Table of Contents
SECURITIES AND EXCHANGE COMMISSION
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
69 Pitts Bay Road
Hamilton, HM 08 Bermuda
(Address of principal executive office)
Table of Contents
a. | Derivative Instruments and Hedging Activities | |
In August 2008, we commenced a review of our application of Statement of Financial Accounting Standards (orSFAS) No. 133,Accounting for Derivative Instruments and Hedging Activities, as amended. Although we believe that our applicable derivative transactions were consistent with our risk management policies and that our overall risk management policies continue to be sound, based on our review we concluded that certain of our derivative instruments did not qualify for hedge accounting treatment under SFAS No. 133 for the three months ended March 31, 2008 and 2007. Certain of our hedge documentation, in respect of our assessment of effectiveness and measurement of ineffectiveness of our derivative instruments for accounting purposes, was not in accordance with the technical requirements of SFAS No. 133. | ||
Accordingly, although we believe each of these derivative instruments were and continue to be effective economic hedges, for accounting purposes we should have reflected changes in fair value of these derivative instruments as increases or decreases to our net income (loss) on our consolidated statements of income, instead of being reflected as increases or decreases to accumulated other comprehensive income (loss), a component of stockholders’ equity on our consolidated balance sheets and statements of changes in stockholders’ equity. | ||
The change in accounting for these transactions does not affect the economics of the derivative transactions or our cash flows or liquidity. | ||
b. | Non-Routine, Complex Financial Structures and Arrangements, and Other | |
Subsequent to the release of its preliminary second quarter financial results, we reviewed and revised our financial statement presentation of debt and interest rate swap agreements related to our joint venture interests in the RasGas 3 LNG carriers. As a result, certain of our assets and liabilities have been grossed up for accounting presentation purposes. These adjustments, which do not affect our net income, cash flow, liquidity, cash distributions or stockholders’ equity in any period, are described below. |
• | Through a wholly-owned subsidiary, we own a 40 percent interest in the four RasGas 3 LNG carriers. The joint venture partner, a wholly-owned subsidiary of Qatar Gas Transport Company, owns the remaining 60 percent interest. Both wholly-owned subsidiaries are joint and several co-borrowers with respect to the RasGas 3 term loan and related interest rate swap agreements. Previously, we recorded 40 percent of the RasGas 3 term loan and interest rate swap obligations in our financial statements. We have now made adjustments to our balance sheet to reflect 100 percent of the RasGas 3 term loan (March 31, 2008 and December 31, 2007 — $360.6 million) and interest rate swap obligations (March 31, 2008 — $21.4 million; December 31, 2007 — $9.6 million), as well as offsetting increases in assets, for the fourth quarter of 2006 through the first quarter of 2008. We have also made adjustments to our statement of income to reflect 100 percent of the interest expense (three months ended March 31, 2008 — $4.6 million; three months ended March 31, 2007 — $2.8 million) on the RasGas 3 term loan with an offsetting amount to interest income from our advances to the joint venture. These adjustments do not result in any increase to our net exposure in this joint venture. |
In 2005, we adopted a long-term share-based incentive plan (theVision Incentive Plan or VIP) for senior management. During 2005, we recognized the VIP expense when incurred instead of over the vesting period. Upon transition to SFAS 123R on January 1, 2006, we were required to account for the VIP based on the fair value of the award as the VIP has a share-based component in determining the amount of the ultimate grant. However, we continued to calculate compensation expense for the VIP under the methodology we had followed in 2005, as we did not identify the VIP as within the scope of SFAS 123R. We have now made adjustments to our statements of income (loss) to increase (decrease) general and administrative expenses for the three months ended March 31, 2008 and 2007 — ($1.5) million and $2.1 million, respectively). We have also made adjustments to our balance sheets to decrease other long-term liabilities (March 31, 2008 — $4.7 million; and December 31, 2007 — $8.1 million) and to increase (decrease) accrued liabilities (March 31, 2008 — ($1.3) million; and December 31, 2007 — $3.6 million). These accounting adjustments associated with the VIP do not impact amounts paid out under the plan. | ||
We have also restated certain other items primarily relating to amounts attributable to minority interests and the measurement of the fair value of certain derivative instruments. |
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PART I: FINANCIAL INFORMATION | ||||
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Restated - Note 17 | ||||||||
Three Months Ended March 31 | ||||||||
2008 | 2007 | |||||||
$ | $ | |||||||
REVENUES(note 14) | 743,372 | 578,248 | ||||||
OPERATING EXPENSES | ||||||||
Voyage expenses | 169,461 | 117,479 | ||||||
Vessel operating expenses(note 14) | 143,049 | 95,190 | ||||||
Time-charter hire expense(note 14) | 144,484 | 98,357 | ||||||
Depreciation and amortization(note 16) | 97,707 | 79,263 | ||||||
General and administrative(note 14) | 64,639 | 58,980 | ||||||
Gain on sale of vessels and equipment (note 11) | (496 | ) | — | |||||
Restructuring charge (note 12) | 1,500 | — | ||||||
Total operating expenses | 620,344 | 449,269 | ||||||
Income from vessel operations | 123,028 | 128,979 | ||||||
OTHER ITEMS | ||||||||
Interest expense(note 14) | (282,248 | ) | (55,905 | ) | ||||
Interest income(note 14) | 60,609 | 14,954 | ||||||
Foreign exchange loss(note 6) | (31,992 | ) | (1,676 | ) | ||||
Minority interest income (expense) | 26,560 | (7,755 | ) | |||||
Other — net (note 12) | (1,086 | ) | 6,386 | |||||
Total other items | (228,157 | ) | (43,996 | ) | ||||
Net (loss) income | (105,129 | ) | 84,983 | |||||
Per common share amounts | ||||||||
• Basic earnings (note 15) | (1.45 | ) | 1.16 | |||||
• Diluted earnings (note 15) | (1.45 | ) | 1.14 | |||||
• Cash dividends declared | 0.2750 | 0.2375 | ||||||
Weighted average number of common shares(note 15) | ||||||||
• Basic | 72,644,397 | 73,129,585 | ||||||
• Diluted | 72,644,397 | 74,545,165 |
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As at | As at | |||||||
March 31, | December 31, | |||||||
2008 | 2007 | |||||||
$ | $ | |||||||
(Restated - Note17) | ||||||||
ASSETS | ||||||||
Current | ||||||||
Cash and cash equivalents(note 6) | 555,673 | 442,673 | ||||||
Restricted cash — current(note 7) | 36,343 | 33,479 | ||||||
Accounts receivable | 289,324 | 262,420 | ||||||
Vessels held for sale (note 11) | 42,704 | 79,689 | ||||||
Net investment in direct financing leases — current | 21,851 | 22,268 | ||||||
Prepaid expenses | 119,834 | 126,761 | ||||||
Other assets | 65,317 | 57,609 | ||||||
Total current assets | 1,131,046 | 1,024,899 | ||||||
Restricted cash — long term(note 7) | 663,471 | 652,717 | ||||||
Vessels and equipment(note 6) | ||||||||
At cost, less accumulated depreciation of $1,104,651 (2007 — $1,061,619) | 5,463,227 | 5,295,751 | ||||||
Vessels under capital lease, at cost, less accumulated amortization of $82,293 (2007 — $74,442)(note 7) | 926,338 | 934,058 | ||||||
Advances on newbuilding contracts(note 9) | 682,178 | 617,066 | ||||||
Total vessels and equipment | 7,071,743 | 6,846,875 | ||||||
Net investment in direct financing leases — non-current | 73,520 | 78,908 | ||||||
Investment in joint ventures(note 9) | 136,508 | 135,515 | ||||||
Derivative instruments(note 14) | 51,930 | 39,381 | ||||||
Loans to joint ventures | 725,462 | 729,429 | ||||||
Other non-current assets | 209,352 | 219,923 | ||||||
Intangible assets — net(note 4) | 267,769 | 259,952 | ||||||
Goodwill(note 4) | 447,323 | 434,590 | ||||||
Total assets | 10,778,124 | 10,422,189 | ||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current | ||||||||
Accounts payable | 95,019 | 89,691 | ||||||
Accrued liabilities | 335,251 | 278,587 | ||||||
Current portion of long-term debt(note 6) | 395,063 | 331,594 | ||||||
Current obligation under capital leases(note 7) | 154,257 | 150,791 | ||||||
Current portion of in-process revenue contracts(note 4) | 78,242 | 82,704 | ||||||
Total current liabilities | 1,057,832 | 933,367 | ||||||
Long-term debt(note 6) | 5,215,558 | 4,931,990 | ||||||
Long-term obligation under capital leases(note 7) | 717,631 | 706,489 | ||||||
Derivative instruments(note 14) | 299,162 | 164,769 | ||||||
Deferred income tax | 82,301 | 78,623 | ||||||
Asset retirement obligation | 25,028 | 24,549 | ||||||
In-process revenue contracts(note 4) | 188,191 | 205,429 | ||||||
Other long-term liabilities | 178,793 | 176,680 | ||||||
Total liabilities | 7,764,496 | 7,221,896 | ||||||
Commitments and contingencies(notes 7, 9 and 14) | ||||||||
Minority interest | 504,075 | 544,339 | ||||||
Stockholders’ equity | ||||||||
Common stock and additional paid-in capital ($0.001 par value; 725,000,000 shares authorized; 72,303,163 shares outstanding (2007 - 72,772,529); 72,802,363 shares issued (2007 - 95,327,329)) (note 8) | 628,221 | 628,786 | ||||||
Retained earnings | 1,881,398 | 2,022,601 | ||||||
Accumulated other comprehensive (loss) income(note 13) | (66 | ) | 4,567 | |||||
Total stockholders’ equity | 2,509,553 | 2,655,954 | ||||||
Total liabilities and stockholders’ equity | 10,778,124 | 10,422,189 | ||||||
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Restated - Note 17 | ||||||||
Three Months Ended March 31, | ||||||||
2008 | 2007 | |||||||
$ | $ | |||||||
Cash and cash equivalents provided by (used for) | ||||||||
OPERATING ACTIVITIES | ||||||||
Net (loss) income | (105,129 | ) | 84,983 | |||||
Non-cash items: | ||||||||
Depreciation and amortization | 97,707 | 79,263 | ||||||
Amortization of in-process revenue contracts | (21,158 | ) | (23,484 | ) | ||||
Gain on sale of marketable securities | (2,708 | ) | (1,817 | ) | ||||
Gain on sale of vessels and equipment | (496 | ) | — | |||||
Loss on repurchase of bonds | 598 | — | ||||||
Equity income (net of dividends received: March 31, 2008 and 2007 — $nil) | 3,609 | 1,595 | ||||||
Income taxes expense (recovery) | 2,483 | (3,886 | ) | |||||
Employee stock option compensation | 2,606 | 2,225 | ||||||
Foreign exchange loss and other — net | 3,444 | 25,199 | ||||||
Unrealized losses (gains) on derivative instruments(note 14) | 155,171 | (13,674 | ) | |||||
Change in non-cash working capital items related to operating activities | (43,784 | ) | (50,890 | ) | ||||
Expenditures for drydocking | (6,240 | ) | (12,567 | ) | ||||
Distribution from subsidiaries to minority owners | (13,110 | ) | (5,724 | ) | ||||
Net operating cash flow | 72,993 | 81,223 | ||||||
FINANCING ACTIVITIES | ||||||||
Proceeds from issuance of long-term debt | 565,324 | 591,329 | ||||||
Debt issuance costs | (3,406 | ) | (2,547 | ) | ||||
Repayments of long-term debt | (253,773 | ) | (227,549 | ) | ||||
Repayments of capital lease obligations | (2,241 | ) | (2,185 | ) | ||||
Repayment of loans from joint venture partner | (535 | ) | (3,653 | ) | ||||
Decrease / (increase) in restricted cash | 2,651 | (81,078 | ) | |||||
Net proceeds from sale of Teekay Offshore Partners L.P. units | — | (1,449 | ) | |||||
Net proceeds from sale of Teekay Tankers Ltd. shares | (892 | ) | — | |||||
Issuance of Common Stock upon exercise of stock options | 326 | 16,750 | ||||||
Repurchase of Common Stock (note 8) | (20,512 | ) | (3,035 | ) | ||||
Cash dividends paid | (20,013 | ) | (17,344 | ) | ||||
Net financing cash flow | 266,929 | 269,239 | ||||||
INVESTING ACTIVITIES | ||||||||
Expenditures for vessels and equipment | (292,917 | ) | (187,883 | ) | ||||
Proceeds from sale of vessels and equipment | 36,630 | — | ||||||
Purchases of marketable securities | (520 | ) | (88,233 | ) | ||||
Proceeds from sale of marketable securities | 7,283 | 12,782 | ||||||
Investment in joint ventures | (1,258 | ) | (1,253 | ) | ||||
Loans to joint ventures | (3,085 | ) | (61,601 | ) | ||||
Investment in direct financing lease assets | (17 | ) | (1,725 | ) | ||||
Direct financing lease payments received | 5,822 | 5,056 | ||||||
Other investing activities | 21,140 | (805 | ) | |||||
Net investing cash flow | (226,922 | ) | (323,662 | ) | ||||
Increase in cash and cash equivalents | 113,000 | 26,800 | ||||||
Cash and cash equivalents, beginning of the period | 442,673 | 343,914 | ||||||
Cash and cash equivalents, end of the period | 555,673 | 370,714 | ||||||
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Fixed-Rate | Liquefied | Spot | ||||||||||||||||||
Offshore | Tanker | Gas | Tanker | |||||||||||||||||
Segment | Segment | Segment | Segment | Total | ||||||||||||||||
Three months ended March 31, 2008 | (restated) | (restated) | (restated) | (restated) | (restated) | |||||||||||||||
Revenues | 258,788 | 60,815 | 56,132 | 367,637 | 743,372 | |||||||||||||||
Voyage expenses | 38,901 | 680 | 150 | 129,730 | 169,461 | |||||||||||||||
Vessel operating expenses | 83,820 | 16,370 | 11,623 | 31,236 | 143,049 | |||||||||||||||
Time-charter hire expense | 35,038 | 11,720 | — | 97,726 | 144,484 | |||||||||||||||
Depreciation and amortization | 46,074 | 9,673 | 14,195 | 27,765 | 97,707 | |||||||||||||||
General and administrative(1) | 27,062 | 5,290 | 5,485 | 26,802 | 64,639 | |||||||||||||||
Gain on sale of vessels and equipment | — | — | — | (496 | ) | (496 | ) | |||||||||||||
Restructuring charge | — | 1,500 | — | — | 1,500 | |||||||||||||||
Income from vessel operations | 27,893 | 15,582 | 24,679 | 54,874 | 123,028 | |||||||||||||||
Fixed-Rate | Liquefied | Spot | ||||||||||||||||||
Offshore | Tanker | Gas | Tanker | |||||||||||||||||
Segment | Segment | Segment | Segment | Total | ||||||||||||||||
Three months ended March 31, 2007 | (restated) | (restated) | (restated) | (restated) | (restated) | |||||||||||||||
Revenues | 248,875 | 44,589 | 37,477 | 247,307 | 578,248 | |||||||||||||||
Voyage expenses | 28,726 | 560 | 5 | 88,188 | 117,479 | |||||||||||||||
Vessel operating expenses | 60,290 | 11,690 | 6,458 | 16,752 | 95,190 | |||||||||||||||
Time-charter hire expense | 41,173 | 3,837 | — | 53,347 | 98,357 | |||||||||||||||
Depreciation and amortization | 45,722 | 8,468 | 10,794 | 14,279 | 79,263 | |||||||||||||||
General and administrative(1) | 24,904 | 4,633 | 5,000 | 24,443 | 58,980 | |||||||||||||||
Income from vessel operations | 48,060 | 15,401 | 15,220 | 50,298 | 128,979 | |||||||||||||||
(1) | Includes direct general and administrative expenses and indirect general and administrative expenses (allocated to each segment based on estimated use of corporate resources). |
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NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. dollars, except share data)
March 31, | December 31, | |||||||
2008 | 2007 | |||||||
$ | $ | |||||||
(restated) | ||||||||
Offshore segment | 3,238,875 | 3,187,635 | ||||||
Fixed-rate tanker segment | 834,829 | 795,775 | ||||||
Liquefied gas segment | 3,476,123 | 3,366,049 | ||||||
Spot tanker segment | 2,045,484 | 1,966,166 | ||||||
Cash and restricted cash | 558,927 | 446,102 | ||||||
Accounts receivable and other assets | 623,886 | 660,462 | ||||||
Consolidated total assets | 10,778,124 | 10,422,189 | ||||||
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 (spot 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 | Liquefied | |||||||||||||||||||
Offshore | Tanker | Gas | Spot Tanker | |||||||||||||||||
Segment | Segment | Segment | Segment | Total | ||||||||||||||||
$ | $ | $ | $ | $ | ||||||||||||||||
Balance as of December 31, 2007 | 359,231 | 3,648 | 35,631 | 36,080 | 434,590 | |||||||||||||||
Adjustment to goodwill acquired (note 3) | — | — | — | 12,733 | 12,733 | |||||||||||||||
Reallocation of goodwill acquired between segments | — | 7,163 | — | (7,163 | ) | — | ||||||||||||||
Balance as of March 31, 2008 | 359,231 | 10,811 | 35,631 | 41,650 | 447,323 | |||||||||||||||
Weighted-Average | Gross Carrying | Accumulated | Net Carrying | |||||||||||||
Amortization Period | Amount | Amortization | Amount | |||||||||||||
(years) | $ | $ | $ | |||||||||||||
Contracts of affreightment | 10.2 | 124,250 | (71,411 | ) | 52,839 | |||||||||||
Time-charter contracts | 15.5 | 243,427 | (43,250 | ) | 200,177 | |||||||||||
Other intangible assets | 2.8 | 20,097 | (5,344 | ) | 14,753 | |||||||||||
13.1 | 387,774 | (120,005 | ) | 267,769 | ||||||||||||
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)
March 31, | December 31, | |||||||
2008 | 2007 | |||||||
$ | $ | |||||||
(restated) | ||||||||
Revolving Credit Facilities | 2,501,712 | 2,393,967 | ||||||
Senior Notes (8.875%) due July 15, 2011 | 236,488 | 246,059 | ||||||
USD-denominated Term Loans due through 2021 | 2,379,261 | 2,162,420 | ||||||
Euro-denominated Term Loans due through 2023 | 476,392 | 443,992 | ||||||
USD-denominated Unsecured Demand Loan | 16,768 | 17,146 | ||||||
5,610,621 | 5,263,584 | |||||||
Less current portion | 395,063 | 331,594 | ||||||
5,215,558 | 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 | $129.7 million | |||
2009 | $8.5 million | |||
2010 | $8.4 million | |||
2011 | $84.0 million |
Year | Commitment | |||
2008 | $18.0 million | |||
2009 | $24.0 million | |||
2010 | $24.0 million | |||
2011 | $24.0 million | |||
2012 | $24.0 million | |||
Thereafter | $977.1 million |
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)
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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 at | ||||||||||||||||
March 31, 2008 | ||||||||||||||||
Asset / (Liability) | Level 1 | Level 2 | Level 3 | |||||||||||||
$ | $ | $ | $ | |||||||||||||
Interest rate swap agreements (restated)(1) | (337,771 | ) | — | (337,771 | ) | — | ||||||||||
Interest rate swap agreements (restated)(1) | 47,992 | — | 47,992 | — | ||||||||||||
Foreign currency forward contracts(1) | 35,664 | — | 35,664 | — | ||||||||||||
Interest rate swaptions(1) | (6,333 | ) | — | (6,333 | ) | — | ||||||||||
Bunker fuel swap contracts(1) | (706 | ) | — | (706 | ) | — | ||||||||||
Freight forward agreements(1) | 6,715 | — | 6,715 | — | ||||||||||||
Foinaven embedded derivative(1) | (19,164 | ) | — | (19,164 | ) | — | ||||||||||
Marketable securities(2) | 33,894 | 33,894 | — | — |
(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 current interest rates, foreign exchange rates, bunker fuel prices, spot market rates for vessels, and the current credit worthiness of both the Company and the swap counterparties. | |
(2) | The fair value of the Company’s marketable securities is the quoted market price as at the reporting date. |
Three Months Ended March 31 | ||||||||
2008 | 2007 | |||||||
$ | $ | |||||||
(restated) | (restated) | |||||||
Equity loss from joint ventures | (3,609 | ) | (1,595 | ) | ||||
Gain on sale of marketable securities | 2,708 | 1,817 | ||||||
Loss on bond repurchase | (598 | ) | — | |||||
Income tax (expense) recovery | (2,483 | ) | 3,886 | |||||
Volatile organic compound emission plant lease income | 2,570 | 2,773 | ||||||
Miscellaneous income (expense) | 326 | (495 | ) | |||||
Other — net | (1,086 | ) | 6,386 | |||||
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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 March 31, | ||||||||
2008 | 2007 | |||||||
$ | $ | |||||||
(restated) | (restated) | |||||||
Net (loss) income | (105,129 | ) | 84,983 | |||||
Other comprehensive (loss) income: | ||||||||
Unrealized (loss) gain on marketable securities | (5,833 | ) | 7,853 | |||||
Reclassification adjustment for gain on sale of marketable securities | (2,708 | ) | (1,759 | ) | ||||
Minimum pension liability | 1,058 | — | ||||||
Net effect from qualifying cash flow hedging instruments | 2,850 | — | ||||||
Comprehensive (loss) income | (109,762 | ) | 91,077 | |||||
March 31, 2008 | December 31, 2007 | |||||||
$ | $ | |||||||
(restated) | ||||||||
Unrealized gain on derivative instruments | 6,370 | 3,520 | ||||||
Minimum pension liability | (5,220 | ) | (6,278 | ) | ||||
Unrealized (loss) gain on marketable securities | (1,216 | ) | 7,325 | |||||
(66 | ) | 4,567 | ||||||
Three Months Ended March 31, | ||||||||
2008 | 2007 | |||||||
$ | $ | |||||||
Vessel operating expenses | (425 | ) | (1,767 | ) | ||||
Time-charter hire expenses | (66 | ) | (144 | ) | ||||
General and administrative | (566 | ) | (1,807 | ) | ||||
Foreign currency exchange loss (gain) | 2,472 | (6,578 | ) | |||||
Total | 1,415 | (10,296 | ) | |||||
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NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. dollars, except share data)
Contract Amount in | Average Contractual | Expected Maturity | ||||||||||||||||||
Foreign Currency | Exchange Rate(1) | 2008 | 2009 | 2010 | ||||||||||||||||
(millions) | (in millions of U.S. Dollars) | |||||||||||||||||||
Norwegian Kroner: | 1,280.7 | 6.04 | $ | 132.6 | $ | 74.6 | $ | 5.0 | ||||||||||||
Euro: | 15.8 | 0.71 | $ | 18.1 | $ | 4.1 | — | |||||||||||||
Canadian Dollar: | 47.8 | 1.02 | $ | 32.4 | $ | 14.7 | — | |||||||||||||
British Pounds: | 30.0 | 0.51 | $ | 37.6 | $ | 18.9 | $ | 1.9 | ||||||||||||
Australian Dollar: | 3.1 | 1.24 | $ | 2.5 | — | — | ||||||||||||||
Singapore Dollar: | 3.6 | 1.38 | $ | 2.6 | — | — |
(1) | Average contractual exchange rate represents the contractual amount of foreign currency one U.S. Dollar will buy. |
Fair Value / | Weighted- | |||||||||||||||||
Carrying Amount | Average | Fixed | ||||||||||||||||
Principal | of Asset / | Remaining | Interest | |||||||||||||||
Amount | (Liability) | Term | Rate | |||||||||||||||
Interest Rate | $ | $ | (years) | (%)(1) | ||||||||||||||
Index | (restated) | (restated) | (restated) | (restated) | ||||||||||||||
LIBOR-Based Debt: | ||||||||||||||||||
U.S. Dollar-denominated interest rate swaps(2) | LIBOR | 500,107 | (26,029 | ) | 28.8 | 4.9 | ||||||||||||
U.S. Dollar-denominated interest rate swaps (restated) | LIBOR | 3,278,989 | (251,893 | ) | 7.7 | 5.0 | ||||||||||||
U.S. Dollar-denominated interest rate swaps(3) | LIBOR | 938,536 | (60,436 | ) | 18.3 | 5.3 | ||||||||||||
LIBOR-Based Restricted Cash Deposit: | ||||||||||||||||||
U.S. Dollar-denominated interest rate swaps(2) | LIBOR | 480,073 | 23,308 | 28.8 | 4.8 | |||||||||||||
EURIBOR-Based Debt: | ||||||||||||||||||
Euro-denominated interest rate swaps(4) (5) | EURIBOR | 476,393 | 25,271 | 16.2 | 3.8 |
(1) | Excludes the margins the Company pays on its variable-rate debt, which at of March 31, 2008 ranged from 0.3% to 1.00% | |
(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 ($110.6 million) by the maturity dates of the swap agreements. | |
(5) | Principal amount is the U.S. Dollar equivalent of 302.4 million Euro. |
Page 16 of 42
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NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. dollars, except share data)
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 | 117,188 | May 15, 2008 | 11.0 | 4.0 |
Three Months Ended March 31, | ||||||||
2008 | 2007 | |||||||
$ | $ | |||||||
(restated) | (restated) | |||||||
Net (loss) income available for common stockholders | (105,129 | ) | 84,983 | |||||
Weighted average number of common shares | 72,644,397 | 73,129,585 | ||||||
Dilutive effect of employee stock options and restricted stock awards | — | 1,415,580 | ||||||
Common stock and common stock equivalents | 72,644,397 | 74,545,165 | ||||||
Earnings per common share: | ||||||||
- Basic | (1.45 | ) | 1.16 | |||||
- Diluted | (1.45 | ) | 1.14 |
Page 17 of 42
Table of Contents
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. dollars, except share data)
17. | Restatement of Previously Issued Financial Statements |
a. | Derivative Instruments and Hedging Activities |
In August 2008, the Company commenced a review of its application of Statement of Financial Accounting Standards (orSFAS) 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 months ended March 31, 2008 and 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 prospective hedge effectiveness assessment that was conducted for certain of the Company 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 not allowed in the case of non-zero fair value derivatives. |
For accounting purposes the Company should have reflected changes in fair value of these derivative instruments as increases or decreases to the Company’s net income (loss) on its consolidated statements of income, instead of being reflected as increases or decreases to accumulated other comprehensive income (loss), a component of stockholders’ equity on the consolidated balance sheets and statements of changes in stockholders’ equity. | ||
The change in accounting for these transactions does not affect the Company’s cash flows or liquidity. |
b. | Non-Routine, Complex Financial Structures and Arrangements, and Other |
Subsequent to the release of its preliminary second quarter financial results, the Company reviewed and revised its financial statement presentation of debt and interest rate swap agreements related to its joint venture interests in the RasGas 3 LNG carriers. As a result, certain of the Company’s assets and liabilities have been grossed up for accounting presentation purposes. These adjustments, which do not affect the Company’s net income, cash flow, liquidity, cash distributions or stockholder’s’ equity in any period, are described below. | ||
Through a wholly-owned subsidiary, the Company owns a 40 percent interest in the four RasGas 3 LNG carriers. The joint venture partner, a wholly-owned subsidiary of Qatar Gas Transport Company, owns the remaining 60 percent interest. Both wholly-owned subsidiaries are joint and several co-borrowers with respect to the RasGas 3 term loan and related interest rate swap agreements. Previously, the Company recorded 40 percent of the RasGas 3 term loan and interest rate swap obligations in its financial statements. The Company has now made adjustments to its balance sheet to reflect 100 percent of the RasGas 3 term loan (March 31, 2008 and December 31, 2007 — $360.6 million) and interest rate swap obligations (March 31, 2008 — $21.4 million; December 31, 2007 — $9.6 million), as well as offsetting increases in assets, for the fourth quarter of 2006 through the first quarter of 2008 (see Note 6). The Company has also made adjustments to its statement of income to reflect 100 percent of the interest expense (three months ended March 31, 2008 — $4.6 million; three months ended March 31, 2007 — $2.8 million) on the RasGas 3 term loan with an offsetting amount to interest income from its advances to the joint venture. These adjustments do not result in any increase to the Company’s net exposure in this joint venture. | ||
In 2005, the Company adopted the long-term share-based VIP for senior management (see Note 9(c)). During 2005, the Company recognized the VIP expense when incurred instead of over the vesting period. Upon transition to SFAS 123R on January 1, 2006, the Company was required to account for the VIP based on the fair value of the award as the VIP has a share-based component in determining the amount of the ultimate grant. However, the Company continued to calculate compensation expense for the VIP under the methodology it had followed in 2005, as it did not identify the VIP as within the scope of SFAS 123R. The Company has now made adjustments to its statements of income (loss) to increase (decrease) general and administrative expenses for the three months ended March 31, 2008 and 2007 — ($1.5) million and $2.1 million, respectively. The Company has also made adjustments to its balance sheets to decrease other long-term liabilities (March 31, 2008 — $4.7 million; and December 31, 2007 — $8.1 million) and to increase (decrease) accrued liabilities (March 31, 2008 — ($1.3) million; and December 31, 2007 — $3.6 million). These accounting adjustments associated with the VIP do not impact amounts paid out under the plan. | ||
The Company has also restated certain other items primarily relating to amounts attributable to minority interests (other assets: March 31, 2008 — $15.9 million, December 31, 2007 — $8.4 million; minority interest: March 31, 2008 — $18.7 million, December 31, 2007 — $18.8 million; minority interest expense: three months ended March 31, 2008 — $0.6 million; three months ended March 31, 2007 — $1.0 million) and the measurement of the fair value of certain derivative instruments (derivative instruments: December 31, 2007 — $6.2 million) and has reclassified an embedded derivative from long-term liabilities to derivative instruments (December 31, 2007 — $19.6 million). |
Page 18 of 42
Table of Contents
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. dollars, except share data)
Net Income (Loss) | Retained Earnings | |||||||||||
Three Months Ended March 31, | At December 31, | |||||||||||
2008 | 2007 | 2006 | ||||||||||
$ | $ | $ | ||||||||||
As previously reported | 15,178 | 76,375 | 1,943,397 | |||||||||
Adjustments: | ||||||||||||
Derivative instruments, net of minority interest | (121,191 | ) | 11,684 | (26,785 | ) | |||||||
Non-routine, complex financial structures and arrangements, and other | 884 | (3,076 | ) | 223 | ||||||||
As restated | (105,129 | ) | 84,983 | 1,916,835 | ||||||||
Three Months Ended March 31, 2008 | ||||||||||||||||
Adjustments | ||||||||||||||||
Non-Routine, | ||||||||||||||||
Complex | ||||||||||||||||
Financial | ||||||||||||||||
Structures and | ||||||||||||||||
Derivative | Arrangements, | |||||||||||||||
As Reported | Instruments | and Other | As Restated | |||||||||||||
$ | $ | $ | $ | |||||||||||||
REVENUES | 736,391 | 6,981 | — | 743,372 | ||||||||||||
OPERATING EXPENSES | ||||||||||||||||
Voyage expenses | 168,723 | 738 | — | 169,461 | ||||||||||||
Vessel operating expenses | 145,443 | (2,394 | ) | — | 143,049 | |||||||||||
Time-charter hire expense | 144,921 | (437 | ) | — | 144,484 | |||||||||||
Depreciation and amortization | 97,707 | — | — | 97,707 | ||||||||||||
General and administrative | 67,671 | (1,515 | ) | (1,517 | ) | 64,639 | ||||||||||
Gain on sale of vessels and equipment | (496 | ) | — | — | (496 | ) | ||||||||||
Restructuring charge | 1,500 | — | — | 1,500 | ||||||||||||
Total operating expenses | 625,469 | (3,608 | ) | (1,517 | ) | 620,344 | ||||||||||
Income from vessel operations | 110,922 | 10,589 | 1,517 | 123,028 | ||||||||||||
OTHER ITEMS | ||||||||||||||||
Interest expense | (87,188 | ) | (190,429 | ) | (4,631 | ) | (282,248 | ) | ||||||||
Interest income | 18,359 | 37,619 | 4,631 | 60,609 | ||||||||||||
Foreign exchange loss | (29,483 | ) | (2,509 | ) | — | (31,992 | ) | |||||||||
Minority interest income (expense) | 3,472 | 23,721 | (633 | ) | 26,560 | |||||||||||
Other — net | (904 | ) | (182 | ) | — | (1,086 | ) | |||||||||
Total other items | (95,744 | ) | (131,780 | ) | (633 | ) | (228,157 | ) | ||||||||
Net income (loss) | 15,178 | (121,191 | ) | 884 | (105,129 | ) | ||||||||||
Per common share amounts | ||||||||||||||||
• Basic earnings | 0.21 | (1.45 | ) | |||||||||||||
• Diluted earnings | 0.21 | (1.45 | ) | |||||||||||||
• Cash dividends declared | 0.2750 | 0.2750 | ||||||||||||||
Weighted average number of common shares | ||||||||||||||||
• Basic | 72,644,397 | 72,644,397 | ||||||||||||||
• Diluted | 73,435,167 | 72,644,397 |
Page 19 of 42
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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 March 31, 2007 | ||||||||||||||||
Adjustments | ||||||||||||||||
Non-Routine, | ||||||||||||||||
Complex | ||||||||||||||||
Financial | ||||||||||||||||
Structures and | ||||||||||||||||
Derivative | Arrangements, | |||||||||||||||
As Reported | Instruments | and Other | As Restated | |||||||||||||
$ | $ | $ | $ | |||||||||||||
REVENUES | 578,395 | (147 | ) | — | 578,248 | |||||||||||
OPERATING EXPENSES | ||||||||||||||||
Voyage expenses | 118,939 | (1,460 | ) | — | 117,479 | |||||||||||
Vessel operating expenses | 97,441 | (2,251 | ) | — | 95,190 | |||||||||||
Time-charter hire expense | 98,501 | (144 | ) | — | 98,357 | |||||||||||
Depreciation and amortization | 79,263 | — | — | 79,263 | ||||||||||||
General and administrative | 58,797 | (1,875 | ) | 2,058 | 58,980 | |||||||||||
Total operating expenses | 452,941 | (5,730 | ) | 2,058 | 449,269 | |||||||||||
Income from vessel operations | 125,454 | 5,583 | (2,058 | ) | 128,979 | |||||||||||
OTHER ITEMS | ||||||||||||||||
Interest expense | (60,383 | ) | 7,325 | (2,847 | ) | (55,905 | ) | |||||||||
Interest income | 16,168 | (4,061 | ) | 2,847 | 14,954 | |||||||||||
Foreign exchange loss | (5,888 | ) | 4,212 | — | (1,676 | ) | ||||||||||
Minority interest income (expense) | (5,640 | ) | (1,097 | ) | (1,018 | ) | (7,755 | ) | ||||||||
Other — net | 6,664 | (278 | ) | — | 6,386 | |||||||||||
Total other items | (49,079 | ) | 6,101 | (1,018 | ) | (43,996 | ) | |||||||||
Net income | 76,375 | 11,684 | (3,076 | ) | 84,983 | |||||||||||
Per common share amounts | ||||||||||||||||
• Basic earnings | 1.04 | 1.16 | ||||||||||||||
• Diluted earnings | 1.02 | 1.14 | ||||||||||||||
• Cash dividends declared | 0.2375 | 0.2375 | ||||||||||||||
Weighted average number of common shares | ||||||||||||||||
• Basic | 73,129,585 | 73,129,585 | ||||||||||||||
• Diluted | 74,545,165 | 74,545,165 |
Page 20 of 42
Table of Contents
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. dollars, except share data)
March 31, 2008 | ||||||||||||||||
Adjustments | ||||||||||||||||
Non-Routine, | ||||||||||||||||
Complex | ||||||||||||||||
Financial | ||||||||||||||||
Structures and | ||||||||||||||||
Derivative | Arrangements, | |||||||||||||||
As Reported | Instruments | and Other | As Restated | |||||||||||||
$ | $ | $ | $ | |||||||||||||
ASSETS | ||||||||||||||||
Current | ||||||||||||||||
Cash and cash equivalents | 555,673 | — | — | 555,673 | ||||||||||||
Restricted cash — current | 36,343 | — | — | 36,343 | ||||||||||||
Accounts receivable | 289,324 | — | — | 289,324 | ||||||||||||
Vessels held for sale | 42,704 | — | — | 42,704 | ||||||||||||
Net investment in direct financing leases — current | 21,851 | — | — | 21,851 | ||||||||||||
Prepaid expenses | 119,834 | — | — | 119,834 | ||||||||||||
Other assets | 49,449 | — | 15,868 | 65,317 | ||||||||||||
Total current assets | 1,115,178 | — | 15,868 | 1,131,046 | ||||||||||||
Restricted cash — long term | 663,471 | — | — | 663,471 | ||||||||||||
Vessels and equipment | ||||||||||||||||
At cost, less accumulated depreciation of $1,104,651 | 5,463,227 | — | — | 5,463,227 | ||||||||||||
Vessels under capital lease, at cost, less accumulated amortization of $82,293 | 926,338 | — | — | 926,338 | ||||||||||||
Advances on newbuilding contracts | 682,178 | — | — | 682,178 | ||||||||||||
Total vessels and equipment | 7,071,743 | — | — | 7,071,743 | ||||||||||||
Net investment in direct financing leases — non-current | 73,520 | — | — | 73,520 | ||||||||||||
Investment in joint ventures | 136,508 | — | — | 136,508 | ||||||||||||
Derivative instruments | 51,930 | — | — | 51,930 | ||||||||||||
Loans to joint ventures | 359,288 | — | 366,174 | 725,462 | ||||||||||||
Other non-current assets | 219,652 | — | (10,300 | ) | 209,352 | |||||||||||
Intangible assets — net | 267,769 | — | — | 267,769 | ||||||||||||
Goodwill | 447,323 | — | — | 447,323 | ||||||||||||
Total assets | 10,406,382 | — | 371,742 | 10,778,124 | ||||||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||||||
Current | ||||||||||||||||
Accounts payable | 95,019 | — | — | 95,019 | ||||||||||||
Accrued liabilities | 331,971 | — | 3,280 | 335,251 | ||||||||||||
Current portion of long-term debt | 383,795 | — | 11,268 | 395,063 | ||||||||||||
Current obligation under capital leases | 154,257 | — | — | 154,257 | ||||||||||||
Current portion of in-process revenue contracts | 78,242 | — | — | 78,242 | ||||||||||||
Total current liabilities | 1,043,284 | — | 14,548 | 1,057,832 | ||||||||||||
Long-term debt | 4,866,232 | — | 349,326 | 5,215,558 | ||||||||||||
Long-term obligation under capital leases | 717,631 | — | — | 717,631 | ||||||||||||
Derivative instruments | 263,551 | — | 35,611 | 299,162 | ||||||||||||
Deferred income tax | 80,701 | — | 1,600 | 82,301 | ||||||||||||
Asset retirement obligation | 25,028 | — | — | 25,028 | ||||||||||||
In-process revenue contracts | 188,191 | — | — | 188,191 | ||||||||||||
Other long-term liabilities | 198,949 | — | (20,156 | ) | 178,793 | |||||||||||
Total liabilities | 7,383,567 | — | 380,929 | 7,764,496 | ||||||||||||
Minority interest | 487,357 | — | 16,718 | 504,075 | ||||||||||||
Stockholders’ equity | ||||||||||||||||
Common stock and additional paid-in capital ($0.001 par value; 725,000,000 shares authorized; 72,303,163 shares outstanding; 72,802,363 shares issued) | 628,221 | — | — | 628,221 | ||||||||||||
Retained earnings | 2,142,489 | (258,842 | ) | (2,249 | ) | 1,881,398 | ||||||||||
Accumulated other comprehensive loss | (235,252 | ) | 258,842 | (23,656 | ) | (66 | ) | |||||||||
Total stockholders’ equity | 2,535,458 | — | (25,905 | ) | 2,509,553 | |||||||||||
Total liabilities and stockholders’ equity | 10,406,382 | — | 371,742 | 10,778,124 | ||||||||||||
Page 21 of 42
Table of Contents
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. dollars, except share data)
December 31, 2007 | ||||||||||||||||
Adjustments | ||||||||||||||||
Non-Routine, | ||||||||||||||||
Complex | ||||||||||||||||
Financial | ||||||||||||||||
Structures and | ||||||||||||||||
Derivative | Arrangements, | |||||||||||||||
AsReported | Instruments | and Other | AsRestated | |||||||||||||
$ | $ | $ | $ | |||||||||||||
ASSETS | ||||||||||||||||
Current | ||||||||||||||||
Cash and cash equivalents | 442,673 | — | — | 442,673 | ||||||||||||
Restricted cash — current | 33,479 | — | — | 33,479 | ||||||||||||
Accounts receivable | 262,420 | — | — | 262,420 | ||||||||||||
Vessels held for sale | 79,689 | — | — | 79,689 | ||||||||||||
Net investment in direct financing leases — current | 22,268 | — | — | 22,268 | ||||||||||||
Prepaid expenses | 126,761 | — | — | 126,761 | ||||||||||||
Other assets | 50,097 | — | 7,512 | 57,609 | ||||||||||||
Total current assets | 1,017,387 | — | 7,512 | 1,024,899 | ||||||||||||
Restricted cash — long term | 652,717 | — | — | 652,717 | ||||||||||||
Vessels and equipment | ||||||||||||||||
At cost, less accumulated depreciation of $1,061,619 | 5,295,751 | — | — | 5,295,751 | ||||||||||||
Vessels under capital lease, at cost, less accumulated amortization of $74,442 | 934,058 | — | — | 934,058 | ||||||||||||
Advances on newbuilding contracts | 617,066 | — | — | 617,066 | ||||||||||||
Total vessels and equipment | 6,846,875 | — | — | 6,846,875 | ||||||||||||
Net investment in direct financing leases — non-current | 78,908 | — | — | 78,908 | ||||||||||||
Investment in joint ventures | 135,515 | — | — | 135,515 | ||||||||||||
Derivative instruments | 39,148 | — | 233 | 39,381 | ||||||||||||
Loans to joint ventures | 366,716 | — | 362,713 | 729,429 | ||||||||||||
Other non-current assets | 228,345 | — | (8,422 | ) | 219,923 | |||||||||||
Intangible assets — net | 259,952 | — | — | 259,952 | ||||||||||||
Goodwill | 434,590 | — | — | 434,590 | ||||||||||||
Total assets | 10,060,153 | — | 362,036 | 10,422,189 | ||||||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||||||
Current | ||||||||||||||||
Accounts payable | 89,691 | — | — | 89,691 | ||||||||||||
Accrued liabilities | 274,944 | — | 3,643 | 278,587 | ||||||||||||
Current portion of long-term debt | 324,082 | — | 7,512 | 331,594 | ||||||||||||
Current obligation under capital leases | 150,791 | — | — | 150,791 | ||||||||||||
Current portion of in-process revenue contracts | 82,704 | — | — | 82,704 | ||||||||||||
Total current liabilities | 922,212 | — | 11,155 | 933,367 | ||||||||||||
Long-term debt | 4,578,908 | — | 353,082 | 4,931,990 | ||||||||||||
Long-term obligation under capital leases | 706,489 | — | — | 706,489 | ||||||||||||
Derivative instruments | 129,079 | — | 35,690 | 164,769 | ||||||||||||
Deferred income tax | 77,023 | — | 1,600 | 78,623 | ||||||||||||
Asset retirement obligation | 24,549 | — | — | 24,549 | ||||||||||||
In-process revenue contracts | 205,429 | — | — | 205,429 | ||||||||||||
Other long-term liabilities | 201,100 | — | (24,420 | ) | 176,680 | |||||||||||
Total liabilities | 6,844,789 | — | 377,107 | 7,221,896 | ||||||||||||
Minority interest | 527,494 | — | 16,845 | 544,339 | ||||||||||||
Stockholders’ equity | ||||||||||||||||
Common stock and additional paid-in capital ($0.001 par value; 725,000,000 shares authorized; 72,772,529 shares outstanding; 95,327,329 shares issued) | 628,786 | — | — | 628,786 | ||||||||||||
Retained earnings | 2,163,189 | (137,651 | ) | (2,937 | ) | 2,022,601 | ||||||||||
Accumulated other comprehensive (loss) income | (104,105 | ) | 137,651 | (28,979 | ) | 4,567 | ||||||||||
Total stockholders’ equity | 2,687,870 | — | (31,916 | ) | 2,655,954 | |||||||||||
Total liabilities and stockholders’ equity | 10,060,153 | — | 362,036 | 10,422,189 | ||||||||||||
Page 22 of 42
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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 March 31, 2008 | ||||||||||||||||
Adjustments | ||||||||||||||||
Non-Routine, | ||||||||||||||||
Complex | ||||||||||||||||
Financial | ||||||||||||||||
Structures and | ||||||||||||||||
Derivative | Arrangements, | |||||||||||||||
As Reported | Instruments | and Other | As Restated | |||||||||||||
$ | $ | $ | $ | |||||||||||||
Cash and cash equivalents provided by (used for) | ||||||||||||||||
OPERATING ACTIVITIES | ||||||||||||||||
Net income | 15,178 | (121,191 | ) | 884 | (105,129 | ) | ||||||||||
Non-cash items: | ||||||||||||||||
Depreciation and amortization | 97,707 | — | — | 97,707 | ||||||||||||
Amortization of in-process revenue contracts | (21,158 | ) | — | — | (21,158 | ) | ||||||||||
Gain on sale of marketable securities | (2,708 | ) | — | — | (2,708 | ) | ||||||||||
Gain on sale of vessels and equipment | (496 | ) | — | — | (496 | ) | ||||||||||
Loss on repurchase of bonds | 598 | — | — | 598 | ||||||||||||
Equity income (net of dividends received: March 31, 2008 - $nil) | 3,220 | 389 | — | 3,609 | ||||||||||||
Income taxes | 2,726 | (243 | ) | — | 2,483 | |||||||||||
Employee stock option compensation | 2,606 | — | — | 2,606 | ||||||||||||
Foreign exchange loss and other — net | 33,491 | (34,126 | ) | 4,079 | 3,444 | |||||||||||
Change in fair value of derivative instruments | — | 155,171 | — | 155,171 | ||||||||||||
Change in non-cash working capital items related to operating activities | (38,821 | ) | — | (4,963 | ) | (43,784 | ) | |||||||||
Expenditures for drydocking | (6,240 | ) | — | — | (6,240 | ) | ||||||||||
Distribution from subsidiaries to minority owners | (13,110 | ) | — | — | (13,110 | ) | ||||||||||
Net operating cash flow | 72,993 | — | — | 72,993 | ||||||||||||
FINANCING ACTIVITIES | ||||||||||||||||
Proceeds from issuance of long-term debt | 565,324 | — | — | 565,324 | ||||||||||||
Debt issuance costs | (3,406 | ) | — | — | (3,406 | ) | ||||||||||
Repayments of long-term debt | (253,773 | ) | — | — | (253,773 | ) | ||||||||||
Repayments of capital lease obligations | (2,241 | ) | — | — | (2,241 | ) | ||||||||||
Repayment of loans from joint venture partner | (535 | ) | — | — | (535 | ) | ||||||||||
Decrease in restricted cash | 2,651 | — | — | 2,651 | ||||||||||||
Net proceeds from sale of Teekay Tankers Ltd. shares | (892 | ) | — | — | (892 | ) | ||||||||||
Issuance of Common Stock upon exercise of stock options | 326 | — | — | 326 | ||||||||||||
Repurchase of Common Stock | (20,512 | ) | — | — | (20,512 | ) | ||||||||||
Cash dividends paid | (20,013 | ) | — | — | (20,013 | ) | ||||||||||
Net financing cash flow | 266,929 | — | — | 266,929 | ||||||||||||
INVESTING ACTIVITIES | ||||||||||||||||
Expenditures for vessels and equipment | (292,917 | ) | — | — | (292,917 | ) | ||||||||||
Proceeds from sale of vessels and equipment | 36,630 | — | — | 36,630 | ||||||||||||
Purchases of marketable securities | (520 | ) | — | — | (520 | ) | ||||||||||
Proceeds from sale of marketable securities | 7,283 | — | — | 7,283 | ||||||||||||
Investment in joint ventures | (1,258 | ) | — | — | (1,258 | ) | ||||||||||
Loans to joint ventures | (3,085 | ) | — | — | (3,085 | ) | ||||||||||
Investment in direct financing lease assets | (17 | ) | — | — | (17 | ) | ||||||||||
Direct financing lease payments received | 5,822 | — | — | 5,822 | ||||||||||||
Other investing activities | 21,140 | — | — | 21,140 | ||||||||||||
Net investing cash flow | (226,922 | ) | — | — | (226,922 | ) | ||||||||||
Increase in cash and cash equivalents | 113,000 | — | — | 113,000 | ||||||||||||
Cash and cash equivalents, beginning of the period | 442,673 | — | — | 442,673 | ||||||||||||
Cash and cash equivalents, end of the period | 555,673 | — | — | 555,673 | ||||||||||||
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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 March 31, 2007 | ||||||||||||||||
Adjustments | ||||||||||||||||
Non-Routine, | ||||||||||||||||
Complex | ||||||||||||||||
Financial | ||||||||||||||||
Structures and | ||||||||||||||||
Derivative | Arrangements, | |||||||||||||||
As Reported | Instruments | and Other | As Restated | |||||||||||||
$ | $ | $ | $ | |||||||||||||
Cash and cash equivalents provided by (used for) | ||||||||||||||||
OPERATING ACTIVITIES | ||||||||||||||||
Net income | 76,375 | 11,684 | (3,076 | ) | 84,983 | |||||||||||
Non-cash items: | ||||||||||||||||
Depreciation and amortization | 79,263 | — | — | 79,263 | ||||||||||||
Amortization of in-process revenue contracts | (23,484 | ) | — | — | (23,484 | ) | ||||||||||
Gain on sale of marketable securities | (1,817 | ) | — | — | (1,817 | ) | ||||||||||
Equity income (net of dividends received: March 31, 2007 - $nil) | 1,595 | — | — | 1,595 | ||||||||||||
Income taxes | (4,082 | ) | 196 | — | (3,886 | ) | ||||||||||
Employee stock option compensation | 2,225 | — | — | 2,225 | ||||||||||||
Foreign exchange loss and other — net | 20,329 | 1,794 | 3,076 | 25,199 | ||||||||||||
Change in fair value of derivative instruments | — | (13,674 | ) | — | (13,674 | ) | ||||||||||
Change in non-cash working capital items related to operating activities | (50,890 | ) | — | — | (50,890 | ) | ||||||||||
Expenditures for drydocking | (12,567 | ) | — | — | (12,567 | ) | ||||||||||
Distribution from subsidiaries to minority owners | (5,724 | ) | — | — | (5,724 | ) | ||||||||||
Net operating cash flow | 81,223 | — | — | 81,223 | ||||||||||||
FINANCING ACTIVITIES | ||||||||||||||||
Proceeds from issuance of long-term debt | 591,329 | — | — | 591,329 | ||||||||||||
Debt issuance costs | (2,547 | ) | — | — | (2,547 | ) | ||||||||||
Repayments of long-term debt | (227,549 | ) | — | — | (227,549 | ) | ||||||||||
Repayments of capital lease obligations | (2,185 | ) | — | — | (2,185 | ) | ||||||||||
Repayment of loans from joint venture partner | (3,653 | ) | — | — | (3,653 | ) | ||||||||||
Increase in restricted cash | (81,078 | ) | — | — | (81,078 | ) | ||||||||||
Net proceeds from sale of Teekay Offshore Partners L.P. units | (1,449 | ) | — | — | (1,449 | ) | ||||||||||
Issuance of Common Stock upon exercise of stock options | 16,750 | — | — | 16,750 | ||||||||||||
Repurchase of Common Stock | (3,035 | ) | — | — | (3,035 | ) | ||||||||||
Cash dividends paid | (17,344 | ) | — | — | (17,344 | ) | ||||||||||
Net financing cash flow | 269,239 | — | — | 269,239 | ||||||||||||
INVESTING ACTIVITIES | ||||||||||||||||
Expenditures for vessels and equipment | (187,883 | ) | — | — | (187,883 | ) | ||||||||||
Purchases of marketable securities | (88,233 | ) | — | — | (88,233 | ) | ||||||||||
Proceeds from sale of marketable securities | 12,782 | — | — | 12,782 | ||||||||||||
Investment in joint ventures | (1,253 | ) | — | — | (1,253 | ) | ||||||||||
Loans to joint ventures | (61,601 | ) | — | — | (61,601 | ) | ||||||||||
Investment in direct financing lease assets | (1,725 | ) | — | — | (1,725 | ) | ||||||||||
Direct financing lease payments received | 5,056 | — | — | 5,056 | ||||||||||||
Other investing activities | (805 | ) | — | — | (805 | ) | ||||||||||
Net investing cash flow | (323,662 | ) | — | — | (323,662 | ) | ||||||||||
Increase in cash and cash equivalents | 26,800 | — | — | 26,800 | ||||||||||||
Cash and cash equivalents, beginning of the period | 343,914 | — | — | 343,914 | ||||||||||||
Cash and cash equivalents, end of the period | 370,714 | — | — | 370,714 | ||||||||||||
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March 31, 2008
PART I — FINANCIAL INFORMATION
Net Income (Loss) | ||||||||
Three Months Ended March 31, | ||||||||
2008 | 2007 | |||||||
$ | $ | |||||||
As previously reported | 15,178 | 76,375 | ||||||
Adjustments: | ||||||||
Derivative instruments, net of minority interest | (121,191 | ) | 11,684 | |||||
Non-routine, complex financial structures and arrangements, and other | 884 | (3,076 | ) | |||||
As restated | (105,129 | ) | 84,983 | |||||
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Three Months Ended | ||||||||||||
March 31, | ||||||||||||
2008 | 2007 | % Change | ||||||||||
(in thousands of U.S. dollars, except calendar-ship-days and percentages) | (restated) | (restated) | (restated) | |||||||||
Revenues | 258,788 | 248,875 | 4.0 | |||||||||
Voyage expenses | 38,901 | 28,726 | 35.4 | |||||||||
Net revenues | 219,887 | 220,149 | (0.1 | ) | ||||||||
Vessel operating expenses | 83,820 | 60,290 | 39.0 | |||||||||
Time-charter hire expense | 35,038 | 41,173 | (14.9 | ) | ||||||||
Depreciation and amortization | 46,074 | 45,722 | 0.8 | |||||||||
General and administrative(1) | 27,062 | 24,904 | 8.7 | |||||||||
Income from vessel operations | 27,893 | 48,060 | (42.0 | ) | ||||||||
Calendar Ship Days | ||||||||||||
Owned Vessels | 3,342 | 3,060 | 9.2 | |||||||||
Chartered-in Vessels | 1,002 | 1,163 | (13.8 | ) | ||||||||
Total | 4,344 | 4,223 | 2.9 | |||||||||
(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). |
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• | 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). |
• | a decrease of $5.2 million from the amortization of contract value liability relating to FPSO service contracts (as discussed below), which was recognized on the date of the acquisition of Petrojarl in 2006 and adjusted in the second quarter of 2007; |
• | a decrease of $4.9 million in shuttle tanker revenue due to an increased number of scheduled drydockings and unexpected repairs performed during the three months ended March 31, 2008, compared to the same period last year; |
• | a relative decrease of $4.3 million due to a shuttle tanker serving as a temporary floating storage unit during the three months ended March 31, 2007, at rates that were higher than the rates earned while employed as a shuttle tanker; |
• | a decrease of $3.4 million in shuttle tanker revenue due to fewer revenue days for shuttle tankers servicing contracts of affreightment in the conventional spot market during the three months ended March 31, 2008, compared to the same period last year; |
• | a decrease of $2.2 million in shuttle tanker revenue due to customer performance claims under the terms of charter party agreements; and |
• | a decrease of $1.7 million in FPSO revenue due to lower net production volumes and increased downtime during the three months ended March 31, 2008 compared to the same period last year; |
• | an increase of $7.6 million from the transfer of theNavion Sagato the offshore segment; |
• | an increase of $6.8 million from the FPSO Delivery; and |
• | an increase of $5.6 million from the Shuttle Tanker Deliveries. |
• | an increase of $7.0 million primarily due to weakening of the U.S. Dollar compared to other major currencies; |
• | an increase of $5.6 million from increases in crew manning and repairs and maintenance costs; |
• | an increase of $5.3 million from the FPSO Delivery; and |
• | an increase of $2.6 million relating to the transfer of theNavion Sagato the offshore segment. |
• | an increase of $2.5 million relating to the transfer of theNavion Sagato the offshore segment; and |
• | an increase of $1.7 million from the Shuttle Tanker Deliveries; |
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• | a decrease of $4.1 million from the refinement of preliminary estimates of fair value assigned to certain assets acquired as a result of the acquisition of Petrojarl. |
Three Months Ended | ||||||||||||
March 31, | ||||||||||||
2008 | 2007 | % Change | ||||||||||
(in thousands of U.S. dollars, except calendar-ship-days and percentages) | (restated) | (restated) | (restated) | |||||||||
Revenues | 60,815 | 44,589 | 36.4 | |||||||||
Voyage expenses | 680 | 560 | 21.4 | |||||||||
Net revenues | 60,135 | 44,029 | 36.6 | |||||||||
Vessel operating expenses | 16,370 | 11,690 | 40.0 | |||||||||
Time-charter hire expense | 11,720 | 3,837 | 205.4 | |||||||||
Depreciation and amortization | 9,673 | 8,468 | 14.2 | |||||||||
General and administrative(1) | 5,290 | 4,633 | 14.2 | |||||||||
Restructuring charge | 1,500 | — | — | |||||||||
Income from vessel operations | 15,582 | 15,401 | 1.2 | |||||||||
Calendar Ship Days | ||||||||||||
Owned Vessels | 1,453 | 1,350 | 7.6 | |||||||||
Chartered-in Vessels | 630 | 179 | 252.0 | |||||||||
Total | 2,083 | 1,529 | 36.2 | |||||||||
(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 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); 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). |
• | an increase of $5.8 million from the Aframax Transfers; |
• | an increase of $5.8 million from the OMI Acquisition; |
• | an increase of $4.3 million from the ConocoPhillips Acquisition; and |
• | an increase of $1.2 million from the Aframax Deliveries. |
• | an increase of $2.0 million form the ConocoPhillips Acquisition; |
• | an increase of $1.0 million in crew manning expenses; |
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• | an increase of $0.6 million due to the effect on our Euro-denominated vessel operating expenses from the strengthening of the Euro against the U.S. Dollar during the period compared to the same period 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); |
• | an increase of $0.5 million from the Aframax Deliveries; and |
• | an increase of $0.5 million from the OMI Acquisition; |
• | a decrease of $0.3 million from the Aframax Transfers. |
• | an increase of $3.1 million from the Aframax Transfers; |
• | an increase of $2.4 million from the OMI Acquisition; and |
• | an increase of $1.8 million from the ConocoPhillips Acquisition. |
Three Months Ended | ||||||||||||
March 31, | ||||||||||||
2008 | 2007 | % Change | ||||||||||
(in thousands of U.S. dollars, except calendar-ship-days and percentages) | (restated) | (restated) | (restated) | |||||||||
Revenues | 56,132 | 37,477 | 49.8 | |||||||||
Voyage expenses | 150 | 5 | 2,900.0 | |||||||||
Net revenues | 55,982 | 37,472 | 49.4 | |||||||||
Vessel operating expenses | 11,623 | 6,458 | 80.0 | |||||||||
Depreciation and amortization | 14,195 | 10,794 | 31.5 | |||||||||
General and administrative(1) | 5,485 | 5,000 | 9.7 | |||||||||
Income from vessel operations | 24,679 | 15,220 | 62.1 | |||||||||
Calendar Ship Days | ||||||||||||
Owned Vessels and Vessels under Capital Lease | 910 | 662 | 37.5 | |||||||||
(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). |
• | an increase of $10.2 million from the acquisition of the Kenai LNG Carriers; |
• | an increase of $5.9 million from the 2007 RasGas II Deliveries; and |
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• | an increase of $2.9 million due to the effect on our Euro-denominated revenues from the strengthening of the Euro against the U.S. Dollar during such period compared to the same period last year; |
• | a decrease of $0.5 million due to theCatalunya Spiritbeing off-hire for 5.5 days during the first quarter of 2008 for unscheduled repairs. |
• | an increase of $3.0 million from the acquisition of the Kenai LNG Carriers; |
• | an increase of $1.0 million from the 2007 RasGas II Deliveries; and |
• | an increase of $0.6 million 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). |
• | an increase of $2.7 million from the acquisition of the Kenai LNG Carriers; and |
• | an increase of $0.7 million from the 2007 RasGas II Deliveries. |
Three Months Ended | ||||||||||||
March 31, | ||||||||||||
2008 | 2007 | % Change | ||||||||||
(in thousands of U.S. dollars, except calendar-ship-days and percentages) | (restated) | (restated) | (restated) | |||||||||
Revenues | 367,637 | 247,307 | 48.7 | |||||||||
Voyage expenses | 129,730 | 88,188 | 47.1 | |||||||||
Net revenues | 237,907 | 159,119 | 49.5 | |||||||||
Vessel operating expenses | 31,236 | 16,752 | 86.5 | |||||||||
Time-charter hire expense | 97,726 | 53,347 | 83.2 | |||||||||
Depreciation and amortization | 27,765 | 14,279 | 94.4 | |||||||||
General and administrative(1) | 26,802 | 24,443 | 9.7 | |||||||||
Gain on sale of vessels | (496 | ) | — | — | ||||||||
Income from vessel operations | 54,874 | 50,298 | 9.1 | |||||||||
Calendar Ship Days | ||||||||||||
Owned Vessels | 3,627 | 2,568 | 41.2 | |||||||||
Chartered-in Vessels | 4,243 | 2,609 | 62.6 | |||||||||
Total | 7,870 | 5,177 | 52.0 | |||||||||
(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). |
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• | the acquisition of 12 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); and |
• | a net increase in the number of chartered-in vessels, primarily Aframax and product tankers. |
Three Months Ended | ||||||||||||||||||||||||
March 31, 2008 | March 31, 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) | 25,273 | 553 | 45,672 | 12,308 | 242 | 50,860 | ||||||||||||||||||
Aframax Tankers(2) | 134,412 | 3,708 | 36,253 | 101,778 | 2,678 | 38,006 | ||||||||||||||||||
Large/Medium Product Tankers(2) | 29,273 | 1,062 | 27,585 | 21,014 | 859 | 24,470 | ||||||||||||||||||
Small Product Tankers(2) | 12,399 | 902 | 13,745 | 14,351 | 896 | 16,017 | ||||||||||||||||||
Time-Charter Fleet(1) | ||||||||||||||||||||||||
Suezmax Tankers(2) | 18,793 | 668 | 28,138 | 4,970 | 182 | 27,307 | ||||||||||||||||||
Aframax Tankers(2) | 4,510 | 142 | 31,759 | — | — | — | ||||||||||||||||||
Large/Medium Product Tankers(2) | 18,525 | 813 | 22,794 | 7,622 | 261 | 29,171 | ||||||||||||||||||
Small Product Tankers(2) | — | — | — | — | — | — | ||||||||||||||||||
Other (restated)(3) | (5,278 | ) | — | — | (2,924 | ) | — | — | ||||||||||||||||
Totals | 237,907 | 7,848 | 30,314 | 159,119 | 5,118 | 31,090 | ||||||||||||||||||
(1) | Spot fleet includes short-term time-charters and fixed-rate contracts of affreightment less than 1 year and gains and losses from 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 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 COA cargoes, unrealized gains and losses from STCs and FFAs, the amortization of in-process revenue contracts and cost of fuel while offhire. |
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• | an increase of $51.4 million from the OMI Acquisition; |
• | an increase of $25.7 million from a net increase in the number of chartered-in vessels; |
• | an increase of $10.8 million from the ConocoPhillips Acquisition; |
• | an increase of $5.2 million from the transfer of two Aframax tankers from the fixed-rate tanker segment in January 2008; |
• | an increase of $4.0 million from the Spot Tanker Deliveries; and |
• | an increase of $1.8 million from the effect of STCs and FFAs; |
• | a decrease of $10.8 million from a 4.6% decrease in our average TCE rate during the three months ended March 31, 2008, compared to the same period in 2007; |
• | a decrease of $7.3 million 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; and |
• | a decrease of $2.0 million from an increase in the number of days our vessels were off-hire due to regularly scheduled maintenance. |
• | an increase of $6.7 million from the OMI Acquisition; |
• | an increase of $4.6 million from the ConocoPhillips Acquisition; |
• | an increase of $2.3 million from higher crew manning and repairs, maintenance and consumables costs; |
• | an increase of $1.3 million from the transfer of two Aframax tankers from the fixed-rate tanker segment in January 2008; and |
• | an increase of $1.2 million from the Spot Tanker Deliveries; |
• | a decrease of $1.4 million 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. |
• | an increase of $18.8 million from an increase in the number of chartered-in tankers (excluding OMI and ConocoPhillips vessels) during the three months ended March 31, 2008 compared to the same period in 2007 ; |
• | an increase of $14.1 million from the OMI Acquisition; |
• | an increase of $4.3 million from the ConocoPhillips Acquisition; |
• | an increase of $4.2 from the increase in the average in-charter rate; and |
• | an increase of $3.0 million due to the sale and leaseback of the Aframax tankers during April and July 2007. |
• | an increase of $15.6 million from the OMI Acquisition; |
• | an increase of $0.6 million from the ConocoPhillips Acquisition; and |
• | an increase of $0.5 million from the Spot Tanker Deliveries; |
• | a decrease of $2.0 million from the sale and leaseback of the Aframax tankers during April and July 2007; and |
• | a decrease of $1.1 million 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. |
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Three Months Ended | ||||||||||||
March 31, | ||||||||||||
2008 | 2007 | % Change | ||||||||||
(in thousands of U.S. dollars, except percentages) | (restated) | (restated) | (restated) | |||||||||
General and administrative | (64,639 | ) | (58,980 | ) | 9.6 | |||||||
Interest expense | (282,248 | ) | (55,905 | ) | 404.9 | |||||||
Interest income | 60,609 | 14,954 | 305.3 | |||||||||
Foreign exchange loss | (31,992 | ) | (1,676 | ) | 1,808.8 | |||||||
Minority interest income (expense) | 26,560 | (7,755 | ) | (442.5 | ) | |||||||
Other — net | (1,086 | ) | 6,386 | (117.0 | ) |
• | an increase of $6.4 million 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; |
• | an increase of $2.2 million in corporate-related expenses, including costs associated with Teekay Tankers becoming a public entity in December 2007; |
• | an increase of $1.8 million in fleet overhead from the timing of seafarer training initiatives and higher training activity in the LNG segment; and |
• | an increase of $1.8 million in travel costs due to business development and other project initiatives; |
• | a decrease of $6.4 million relating to the costs associated with our equity-based compensation and long-term incentive program for management (please read Item 1 — Financial Statements: Note 9(c) — Commitments and Contingencies — Long-Term Incentive Program). |
• | an increase of $207.9 million from the change in fair value of non-designated interest rate swaps and swaptions (please read Item 1 — Financial Statements: Note 14 — Derivative Instruments and Hedging Activities); |
• | an increase of $8.6 million relating to the increase in debt used to finance our acquisition of 50% of OMI; |
• | an increase of $3.2 million for the three months ended March 31, 2008, 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 — see below; and |
• | an increase of $3.4 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. |
• | an increase of $41.7 million from change in fair value of derivative instruments; |
• | increases of $1.4 million resulting from 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 $3.2 million relating to interest-bearing advances made by us to the RasGas 3 Joint Venture for shipyard construction installment payments; |
• | a decrease of $0.7 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 7 — Capital Leases and Restricted Cash). |
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• | a decrease of $21.2 million resulting from a decrease in earnings from Teekay LNG which was primarily the result of unrealized losses on interest rate swaps and unrealized foreign exchange losses attributable to the revaluation of its Euro-denominated term loans; |
• | a decrease of $10.1 million resulting from a decrease in earnings from Teekay Offshore and certain of our shuttle tanker joint ventures, which was primarily the result of unrealized losses on interest rates swaps and increasing operating costs due to general wage escalations, and an increase in repairs and maintenance performed for certain vessels during the three months ended March 31, 2008, compared to the same period last year; and |
• | a decrease of $7.0 million resulting from a decrease in earnings from Petrojarl, which was primarily the result of unrealized losses on interest rate swaps and higher operating costs; |
• | an increase of $4.0 million resulting from an increase in earnings from Teekay Tankers from the initial public offering in December 2007. |
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Three Months Ended March 31, | ||||||||
2008 | 2007 | |||||||
(restated) | (restated) | |||||||
($000’s) | ($000’s) | |||||||
Net operating cash flows | 72,993 | 81,223 | ||||||
Net financing cash flows | 266,929 | 269,239 | ||||||
Net investing cash flows | (226,922 | ) | (323,662 | ) |
• | incurred capital expenditures for vessels and equipment of $178.7 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 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 $36.6 million from the sale of a Handysize product tanker. |
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2009 and | 2011 and | |||||||||||||||||||
In millions of U.S. Dollars | Total | 2008 | 2010 | 2012 | Beyond 2012 | |||||||||||||||
U.S. Dollar-Denominated Obligations: | ||||||||||||||||||||
Long-term debt (restated)(1) | 5,134.2 | 323.6 | 746.8 | 1,220.6 | 2,843.2 | |||||||||||||||
Chartered-in vessels (operating leases) | 1,239.6 | 373.3 | 535.8 | 243.6 | 86.9 | |||||||||||||||
Commitments under capital leases(2) | 230.6 | 129.7 | 16.9 | 84.0 | — | |||||||||||||||
Commitments under capital leases(3) | 1,091.1 | 18.0 | 48.0 | 48.0 | 977.1 | |||||||||||||||
Newbuilding installments(4) | 1,068.7 | 350.8 | 554.7 | 163.2 | — | |||||||||||||||
Asset retirement obligation | 41.5 | — | — | — | 41.5 | |||||||||||||||
Total U.S. Dollar-denominated obligations | 8,805.7 | 1,195.4 | 1,902.2 | 1,759.4 | 3,948.7 | |||||||||||||||
Euro-Denominated Obligations:(5) | ||||||||||||||||||||
Long-term debt(6) | 476.4 | 9.4 | 27.6 | 258.2 | 181.2 | |||||||||||||||
Commitments under capital leases(2) (7) | 223.4 | 38.5 | 82.8 | 102.1 | — | |||||||||||||||
Total Euro-denominated obligations | 699.8 | 47.9 | 110.4 | 360.3 | 181.2 | |||||||||||||||
Total | 9,505.5 | 1,243.3 | 2,012.6 | 2,119.7 | 4,129.9 | |||||||||||||||
(1) | Excludes expected interest payments of $150.3 million (balance of 2008), $369.4 million (2009 and 2010), $261.9 million (2011 and 2012) and $425.7 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 March 31, 2008 (variable-rate loans). The expected interest payments do not reflect the effect of related interest rate swaps that we have used to hedge 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 2008 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 $37.3 million to $40.7 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 7 — Capital Leases and Restricted Cash. | |
(3) | Existing restricted cash deposits of $489.8 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, ten Suezmax tankers, three LPG carriers, two LNG carriers and one product tanker. Please read Item 1 — Financial Statements: Note 9 — 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 March 31, 2008. | |
(6) | Excludes expected interest payments of $17.7 million (balance of 2008), $45.4 million (2009 and 2010), $25.0 million (2011 and 2012) and $65.5 million (beyond 2012). Expected interest payments are based on EURIBOR plus margins that ranged up to 0.66% at March 31, 2008, as well as the prevailing U.S. Dollar/Euro exchange rate as of March 31, 2008. The expected interest payments do not reflect the effect of related interest rate swaps that we have used to hedge certain of our floating-rate debt. | |
(7) | Existing restricted cash deposits of $196.0 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 belief that the OMI acquisition will improve the utilization of certain of our existing vessels; | |
• | 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 ability of the counter-parties to our derivative contracts to fulfill their contractual obligations; | |
• | our ability to utilize recently acquired LNG vessels in a new service offering; and | |
• | the growth of global oil demand. |
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MARCH 31, 2008
PART I — FINANCIAL INFORMATION
Expected maturity date | ||||||||||||||||||||
Remainder | ||||||||||||||||||||
of 2008 | 2009 | 2010 | Total | Total | ||||||||||||||||
Contract | Contract | Contract | Contract | Fair value Asset/ | ||||||||||||||||
amount(1) | amount(1) | amount(1) | amount(1) | (Liability)(1) | ||||||||||||||||
Norwegian Kroner: | $ | 132.6 | $ | 74.6 | $ | 5.0 | $ | 212.2 | $ | 33.8 | ||||||||||
Average contractual exchange rate(2) | 6.16 | 5.83 | 6.05 | 6.04 | ||||||||||||||||
Euro: | $ | 18.1 | $ | 4.1 | — | $ | 22.2 | $ | 2.5 | |||||||||||
Average contractual exchange rate(2) | 0.71 | 0.70 | — | 0.71 | ||||||||||||||||
Canadian Dollar: | $ | 32.4 | $ | 14.7 | — | $ | 47.1 | ($0.6 | ) | |||||||||||
Average contractual exchange rate(2) | 1.02 | 1.01 | — | 1.02 | ||||||||||||||||
British Pounds: | $ | 37.6 | $ | 18.9 | $ | 1.9 | $ | 58.4 | $ | 0.1 | ||||||||||
Average contractual exchange rate(2) | 0.51 | 0.52 | 0.52 | 0.51 | ||||||||||||||||
Australian Dollar: | $ | 2.5 | — | — | $ | 2.5 | $ | 0.3 | ||||||||||||
Average contractual exchange rate(2) | 1.24 | — | — | 1.24 | ||||||||||||||||
Singapore Dollar: | $ | 2.6 | — | — | $ | 2.6 | $ | 0.0 | ||||||||||||
Average contractual exchange rate(2) | 1.38 | — | — | 1.38 |
(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 | There- | Asset / | ||||||||||||||||||||||||||||||||||
of 2008 | 2009 | 2010 | 2011 | 2012 | after | Total | (Liability) | Rate(1) | ||||||||||||||||||||||||||||
(in millions of U.S. dollars, except percentages) | ||||||||||||||||||||||||||||||||||||
Long-Term Debt: | ||||||||||||||||||||||||||||||||||||
Variable Rate ($U.S.) (restated)(2) | 290.3 | 258.0 | 396.7 | 671.2 | 220.7 | 2,532.1 | 4,369.0 | (4,369.0 | ) | 3.6 | % | |||||||||||||||||||||||||
Variable Rate (Euro)(3) (4) | 9.4 | 13.3 | 14.3 | 250.2 | 8.0 | 181.2 | 476.4 | (476.4 | ) | 5.0 | % | |||||||||||||||||||||||||
Fixed-Rate Debt ($U.S.) | 33.3 | 45.6 | 46.5 | 282.2 | 46.5 | 311.1 | 765.2 | (711.9 | ) | 6.2 | % | |||||||||||||||||||||||||
Average Interest Rate | 5.1 | % | 5.1 | % | 5.1 | % | 8.1 | % | 5.1 | % | 5.1 | % | 6.2 | % | ||||||||||||||||||||||
Capital Lease Obligations(5) (6) | ||||||||||||||||||||||||||||||||||||
Fixed-Rate ($U.S.)(7) | 123.4 | 3.8 | 3.9 | 80.1 | — | — | 211.2 | (211.2 | ) | 7.4 | % | |||||||||||||||||||||||||
Average Interest Rate(8) | 8.9 | % | 5.4 | % | 5.4 | % | 5.5 | % | — | — | 7.4 | % | ||||||||||||||||||||||||
Interest Rate Swaps: | ||||||||||||||||||||||||||||||||||||
Contract Amount ($U.S.) (restated)(6) (9) (10) | 78.7 | 626.0 | 358.8 | 59.8 | 60.9 | 3,033.3 | 4,217.5 | (312.3 | ) | 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) | 9.4 | 13.3 | 14.3 | 250.2 | 8.0 | 181.2 | 476.4 | 25.3 | 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 March 31, 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 March 31, 2008. | |
(5) | Excludes capital lease obligations (present value of minimum lease payments) of 121.6 million Euros ($191.7 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 March 31, 2008, this amount was 124.4 million Euros ($196.0 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 7 — 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 March 31, 2008 totaled $489.8 million, and the lease obligations, which as at March 31, 2008 totaled $469.0 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 March 31, 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 $500.1 million and $480.1 million, ($26.0) million and $23.3 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 7 — 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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MARCH 31, 2008
• | 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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