Review of Operations
Styrenics
The Styrenics business reported a net loss of $59 million in the
third quarter of 2005 compared to a net loss of $76 million in the
second quarter of 2005, largely due to more favorable feedstock costs.
Styrene monomer prices declined slightly. North American polymer
prices and volumes declined 3% and 6%, respectively. European polymer
prices declined 3% and volumes increased 11% compared to the second
quarter.
In the third quarter of 2004, the Styrenics business reported a
net loss of $10 million. The year-over-year variance is attributed to
slightly lower margins and 11% lower volumes.
Year-to-date, the Styrenics business reported a net loss of $156
million compared to $56 million for the first nine months of 2004. The
year-over-year variance is due to an 8% decline in third-party sales
volume, compounded by increasing feedstock and energy costs. Benzene
and ethylene prices have increased 14% and 25% respectively,
year-over-year.
Styrene Monomer
Quarter-over-quarter, styrene monomer margins were flat. In the
third quarter of 2005, average benchmark styrene monomer prices
declined by 1 cent per pound, compared to the second quarter of 2005.
Benchmark benzene prices increased to $2.98 per gallon in July
from $2.30 per gallon in June before settling at $2.75 per gallon for
Aug. and Sept. The third quarter 2005 average price of benzene
decreased from $3.06 to $2.82 per gallon compared to the second
quarter, which is the equivalent of approximately 2 cents per pound of
styrene. Since peaking in the fourth quarter of 2004, benzene prices
are now at the lowest level relative to crude oil since the second
quarter of 2003.
In the third quarter, third party styrene monomer sales volume was
down 3% compared to the second quarter. Production volume was reduced
due to planned turnarounds at Sarnia and Bayport. The Bayport plant
was also shutdown as a precaution on Sept. 21 in anticipation of
Hurricane Rita. The plant sustained minimal damage from the hurricane
and successfully re-started operations at reduced rates on Oct. 6.
Bayport is currently on allocation due to a force majeure declaration
issued because of hurricane-related feedstock constraints. We expect
the financial impact in the fourth quarter will be approximately $5
million. NOVA Chemicals estimates approximately 60 to 70 million
pounds of Bayport styrene monomer production was lost during the
outage.
Hurricanes Katrina and Rita forced the shutdown of several styrene
monomer facilities located on the USGC and affected 83% of North
American capacity. CMAI estimates the styrene monomer production lost
due to the combined effects of the hurricanes was in excess of 600
million pounds.
NOVA Chemicals announced two price increases for styrene monomer
during the quarter totaling 11 cents per pound:
2005 Effective Date Price Increase Announcements
Sept. 1 +3 cpp
Oct. 1 +8 cpp
North American Solid Polystyrene (SPS)
North American SPS sales volumes decreased 2%
quarter-over-quarter.
North American benchmark SPS prices declined by approximately 3
cents per pound from the second quarter.
NOVA Chemicals issued a force majeure for SPS in North America as
a result of the impact of Hurricane Rita.
NOVA Chemicals began to implement a series of SPS price increases
during the quarter. As of Oct. 15, NOVA Chemicals had announced price
increases totaling 21 cents per pound:
2005 Effective Date Price Increase Announcements
Sept. 1 +5 cpp
Oct. 1 +5 cpp
Nov. 1 +6 cpp
Nov. 15 +5 cpp
North American Expandable Polystyrene (EPS)
North American EPS sales volumes fell 12% compared to second
quarter.
North American benchmark EPS prices declined by 2 cents per pound
from the second quarter.
NOVA Chemicals has announced the following North American price
increase:
2005 Effective Date Price Increase Announcement
Nov. 1 +5 cpp
During the quarter, NOVA Chemicals and GRUPO IDESA signed binding
agreements to form a cashless 50:50 joint venture in Mexico, called
NOVIDESA, SA de CV. The joint venture, which plans to be a market
leader in high-value EPS applications primarily targeted to the
construction market in Mexico, commenced operations on Oct. 1, 2005.
European Styrenic Polymers
On Oct. 1, 2005 the NOVA Innovene joint venture in Europe
commenced operations.
On Oct. 11, 2005, NOVA Innovene announced it will permanently
shutdown an EPS plant in Carrington, UK which had previously been
idled, and permanently cease EPS production at its Berre, France
plant. The two rationalizations will remove nearly 30% of NOVA
Innovene's EPS capacity, 310 million pounds per year, and
approximately 10% of Western European industry capacity. This action
represents the first step toward achieving a minimum of $40 million in
expected synergies identified by the joint venture.
European-SPS
European SPS volume was up 1% from the second quarter.
The weighted-average European SPS benchmark price declined by
approximately 3 cents per pound from the second quarter.
NOVA Chemicals announced two price increases totaling 9 cents per
pound:
2005 Effective Date Price Increase Announcements
Sept. 1 +4 cpp
Oct. 1 +5 cpp
Expandable Polystyrene (EPS)
European EPS volumes increased 23% as demand strengthened in
anticipation of increased pricing.
In Europe, EPS prices fell 6% on average over the quarter.
NOVA Chemicals announced two price increases totaling 9 cents per
pound including:
2005 Effective Date Price Increase Announcements
Sept. 1 +3 cpp
Oct. 1 +6 cpp
Performance Products
Styrenics Performance Products include products such as ARCEL
specialty foam resins; DYLARK resins for automotive and food
packaging; ZYLAR resins for food, medical and industrial packaging;
and EPS Silver resins for building and construction products.(2)
Styrenics Performance Products volumes for the quarter were 24 million
pounds, approximately the same as third quarter 2004.
There were several Performance Products developments during the
quarter including:
-- NOVA Chemicals entered into a long-term agreement with Loyal
Chemical Industrial Corporation to manufacture ARCEL moldable
foam resin near Shanghai, China. The agreement is a component
of NOVA Chemicals' plan to expand manufacturing capacity for
ARCEL from 30 million to 100 million pounds annually by the
end of 2006.
-- NOVA Chemicals signed a joint development agreement with
Dietrich Metal Framing, a Worthington Industries company, to
commercialize innovative construction products that combine
light gauge steel framing and with EPS.
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 14.
(2)ARCEL and DYLARK are registered trademarks of NOVA Chemicals
Inc. ZYLAR is a registered trademark of NOVA Chemicals (Canada)
Ltd./NOVA Chimie (Canada) Ltee.; authorized use/utilization autorisee.
EPS Silver (R) is a registered trademark of NOVA Chemicals
(International) SA in the European Community and a trademark of NOVA
Chemicals Inc. in North America.
Liquidity and Capital Resources
Capitalization
(unaudited, millions of U.S. dollars Sept. 30 June 30 Dec. 31
except as noted) 2005 2005 2004
------- -------- --------
Current debt (1) $303 $400 $100
Long-term debt (2) (3) 1,338 1,309 1,614
Less: cash and cash equivalents (97) (216) (245)
restricted cash (65) (65) (65)
------- -------- --------
Total debt, net of cash, cash equivalents
and restricted cash 1,479 1,428 1,404
Total common shareholders'
equity (4) (5) (6) (7) (8) 1,301 1,338 1,493
------- -------- --------
Total capitalization (9) $2,780 $2,766 $2,897
------- -------- --------
-------
(1) A total of $100 million of 7%, 10-year notes matured in Sept.
2005 and $300 million of 7% medium term notes are due in May 2006.
Current debt also includes bank loans and the current debt related
to the Joffre cogeneration facility joint venture.
(2) On Jan. 1, 2005, NOVA Chemicals adopted new Canadian accounting
standards, which require the preferred shares of our subsidiary,
NOVA Chemicals Inc. to be classified as debt. Prior periods have
been restated accordingly. Maturity dates for NOVA Chemicals'
current and long-term debt range from May 2006 to Aug. 2028.
(3) During September 2005, the terms of the retractable preferred
shares of our subsidiary NOVA Chemicals, Inc. were amended to
remove the feature allowing the holders, under certain
circumstances, to convert the preferred shares to NOVA Chemicals'
common shares. Accordingly, the preferred shares no longer have an
impact on diluted earnings per share.
(4) Common shares outstanding on Oct. 14, 2005 were 82,348,163
(Sept. 30, 2005 - 82,335,363; June 30, 2005 - 82,316,338; Dec.
31, 2004 - 84,268,293).
(5) A total of 5,194,259 stock options were outstanding to officers
and employees on Oct. 14, 2005 and 5,207,259 were outstanding on
Sept. 30, 2005 to purchase common shares of NOVA Chemicals. A
total of 2,697,002 common shares were reserved but unallocated at
Sept. 30, 2005. A total of 13 million common shares were initially
reserved for issuance under the Option Plan.
(6) A total of 47,800 shares were reserved for the Directors' Share
Compensation Plan.
(7) In Apr. 2005, NOVA Chemicals' shareholders reconfirmed a
shareholder rights plan where one right was issued for each
outstanding common share. The plan expires May 2009.
(8) For the three months ended Sept. 30, 2005, a total of 19,025
shares were issued upon the exercise of stock options.
(9) Total capitalization includes shareholders' equity and total debt
net of cash and cash equivalents and restricted cash (see
Supplemental Measures on (page 12)).
Senior Debt Ratings (1)
Senior Unsecured Debt
---------------------------
DBRS BBB (low) (stable)
Fitch Ratings BB+ (stable)
Moody's Ba2 (stable)
Standard & Poor's BB+ (stable)
(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
Three Months Ended
-------------------------------
Sept 30 June 30 Dec. 31
2005 2005 2004
---------- --------- ----------
Net debt to total capitalization (1) 53.2% 51.6% 48.5%
Interest coverage on long-term debt (2) 2.7x 4.6x 4.0x
Net tangible asset coverage on long- 1.8x 1.8x 1.9x
term debt (3)
(1) Net debt to total capitalization is equal to total debt, net of
cash, cash equivalents, and restricted cash, divided by total
common shareholders' equity plus net debt. See Capitalization
table above, and Supplemental Measures on page 12.
(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.
dollars) Three Months Ended Nine Months Ended
Sept. 30, 2005 Sept. 30, 2005
------------------ -----------------
Operating income (loss) $(96) $75
Add back - depreciation and
amortization 70 216
- restructuring charges 85 85
------------------ -----------------
EBITDA (1) 59 376
Interest (28) (80)
Current tax expense and other 4 (65)
------------------ -----------------
Funds from operations 35 231
Operating working capital decrease 96 130
------------------ -----------------
Cash from operations 131 361
Tax-related settlement - 108
Capital expenditures (102) (290)
Turnaround costs, long-term
investments and other assets (61) (101)
Dividends paid (7) (20)
Common shares issued for stock
options - 11
Common shares repurchased - (125)
Options retired for cash - (10)
Foreign exchange and other (12) (9)
------------------ -----------------
Total change in cash and debt $(51) $(75)
------------------ -----------------
------------------ -----------------
Decrease in cash and cash
equivalents $(119) $(148)
Decrease in debt (including
foreign exchange changes) 68 73
------------------ -----------------
Total change in cash and cash
equivalents and debt $(51) $(75)
------------------ -----------------
------------------ -----------------
(1) See Consolidated Statement of Net Income (Loss) and Reinvested
Earnings on page 16 and Supplemental Measures on page 12.
NOVA Chemicals' net debt to total capitalization ratio was 53.2%
at Sept. 30, 2005. Cash on hand at the end of the third quarter was
$97 million, down from $216 million at the end of the second quarter,
primarily as a result of debt reduction.
NOVA Chemicals' funds from operations were $35 million for the
third quarter of 2005, down from $41 million in the second quarter.
Operating working capital decreased by $96 million in the third
quarter of 2005 compared to a $93 million decrease in the second
quarter of 2005. This decline was related primarily to lower inventory
levels associated with the Corunna turnaround partially offset by
higher feedstock costs.
NOVA Chemicals measures the effectiveness of its working capital
management through Cash Flow Cycle Time (CFCT). See Supplemental
Measures on page 12. 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 to
determine which portion of changes in working capital results from
factors other than price movements. CFCT was 29 days as of Sept.
30, 2005 down from 34 days as of June 30, 2005, primarily due to lower
inventory.
Capital expenditures were $102 million in the third quarter of
2005, compared to $115 million in the second quarter and $60 million
in the third quarter of 2004. The increase from the third quarter is
primarily related to the Corunna flexi-cracker plant modernization
project and the Bayport expansion project.
Selling, general and administrative expenses (SG&A) increased by
$68 million from the second quarter, and was up $1 million from the
third quarter of 2004. This third quarter increase was primarily due
to the mark-to-market cost of stock-based compensation. NOVA Chemicals
stock price dropped by $12.39 per share in the second quarter and
increased by $6.24 per share in the third quarter causing a
quarter-over-quarter swing in SG&A costs of $65 million.
Financing
NOVA Chemicals has a $375 million revolving credit facility,
expiring June 30, 2010. As of Sept. 30, 2005, NOVA Chemicals has
utilized $62 million of the revolving credit facility in the form of
operating letters of credit. As of Oct. 18, 2005, the company utilized
$90 million of the facility, $65 million of which is in the form of
letters of credit. NOVA Chemicals continues to comply with all
financial covenants under the facility.
As of Sept. 30, 2005, $285 million was sold under the accounts
receivable securitization programs compared to $243 million as of June
30, 2005.
In Sept. 2005, $100 million of 7%, 10-year notes matured and
were retired for cash, and a $19 million lease for new Corunna
compressors was finalized for a net debt reduction of $81 million. In
May 2006, $300 million of 7% medium-term notes will mature.
During Sept. 2005, the certificate of incorporation of our
subsidiary, NOVA Chemicals Inc., was amended to remove the conversion
feature that allowed the holders of the retractable preferred shares,
under certain circumstances, to convert the preferred shares to NOVA
Chemicals' common shares. Accordingly, the preferred shares will no
longer have an impact on diluted earnings per share.
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 NOVA Chemicals uses FIFO, a
portion of the second quarter feedstock purchases flowed through the
income statement in the third quarter. June benzene prices were $2.30
per gallon increasing to $2.75 per gallon in Sept. Sept. NYMEX natural
gas pricing was higher than June pricing by $3.88 per mmBTU, while
crude oil increased from $56.42 per barrel in June to $59.03 per
barrel in July. Minimal purchases were made in Aug. and Sept. in
anticipation of the Corunna plant turnaround in Sept. 2005. We
estimate that net income would have been about $13 million lower in
the third quarter had NOVA Chemicals used the LIFO method of
accounting. Had Corunna been at normal inventory levels the impact
would have been approximately $23 million.
We estimate that net income in the second quarter would have been
about $23 million higher had NOVA Chemicals used the LIFO method of
accounting. See Causal Analysis on page 15.
Feedstock Derivative Positions
NOVA Chemicals maintains a derivatives program to manage risk
associated with feedstock purchases. The after-tax gain from natural
gas, benzene and crude oil positions realized in the third quarter of
2005 was $1 million compared to an $8 million gain in the second
quarter.
In addition, NOVA Chemicals is required to record on its balance
sheet the market value of any outstanding derivative positions that do
not qualify for hedge accounting treatment. The gain or loss resulting
from changes in the market value of these derivatives is recorded
through earnings each period. The mark-to-market impact in the third
quarter of our outstanding feedstock derivative portfolio was an $11
million after-tax gain compared to a $9 million after-tax loss in the
second quarter.
Supplemental Measures
In addition to providing measures in accordance with Canadian
Generally Accepted Accounting Practices (GAAP), NOVA Chemicals
presents certain supplemental measures as follows:
-- EBITDA - defined on page 13
-- Average capital employed - defined on page 2
-- CFCT - defined on page 11
-- After-tax return on capital employed - defined on page 2
-- Net debt to total capitalization - defined on page 10
-- Net income (loss) from the businesses - total net income or
loss from the Olefins/Polyolefins and Styrenics businesses,
which equals NOVA Chemicals' net income less corporate and
other items (see page 1)
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 Net Income (Loss) and
Reinvested Earnings by adding to net income (loss) interest expense,
income taxes, depreciation and amoritization, other gains and losses,
and restructuring charges. 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:
Three Months Nine Months
Ended Ended
------------------------- -----------------
(unaudited, millions of Sept. 30 June 30 Sept. 30 Sept. 30 Sept. 30
U.S. dollars) 2005 2005 2004 2005 2004
-------- ------- -------- -------- --------
Stock-based compensation
and profit sharing (1)
Profit sharing accrual
adjustment $6 $(3) $- $- $-
Stock-based compensation
accrual (2) (4) - (10) (5)
Stock-based compensation
mark-to-market adjustment (14) 28 (21) 24 (26)
Unusual non-cash insurance
charge(2) - (15) - (15) -
IRS Settlement - - 10 - 10
Non-cash write-down(3) (75) - - (75) -
-------- ------- -------- -------- ---------
$(85) $6 $(11) $(76) $(21)
-------- ------- -------- -------- ---------
-------- ------- -------- -------- ---------
(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. In the first quarter of 2004 the
stock-based compensation plan was amended to price equity
appreciation units using NYSE values. The NYSE market price on
Sept. 30, 2005, was $36.80 U.S. In addition, NOVA Chemicals
maintains a profit sharing program available to most employees
based on the achievement of shareholder return on equity targets.
The calculation of stock-based compensation and profit sharing
expense each quarter is dependent upon a number of variables. One
variable is NOVA Chemicals' common share price. During the third
quarter of 2005, the share price rose by $6.24 thereby increasing
our liability under the stock-based compensation programs.
Accordingly, a $14 million after-tax expense was recorded in
earnings during the quarter. We are also required to record an
expense for our estimate of profit sharing and stock-based
compensation earned by employees during the quarter. NOVA
Chemicals accrues profit sharing based on an evaluation of
expected results versus target results. As a consequence of our
most recent review of our ability to achieve the minimum return on
equity targets required to trigger a profit share payout, we have
reversed the amounts previously accrued in 2005. This resulted in
an after-tax recovery of $6 million in the quarter. We accrue
stock-based compensation expense over the vesting periods in which
employees earn the units. The amount of expense is also impacted
by the number of units redeemed during the quarter and the price
at which they are redeemed. The after-tax amount of stock-based
compensation expense in the third quarter of 2005 related to these
items was $2 million.
(2) NOVA Chemicals accrued a non-cash expense of $15 million after-tax
related to its share of estimated incremental costs in the
insurance pools in which it participates. NOVA Chemicals is one of
many participants in OIL and sEnergy - two mutual insurance
companies formed to insure against catastrophic risks. Due to
recent losses incurred by OIL and sEnergy that are related to
participants other than NOVA Chemicals, the company will be
required to pay higher future premiums.
(3) NOVA Chemicals recorded a charge of $75 million after-tax
primarily as a result of a NOVA-Innovene joint venture decision to
cease EPS production at Berre, France and permanently shutdown the
EPS plant at Carrington, UK. The benefit of tax losses in France
and obsolete assets associated with the Corunna modernization were
written off and also included in this charge (see Note 8 to the
consolidated financial statements).
NOVA Chemicals' share price on the New York Stock Exchange (NYSE)
rose to U.S. $36.80 at Sept. 30, 2005 from U.S. $30.56 at June 30,
2005. NOVA Chemicals' share value increased 20% for the quarter ending
Sept. 30, 2005 on the NYSE and 14% on the Toronto Stock Exchange
(TSX), while peer chemical companies' share values declined 7% on
average and the S&P Chemicals Index decreased 6%. The S&P/TSX
Composite Index was up 11% and the S&P 500 was up 3% in the third
quarter. As of October 18, 2005, NOVA Chemicals' share price was U.S.
$37.06, up 1% from Sept. 30, 2005. The S&P Chemicals Index was down 2%
in the same period.
In the third quarter, approximately 46% of trading in NOVA
Chemicals' shares took place on the TSX and 54% of trading took place
in the U.S.
Third Quarter Trading Volumes Millions of % of % of
Shares Float Trading
------------------------------------------------------ ------ --------
Toronto Stock Exchange 26.5 32 46
Consolidated U.S. Trading Volumes 31.0 38 54
----------- ------ --------
Total 57.5 70 100
----------- ------ --------
----------- ------ --------
----------------------------------------------------------------------
INVESTOR INFORMATION
For inquiries on stock-related Transfer Agent and Registrar
matters including dividend CIBC Mellon Trust Company
payments, stock transfers and 600 The Dome Tower, 333 Seventh
address changes, contact NOVA Avenue S.W.
Chemicals toll-free at 1-800-661- Calgary, Alberta, Canada T2P 2Z1
8686 or e-mail to Phone: (403) 232-2400/1-800-387-
shareholders@novachem.com. 0825
Fax: (403) 264-2100
Contact Information Internet: www.cibcmellon.ca
Phone: (403) 750-3600 (Canada) or E-Mail:
(412) 490-4000 (United States) inquiries@cibcmellon.ca
Internet: www.novachemicals.com Share Information
E-Mail: invest@novachem.com NOVA Chemicals' trading symbol on
the New York and Toronto Stock
NOVA Chemicals Corporation Exchanges is NCX. On the TSX,
1000 Seventh Avenue S.W., P.O. Box NOVA Chemicals is listed and
2518 traded in both Canadian and U.S.
Calgary, Alberta, Canada T2P 5C6 dollars. The U.S. dollar trading
symbol on the TSX is NCX.U.
If you would like to receive a
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. This same information is filed with the U.S. Securities
and Exchange Commission and can be accessed via their Electronic Data
Gathering Analysis and Retrieval System (EDGAR) at
www.sec.gov/edgar.shtml
----------------------------------------------------------------------
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 (LOSS)
(unaudited, millions of U.S. dollars)
Q3 2005 First Nine Months
Compared with 2005 Compared
---------------------- with First Nine
Q2 2005 Q3 2004 Months 2004
----------- ---------- -------------------
Higher (lower) net unit
margins $62 $(38) $34
Lower sales volumes (8) (63) (147)
----------- ---------- -------------------
Higher (lower) gross margin(1) 54 (101) (113)
Higher research and
development (2) (3) (4)
(Higher) lower selling,
general and administrative (68) (1) 55
Higher restructuring charges (85) (85) (85)
Lower (higher) depreciation
and amortization 4 (2) 9
Higher interest expense (1) (2) -
Lower other gains and losses - (12) (13)
Lower income tax expense
(Note 4 to the Financial
Statements) 18 45 25
----------- ---------- -------------------
Decrease in net income $(80) $(161) $(126)
----------- ---------- -------------------
----------- ---------- -------------------
(1) Revenue less feedstock and operating costs.
CAUSAL ANALYSIS - NET INCOME (LOSS)
(unaudited, millions of U.S. dollars, all amounts are after-tax)
Q2 2005 Net Income (Loss) $(25)
Margin erosion assuming LIFO based accounting $(29)
Additional margin provided by FIFO based
accounting 36 7
---------
Unusual Events
Joffre ethane interruption - June 21, 2005 (16)
Corunna power outage - Apr. 16, 2005 19
Insurance accrual from Q2 2005 15 18
---------
Non-cash write-down (75)
Profit sharing 9
Stock-based compensation (40)
Other 1 (30)
--------- ---------
Q3 2005 Net Income (Loss) $(105)
---------
---------
The above table is provided to describe significant items
affecting the variance in net income (loss) from quarter to quarter.
NOVA Chemicals had higher margins in the third quarter because it
uses FIFO-based accounting versus LIFO-based. The additional margin
provided by FIFO-based accounting is partially offset by margin
erosion caused by an increase in feedstock prices from June to
Sept. which was not fully realized in higher selling prices. The
overall quarter-to-quarter gain in margin was $7 million, before the
effect of second quarter unusual events and lower profit sharing.
Second quarter unusual events included the power outage at the
Corunna, Ontario flexi-cracker, the ethane feedstock interruption to
the Joffre, Alberta site and the insurance accrual related to NOVA
Chemicals' share of anticipated incremental future costs in the
insurance pools in which it participates. The after-tax impact of
these events totaled $39 million in the second quarter and $21 million
in the third quarter, resulting in approximately $18 million higher
earnings quarter-over-quarter.
In the third quarter, NOVA Chemicals took a non-cash write-down of
$75 million primarily as a result of a decision by the NOVA Innovene
joint venture to cease EPS production at Berre, France and permanently
shutdown the EPS plant at Carrington, UK.
Differences in the amount of profit sharing and stock-based
compensation accruals from quarter to quarter account for the
remaining increase in net loss from the second quarter to third
quarter.
FINANCIAL STATEMENTS
Consolidated Statement of Net Income (Loss) and Reinvested
Earnings
(unaudited, millions of U.S. dollars except per share amounts)
Three Months Nine Months
Ended Ended
------------------------- -----------------
Sept. 30 June 30 Sept. 30 Sept. 30 Sept. 30
2005 2005 2004 2005 2004
-------- ------- -------- -------- --------
Revenue $1,366 $1,329 $1,379 $4,183 $3,743
-------- ------- -------- -------- --------
Feedstock and operating
costs 1,212 1,229 1,124 3,633 3,080
Research and development 14 12 11 38 34
Selling, general and
administrative 81 13 80 136 191
Restructuring charges 85 - - 85 -
Depreciation and amortization 70 74 68 216 225
-------- ------- -------- -------- --------
1,462 1,328 1,283 4,108 3,530
-------- ------- -------- -------- --------
Operating income (loss) (96) 1 96 75 213
-------- ------- -------- -------- --------
Interest expense (net)
(Note 3) (28) (27) (26) (80) (80)
Other gains and losses - - 12 - 13
-------- ------- -------- -------- --------
(28) (27) (14) (80) (67)
-------- ------- -------- -------- --------
Income (loss) before income
taxes (124) (26) 82 (5) 146
Income tax (expense) recovery
(Note 4) 19 1 (26) (31) (56)
-------- ------- -------- -------- --------
Net income (loss) $(105) $(25) $56 $(36) $90
Reinvested earnings, beginning
of period 577 608 597 633 584
Change in accounting policy - - - - (7)
Common share dividends (7) (6) (7) (20) (21)
Common share repurchase - - (59) (107) (59)
Options retired for cash
(net) - - - (5) -
-------- ------- -------- -------- --------
Reinvested earnings, end of
period $465 $577 $587 $465 $587
-------- ------- -------- -------- --------
-------- ------- -------- -------- --------
Earnings (loss) per share
(Note 5)
- basic $(1.28) $(0.29) $0.64 $(0.44) $1.03
- diluted $(1.28) $(0.29) $0.60 $(0.44) $0.98
Summary Quarterly Financial Information
(unaudited; millions of U.S. dollars, except per share amounts)
Three Months Ended
------------------------
2005
-----------------------
Sept. 30 June 30 Mar. 31
Revenue $1,366 1,329 1,488
Operating income (loss) $(96) 1 170
Net income (loss) $(105) (25) 94
Net income (loss) per share
-basic $(1.28) (0.29) 1.12
-diluted $(1.28) (0.29) 1.06
Weighted-average common shares outstanding
(millions)
-basic 82.3 82.3 83.2
-diluted 82.3 82.3 90.0
Three Months Ended
------------------------------------------
2004 2003
--------------------------------- --------
Dec. 31 Sept. 30 June 30 Mar. 31 Dec. 31
Revenue $1,527 1,379 1,238 1,126 1,041
Operating income (loss)
51 96 76 41 3
Net income (loss) 162 56 27 7 (15)
Net income (loss) per share
-basic 1.91 0.64 0.31 0.08 (0.18)
-diluted 1.78 0.60 0.30 0.08 (0.18)
Weighted-average common shares
outstanding (millions)
-basic 84.8 87.2 87.6 87.3 87.0
-diluted 92.4 95.9 96.9 89.2 87.0
Notes to the Consolidated Financial Statements appear on pages 19
to 22.
Consolidated Balance Sheet
(unaudited, millions of U.S. dollars) Sept. 30, 2005 Dec. 31, 2004
------------- -------------
Assets
Current assets
Cash and cash equivalents $97 $245
Receivables 430 567
Inventories 536 634
------------- -------------
1,063 1,446
Investments and other assets 150 147
Plant, property and equipment, net 3,579 3,454
------------- -------------
$4,792 $ 5,047
------------- -------------
------------- -------------
Liabilities and Shareholders' Equity
Current liabilities
Bank loans $1 $-
Accounts payable and accrued liabilities 863 808
Long-term debt due within one year 302 100
------------- -------------
1,166 908
Long-term debt (Note 1) 1,338 1,614
Future income taxes 652 677
Deferred credits 335 355
------------- -------------
3,491 3,554
------------- -------------
Shareholders' equity
Common equity
Common shares 494 499
Contributed surplus 11 8
Cumulative translation adjustment 331 353
Reinvested earnings 465 633
------------- -------------
1,301 1,493
------------- -------------
$4,792 $5,047
------------- -------------
------------- -------------
Notes to the Consolidated Financial Statements appear on pages 19
to 22.
Consolidated Statement of Cash Flows
(unaudited, millions of U.S. dollars)
Three Months Nine Months
Ended Ended
------------------------- -----------------
Sept. 30 June 30 Sept. 30 Sept. 30 Sept. 30
2005 2005 2004 2005 2004
-------- ------- -------- -------- --------
Operating activities
Net income (loss) $(105) $(25) $56 $(36) $90
Depreciation and
amortization 70 74 68 216 225
Future income tax expense
(recovery) (15) (9) 15 (38) 31
Restructuring charges 85 - - (85) -
Other gains and losses - - (12) - (13)
Stock option expense - 1 1 4 3
-------- ------- -------- -------- --------
Funds from operations 35 41 128 231 336
Changes in non-cash
working capital 96 93 (56) 130 (159)
-------- ------- -------- -------- --------
Cash from operations 131 134 72 361 177
-------- ------- -------- -------- --------
Investing activities
Proceeds on asset sales
and other capital
transactions - - 31 - 37
Plant, property and
equipment net
additions (102) (115) (60) (290) (142)
Turnaround costs, long-
term
investments and other
assets (61) (23) (4) (101) (8)
Changes in non-cash
working capital - - - 108 -
-------- ------- -------- -------- --------
(163) (138) (33) (283) (113)
-------- ------- -------- -------- --------
Financing activities
Increase in current bank
loans 1 - - 1 -
Long term debt additions 19 - - 19 400
Long term debt repayments (101) - - (101) -
Preferred securities
redeemed - - - - (383)
Options retired for cash - - (1) (10) (1)
Common shares issued for
stock options - - 13 11 25
Common share repurchases - - (72) (125) (72)
Common share dividends (7) (6) (7) (20) (21)
Project advances from
third parties - - 3 - 9
Changes in non-cash
working capital 1 (1) 1 (1) -
-------- ------- -------- -------- --------
(87) (7) (63) (226) (43)
-------- ------- -------- -------- --------
Increase (decrease) in cash
and cash equivalents (119) (11) (24) (148) 21
Cash and cash equivalents,
beginning
of period 216 227 257 245 212
-------- ------- -------- -------- --------
Cash and cash equivalents,
end
of period $97 $216 $233 $97 $233
-------- ------- -------- -------- --------
-------- ------- -------- -------- --------
Cash tax payments $1 $44 $(5) $54 $6
-------- ------- -------- -------- --------
-------- ------- -------- -------- --------
Cash interest payments $40 $24 $36 $102 $84
-------- ------- -------- -------- --------
-------- -------- ------- -------- -------
Notes to the Consolidated Financial Statements appear on pages 19
to 22.
Notes to Consolidated Financial Statements
(unaudited, millions of U.S. dollars, except per share amounts
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, 2004.
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, 2004 on pages 75 to 79 of the 2004 Annual Report,
except as noted below:
Accounting for Financial Instruments with Characteristics of Both
Liabilities and Equity
The CICA implemented new accounting standards, which harmonize
accounting standards with U.S. GAAP for some types of mandatorily
redeemable shares and other financial instruments. Beginning on Jan.
1, 2005, these instruments are required to be classified, on a
retroactive basis, as liabilities rather than equity. As a result, the
preferred shares of NOVA Chemicals' subsidiary, NOVA Chemicals Inc.,
have been classified as debt. In addition, any dividends associated
with these preferred shares have been reclassified to interest expense
reducing net income by $2 million in the third quarter of 2005, $2
million in the second quarter of 2005 and $1 million in the third
quarter of 2004. All prior periods have been restated.
2. Pensions and Other Post-Retirement Benefits
Components of Net
Periodic Benefit Cost
for Defined Benefit Three Months Ended Nine Months Ended
Plans(1) Sept. 30 Sept. 30
----------------------- -----------------------
Pension Other Pension Other
Benefits Benefits Benefits Benefits
----------- ----------- ----------- -----------
2005 2004 2005 2004 2005 2004 2005 2004
----- ----- ----- ----- ----- ----- ----- -----
Current service cost $8 $6 $- $- $20 $18 $2 $2
Interest cost on
projected benefit
obligations 11 9 1 1 29 25 3 3
Actual return on
plan assets (10) (11) - - (28) (34) - -
Actuarial (gain)
loss on accrued
benefit obligations - 6 - - - 19 - (2)
----- ----- ----- ----- ----- ----- ----- -----
Costs arising in the
period 9 10 1 1 21 28 5 3
Differences
between costs
arising in the
period and costs
recognized in the
period in respect
of the long-term
nature of
employee future
benefit costs:
Return on plan
assets - 3 - - - 11 - -
Transition (asset)
obligation (2) (1) - - (4) (4) 1 1
Actuarial (gain)
loss 1 (5) - 1 5 (15) 1 3
Past service and
actual plan
amendments 1 - - - 1 2 - -
----- ----- ----- ----- ----- ----- ----- -----
Net defined
benefit cost
recognized $9 $7 $1 $2 $23 $22 $7 $7
----- ----- ----- ----- ----- ----- ----- -----
----- ----- ----- ----- ----- ----- ----- -----
(1) Certain prior year amounts have been restated to conform with
the presentation adopted in 2004 due to new Canadian GAAP disclosure
requirements.
The expected long-term rate of return on plan assets is 7.5% in
2005.
Employer Contributions
NOVA Chemicals contributed $17 million to its defined benefit
pension plans and $2 million to its defined contribution plans in the
third quarter of 2005 ($32 million and $6 million in the nine months
ended Sept. 30, 2005).
3. Interest Expense
Components of Interest Expense
Three Months Nine Months
Ended Ended
-------------------------- -----------------
Sept. 30 June 30 Sept. 30 Sept. 30 Sept. 30
2005 2005 2004 2005 2004
-------- -------- -------- -------- --------
Interest on long-term debt $29 $28 $26 $84 $79
Interest on securitizations
and other 4 3 2 8 6
-------- -------- -------- -------- --------
Gross interest expense 33 31 28 92 85
Interest capitalized during
plant construction (4) (3) - (9) (1)
Interest income (1) (1) (2) (3) (4)
-------- -------- -------- -------- --------
Interest expense (net) $28 $27 $26 $80 $80
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
4.Income Taxes
Three Months Nine Months
Ended Ended
------------------------- -----------------
Sept. 30 June 30 Sept. 30 Sept. 30 Sept. 30
2005 2005 2004 2005 2004
-------- ------- -------- -------- --------
Income (loss) before income
taxes $(124) $(26) $82 $(5) $146
Statutory income tax rate 33.62% 33.62% 33.87% 33.62% 33.87%
-------- ------- -------- -------- --------
Computed income tax expense
(recovery) $(42) $(9) $28 $(2) $49
Increase (decrease) in taxes
resulting from:
Lower tax rates on other
gains - - (2) - (2)
Tax benefits not
recognized on
restructuring charges 16 - - 16 -
Income tax rate adjustment - - - - (7)
Additional cost-of-service
income taxes (1) - - - - 4
Foreign tax rates 3 6 (2) 10 2
Other 4 2 2 7 10
-------- ------- -------- -------- --------
Income tax expense (recovery) $(19) $(1) $26 $31 $56
-------- ------- -------- -------- --------
-------- ------- -------- -------- --------
(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.
5. Earnings (Loss) Per Share
(shares in millions) Three Months Ended
----------------------------------------------
Sept. 30 June 30 Sept. 30
2005 2005 2004
--------------- --------------- --------------
Basic Diluted Basic Diluted Basic Diluted
Net income (loss) $(105) $(105) $(25) $(25) $56 $56
Interest on convertible
preferred shares - - - - - 1
------- ------- ------- ------- ------ -------
Net income (loss) for
EPS calculation $(105) $(105) $(25) $(25) $56 $57
------- ------- ------- ------- ------ -------
------- ------- ------- ------- ------ -------
Weighted-average
common shares
outstanding 82.3 82.3 82.3 82.3 87.2 87.2
Add back effect of
dilutive securities:
Stock options - - - - - 2.7
Preferred shares - - - - - 6.0
------- ------- ------- ------- ------ -------
Weighted-average
common shares for
EPS calculations 82.3 82.3 82.3 82.3 87.2 95.9
------- ------- ------- ------- ------ -------
Earnings (loss) per
common share $(1.28) $(1.28) $(0.29) $(0.29) $0.64 $0.60
------- ------- ------- ------- ------ -------
------- ------- ------- ------- ------ -------
5. Earnings (Loss) Per Share
(shares in millions) Nine Months Ended
------------------------------
Sept. 30 Sept. 30
2005 2004
--------------- --------------
Basic Diluted Basic Diluted
Net income (loss) $(36) $(36) $90 $90
Interest on convertible preferred shares - - - 4
------- ------- ------ -------
Net income (loss) for
EPS calculation $(36) $(36) $90 $94
------- ------- ------ -------
------- ------- ------ -------
Weighted-average
common shares
outstanding 82.6 82.6 87.4 87.4
Add back effect of
dilutive securities:
Stock options - - - 2.2
Preferred shares - - - 6.9
------- ------- ------ -------
Weighted-average
common shares for
EPS calculations 82.6 82.6 87.4 96.5
------- ------- ------ -------
Earnings (loss) per
common share $(0.44) $(0.44) $1.03 $0.98
------- ------- ------ -------
------- ------- ------ -------
A total of 4.7 million stock options have been excluded from the
computation of diluted earnings per share for the quarter ended Sept.
30, 2005. As of Sept. 30, 2005, the fully diluted share count was
82,335,363 million. A total of 8.5 million retractable preferred
shares and 4.7 million stock options were excluded in the quarter
ended June 30, 2005. No retractable preferred shares or stock options
were excluded from the computation of diluted earnings per share for
the quarter ended Sept. 30, 2004. 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 were dilutive prior to Sept. 2005 if our
earnings per share was greater than the preferred share dividend
divided by the number of shares issued on conversion. As of Sept. 30,
2005, the retractable preferred shares are no longer convertible to
NOVA Chemicals' common stock and therefore are no longer a dilutive
factor in the earnings per share calculation. No restatements were
made to prior periods.
6. Segmented Information
NOVA Chemicals operates its business under the following principal
business segments:
Three Months Nine Months
Ended Ended
------------------------- -----------------
Sept. 30 June 30 Sept. 30 Sept. 30 Sept. 30
2005 2005 2004 2005 2004
-------- ------- -------- -------- --------
Revenue
Olefins/Polyolefins $878 $851 $824 $2,687 $2,318
Styrenics 525 540 641 1,672 1,633
Intersegment eliminations (37) (62) (86) (176) (208)
-------- ------- -------- -------- --------
$1,366 $1,329 $1,379 $4,183 $3,743
-------- ------- -------- -------- --------
-------- ------- -------- -------- --------
Operating income (loss)
Olefins/Polyolefins $77 $85 $137 $348 $311
Styrenics (74) (97) (5) (191) (44)
Corporate and other (99) 13 (36) (82) (54)
-------- ------- -------- -------- --------
$(96) $1 $96 $75 $213
-------- ------- -------- -------- --------
-------- ------- -------- -------- --------
Net income (loss)
Olefins/Polyolefins $39 $45 $77 $196 $167
Styrenics (59) (76) (10) (156) (56)
Corporate and other (85) 6 (11) (76) (21)
-------- ------- -------- -------- --------
$(105) $(25) $56 $(36) $90
-------- ------- -------- -------- --------
-------- ------- -------- -------- --------
Sept. 30 Dec. 31
2005 2004
------- -------
Assets
Olefins/Polyolefins $2,602 $2,510
Styrenics 1,911 2,018
Corporate and other(1) 279 519
------- -------
$4,792 $5,047
------- -------
------- -------
(1) Amounts include all cash and cash equivalents.
7. Reconciliation to United States Accounting Principles
Three Months Nine Months
Ended Ended
------------------------- -----------------
Sept. 30 June 30 Sept. 30 Sept. 30 Sept. 30
2005 2005 2004 2005 2004
-------- ------- -------- -------- --------
Net income (loss) in
accordance with Canadian
GAAP $(105) $(25) $56 $(36) $90
Add (deduct) adjustments for:
Hedging and derivative
activity(1) (1) - (2) (3) 2
Inventory costing(2) - (6) 1 (7) 3
Start-up costs(3) 2 - 4 3 2
Change in accounting
policy(4) - - - - (7)
Other - 1 - 1 -
-------- ------- -------- -------- --------
Net income (loss) in
accordance with
U.S. GAAP $(104) $(30) $59 $(42) $90
-------- ------- -------- -------- --------
-------- ------- -------- -------- --------
Earnings (loss) per share -
basic $(1.27) $(0.36) $0.68 $(0.51) $1.03
-------- ------- -------- -------- --------
-------- ------- -------- -------- --------
Earnings (loss) per share -
diluted $(1.27) $(0.36) $0.63 $(0.51) $0.98
-------- ------- -------- -------- --------
-------- ------- -------- -------- --------
Three Months Nine Months
Ended Ended
------------------------- -----------------
Sept. 30 June 30 Sept. 30 Sept. 30 Sept. 30
2005 2005 2004 2005 2004
-------- ------- -------- -------- --------
Comprehensive income
(loss) (5)
Net income (loss) in
accordance with U.S.
GAAP(8) $(104) $(30) $59 $(42) $90
Cumulative translation
adjustment(6) 73 (63) 75 (22) 14
-------- ------- -------- -------- --------
Comprehensive income (loss)
in accordance with
U.S. GAAP $(31) $(93) $134 $(64) $104
-------- ------- -------- -------- --------
-------- ------- -------- -------- --------
Sept. 30 Dec. 31
2005 2004
--------- ---------
Accumulated other comprehensive income(5)
Cumulative translation adjustment(6) $310 $332
Minimum pension liability(7) (3) (3)
--------- ---------
$307 $329
--------- ---------
--------- ---------
Balance sheet in accordance with U.S. GAAP
Current assets(1), (2) $1,093 $1,482
Investments and other assets(3), (7) 149 139
Plant, property and equipment, net 3,557 3,429
Current liabilities(1) (1,161) (893)
Long-term debt(1) (1,344) (1,625)
Deferred credits(1), (7) (987) (1,030)
--------- ---------
Common equity $1,307 $1,502
--------- ---------
--------- ---------
(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 largely 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) On Jan. 1, 2004, NOVA Chemicals adopted the CICA standard for
expensing of stock options. 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.
(5) 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 included in net income.
(6) 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.
(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) See Note 1 on page 19 for change in accounting policy related to
financial instruments.
8. Restructuring Charges
On Oct. 1, 2005, NOVA Chemicals and Innovene combined their
European polystyrene businesses into a 50:50 joint venture known as
NOVA Innovene. In accordance with Canadian generally accepted
accounting procedures, NOVA Chemicals will be accounting for the joint
venture on a proportionate consolidation basis.
On Oct. 11, 2005, NOVA Innovene announced it plans to cease EPS
production at Berre, France and permanently shutdown the EPS plant at
Carrington, UK. Accordingly, NOVA Chemicals has written down the value
of the plants on its books to zero as of Sept. 30, 2005. The amount of
the write-down was $76 million ($60 million after-tax). The company
also reduced the recorded benefit of certain tax loss carry-forwards
by $9 million, as the likelihood of their utilization is reduced as a
result of the formation of the joint venture and closure of the
plants.
Certain other non-productive assets were written off amounting to
$9 million ($6 million after-tax). The total amount of the
restructuring charge is $85 million $75 million after-tax).
CONTACT: NOVA Chemicals Corporation
Chris Bezaire, 412-490-5070
Investor Relations
or
NOVA Chemicals Corporation
Greg Wilkinson, 412-490-4166
Media Relations
Exhibit (b)
CERTIFICATION
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)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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) designed such internal control over financial reporting, or caused
such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles;
c) 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
d) disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's most
recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an
annual 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 19, 2005 Chief Executive Officer
(Principal Executive Officer)
Exhibit (c)
CERTIFICATION
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)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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) designed such internal control over financial reporting, or caused
such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles;
c) 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
d) disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's most
recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an
annual 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 19, 2005 Chief Financial Officer
(Principal Financial Officer)
EXHIBIT (d)
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, 2005 (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.
/s/ Jeffrey M. Lipton
------------------------------------
Jeffrey M. Lipton
October 19, 2005 Chief Executive Officer
EXHIBIT (e)
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, 2005 (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.
/s/ Larry A. MacDonald
------------------------------------
Larry A. MacDonald
October 19, 2005 Chief Financial Officer