All financial information is in U.S. dollars, and all earnings
per share results are diluted, unless otherwise indicated.
First Quarter 2009 Results
- Net loss of $123 million ($1.48
loss per share) compares to net loss of $212 million ($2.55 loss
per share) for the fourth quarter of 2008, and net income of $52
million ($0.63 per share) for the first quarter of 2008.
- Adjusted net loss of $109
million ($1.31 loss per share) compares to adjusted net loss of
$189 million ($2.27 loss per share) in the fourth quarter of 2008,
and adjusted net income of $73 million ($0.88 per share) for the
first quarter of 2008. See Supplemental Measures on page 15.
- Adjusted EBITDA from the
businesses of $6 million compares to an adjusted EBITDA loss of
$322 million in the fourth quarter of 2008 and adjusted EBITDA of
$256 million in the first quarter of 2008. See Supplemental
Measures on page 15.
Highlights
- On Apr. 14, 2009, shareholders
voted overwhelmingly in favor of a special resolution to approve an
arrangement under the Canada Business Corporations Act involving,
among other things, the acquisition, directly or indirectly, by
International Petroleum Investment Company (IPIC) of all of the
issued and outstanding common shares of NOVA Chemicals
(NYSE:NCX)(TSX:NCX) for US$6.00 in cash for each common share.
- On Feb. 22, 2009, NOVA Chemicals
announced an agreement with Export Development Canada (EDC) and a
group of three Canadian banks for a new revolving credit facility
worth $150 million.
- NOVA Chemicals repaid the $250
million 7.4% notes that matured on April 1, 2009.
�We are pleased that our shareholders voted overwhelmingly in
favor of the IPIC transaction and we are looking forward to the
transaction closing later in the second quarter, subject to
receiving necessary regulatory and court approvals, and meeting
other customary conditions,� said Jeff Lipton, CEO, NOVA
Chemicals.
�Market conditions and the Alberta Advantage improved
month-to-month, leading to a solid March. We are looking forward to
working more closely with IPIC after the transaction closes,� added
Chris Pappas, President and COO, NOVA Chemicals.
Adjusted EBITDAfrom the
Businesses($U.S. millions)
�
FirstQuarter2009
�
FourthQuarter2008
� Olefins/Polyolefins $ 13 $ (210 ) INEOS NOVA JV 6 (77 )
Performance Styrenics (13 ) (35 )
Adjusted EBITDA from the
Businesses
$ 6
$ (322
)
*Adjusted EBITDA from the Olefins/Polyolefins, INEOS NOVA JV and
Performance Styrenics business units. (See Supplemental Measures on
page 15.)
NOVA Chemicals� pre-recorded first quarter 2009 earnings report
will be available on Thursday, April 23, 2009 for investors,
analysts and media at 11:30 a.m. EDT (9:30 a.m. MDT; 8:30 a.m.
PDT). The replay number is (416) 695-5800 (Reservation No.
3271221). The report also will be available on the Internet at
www.novachemicals.com.
NOVA Chemicals Financial Highlights
These highlights should be read in conjunction with NOVA
Chemicals� other interim and annual financial statement disclosures
and its 2008 Annual Report.
(millions of U.S. dollars, except
per share amounts or unless otherwise noted)
Three Months Ended
Mar. 312009
�
Dec. 312008
(1)
�
Mar. 312008
(1)
Revenue $ 818 � $ 1,153 � $ 1,912 � Adjusted EBITDA (2)
Olefins/Polyolefins (3) $ 13 $ (210 ) $ 246 INEOS NOVA Joint
Venture 6 (77 ) 8 Performance Styrenics (13 ) � (35 ) � 2 �
Adjusted EBITDA from the Businesses (4)
6 (322
) 256 Corporate (see page 7)
(45 ) �
96 � �
(49 ) Adjusted EBITDA
$ (39
) $ (226 ) $ 207 � Operating (loss)
income (4) $ (120 ) $ (315 ) $ 110 � Net (loss) income $ (123 ) $
(212 ) $ 52 (Loss) earnings per common share, diluted $ (1.48 ) $
(2.55 ) $ 0.63 Adjusted (loss) earnings per share, diluted (4) $
(1.31 ) $ (2.27 ) $ 0.88 � Funds from operations (4) $ (78 ) $ (323
) $ 127 Cash (used in) from operations $ (271 ) $ 107 $ (12 ) �
(1) Prior periods were restated
due to the write-off of certain intangible assets and the related
amortization expense, net of tax, due to the adoption of CICA 3064
in the first quarter of 2009. The after-tax impact to the net loss
in the fourth quarter of 2008 and net income in the first quarter
of 2008 was a $2 million benefit for each period.
(2) Net income before interest expense, income taxes, depreciation
and amortization, other gains/losses, mark-to-market feedstock
derivatives, IPIC transaction costs and restructuring charges (see
Supplemental Measures on page 15). In the first quarter of 2009,
NOVA Chemicals changed its definition of adjusted EBITDA to exclude
the IPIC transaction costs. (3) Olefins/Polyolefins consists of the
Joffre Olefins, Corunna Olefins and Polyethylene segments. (4) See
Supplemental Measures on page 15.
IPIC
Transaction
On Apr. 14, 2009, shareholders voted overwhelmingly in favor of
a special resolution to approve an arrangement (the Arrangement)
under the Canada Business Corporations Act involving, among other
things, the acquisition, directly or indirectly, by International
Petroleum Investment Company (IPIC) of all of the issued and
outstanding common shares of NOVA Chemicals for US$6.00 in cash for
each common share. On April 17, 2009, the Court of Queen�s Bench of
Alberta entered an Order approving the Arrangement. Closing of the
transaction is expected in the second quarter of 2009 following
receipt of regulatory and court approvals, and satisfaction of
customary conditions. All regulatory filings have been made. The
U.S. Federal Trade Commission granted early termination of the
waiting period under the Hart-Scott-Rodino Antitrust Improvements
Act and the Commissioner of Competition appointed under the
Competition Act (Canada) issued a �no-action� letter advising the
parties in writing that she does not have grounds on which to
initiate proceedings before the Competition Tribunal under the
merger provisions of the Competition Act (Canada).
Exceptional Factors Affecting
First Quarter Results
During the first quarter of 2009, various exceptional items
totaling $16 million before-tax ($14 million after-tax) negatively
affected NOVA Chemicals� results.
- The mark-to-market value of NOVA
Chemicals� open feedstock positions improved in the first quarter
of 2009, resulting in a non-cash gain of $15 million before-tax
($11 million after-tax).
- The legal and financial advisor
fees related to the IPIC transaction resulted in expenses totaling
$23 million before-tax ($17 million after-tax). As of Mar. 31,
2009, $8 million of these costs have been paid.
- In March 2009, NOVA Chemicals
resumed restructuring its Performance Styrenics segment to
strengthen the business. The target for restructuring is to reduce
fixed costs within the business unit by 40%. The Company recorded a
restructuring charge of $8 million before-tax ($8 million
after-tax) during the first quarter of 2009 related to severance
and other employee related costs.
Liquidity Update / Balance
Sheet Classification
The $250 million 7.4% notes that matured on Apr. 1, 2009, were
repaid in full using available liquidity, including $150 million
from the $250 million backstop term loan credit facility entered
into with IPIC.
Because NOVA Chemicals has not completed negotiations with its
core banks to amend its financial covenants over the coming 12
month period, the Company is required as a technical matter in
accordance with EIC-59, Long-term Debt with Covenant Violations, to
classify all outstanding long-term debt, except its public
debentures and notes, as current liabilities at Mar. 31, 2009. See
Liquidity on page 9, last paragraph, for further
details.
Review of Business Results
OLEFINS/POLYOLEFINS BUSINESS UNIT
Financial Highlights
(millions of U.S. dollars, except as noted)
Three Months
Ended
�
Mar. 312009
�
Dec. 312008
�
Mar. 312008
Revenue $ 551 � $ 801 $ 1,402 � Adjusted EBITDA (1) Joffre Olefins
$ 45 $ 107 $ 168 Corunna Olefins (38 ) (221 ) 14 Polyethylene 11
(120 ) 44 Eliminations (5 ) � 24 � � 20 Total Adjusted EBITDA $ 13
$ (210 ) $ 246 Depreciation (2) 51 � � 52 � � 53 Operating (Loss)
Income (1) (2) $ (38 ) $ (262 ) $ 193 � Capital Spending $ 17 $ 40
$ 27 � PE Sales Volumes (millions of pounds) (3) Advanced
SCLAIRTECHTM resins 214 206 237 All other polyethylene resins 557 �
� 541 � � 679 Total Sales 771 � � 747 � � 916 � (1) See
Supplemental Measures on page 15. (2) Prior periods have been
restated due to the adoption of CICA 3064 in the first quarter of
2009. (3) Third-party sales. Advanced SCLAIRTECH resins are
produced at the Joffre site and include SCLAIR� and SURPASS�
resins.
Average Benchmark Prices (1)
(U.S. dollars per pound, unless otherwise noted)
Three Month
Average
�
Mar. 312009
�
Dec. 312008
�
Mar. 312008
Principal Products: � � Ethylene (2) $ 0.32 $ 0.39 $ 0.61
Polyethylene � linear low density butene liner (3) $ 0.49 $ 0.61 $
0.78 Polyethylene � weighted-average benchmark (3) $ 0.39 $ 0.51 $
0.83
Raw Materials: AECO natural gas (dollars per mmBTU) (4)
$ 3.96 $ 5.51 $ 7.87 NYMEX natural gas (dollars per mmBTU) (4) $
4.86 $ 6.82 $ 8.09 WTI crude oil (dollars per barrel) (5) $ 43.08 �
$ 58.73 � $ 97.92 � (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) Source.
Townsend Polymer Services and Information (TPSI). Benchmark prices
weighted according to NOVA Chemicals� sales volume mix in North
America. (4) Source: Canadian Gas Price Reporter. AECO gas is
weighted-average daily spot gas price. NYMEX gas is Henry Hub 3-Day
Average Close. (5) Source: Platt�s. NYMEX WTI daily spot-settled
price average for calendar month.
Review of
Operations
In the first quarter of 2009, business conditions were
relatively stable as feedstock costs and selling prices were much
less volatile than in the fourth quarter of 2008, when they fell
dramatically throughout the period. The Olefins/Polyolefins
business unit reported adjusted EBITDA profit of $13 million, up
significantly from the adjusted EBITDA loss of $210 million in the
fourth quarter of 2008. The quarter-over-quarter increase was due
to sharply higher margins for the Corunna Olefins and Polyethylene
segments, as flow-through feedstock costs fell more than average
selling prices, partially offset by lower EBITDA for the Joffre
Olefins segment due to lower margins.
Adjusted EBITDA of $13 million in the first quarter of 2009 was
significantly lower than adjusted EBITDA of $246 million reported
in the first quarter last year. The decline was due to lower
margins, as selling prices fell more than flow-through feedstock
costs, and lower sales volumes.
Joffre Olefins
First Quarter 2009 Versus Fourth Quarter 2008
The Joffre Olefins segment reported adjusted EBITDA of $45
million in the first quarter of 2009, down from $107 million in the
fourth quarter of 2008. Higher sales volume was more than offset by
lower margins as selling prices fell faster than flow-through
feedstock costs.
Alberta ethane costs were 27% lower in the first quarter.
Natural gas prices declined 28% due to higher production, weaker
industrial demand and ample inventories. In contrast, USGC ethane
prices fell only 15%, as the balance between strong ethane supply
and weak demand improved. As a result, the Alberta Advantage rose
from an average of 2� per pound in the fourth quarter of 2008 to an
average of 4� per pound in the first quarter of 2009, and has
increased to an average of 7� per pound to date in April.
First Quarter 2009 Versus First Quarter 2008
Joffre Olefins reported an adjusted EBITDA of $45 million in the
first quarter of 2009, down from $168 million in the first quarter
of 2008. Sales volumes were lower and margins declined due to
selling prices that fell faster than feedstock costs. Industry
average prices for ethylene were 48% lower in the first quarter of
2009 compared to the same period one year ago.
Corunna Olefins
First Quarter 2009 Versus Fourth Quarter 2008
Corunna Olefins reported an adjusted EBITDA loss of $38 million
in the first quarter of 2009, compared to an adjusted EBITDA loss
of $221 million in the fourth quarter of 2008. Lower sales volumes
were more than offset by higher margins as flow-through feedstock
costs fell faster than selling prices.
In the first quarter of 2009, the average WTI crude oil price
fell 27%, while NOVA Chemicals� average flow-through crude oil
costs declined 59%, due in part to the write-down of inventory to
market value as of Dec. 31, 2008. Industry average prices for
ethylene fell 18% due to lower average feedstock costs in the USGC
region. Average co-product selling prices in the first quarter were
41% lower and total sales volumes were 25% lower than the fourth
quarter of 2008.
First Quarter 2009 Versus First Quarter 2008
Corunna Olefins reported an adjusted EBITDA loss of $38 million
in the first quarter of 2009, compared to an adjusted EBITDA profit
of $14 million in the first quarter one year ago. Sales volumes
declined, and margins contracted as selling prices fell more than
feedstock costs. In the first quarter of 2009, industry average
prices for ethylene fell 48% compared to the first quarter of 2008,
due to lower average feedstock costs and relatively weak demand in
the USGC region.
Polyethylene
First Quarter 2009 Versus Fourth Quarter 2008
The Polyethylene segment reported an adjusted EBITDA profit of $
11 million in the first quarter of 2009, compared to an adjusted
EBITDA loss of $120 million in the fourth quarter of 2008. The
improvement was due to higher margins, as feedstock costs fell
faster than average selling prices, and higher sales volume.
NOVA Chemicals� sales volume was 771 million pounds in the first
quarter of 2009, compared to 747 million pounds in the fourth
quarter of 2008, as the market began to stabilize following the
dramatic price and inventory reductions in late 2008. International
sales volume represented 19% of total sales, up from 14% in the
prior period and higher than the 15% long-term average. Selling
prices in international markets rose as naphtha-based cash costs
increased and demand recovered, keeping the export window open
throughout the quarter.
Sales of polyethylene manufactured using the Advanced SCLAIRTECH
technology (AST polyethylene) totaled 214 million pounds in the
first quarter, up from 206 million pounds in the fourth quarter of
2008. First quarter sales represent 91% of the recently increased
annualized AST production capacity of 950 million pounds, a
significantly higher level than the first quarter industry
operating rate of 85%, as published by the American Chemistry
Council (ACC).
NOVA Chemicals ended the quarter with 20 days of polyethylene
inventory, much lower than the industry average of 44 days as
reported by the ACC. Producer inventory levels in the first quarter
were much more stable than in the volatile fourth quarter of 2008,
as producers effectively matched production to demand. Inventory
downstream of producers continued to decline.
The average first quarter North American industry butene liner
polyethylene price decreased 12� per pound to an average 49� per
pound, according to Townsend Polymers Services and Information. The
industry price reached its recent low in December 2008, while the
average first quarter price was 7� per pound higher than December.
Of the price increases announced for the first quarter, a 7� per
pound increase was fully implemented, while a second increase of 5�
per pound has been delayed to the second quarter.
First Quarter 2009 Versus First Quarter 2008
The Polyethylene segment reported adjusted EBITDA of $ 11
million in the first quarter of 2009, compared to adjusted EBITDA
of $44 million in the first quarter of 2008. The decline was due to
lower margins, as selling prices fell more than flow-through
feedstock costs, and lower sales volumes. Lower margins were only
partially offset by lower operating costs, that were due to lower
transportation and utilities costs. The first quarter 2009 industry
average butene liner polyethylene price decreased 37% as compared
to the first quarter one year ago.
NOVA Chemicals� ability to implement price increases depends on
many factors that may be beyond its control. See Forward-Looking
Information on Page 16.
INEOS NOVA Joint Venture(1)
Financial Highlights
(millions of U.S. dollars, except as noted)
Three Months
Ended
�
Mar. 312009
�
Dec. 312008
�
Mar. 312008
Revenue $ 237 � $ 320 � $ 479 � Adjusted EBITDA (2) $ 6 $ (77 ) $ 8
Depreciation 6 � 7 � � 6 Operating Income (Loss) (2) $ - $ (84 ) $
2 � Capital Spending $ 1 $ 4 $ 7 � Sales Volumes (millions of
pounds) (3) Styrene Monomer 176 180 243 Solid and Expandable
Polystyrene 377 � 320 � � 414 Total Sales 553 � 500 � � 657 �
(1) Results reflect NOVA Chemicals
50% position in the INEOS NOVA joint venture.
(2) See Supplemental Measures on page 15. (3) Third-party sales.
Polystyrene sales consist of solid polystyrene sales in North
America and solid and expandable polystyrene sales in Europe.
Average Benchmark Prices (1)
(U.S. dollars per pound, unless otherwise noted)
Three Month
Average
�
Mar. 31
2009
�
Dec. 31
2008
�
Mar. 31
2008
Principal Products: � � Styrene Monomer � North America (2)
$ 0.40 $ 0.56 $ 0.72 Solid Polystyrene � North America (2) $ 0.77 $
0.99 $ 1.04 Solid Polystyrene � Europe (2) $ 0.43 $ 0.57 $ 0.88
Raw Materials: Benzene (dollars per gallon) (2) $ 1.22 $
2.30 $ 3.65 Ethylene (2) $ 0.32 � $ 0.39 � $ 0.61 � (1) Average
benchmark prices do not necessarily reflect actual prices realized
by INEOS NOVA or any other petrochemical company. (2) Source: CMAI
Contract Market.
Review of Operations
First Quarter 2009 Versus Fourth Quarter 2008
NOVA Chemicals� 50% share of INEOS NOVA provided an adjusted
EBITDA profit of $6 million in the first quarter of 2009, compared
to an adjusted EBITDA loss of $77 million in the fourth quarter of
2008. The significant improvement was due to higher margins, as
flow-through feedstock costs fell more than selling prices, and
higher sales volume across all product lines and regions.
In North America, styrene monomer margins expanded due to
flow-through feedstock costs that fell much more than selling
prices. The market price of benzene, which represents approximately
70% of styrene monomer raw material costs, declined 47% while
industry styrene monomer selling prices declined 27%. For North
American polymers, flow-through feedstock costs declined further
than selling prices, leading to margin improvement. Sales volumes
rose 18% in the first quarter of 2009 versus the fourth quarter of
2008 as lower polystyrene prices led customers to restock, and
INEOS NOVA benefited from its strong market position in food
service ware and packaging markets that were less affected by the
recession than other market segments.
In Europe, polystyrene (PS) and expandable polystyrene (EPS)
margins were higher in the first quarter of 2009 versus the fourth
quarter of 2008 mainly due to some recovery in volumes of both PS
and EPS that improved slightly from the extremely weak levels
caused by significant inventory destocking in the fourth quarter of
2008.
First Quarter 2009 Versus First Quarter 2008
NOVA Chemicals� 50% share of INEOS NOVA provided adjusted EBITDA
of $6 million in the first quarter of 2009, compared to adjusted
EBITDA of $8 million in the first quarter of 2008. In North
America, first quarter 2009 styrene monomer margin declined
modestly due to lower sales volume, as inventory destocking
continued into early 2009, though monomer margins and volumes
improved later in the quarter. In North America polymers, margins
were higher due to flow-through feedstock costs that fell more than
selling prices as compared to the first quarter of 2008. In Europe,
significantly lower sales volumes, due to the effects of the
recession, more than offset higher product margins as flow-through
feedstock costs fell more than selling prices.
PERFORMANCE STYRENICS BUSINESS UNIT
Financial Highlights
(millions of U.S. dollars, except as noted)
Three Months
Ended
�
Mar. 31
2009
�
Dec. 31
2008
�
Mar. 31
2008
Revenue $ 46 � $ 70 � $ 122 � Adjusted EBITDA (1) $ (13 ) $ (35 ) $
2 Depreciation 7 � � 6 � � 6 � Operating Loss (1) $ (20 ) $ (41 ) $
(4 ) � Capital Spending $ 1 $ 6 $ 1 � Sales Volumes (millions of
pounds) (2) 59 � � 65 � � 103 � �
(1) See Supplemental Measures on
page 15.
(2) Third-party sales.
Average Benchmark Prices (1)
(U.S. dollars per pound)
Three Month Average
�
Mar. 31
2009
�
Dec. 31
2008
�
Mar. 31
2008
Styrene Monomer $ 0.40 � $ 0.56 � $ 0.72 Expandable Polystyrene $
0.82 � $ 1.08 � $ 1.02 � (1) Source: CMAI. Average benchmark prices
do not necessarily reflect actual prices realized by NOVA Chemicals
or any other petrochemical company.
Review of Operations
First Quarter 2009 Versus Fourth Quarter 2008
The Performance Styrenics segment reported an adjusted EBITDA
loss of $13 million in the first quarter of 2009 compared to an
adjusted EBITDA loss of $35 million in the fourth quarter of 2008.
The improvement was due to higher margins, as flow-through
feedstock costs declined faster than selling prices, and fixed cost
reductions related to cost control measures and temporary
manufacturing plant idling.
In March 2009, NOVA Chemicals resumed a restructuring of its
Performance Styrenics unit that is targeted to ultimately reduce
fixed costs by 40% and strengthen the business. The Company
recorded a restructuring charge of $8 million before-tax (which is
reflected in Corporate results) during the first quarter of 2009
related to severance and other employee related costs.
Additionally, plant operations were rationalized, resulting in
re-rating the Monaca, PA, EPS unit from 285 million pounds per year
to 180 million pounds per year, and the Painesville, OH, EPS unit
from 85 million pounds per year to 100 million pounds per year.
First quarter DYLARK� resin sales declined 14% primarily due to
dramatic declines in European automobile production. ARCEL� resin
first quarter sales declined 22% due to continued weakness in the
consumer durables market.�Asian sales of ARCEL resin dropped 37%
compared to the fourth quarter.
NOVIDESA and NOVA Chile generated record profitability as
Mexican and Chilean building and construction markets were
resilient and lower materials costs stimulated demand. Elemix�
Concrete Additive was launched at the 2009 World of Concrete
Conference in February 2009, where the product was voted �Most
Innovative Product� for concrete applications by industry
experts.
First Quarter 2009 Versus First Quarter 2008
The Performance Styrenics segment reported an adjusted EBITDA
loss of $13 million in the first quarter of 2009 compared to an
adjusted EBITDA profit of $2 million in the first quarter of 2008.
The decline was due to lower sales volumes and lower margins, as
selling prices declined more than flow-through feedstock costs.
EPS sales declined 40% in the first quarter of 2009 due to the
sharp decline in the construction market as compared to the first
quarter of 2008. DYLARK resin first quarter sales declined 58% due
to weakness in automotive markets. ARCEL resin first quarter sales
declined 54% from the first quarter of 2008 due to weakness in
consumer durables markets.�European ARCEL resin sales were
particularly weak as sales dropped 72% because of low consumer
demand and inventory corrections.
CORPORATE
(millions of U.S. dollars)
Three Months Ended
�
Mar. 31
2009
�
Dec. 31
2008
�
Mar. 31
2008
Before-Tax Corporate Items: � � Corporate operating
costs (1) (2) $ (24 ) $ (7 ) $ (34 ) Stock-based compensation and
profit sharing (3) (22 ) (14 ) (17 ) Mark-to-market feedstock
derivatives (4) 15 8 (30 ) Foreign exchange gain (impact of
functional currency change) - 117 - IPIC transaction costs (23 ) -
- Restructuring (8 ) � (32 ) � - � Operating (Loss) Income (2) $
(62 ) $ 72 $ (81 ) � Add back: Mark-to-market feedstock derivatives
(4) (15 ) (8 ) 30 Corporate depreciation (2) 1 - 2 IPIC transaction
costs 23 - - Restructuring 8 � � 32 � � - �
Adjusted EBITDA
(5) $ (45 ) �
$ 96 � �
$ (49
) (1) Includes corporate depreciation. � (2) Prior period
have been restated due to the adoption of CICA 3064 in the first
quarter of 2009. � (3) NOVA Chemicals has three cash-settled,
stock-based compensation plans that are marked to market with
changes in the value of the common stock price. NOVA Chemicals
entered into forward transactions with the intent to neutralize the
mark-to-market impact of two of the stock-based compensation plans.
All forward transactions were cash settled in the first quarter of
2009 (see page 10). In the fourth quarter of 2008, NOVA Chemicals
changed its accounting policy for one of its stock-based
compensation plans. Stock-based compensation also includes the
amount expensed related to the fair value of stock options earned
by employees during the period. In addition, NOVA Chemicals
maintains a profit sharing program available to most employees
based on the achievement of shareholder return on equity targets. �
(4) NOVA Chemicals is required to record on its balance sheet the
market value of its open derivative positions which do not qualify
for hedge accounting treatment. The gain or loss resulting from
changes in the market value of these derivatives is recorded as
earnings or loss each period. These mark-to-market adjustments are
recorded in the Feedstock and operating costs line on the
Consolidated Statements of Net (Loss) Income and as part of
Corporate results until the positions are realized. Once realized,
any income effects are recorded in business results. � (5) See
Supplemental Measures on page 15. In the first quarter of 2009,
NOVA Chemicals changed its definition of adjusted EBITDA to exclude
the IPIC transaction costs.
Corporate Operating Costs
Corporate operating costs were higher during the first quarter
of 2009 as compared to the fourth quarter of 2008 primarily due to
a settlement charge of $8 million related to a partial payment from
the Company�s supplemental employee retirement plan and increased
incentive compensation accruals during the first quarter of 2009.
Corporate operating costs in the first quarter of 2008 were higher
than the first quarter of 2009 primarily due to project write-offs
in the first quarter of 2008.
Stock-based Compensation and Profit Sharing
Expenses increased by $8 million in the first quarter of 2009
versus the fourth quarter of 2008. Recognition of stock-based
compensation costs for restricted share units granted in February
2009 to retirement eligible employees in accordance with EIC-162
increased first quarter expenses by $12 million, while the fourth
quarter expense benefited from a reversal of profit sharing
accruals amounting to $8 million. The mark-to-market cost of
stock-based compensation programs declined by $12 million in the
first quarter of 2009 as compared to the fourth quarter of 2008.
The hedging program designed to offset the mark-to-market costs of
stock-based compensation programs was ineffective in both the
fourth quarter of 2008 and the first quarter of 2009 because the
stock price had fallen below the level at which the hedging program
was effective. This hedging program was still effective in the
first quarter of 2008, which mainly accounts for the lower expense
in that quarter despite record profitability in 2007. The hedging
program was cash settled in the first quarter of 2009 (see page
10).
Mark-to-Market Feedstock Derivatives
The mark-to-market value of NOVA Chemicals� open feedstock
positions improved in the first quarter of 2009, resulting in a
non-cash gain of $15 million ($11 million after-tax). The Company
locks in a portion of its propane and butane feedstock requirements
as a percentage of crude oil using forward contracts that extend to
2012. Strengthening forward propane and butane prices as a
percentage of forward crude oil prices drove the non-cash
mark-to-market improvement. NOVA Chemicals recorded an unrealized
gain of $8 million ($6 million after-tax) in the fourth quarter of
2008 and an unrealized loss of $30 million ($21 million after-tax)
in the first quarter of 2008 on the feedstock derivative
positions.
On Jan. 1, 2009, NOVA Chemical adopted EIC-173, Credit Risk and
the Fair Value of Financial Assets and Liabilities, which requires
the mark-to-market value of NOVA Chemicals� open feedstock
positions to include consideration of the Company�s own credit risk
and the credit risk of its counterparties. The adoption of EIC-173
resulted in a one-time credit on Jan. 1, 2009 to opening retained
earnings and a corresponding decrease in the mark-to-market
liability of $18 million ($12 million after-tax). During the first
quarter of 2009, the initial EIC-173 impact was reduced by $15
million ($10 million after-tax), decreasing the first quarter 2009
non-cash mark-to-market gain and increasing the mark-to-market
liability.
Functional Currency Change
Effective Oct. 1, 2008, the functional currency of NOVA
Chemicals� Canadian operations changed to U.S. dollars. The change
resulted in a $117 million foreign exchange non-cash gain during
the fourth quarter of 2008 that was recorded in Corporate results.
NOVA Chemicals will continue to see foreign exchange gains and
losses flow through earnings in the future and has separately
highlighted these amounts on the Consolidated Statements of Net
(Loss) Income. See page 12.
IPIC Transaction Costs
Costs incurred by NOVA Chemicals related to the IPIC transaction
include financial advisor fees and legal fees incurred during the
first quarter of 2009. As of Mar. 31, 2009, $8 million of these
costs have been paid.
Restructuring
In March 2009, NOVA Chemicals resumed restructuring its
Performance Styrenics segment to strengthen the business. The
target for restructuring is to reduce fixed costs within the unit
by 40%. The Company recorded a restructuring charge of $8 million
during the first quarter of 2009 related to severance and other
employee related costs as a result of the restructuring.
IFRS Changeover Plan
NOVA Chemicals has provided a qualitative assessment of its IFRS
convergence plan at Dec. 31, 2008, in the 2008 Annual Report
MD&A on page 63. There were no further changes to this plan
during the first quarter of 2009. The Company will continue to
investigate the impact of IFRS convergence throughout the remainder
of 2009.
Capitalization, Liquidity and Cash Flow
Capitalization
(millions of U.S. dollars) �
Mar. 31
2009
�
Dec. 31
2008
�
Mar. 31
2008
Net current debt (1) � $ 840 � $ 333 � $ 254 Long-term debt 1,107
1,270 1,525 Less: cash and cash equivalents � (141 ) � (74 ) � (59
)
Total debt, net of cash, cash
equivalents, and restricted cash
� 1,806 � � 1,529 � �
1,720
� Total shareholders� equity � 779 � � 895 � � 1,113 � � � � � � �
� (Increase) decrease in debt, net of cash � (277 ) � 140 � � (45 )
� (1) See Supplemental Measures on page 15.
Liquidity
Liquidity is defined as total available revolving credit
facilities, less utilization (including letters of credit), plus
cash and cash equivalents. NOVA Chemicals� total liquidity at the
end of the first quarter of 2009 was $323 million, down from $573
million at the end of the fourth quarter of 2008. The Company�s
future liquidity is dependent on the actions described below and
many other factors such as cash generated from ongoing operations,
internal actions taken to reduce costs and conserve cash, and other
potential sources of financing.
NOVA Chemicals has five revolving credit facilities totaling
$765 million of which $740 million was available as of Mar. 31,
2009 ($683 million as of Dec. 31, 2008). As of Mar. 31, 2009 and
Dec. 31, 2008, NOVA Chemicals had utilized $558 million and $184
million of its revolving credit facilities, respectively (of which
$45 million and $40 million, respectively, was in the form of
letters of credit).
On Jan. 28, 2009, the $68 million facility was reduced to $33
million and on Mar. 15, 2009, this facility expired. On Feb. 22,
2009, the Company secured a $150 million facility with Export
Development Canada (EDC) and a syndicate of three Canadian banks
that expires on June 30, 2010. This new facility is governed by the
quarterly financial covenants discussed below. This $150 million
facility exceeded the $100 million of new financing required to be
raised by Feb. 28, 2009, as a condition subsequent to the covenant
relief discussed below. The $50 million of excess financing may be
used toward meeting the additional $100 million of financing
required by June 1, 2009 as a condition subsequent to the same
covenant relief.
The indentures governing NOVA Chemicals� public debt allow for
debt up to 10% of consolidated net tangible assets to be secured
without having to secure the public debt. If consolidated net
tangible assets (defined in accordance with the indentures and
calculated on a quarterly basis) fall below $3.5 billion, access to
the $350 million secured revolving credit facility will be reduced
proportionately. Effective Feb. 25, 2009, the availability on the
$350 million revolving credit facility was reduced by $25 million
to $325 million. The revolving credit facility size remains at $350
million and NOVA Chemicals anticipates that close to full
availability will be restored in April 2009 based on the
consolidated net tangible assets calculation performed at Mar. 31,
2009.
In connection with an arrangement agreement (the Arrangement
Agreement) entered into by IPIC and NOVA Chemicals, IPIC provided a
$250 million unsecured backstop credit facility (the Backstop
Facility) to NOVA Chemicals. The Backstop Facility could only be
used as a single draw to assist the Company in repaying the $250
million, 7.4% notes due on Apr. 1, 2009. The amount drawn and all
related interest and fees are payable upon maturity of the Backstop
Facility on June 30, 2010 or other termination of the Backstop
Facility. In addition, unless the Backstop Facility has been repaid
in full, an event of default will occur if the Arrangement
Agreement is terminated under certain circumstances, in which case
IPIC would have the right to accelerate any amounts owed and/or
outstanding under the Backstop Facility. On Mar. 31, 2009, $150
million was drawn on the Backstop Facility which was deposited by
IPIC directly with the trustee in respect of the 7.4% notes to
repay the 7.4% notes. As a result, this $150 million is included in
Restricted cash on the Consolidated Balance Sheets.
The $350 million secured revolving credit facility, the new $150
million facility, the Backstop Facility, the total return swap and
NOVA Chemicals� Accounts Receivable Securitization programs are
governed by financial covenants which require quarterly compliance.
The covenants require a maximum net debt-to-cash flow ratio of 5:1
and a minimum interest coverage ratio of 2:1 computed on a rolling
12-month basis. Effective Jan. 28, 2009, NOVA Chemicals amended
these financial covenants in the $350 million secured revolving
credit facility and the total return swap for the quarter ending
Mar. 31, 2009, to exclude the quarter ending Dec. 31, 2008, results
and include the quarter ending Mar. 31, 2008 results (the new $150
million facility and the Backstop Facility include these amended
financial covenants). At Mar. 31, 2009, the Company was in
compliance with these amended financial covenants. These amendments
provide relief to give the Company access to its major credit lines
during the first half of 2009, subject to complying with certain
conditions subsequent which include the following:
- amending NOVA Chemicals Accounts
Receivable Securitization programs� financial covenants to mirror
the amended financial covenants for the revolving credit
facilities, which was completed on Feb. 13, 2009 (see below);
- securing $100 million in
additional financing by Feb. 28, 2009, which was completed on Feb.
22, 2009 (see new $150 million financing above); and
- securing an additional $100
million in financing by June 1, 2009, of which $50 million was
secured on Feb. 22, 2009, as part of the new $150 million financing
discussed above.
The Company anticipates that further amendments to its financial
covenants will be required with an effective date no later than
June 30, 2009. These amendments are expected to be required due to
the continuing effect of the large loss incurred in the fourth
quarter of 2008 on compliance with the rolling 12-month
debt-to-cash flow and interest coverage ratio limits. NOVA
Chemicals is currently in negotiations with its core group of banks
to amend these covenants such that compliance will be achieved.
NOVA Chemicals also anticipates that once the IPIC acquisition
closes, the remaining $50 million additional financing condition
subsequent by June 1, 2009 will be met given the IPIC Backstop
Facility funding and or other financing facilities. NOVA Chemicals�
ability to maintain compliance with these financial covenants is
dependent on various factors, certain of which are outside the
Company�s control. Such factors include successful closing of the
IPIC transaction, future industry and capital market conditions,
impacts of planned restructuring activities and results of ongoing
negotiations with the Company�s core group of banks and other
sources of financing.
If NOVA Chemicals were to fail to negotiate amendments to these
covenants and be in breach of these covenants or other covenants,
it could result in a default which would permit the lenders to
declare all amounts outstanding to be due and payable and to
terminate all commitments to extend further credit. Because NOVA
Chemicals has not completed these negotiations with its core group
of banks, the Company is required as a technical matter in
accordance with EIC-59, Long-term Debt with Covenant Violations, to
classify all outstanding long-term debt subject to these financial
covenants and revolving credit facilities which contain cross
defaults as current liabilities at Mar. 31, 2009. NOVA Chemicals
believes covenant amendments are likely to be negotiated and the
Company will be in compliance over the coming 12 month period, with
the result that the classification of certain indebtedness as
long-term will be restored.
On Feb. 22, 2009, NOVA Chemicals agreed to jointly develop a
financing plan with certain of its existing lenders. The plan would
only be implemented if the IPIC transaction was not completed. The
financing plan would provide for the refinancing of all or part of
the Company�s existing debt and the raising of incremental
liquidity. Pursuant to the financing plan, NOVA Chemicals would
issue both debt securities and equity securities or other hybrids
in one or more financings or public or private offerings. The
Company has agreed with certain of its existing lenders that such
issuance of equity or equity-like securities would be intended to
raise net proceeds of not less than $300 million.
The total return swap was amended on Feb. 22, 2009, to extend
the termination date from Oct. 31, 2009, to June 30, 2010, and
reduce the equity notional amount. Of the $52 million cash
collateral posted as of Feb. 22, 2009 ($45 million as of Dec. 31,
2008 plus $7 million provided from Jan. 1, 2009, through Feb. 22,
2009), $51 million was applied to the $126 million equity notional
amount to reduce the equity notional amount to $75 million. The
remaining $1 million cash collateral was returned to NOVA
Chemicals.
The Company had share forward transactions to manage its
exposure to fluctuations in its stock-based compensation costs
related to stock-based compensation plans. Prior to Dec. 31, 2008,
NOVA Chemicals agreed to terminate one of the forward transactions
for 1,300,000 notional common shares. This forward transaction was
cash settled for $42 million in January 2009. The counterparty had
the election to settle the remaining forward transaction for
2,312,100 notional common shares if the closing price of NOVA
Chemicals� common shares on any three consecutive trading days
commencing Feb. 1, 2009, was $8 or less. The stock price trigger
was met and the counterparty elected to terminate the agreement on
Feb. 4, 2009. NOVA Chemicals paid the counterparty $88 million on
Feb. 12, 2009.
On Feb. 13, 2009, NOVA Chemicals amended the financial covenants
of its accounts receivable securitization programs to mirror the
amended financial covenants for the $350 million secured revolving
credit facility. In addition, the maximum amount of the programs
was reduced from $300 million to $190 million and the expiration
dates were changed from June 2010 to February 2010. The balances as
of Mar. 31, 2009 and Dec. 31, 2008, were $99 million and $175
million, respectively. NOVA Chemicals does not include any undrawn
amounts under the accounts receivable securitization programs as
part of liquidity.
The INEOS NOVA joint venture has two accounts receivable
securitization programs, a $150 million North American program and
a �120 million European program. NOVA Chemicals� 50% share of the
balances as of Mar. 31, 2009 and Dec. 31, 2008, were $14 million
and $27 million, respectively, under the North American program and
�24 million and �25 million, respectively, under the European
program.
Cash Flow and Working Capital
Working capital increased $186 million in the first quarter of
2009 primarily due to the cash settlement of the share forward
transactions in January and February 2009 (see above) as well as a
$76 million reduction in the balance outstanding on the accounts
receivable securitization programs.
Feedstock Derivative Positions
NOVA Chemicals maintains a derivatives program to manage risk
associated with its crude oil feedstock purchases. In the first
quarter of 2009, the Company recorded no net after-tax gain or loss
on realized positions compared to a net after-tax gain of $2
million in the fourth quarter of 2008 and a net after-tax loss of
$5 million in the first quarter of 2008.
Mark-to-market adjustments related to the change in the value of
open feedstock positions are recorded as part of Corporate results
until the positions are realized. Once realized, any income effects
are recorded in business results. See page 7 for more details.
Summary Quarterly Financial Information
(millions of U.S. dollars,
Three Months Ended except per
share amounts)
2009 �
2008 (1)
�
2007 (1)
�
Mar. 31 �
Dec. 31 �
Sep. 30 �
June 30
�
Mar. 31 �
Dec. 31 �
Sep. 30 �
June 30
� � � � � � � Revenue $ 818 $ 1,153 $ 2,088 $ 2,213 $ 1,912 $ 1,795
$ 1,755 $ 1,676 Operating (loss) income $ (120 ) $ (315 ) $ 191 $
70 $ 110 $ 114 $ 188 $ 151 Net (loss) income $ (123 ) $ (212 ) $
100 $ 20 $ 52 $ 126 $ 97 $ 80 (Loss) earnings per share - basic $
(1.48 ) $ (2.55 ) $ 1.20 $ 0.24 $ 0.63 $ 1.52 $ 1.17 $ 0.97 -
diluted $ (1.48 ) $ (2.55 ) $ 1.20 $ 0.24 $ 0.63 $ 1.51 $ 1.16 $
0.96 Adj. (loss) earnings per share (2) $ (1.31 ) $ (2.27 ) $ 1.02
$ 1.02 $ 0.88 $ 1.53 $ 1.01 $ 1.00 Weighted-average common shares
outstanding (millions) - basic 83.2 83.2 83.2 83.1 83.1 83.0 83.0
82.9 - diluted 83.2 � � 83.2 � � 83.2 � 83.2 � 83.2 � � 83.4 � 83.8
� 83.7 � �
(1) Prior periods have been
restated due to the adoption of CICA 3064 in the first quarter of
2009.
(2) See Supplemental Measures on page 15.
Changes in Net Income
(millions of U.S. dollars)
�
Q1 2009
Compared to
� �
Q4 2008 �
Q1 2008
Higher (lower) operating margin
(1)
$ 306 � $ (217 ) Lower research and development 3 3 Higher selling,
general and administrative (33 ) (22 ) Lower (higher) restructuring
charges 24 (8 )
Lower foreign exchange gain due to
change in functional currency
(117
)
-
Higher foreign exchange gains 12 12 Lower depreciation and
amortization - 2 Higher interest expense (12 ) (3 ) Lower net gains
and losses - 1 (Higher) lower income tax expense � (94 ) � 57 �
Increase (decrease) in net income � $ 89 � � $ (175 ) � (1)
Operating margin equals revenue less feedstock and operating costs
(includes impact of realized and unrealized gains and losses on
mark-to-market feedstock derivatives), see page 7.
Net income for the first quarter of 2009 was higher than the
fourth quarter of 2008 due to lower fourth quarter margins
resulting from the dramatic drop in energy and petrochemical prices
which led to large inventory flow-through impacts and an inventory
write-down. During the fourth quarter of 2008, sharp price
reductions and lower sales volumes also contributed to the margin
decline. Net income for the first quarter of 2009 was lower than
the first quarter of 2008 due to significant margin and volume
declines.
Selling, general and administrative costs were $33 million
higher in the first quarter of 2009 as compared to the fourth
quarter of 2008 primarily due to $23 million of financial advisor
fees and legal fees (transaction costs) incurred with respect to
the IPIC transaction, as well as an $8 million settlement charge
related to a partial payment from the Company�s supplemental
employee retirement plan. Selling, general and administrative costs
were $22 million higher in the first quarter of 2009 as compared to
the first quarter of 2008 primarily due to the $23 million IPIC
transaction costs. The $8 million settlement charge related to a
partial payment from the Company�s supplemental employee retirement
plan incurred in the first quarter of 2009 was offset by various
project write-offs that occurred in the first quarter of 2008.
Restructuring charges in the first quarter of 2009 were $24
million lower than the fourth quarter of 2008 and $8 million higher
than the first quarter of 2008. In the first quarter of 2009, NOVA
Chemicals recorded $8 million of restructuring charges for
severance and other employee related costs associated with
restructuring of the Performance Styrenics business unit. In the
fourth quarter of 2008, NOVA Chemicals recorded $32 million related
to the following activities: $17 million impairment charge related
to certain joint venture and equity investments; $9 million related
to costs incurred on capital projects which will not be pursued at
this time; $2 million of severance costs incurred by the INEOS NOVA
joint venture; and $4 million of other restructuring charges
related to actions taken to reduce costs. There were no
restructuring charges in the first quarter of 2008.
In the fourth quarter of 2008, NOVA Chemicals changed the
functional currency of its Canadian operations to U.S. dollars.
This change resulted in a foreign exchange gain of $117 million
during the fourth quarter of 2008.
Interest expense in the first quarter of 2009 was $12 million
higher than the fourth quarter of 2008 due to $3 million of
additional amortization expense of debt issue costs as a result of
the amendments and additional financings completed in the first
quarter; $4 million debt advisory fee related to future debt
refinancing plans; and interest income being $4 million lower in
the first quarter of 2009 compared to the fourth quarter of
2008.
The income tax recovery in the first quarter of 2009 was $94
million lower than the recovery recorded in the fourth quarter of
2008 primarily due to the lower losses incurred. In addition to
this, the tax reserve was reduced by $20 million in the fourth
quarter of 2008. The decrease in tax expense of $57 million in the
first quarter of 2009 compared with the first quarter of 2008 is
due to the reduction in earnings from a profit in the first quarter
of 2008 to a loss in the first quarter of 2009.
CONSOLIDATED FINANCIAL INFORMATION (1)
Consolidated Statements of Net (Loss) Income
(
unaudited, millions of U.S. dollars, except per share
amounts)
Three Months Ended
Mar. 31
2009
�
Dec. 31
2008 (2)
�
Mar. 31
2008 (2)
� � Revenue $ 818 $ 1,153 $ 1,912 Feedstock and operating costs
(excluding depreciation) 778 1,419 1,655 Research and development
10 13 13 Selling, general and administrative 89 56 67 Restructuring
8 32 - Foreign exchange gain - impact of change in functional
currency - (117) - Foreign exchange gain (12) - - Depreciation and
amortization 65 � 65 � 67 � 938 � 1,468 � 1,802 Operating (loss)
income (120) � (315) � 110 Interest expense, net (46) (34) (43)
Other (losses) gains, net - � - � (1) � (46) � (34) � (44) (Loss)
income before income taxes (166) (349) 66 Income tax (recovery)
expense (43) � (137) � 14 Net (loss) income $ (123) � $ (212) � $
52 (Loss) earnings per share - basic $ (1.48) $ (2.55) $ 0.63 -
diluted $ (1.48) � $ (2.55) � $ 0.63
Consolidated Balance Sheets
(
unaudited, millions of U.S. dollars)
Mar. 312009
�
Dec. 312008
(2)
�
Mar. 31
2008 (2)
�
�
�
Assets Current assets Cash and cash equivalents $ 141 $ 74
$ 59 Accounts receivable 312 290 620 Inventories 406 529 1,075
Prepaid expenses and other assets 31 34 16 Future income taxes - 68
- Restricted cash 154 � � 49 � � 4 1,044 1,044 1,774 Investments
and other assets 160 155 127 Property, plant and equipment, net
2,762 � � 2,808 � � 2,933 $ 3,966 $ 4,007 $ 4,834
Liabilities
and Shareholders� Equity Current liabilities Bank loans $ 2 $ 2
$ 3 Accounts payable and accrued liabilities 487 781 1,229 Future
income taxes 9 - - Long-term debt due within one year (Pages 9 and
10) 992 � � 380 � � 255 1,490 1,163 1,487 Long-term debt (Pages 9
and 10) 1,107 1,270 1,525 Future income taxes 292 377 449 Deferred
credits and long-term liabilities 298 � � 302 � � 260 3,187 3,112
3,721 Shareholders� equity Common shares 508 508 507 Contributed
surplus 26 25 27 Reinvested (deficit) earnings (211 ) (100 ) 15
Accumulated other comprehensive income 456 � � 462 � � 564 � 779 �
� 895 � � 1,113 � $ 3,966 � � $ 4,007 � � $ 4,834
(1) The consolidated financial
information does not include note disclosures that would be
included in full interim financial statements prepared in
accordance with Canadian GAAP.
(2) Prior periods have been restated due to the adoption of CICA
3064 in the first quarter of 2009.
Consolidated Statements of Cash Flows
(
unaudited, millions of U.S. dollars)
Three Months
Ended
�
Mar. 31
2009
�
Dec. 312008
(1)
�
Mar. 31
2008 (1)
� �
Operating activities Net (loss) income $ (123 ) $ (212 )
$ 52 Depreciation and amortization 65 65 67 Future income tax
recovery (7 ) (74 ) (24 ) Unrealized (gain) loss on derivatives (15
) (8 ) 30 Unrealized foreign exchange loss (gain) 2 (119 ) - Other
losses - - 1 Stock option expense - - 1 Non-cash restructuring
charges - � � 25 � � - � � (78 ) � (323 ) � 127 � � Changes in
non-cash working capital: Accounts receivable (25 ) 203 (26 )
Inventories 120 420 (148 ) Other current assets (5 ) (39 ) 4
Accounts payable and accrued liabilities (276 ) � (140 ) � 47 � �
(186 ) � 444 � � (123 ) �
Changes in other current assets
and non-current assets and liabilities
(7
)
�
(14
)
�
(16
)
Cash flow (used in) from operating activities
(271
)
�
107
� �
(12
)
�
Investing activities Property, plant and equipment
additions (19 ) (50 ) (35 ) Turnaround costs, long-term investments
and other assets
(1
)
�
(4
)
�
(2
)
Cash flow used in investing activities (20 ) � (54 ) � (37 )
�
Financing activities Decrease in current bank loans (1 )
(1 ) - Long-term debt additions 1 - 1 Long-term debt repayments (1
) - (1 ) Increase (decrease) in revolving debt facilities
370
(60
)
(4
)
Common shares issued - - 2 Common share dividends (7 ) � (7 ) � (8
)
Cash flow from (used in) financing activities
362
� �
(68
)
�
(10
)
�
(Decrease) increase in cash due to exchange rates
(4
)
�
13
� �
-
� �
Increase (decrease) in cash and cash equivalents
67
(2
)
(59
)
Cash and cash equivalents, beginning of period
74
� �
76
� �
118
� Cash and cash equivalents, end of period
$ 141
� �
$ 74
� �
$ 59
� � Cash tax payments, net of refunds $ (17 ) $ (8 ) $ 12 � Cash
interest payments $ 45 � � $ 63 � � $ 46 �
(1) Prior periods have been
restated due to the adoption of CICA 3064 in the first quarter of
2009.
Consolidated Statements of Changes in Shareholders�
Equity
(unaudited, millions of
U.S. dollars, except share amounts)
�
Three Months Ended
Mar. 31
2009
�
Dec. 31
2008 (1)
�
Mar. 31
2008 (1)
� � Common shares Balance at beginning of period $ 508 $ 508 $ 505
Common shares issued - � � - � � 2 � Balance at end of period $ 508
� � $ 508 � � $ 507 � � Contributed surplus Balance at beginning of
period $ 25 $ 24 $ 27 Stock option compensation cost - 1 - Other 1
� � - � � - � Balance at end of period $ 26 � � $ 25 � � $ 27 � �
Reinvested (deficit) earnings Balance at beginning of period $ (100
) $ 119 $ (68 ) Net (loss) income (123 ) (212 ) 52 Changes in
accounting standards: Adoption of inventory full costing (2) - - 39
Adoption of EIC-173 12 - - Common share dividends - � � (7 ) � (8 )
Balance at end of period $ (211 ) � $ (100 ) � $ 15 � � Accumulated
other comprehensive income Balance at beginning of period $ 462 $
488 $ 608 Other comprehensive (loss) income: Unrealized loss on
translation of self-sustaining foreign operations
�
(6
�
)
(27
)
(44
)
Unrealized gain on available for sale securities - � � 1 � � - �
Balance at end of period $ 456 � � $ 462 � � $ 564 � �
Total
shareholders� equity $ 779 � � $ 895 � � $ 1,113 � � � Common
shares Balance at beginning of period 83,160,889 83,160,889
83,054,528 Common shares issued - � � - � � 81,511 � Balance at end
of period 83,160,889 � � 83,160,889 � � 83,136,039 � (1) Prior
periods have been restated due to the adoption of CICA 3064 in the
first quarter of 2009.
(2) One-time credit on Jan. 1,
2008 to opening retained earnings and a corresponding increase in
opening inventory of $47 million ($39 million after-tax).
Consolidated Statements of Comprehensive (Loss)
Income
(
unaudited, millions of U.S. dollars)
Three Months
Ended
�
Mar. 31
2009
�
Dec. 31
2008 (1)
�
Mar. 31
2008 (1)
� � Net (loss) income $ (123 ) $ (212 ) $ 52 Other comprehensive
(loss) income:
Unrealized loss on translation of
self-sustaining foreign operations
(6
)
(27
)
(44 ) Unrealized gain on available for sale securities - � � 1 � �
- � Comprehensive (loss) income $ (129 ) � $ (238 ) � $ 8 �
(1) Prior periods have been
restated due to the adoption of CICA 3064 in the first quarter of
2009.
Supplemental Measures
NOVA Chemicals presents certain supplemental measures below,
which do not have any standardized meaning prescribed by Canadian
GAAP and are therefore unlikely to be comparable to similar
measures presented by other companies. The Company believes that
certain non-GAAP financial measures, when presented in conjunction
with comparable GAAP financial measures, are useful to investors
and other readers because the information is an appropriate measure
for evaluating NOVA Chemicals operating performance. Internally,
the Company uses this non-GAAP financial information as an
indicator of business performance, with specific reference to these
indicators. These measures should be considered in addition to, and
not as a substitute for or superior to, measures of financial
performance prepared in accordance with GAAP.
- Adjusted EBITDA � defined
on page 2, assists investors in determining NOVA Chemicals� ability
to generate cash from operations.
Reconciliation of Consolidated
Net (Loss)Income to Adjusted EBITDA
Three Months Ended
(millions of U.S.
dollars)
Mar. 31
2009
�
Dec. 31
2008 (1)
�
Mar. 31
2008 (1)
Adjusted EBITDA $ (39 ) � $ (226 ) � $ 207 Depreciation and
amortization (65 ) (65 ) (67 ) Interest expense (net) (46 ) (34 )
(43 ) Other losses - - (1 ) Income tax recovery (expense) 43 137
(14 )
Mark-to-market feedstock
derivative unrealized gains (losses)
15
8
(30
)
IPIC transaction costs (23 ) - - Restructuring charges (8 ) � (32 )
� - � Net (loss) income $ (123 ) � $ (212 ) � $ 52 �
(1) Prior periods have been
restated due to the adoption of CICA 3064 in the first quarter of
2009.
- Adjusted EBITDA from the
Businesses � defined on page 1, highlights the ongoing
performance of the business units excluding one-time charges,
events or other items that are not driven by the business
units.
- Adjusted net (loss)
income � equals net income (loss) plus (minus) after-tax
mark-to-market feedstock derivative unrealized (gains) losses,
after-tax IPIC transaction costs, after-tax restructuring charges
and other after-tax non-recurring items. Adjusted net (loss) income
allows investors to compare the underlying financial results for
various periods.
- Adjusted earnings per share,
diluted � equals adjusted net (loss) income divided by diluted
weighted-average common shares outstanding. Adjusted EPS allows
investors to analyze the underlying financial results for various
periods on a comparative basis.
Reconciliation of Adjusted Net
(Loss) Incomeand Adjusted EPS
Three Months Ended
(millions of U.S. dollars,
except per share amounts)
Mar. 31
2009
�
Dec. 31
2008 (1)
�
Mar. 31
2008 (1)
Net (loss) income
$ (123 ) � $ (212 ) � $ 52 Non-GAAP Adjustments:
After-tax mark-to-market feedstock
derivative unrealized (gains) losses
(11
)
(6
)
21
After-tax IPIC transaction costs 17 - - After-tax restructuring
charges 8 � � 29 � � - Adjusted net (loss) income $ (109 ) $ (189 )
$ 73
Diluted weighted-average common
shares outstanding
83.2
� �
83.2
� �
83.2
Adjusted EPS $ (1.31 ) � $ (2.27 ) � $ 0.88
(1) Prior periods have been
restated due to the adoption of CICA 3064 in the first quarter of
2009.
- Funds from operations �
equals cash flow from (used in) operating activities excluding
changes in non-cash working capital and changes in other current
assets and non-current assets and liabilities.
- Interest coverage �
consolidated adjusted EBITDA (excluding the INEOS NOVA JV) divided
by interest expense for the preceding twelve-month period.
- Net current debt � equals
long-term debt due within one year and bank loans, less restricted
cash.
- Net debt to cash flow �
equals consolidated debt (including accounts receivable
securitization funding), less preferred shares and cash and cash
equivalents, divided by consolidated adjusted EBITDA. Consolidated
debt and consolidated adjusted EBITDA exclude amounts for the INEOS
NOVA JV. This measure is provided to assist investors in
calculating NOVA Chemicals� debt covenant.
- Net debt to total
capitalization � equals total debt, net of cash and cash
equivalents, and restricted cash, divided by total common
shareholders� equity plus net debt. This measure can be used to
analyze the leverage of the Company.
- Operating income (loss)
�equals net income (loss) before income taxes, interest expense and
other gains and losses. This measure is provided to assist
investors in analyzing NOVA Chemicals' income from operations.
- Total capitalization �
includes shareholders� equity and total debt, net of cash and cash
equivalents, and restricted cash.
Forward-Looking Information
This news release contains forward-looking information with
respect to NOVA Chemicals, its subsidiaries and affiliated
companies. By its nature, forward-looking information requires NOVA
Chemicals to make assumptions and is subject to inherent risks and
uncertainties. There is significant risk that predictions,
forecasts, conclusions and projections that constitute
forward-looking information will not prove to be accurate, that
NOVA Chemicals� assumptions may not be correct and that actual
results may differ materially from such forward-looking
information. Forward-looking information for the time periods
beyond 2009 involve longer-term assumptions and estimates than
forward-looking information for 2009 and are consequently subject
to greater uncertainty. NOVA Chemicals cautions readers of this
news release not to place undue reliance on its forward-looking
information as a number of factors could cause actual results,
conditions, actions or events to differ materially from the
targets, expectations, estimates or intentions expressed in the
forward-looking information.
The words �believe�, �expect�, �plan�, �intend�, �estimate�, or
�anticipate� and similar expressions, as well as future or
conditional verbs such as �will�, �should�, �would�, and �could�
often identify forward-looking information. Specific
forward-looking information contained in this news release
includes, among others, statements regarding: NOVA Chemicals�
expectations concerning the IPIC transaction, including the timing
of closing; NOVA Chemicals� beliefs and expectations concerning the
restructuring of its Performance Styrenics business, including the
target of reducing fixed costs within the business by 40%; NOVA
Chemicals use of its major credit lines during the first half of
2009; NOVA Chemicals� expectation that its $350 million revolving
credit facility will be restored to close to full availability in
April 2009 based on the consolidated net tangible assets
calculation performed at Mar. 31, 2009; NOVA Chemicals� expectation
that further amendments to the financial covenants that govern
certain of its financings will be required with an effective date
no later than June 30, 2009, and NOVA Chemicals� belief that it is
likely such covenant amendments will be negotiated and the Company
will be in compliance in the coming 12 month period; and NOVA
Chemicals� belief that once the IPIC transaction closes, the
remaining $50 million additional financing by June 1, 2009
condition subsequent required by the Jan. 28, 2009 amendment to the
$350 million revolving credit facility will be met given the IPIC
Backstop Facility funding or other financing facilities. With
respect to forward-looking information contained in this news
release, NOVA Chemicals has made assumptions regarding, among other
things: future oil, natural gas and benzene prices; its ability to
obtain raw materials; its ability to market products successfully
to its anticipated customers; the impact of increasing competition;
and its ability to obtain financing on acceptable terms. Some of
the risks that could affect NOVA Chemicals� future results and
could cause results to differ materially from those expressed in
the forward-looking information include: failure to consummate the
Arrangement with IPIC; a deterioration in NOVA Chemicals� cash
balances or liquidity; NOVA Chemicals� lenders willingness to
provide any consents or waivers; NOVA Chemicals� ability to access
capital markets and the terms and availability of financing;
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; technology
developments; currency exchange rate fluctuations; starting up and
operating facilities using new technology; realizing synergy and
cost savings targets; NOVA Chemicals� ability to implement its
business strategies; 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, including customer
acceptance of NOVA Chemicals� Performance Polymers; 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, South American, European, and Asian economies, terrorist
attacks, severe weather events, and other risks detailed from time
to time in the publicly filed disclosure documents and securities
commission reports of NOVA Chemicals.
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.
NOVA Chemicals� forward-looking information is expressly
qualified in its entirety by this cautionary statement. In
addition, the forward-looking information is made only as of the
date of this news release, and except as required by applicable
law, NOVA Chemicals undertakes no obligation to publicly update
this forward-looking information to reflect new information,
subsequent events or otherwise.
Trademark Information
Advanced SCLAIRTECHTM is a trademark of NOVA
Chemicals; ARCEL�, DYLARK� and Elemix� are
registered trademarks of NOVA Chemicals Inc.; SCLAIR�
is a registered trademark of NOVA Chemicals Corporation in Canada
and of NOVA Chemicals (International) S.A. elsewhere, authorized
use/utilisation autoriss�e; and SURPASS� is a
registered trademark of NOVA Chemicals Corporation in Canada and of
NOVA Chemicals (International) S.A. elsewhere.
INVESTOR INFORMATION
For inquiries on stock-related
matters including dividend payments, stock transfers and address
changes, contact NOVA Chemicals toll-free at 1-800-661-8686 or
e-mail to shareholders@novachem.com
�
Transfer Agent and
Registrar
Contact Information
CIBC Mellon Trust Company
600 The Dome Tower, 333 Seventh
Avenue S.W.
Calgary, Alberta, Canada T2P
2Z1
Phone: (403) 750-3600 (Canada) or (412) 490-4000 (United States)
Internet:
www.novachemicals.com
�
E-Mail: invest@novachem.com
Phone: (403) 232-2400 / 1-800-387-0825 Fax: (403) 264-2100
NOVA Chemicals Corporation
1000 Seventh Avenue S.W., P.O. Box
2518
Calgary, Alberta, Canada T2P
5C6
Internet:
www.cibcmellon.com
� �
Share Information
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
NOVA Chemicals� trading symbol on
the New York and Toronto Stock Exchanges is NCX.
�
NOVA Chemicals files additional
information, including its Annual Information Form, 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
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