UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 6-K

Report of Foreign Private Issuer

Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934

 

For the quarterly period ended September 30, 2009

Commission file number 1-12874

TEEKAY CORPORATION

(Exact name of Registrant as specified in its charter)

4^th Floor, Belvedere Building
69 Pitts Bay Road
Hamilton, HM 08 Bermuda
(Address of principal executive office)

 

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.

Form 20-F þ Form 40- F o

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1).

Yes o No þ

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7).

Yes o No þ

 

 

TEEKAY CORPORATION AND SUBSIDIARIES

REPORT ON FORM 6-K FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2009

INDEX

		PAGE
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Unaudited Consolidated Statements of Income (Loss) for the three and nine months ended September 30, 2009 and 2008			3
Unaudited Consolidated Balance Sheets as at September 30, 2009 and December 31, 2008			4
Unaudited Consolidated Statements of Cash Flows for the nine months ended September 30, 2009 and 2008			5
Unaudited Consolidated Statements of Comprehensive Income (Loss) for the nine months ended September 30, 2009 and 2008			6
Notes to the Unaudited Consolidated Financial Statements			7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			22
Item 3. Quantitative and Qualitative Disclosures about Market Risk			40
PART II: OTHER INFORMATION			42
SIGNATURES			51

ITEM 1 — FINANCIAL STATEMENTS

TEEKAY CORPORATION AND SUBSIDIARIES

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2009				2008				2009				2008
		$				$				$				$
REVENUES			500,368				880,876				1,649,392				2,432,123
OPERATING EXPENSES
Voyage expenses			71,659				213,709				225,253				572,685
Vessel operating expenses (note 16)			147,442				160,138				437,299				469,517
Time-charter hire expense (note 16)			94,964				157,822				348,243				445,444
Depreciation and amortization			107,111				108,493				321,856				312,900
General and administrative (notes 11d and 16)			52,238				44,372				156,073				184,735
Loss (gain) on sale of vessels and equipment — net of write-downs (note 13)			915				(36,292	)			(10,286	)			(39,713	)
Restructuring charge (note 14a)			1,456				5,063				12,017				11,180
Total operating expenses			475,785				653,305				1,490,455				1,956,748
Income from vessel operations			24,583				227,571				158,937				475,375
OTHER ITEMS
Interest expense (note 16)			(30,035	)			(63,180	)			(111,505	)			(215,139	)
Interest income (note 16)			4,193				20,686				15,894				73,408
Realized and unrealized (loss) gain on non-designated derivative instruments (note 16)			(121,664	)			(90,594	)			83,066				(125,542	)
Equity (loss) income from joint ventures (note 11b)			(8,945	)			(5,108	)			29,857				(10,780	)
Foreign exchange (loss) gain (notes 8 and 16)			(26,047	)			44,918				(39,900	)			8,323
Other income (loss) (note 14b)			2,938				(18,144	)			8,343				(7,662	)
Net (loss) income before income taxes			(154,977	)			116,149				144,692				197,983
Income tax (expense) recovery (note 18)			(10,904	)			26,304				(12,174	)			35,022
Net (loss) income			(165,881	)			142,453				132,518				233,005
Less: Net loss (income) attributable to non-controlling interests			23,633				(39,325	)			(33,902	)			(51,587	)
Net (loss) income attributable to stockholders of Teekay Corporation			(142,248	)			103,128				98,616				181,418
Per common share of Teekay Corporation (note 17)
• Basic (loss) earnings			(1.96	)			1.42				1.36				2.50
• Diluted (loss) earnings			(1.96	)			1.41				1.35				2.48
• Cash dividends declared			0.31625				0.27500				0.94875				0.82500
Weighted average number of common shares outstanding (note 17)
• Basic			72,553,809				72,467,924				72,535,438				72,496,564
• Diluted			72,553,809				73,033,603				72,876,558				73,248,540

The accompanying notes are an integral part of the unaudited consolidated financial statements.

TEEKAY CORPORATION AND SUBSIDIARIES

		As at				As at
		September 30,				December 31,
		2009				2008
		$				$
ASSETS
Current
Cash and cash equivalents (note 8)			495,402				814,165
Restricted cash (note 9)			37,845				35,841
Accounts receivable			180,121				300,462
Vessels held for sale (note 13)			34,637				69,649
Net investment in direct financing leases (note 4)			33,217				22,941
Prepaid expenses			106,550				117,651
Other assets			41,233				33,794
Total current assets			929,005				1,394,503
Restricted cash — long-term (note 9)			615,093				614,715
Vessels and equipment (note 8)
At cost, less accumulated depreciation of $1,606,647 (2008 - $1,351,786)			5,786,648				5,784,597
Vessels under capital leases, at cost, less accumulated amortization of $130,499 (2008 - $106,975) (note 9)			908,040				928,795
Advances on newbuilding contracts (note 11a)			196,080				553,702
Total vessels and equipment			6,890,768				7,267,094
Net investment in direct financing leases — non-current (note 4)			448,272				56,567
Loans to joint ventures			22,161				28,019
Derivative assets (note 16)			58,249				154,248
Investment in joint ventures (note 11b)			117,204				103,956
Other non-current assets			139,898				127,940
Intangible assets — net (note 6)			238,392				264,768
Goodwill (note 6)			203,191				203,191
Total assets			9,662,233				10,215,001
LIABILITIES AND EQUITY
Current
Accounts payable			53,835				59,973
Accrued liabilities			277,822				315,987
Current portion of derivative liabilities (note 16)			135,091				166,725
Current portion of long-term debt (note 8)			350,239				245,043
Current obligation under capital leases (note 9)			44,739				147,616
Current portion of in-process revenue contracts (note 6)			63,302				74,777
Loan from joint venture partners			1,990				21,019
Total current liabilities			927,018				1,031,140
Long-term debt (note 8)			4,168,490				4,707,749
Long-term obligation under capital leases (note 9)			779,626				669,725
Derivative liabilities (note 16)			362,816				676,540
Deferred income taxes (note 18)			16,803				6,182
Asset retirement obligation			22,000				18,977
In-process revenue contracts (note 6)			200,935				243,088
Other long-term liabilities			228,961				209,195
Total liabilities			6,706,649				7,562,596
Commitments and contingencies (notes 9, 11 and 16)
Equity
Common stock and additional paid-in capital (note 10)			651,884				642,911
Retained earnings			1,563,713				1,507,617
Non-controlling interest			757,167				583,938
Accumulated other comprehensive loss (note 15)			(17,180	)			(82,061	)
Total equity			2,955,584				2,652,405
Total liabilities and equity			9,662,233				10,215,001

The accompanying notes are an integral part of the unaudited consolidated financial statements.

TEEKAY CORPORATION AND SUBSIDIARIES

		Nine Months Ended September 30,
		2009				2008
		$				$
Cash and cash equivalents provided by (used for)
OPERATING ACTIVITIES
Net income			132,518				233,005
Non-cash items:
Depreciation and amortization			321,856				312,900
Amortization of in-process revenue contracts			(56,719	)			(55,733	)
Gain on sale of marketable securities			—				(4,576	)
Gain on sale of vessels and equipment			(27,399	)			(39,713	)
Write-down of marketable securities			—				13,885
Write-down of intangible assets			1,076				—
Write-down of vessels and equipment			17,113				—
Loss on repurchase of bonds			—				1,310
Equity (income) loss, net of dividends received			(26,914	)			7,278
Income tax expense (recovery)			12,174				(35,022	)
Employee stock option compensation			8,607				8,981
Foreign exchange loss and other			37,049				(56,406	)
Unrealized (gains) losses on derivative instruments			(195,048	)			95,366
Change in non-cash working capital items related to operating activities (note 7)			132,802				(103,055	)
Expenditures for drydocking			(58,815	)			(60,905	)
Net operating cash flow			298,300				317,315
FINANCING ACTIVITIES
Proceeds from issuance of long-term debt			762,712				1,978,792
Debt issuance costs			(3,852	)			(1,825	)
Scheduled repayments of long-term debt			(113,534	)			(235,172	)
Prepayments of long-term debt			(1,104,204	)			(881,993	)
Repayments of capital lease obligations			(6,949	)			(6,766	)
Proceeds from loans from joint venture partner			591				—
Repayment of loans from joint venture partner			(23,390	)			(1,489	)
Decrease (increase) in restricted cash			5,228				(56,924	)
Net proceeds from issuance of Teekay LNG Partners L.P. units (note 5)			67,095				148,331
Net proceeds from issuance of Teekay Offshore Partners L.P. units (note 5)			102,098				142,160
Net proceeds from issuance of Teekay Tankers Ltd. Class A shares (note 5)			65,556				—
Issuance of Common Stock upon exercise of stock options			352				4,206
Repurchase of Common Stock			—				(20,512	)
Distribution from subsidiaries to non-controlling interests			(83,646	)			(61,616	)
Cash dividends paid			(68,800	)			(59,952	)
Other financing activities			—				(1,442	)
Net financing cash flow			(400,743	)			945,798
INVESTING ACTIVITIES
Expenditures for vessels and equipment			(431,607	)			(546,334	)
Proceeds from sale of vessels and equipment			198,837				184,338
Purchases of marketable securities			—				(542	)
Proceeds from sale of marketable securities			—				11,058
Acquisition of additional 35.3% of Teekay Petrojarl ASA (note 3)			—				(258,555	)
Investment in joint ventures			(7,288	)			(1,434	)
Advances to joint ventures			(1,206	)			(255,971	)
Investment in direct financing lease assets			—				(537	)
Direct financing lease payments received			2,135				16,664
Other investing activities			22,809				21,140
Net investing cash flow			(216,320	)			(830,173	)
(Decrease) increase in cash and cash equivalents			(318,763	)			432,940
Cash and cash equivalents, beginning of the period			814,165				442,673
Cash and cash equivalents, end of the period			495,402				875,613

The accompanying notes are an integral part of the unaudited consolidated financial statements.

TEEKAY CORPORATION AND SUBSIDIARIES

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2009				2008				2009				2008
		$				$				$				$
Net (loss) income			(165,881	)			142,453				132,518				233,005
Other comprehensive income (loss):
Unrealized gain (loss) on marketable securities			3,963				(12,870	)			5,053				(16,636	)
Reclassification adjustment for gain on sale of marketable securities			—				13,886				—				9,310
Pension adjustments			437				—				252				1,058
Unrealized change on qualifying cash flow hedging instruments			22,980				(44,320	)			44,967				(37,743	)
Realized change on qualifying cash flow hedging instruments			4,628				6,173				23,314				2,153
Other comprehensive income (loss)			32,008				(37,131	)			73,586				(41,858	)
Comprehensive (loss) income			(133,873	)			105,322				206,104				191,147
Less: Comprehensive loss (income) attributable to non-controlling interests			19,657				(35,132	)			(42,589	)			(48,332	)
Comprehensive (loss) income attributable to stockholders of Teekay Corporation			(114,216	)			70,190				163,515				142,815

TEEKAY CORPORATION AND SUBSIDIARIES

1. Summary of Significant Accounting Policies

Basis of Presentation

The unaudited interim consolidated financial statements have been prepared in conformity with United States generally accepted accounting principles (or GAAP). They include the accounts of Teekay Corporation (or Teekay), which is incorporated under the laws of the Republic of The Marshall Islands, and its wholly-owned or controlled subsidiaries (collectively, the Company). Certain information and footnote disclosures required by GAAP for complete annual financial statements have been omitted and, therefore, it is suggested that these interim financial statements be read in conjunction with the Company’s audited financial statements for the year ended December 31, 2008, included on the Company’s Form 20-F filed with the Securities Commission (or the SEC) on June 30, 2009. In the opinion of management, these unaudited financial statements reflect all adjustments, of a normal recurring nature, necessary to present fairly, in all material respects, the Company’s consolidated financial position, results of operations, and cash flows for the interim periods presented. The results of operations for the nine months ended September 30, 2009 are not necessarily indicative of those for a full fiscal year.

Certain of the comparative figures have been reclassified to conform with the presentation adopted in the current period.

The Company evaluated events and transactions occurring after the balance sheet date and through the day the financial statements were issued. The date of issuance of the financial statements was December 16, 2009.

Changes in Accounting Policies

a)

In January 2009, the Company adopted an amendment to Financial Accounting Standards Board (or FASB) Accounting Standards Codification (or ASC) 810, Consolidation, which requires the Company to make certain changes to the presentation of our financial statements. This amendment requires that non-controlling interests in subsidiaries held by parties other than the Company be identified, labeled and presented in the statement of financial position within equity, but separate from the stockholders’ equity. This amendment requires that the amount of consolidated net income (loss) attributable to the stockholders and to the non-controlling interest be clearly identified on the consolidated statements of income (loss). In addition, this amendment provides for consistency regarding changes in stockholders’ ownership including when a subsidiary is deconsolidated. Any retained non-controlling equity investment in the former subsidiary will be initially measured at fair value. Except for the presentation and disclosure provisions of this amendment, which were adopted retrospectively to the Company’s consolidated financial statements, this amendment was adopted prospectively.

Consolidated net (loss) income attributable to the stockholders of Teekay Corporation would have been different in the three and nine months ended September 30, 2009, had the amendment to FASB ASC 810 not been adopted. Losses attributable to the non-controlling interest that exceed the entities’ equity capital would have been charged against the majority interest, as there was no obligation of the non-controlling interest to cover such losses. However, if future earnings do materialize, the majority interest should have been credited to the extent of such losses previously absorbed. Pro forma consolidated net (loss) income attributable to non-controlling interest and to the stockholders of Teekay Corporation and pro forma (loss) earnings per share had the amendment to FASB ASC 810 not been adopted are as follows:

		Three Months Ended				Nine Months Ended
		September 30, 2009				September 30, 2009
		$				$
Pro forma net (loss) income attributable to the stockholders of Teekay Corporation			(142,785	)			104,260
Pro forma (loss) earnings per share:
Basic			(1.97	)			1.44
Diluted			(1.97	)			1.43

b)

In January 2009, the Company adopted an amendment to FASB ASC 805, Business Combinations. This amendment requires an acquirer to recognize the assets acquired, the liabilities assumed, and any non-controlling interest in the acquiree at the acquisition date, measured at their fair values as of that date. This amendment also requires that the acquirer in a business combination achieved in stages to recognize the identifiable assets and liabilities, as well as the non-controlling interest in the acquiree, at the full fair values of the assets and liabilities as if they had occurred on the acquisition date. In addition, this amendment requires that all acquisition related costs be expensed as incurred, rather than capitalized as part of the purchase price and those restructuring costs that an acquirer expected, but was not obligated to incur, to be recognized separately from the business combination. This amendment applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. The adoption of this amendment did not have a material impact on the consolidated financial statements.

c)

In January 2009, the Company adopted an amendment to FASB ASC 323, Investments — Equity Method and Joint Ventures, which addresses the accounting for the acquisition of equity method investments for changes in ownership levels. The adoption of this amendment did not have a material impact on the consolidated financial statements.

TEEKAY CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. dollars, except share data)

d)

In January 2009, the Company adopted an amendment to FASB ASC 820, Fair Value Measurements and Disclosures, which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements for nonfinancial assets and nonfinancial liabilities, except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). Non-financial assets and non-financial liabilities include all assets and liabilities other than those meeting the definition of a financial asset or financial liability. The Company’s adoption of this amendment did not have a material impact on the consolidated financial statements. See Note 12 of the notes to the consolidated financial statements.

e)

In January 2009, the Company adopted an amendment to FASB ASC 815, Derivatives and Hedging, which requires expanded disclosures about a company’s derivative instruments and hedging activities, including increased qualitative, and credit-risk disclosures. See Note 16 of the notes to the consolidated financial statements.

f)

In January 2009, the Company adopted an amendment to FASB ASC 350, Intangibles — Goodwill and Other, which amends the factors that should be considered in developing renewal or extension of assumptions used to determine the useful life of a recognized intangible asset. The adoption of this amendment did not have a material impact on the consolidated financial statements.

g)

In April 2009, the Company adopted an amendment to FASB ASC 825, Financial Instruments, which requires disclosure of the fair value of financial instruments to be disclosed on a quarterly basis and that disclosures provide qualitative and quantitative information on fair value estimates for all financial instruments not measured on the balance sheet at fair value, when practicable, with the exception of certain financial instruments. See Note 12 of the notes to the consolidated financial statements.

h)

In April 2009, the Company adopted an amendment to FASB ASC 855, Subsequent Events, which established general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. This amendment requires the disclosure of the date through which an entity has evaluated subsequent events and the basis for selecting that date, that is, whether that date represents the date the financial statements were issued or were available to be issued. This amendment is effective for interim and annual reporting periods ending after June 15, 2009. The adoption of this amendment did not have a material impact on the consolidated financial statements. See Note 20 of the notes to the consolidated financial statements.

i)

In June 2009, the FASB issued the FASB ASC effective for financial statements issued for interim and annual periods ending after September 15, 2009. The ASC identifies the source of GAAP recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the SEC under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. On the effective date, the ASC superseded all then-existing non-SEC accounting and reporting standards. All other non-grandfathered non-SEC accounting literature not included in the ASC will become non-authoritative. The Company adopted the ASC on July 1, 2009, and incorporated it in the notes to the consolidated financial statements.

2. Segment Reporting

The Company is primarily engaged in the international marine transportation of crude oil and clean petroleum products through the operation of its tankers, and of liquefied natural gas (or LNG) and liquefied petroleum gas (or LPG) through the operation of its tankers and LNG and LPG carriers, and in the offshore processing and storage of crude oil. The Company’s revenues are earned in international markets.

The Company has four operating segments: its shuttle tanker and floating storage and offtake (or FSO) segment (or Teekay Navion Shuttle Tankers and Offshore), its floating production storage and offtake (or FPSO) segment (or Teekay Petrojarl), its liquefied gas segment (or Teekay Gas Services) and its conventional tanker segment (or Teekay Tanker Services). In order to provide investors with additional information about its conventional tanker segment, the Company has divided this operating segment into the fixed-rate tanker segment and the spot tanker segment. The Company’s shuttle tanker and FSO segment consists of shuttle tankers and FSO units. The Company’s FPSO segment consists of FPSO units and other vessels used to service its FPSO contracts. The Company’s liquefied gas segment consists of LNG and LPG carriers. The Company’s fixed-rate tanker segment consists of conventional crude oil and product tankers subject to long-term, fixed-rate time-charter contracts. The Company’s spot tanker segment consists of conventional crude oil tankers and product carriers operating in the spot tanker market or subject to time-charters or contracts of affreightment that are priced on a spot-market basis or are short-term, fixed-rate contracts. The Company considers contracts that have an original term of less than three years in duration to be short-term. Segment results are evaluated based on income from vessel operations. The accounting policies applied to the reportable segments are the same as those used in the preparation of the Company’s consolidated financial statements.

TEEKAY CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. dollars, except share data)

The following tables present results for these segments for the three and nine months ended September 30, 2009 and 2008:

		Shuttle												Conventional Tanker
		Tanker and								Liquefied				Fixed-Rate				Spot
		FSO				FPSO				Gas				Tanker				Tanker
Three Months ended September 30, 2009		Segment				Segment				Segment				Segment				Segment				Total
Revenues			144,182				100,327				61,435				74,971				119,453				500,368
Voyage expenses			23,652				—				465				1,552				45,990				71,659
Vessel operating expenses			39,166				49,375				12,402				20,628				25,871				147,442
Time-charter hire expense			27,772				—				—				13,015				54,177				94,964
Depreciation and amortization			30,014				25,344				14,188				15,155				22,410				107,111
General and administrative (1)			13,429				8,460				5,277				7,721				17,351				52,238
Loss (gain) on sale of vessels and equipment, net of write-downs			961				—				—				680				(726	)			915
Restructuring charge			693				—				590				108				65				1,456
Income (loss) from vessel operations			8,495				17,148				28,513				16,112				(45,685	)			24,583

		Shuttle												Conventional Tanker
		Tanker and								Liquefied				Fixed- Rate				Spot
		FSO				FPSO				Gas				Tanker				Tanker
Three Months ended September 30, 2008		Segment				Segment				Segment				Segment				Segment				Total
Revenues			183,386				100,359				57,669				61,486				477,976				880,876
Voyage expenses			47,883				—				189				1,276				164,361				213,709
Vessel operating expenses			45,698				59,667				10,476				16,869				27,428				160,138
Time-charter hire expense			32,951				—				—				9,716				115,155				157,822
Depreciation and amortization			28,758				27,191				14,606				12,067				25,871				108,493
General and administrative (1)			13,677				11,508				5,965				2,604				10,618				44,372
Gain on sale of vessels and equipment, net of write-downs			(621	)			—				—				—				(35,671	)			(36,292	)
Restructuring charge			3,173				—				393				335				1,162				5,063
Income from vessel operations			11,867				1,993				26,040				18,619				169,052				227,571

		Shuttle												Conventional Tanker
		Tanker and								Liquefied				Fixed-Rate				Spot
		FSO				FPSO				Gas				Tanker				Tanker
Nine Months ended September 30, 2009		Segment				Segment				Segment				Segment				Segment				Total
Revenues			432,371				289,825				176,283				217,574				533,339				1,649,392
Voyage expenses			58,227				—				723				4,614				161,689				225,253
Vessel operating expenses			126,911				140,825				36,238				55,540				77,785				437,299
Time-charter hire expense			85,645				—				—				35,918				226,680				348,243
Depreciation and amortization			88,003				76,869				44,257				41,803				70,924				321,856
General and administrative (1)			40,406				25,799				15,875				20,388				53,605				156,073
Loss (gain) on sale of vessels and equipment, net of write-downs			1,902				—				—				3,960				(16,148	)			(10,286	)
Restructuring charge			5,991				—				3,802				613				1,611				12,017
Income (loss) from vessel operations			25,286				46,332				75,388				54,738				(42,807	)			158,937

TEEKAY CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. dollars, except share data)

		Shuttle												Conventional Tanker
		Tanker and								Liquefied				Fixed-Rate				Spot
		FSO				FPSO				Gas				Tanker				Tanker
Nine Months ended September 30, 2008		Segment				Segment				Segment				Segment				Segment				Total
Revenues			532,821				283,673				167,297				188,519				1,259,813				2,432,123
Voyage expenses			132,808				—				791				2,904				436,182				572,685
Vessel operating expenses			130,038				165,122				35,224				49,626				89,507				469,517
Time-charter hire expense			100,231				—				—				32,881				312,332				445,444
Depreciation and amortization			88,036				67,759				43,010				32,447				81,648				312,900
General and administrative (1)			45,412				35,544				17,520				15,157				71,102				184,735
Gain on sale of vessels and equipment, net of write-downs			(3,771	)			—				—				—				(35,942	)			(39,713	)
Restructuring charge			6,500				—				614				1,893				2,173				11,180
Income from vessel operations			33,567				15,248				70,138				53,611				302,811				475,375

A reconciliation of total segment assets to amounts presented in the consolidated balance sheets is as follows:

		September 30,				December 31,
		2009				2008
		$				$
Shuttle tanker and FSO segment			1,695,154				1,722,432
FPSO segment			1,272,105				1,331,325
Liquefied gas segment			2,890,314				2,919,194
Fixed-rate tanker segment			1,173,719				951,592
Spot tanker segment			1,728,456				1,935,537
Cash and portion of restricted cash			495,402				821,286
Accounts receivable and other assets			407,083				533,635
Consolidated total assets			9,662,233				10,215,001

3. Acquisition of Additional 35.3% of Teekay Petrojarl ASA

As of October 1, 2006, the Company acquired a 64.7% interest in Petrojarl ASA (subsequently renamed Teekay Petrojarl ASA, or Teekay Petrojarl). In June and July 2008, the Company acquired the remaining 35.3% interest (26.5 million common shares) in Teekay Petrojarl at a price between NOK 59 and NOK 62.95 per share. The total purchase price of approximately NOK 1.5 billion ($304.9 million) for this remaining interest was paid in cash. As a result of these transactions, the Company’s owns 100% of Teekay Petrojarl.

Teekay Petrojarl’s operating results are reflected in the Company’s consolidated financial statements from October 1, 2006, the designated effective date of the Company’s acquisition of the original 64.7% interest in Teekay Petrojarl, which was accounted for using the purchase method of accounting. The acquisition of the remaining 35.3% interest has also been accounted for using the purchase method of accounting, based upon estimates of fair value.

TEEKAY CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. dollars, except share data)

4. Net Investment in Direct Financing Leases

Two of the Company’s LNG carriers are employed on 20-year time-charters. In addition, the Company leases equipment that reduces volatile organic compound emissions (or VOC equipment). The two time charters and leasing of the VOC equipment are accounted for as direct financing leases. The following table lists the components of the net investments in direct financing leases:

		September 30,				December 31,
		2009				2008
		$				$
Total minimum lease payments to be received			811,028				94,409
Estimated residual value of leased property (not guaranteed)			194,497				—
Initial direct costs and other			1,230				674
Less unearned income			(525,266	)			(15,575	)
Total			481,489				79,508
Less current portion			33,217				22,941
Total			448,272				56,567

As at September 30, 2009, minimum lease payments to be received by the Company in each of the next five succeeding fiscal years were approximately $15.7 million (remainder of 2009), $59.0 million (2010), $56.7 million (2011), $52.3 million (2012) and $40.8 million (2013). The VOC equipment leases will expire in 2014 and the time charters will both expire in 2029.

5. Public Offerings

During August 2009, Teekay Offshore Partners L.P. (or Teekay Offshore) completed a follow-on public offering of 7.475 million common units (including 975,000 units issued upon the exercise in full of the underwriter’s overallotment option) at a price of $14.32 per unit, for total gross proceeds of $107.0 million (including the general partner’s $2.2 million proportionate capital contribution). As a result, the Company’s ownership of Teekay Offshore was reduced from 50.0% to 40.5% (including the Company’s 2% general partner interest), and the Company recorded an increase to stockholders’ equity of $26.9 million, which represents the Company’s dilution gain from the issuance of units. Teekay maintains control of Teekay Offshore by virtue of its control of the general partner and continues to consolidate this subsidiary. The total net offering proceeds of approximately $104.3 million were used to reduce amounts outstanding under one of Teekay Offshore’s revolving credit facilities.

During June 2009, the Company’s subsidiary Teekay Tankers Limited (or Teekay Tankers) completed a follow-on public offering by issuing an additional 7.0 million shares of its Class A Common Stock at a price of $9.80 per share, for gross proceeds of $68.6 million. As a result, the Company’s ownership of Teekay Tankers has been reduced from 54.0% to 42.2%, and the Company recorded an increase to stockholders’ equity of $1.7 million, which represents the Company’s dilution gain from the issuance of shares. Teekay maintains voting control of Teekay Tankers and continues to consolidate the subsidiary. Teekay Tankers used the total net offering proceeds of approximately $65.6 million to acquire a 2003-built Suezmax tanker from Teekay for $57.0 million and to repay a portion of its outstanding debt under its revolving credit facility.

During March 2009, the Company’s subsidiary Teekay LNG Partners L.P. (or Teekay LNG) completed a follow-on public offering by issuing an additional 4.0 million of its common units at a price of $17.60 per unit, for gross proceeds of $71.8 million (including the general partner’s proportionate capital contribution). As a result, the Company’s ownership of Teekay LNG was reduced from 57.7% to 53.1% (including the Company’s 2% general partner interest), and the Company recorded a decrease to stockholders’ equity of $2.3 million, which represents the Company’s dilution loss from the issuance of units. Teekay LNG used the total net offering proceeds of approximately $68.5 million to prepay amounts outstanding on two of its revolving credit facilities.

In connection with Teekay LNG’s initial public offering in May 2005, Teekay entered into an omnibus agreement with Teekay LNG, Teekay LNG’s general partner and others governing, among other things, when the Company and Teekay LNG may compete with each other and to provide the applicable parties certain rights of first offer on LNG carriers and Suezmax tankers. In December 2006, the omnibus agreement was amended in connection with the initial public offering of the Company’s subsidiary Teekay Offshore to govern, among other things, when the Company, Teekay LNG and Teekay Offshore may compete with each other and to provide the applicable parties certain rights of first offer on LNG carriers, oil tankers, shuttle tankers, FSO units and FPSO units.

See Note 20(c) of the notes to the consolidated financial statements for the information relating to a follow-on public offering by Teekay LNG in November 2009.

TEEKAY CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. dollars, except share data)

6. Goodwill, Intangible Assets and In-Process Revenue Contracts

Goodwill

There were no changes in the carrying amount of goodwill for the nine months ended September 30, 2009, from December 31, 2008.

		Shuttle								Liquefied				Conventional
		Tanker and FSO				FPSO				Gas				Tanker
		Segment				Segment				Segment				Segment				Total
		$				$				$				$				$
Balance as of September 30, 2009, and December 31, 2008			130,908				—				35,631				36,652				203,191

Intangible Assets

As at September 30, 2009, the Company’s intangible assets consisted of:

		Weighted-Average				Gross Carrying				Accumulated				Net Carrying
		Amortization Period				Amount				Amortization				Amount
		(Years)				$				$				$
Contracts of affreightment			10.2				124,250				(85,750	)			38,500
Time-charter contracts			16.0				232,602				(78,087	)			154,515
Other intangible assets			1.0				59,231				(13,854	)			45,377
			12.1				416,083				(177,691	)			238,392

As at December 31, 2008, the Company’s intangible assets consisted of:

		Weighted-Average				Gross Carrying				Accumulated				Net Carrying
		Amortization Period				Amount				Amortization				Amount
		(Years)				$				$				$
Contracts of affreightment			10.2				124,251				(78,961	)			45,290
Time-charter contracts			15.9				233,678				(60,875	)			172,803
Other intangible assets			1.0				58,950				(12,275	)			46,675
			12.1				416,879				(152,111	)			264,768

Aggregate amortization expense of intangible assets for the three and nine months ended September 30, 2009 was $8.5 million ($10.2 million — 2008) and $25.6 million ($35.1 million — 2008), respectively, and is recorded in depreciation and amortization expense. Amortization of intangible assets for the next five years is expected to be $8.5 million (remainder of 2009), $27.2 million (2010), $34.3 million (2011), $31.8 million (2012), $17.8 million (2013), and $118.8 million (thereafter).

In-Process Revenue Contracts

As part of the Company’s acquisitions of Teekay Petrojarl in 2006 and 2008 and of 50% of OMI Corporation (or OMI) in 2007, the Company assumed certain FPSO service contracts and charter-out contracts with terms that were less favorable than prevailing market terms at the time of acquisition. The Company has recognized a liability based on the estimated fair value of these contracts. The Company is amortizing this liability over the remaining term of the contracts on a weighted basis based on the projected revenue to be earned under the contracts.

Amortization of these in-process revenue contracts for the three and nine months ended September 30, 2009, was $18.9 million ($20.8 million — 2008) and $56.7 million ($55.7 million — 2008), respectively, and is recorded in revenues. Amortization for the next five years is expected to be $17.0 million (remainder of 2009), $60.0 million (2010), $47.0 million (2011), $41.3 million (2012), $39.5 million (2013) and $59.4 million (thereafter).

TEEKAY CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. dollars, except share data)

7. Supplemental Cash Flow Information

The changes in non-cash working capital items related to operating activities for the nine months ended September 30, 2009 and 2008 are as follows:

		Nine Months Ended September 30,
		2009				2008
		$				$
Accounts receivable			120,341				(80,220	)
Prepaid expenses and other assets			17,485				(33,781	)
Accounts payable			(6,982	)			(9,305	)
Accrued and other liabilities			1,958				20,251
			132,802				(103,055	)

8. Long-Term Debt

		September 30,				December 31,
		2009				2008
		$				$
Revolving Credit Facilities			2,018,027				2,656,658
Senior Notes (8.875%) due July 15, 2011			194,466				194,642
USD-denominated Term Loans due through 2021			1,865,225				1,670,005
Euro-denominated Term Loans due through 2023			424,782				414,144
USD-denominated Unsecured Demand Loan due to Joint Venture Partners			16,229				17,343
			4,518,729				4,952,792
Less current portion			350,239				245,043
			4,168,490				4,707,749

As of September 30, 2009, the Company had thirteen long-term revolving credit facilities (or the Revolvers) available, which, as at such date, provided for borrowings of up to $3.3 billion, of which $1.3 billion was undrawn. Interest payments are based on LIBOR plus margins; at September 30, 2009, and December 31, 2008, the margins ranged between 0.45% and 0.95%. At September 30, 2009 and December 31, 2008, the three-month LIBOR was 0.30% and 1.43%, respectively. The total amount available under the Revolvers reduces by $74.0 million (remainder of 2009), $173.0 million (2010), $205.8 million (2011), $313.8 million (2012), $596.3 million (2013) and $1.9 billion (thereafter). The Revolvers are collateralized by first-priority mortgages granted on 62 of the Company’s vessels, together with other related security, and include a guarantee from Teekay or its subsidiaries for all outstanding amounts.

The 8.875% Senior Notes due July 15, 2011 (or the 8.875% Notes) rank equally in right of payment with all of Teekay’s existing and future senior unsecured debt and senior to Teekay’s existing and future subordinated debt. The 8.875% Notes are not guaranteed by any of Teekay’s subsidiaries and effectively rank behind all existing and future secured debt of Teekay and other liabilities, secured and unsecured, of its subsidiaries. During the nine months ended September 30, 2009, the Company repurchased $nil (2008 — $19.7 million) principal amount of the 8.875% Notes (see also Note 14b).

As of September 30, 2009, the Company had fifteen U.S. Dollar-denominated term loans outstanding, which totaled $1.9 billion. Certain of the term loans with a total outstanding principal balance of $491.0 million as at September 30, 2009, bear interest at a weighted-average fixed rate of 5.19%. Interest payments on the remaining term loans are based on LIBOR plus a margin. At September 30, 2009, and December 31, 2008, the margins ranged between 0.30% and 3.25%. At September 30, 2009, and December 31, 2008, the three-month LIBOR was 0.30% and 1.43%, respectively. The term loan payments are made in quarterly or semi-annual payments commencing three or six months after delivery of each newbuilding vessel financed thereby, and fourteen of the term loans also have balloon or bullet repayments due at maturity. The term loans are collateralized by first-priority mortgages on 30 of the Company’s vessels, together with certain other security. In addition, at September 30, 2009, all but $137.7 million (December 31, 2008 — $126.1 million) of the outstanding term loans were guaranteed by Teekay or its subsidiaries.

The Company has two Euro-denominated term loans outstanding, which, as at September 30, 2009, totaled 290.1 million Euros ($424.8 million). The Company repays the loans with funds generated by two Euro-denominated long-term time-charter contracts. Interest payments on the loans are based on EURIBOR plus a margin. At September 30, 2009 and December 31, 2008, the margins ranged between 0.60% and 0.66% and the one-month EURIBOR at September 30, 2009, was 0.44% (December 31, 2008 — 2.6%). The Euro-denominated term loans reduce in monthly payments with varying maturities through 2023 and are collateralized by first-priority mortgages on two of the Company’s vessels, together with certain other security, and are guaranteed by a subsidiary of Teekay.

Both Euro-denominated term loans are revalued at the end of each period using the then prevailing Euro/U.S. Dollar exchange rate. Due substantially to this revaluation, the Company recognized unrealized foreign exchange losses of $26.0 million and $39.9 million (2008 — gains of $44.9 million and $8.3 million) during the three and nine months ended September 30, 2009, respectively.

TEEKAY CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. dollars, except share data)

The Company has two U.S. Dollar-denominated loans outstanding owing to joint venture partners, which, as at September 30, 2009, totaled $15.1 million and $1.1 million, respectively, including accrued interest. Interest payments on the first loan, which are based on a fixed interest rate of 4.84%, commenced in February 2008. This loan is repayable on demand no earlier than February 27, 2027.

Among other matters, the Company’s long-term debt agreements generally provide for maintenance of minimum financial covenants and certain loan agreements require the maintenance of vessel market value-to-loan ratios. Certain loan agreements require that a minimum level of free cash be maintained. As at September 30, 2009, and December 31, 2008, this amount was $100.0 million. Certain of the loan agreements also require that the Company maintain an aggregate level of free liquidity and undrawn revolving credit lines with at least six months to maturity, of at least 7.5% of total debt. As at September 30, 2009, and December 31, 2008, this amount was $233.4 million and $293.0 million, respectively. The Company was in compliance with its debt covenants as at September 30, 2009.

9. Capital Leases and Restricted Cash

Capital Leases

Suezmax Tankers. As at September 30, 2009, the Company was a party, as lessee, to capital leases on five Suezmax tankers. Under the terms of the lease arrangements, the Company is required to purchase these vessels after the end of their respective lease terms for fixed prices by assuming the existing vessel financing upon the lenders consent. At their inception, the weighted-average interest rate implicit in these leases was 7.4%. These capital leases are variable-rate capital leases; however, any change in the lease payments resulting from changes in interest rates is offset by a corresponding change in the charter hire payments received by the Company. As at September 30, 2009, the remaining commitments under these capital leases, including the purchase obligations, approximated $227.6 million, including imputed interest of $30.2 million, repayable as follows:

Year		Commitment
Remainder of 2009		$	6.0 million
2010		$	23.7 million
2011		$	197.9 million

RasGas II LNG Carriers. As at September 30, 2009, the Company was a party, as lessee, to 30-year capital lease arrangements for the three LNG carriers (or the RasGas II LNG Carriers) that operate under time-charter contracts with Ras Laffan Liquefied Natural Gas Co. Limited (II) (or RasGas II), a joint venture between Qatar Petroleum and ExxonMobil RasGas Inc., a subsidiary of ExxonMobil Corporation. All amounts below relating to the RasGas II LNG Carriers capital leases include the non-controlling interest’s 30% share.

Under the terms of the RasGas II LNG Carriers capital lease arrangements, the lessor claims tax depreciation on the capital expenditures it incurred to acquire these vessels. As is typical in these leasing arrangements, tax and change of law risks are assumed by the lessee.

Payments under the lease arrangements are based on tax and financial assumptions at the commencement of the leases. If an assumption proves to be incorrect, the lessor is entitled to increase the lease payments to maintain its agreed after-tax margin. At inception of the leases the Company’s best estimate of the fair value of the guarantee liability was $18.6 million. During 2008, the Company has agreed under the terms of its tax lease indemnification guarantee to increase its capital lease payments for the three RasGas II LNG Carriers to compensate the lessor for losses suffered as a result of changes in tax rates. The estimated increase in lease payments is approximately $8.1 million over the term of the leases, with a carrying value of $7.9 million as at September 30, 2009. The Company’s carrying amount of this tax indemnification is $9.3 million as at September 30, 2009. Both amounts are included as part of other long-term liabilities in the accompanying consolidated balance sheets. The tax indemnification is for the duration of the lease contract with the third party plus the years it would take for the lease payments to be statute barred, and ends in 2042. Although there is no maximum potential amount of future payments, the Company may terminate the lease arrangements at any time. If the lease arrangements terminate, the Company will be required to pay termination sums to the lessor sufficient to repay the lessor’s investment in the vessels and to compensate it for the tax-effect of the terminations, including recapture of any tax depreciation.

At their inception, the weighted-average interest rate implicit in these leases was 5.2%. These capital leases are variable-rate capital leases. As at September 30, 2009, the commitments under these capital leases approximated $1.1 billion, including imputed interest of $0.6 billion, repayable as follows:

Year		Commitment
Remainder of 2009		$	6.0 million
2010		$	24.0 million
2011		$	24.0 million
2012		$	24.0 million
2013		$	24.0 million
Thereafter		$	953.1 million

TEEKAY CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. dollars, except share data)

Spanish-Flagged LNG Carrier. As at September 30, 2009, the Company was a party, as lessee, to a capital lease on one Spanish-flagged LNG carrier, which is structured as a “Spanish tax lease.” Under the terms of the Spanish tax lease, the Company will purchase the vessel at the end of the lease term in 2011. The purchase obligation has been fully funded with restricted cash deposits described below. At its inception, the implicit interest rate was 5.8%. As at September 30, 2009, the commitments under this capital lease, including the purchase obligation, approximated 117.4 million Euros ($171.8 million), including imputed interest of 10.2 million Euros ($14.9 million), repayable as follows:

Year		Commitment
Remainder of 2009		25.7 million Euros ($37.5 million)
2010		26.9 million Euros ($39.4 million)
2011		64.8 million Euros ($94.9 million)

FPSO Units. As at September 30, 2009, the Company was a party, as lessee, to capital leases on one FPSO unit, the Petrojarl Foinaven, and the topside production equipment for another FPSO unit, the Petrojarl Banff. However, prior to being acquired by Teekay Corporation, Teekay Petrojarl legally defeased its future charter obligations for these assets by making up-front, lump-sum payments to unrelated banks, which have assumed Teekay Petrojarl’s liability for making the remaining periodic payments due under the long-term charters (or Defeased Rental Payments) and termination payments under the leases.

The Defeased Rental Payments for the Petrojarl Foinaven were based on assumed Sterling LIBOR of 8% per annum. If actual interest rates are greater than 8% per annum, the Company receives rental rebates; if actual interest rates are less than 8% per annum, the Company is required to pay rentals in excess of the Defeased Rental Payments. For accounting purposes, this contract feature is an embedded derivative, and has been separated from the underlying lease and is separately accounted for as a derivative instrument.

As is typical for these types of leasing arrangements, the Company has indemnified the lessors of the Petrojarl Foinaven for the tax consequence resulting from changes in tax laws or interpretation of such laws or adverse rulings by authorities and for fluctuations in actual interest rates from those assumed in the leases.

Restricted Cash

Under the terms of the capital leases for the four LNG carriers described above in this Note 9, the Company is required to have on deposit with financial institutions an amount of cash that, together with interest earned on the deposits, will equal the remaining amounts owing under the leases, including the obligations to purchase the LNG carriers at the end of the lease periods, where applicable. These cash deposits are restricted to being used for capital lease payments and have been fully funded with term loans and, for one vessel, a loan from the Company’s joint venture partner (see Note 8).

As at September 30, 2009, and December 31, 2008, the amount of restricted cash on deposit for the three RasGas II LNG Carriers was $480.4 million and $487.4 million, respectively. As at September 30, 2009, and December 31, 2008, the weighted-average interest rates earned on the deposits were 0.7% and 4.8%, respectively.

As at September 30, 2009, and December 31, 2008, the amount of restricted cash on deposit for the Spanish-flagged LNG carrier was 108.6 million Euros ($159.1 million) and 104.7 million Euros ($146.2 million), respectively. As at September 30, 2009, and December 31, 2008, the weighted-average interest rate earned on these deposits was 5.0%.

The Company also maintains restricted cash deposits relating to certain term loans and other obligations, which cash deposits totaled $2.4 million and $17.0 million as at September 30, 2009, and December 31, 2008, respectively.

10. Capital Stock

The authorized capital stock of Teekay at September 30, 2009, and December 31, 2008, was 25,000,000 shares of Preferred Stock, with a par value of $1 per share, and 725,000,000 shares of Common Stock, with a par value of $0.001 per share. As at September 30, 2009, Teekay had 73,068,523 shares of Common Stock (December 31, 2008 — 73,011,488) issued and no shares of Preferred Stock issued. As at September 30, 2009, Teekay had 72,569,326 shares of Common Stock outstanding (December 31, 2008 — 72,512,291).

Dividends may be declared and paid out of surplus only, but if there is no surplus, dividends may be declared or paid out of the net profits for the fiscal year in which the dividend is declared and for the preceding fiscal year. Subject to preferences that may apply to any shares of preferred stock outstanding at the time, the holders of common stock are entitled to share equally in any dividends that the board of directors may declare from time to time out of funds legally available for dividends.

During 2008, Teekay announced that its Board of Directors had authorized the repurchase of up to $200 million of shares of its Common Stock in the open market. As at September 30, 2009, Teekay had not repurchased any shares of Common Stock pursuant to such authorization.

During the nine months ended September 30, 2009, the Company issued 0.1 million common shares for $0.4 million on exercise of stock options and recorded employee stock option compensation expense of $8.6 million, which increased additional paid-in capital by a total of $9.0 million. For the same period in 2008, the Company issued 0.2 million common shares for $5.0 million on exercise of stock options, partially offset by a repurchase of 0.5 million common shares for $4.2 million, and recorded employee stock option compensation expense of $8.2 million, which increased additional paid-in capital by a net amount of $9.0 million.

11. Commitments and Contingencies

a) Vessels Under Construction

As at September 30, 2009, the Company was committed to the construction of one Suezmax tanker, four LPG carriers, and four shuttle tankers. One LPG carrier was delivered in November 2009 with the remaining vessels scheduled for delivery between December 2009 and August 2011, at a total cost of approximately $687.0 million, excluding capitalized interest. As at September 30, 2009, payments made towards these commitments totaled $176.6 million (excluding $19.9 million of capitalized interest and other miscellaneous construction costs), and long- term financing arrangements existed for $510.3 million of the unpaid cost of these vessels. As at September 30, 2009, the remaining payments required to be made under these newbuilding contracts were $42.5 million (2009), $316.1 million (2010), and $151.7 million (2011).

TEEKAY CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. dollars, except share data)

b) Joint Ventures

The Company has a 33% interest in a consortium that will charter four newbuilding 160,400-cubic meter LNG carriers for a period of 20 years to the Angola LNG Project, which is being developed by subsidiaries of Chevron Corporation, Sociedade Nacional de Combustiveis de Angola EP, BP Plc, Total S.A. and ENI SpA. Final award of the charter was made in December 2007. The vessels will be chartered at fixed rates, with inflation adjustments, commencing in 2011. The remaining members of the consortium are Mitsui & Co., Ltd. and NYK Bulkship (Europe) Ltd., which hold 34% and 33% interests in the consortium, respectively. In connection with this award, the consortium has entered into agreements with Samsung Heavy Industries Co. Ltd. to construct the four LNG carriers at a total cost of approximately $906.0 million (of which the Company’s 33% portion is $299.0 million), excluding capitalized interest. As at September 30, 2009, payments made towards these commitments by the joint venture company totaled $181.2 million (of which the Company’s 33% contribution was $59.8 million), excluding capitalized interest and other miscellaneous construction costs. As at September 30, 2009, the remaining payments required to be made under these contracts were $113.2 million (2010), $475.6 million (2011) and $135.9 million (2012). In accordance with existing agreements, the Company is required to offer to Teekay LNG its 33% interest in these vessels and related charter contracts no later than 180 days before the scheduled delivery dates of the vessels. Deliveries of the vessels are scheduled between August 2011 and January 2012. The Company has also provided certain guarantees in relation to the performance of the joint venture company.

For the three and nine months ended September 30, 2009, the Company recorded equity (loss) income of $(6.2) million and $17.9 million, respectively, for its share of the Angola LNG Project earnings. This amount is included in equity income (loss) from joint ventures in the consolidated statement of income (loss). Substantially all of the equity (loss) income related to unrealized (losses) gains on interest rate swaps.

One of the Kenai LNG Carriers, the Arctic Spirit, came off charter from the Marathon Oil Corporation/ConocoPhillips joint venture on March 31, 2009, and the Company 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 (FLNG). The agreement provides for a purchase price of $105 million if the Company chooses to participate in the project (as described below), or $110 million if the Company chooses not to participate. Under the option agreement, the Arctic Spirit is 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 FLNG (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 the Arctic Spirit to an FLNG proceeds, the Company will offer a similar option for a designee of MLCI to purchase the second Kenai LNG carrier for $125 million when it comes off charter.

c) Legal Proceedings and Claims

The Company may, from time to time, be involved in legal proceedings and claims that arise in the ordinary course of business. The Company believes that any adverse outcome of existing claims, individually or in the aggregate, would not have a material effect on its financial position, results of operations or cash flows, when taking into account its insurance coverage and indemnifications from charterers.

d) Long-Term Incentive Plan

In 2005, the Company adopted the Vision Incentive Plan (or the VIP) to reward exceptional corporate performance and shareholder returns. This plan will result in an award pool for senior management based on the following two measures: (a) economic profit from 2005 to 2010 (or the Economic Profit); and (b) market value added from 2001 to 2010 (or the MVA). The Plan terminates on December 31, 2010. Under the VIP, the Economic Profit is the difference between the Company’s annual return on invested capital and its weighted-average cost of capital multiplied by its average invested capital employed during the year, and the increase in MVA from January 1, 2001 to December 31, 2010, where the MVA is the amount by which the average market value of the Company for the preceding 18 months exceeds the average book value of the Company for the same period.

During the three and nine months ended September 30, 2009, the Company recorded an expense (recovery) related to the VIP of $nil (2008 — $(19.4) million) and $nil (2008 — $(16.4) million), respectively, which are included in general and administrative expense. As at September 30, 2009, and December 31, 2008, the VIP liability was $nil.

e) Other

The Company enters into indemnification agreements with certain officers and directors. In addition, the Company enters into other indemnification agreements in the ordinary course of business. The maximum potential amount of future payments required under these indemnification agreements is unlimited. However, the Company maintains what it believes is appropriate liability insurance that reduces its exposure and enables the Company to recover future amounts paid up to the maximum amount of the insurance coverage, less any deductible amounts pursuant to the terms of the respective policies, the amounts of which are not considered material.

TEEKAY CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. dollars, except share data)

12. Fair Value Measurements

The following methods and assumptions were used to estimate the fair value of each class of financial instruments and other non-financial assets.

Cash and cash equivalents and restricted cash — The fair value of the Company’s cash and cash equivalents approximates their carrying amounts reported in the accompanying consolidated balance sheets.

Vessels held for sale — The fair value of the Company’s vessels held for sale is based on selling prices of similar vessels and approximates their carrying amounts reported in the accompanying consolidated balance sheets.

Loans to joint ventures — The fair value of the Company’s loans to joint ventures approximates their carrying amounts reported in the accompanying consolidated balance sheets.

Loans from joint venture partners — The fair value of the Company’s loans from joint venture partners approximates their carrying amounts reported in the accompanying consolidated balance sheet.

Long-term debt — The fair value of the Company’s fixed-rate and variable-rate long-term debt is either based on quoted market prices or estimated using discounted cash flow analyses, based on current rates currently available for debt with similar terms and remaining maturities and the current credit worthiness of the Company.

Derivative instruments — 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, 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 assets and liabilities could vary by material amounts in the near term.

The Company categorizes its fair value estimates using a fair value hierarchy based on the inputs used to measure fair value. The fair value hierarchy has three levels based on the reliability of the inputs used to determine fair value as follows:

The estimated fair value of the Company’s financial instruments and other non-financial assets and categorization using the fair value hierarchy are as follows:

				September 30, 2009
				Carrying				Fair
		Fair Value		Amount				Value
		Hierarchy		Asset (Liability)				Asset (Liability)
		Level		$				$
Cash and cash equivalents and restricted cash		—			1,148,340				1,148,340
Vessels held for sale		Level 2			34,637				34,637
Loans to joint ventures		—			22,161				22,161
Loan from joint venture partners		—			(1,990	)			(1,990	)
Long-term debt		Level 1 and 2			(4,518,729	)			(4,060,750	)
Derivative instruments (1)
Interest rate swap agreements (2)		Level 2			(512,943	)			(512,943	)
Interest rate swap agreements (2)		Level 2			76,368				76,368
Foreign currency contracts		Level 2			8,523				8,523
Foinaven embedded derivative		Level 2			(13,818	)			(13,818	)

The Company has determined that other than Vessels Held for Sale, there are no other non-financial assets or non-financial liabilities carried at fair value less costs to sell at September 30, 2009. See Note 13(b) of the notes to the consolidated financial statements.

TEEKAY CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. dollars, except share data)

13. Vessel Sales and Write-downs of Vessels and Equipment

a) Vessel Sales

During January and February 2009, the Company sold a 2009-built product tanker and a 1993-built Aframax tanker through a sale-leaseback agreement, respectively, which were presented on the December 31, 2008 balance sheet as vessels held for sale. Both vessels were part of the Company’s spot tanker segment. The Company realized a gain of approximately $17.7 million as a result of these transactions, of which $17.6 million was deferred and will be amortized over the four-year term of the bareboat charter leaseback.

During May 2009, the Company sold a 2007-built product tanker and a 2005-built product tanker. Both vessels were part of the Company’s spot tanker segment. The Company realized a gain of approximately $29.8 million as a result of these transactions.

During July 2009, the Company entered into an agreement to sell a 1992-built Aframax tanker. The vessel was part of the Company’s spot tanker segment and is presented on the September 30, 2009 balance sheet as a vessel held for sale. The vessel was written-down by $7.1 million to its fair market value less costs to sell. The vessel sale was completed during the fourth quarter of 2009.

During September 2009, the Company entered into an agreement to sell a 1989-built product tanker. The vessel was part of the Company’s fixed-rate tanker segment and is presented on the September 30, 2009 balance sheet as a vessel held for sale. During the nine months ended September 30, 2009, the vessel was written-down by $4.0 million to its fair market value less costs to sell. The vessel sale was completed during the fourth quarter of 2009.

b) Vessels and Equipment Write-down

The Company’s consolidated statement of income (loss) for the nine months ended September 30, 2009, includes a $17.1 million write-down for impairment of three older vessels due to lower fair values compared to carrying values. The Company used recent sale prices of similar age and size of vessels to determine the fair value. These vessels are presented on the September 30, 2009, balance sheet as vessels held for sale.

14. Restructuring Charge and Other Income (Loss)

a) Restructuring Charge

During the three and nine months ended September 30, 2009, the Company incurred $1.5 million and $12.0 million of restructuring costs, respectively. The restructuring costs were primarily comprised of the reflagging of certain vessels, transfer of certain ship management functions from the Spain office to a subsidiary of Teekay, global staffing changes and closure of one of the Company’s three offices in Norway. The Company expects to incur approximately $4.0 million of additional restructuring costs relating to these changes in operations. At September 30, 2009, $1.2 million of restructuring liability is recorded in accrued liabilities on the balance sheet.

b) Other Income (Loss)

		Three Months Ended September 30,								Nine Months Ended September 30,
		2009				2008				2009				2008
		$				$				$				$
Net gain on sale (write-down) of marketable securities			—				(13,885	)			—				(9,309	)
Loss on bond repurchase			—				—				—				(1,310	)
Volatile organic compound emission plant lease income			1,570				2,564				5,172				7,529
Miscellaneous income (loss)			1,368				(6,823	)			3,171				(4,572	)
Other income (loss)			2,938				(18,144	)			8,343				(7,662	)

15. Accumulated Other Comprehensive Loss

As at September 30, 2009, and December 31, 2008, the Company’s accumulated other comprehensive loss consisted of the following components:

		September 30,				December 31,
		2009				2008
		$				$
Unrealized loss on derivative instruments			(206	)			(58,723	)
Pension adjustments			(22,027	)			(23,338	)
Unrealized gain on marketable securities			5,053				—
			(17,180	)			(82,061	)

16. Derivative Instruments and Hedging Activities

The Company uses derivatives in accordance with its overall risk management policies. The following summarizes the Company’s risk strategies with respect to market risk from foreign currency fluctuations and changes in interest rates.

Foreign Currency Fluctuation Risk

The Company hedges portions of its forecasted expenditures denominated in foreign currencies with foreign currency forward contracts. Certain of these foreign currency forward contracts are designated as cash flow hedges of forecasted foreign currency expenditures. Where such instruments are designated and qualify as cash flow hedges for accounting purposes, the effective portion of the changes in their fair value is recorded in accumulated other comprehensive income (loss), until the hedged item is recognized in earnings. At such time, the respective amount in accumulated other comprehensive income (loss) is released to earnings and is recorded within operating expenses, based on the nature of the expense. The ineffective portion of these foreign currency forward contracts consists of a $1.1 million gain for the nine months ended September 30, 2009, and has been reported as a reduction of operating expenses, based on the nature of the expense.

TEEKAY CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. dollars, except share data)

During the three and nine months ended September 30, 2009 and 2008, the Company recognized the following realized and unrealized gains (losses) relating to foreign currency forward contracts that are designated as cash flow hedges for accounting purposes:

		Three Months Ended September 30,								Nine Months Ended September 30,
		2009				2008				2009				2008
		$				$				$				$
Gains (losses) recognized in:
Vessel operating expenses			(1,307	)			3,538				(11,598	)			5,315
General and administrative			466				1,045				(3,760	)			2,736
Foreign exchange (loss) gain			—				—				(3	)			9
Accumulated other comprehensive loss			22,980				(44,320	)			44,967				(37,743	)
Gains (losses) reclassified from:
Accumulated other comprehensive loss			4,628				6,173				23,314				2,153

Realized and unrealized gains (losses) of foreign currency forward contracts that are not designated for accounting purposes as cash flow hedges, are recognized in earnings and reported in realized and unrealized gains (losses) on non-designated derivative instruments in the consolidated statements of income (loss). During the three and nine months ended September 30, 2009, the Company recognized net realized and unrealized gains on foreign currency forward contracts of $1.1 million and $6.3 million, respectively. During the three and nine months ended September 30, 2008, the Company recognized net realized and unrealized gains (losses) on foreign currency forward contracts of $(16.5) million and $(1.6) million, respectively. Realized and unrealized (losses) gains of $(4.8) million and $(0.1) million, respectively, relating to foreign currency forwards contracts for the three and nine months ended September 30, 2008, were reclassified from general and administrative expenses to realized and unrealized (losses) gains on non-designated derivative instruments for comparative purposes. Realized and unrealized gains (losses) of $(10.4) million and $(3.7) million, respectively, relating to foreign currency forwards contracts for the three and nine months ended September 30, 2008, were reclassified from vessel operating expenses to realized and unrealized (losses) gains on non-designated derivative instruments for comparative purposes. Realized and unrealized (losses) gains of $(1.4) million and $2.3 million, respectively, relating to foreign currency forwards contracts for the three and nine months ended September 30, 2008, were reclassified from time-charter hire and foreign exchange expenses to realized and unrealized (losses) gains on non-designated derivative instruments for comparative purposes.

As at September 30, 2009, the Company was committed to the following foreign currency forward contracts:

										Fair Value /
		Contract Amount								Carrying Amount
		in Foreign								of Asset / (Liability)				Expected Maturity
		Currency				Average Forward				(in millions of				2009				2010				2011
		(millions)				Rate(1)				U.S. Dollars)				(in millions of U.S. Dollars)
Norwegian Kroner			1,197.6				6.11			$	9.7			$	46.8			$	139.5			$	9.6
Euro			38.6				0.69				0.5				16.9				36.8				2.3
Canadian Dollar			65.1				1.09				1.0				14.5				45.3				—
British Pound			30.5				0.59				(2.7	)			15.4				34.3				1.8
Australian Dollar			0.3				1.13				—				0.3				—				—
Singapore Dollar			2.2				1.41				—				1.6				—				—
										$	8.5			$	95.5			$	255.9			$	13.7