Table of Contents
SECURITIES AND EXCHANGE COMMISSION
the Securities Exchange Act of 1934
69 Pitts Bay Road
Hamilton, HM 08 Bermuda
(Address of principal executive office)
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Three Months Ended June 30 | Six Months Ended June 30 | |||||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||
$ | $ | $ | $ | |||||||||||||
(Restated - | (Restated - | |||||||||||||||
Note 19) | Note 19) | |||||||||||||||
REVENUES(note 16) | 769,399 | 565,736 | 1,512,771 | 1,143,984 | ||||||||||||
OPERATING EXPENSES | ||||||||||||||||
Voyage expenses | 189,515 | 122,508 | 358,976 | 239,987 | ||||||||||||
Vessel operating expenses(note 16) | 159,470 | 103,903 | 302,519 | 199,093 | ||||||||||||
Time-charter hire expense(note 16) | 142,682 | 100,958 | 287,166 | 199,315 | ||||||||||||
Depreciation and amortization(note 21) | 106,700 | 68,095 | 204,407 | 147,358 | ||||||||||||
General and administrative expenses(note 16) | 70,882 | 56,265 | 135,521 | 115,245 | ||||||||||||
Gain on sale of vessels and equipment (note 13) | (2,925 | ) | (11,613 | ) | (3,421 | ) | (11,613 | ) | ||||||||
Restructuring charge (note 14) | 4,617 | — | 6,117 | — | ||||||||||||
Total operating expenses | 670,941 | 440,116 | 1,291,285 | 889,385 | ||||||||||||
Income from vessel operations | 98,458 | 125,620 | 221,486 | 254,599 | ||||||||||||
OTHER ITEMS | ||||||||||||||||
Interest gain (expense) (note 16) | 113,962 | 68,956 | (168,286 | ) | 13,051 | |||||||||||
Interest (loss) income(note 16) | (2,149 | ) | 422 | 58,460 | 15,376 | |||||||||||
Foreign exchange loss (note 8) | (1,807 | ) | (8,635 | ) | (33,799 | ) | (10,311 | ) | ||||||||
Minority interest expense | (38,822 | ) | (24,076 | ) | (12,262 | ) | (31,831 | ) | ||||||||
Other — net (note 14) | 13,777 | 5,330 | 12,691 | 11,716 | ||||||||||||
Total other items | 84,961 | 41,997 | (143,196 | ) | (1,999 | ) | ||||||||||
Net income | 183,419 | 167,617 | 78,290 | 252,600 | ||||||||||||
Per common share amounts | ||||||||||||||||
• Basic earnings (note 17) | 2.53 | 2.27 | 1.08 | 3.44 | ||||||||||||
• Diluted earnings (note 17) | 2.50 | 2.23 | 1.07 | 3.37 | ||||||||||||
• Cash dividends declared | 0.2750 | 0.2375 | 0.5500 | 0.4750 | ||||||||||||
Weighted average number of common shares(note 17) | ||||||||||||||||
• Basic | 72,377,684 | 73,843,784 | 72,511,041 | 73,488,668 | ||||||||||||
• Diluted | 73,279,213 | 75,310,567 | 73,357,190 | 74,929,991 | ||||||||||||
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As at | As at | |||||||
June 30, 2008 | December 31, 2007 | |||||||
$ | $ | |||||||
ASSETS | ||||||||
Current | ||||||||
Cash and cash equivalents(note 8) | 498,933 | 442,673 | ||||||
Restricted cash — current(note 9) | 53,067 | 33,479 | ||||||
Accounts receivable | 336,607 | 262,420 | ||||||
Vessels held for sale (note 13) | 18,203 | 79,689 | ||||||
Net investment in direct financing leases — current | 21,727 | 22,268 | ||||||
Prepaid expenses | 135,691 | 126,761 | ||||||
Other assets | 67,481 | 57,609 | ||||||
Total current assets | 1,131,709 | 1,024,899 | ||||||
Restricted cash — long-term(note 9) | 661,758 | 652,717 | ||||||
Vessels and equipment(note 8) | ||||||||
At cost, less accumulated depreciation of $1,185,062 (2007 — $1,061,619) | 5,738,013 | 5,295,751 | ||||||
Vessels under capital lease, at cost, less accumulated amortization of $90,095 (2007 — $74,442)(note 9) | 926,140 | 934,058 | ||||||
Advances on newbuilding contracts(note 11) | 693,292 | 617,066 | ||||||
Total vessels and equipment | 7,357,445 | 6,846,875 | ||||||
Net investment in direct financing leases — non-current | 68,181 | 78,908 | ||||||
Investment in joint ventures(note 11) | 135,941 | 135,515 | ||||||
Derivative instruments(note 16) | 41,493 | 39,381 | ||||||
Loans to joint ventures | 912,597 | 729,429 | ||||||
Other non-current assets | 200,157 | 219,923 | ||||||
Intangible assets — net(note 6) | 256,070 | 259,952 | ||||||
Goodwill(note 6) | 491,911 | 434,590 | ||||||
Total assets | 11,257,262 | 10,422,189 | ||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current | ||||||||
Accounts payable | 94,082 | 89,691 | ||||||
Accrued liabilities | 347,135 | 278,587 | ||||||
Current portion of long-term debt(note 8) | 289,717 | 331,594 | ||||||
Current obligation under capital leases(note 9) | 41,925 | 150,791 | ||||||
Current portion of in-process revenue contracts(note 6) | 76,784 | 82,704 | ||||||
Total current liabilities | 849,643 | 933,367 | ||||||
Long-term debt(note 8) | 5,457,031 | 4,931,990 | ||||||
Long-term obligation under capital leases(note 9) | 830,639 | 706,489 | ||||||
Derivative instruments(note 16) | 158,048 | 164,769 | ||||||
Deferred income tax | 74,715 | 78,623 | ||||||
Asset retirement obligation | 25,506 | 24,549 | ||||||
In-process revenue contracts(note 6) | 285,989 | 205,429 | ||||||
Other long-term liabilities | 174,813 | 176,680 | ||||||
Total liabilities | 7,856,384 | 7,221,896 | ||||||
Commitments and contingencies(notes 9, 11 and 16) | ||||||||
Minority interest | 670,193 | 544,339 | ||||||
Stockholders’ equity | ||||||||
Common stock and additional paid-in capital ($0.001 par value; 725,000,000 shares authorized; 72,458,908 shares outstanding (2007 — 72,772,529); 72,958,108 shares issued (2007 — 95,327,329)) (note 10) | 634,755 | 628,786 | ||||||
Retained earnings | 2,096,949 | 2,022,601 | ||||||
Accumulated other comprehensive (loss) income(note 15) | (1,019 | ) | 4,567 | |||||
Total stockholders’ equity | 2,730,685 | 2,655,954 | ||||||
Total liabilities and stockholders’ equity | 11,257,262 | 10,422,189 | ||||||
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Six Months Ended June 30 | ||||||||
2008 | 2007 | |||||||
$ | $ | |||||||
(Restated - | ||||||||
Note 19) | ||||||||
Cash and cash equivalents provided by (used for) | ||||||||
OPERATING ACTIVITIES | ||||||||
Net income | 78,290 | 252,600 | ||||||
Non-cash items: | ||||||||
Depreciation and amortization | 204,407 | 147,358 | ||||||
Amortization of in-process revenue contracts | (34,870 | ) | (30,547 | ) | ||||
Gain on sale of marketable securities | (4,576 | ) | (6,653 | ) | ||||
Gain on sale of vessels and equipment | (3,421 | ) | (11,613 | ) | ||||
Loss on repurchase of bonds | 1,310 | — | ||||||
Equity income (net of dividends received: June 30, 2008 and 2007 — $nil) | 5,672 | 3,687 | ||||||
Income taxes | (8,718 | ) | (3,041 | ) | ||||
Employee stock-based compensation | 6,183 | 4,708 | ||||||
Foreign exchange loss and other — net | 34,412 | 49,805 | ||||||
Unrealized gains on derivative instruments | 24,058 | (136,597 | ) | |||||
Change in non-cash working capital items related to operating activities | (75,554 | ) | (60,028 | ) | ||||
Expenditures for drydocking | (28,227 | ) | (40,623 | ) | ||||
Distribution from subsidiaries to minority owners | (34,546 | ) | (16,354 | ) | ||||
Net operating cash flow | 164,420 | 152,702 | ||||||
FINANCING ACTIVITIES | ||||||||
Proceeds from issuance of long-term debt | 1,284,496 | 1,998,316 | ||||||
Debt issuance costs | (5,108 | ) | (4,382 | ) | ||||
Repayments of long-term debt | (837,641 | ) | (737,938 | ) | ||||
Repayments of capital lease obligations | (4,495 | ) | (4,384 | ) | ||||
Proceeds from loan from joint venture partner | 1,041 | 22,093 | ||||||
Increase in restricted cash | (11,503 | ) | (79,230 | ) | ||||
Net proceeds from sale of Teekay LNG Partners L.P. units | 148,345 | 84,186 | ||||||
Net proceeds from sale of Teekay Offshore Partners L.P. units | 134,265 | — | ||||||
Issuance of Common Stock upon exercise of stock options | 4,009 | 27,326 | ||||||
Repurchase of Common Stock | (20,512 | ) | (3,035 | ) | ||||
Cash dividends paid | (40,028 | ) | (34,897 | ) | ||||
Other financing activities | (2,715 | ) | (3,643 | ) | ||||
Net financing cash flow | 650,154 | 1,264,412 | ||||||
INVESTING ACTIVITIES | ||||||||
Expenditures for vessels and equipment | (410,495 | ) | (356,104 | ) | ||||
Proceeds from sale of vessels and equipment | 79,224 | 118,975 | ||||||
Purchases of marketable securities | (542 | ) | (28,636 | ) | ||||
Proceeds from sale of marketable securities | 11,058 | 49,059 | ||||||
Acquisition of 50% of OMI Corporation | — | (896,841 | ) | |||||
Acquisition of additional 30.1% of Teekay Petrojarl ASA | (257,142 | ) | — | |||||
Loans to joint ventures | (211,491 | ) | (354,341 | ) | ||||
Investment in direct financing lease assets | (30 | ) | (7,530 | ) | ||||
Direct financing lease payments received | 11,298 | 10,399 | ||||||
Other investing activities | 19,806 | (3,677 | ) | |||||
Net investing cash flow | (758,314 | ) | (1,468,696 | ) | ||||
Increase (decrease) in cash and cash equivalents | 56,260 | (51,582 | ) | |||||
Cash and cash equivalents, beginning of the period | 442,673 | 343,914 | ||||||
Cash and cash equivalents, end of the period | 498,933 | 292,332 | ||||||
The accompanying notes are an integral part of the unaudited consolidated financial statements.
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Fixed-Rate | Liquefied | Spot | ||||||||||||||||||
Offshore | Tanker | Gas | Tanker | |||||||||||||||||
Three months ended June 30, 2008 | Segment | Segment | Segment | Segment | Total | |||||||||||||||
Revenues | 273,961 | 66,218 | 53,496 | 375,724 | 769,399 | |||||||||||||||
Voyage expenses | 46,024 | 948 | 452 | 142,091 | 189,515 | |||||||||||||||
Vessel operating expenses | 101,596 | 16,387 | 13,125 | 28,362 | 159,470 | |||||||||||||||
Time-charter hire expense | 32,242 | 11,445 | — | 98,995 | 142,682 | |||||||||||||||
Depreciation and amortization | 53,772 | 11,289 | 14,209 | 27,430 | 106,700 | |||||||||||||||
General and administrative expenses(1) | 26,957 | 7,263 | 6,070 | 30,592 | 70,882 | |||||||||||||||
Gain on sale of vessels and equipment | (3,150 | ) | — | — | 225 | (2,925 | ) | |||||||||||||
Restructuring charge | 3,327 | 58 | 221 | 1,011 | 4,617 | |||||||||||||||
Income from vessel operations | 13,193 | 18,828 | 19,419 | 47,018 | 98,458 | |||||||||||||||
Fixed-Rate | Liquefied | Spot | ||||||||||||||||||
Offshore | Tanker | Gas | Tanker | |||||||||||||||||
Segment | Segment | Segment | Segment | Total | ||||||||||||||||
Three months ended June 30, 2007 | (restated) | (restated) | (restated) | (restated) | (restated) | |||||||||||||||
Revenues | 236,233 | 45,787 | 38,496 | 245,220 | 565,736 | |||||||||||||||
Voyage expenses | 26,064 | 592 | 8 | 95,844 | 122,508 | |||||||||||||||
Vessel operating expenses | 69,325 | 11,822 | 7,881 | 14,875 | 103,903 | |||||||||||||||
Time-charter hire expense | 39,260 | 3,981 | — | 57,717 | 100,958 | |||||||||||||||
Depreciation and amortization | 35,627 | 8,260 | 11,571 | 12,637 | 68,095 | |||||||||||||||
General and administrative expenses(1) | 23,164 | 4,473 | 5,163 | 23,465 | 56,265 | |||||||||||||||
Gain on sale of vessels and equipment | (11,613 | ) | — | — | — | (11,613 | ) | |||||||||||||
Income from vessel operations | 54,406 | 16,659 | 13,873 | 40,682 | 125,620 | |||||||||||||||
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NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. dollars, except share data)
Fixed-Rate | Liquefied | Spot | ||||||||||||||||||
Offshore | Tanker | Gas | Tanker | |||||||||||||||||
Six months ended June 30, 2008 | Segment | Segment | Segment | Segment | Total | |||||||||||||||
Revenues | 532,749 | 127,033 | 109,628 | 743,361 | 1,512,771 | |||||||||||||||
Voyage expenses | 84,925 | 1,628 | 602 | 271,821 | 358,976 | |||||||||||||||
Vessel operating expenses | 185,416 | 32,757 | 24,748 | 59,598 | 302,519 | |||||||||||||||
Time-charter hire expense | 67,280 | 23,165 | — | 196,721 | 287,166 | |||||||||||||||
Depreciation and amortization | 99,846 | 20,962 | 28,404 | 55,195 | 204,407 | |||||||||||||||
General and administrative expenses(1) | 54,019 | 12,553 | 11,555 | 57,394 | 135,521 | |||||||||||||||
Gain on sale of vessels and equipment | (3,150 | ) | — | — | (271 | ) | (3,421 | ) | ||||||||||||
Restructuring charge | 3,327 | 1,558 | 221 | 1,011 | 6,117 | |||||||||||||||
Income from vessel operations | 41,086 | 34,410 | 44,098 | 101,892 | 221,486 | |||||||||||||||
Fixed-Rate | Liquefied | Spot | ||||||||||||||||||
Offshore | Tanker | Gas | Tanker | |||||||||||||||||
Segment | Segment | Segment | Segment | Total | ||||||||||||||||
Six months ended June 30, 2007 | (restated) | (restated) | (restated) | (restated) | (restated) | |||||||||||||||
Revenues | 485,108 | 90,376 | 75,973 | 492,527 | 1,143,984 | |||||||||||||||
Voyage expenses | 54,790 | 1,152 | 13 | 184,032 | 239,987 | |||||||||||||||
Vessel operating expenses | 129,615 | 23,512 | 14,339 | 31,627 | 199,093 | |||||||||||||||
Time-charter hire expense | 80,433 | 7,818 | — | 111,064 | 199,315 | |||||||||||||||
Depreciation and amortization | 81,349 | 16,728 | 22,365 | 26,916 | 147,358 | |||||||||||||||
General and administrative expenses(1) | 48,068 | 9,106 | 10,163 | 47,908 | 115,245 | |||||||||||||||
Gain on sale of vessels and equipment | (11,613 | ) | — | — | — | (11,613 | ) | |||||||||||||
Income from vessel operations | 102,466 | 32,060 | 29,093 | 90,980 | 254,599 | |||||||||||||||
(1) | Includes direct general and administrative expenses and indirect general and administrative expenses (allocated to each segment based on estimated use of corporate resources). |
June 30, 2008 | December 31, 2007 | |||||||
$ | $ | |||||||
Offshore segment | 3,497,589 | 3,187,635 | ||||||
Fixed-rate tanker segment | 876,009 | 795,775 | ||||||
Liquefied gas segment | 3,664,550 | 3,366,049 | ||||||
Spot tanker segment | 2,032,268 | 1,966,166 | ||||||
Cash and restricted cash | 501,678 | 446,102 | ||||||
Accounts receivable and other assets | 685,168 | 660,462 | ||||||
Consolidated total assets | 11,257,262 | 10,422,189 | ||||||
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NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. dollars, except share data)
Original at | Revised at | |||||||||||
August 1, 2007 | Revisions | August 1, 2007 | ||||||||||
$ | $ | $ | ||||||||||
ASSETS | ||||||||||||
Cash, cash equivalents and short-term restricted cash | 577 | — | 577 | |||||||||
Other current assets | 67,159 | (40,331 | ) | 26,828 | ||||||||
Vessels and equipment | 923,670 | — | 923,670 | |||||||||
Other assets — long-term | 6,820 | 31,680 | 38,500 | |||||||||
Investment in joint venture | 64,244 | 5,785 | 70,029 | |||||||||
Intangible assets subject to amortization | 60,540 | 8,407 | 68,947 | |||||||||
Goodwill ($41.7 million spot tanker segment, and $7.1 million fixed rate tanker segment) | 31,961 | 16,852 | 48,813 | |||||||||
Total assets acquired | 1,154,971 | 22,393 | 1,177,364 | |||||||||
LIABILITIES | ||||||||||||
Current liabilities | 21,006 | (1,429 | ) | 19,577 | ||||||||
Other long-term liabilities | — | 15,873 | 15,873 | |||||||||
In-process revenue contracts | 25,402 | (3,811 | ) | 21,591 | ||||||||
Total liabilities assumed | 46,408 | 10,633 | 57,041 | |||||||||
Net assets acquired (cash consideration) | 1,108,563 | 11,760 | 1,120,323 | |||||||||
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NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. dollars, except share data)
Fixed-Rate | ||||||||||||||||||||
Offshore | Tanker | Liquefied Gas | Spot Tanker | |||||||||||||||||
Segment | Segment | Segment | Segment | Total | ||||||||||||||||
$ | $ | $ | $ | $ | ||||||||||||||||
Balance as of December 31, 2007 | 359,231 | 3,648 | 35,631 | 36,080 | 434,590 | |||||||||||||||
Goodwill acquired (note 3) | 44,589 | — | — | — | 44,589 | |||||||||||||||
Adjustment to goodwill acquired (note 4) | — | — | — | 12,732 | 12,732 | |||||||||||||||
Reallocation of goodwill acquired between segments | — | 7,163 | — | (7,163 | ) | — | ||||||||||||||
Balance as of June 30, 2008 | 403,820 | 10,811 | 35,631 | 41,649 | 491,911 | |||||||||||||||
Weighted-Average | Gross Carrying | Accumulated | Net Carrying | |||||||||||||
Amortization Period | Amount | Amortization | Amount | |||||||||||||
(years) | $ | $ | $ | |||||||||||||
Contracts of affreightment | 10.2 | 124,250 | (73,927 | ) | 50,323 | |||||||||||
Time-charter contracts | 15.5 | 243,427 | (49,126 | ) | 194,301 | |||||||||||
Other intangible assets | 2.8 | 20,398 | (8,952 | ) | 11,446 | |||||||||||
13.1 | 388,075 | (132,005 | ) | 256,070 | ||||||||||||
Weighted-Average | Gross Carrying | Accumulated | Net Carrying | |||||||||||||
Amortization Period | Amount | Amortization | Amount | |||||||||||||
(years) | $ | $ | $ | |||||||||||||
Contracts of affreightment | 10.2 | 124,250 | (68,895 | ) | 55,355 | |||||||||||
Time-charter contracts | 16.0 | 232,049 | (37,374 | ) | 194,675 | |||||||||||
Other intangible assets | 5.0 | 10,797 | (875 | ) | 9,922 | |||||||||||
13.7 | 367,096 | (107,144 | ) | 259,952 | ||||||||||||
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NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. dollars, except share data)
June 30, 2008 | December 31, 2007 | |||||||
$ | $ | |||||||
Revolving Credit Facilities | 2,585,730 | 2,393,967 | ||||||
Senior Notes (8.875%) due July 15, 2011 | 226,259 | 246,059 | ||||||
USD-denominated Term Loans due through 2021 | 2,444,481 | 2,162,420 | ||||||
Euro-denominated Term Loans due through 2023 | 473,320 | 443,992 | ||||||
USD-denominated Unsecured Demand Loan | 16,958 | 17,146 | ||||||
5,746,748 | 5,263,584 | |||||||
Less current portion | 289,717 | 331,594 | ||||||
5,457,031 | 4,931,990 | |||||||
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NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. dollars, except share data)
Year | Commitment | ||||
2008 | $ | 12.3 million | |||
2009 | $ | 134.4 million | |||
2010 | $ | 8.4 million | |||
2011 | $ | 84.0 million |
Year | Commitment | ||||
2008 | $ | 12.0 million | |||
2009 | $ | 24.0 million | |||
2010 | $ | 24.0 million | |||
2011 | $ | 24.0 million | |||
2012 | $ | 24.0 million | |||
Thereafter | $ | 977.1 million |
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NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. dollars, except share data)
Year | Commitment | |||
2008 | 24.4 million Euros ($38.5 million) | |||
2009 | 25.6 million Euros ($40.4 million) | |||
2010 | 26.9 million Euros ($42.4 million) | |||
2011 | 64.8 million Euros ($102.1million) |
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NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. dollars, except share data)
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NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. dollars, except share data)
Level 2. Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and
Level 3. Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its
Fair Value at | ||||||||||||||||
June 30, 2008 | ||||||||||||||||
Asset / (Liability) | Level 1 | Level 2 | Level 3 | |||||||||||||
$ | $ | $ | $ | |||||||||||||
Interest rate swap agreements(1) | (168,978 | ) | — | (168,978 | ) | — | ||||||||||
Interest rate swap agreements(1) | 45,328 | — | 45,328 | — | ||||||||||||
Foreign currency forward contracts(1) | 29,071 | — | 29,071 | — | ||||||||||||
Interest rate swaptions(1) | (3,309 | ) | — | (3,309 | ) | — | ||||||||||
Bunker fuel swap contracts(1) | 638 | — | 638 | — | ||||||||||||
Freight forward agreements(1) | (25,133 | ) | — | (25,133 | ) | — | ||||||||||
Foinaven embedded derivative(1) | (13,493 | ) | — | (13,493 | ) | — | ||||||||||
Marketable securities(2) | 32,209 | 32,209 | — | — |
(1) | The fair value of the Company’s derivative instruments is the estimated amount that the Company would receive or pay to terminate the agreements at the reporting date, taking into account, as applicable, current interest rates, foreign exchange rates, bunker fuel prices, spot tanker market rates for vessels, and the current credit worthiness of both the Company and the swap counterparties. Given the current volatility in the credit markets, it is reasonably possible that the amounts recorded as derivative liabilities could vary by material amounts in the near term. | |
(2) | The fair value of the Company’s marketable securities is the quoted market price as at the reporting date. |
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NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. dollars, except share data)
a) | During March 2008, the Company sold two Handysize product tankers, one of which was delivered in April 2008. During March 2008, the Company also entered into an agreement to sell a third Handysize product tanker upon the expiration of its current time-charter, which occurred during September 2008. All three vessels are part of the Company’s spot tanker segment. | |
b) | During June 2008, the Company entered into an agreement to sell an Aframax product tanker which delivered in September 2008, and which is presented on the June 30, 2008 balance sheet as vessel held for sale. During June 2008, the Company also entered into an agreement to sell a medium-range product tanker upon the expiration of its current time-charter, which occurred during September 2008. Both vessels are part of the Company’s spot tanker segment. |
Three Months Ended June 30 | Six Months Ended June 30 | |||||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||
$ | $ | $ | $ | |||||||||||||
(restated) | (restated) | |||||||||||||||
Equity loss from joint ventures | (2,063 | ) | (2,092 | ) | (5,672 | ) | (3,687 | ) | ||||||||
Gain on sale of marketable securities | 1,868 | 4,836 | 4,576 | 6,653 | ||||||||||||
Loss on bond repurchase | (712 | ) | — | (1,310 | ) | — | ||||||||||
Income tax (expense) recovery | 11,201 | (845 | ) | 8,718 | 3,041 | |||||||||||
Volatile organic compound emission plant lease income | 2,395 | 2,715 | 4,965 | 5,488 | ||||||||||||
Miscellaneous income | 1,088 | 716 | 1,414 | 221 | ||||||||||||
Other — net | 13,777 | 5,330 | 12,691 | 11,716 | ||||||||||||
Three Months Ended June 30 | Six Months Ended June 30 | |||||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||
$ | $ | $ | $ | |||||||||||||
(restated) | (restated) | |||||||||||||||
Net income | 183,419 | 167,617 | 78,290 | 252,600 | ||||||||||||
Other comprehensive income: | ||||||||||||||||
Unrealized gain (loss) on marketable securities | 2,068 | 2,858 | (3,766 | ) | 10,711 | |||||||||||
Reclassification adjustment for gain on sale of marketable securities | (1,868 | ) | (4,836 | ) | (4,575 | ) | (6,653 | ) | ||||||||
Minimum pension liability | — | — | 1,058 | — | ||||||||||||
Net effect from qualifying cash flow hedging instruments | (1,153 | ) | — | 1,697 | — | |||||||||||
Comprehensive income | 182,466 | 165,639 | 72,704 | 256,658 | ||||||||||||
June 30, 2008 | December 31, 2007 | |||||||
$ | $ | |||||||
Unrealized gain on derivative instruments | 5,217 | 3,520 | ||||||
Minimum pension liability | (5,220 | ) | (6,278 | ) | ||||
Unrealized (loss) gain on marketable securities | (1,016 | ) | 7,325 | |||||
(1,019 | ) | 4,567 | ||||||
Page 15 of 46
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NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. dollars, except share data)
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||
$ | $ | $ | $ | |||||||||||||
Vessel operating expenses | 4,048 | (4,393 | ) | 3,623 | (6,161 | ) | ||||||||||
Time-charter hire expenses | 431 | (227 | ) | 365 | (371 | ) | ||||||||||
General and administrative | 3,075 | (2,720 | ) | 2,509 | (4,527 | ) | ||||||||||
Foreign currency exchange (gain) loss | (763 | ) | (3,531 | ) | 1,708 | (10,109 | ) | |||||||||
Total | 6,791 | (10,871 | ) | 8,205 | (21,168 | ) | ||||||||||
Contract amount in | Average | |||||||||||||||||||
foreign currency | contractual | Expected maturity | ||||||||||||||||||
(millions) | exchange rate(1) | 2008 | 2009 | 2010 | ||||||||||||||||
(in millions of U.S. Dollars) | ||||||||||||||||||||
Norwegian Kroner: | 1,083.7 | 5.93 | $ | 86.2 | $ | 87.1 | $ | 9.5 | ||||||||||||
Euro: | 43.3 | 0.65 | $ | 35.6 | $ | 29.1 | $ | 1.6 | ||||||||||||
Canadian Dollar: | 50.1 | 1.01 | $ | 21.8 | $ | 24.9 | $ | 2.7 | ||||||||||||
British Pounds: | 30.3 | 0.52 | $ | 26.3 | $ | 28.3 | $ | 4.2 | ||||||||||||
Australian Dollar: | 1.3 | 0.85 | $ | 1.1 | — | — | ||||||||||||||
Singapore Dollar: | 3.6 | 1.37 | $ | 2.6 | — | — |
(1) | Average contractual exchange rate represents the contractual amount of foreign currency one U.S. Dollar will buy. |
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NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. dollars, except share data)
Fair Value / | Weighted- | Fixed | ||||||||||||||||
Interest | Principal | Carrying Amount | Average | Interest | ||||||||||||||
Rate | Amount | of Asset (Liability) | Remaining Term | Rate | ||||||||||||||
Index | $ | $ | (years) | (%)(1) | ||||||||||||||
LIBOR-Based Debt: | ||||||||||||||||||
U.S. Dollar-denominated interest rate swaps(2) | LIBOR | 491,954 | (4,548 | ) | 28.6 | 4.9 | ||||||||||||
U.S. Dollar-denominated interest rate swaps | LIBOR | 3,267,344 | (131,810 | ) | 7.4 | 5.0 | ||||||||||||
U.S. Dollar-denominated interest rate swaps(3) | LIBOR | 938,536 | (32,620 | ) | 18.3 | 5.3 | ||||||||||||
LIBOR-Based Restricted Cash Deposit: | ||||||||||||||||||
U.S. Dollar-denominated interest rate swaps(2) | LIBOR | 479,074 | 1,686 | 28.6 | 4.8 | |||||||||||||
EURIBOR-Based Debt: | ||||||||||||||||||
Euro-denominated interest rate swaps(4) (5) | EURIBOR | 473,320 | 43,642 | 16.0 | 3.8 |
(1) | Excludes the margins the Company pays on its variable-rate debt, which at of June 30, 2008 ranged from 0.3% to 1.0%. | |
(2) | Principal amount reduces quarterly. | |
(3) | Inception dates of swaps are 2008 ($30.0 million), 2009 ($408.5 million), 2010 ($300.0 million) and 2011 ($200.0 million). | |
(4) | Principal amount reduces monthly to 70.1 million Euros ($110.4 million) by the maturity dates of the swap agreements. | |
(5) | Principal amount is the U.S. Dollar equivalent of 300.4 million Euros. |
Interest | Principal | |||||||||||||
Rate | Amount(1) | Remaining Term | Fixed Interest Rate | |||||||||||
Index | $ | Start Date | (years) | (%) | ||||||||||
LIBOR | 150,000 | August 31, 2009 | 12.0 | 4.3 | ||||||||||
LIBOR | 114,583 | August 15, 2008 | 10.8 | 4.0 |
(1) | Principal amount reduces $5.0 million semi-annually ($150.0 million) and $2.6 million quarterly ($114.6 million). |
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NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. dollars, except share data)
Three Months Ended June 30 | Six Months Ended June 30 | |||||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||
$ | $ | $ | $ | |||||||||||||
(restated) | (restated) | |||||||||||||||
Net income available for common stockholders | 183,419 | 167,617 | 78,290 | 252,600 | ||||||||||||
Weighted average number of common shares | 72,377,684 | 73,843,784 | 72,511,041 | 73,488,668 | ||||||||||||
Dilutive effect of employee stock options and restricted stock awards | 901,529 | 1,466,783 | 846,149 | 1,441,323 | ||||||||||||
Common stock and common stock equivalents | 73,279,213 | 75,310,567 | 73,357,190 | 74,929,991 | ||||||||||||
Earnings per common share: | ||||||||||||||||
- Basic | 2.53 | 2.27 | 1.08 | 3.44 | ||||||||||||
- Diluted | 2.50 | 2.23 | 1.07 | 3.37 |
a) | In October 2008 the Company announced that its Board of Directors approved a 15 percent increase in the Company’s quarterly cash dividend, commencing with the dividend for the quarter ended September 30, 2008. The dividend increased to $0.31625 per share, from $0.275 per share in the previous quarter. This dividend was paid on October 31, 2008 to shareholders of record as at October 17, 2008. The Company also announced that its Board of Directors authorized the repurchase of $200 million shares of its common stock, which represented approximately 14 percent of the Company’s total market capitalization as of October 6, 2008. | |
b) | In November 2008, the Company sold its 50 percent interest in the Swift Product Tanker Pool, which included the Company’s rights in 10 of its in-chartered intermediate product tankers, for gross proceeds of $49 million. | |
c) | During November 2008 the Company sold a 2008-built Suezmax tanker. The vessel operated in the Company’s spot tanker segment and was delivered in November 2008. The Company expects to realize a gain on the transaction. | |
d) | During September 2008, the Company drew $310 million on one of its Revolvers and during October 2008 the Company drew $10 million and $60 million, respectively, on two of its Revolvers. | |
e) | On December 31, 2008 Teekay Nakilat (III) and QGTC 3 novated the RasGas 3 term loan and their interest rate swap agreements to the RasGas 3 Joint Venture for no consideration. As a result, the RasGas 3 Joint Venture shall assume all the rights, liabilities and obligations of Teekay Nakilat (III) and QGTC 3 under the terms of the RasGas 3 term loan and the interest rate swap agreements. However, Teekay Nakilat (III) has guaranteed 40% of the RasGas 3 Joint Venture’s obligations under these interest rate swap agreements. The Company owns a 40% interest in the RasGas 3 Joint Venture and accounts for it under the equity method. | |
f) | During March 2009, Teekay LNG completed a public offering of 4.0 million common units at a price of $17.60 per unit, for gross proceeds of $71.8 million (including the general partner’s $1.4 million proportionate capital contribution). As result, the Company’s ownership, as of March 31, 2009, of Teekay LNG was reduced from 57.7 percent to 53.0 percent (including the Company’s 2 percent general partner interest). The total net proceeds from the offering and private placement of approximately $68.5 million were used to reduce amounts outstanding under one of Teekay LNG’s revolving credit facilities. Teekay LNG has granted the underwriters a 30-day option, from March 30, 2009, to purchase up to an additional 600,000 units to cover over-allotments, if any. | |
g) | One of the Kenai vessels, theArctic Spirit, has come off charter from the Marathon Oil Corporation/ConocoPhillips joint venture on March 31, 2009, and the Company has entered into a joint development and option agreement with Merrill Lynch Commodities, Inc. (MLCI), giving MLCI the option to purchase the vessel for conversion to an LNG floating production, storage and offload unit (FPSO). The agreement provides for a purchase price of $105 million if the Company exercises its option to participate in the project, or $110 million if the Company chooses not to participate. Under the option agreement, theArctic Spiritis reserved for MLCI until December 31, 2009 and MLCI may extend the option quarterly through 2010. If MLCI exercises the option and purchases the vessel from the Company, it is expected that MLCI will convert the vessel to an FPSO (although it is not required to do so) and charter it under a long-term charter contract to a third party. The Company has the right to participate up to 50% in the conversion and charter project on terms that will be determined as the project progresses. The agreement with MLCI also provides that if the conversion of theArctic Spirit to an FPSO proceeds, the Company will negotiate, along with an equity investment, a similar option for a designee of MLCI to purchase thePolar Spiritfor $125 million when it comes off charter. |
Page 18 of 46
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NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. dollars, except share data)
a) | Derivative Instruments and Hedging Activities | |
In August 2008, the Company commenced a review of its application of SFAS No. 133,Accounting for Derivative Instruments and Hedging Activities, as amended. Based on its review the Company concluded that certain of its interest rate swap agreements, foreign currency forward contracts, bunker fuel swap contracts and forward freight agreements did not qualify for hedge accounting treatment under SFAS No. 133 for the three and six months ended June 30, 2007. The Company’s findings were as follows: |
• | One of the requirements of SFAS No. 133 is that hedge accounting is appropriate only for those hedging relationships that a company expects will be highly effective in achieving offsetting changes in fair value or cash flows attributable to the risk being hedged. To determine whether transactions satisfy this requirement, entities must periodically assess the effectiveness of hedging relationships both prospectively and retrospectively. Based on the Company’s review, the Company concluded that the hedge effectiveness assessment that was conducted for certain of the Company’s derivative instruments on the date of designation was not sufficient to conclude that the derivative instruments would be highly effective, in accordance with the technical requirements of SFAS No. 133, in achieving offsetting changes in cash flows attributable to the risk being hedged. | ||
• | To conclude that hedge accounting is appropriate, another requirement of SFAS No. 133 is that the applicable hedge documentation specifies the method that will be used to assess, retrospectively and prospectively, the hedging instrument’s effectiveness, and the method that will be used to measure hedge ineffectiveness. Documentation for certain of the Company’s derivative instruments did not clearly specify the method to be used to measure hedge ineffectiveness. | ||
• | Certain of the Company’s derivative instruments were designated as hedges when the derivative instruments had a non-zero fair value. However, this designation was not appropriate as the Company used certain methods of measuring ineffectiveness that are prohibited in the case of non-zero fair value derivatives. |
b) | Non-Routine, Complex Financial Structures and Arrangements, and Other |
Page 19 of 46
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NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. dollars, except share data)
Net Income | Retained Earnings | |||||||||||
Three Months | Six Months Ended | |||||||||||
Ended June 30, | June 30, | At December 31, | ||||||||||
2007 | 2007 | 2006 | ||||||||||
$ | $ | $ | ||||||||||
As previously reported | 78,411 | 154,786 | 1,943,397 | |||||||||
Adjustments: | ||||||||||||
Derivative instruments, net of minority interest | 90,426 | 102,110 | (26,785 | ) | ||||||||
Non-routine, complex financial structures and arrangements, and other | (1,220 | ) | (4,296 | ) | 223 | |||||||
As restated | 167,617 | 252,600 | 1,916,835 | |||||||||
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NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. dollars, except share data)
Three Months Ended June 30, 2007 | ||||||||||||||||
Adjustments | ||||||||||||||||
Non-Routine | ||||||||||||||||
Complex | ||||||||||||||||
Financial | ||||||||||||||||
Structures and | ||||||||||||||||
As | Derivative | Arrangements, | As | |||||||||||||
Reported | Instruments | and Other | Restated | |||||||||||||
$ | $ | $ | $ | |||||||||||||
REVENUES | 566,127 | (391 | ) | — | 565,736 | |||||||||||
OPERATING EXPENSES | ||||||||||||||||
Voyage expenses | 123,554 | (1,046 | ) | — | 122,508 | |||||||||||
Vessel operating expenses | 108,851 | (4,948 | ) | — | 103,903 | |||||||||||
Time-charter hire expense | 101,247 | (289 | ) | — | 100,958 | |||||||||||
Depreciation and amortization | 68,095 | — | — | 68,095 | ||||||||||||
General and administrative expenses | 58,358 | (3,467 | ) | 1,374 | 56,265 | |||||||||||
Gain on sale of vessels and equipment | (11,613 | ) | — | — | (11,613 | ) | ||||||||||
Total operating expenses | 448,492 | (9,750 | ) | 1,374 | 440,116 | |||||||||||
Income from vessel operations | 117,635 | 9,359 | (1,374 | ) | 125,620 | |||||||||||
OTHER ITEMS | ||||||||||||||||
Interest (expense) gain | (64,158 | ) | 137,193 | (4,079 | ) | 68,956 | ||||||||||
Interest income | 23,390 | (27,047 | ) | 4,079 | 422 | |||||||||||
Foreign exchange gain (loss) | 1,214 | (9,849 | ) | — | (8,635 | ) | ||||||||||
Minority interest expense | (6,341 | ) | (17,889 | ) | 154 | (24,076 | ) | |||||||||
Other — net | 6,671 | (1,341 | ) | — | 5,330 | |||||||||||
Total other items | (39,224 | ) | 81,067 | 154 | 41,997 | |||||||||||
Net income | 78,411 | 90,426 | (1,220 | ) | 167,617 | |||||||||||
Per common share amounts | ||||||||||||||||
• Basic earnings | 1.06 | 2.27 | ||||||||||||||
• Diluted earnings | 1.04 | 2.23 | ||||||||||||||
• Cash dividends declared | 0.2375 | 0.2375 | ||||||||||||||
Weighted average number of common shares | ||||||||||||||||
• Basic | 73,843,784 | 73,843,784 | ||||||||||||||
• Diluted | 75,310,567 | 75,310,567 | ||||||||||||||
Page 21 of 46
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NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. dollars, except share data)
Six Months Ended June 30, 2007 | ||||||||||||||||
Adjustments | ||||||||||||||||
Non-Routine | ||||||||||||||||
Complex | ||||||||||||||||
Financial | ||||||||||||||||
Structures and | ||||||||||||||||
As | Derivative | Arrangements, | As | |||||||||||||
Reported | Instruments | and Other | Restated | |||||||||||||
$ | $ | $ | $ | |||||||||||||
REVENUES | 1,144,522 | (538 | ) | — | 1,143,984 | |||||||||||
OPERATING EXPENSES | ||||||||||||||||
Voyage expenses | 242,493 | (2,506 | ) | — | 239,987 | |||||||||||
Vessel operating expenses | 206,292 | (7,199 | ) | — | 199,093 | |||||||||||
Time-charter hire expense | 199,748 | (433 | ) | — | 199,315 | |||||||||||
Depreciation and amortization | 147,358 | — | — | 147,358 | ||||||||||||
General and administrative expenses | 117,155 | (5,342 | ) | 3,432 | 115,245 | |||||||||||
Gain on sale of vessels and equipment | (11,613 | ) | — | — | (11,613 | ) | ||||||||||
Total operating expenses | 901,433 | (15,480 | ) | 3,432 | 889,385 | |||||||||||
Income from vessel operations | 243,089 | 14,942 | (3,432 | ) | 254,599 | |||||||||||
OTHER ITEMS | ||||||||||||||||
Interest (expense) gain | (124,541 | ) | 144,518 | (6,926 | ) | 13,051 | ||||||||||
Interest income | 39,558 | (31,108 | ) | 6,926 | 15,376 | |||||||||||
Foreign exchange loss | (4,674 | ) | (5,637 | ) | — | (10,311 | ) | |||||||||
Minority interest expense | (11,981 | ) | (18,986 | ) | (864 | ) | (31,831 | ) | ||||||||
Other — net | 13,335 | (1,619 | ) | — | 11,716 | |||||||||||
Total other items | (88,303 | ) | 87,168 | (864 | ) | (1,999 | ) | |||||||||
Net income | 154,786 | 102,110 | (4,296 | ) | 252,600 | |||||||||||
Per common share amounts | ||||||||||||||||
• Basic earnings | 2.11 | 3.44 | ||||||||||||||
• Diluted earnings | 2.07 | 3.37 | ||||||||||||||
• Cash dividends declared | 0.4750 | 0.4750 | ||||||||||||||
Weighted average number of common shares | ||||||||||||||||
• Basic | 73,488,668 | 73,488,668 | ||||||||||||||
• Diluted | 74,929,991 | 74,929,991 | ||||||||||||||
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NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. dollars, except share data)
Six Months Ended June 30, 2007 | ||||||||||||||||
Adjustments | ||||||||||||||||
Non-Routine | ||||||||||||||||
Complex | ||||||||||||||||
Financial | ||||||||||||||||
Structures and | ||||||||||||||||
As | Derivative | Arrangements, | As | |||||||||||||
Reported | Instruments | and Other | Restated | |||||||||||||
$ | $ | $ | $ | |||||||||||||
Cash and cash equivalents provided by (used for) | ||||||||||||||||
OPERATING ACTIVITIES | ||||||||||||||||
Net income | 154,786 | 102,110 | (4,296 | ) | 252,600 | |||||||||||
Non-cash items: | ||||||||||||||||
Depreciation and amortization | 147,358 | — | — | 147,358 | ||||||||||||
Amortization of in-process revenue contracts | (30,547 | ) | — | — | (30,547 | ) | ||||||||||
Gain on sale of marketable securities | (6,653 | ) | — | — | (6,653 | ) | ||||||||||
Gain on sale of vessels and equipment | (11,613 | ) | — | — | (11,613 | ) | ||||||||||
Equity income (net of dividends received: June 30, 2007 — $nil) | 3,687 | — | — | 3,687 | ||||||||||||
Income taxes | (3,795 | ) | 754 | — | (3,041 | ) | ||||||||||
Employee stock-based compensation | 4,708 | — | — | 4,708 | ||||||||||||
Foreign exchange loss and other — net | 11,776 | 33,733 | 4,296 | 49,805 | ||||||||||||
Unrealized gains on derivative instruments | — | (136,597 | ) | — | (136,597 | ) | ||||||||||
Change in non-cash working capital items related to operating activities | (60,028 | ) | — | — | (60,028 | ) | ||||||||||
Expenditures for drydocking | (40,623 | ) | — | — | (40,623 | ) | ||||||||||
Distribution from subsidiaries to minority owners | (16,354 | ) | — | — | (16,354 | ) | ||||||||||
Net operating cash flow | 152,702 | — | — | 152,702 | ||||||||||||
FINANCING ACTIVITIES | ||||||||||||||||
Proceeds from issuance of long-term debt | 1,788,245 | — | 210,071 | 1,998,316 | ||||||||||||
Debt issuance costs | (4,382 | ) | — | — | (4,382 | ) | ||||||||||
Repayments of long-term debt | (737,938 | ) | — | — | (737,938 | ) | ||||||||||
Repayments of capital lease obligations | (4,384 | ) | — | — | (4,384 | ) | ||||||||||
Proceeds from loan from joint venture partner | 22,093 | — | — | 22,093 | ||||||||||||
Increase in restricted cash | (79,230 | ) | — | — | (79,230 | ) | ||||||||||
Net proceeds from sale of Teekay LNG Partners L.P. units | 84,186 | — | — | 84,186 | ||||||||||||
Issuance of Common Stock upon exercise of stock options | 27,326 | — | — | 27,326 | ||||||||||||
Repurchase of Common Stock | (3,035 | ) | — | — | (3,035 | ) | ||||||||||
Cash dividends paid | (34,897 | ) | — | — | (34,897 | ) | ||||||||||
Other financing activities | (3,643 | ) | — | — | (3,643 | ) | ||||||||||
Net financing cash flow | 1,054,341 | — | 210,071 | 1,264,412 | ||||||||||||
INVESTING ACTIVITIES | ||||||||||||||||
Expenditures for vessels and equipment | (356,104 | ) | — | — | (356,104 | ) | ||||||||||
Proceeds from sale of vessels and equipment | 118,975 | — | — | 118,975 | ||||||||||||
Purchases of marketable securities | (28,636 | ) | — | — | (28,636 | ) | ||||||||||
Proceeds from sale of marketable securities | 49,059 | — | — | 49,059 | ||||||||||||
Acquisition of 50% of OMI Corporation | (896,841 | ) | — | — | (896,841 | ) | ||||||||||
Loans to joint ventures | (144,270 | ) | — | (210,071 | ) | (354,341 | ) | |||||||||
Investment in direct financing lease assets | (7,530 | ) | — | — | (7,530 | ) | ||||||||||
Direct financing lease payments received | 10,399 | — | — | 10,399 | ||||||||||||
Other investing activities | (3,677 | ) | — | — | (3,677 | ) | ||||||||||
Net investing cash flow | (1,258,625 | ) | — | (210,071 | ) | (1,468,696 | ) | |||||||||
Decrease in cash and cash equivalents | (51,582 | ) | — | — | (51,582 | ) | ||||||||||
Cash and cash equivalents, beginning of the period | 343,914 | — | — | 343,914 | ||||||||||||
Cash and cash equivalents, end of the period | 292,332 | — | — | 292,332 | ||||||||||||
Page 23 of 46
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NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. dollars, except share data)
Page 24 of 46
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June 30, 2008
ITEM 2 — | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
Net Income | ||||||||
Three Months Ended | Six Months Ended | |||||||
June 30, 2007 | June 30, 2007 | |||||||
$ | $ | |||||||
As previously reported | 78,411 | 154,786 | ||||||
Adjustments: | ||||||||
Derivative instruments, net of minority interest | 90,426 | 102,110 | ||||||
Non-routine, complex financial structures and arrangements, and other | (1,220 | ) | (4,296 | ) | ||||
As restated | 167,617 | 252,600 | ||||||
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Three Months Ended | Six Months Ended | |||||||||||||||||||||||
June 30, | June 30, | |||||||||||||||||||||||
(in thousands of U.S. dollars, except | 2008 | 2007 | % Change | 2008 | 2007 | % Change | ||||||||||||||||||
calendar-ship-days and percentages) | (restated) | (restated) | ||||||||||||||||||||||
Revenues | 273,961 | 236,233 | 16.0 | 532,749 | 485,108 | 9.8 | ||||||||||||||||||
Voyage expenses | 46,024 | 26,064 | 76.6 | 84,925 | 54,790 | 55.0 | ||||||||||||||||||
Net revenues | 227,937 | 210,169 | 8.5 | 447,824 | 430,318 | 4.1 | ||||||||||||||||||
Vessel operating expenses | 101,596 | 69,325 | 46.6 | 185,416 | 129,615 | 43.1 | ||||||||||||||||||
Time-charter hire expense | 32,242 | 39,260 | (17.9 | ) | 67,280 | 80,433 | (16.4 | ) | ||||||||||||||||
Depreciation and amortization | 53,772 | 35,627 | 50.9 | 99,846 | 81,349 | 22.7 | ||||||||||||||||||
General and administrative expenses(1) | 26,957 | 23,164 | 16.4 | 54,019 | 48,068 | 12.4 | ||||||||||||||||||
Gain on sale of vessels | (3,150 | ) | (11,613 | ) | (72.9 | ) | (3,150 | ) | (11,613 | ) | (72.9 | ) | ||||||||||||
Restructuring charge | 3,327 | — | 3,327 | — | ||||||||||||||||||||
Income from vessel operations | 13,193 | 54,406 | (75.8 | ) | 41,086 | 102,466 | (59.9 | ) | ||||||||||||||||
Calendar-Ship-Days | ||||||||||||||||||||||||
Owned Vessels | 3,459 | 3,181 | 8.7 | 6,801 | 6,240 | 9.0 | ||||||||||||||||||
Chartered-in Vessels | 897 | 1,143 | (21.5 | ) | 1,899 | 2,307 | (17.7 | ) | ||||||||||||||||
Total | 4,356 | 4,324 | 0.7 | 8,700 | 8,547 | 1.8 | ||||||||||||||||||
(1) | Includes direct general and administrative expenses and indirect general and administrative expenses (allocated to the offshore segment based on estimated use of corporate resources). |
• | the delivery of a new FPSO unit in February 2008 (or theFPSO Delivery); | ||
• | the transfer of theNavion Sagafrom the fixed-rate segment to the offshore segment in connection with the completion of its conversion to an FSO unit in May 2007; and | ||
• | the delivery of two new shuttle tankers, theNavion Bergenand theNavion Gothenburg, in April and July 2007, respectively (collectively, theShuttle Tanker Deliveries); |
• | a decline in the number of chartered-in shuttle tankers; and | ||
• | the sale of a 1987-built shuttle tanker in May 2007 (or theShuttle Tanker Disposition). |
• | increases of $9.6 million and $16.4 million, respectively, for the three and six months ended June 30, 2008, from the FPSO Delivery; | ||
• | an increase of $5.0 million for the three months ended June 30, 2008, in shuttle tanker revenue due to more revenue days for shuttle tankers servicing contracts of affreightment in the conventional spot tanker market during the three months ended June 30, 2008, compared to the same period last year; | ||
• | an increase of $4.9 million for the three months ended June 30, 2008, from the amortization of contract value liability relating to FPSO service contracts (as discussed below), which was recognized on the date of the acquisition by us of a controlling interest in Teekay Petrojarl in 2006 and adjusted in the second quarter of 2007; | ||
• | increases of $3.6 million and $9.1 million, respectively, for the three and six months ended June 30, 2008, from the Shuttle Tanker Deliveries; |
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• | increases of $2.3 million and $9.9 million, respectively, for the three and six months ended June 30, 2008, from the transfer of theNavion Sagato the offshore segment; |
• | increases of $1.2 million and $2.5 million, respectively, for the three and six months ended June 30, 2008, due to the redeployment of one shuttle tanker from servicing contracts of affreightment to a time-charter effective October 2007, and earning a higher average daily charter rate than the same periods last year; and |
• | an increase of $1.3 million for the six months ended June 30, 2008, due to more revenue days for shuttle tankers servicing contracts of affreightment, partially offset by fewer revenue days from shuttle tankers servicing contracts of affreightment in the conventional spot tanker market, earning a higher average daily charter rate, compared to the same period last year; |
• | decreases of $2.3 million and $3.9 million, respectively, for the three and six months ended June 30, 2008, due to an increase in bunker costs which are not passed on to the charterer under certain contracts; |
• | decreases of $2.2 million and $5.3 million, respectively, for the three and six months ended June 30, 2008, due to declining oil production at mature oil fields in the North Sea which are serviced by certain shuttle tankers on contracts of affreightment; |
• | a decrease of $4.0 million for the six months ended June 30, 2008, due to an increased number of offhire days resulting from an increase in scheduled drydockings and unexpected repairs performed during the six months ended June 30, 2008, compared to the same period last year; and |
• | decreases of $1.6 million and $3.8 million, respectively, for the three and six months ended June 30, 2008, due to customer performance claims under the terms of charter party agreements. |
• | increases of $9.5 million and $14.4 million, respectively, for the three and six months ended June 30, 2008, from increases in the price of consumables, freight and lubricants; |
• | increases of $9.2 million and $17.2 million, respectively, for the three and six months ended June 30, 2008, from increases in crew manning costs; |
• | increases of $7.9 million and $10.0 million, respectively, for the three and six months ended June 30, 2008, relating to the unrealized change in fair value of our foreign currency forward contracts; |
• | increases of $6.0 million and $11.3 million, respectively, for the three and six months ended June 30, 2008, from the FPSO Delivery; |
• | an increase of $3.6 million for the six months ended June 30, 2008, relating to the transfer of theNavion Sagato the offshore segment; and |
• | increases of $1.5 million and $1.7 million, respectively, for the three and six months ended June 30, 2008, from the acquisition of an in-chartered shuttle tanker, theNavion Oslo, which was delivered in late March 2008. |
• | increases of $8.7 million and $4.6 million, respectively, for the three and six months ended June 30, 2008, from the refinement of preliminary estimates of fair value assigned to certain assets included in our acquisition of Teekay Petrojarl; |
• | an increase of $3.7 million for the three months ended June 30, 2008, from the FPSO Delivery; |
• | increases of $3.1 million and $5.6 million, respectively, for the three and six months ended June 30, 2008, relating to the transfer of theNavion Sagato the offshore segment; and |
• | increases of $1.0 million and $2.7 million, respectively, for the three and six months ended June 30, 2008, from the Shuttle Tanker Deliveries. |
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Three Months Ended | Six Months Ended | |||||||||||||||||||||||
(in thousands of U.S. dollars, except | June 30, | June 30, | ||||||||||||||||||||||
calendar-ship-days and percentages) | 2008 | 2007 | % Change | 2008 | 2007 | % Change | ||||||||||||||||||
(restated) | (restated) | |||||||||||||||||||||||
Revenues | 66,218 | 45,787 | 44.6 | 127,033 | 90,376 | 40.6 | ||||||||||||||||||
Voyage expenses | 948 | 592 | 60.1 | 1,628 | 1,152 | 41.3 | ||||||||||||||||||
Net revenues | 65,270 | 45,195 | 44.4 | 125,405 | 89,224 | 40.6 | ||||||||||||||||||
Vessel operating expenses | 16,387 | 11,822 | 38.6 | 32,757 | 23,512 | 39.3 | ||||||||||||||||||
Time-charter hire expense | 11,445 | 3,981 | 187.5 | 23,165 | 7,818 | 196.3 | ||||||||||||||||||
Depreciation and amortization | 11,289 | 8,260 | 36.7 | 20,962 | 16,728 | 25.3 | ||||||||||||||||||
General and administrative expenses(1) | 7,263 | 4,473 | 62.4 | 12,553 | 9,106 | 37.9 | ||||||||||||||||||
Restructuring charge | 58 | — | 1,558 | — | ||||||||||||||||||||
Income from vessel operations | 18,828 | 16,659 | 13.0 | 34,410 | 32,060 | 7.3 | ||||||||||||||||||
Calendar-Ship-Days | ||||||||||||||||||||||||
Owned Vessels | 1,728 | 1,365 | 26.6 | 3,181 | 2,715 | 17.2 | ||||||||||||||||||
Chartered-in Vessels | 627 | 181 | 246.4 | 1,257 | 360 | 249.2 | ||||||||||||||||||
Total | 2,355 | 1,546 | 52.3 | 4,438 | 3,075 | 44.3 | ||||||||||||||||||
(1) | Includes direct general and administrative expenses and indirect general and administrative expenses (allocated to the fixed-rate tanker segment based on estimated use of corporate resources). |
• | the acquisition of two Suezmax and two product tankers from OMI on August 1, 2007 (collectively, theOMI Acquisition); |
• | the addition of two new chartered-in Aframax tankers in January 2008 as part of the multi-vessel transaction with ConocoPhillips, in which we acquired ConocoPhillips’ rights in six double-hull Aframax tankers (collectively, theConocoPhillips Acquisition); |
• | the delivery of two new Aframax tankers during January and March 2008 (collectively, theAframax Deliveries); |
• | the transfer of two product tankers from the spot tanker segment in April 2008 upon commencement of long-term time-charters (theProduct Tanker Transfers); and |
• | the transfer of one Aframax tanker, on a net basis, from the spot tanker segment in 2007 upon commencement of long-term time-charters (theAframax Transfers). |
• | increases of $10.3 million and $16.1 million, respectively, for the three and six months ended June 30, 2008, from the OMI Acquisition; |
• | increases of $4.4 million and $8.6 million, respectively, for the three and six months ended June 30, 2008, from the ConocoPhillips Acquisition; |
• | increases of $3.9 million and $9.9 million, respectively, for the three and six months ended June 30, 2008, from the Aframax Transfers; |
• | an increase of $3.5 million for the three months ended June 30, 2008, from the Product Tanker Transfers; and |
• | increases of $2.5 million and $3.7 million, respectively, for the three and six months ended June 30, 2008, from the Aframax Deliveries; |
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• | decreases of $2.1 million and $3.8 million, respectively, for the three and six months ended June 30, 2008, from reduced revenues earned by theTeide Spiritand theToledo Spirit (the time-charters for both these vessels provide for additional revenues to us beyond the fixed hire rate when spot tanker market rates exceed threshold amounts; the time-charter for theToledo Spiritalso provides for a reduction in revenues to us when spot tanker market rates are below threshold amounts); and |
• | a decrease of $1.3 million for the three months ended June 30, 2008, because two of our Suezmax tankers were off-hire for 50 days for scheduled drydocking during the period. |
• | increases of $1.7 million and $3.7 million, respectively, for the three and six months ended June 30, 2008, from the ConocoPhillips Acquisition; |
• | an increase of $1.1 million for the three months ended June 30, 2008, from the Product Tanker Transfers; |
• | increases of $1.4 million and $2.2 million, respectively, for the three and six months ended June 30, 2008, in crew manning expenses; |
• | increases of $0.6 million and $1.2 million, respectively, for the three and six months ended June 30, 2008, from the OMI Acquisition; and |
• | increases of $0.5 million and $1.3 million, respectively, for the three and six months ended June 30, 2008, due to the effect on our Euro-denominated vessel operating expenses from the strengthening of the Euro against the U.S. Dollar during the periods compared to the same periods last year (a majority of our vessel operating expenses on five of our Suezmax tankers are denominated in Euros, which is primarily a function of the nationality of our crew: our Euro-denominated revenues currently generally approximate our Euro-denominated expenses and Euro-denominated loan and interest payments); |
• | decreases of $1.1 million and $1.4 million, respectively, for the three and six months ended June 30, 2008, from the Aframax Transfers. |
• | increases of $3.2 million and $6.3 million, respectively, for the three and six months ended June 30, 2008, from the Aframax Transfers; |
• | increases of $2.4 million and $4.8 million, respectively, for the three and six months ended June 30, 2008, from the OMI Acquisition; and |
• | increases of $ 1.8 million and $3.6 million, respectively, for the three and six months ended June 30, 2008, from the ConocoPhillips Acquisition. |
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Three Months Ended | Six Months Ended | |||||||||||||||||||||||
(in thousands of U.S. dollars, except | June 30, | June 30, | ||||||||||||||||||||||
calendar-ship-days and percentages) | 2008 | 2007 | % Change | 2008 | 2007 | % Change | ||||||||||||||||||
(restated) | (restated) | |||||||||||||||||||||||
Revenues | 53,496 | 38,496 | 39.0 | 109,628 | 75,973 | 44.3 | ||||||||||||||||||
Voyage expenses | 452 | 8 | 5,550.0 | 602 | 13 | 4,530.8 | ||||||||||||||||||
Net revenues | 53,044 | 38,488 | 37.8 | 109,026 | 75,960 | 43.5 | ||||||||||||||||||
Vessel operating expenses | 13,125 | 7,881 | 66.5 | 24,748 | 14,339 | 72.6 | ||||||||||||||||||
Depreciation and amortization | 14,209 | 11,571 | 22.8 | 28,404 | 22,365 | 27.0 | ||||||||||||||||||
General and administrative expenses(1) | 6,070 | 5,163 | 17.6 | 11,555 | 10,163 | 13.7 | ||||||||||||||||||
Restructuring charge | 221 | — | 221 | — | ||||||||||||||||||||
Income from vessel operations | 19,419 | 13,873 | 40.0 | 44,098 | 29,093 | 51.6 | ||||||||||||||||||
Calendar-Ship-Days | ||||||||||||||||||||||||
Owned Vessels and Vessels under Capital Lease | 910 | 728 | 25.0 | 1,820 | 1,390 | 30.9 | ||||||||||||||||||
(1) | Includes direct general and administrative expenses and indirect general and administrative expenses (allocated to the liquefied gas segment based on estimated use of corporate resources). |
• | increases of $8.9 million and $19.1 million, respectively, for the three and six months ended June 30, 2008, from the Kenai LNG Carrier Acquisition; |
• | an increase of $5.9 million for the six months ended June 30, 2008, from the 2007 RasGas II Deliveries; |
• | relative increases of $5.3 million and $5.5 million, respectively, for the three and six months ended June 30, 2008, due to theMadrid Spiritbeing off-hire during the first half of 2007 after sustaining damage to its engine boilers; and |
• | increases of $2.5 million and $5.4 million, respectively, for the three and six months ended June 30, 2008, due to the effect on our Euro-denominated revenues from the strengthening of the Euro against the U.S. Dollar during such periods compared to the same periods last year; |
• | decreases of $2.6 million and $3.1 million, respectively, for the three and six months ended June 30, 2008, due to theCatalunya Spiritbeing off-hire for 34.3 days during the first half of 2008 for scheduled drydocks. |
• | increases of $2.5 million and $5.5 million, respectively, for the three and six months ended June 30, 2008, from the Kenai LNG Carrier Acquisition; |
• | increases of $ 1.0 million and $1.8 million, respectively, for the three and six months ended June 30, 2008, due to the effect on our Euro-denominated vessel operating expenses from the strengthening of the Euro against the U.S. Dollar during such period compared to the same period last year (a majority of our vessel operating expenses are denominated in Euros, which is primarily a function of the nationality of our crew; our Euro-denominated revenues currently generally approximate our Euro-denominated expenses and Euro-denominated loan and interest payments); and |
• | increases of $0.4 million and $1.4 million, respectively, for the three and six months ended June 30, 2008, from the 2007 RasGas II Deliveries. |
• | increases of $2.5 million and $5.2 million, respectively, for the three and six months ended June 30, 2008, from the Kenai LNG Carrier Acquisition; and |
• | an increase of $0.7 million for the six months ended June 30, 2008, from the 2007 RasGas II Deliveries. |
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Three Months Ended | Six Months Ended | ||||||||||||||||||||||||
(in thousands of U.S. dollars, except | June 30, | June 30, | |||||||||||||||||||||||
calendar-ship-days and percentages) | 2008 | 2007 | % Change | 2008 | 2007 | % Change | |||||||||||||||||||
(restated) | (restated) | ||||||||||||||||||||||||
Revenues | 375,724 | 245,220 | 53.2 | 743,361 | 492,527 | 50.9 | |||||||||||||||||||
Voyage expenses | 142,091 | 95,844 | 48.3 | 271,821 | 184,032 | 47.7 | |||||||||||||||||||
Net revenues | 233,633 | 149,376 | 56.4 | 471,540 | 308,495 | 52.9 | |||||||||||||||||||
Vessel operating expenses | 28,362 | 14,875 | 90.7 | 59,598 | 31,627 | 88.4 | |||||||||||||||||||
Time-charter hire expense | 98,995 | 57,717 | 71.5 | 196,721 | 111,064 | 77.1 | |||||||||||||||||||
Depreciation and amortization | 27,430 | 12,637 | 117.1 | 55,195 | 26,916 | 105.1 | |||||||||||||||||||
General and administrative expenses(1) | 30,592 | 23,465 | 30.4 | 57,394 | 47,908 | 19.8 | |||||||||||||||||||
Gain on sale of vessels | 225 | — | — | (271 | ) | — | — | ||||||||||||||||||
Restructuring charge | 1,011 | — | — | 1,011 | — | — | |||||||||||||||||||
Income from vessel operations | 47,018 | 40,682 | 15.6 | 101,892 | 90,980 | 12.0 | |||||||||||||||||||
Calendar-Ship-Days | |||||||||||||||||||||||||
Owned Vessels | 3,326 | 2,472 | 34.5 | 6,953 | 5,040 | 38.0 | |||||||||||||||||||
Chartered-in Vessels | 4,225 | 2,790 | 51.4 | 8,468 | 5,399 | 56.8 | |||||||||||||||||||
Total | 7,551 | 5,262 | 43.5 | 15,421 | 10,439 | 47.7 | |||||||||||||||||||
(1) | Includes direct general and administrative expenses and indirect general and administrative expenses (allocated to the spot tanker segment based on estimated use of corporate resources). |
• | the acquisition of 12 owned and five chartered-in vessels from OMI Corporation on August 1, 2007 (collectively, theOMI Acquisition); |
• | the addition of two owned and two chartered-in Aframax tankers in January 2008 as part of the multi-vessel transaction with ConocoPhillips, in which we acquired ConocoPhillips’ rights in six double-hull Aframax tankers (collectively, theConocoPhillips Acquisition); |
• | the delivery of two new Large product tankers in February and May 2007 (or theSpot Tanker Deliveries); |
• | the delivery of one new Suezmax tankers in May 2008 (or theSuezmax Delivery); and |
• | a net increase in the number of chartered-in vessels, primarily Aframax and product tankers. |
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Three Months Ended | ||||||||||||||||||||||||
June 30, 2008 | June 30, 2007 | |||||||||||||||||||||||
Net | TCE | Net | TCE | |||||||||||||||||||||
Revenues | Revenue | Rate | Revenues | Revenue | Rate | |||||||||||||||||||
Vessel Type | ($000’s) | Days | $ | ($000’s) | Days | $ | ||||||||||||||||||
Spot Fleet(1) | ||||||||||||||||||||||||
Suezmax Tankers(2) | 31,690 | 432 | 73,356 | 7,924 | 197 | 40,221 | ||||||||||||||||||
Aframax Tankers(2) | 158,508 | 3,635 | 43,606 | 90,794 | 2,729 | 33,270 | ||||||||||||||||||
Large/Medium Product Tankers(2) | 35,686 | 1,156 | 30,870 | 27,637 | 876 | 31,549 | ||||||||||||||||||
Small Product Tankers(2) | 12,196 | 887 | 13,750 | 13,935 | 901 | 15,466 | ||||||||||||||||||
Time-Charter Fleet(1) | ||||||||||||||||||||||||
Suezmax Tankers(2) | 22,651 | 740 | 30,609 | 2,535 | 140 | 18,108 | ||||||||||||||||||
Aframax Tankers(2) | 5,725 | 180 | 31,803 | 2,594 | 91 | 28,500 | ||||||||||||||||||
Large/Medium Product Tankers(2) | 12,135 | 431 | 28,156 | 7,969 | 273 | 29,191 | ||||||||||||||||||
Small Product Tankers(2) | — | — | — | — | — | — | ||||||||||||||||||
Other(3) | (44,958 | ) | — | — | (4,012 | ) | — | — | ||||||||||||||||
Totals | 233,633 | 7,461 | 31,314 | 149,376 | 5,207 | 28,688 | ||||||||||||||||||
Six Months Ended | ||||||||||||||||||||||||
June 30, 2008 | June 30, 2007 | |||||||||||||||||||||||
Net | TCE | Net | TCE | |||||||||||||||||||||
Revenues | Revenue | Rate | Revenues | Revenue | Rate | |||||||||||||||||||
Vessel Type | ($000’s) | Days | $ | ($000’s) | Days | $ | ||||||||||||||||||
Spot Fleet(1) | ||||||||||||||||||||||||
Suezmax Tankers(2) | 57,095 | 985 | 57,964 | 20,303 | 439 | 46,249 | ||||||||||||||||||
Aframax Tankers(2) | 292,934 | 7,343 | 39,893 | 192,851 | 5,407 | 35,667 | ||||||||||||||||||
Large/Medium Product Tankers(2) | 64,961 | 2,218 | 29,288 | 48,302 | 1,735 | 27,840 | ||||||||||||||||||
Small Product Tankers(2) | 24,595 | 1,789 | 13,748 | 28,287 | 1,797 | 15,741 | ||||||||||||||||||
Time-Charter Fleet(1) | ||||||||||||||||||||||||
Suezmax Tankers(2) | 41,446 | 1,408 | 29,436 | 7,507 | 322 | 23,314 | ||||||||||||||||||
Aframax Tankers(2) | 10,234 | 322 | 31,784 | 2,594 | 91 | 28,500 | ||||||||||||||||||
Large/Medium Product Tankers(2) | 30,661 | 1,244 | 24,647 | 15,583 | 534 | 29,181 | ||||||||||||||||||
Small Product Tankers(2) | — | — | — | — | — | — | ||||||||||||||||||
Other(3) | (50,386 | ) | — | — | (6,932 | ) | — | — | ||||||||||||||||
Totals | 471,540 | 15,309 | 30,801 | 308,495 | 10,325 | 29,878 | ||||||||||||||||||
(1) | Spot fleet includes short-term time-charters and fixed-rate contracts of affreightment less than 1 year and gains and losses from forward freight agreements (FFAs) less than 1 year and time-charter fleet includes short-term time-charters and fixed-rate contracts of affreightment between 1-3 years and gains and losses from synthetic time-charters (STCs) and FFAs between 1-3 years. | |
(2) | Includes realized gains and losses from STCs and FFAs. | |
(3) | Includes broker commissions, the cost of spot in-charter vessels servicing fixed-rate contract of affreightment cargoes, unrealized gains and losses from STCs and FFAs, the amortization of in-process revenue contracts and cost of fuel while offhire. |
• | increases of $68.5 million and $119.9 million, respectively, for the three and six months ended June 30, 2008, from the OMI Acquisition; |
• | increases of $25.8 million and $52.2 million, respectively, for the three and six months ended June 30, 2008, from a net increase in the number of chartered-in vessels; |
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• | increases of $24.5 million and $11.2 million, respectively, for the three and six months ended June 30, 2008, from an increase in our average TCE rate during the periods compared to the same periods in 2007; |
• | increases of $9.5 million and $20.3 million, respectively, for the three and six months ended June 30, 2008, from the ConocoPhillips Acquisition; |
• | increases of $7.4 million and $12.6 million, respectively, for the three and six months ended June 30, 2008, from the transfer of two Aframax tankers from the fixed-rate tanker segment in January 2008; and |
• | increases of $2.9 million and $6.9 million, respectively, for the three and six months ended June 30, 2008, from the Spot Tanker Deliveries and the Suezmax Delivery; |
• | decreases of $43.3 million and $41.5 million, respectively, for the three and six months ended June 30, 2008, from the effect of STCs and FFAs; |
• | decreases of $6.6 million and $6.8 million, respectively, for the three and six months ended June 30, 2008, from an increase in the number of days our vessels were off-hire due to regularly scheduled maintenance; and |
• | decreases of $4.5 million and $11.8 million, respectively, for the three and six months ended June 30, 2008, from the transfer of an Aframax tanker to the offshore segment in May 2007 and the transfer of a Suezmax tanker to the fixed-rate tanker segment in December 2007. |
• | increases of $4.6 million and $11.3 million, respectively, for the three and six months ended June 30, 2008, from the OMI Acquisition; |
• | increases of $4.0 million and $8.6 million, respectively, for the three and six months ended June 30, 2008, from the ConocoPhillips Acquisition; |
• | increases of $3.4 million and $6.9 million, respectively, for the three and six months ended June 30, 2008, from higher crew manning, repairs, maintenance and consumables costs, and non-recurring damages; |
• | increases of $1.6 million and $2.9 million, respectively, for the three and six months ended June 30, 2008, from the transfer of two Aframax tankers from the fixed-rate tanker segment in January 2008; and |
• | increases of $0.7 million and $1.9 million, respectively, for the three and six months ended June 30, 2008, from the Spot Tanker Deliveries and the Suezmax Delivery; |
• | decreases of $0.9 million and $2.3 million, respectively, for the three and six months ended June 30, 2008, from the transfer of an Aframax tanker to the offshore segment in May 2007 and the transfer of a Suezmax tanker to the fixed-rate tanker segment in December 2007. |
• | increases of $16.2 million and $35.2 million, respectively, for the three and six months ended June 30, 2008, from an increase in the number of chartered-in tankers (excluding OMI and ConocoPhillips vessels) during the three and six months ended June 30, 2008 compared to the same periods in 2007 ; |
• | increases of $16.5 million and $30.6 million, respectively, for the three and six months ended June 30, 2008, from the OMI Acquisition; |
• | increases of $4.3 million and $8.3 million, respectively, for the three and six months ended June 30, 2008, from the increase in the average in-charter rate; |
• | increases of $3.2 million and $7.5 million, respectively, for the three and six months ended June 30, 2008, from the ConocoPhillips Acquisition; and |
• | increases of $1.1 million and $4.1 million, respectively, for the three and six months ended June 30, 2008, due to the sale and leaseback of the Aframax tankers during April and July 2007. |
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• | increases of $13.3 million and $28.9 million, respectively, for the three and six months ended June 30, 2008, from the OMI Acquisition; |
• | increases of $2.5 million and $3.1 million, respectively, for the three and six months ended June 30, 2008, from the ConocoPhillips Acquisition; and |
• | increases of $0.6 million and $1.1 million, respectively, for the three and six months ended June 30, 2008, from the Spot Tanker Deliveries and the Suezmax Delivery; |
• | decreases of $0.8 million and $2.8 million, respectively, for the three and six months ended June 30, 2008, from the sale and leaseback of the Aframax tankers during April and July 2007; and |
• | decreases of $0.4 million and $1.5 million, respectively, for the three and six months ended June 30, 2008, from the transfer of an Aframax tanker to the offshore segment in May 2007 and the transfer of a Suezmax tanker to the fixed-rate tanker segment in December 2007. |
Three Months Ended | Six Months Ended | ||||||||||||||||||||||||
(in thousands of U.S. dollars, | June 30, | June 30, | |||||||||||||||||||||||
except percentages) | 2008 | 2007 | % Change | 2008 | 2007 | % Change | |||||||||||||||||||
(restated) | (restated) | ||||||||||||||||||||||||
General and administrative expenses | (70,882 | ) | (56,265 | ) | 26.0 | (135,521 | ) | (115,245 | ) | 17.6 | |||||||||||||||
Interest gain (expense) | 113,962 | 68,956 | 65.3 | (168,286 | ) | 13,051 | (1,389.4 | ) | |||||||||||||||||
Interest (loss) income | (2,149 | ) | 422 | (609.2 | ) | 58,460 | 15,376 | 280.2 | |||||||||||||||||
Foreign exchange loss | (1,807 | ) | (8,635 | ) | (79.1 | ) | (33,799 | ) | (10,311 | ) | 227.8 | ||||||||||||||
Minority interest expense | (38,822 | ) | (24,076 | ) | 61.2 | (12,262 | ) | (31,831 | ) | (61.5 | ) | ||||||||||||||
Other — net | 13,777 | 5,330 | 158.5 | 12,691 | 11,716 | 8.3 |
• | increases of $5.4 million and $7.1 million, respectively, for the three and six months ended June 30, 2008 relating to the unrealized change in fair value of our foreign currency forward contracts; |
• | increases of $3.5 million and $10.0 million, respectively, for the three and six months ended June 30, 2008, in compensation for shore-based employees and other personnel expenses, primarily due to weakening of the U.S. Dollar compared to other major currencies and increases in headcount and compensation levels; |
• | increases of $2.3 million and $4.5 million, respectively, for the three and six months ended June 30, 2008, in corporate-related expenses, including costs associated with Teekay Tankers becoming a public entity in December 2007; |
• | increases of $2.1 million and $3.9 million, respectively, for the three and six months ended June 30, 2008, in fleet overhead from the timing of seafarer training initiatives and higher training activity in the liquefied gas segment; and |
• | increases of $1.6 million and $3.4 million, respectively, for the three and six months ended June 30, 2008, in travel costs due to business development and other project initiatives; |
• | a decrease of $7.8 million for the six months ended June 30, 2008, relating to the costs associated with our equity-based compensation and long-term incentive program for management (please read Item 1 — Financial Statements: Note 11(c) — Commitments and Contingencies — Long-Term Incentive Program). |
• | an increase of $52.6 million relating to the unrealized change in fair value of our interest rate swaps and swaptions (please read Item 1 — Financial Statements: Note 16 - Derivative Instruments and Hedging Activities); |
• | an increase in interest expense of $3.1 million relating to the increase in debt used to finance our acquisition of 50% of OMI; and |
• | an increase in interest expense of $3.0 million due to additional debt drawn under long-term revolving credit facilities and term loans relating to the Shuttle Tanker Deliveries, the Aframax Deliveries, the Spot Tanker Deliveries and other investing activities. |
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• | an increase of $155.2 million relating to the unrealized change in fair value of our interest rate swaps and swaptions (please read Item 1 — Financial Statements: Note 16 - Derivative Instruments and Hedging Activities); |
• | an increase of $11.7 million relating to the increase in debt used to finance our acquisition of 50% of OMI; |
• | an increase of $6.4 million, due to additional debt drawn under long-term revolving credit facilities and term loans relating to the Shuttle Tanker Deliveries, the Aframax Deliveries, the Spot Tanker Deliveries and other investing activities; and |
• | an increase of $4.7 million relating to debt of Teekay Nakilat (III) used by the RasGas 3 Joint Venture to fund shipyard construction installment payments (this increase in interest expense from debt is offset by a corresponding increase in interest income from advances to joint venture — as described below). |
• | an increase of $4.0 million resulting from the repayment of interest-bearing loans we made to a 50% joint venture between us and TORM, which were used during the second quarter of 2007, together with comparable loans made by TORM, to acquire 100% of the outstanding shares of OMI; and |
• | an increase of $1.1 million relating to a decrease in restricted cash used to fund capital lease payments for the RasGas II LNG Carriers (please read Item 1 — Financial Statements: Note 9 — Capital Leases and Restricted Cash); |
• | a decrease of $3.8 million relating to the unrealized change in fair value of our interest rate swaps (please read Item 1 — Financial Statements: Note 16 — Derivative Instruments and Hedging Activities). |
• | an increase of $45.5 million relating to the unrealized change in fair value of our interest rate swaps (please read Item 1 — Financial Statements: Note 16 — Derivative Instruments and Hedging Activities); and |
• | an increase of $3.8 million relating to interest-bearing loans made by us to the RasGas 3 Joint Venture for shipyard construction installment payments; |
• | a decrease of $2.5 million resulting from the repayment of interest-bearing loans we made to a 50% joint venture between us and TORM, which were used during the second quarter of 2007, together with comparable loans made by TORM, to acquire 100% of the outstanding shares of OMI; and |
• | a decrease of $1.8 million relating to a decrease in restricted cash used to fund capital lease payments for the RasGas II LNG Carriers (please read Item 1 — Financial Statements: Note 9 — Capital Leases and Restricted Cash). |
• | an increase of $10.3 million from the initial public offering of Teekay Tankers in December 2007; |
• | a decrease of $6.0 million resulting from a decrease in earnings from Teekay Petrojarl, which was primarily the result of higher operating costs and our acquisition of an additional 30.1% in Teekay Petrojarl. |
• | a decrease of $17.7 million for the six months ended June 30, 2008, resulting from a decrease in earnings from Teekay LNG which was primarily the result of unrealized foreign exchange losses attributable to the revaluation of its Euro-denominated term loans partially offset by the follow-on public offering of Teekay LNG in April 2008; and |
• | a decrease of $12.0 million resulting from a decrease in earnings from Teekay Petrojarl, which was primarily the result of higher operating costs and the acquisition of an additional 30.1% of Teekay Petrojarl; |
• | an increase of $14.3 million from the initial public offering of Teekay Tankers in December 2007. |
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Six Months Ended June 30 | ||||||||
2008 | 2007 | |||||||
($000’s) | ($000’s) | |||||||
(restated) | ||||||||
Net operating cash flows | 164,420 | 152,702 | ||||||
Net financing cash flows | 650,154 | 1,264,412 | ||||||
Net investing cash flows | (758,314 | ) | (1,468,696 | ) |
• | incurred capital expenditures for vessels and equipment of $296.3 million, primarily for shipyard construction installment payments on our newbuilding Suezmax tankers, Aframax tankers, shuttle tankers and LNG carriers and for costs to convert a conventional tanker to an FPSO unit; |
• | acquired an additional 30.1% interest in Teekay Petrojarl for a total cost of $257.1 million; |
• | loaned $211.5 million to the RasGas 3 joint venture for shipyard construction installment payments; |
• | acquired two Aframax tankers for a total cost of approximately $72.5 million as part of the multi-vessel transaction with ConocoPhillips; |
• | acquired a shuttle tanker for a total cost of $41.7 million; and |
• | received proceeds of $79.2 million from the sale of two Handysize product tankers. |
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Remainder of | 2009 and | 2011 and | ||||||||||||||||||
In millions of U.S. Dollars | Total | 2008 | 2010 | 2012 | Beyond 2012 | |||||||||||||||
U.S. Dollar-Denominated Obligations: | ||||||||||||||||||||
Long-term debt(1) | 5,273.4 | 133.3 | 775.8 | 1,174.4 | 3,189.9 | |||||||||||||||
Chartered-in vessels (operating leases) | 1,170.5 | 282.4 | 585.0 | 227.2 | 75.9 | |||||||||||||||
Commitments under capital leases(2) | 239.1 | 12.3 | 142.8 | 84.0 | — | |||||||||||||||
Commitments under capital leases(3) | 1,085.1 | 12.0 | 48.0 | 48.0 | 977.1 | |||||||||||||||
Newbuilding installments(4) | 1,087.2 | 338.4 | 585.6 | 163.2 | — | |||||||||||||||
Asset retirement obligation | 41.5 | — | — | — | 41.5 | |||||||||||||||
Total U.S. Dollar-denominated obligations | 8,896.8 | 778.4 | 2,137.2 | 1,696.8 | 4,284.4 | |||||||||||||||
Euro-Denominated Obligations:(5) | ||||||||||||||||||||
Long-term debt(6) | 473.3 | 6.3 | 27.6 | 258.2 | 181.2 | |||||||||||||||
Commitments under capital leases(2) (7) | 223.4 | 38.5 | 82.8 | 102.1 | — | |||||||||||||||
Total Euro-denominated obligations | 696.7 | 44.8 | 110.4 | 360.3 | 181.2 | |||||||||||||||
Total | 9,593.5 | 823.2 | 2,247.6 | 2,057.1 | 4,465.6 | |||||||||||||||
(1) | Excludes expected interest payments of $91.4 million (balance of 2008), $343.9 million (2009 and 2010), $245.5 million (2011 and 2012) and $384.0 million (beyond 2012). Expected interest payments are based on the existing interest rates (fixed-rate loans) and LIBOR plus margins that ranged up to 1.0% at June 30, 2008 (variable-rate loans). The expected interest payments do not reflect the effect of related interest rate swaps that we have used as an economic hedge of certain of our floating-rate debt. | |
(2) | Includes, in addition to lease payments, amounts we are required to pay to purchase certain leased vessels at the end of the lease terms. We are obligated to purchase five of our existing Suezmax tankers upon the termination of the related capital leases, which will occur at various times from late 2009 to 2011. The purchase price will be based on the unamortized portion of the vessel construction financing costs for the vessels, which we expect to range from $35.6 million to $39.2 million per vessel. We expect to satisfy the purchase price by assuming the existing vessel financing. We are also obligated to purchase one of our LNG carriers upon the termination of the related capital lease on December 31, 2011. The purchase obligation has been fully funded with restricted cash deposits. Please read Item 1 — Financial Statements: Note 9 — Capital Leases and Restricted Cash. | |
(3) | Existing restricted cash deposits of $487.3 million, together with the interest earned on the deposits, will equal the remaining amounts we owe under the lease arrangements. | |
(4) | Represents remaining construction costs (including the joint venture partner’s 30% interest, as applicable, but excluding capitalized interest and miscellaneous construction costs) for four shuttle tankers, nine Suezmax tankers, three LPG carriers, two LNG carriers, two multi-gas carriers and one product tanker. Please read Item 1 — Financial Statements: Note 11 — Commitments and Contingencies — Vessels Under Construction. | |
(5) | Euro-denominated obligations are presented in U.S. Dollars and have been converted using the prevailing exchange rate as of June 30, 2008. | |
(6) | Excludes expected interest payments of $12.0 million (balance of 2008), $46.4 million (2009 and 2010), $25.6 million (2011 and 2012) and $67.2 million (beyond 2012). Expected interest payments are based on EURIBOR plus margins that ranged up to 0.66% at June 30, 2008, as well as the prevailing U.S. Dollar/Euro exchange rate as of June 30, 2008. The expected interest payments do not reflect the effect of related interest rate swaps that we have used as an economic hedge of certain of our floating-rate debt. | |
(7) | Existing restricted cash deposits of $198.4 million, together with the interest earned on the deposits, will equal the remaining amounts we owe under the lease arrangements, including our obligation to purchase the vessels at the end of the lease terms. |
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• | our future growth prospects; |
• | tanker market fundamentals, including the balance of supply and demand in the tanker market and spot tanker charter rates; |
• | the sufficiency of working capital for short-term liquidity requirements; |
• | future capital expenditure commitments and the financing requirements for such commitments; |
• | delivery dates of and financing for newbuildings, and the commencement of service of newbuildings under long-term time-charter contracts; |
• | the adequacy of restricted cash deposits to fund capital lease obligations; |
• | our ability to capture some of the value from the volatility of the spot tanker market and from market imbalances by utilizing FFAs and STCs; |
• | the effectiveness of our risk management policies and procedures and the ability of the counter-parties to our derivative contracts to fulfill their contractual obligations; |
• | the condition of financial and economic markets, including the recent credit crisis, interest rate volatility and the availability and cost of capital; and |
• | the growth of global oil demand. |
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JUNE 30, 2008
PART I — FINANCIAL INFORMATION
Expected maturity date | ||||||||||||||||||||
Remainder | ||||||||||||||||||||
of 2008 | 2009 | 2010 | Total | Total | ||||||||||||||||
Contract | Contract | Contract | Contract | Fair value(1) | ||||||||||||||||
amount(1) | amount(1) | amount(1) | amount(1) | Asset (Liability) | ||||||||||||||||
Norwegian Kroner: | $ | 86.2 | $ | 87.1 | $ | 9.5 | $ | 182.8 | $ | 26.0 | ||||||||||
Average contractual exchange rate(2) | 6.13 | 5.75 | 5.72 | 5.93 | ||||||||||||||||
Euro: | $ | 35.6 | $ | 29.1 | $ | 1.6 | $ | 66.3 | $ | 1.4 | ||||||||||
Average contractual exchange rate(2) | 0.65 | 0.66 | 0.65 | 0.65 | ||||||||||||||||
Canadian Dollar: | $ | 21.8 | $ | 24.9 | $ | 2.7 | $ | 49.4 | $ | (0.5 | ) | |||||||||
Average contractual exchange rate(2) | 1.01 | 1.01 | 1.02 | 1.01 | ||||||||||||||||
British Pounds: | $ | 26.3 | $ | 28.3 | $ | 4.2 | $ | 58.8 | $ | 0.5 | ||||||||||
Average contractual exchange rate(2) | 0.51 | 0.52 | 0.52 | 0.52 | ||||||||||||||||
Australian Dollar: | $ | 1.1 | — | — | $ | 1.1 | $ | 0.1 | ||||||||||||
Average contractual exchange rate(2) | 1.18 | — | — | 1.18 | ||||||||||||||||
Singapore Dollar: | $ | 2.6 | — | — | $ | 2.6 | $ | 0.0 | ||||||||||||
Average contractual exchange rate(2) | 1.37 | — | — | 1.37 |
(1) | Contract amounts and fair value amounts in millions of U.S. Dollars. | |
(2) | Average contractual exchange rate represents the contractual amount of foreign currency one U.S. Dollar will buy. |
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Expected Maturity Date | Fair Value | |||||||||||||||||||||||||||||||||||
Remainder | Asset / | |||||||||||||||||||||||||||||||||||
of 2008 | 2009 | 2010 | 2011 | 2012 | Thereafter | Total | (Liability) | Rate(1) | ||||||||||||||||||||||||||||
(in millions of U.S. dollars, except percentages) | ||||||||||||||||||||||||||||||||||||
Long-Term Debt: | ||||||||||||||||||||||||||||||||||||
Variable Rate ($U.S.)(2) | 97.0 | 239.9 | 388.7 | 585.2 | 214.1 | 2,666.7 | 4,191.6 | (4,191.6 | ) | 3.4 | % | |||||||||||||||||||||||||
Variable Rate (Euro)(3) (4) | 6.3 | 13.3 | 14.3 | 250.2 | 8.0 | 181.2 | 473.3 | (473.3 | ) | 5.1 | % | |||||||||||||||||||||||||
Fixed-Rate Debt ($U.S.) | 36.3 | 72.8 | 74.4 | 300.7 | 74.4 | 523.2 | 1,081.8 | (916.5 | ) | 5.9 | % | |||||||||||||||||||||||||
Average Interest Rate | 5.2 | % | 5.2 | % | 5.2 | % | 7.8 | % | 5.2 | % | 5.2 | % | 5.9 | % | ||||||||||||||||||||||
Capital Lease Obligations(5)(6) | ||||||||||||||||||||||||||||||||||||
Fixed-Rate ($U.S.)(7) | 4.6 | 120.3 | 3.9 | 80.1 | — | — | 208.9 | (208.9 | ) | 7.4 | % | |||||||||||||||||||||||||
Average Interest Rate(8) | 7.5 | % | 8.8 | % | 5.4 | % | 5.5 | % | — | — | 7.4 | % | ||||||||||||||||||||||||
Interest Rate Swaps: | ||||||||||||||||||||||||||||||||||||
Contract Amount ($U.S.)(6) (9)(10) | 67.0 | 626.0 | 358.9 | 59.8 | 60.9 | 3,033.3 | 4,205.9 | (164.4 | ) | 5.1 | % | |||||||||||||||||||||||||
Average Fixed Pay Rate(2) | 5.1 | % | 4.7 | % | 4.9 | % | 5.2 | % | 5.2 | % | 5.2 | % | 5.1 | % | ||||||||||||||||||||||
Contract Amount (Euro)(4) (9) | 6.3 | 13.3 | 14.3 | 250.2 | 8.0 | 181.2 | 473.3 | 43.6 | 3.8 | % | ||||||||||||||||||||||||||
Average Fixed Pay Rate(3) | 3.8 | % | 3.8 | % | 3.8 | % | 3.8 | % | 3.7 | % | 3.8 | % | 3.8 | % |
(1) | Rate refers to the weighted-average effective interest rate for our long-term debt and capital lease obligations, including the margin we pay on our floating-rate debt and the average fixed pay rate for our interest rate swap agreements. The average interest rate for our capital lease obligations is the weighted-average interest rate implicit in our lease obligations at the inception of the leases. The average fixed pay rate for our interest rate swaps excludes the margin we pay on our floating-rate debt, which as of June 30, 2008 ranged from 0.3% to 1.0%. | |
(2) | Interest payments on U.S. Dollar-denominated debt and interest rate swaps are based on LIBOR. | |
(3) | Interest payments on Euro-denominated debt and interest rate swaps are based on EURIBOR. | |
(4) | Euro-denominated amounts have been converted to U.S. Dollars using the prevailing exchange rate as of June 30, 2008. | |
(5) | Excludes capital lease obligations (present value of minimum lease payments) of 123.4 million Euros ($194.5 million) on one of our existing LNG carriers with a weighted-average fixed interest rate of 5.8%. Under the terms of this fixed-rate lease obligation, we are required to have on deposit, subject to a weighted-average fixed interest rate of 5.0%, an amount of cash that, together with the interest earned thereon, will fully fund the amount owing under the capital lease obligation, including a vessel purchase obligation. As at June 30, 2008, this amount was 125.9 million Euros ($198.4 million). Consequently, we are not subject to interest rate risk from these obligations or deposits. | |
(6) | Under the terms of the capital leases for the three RasGas II LNG Carriers (see Item 1 — Financial Statements: Note 9 — Capital Leases and Restricted Cash), we are required to have on deposit, subject to a variable rate of interest, an amount of cash that, together with interest earned on the deposit, will equal the remaining amounts owing under the leases. The deposits, which as at June 30, 2008 totaled $487.3 million, and the lease obligations, which as at June 30, 2008 totaled $469.2 million, have been swapped for fixed-rate deposits and fixed-rate obligations. Consequently, we are not subject to interest rate risk from these obligations and deposits and, therefore, the lease obligations, cash deposits and related interest rate swaps have been excluded from the table above. As at June 30, 2008, the contract amount, fair value and fixed interest rates of these interest rate swaps related to the RasGas II LNG Carrier capital lease obligations and restricted cash deposits were $492.0 million and $479.1 million, ($4.5) million and $1.7 million, and 4.9% and 4.8%, respectively. | |
(7) | The amount of capital lease obligations represents the present value of minimum lease payments together with our purchase obligation, as applicable. (See Item 1 — Financial Statements: Note 9 — Capital Leases and Restricted Cash.) | |
(8) | The average interest rate is the weighted-average interest rate implicit in the capital lease obligations at the inception of the leases. | |
(9) | The average variable receive rate for our interest rate swaps is set monthly at the 1-month LIBOR or EURIBOR, quarterly at the 3-month LIBOR or semi-annually at the 6-month LIBOR. | |
(10) | Includes interest rate swaps of $30.0 million, $408.5 million, $300.0 million and $200.0 million that have commencement dates of 2008, 2009, 2010 and 2011, respectively. |
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JUNE 30, 2008
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Votes Against or | Shares Which | Broker | ||||||||||||||
Terms Expiring in 2011 | Votes For | Withheld | Abstained | Non-Votes | ||||||||||||
Thomas Kuo-Yuen Hsu | 55,209,481 | 13,087,797 | N/A | N/A | ||||||||||||
Axel Karlshoej | 67,400,849 | 896,429 | N/A | N/A | ||||||||||||
Bjorn Moller | 67,631,856 | 665,422 | N/A | N/A |
Votes against or | Shares Which | Broker | ||||||||||||||
Votes For | Withheld | Abstained | Non-Votes | |||||||||||||
Ernst & Young LLP | 67,678,690 | 16,654 | 601,932 | — |
• | REGISTRATION STATEMENT ON FORM F-3 (FILE NO. 33-97746) FILED WITH THE SEC ON OCTOBER 4, 1995; | |
• | REGISTRATION STATEMENT ON FORM S-8 (FILE NO. 333-42434) FILED WITH THE SEC ON JULY 28, 2000; | |
• | REGISTRATION STATEMENT ON FORM S-8 (FILE NO. 333-119564) FILED WITH THE SEC ON OCTOBER 6, 2004; AND | |
• | REGISTRATION STATEMENT ON FORM S-8 (FILE NO. 333-147683) FILED WITH THE SEC ON NOVEMBER 28, 2007 |
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TEEKAY CORPORATION | ||||
Date: April 6, 2009 | By: | /s/ Vincent Lok | ||
Vincent Lok | ||||
Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) |
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