February 12, 2009
HAMILTON, BERMUDA–(Marketwire – Feb. 12, 2009) – Teekay Corporation (NYSE:TK) – Highlights – Generated cash flow from vessel operations of $278.6 million, up from $227.0 million in the prior quarter. – Reported third quarter net income of $103.1 million, or $1.41 per share (including specific items which increased net income by $8.9 million, or $0.12 per share)(1). – Completed financial restatement. – Renewed FPSO Petrojarl Varg contract for four years (plus charterer’s options for up to an additional nine years) which is expected to increase cash flow from vessel operations expected to increase by over $20 million annually commencing July 1, 2009. Teekay Corporation (Teekay or the Company) (NYSE:TK) today reported net income of $103.1 million, or $1.41 per share, for the quarter ended September 30, 2008, compared to a net loss of $74.2 million, or $0.99 per share, for the same period of the prior year. The results for the quarters ended September 30, 2008 and 2007 include a number of specific items which had the net effect of increasing net income by $8.9 million (or $0.12 per share) and decreasing net income by $97.1 million (or $1.30 per share), respectively, as detailed in Appendix A to this release. Net revenues(2) for the third quarter of 2008 increased to $672.5 million from $462.7 million for the same period of the prior year, and income from vessel operations increased to $217.5 million from $98.2 million. Net income for the nine months ended September 30, 2008 was $181.4 million, or $2.48 per share, compared to $178.4 million, or $2.38 per share, for the same period of the prior year. The results for the nine months ended September 30, 2008 and 2007 include a number of specific items which had the net effect of decreasing net income by $50.7 million (or $0.69 per share) and increasing net income by $4.1 million (or $0.06 per share), respectively, as detailed in Appendix A to this release. Net revenues for the nine months ended September 30, 2008 increased to $1.8 billion from $1.4 billion for the same period of the prior year, and income from vessel operations increased to $439.0 million from $352.8 million. Financial Restatement The Company has now resolved the remaining accounting item identified for restatement relating to its accounting for the costs associated with its long-term incentive plan, as described in the Company’s press release dated November 25, 2008. As a result, the Company has revised the amounts accrued in respect of its long-term incentive plan, resulting in a net reduction to its general and administrative expenses of approximately $7 million for the period January 1, 2005 to June 30, 2008, which have been reflected in the appropriate periods in this release. These accounting adjustments associated with the long-term incentive program do not impact amounts paid out under the plan. A component of the long-term incentive plan is linked to the Company’s share price. Consistent with the decline in the Company’s share price during the third quarter, the accrual for the amounts payable under the plan decreased by approximately $20 million as at September 30, 2008. This resulted in a reduction in general and administrative expenses of that amount in the third quarter of 2008, which has been included in Appendix A of this release. (1) Please refer to Appendix A to this release for information about specific items affecting net income. (2) Net revenues represents revenues less voyage expenses. Net revenues is a non-GAAP financial measure used by certain investors to measure the financial performance of shipping companies. Please see the Company’s web site at www.teekay.com for a reconciliation of this non-GAAP measure as used in this release to the most directly comparable financial measure under United States generally accepted accounting principles (GAAP). More detailed financial information relating to the restatements will be included in the amended Form 20-F/A for the year ended December 31, 2007 (certain financial information will be included for annual fiscal periods from 2003 through 2007), in the amended Form 6-K/A for the quarter ended March 31, 2008 and in the Form 6-K for the quarter ended June 30, 2008, which the Company will file with or furnish to, as applicable, the SEC and make available on its website at www.teekay.com. Operating Results During the third quarter of 2008, approximately 43 percent of the Company’s cash flow from vessel operations was generated from its fixed-rate businesses, compared to 83 percent in the third quarter of the prior year. This change is primarily due to the significant increase in spot tanker rates in the third quarter of 2008, partially offset by the continued growth of the Company’s fixed-rate businesses. The following table highlights certain financial information for Teekay’s four main operating segments: the offshore segment, the fixed-rate tanker segment, the liquefied gas segment, and the spot tanker segment (please refer to the “Teekay Fleet” section of this release below and Appendix B for further details): /T/ ————————————————————————— Three Months Ended September 30, 2008 ————————————- (unaudited) Fixed- Rate Liquefied Spot (in thousands of Offshore Tanker Gas Tanker U.S. dollars) Segment Segment Segment Segment Total ————————————————————————— Net revenues 235,862 63,557 57,480 315,636 672,535 Vessel operating expenses 113,606 16,869 10,476 29,566 170,517 Time-charter hire expense 32,951 9,716 – 115,459 158,126 Depreciation & amortization 55,949 12,067 14,606 25,871 108,493 Cash flow from vessel Operations (1) 48,817 31,059 41,126 157,596 278,598 ————————————————————————— ————————————————————————— Three Months Ended September 30, 2007 ————————————- (unaudited) Fixed- Rate Liquefied Spot (in thousands of Offshore Tanker Gas Tanker U.S. dollars) Segment Segment Segment Segment Total ————————————————————————— Net revenues 219,613 50,457 42,921 149,716 462,707 Vessel operating expenses 64,733 13,285 8,056 21,734 107,808 Time-charter hire expense 39,865 7,773 – 73,368 121,006 Depreciation & amortization 45,359 9,236 11,491 20,972 87,058 Cash flow from vessel Operations (1) 60,828 24,419 29,228 23,855 138,330 ————————————————————————— (1) Cash flow from vessel operations represents income from vessel operations before depreciation and amortization expense, vessel write-downs/(gain) loss on sale of vessels and unrealized gains or losses relating to derivatives. Cash flow from vessel operations is a non-GAAP financial measure used by certain investors to measure the financial performance of shipping companies. Please see the Company’s web site at www.teekay.com for a reconciliation of this non-GAAP measure as used in this release to the most directly comparable GAAP financial measure. /T/ Offshore Segment The Company’s offshore segment is comprised of shuttle tankers, floating storage and off-take (FSO) units, and floating production storage and offloading (FPSO) units. Cash flow from vessel operations from the Company’s offshore segment decreased to $48.8 million in the third quarter of 2008, compared to $60.8 million in the third quarter of the prior year, primarily due to increases in crewing costs, repair and maintenance expenditures, and business development costs, partially offset by the delivery of the Siri FPSO in February 2008. Vessel operating expenses of the Company’s offshore segment increased to $113.6 million in the third quarter of 2008 from $64.7 million in the third quarter of prior year, including a $24.6 million increase due to the change in fair value of foreign exchange forward contracts not designated as cash flow hedges pursuant to US GAAP. Also contributing to the increase was an additional $8.4 million from an increase in fleet size, including the Siri FPSO. The remainder of the increase was the result of increases in crewing costs and repair and maintenance expenditures. In December 2008, the Company entered into a contract extension with Talisman Energy for the FPSO Petrojarl Varg. The new terms under the contract extension commence on July 1, 2009, and provide that the Petrojarl Varg will continue to be chartered to Talisman for an additional four years, with its option to extend the contract for up to an additional nine years thereafter. The contract extension provides an increased base daily time-charter rate plus an incentive component based on the operational performance of the unit and a tariff component based on the volume of oil produced. The new contract terms are expected to increase the annual cash flow from vessel operations from the Petrojarl Varg by approximately 50 percent, or $20 million per annum, with opportunities for additional upside from the tariff component if nearby oil fields that would be covered by the contract become operational, as is expected. In accordance with an existing agreement, Teekay’s publicly-traded subsidiary Teekay Offshore Partners, L.P. has the right to purchase the Petrojarl Varg at any time prior to December 4, 2009 at its fair market value when such right is exercised. Fixed-Rate Tanker Segment The Company’s fixed-rate tanker segment includes its conventional tankers that operate under fixed-rate charter contracts with an initial term of three or more years. Cash flow from vessel operations from the Company’s fixed-rate tanker segment increased to $31.1 million in the third quarter of 2008, compared to $24.4 million in the third quarter of the prior year. This increase was primarily due to an increase in the size of the Company’s fixed-rate tanker fleet (including vessels chartered-in), partially offset by an increase in vessel crewing and service costs. The increase in the fixed-rate tanker fleet included the acquisition of two Suezmax and two product tankers from OMI Corporation on August 1, 2007, the addition of two new chartered-in Aframax tankers in January 2008 as part of the previously-announced multi-vessel transaction with ConocoPhillips and the delivery of two new Aframax tankers during January and March 2008. Liquefied Gas Segment The liquefied gas segment includes liquefied natural gas (LNG) and liquefied petroleum gas (LPG) carriers. The Company’s cash flow from vessel operations from its LNG and LPG carriers during the third quarter of 2008 was $41.1 million, compared to $29.2 million in the third quarter of the prior year. This increase was primarily due to the contribution from the two Kenai LNG carriers which were acquired in December 2007 and the effect on the Company’s Euro-denominated revenues resulting from the depreciation of the U.S. Dollar against the Euro over the same periods of the prior year. Spot Tanker Segment The Company’s spot tanker segment includes its conventional tankers that operate on voyage and time-charters with an initial term of less than three years. Cash flow from vessel operations from the Company’s spot tanker segment increased to $157.6 million for the third quarter of 2008, from $23.9 million for the third quarter of the prior year, primarily due to a significant increase in spot tanker rates and an increase in the size of the Company’s spot tanker fleet, partially offset by an increase in time-charter hire expenses and an increase in vessel crewing costs. On a net basis, fleet changes increased the total number of revenue days in the Company’s spot tanker segment to 7,761 for the third quarter of 2008, compared to 6,417 for the third quarter of the prior year. Revenue days increased in 2008 as a result of the inclusion of vessels acquired from OMI Corporation for the full quarter, two vessel purchases, one newbuilding delivery and seven additional in-charters. Revenue days represent the total number of vessel calendar days less off-hire associated with major repairs, drydockings, or mandated surveys. Average spot tanker freight rates during the third quarter of 2008 were the highest ever for a third quarter. This counter-seasonal strength in tanker freight rates was primarily due to higher oil production volumes from ton-mile intensive OPEC producers, as well as other factors, including port delays in the United States and Japan and stockpiling of oil ahead of the Olympics in China. During the fourth quarter of 2008, rates for very large crude carriers (VLCCs) declined as OPEC producers implemented production cutbacks in response to declining oil prices. In comparison, rates for medium-sized crude oil tankers remained relatively firm primarily due to seasonal factors, rising volumes of non-OPEC production corresponding with the completion of summer maintenance in the North Sea and weather-related delays, particularly in the Bosphorus Straits and United States Gulf ports. The global tanker fleet grew by approximately 5.7 percent (approximately 22 million deadweight tonnes) in 2008 which is slightly lower than average annual fleet growth of 6.1 percent from 2003 to 2007. The following table highlights the operating performance of the Company’s spot tanker segment measured in net revenues per revenue day (before deducting commissions), or time-charter equivalent (TCE) rates, and includes the realized gains and losses from forward freight agreements (FFAs) and synthetic time-charters, which are entered into as hedges against a portion of the Company’s exposure to spot market rates or for speculative purposes: /T/ ————————————————————————— Three Months Ended Nine Months Ended September September September September 30, June 30, 30, 30, 30, Spot Tanker Segment 2008 2008 2007 2008 2007 —————————– ——————- Suezmax Tanker Fleet Spot revenue days 497 432 533 1,483 972 Average spot rate (1) $67,696 $73,356 $25,723 $61,229 $34,998 Time-charter revenue days 652 740 506 2,059 828 Average Time-charter rate (2)(3) $36,527 $30,609 $29,177 $31,680 $26,899 Aframax Tanker Fleet Spot revenue days 3,844 3,635 2,867 11,187 8,274 Average spot rate (1) $48,162 $43,606 $22,247 $42,735 $31,017 Time-charter revenue days 391 180 92 714 182 Average Time-charter rate (2) $33,514 $31,803 $34,138 $32,733 $31,334 Large/Medium-Size Product Tanker Fleet Spot revenue days 1,101 1,156 1,062 3,320 2,797 Average spot rate (1) $42,082 $30,870 $27,534 $33,532 $27,724 Time-charter revenue days 361 431 459 1,605 810 Average Time-charter rate (2) $32,479 $28,156 $26,065 $25,548 $29,179 Small Product Tanker Fleet Spot revenue days 915 887 898 2,705 2,695 Average spot rate $13,846 $13,750 $13,880 $13,781 $15,121 ————————————————————————— (1) Average spot rates include realized results of FFAs, short-term time- charters and fixed-rate contracts of affreightment that are under a year in duration. (2) Average time-charter rates include realized results of synthetic time- charters and FFAs, short-term time-charters, and fixed-rate contracts of affreightment that are over a year but under three years in duration. (3) Average Suezmax time-charter rates exclude the cost of spot in- chartering vessels for contract of affreightment cargoes. /T/ Teekay Fleet As at December 31, 2008, Teekay’s fleet consisted of 186 vessels, including chartered-in vessels and newbuildings on-order, but excluding vessels managed for third parties. The following table summarizes the Teekay fleet as at December 31, 2008: /T/ ————————————————————————— Number of Vessels (1) —————————————— Owned Chartered-in Vessels Vessels Newbuildings Total ——————————————————————– —– Offshore Segment Shuttle Tankers (2) 28 9 4 41 Floating Storage & Offtake (FSO) Units (3) 5 – – 5 Floating Production Storage & Offloading (FPSO) Units 5 – – 5 ——————————————————————– —– Total Offshore Segment 38 9 4 51 ——————————————————————– —– Fixed-Rate Tanker Segment Conventional Tankers (4) 17 6 – 23 ——————————————————————– —– Total Fixed-Rate Tanker Segment 17 6 – 23 ——————————————————————– —– Liquefied Gas Segment LNG Carriers (5) 14 – 5 19 LPG Carriers 1 – 5 6 ——————————————————————– —– Total Liquefied Gas Segment 15 – 10 25 ——————————————————————– —– Spot Tanker Segment Suezmaxes (6) 8 6 7 21 Aframaxes (7) 21 26 – 47 Panamaxes – 1 – 1 Large/Medium Product Tankers 9 8 1 18 ——————————————————————– —– Total Spot Tanker Segment 38 41 8 87 ——————————————————————– —– Total 108 56 22 186 ——————————————————————– —– (1) Excludes vessels managed on behalf of third parties. (2) Includes six shuttle tankers in which the Company’s ownership interest is 50 percent. (3) Includes one unit in which the Company’s ownership interest is 89 percent. (4) Includes eight Suezmax tankers owned by Teekay LNG. (5) Includes fourteen LNG vessels owned by Teekay LNG. Teekay LNG has agreed to acquire Teekay’s 70 percent interest in two of the LNG vessels upon delivery of the second vessel. (6) Includes two Suezmax tankers owned by Teekay Tankers. (7) Includes nine Aframax tankers owned by Teekay Offshore and chartered to Teekay and nine Aframaxes owned by Teekay Tankers. /T/ During the third quarter of 2008, the Company sold and delivered two vessels for net proceeds of $105.1 million, resulting in a total gain of approximately $35.7 million. During the fourth quarter of 2008, the Company sold and delivered two vessels for net proceeds of $147.3 million, resulting in a total gain of approximately $16.7 million. In November 2008, the Company completed the previously-announced sale of its 50 percent interest in the Swift Product Tanker Pool, which included 10 of the Company’s in-chartered intermediate product tankers, for a total gain of approximately $46.4 million. Liquidity and Capital Expenditures As of September 30, 2008 the Company had current liquidity of more than $1.7 billion, consisting of $875.6 million cash and $872.8 million of undrawn revolving credit facilities. In addition, the Company has pre-arranged newbuilding financing commitments of approximately $1.1 billion, bringing total liquidity to over $2.8 billion. The Company’s remaining capital commitments relating to its portion of newbuildings were as follows as at September 30, 2008: /T/ ————————————————————————- Q4 (in millions) 2008 2009 2010 2011 2012 Total ————————————————————————- Offshore Segment – $34 $219 $163 – $416 ————————————————————————- Fixed-Rate Tanker Segment – – – – – – ————————————————————————- Liquefied Gas Segment $35 129 106 157 45 472 ————————————————————————- Spot Tanker Segment 63 246 – – – 309 ————————————————————————- ————————————————————————- Total $98 $409 $325 $320 $45 $1,197 ————————————————————————- ————————————————————————- /T/ As indicated above, the Company had capital expenditure commitments of approximately $1.2 billion remaining as at September 30, 2008, of which $1.05 billion has pre-arranged financing, leaving only $176 million to be funded from operating cash flow or other sources. Supplemental Financial Information Appendix B to this release includes supplemental financial information for each of the Company’s publicly-listed subsidiaries (Teekay LNG, Teekay Offshore, and Teekay Tankers), its wholly-owned subsidiary, Teekay Petrojarl, and the remaining business (referred to as Teekay Corp. Standalone). Appendix B also includes consolidation adjustments required to reconcile to Teekay’s consolidated balance sheet and statement of income as at and for the three and nine months ended September 30, 2008. About Teekay Teekay Corporation transports more than 10 percent of the world’s seaborne oil, has built a significant presence in the liquefied natural gas shipping sector through its publicly-listed subsidiary, Teekay LNG Partners L.P. (NYSE:TGP), is further growing its operations in the offshore oil production, storage and transportation sector through its publicly-listed subsidiary, Teekay Offshore Partners L.P. (NYSE:TOO), and continues to expand its conventional tanker business through its publicly-listed subsidiary, Teekay Tankers Ltd. (NYSE:TNK). With a fleet of over 180 vessels, offices in 17 countries and 6,600 seagoing and shore-based employees, Teekay provides a comprehensive set of marine services to the world’s leading oil and gas companies, helping them seamlessly link their upstream energy production to their downstream processing operations. Teekay’s reputation for safety, quality and innovation has earned it a position with its customers as The Marine Midstream Company. Teekay’s common stock is listed on the New York Stock Exchange where it trades under the symbol “TK”. /T/ ————————————————————————– TEEKAY CORPORATION SUMMARY CONSOLIDATED STATEMENTS OF INCOME (LOSS) (in thousands of U.S. dollars, except share and per share data) Three Months Ended Nine Months Ended —————— —————– September September September September 30, June 30, 30, 30, 30, ——— ——- ——— ——— ——— 2008 2008 2007 2008 2007 —- —- —- —- —- (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) ————————————————– ———————- REVENUES 879,244 769,399 590,160 2,392,015 1,734,144 ————————————————– ———————- OPERATING EXPENSES Voyage expenses 206,709 189,515 127,453 565,685 367,440 Vessel operating expenses (1) 170,517 159,470 107,808 473,036 306,901 Time-charter hire expense 158,126 142,682 121,006 445,292 320,321 Depreciation and amortization 108,493 106,700 87,058 312,900 234,416 General and administrative (1)(2) 49,157 70,882 54,635 184,678 169,880 Gain on sale of vessels and equipment (36,292) (2,925) (5,973) (39,713) (17,586) Restructuring charge 5,063 4,617 – 11,180 – ————————————————– ———————- 661,773 670,941 491,987 1,953,058 1,381,372 ————————————————– ———————- Income from vessel operations 217,471 98,458 98,173 438,957 352,772 ————————————————– ———————- OTHER ITEMS Interest (expense) gain (1) (156,402) 113,962 (223,587) (324,688) (210,536) Interest income (loss) (1) 40,655 (2,149) 54,636 99,115 70,012 Income tax recovery (expense) 19,304 11,201 (9,892) 28,022 (6,851) Equity loss from joint ventures (5,108) (2,063) (1,654) (10,780) (5,341) Foreign exchange gain (loss) 43,857 (1,807) (19,052) 10,058 (29,363) Minority interest (expense) income (39,325) (38,822) 15,308 (51,587) (16,523) Other – net (17,324) 4,639 11,841 (7,679) 24,203 ————————————————– ———————- (114,343) 84,961 (172,400) (257,539) (174,399) ————————————————– ———————- Net income (loss) 103,128 183,419 (74,227) 181,418 178,373 ————————————————– ———————- ————————————————– ———————- Earnings per common share – Basic $1.42 $2.53 ($1.01) $2.50 $2.43 – Diluted $1.41 $2.50 ($0.99) $2.48 $2.38 ————————————————– ———————- Weighted-average number of common shares outstanding – Basic 72,467,924 72,377,684 73,592,554 72,496,564 73,523,627 – Diluted 73,033,603 73,279,213 74,917,614 73,248,540 74,925,820 ————————————————————————– (1) The Company has entered into foreign exchange forward contracts, which are economic hedges of vessel operating expenses and general and administrative expenses, and interest rate swaps, which are economic hedges of interest bearing debt and restricted cash deposits; however, certain of these forward contracts and all of the interest rate swaps are not designated as cash flow hedges pursuant to US GAAP. Unrealized gains and losses from these undesignated forward contracts and designated forward contracts with sources of ineffectiveness are reflected in vessel operating expenses and general and administrative expenses in the above Statements of Income (Loss). Unrealized gains and losses from these undesignated swap contracts are reflected in interest expense and interest income in the above Statements of Income (Loss). The Company recorded the following unrealized gains (losses), relating to these undesignated foreign currency forward contracts and interest rate swaps: Three Months Ended Nine Months Ended —————— —————– September September September September 30, June 30, 30, 30, 30, ——— ——- ——— ——— ——— 2008 2008 2007 2008 2007 —- —- —- —- —- Vessel operating expenses (10,514) (3,602) 9,885 (14,327) 16,045 General and administrative (5,788) (2,775) 5,800 (8,412) 10,326 Interest (expense) gain (75,484) 190,845 (144,644) (86,405) (325) Interest income (loss) 17,452 (23,183) 26,973 31,888 (4,135) (2) General and administrative expense for the three and nine months ended September 30, 2008 included a reduction of $20.2 million and $22.6 million, respectively, of amounts accrued in respect of the Company’s long-term incentive plan. ————————————————————————– TEEKAY CORPORATION SUMMARY CONSOLIDATED BALANCE SHEETS (in thousands of U.S. dollars) ————————————————————————– As at September 30, As at December 31, —————— —————– 2008 2007 —- —- (unaudited) (unaudited) ——— ——— ASSETS Cash and cash equivalents 875,613 442,673 Other current assets 559,097 469,058 Restricted cash – current 91,928 33,479 Vessels held for sale 98,726 79,689 Restricted cash – long-term 642,776 652,717 Vessels and equipment 6,644,137 6,229,809 Advances on newbuilding contracts 727,227 617,066 Other assets (1) 1,330,272 1,203,156 Intangible assets 245,840 259,952 Goodwill 484,643 434,590 ————————————————————————– Total Assets 11,700,259 10,422,189 ————————————————————————– ————————————————————————– LIABILITIES AND STOCKHOLDERS’ EQUITY Accounts payable and accrued liabilities 497,441 364,635 Current portion of long-term debt 281,568 482,385 Long-term debt (1) 6,682,710 5,638,479 Other long-term liabilities / In process revenue contracts (1) 784,199 736,397 Minority interest 668,563 544,339 Stockholders’ equity 2,785,778 2,655,954 ————————————————————————– Total Liabilities and Stockholders’ Equity 11,700,259 10,422,189 ————————————————————————– ————————————————————————– (1) Through a wholly-owned subsidiary, the Company owns a 40 percent interest in a joint venture that owns 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 joint venture’s term loan and related interest rate swap agreements. As a result, the Company’s balance sheet reflects 100 percent of the joint ventures’s term loan and interest rate swap agreements, as well as offsetting increases in assets. As at September 30, 2008, the effect of the 60 percent gross-up were increases to total debt of $525.5 million, other long-term liabilities of $11.6 million and other assets of $537.1 million. In December 2008, the term loan and related interest rate swap agreements were novated to the joint venture company that owns the four RasGas 3 LNG carriers. Since the Company’s 40% interest in the joint venture company is equity accounted for, this will result in a reduction in total debt of approximately $875 million as at December 31, 2008, compared to September 30, 2008. ————————————————————————– TEEKAY CORPORATION SUMMARY CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands of U.S. dollars) ————————————————————————– Nine Months Ended —————– September 30, ————- 2008 2007 —- —- (unaudited) (unaudited) ——— ——— Cash and cash equivalents provided by (used for) OPERATING ACTIVITIES ————————————————————————– Net operating cash flow 255,699 236,853 ————————————————————————– FINANCING ACTIVITIES Net proceeds from long-term debt 1,976,961 2,680,898 Scheduled repayments of long-term debt (243,421) (232,105) Prepayments of long-term debt (881,993) (851,178) Increase in restricted cash (56,924) (13,333) Repurchase of common stock (20,512) (50,257) Net proceeds from the public offering of Teekay LNG 148,331 84,182 Net proceeds from the public offering of Teekay Offshore 142,160 – Other (57,188) (21,079) ————————————————————————– Net financing cash flow 1,007,414 1,597,128 ————————————————————————– INVESTING ACTIVITIES Expenditures for vessels and equipment (546,334) (550,531) Proceeds from sale of vessels and equipment 184,338 199,475 Purchase of marketable securities (542) (39,265) Proceeds from sale of marketable securities 11,058 53,941 Purchase of Teekay Petrojarl ASA (258,555) (1,210) Purchase of 50% of OMI Corporation – (1,108,136) Loan to joint ventures (255,971) (457,525) Other 35,833 21,993 ————————————————————————– Net investing cash flow (830,173) (1,881,258) ————————————————————————– Increase (decrease) in cash and cash equivalents 432,940 (47,277) Cash and cash equivalents, beginning of the period 442,673 343,914 ————————————————————————– Cash and cash equivalents, end of the period 875,613 296,637 ————————————————————————– ————————————————————————– ————————————————————————– TEEKAY CORPORATION APPENDIX A – SPECIFIC ITEMS AFFECTING NET INCOME (in thousands of U.S. dollars, except per share data) Set forth below are some of the significant items of income and expense that affected the Company’s net income for the three and nine months ended September 30, 2008, all of which items are typically excluded by securities analysts in their published estimates of the Company’s financial results: ————————————————————————– Three Months Ended Nine Months Ended —————— —————– September 30, 2008 September 30, 2008 —————— —————— (unaudited) (unaudited) $ Per $ Per $ Share $ Share ————————————————————————– Gain on sale of vessels and equipment 36,292 0.50 39,713 0.54 Foreign currency exchange gains (1) 43,857 0.60 8,518 0.12 Deferred income tax recovery on unrealized foreign exchange losses (2) 16,842 0.23 8,162 0.11 Unrealized losses from derivative instruments (3) (70,161) (0.97) (85,719) (1.17) Net effect from non-cash changes in purchase price allocation for the acquisition of Teekay Petrojarl ASA (4) – – (6,398) (0.09) Net effect from non-cash changes in purchase price allocation for the acquisition of 50 percent of OMI Corporation (5) (1,364) (0.02) (8,392) (0.11) Restructuring charge (6) (5,063) (0.07) (9,680) (0.13) Change in long-term incentive plan accruals (7) 20,231 0.28 22,606 0.31 Write-down of marketable securities (13,885) (0.19) (13,885) (0.19) Other (8) (4,774) (0.06) (7,984) (0.11) Minority owners’ share of items above (9) (13,109) (0.18) 2,393 0.03 ————————————————————————– Total 8,866 0.12 (50,666) (0.69) ————————————————————————– ————————————————————————– (1) Foreign currency exchange gains (losses) primarily relate to the Company’s debt denominated in Euros and deferred tax liability denominated in Norwegian Kroner. Nearly all of the Company’s foreign currency exchange gains and losses are unrealized. (2) Portion of deferred income tax related to unrealized foreign exchange gains and losses. (3) Reflects the unrealized gains or losses relating to the change in the mark-to-market value of derivative instruments that are not designated as hedges for accounting purposes. (4) Primarily relates to changes in amortization of in-process revenue contracts as a result of adjustments to the purchase price allocation of Teekay Petrojarl ASA. (5) Primarily relates to changes in amortization of intangible assets as a result of adjustments to the purchase price allocation of OMI Corporation. (6) Restructuring charges relate to the reorganization of certain of the Company’s operational functions. (7) Relates to changes in accruals relating to the Company’s long-term incentive plan which is linked to the Company’s share price. Amounts are included in general and administrative expenses. (8) Primarily relates to a change in a non-cash deferred tax balance for the 2006 fiscal year, the settlement of a previous claim against OMI Corporation, losses on bond repurchases (8.875% Notes due 2011) and goodwill impairment. (9) Primarily relates to minority owners’ share of foreign currency exchange gains (losses) and unrealized gains (losses) from derivative instruments. ————————————————————————– TEEKAY CORPORATION APPENDIX A – SPECIFIC ITEMS AFFECTING NET INCOME (in thousands of U.S. dollars, except per share data) Set forth below are some of the significant items of income and expense that affected the Company’s net income for the three and nine months ended September 30, 2007, all of which items are typically excluded by securities analysts in their published estimates of the Company’s financial results: ————————————————————————– Three Months Ended Nine Months Ended —————— —————– September 30, 2007 September 30, 2007 —————— —————— (unaudited) (unaudited) $ Per $ Per $ Share $ Share ————————————————————————– Gain on sale of vessels 5,973 0.08 17,586 0.24 Gain on sale of marketable securities – – 4,836 0.06 Gain on sale of Seagull AS 6,997 0.09 6,997 0.09 Foreign currency exchange losses (1) (19,052) (0.25) (29,363) (0.39) Deferred income tax expense on unrealized foreign exchange gains (2) (12,031) (0.16) (19,744) (0.26) Unrealized (losses) gains from derivative instruments (3) (98,146) (1.31) 28,587 0.38 Net effect from non-cash changes in purchase price allocation for acquisition of Teekay Petrojarl ASA (4) – – (4,240) (0.06) Changes in long-term incentive plan accruals(5) 52 – (3,380) (0.04) Other (6) (842) (0.01) (842) (0.01) Minority owners’ share of items above (7) 19,923 0.26 3,634 0.05 ————————————————————————– Total (97,126) (1.30) 4,071 0.06 ————————————————————————– ————————————————————————– (1) Foreign currency exchange gains (losses) primarily relate to the Company’s debt denominated in Euros and deferred tax liability denominated in Norwegian Kroner. Nearly all of the Company’s foreign currency exchange gains and losses are unrealized. (2) Portion of deferred income tax related to unrealized foreign exchange gains and losses. (3) Reflects the unrealized gains or losses relating to the change in the mark-to-market value of derivative instruments that are not designated as hedges for accounting purposes. (4) Primarily relates to changes in amortization of in-process revenue contracts as a result of adjustments to the purchase price allocation of Teekay Petrojarl ASA. (5) Relates to changes in accruals relating to the Company’s long-term incentive plan which is linked to the Company’s share price. Amounts are included in general and administrative expenses. (6) Primarily relates to losses on bond repurchases (8.875% Notes due 2011). (7) Primarily relates to minority owners’ share of foreign currency exchange gains (losses) and unrealized gains (losses) from derivative instruments. ————————————————————————– TEEKAY CORPORATION APPENDIX B – SUPPLEMENTAL FINANCIAL INFORMATION SUMMARY BALANCE SHEET AS AT SEPTEMBER 30, 2008 (in thousands of U.S. dollars) ————————————————————————– (unaudited) Teekay Teekay Teekay Teekay Offshore LNG Tankers Petrojarl ————————————— ASSETS Cash and cash equivalents 159,204 59,731 16,873 41,676 Other current assets 106,906 49,070 24,966 87,869 Restricted cash (current & non-current) – 674,821 – (3,749) Other assets (1) 35,735 958,475 5,416 (73,469) Vessels and equipment 1,731,709 1,794,439 436,354 1,430,522 Advances on vessels – 354,512 – – Equity investment in subsidiaries – – – – Intangibles and goodwill 174,919 179,719 – 286,099 ————————————— TOTAL ASSETS 2,208,473 4,070,767 483,609 1,768,948 ————————————— ————————————— LIABILITIES AND EQUITY Accounts payable and accrued liabilities 72,332 55,126 10,036 64,487 Current portion of debt and leases 74,766 166,954 3,600 12,100 Long-term debt and capital leases 1,535,308 2,862,566 316,128 384,628 Other long-term liabilities / in process revenue contracts 99,433 95,953 8,614 414,548 Minority interest (2) 30,640 18,623 – 669 Equity 395,994 871,545 145,231 892,516 ————————————— TOTAL LIABILITIES AND EQUITY 2,208,473 4,070,767 483,609 1,768,948 ————————————— ————————————— Consoli- Teekay dation Corp. Adjust- Standalone ments Total ——————————— ASSETS Cash and cash equivalents 598,129 – 875,613 Other current assets 389,012 – 657,823 Restricted cash (current & non-current) 63,632 – 734,704 Other assets (1) 404,115 – 1,330,272 Vessels and equipment 1,251,113 – 6,644,137 Advances on vessels 372,715 – 727,227 Equity investment in subsidiaries 1,691,221 (1,691,221) – Intangibles and goodwill 89,746 – 730,483 ——————————— TOTAL ASSETS 4,859,683 (1,691,221) 11,700,259 ——————————— ——————————— LIABILITIES AND EQUITY Accounts payable and accrued liabilities 295,460 – 497,441 Current portion of debt and leases 24,148 – 281,568 Long-term debt and capital leases 1,584,080 – 6,682,710 Other long-term liabilities / in process revenue contracts 165,651 – 784,199 Minority interest (2) 4,566 614,065 668,563 Equity 2,785,778 (2,305,286) 2,785,778 ——————————— TOTAL LIABILITIES AND EQUITY 4,859,683 (1,691,221) 11,700,259 ——————————– ——————————– (1) Other assets includes equity investments in joint ventures. (2) Minority interest in the Teekay Offshore, Teekay LNG, Teekay Tankers and Teekay Petrojarl columns represent the joint venture partners’ share of the joint venture net assets. Minority interest in the Consolidation Adjustments column represents the public’s share of the net assets of Teekay’s publicly-traded subsidiaries. ————————————————————————– TEEKAY CORPORATION APPENDIX B – SUPPLEMENTAL FINANCIAL INFORMATION SUMMARY STATEMENTS OF INCOME FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2008 (in thousands of U.S. dollars) ————————————————————————– (unaudited) Teekay Teekay Teekay Teekay Offshore LNG Tankers Petrojarl ————————————— Voyage revenues 226,947 88,489 48,901 107,658 ————————————— Voyage expenses 62,548 728 290 – Vessel operating expense 47,449 20,507 8,860 64,357 Time-charter hire expense 31,474 – – 5,974 Depreciation and amortization 34,042 21,823 8,108 27,191 General and administrative 14,087 4,662 3,974 13,230 Gain on disposal of vessels and equipment – – – – Restructuring charge – – – – ————————————— Total operating expenses 189,600 47,720 21,232 110,752 ————————————— Income from vessel operations 37,347 40,769 27,669 (3,094) ————————————— Net interest expense (31,689) (44,738) (6,084) (4,692) Income tax recovery (expense) 29,485 336 – (311) Equity income (loss) – (1,722) – (3,849) Equity in earnings of subsidiaries (1) – – – – Foreign exchange gain (loss) 2,150 48,567 (3) 5,083 Minority interest income (expense) (2) 931 1,665 – (157) Other (net) 1,252 (3,777) – (737) ————————————— Total other income 2,129 331 (6,087) (4,663) ————————————— ————————————— NET INCOME (LOSS) 39,476 41,100 21,582 (7,757) ————————————— ————————————— ————————————— CASH FLOW FROM VESSEL OPERATIONS (3) 71,972 60,905 35,777 15,250 ————————————— ————————————— Consoli- Teekay dation Corp. Adjust- Standalone ments Total ——————————— Voyage revenues 479,068 (71,819) 879,244 ——————————— Voyage expenses 143,143 – 206,709 Vessel operating expense 29,344 – 170,517 Time-charter hire expense 192,497 (71,819) 158,126 Depreciation and amortization 17,329 – 108,493 General and administrative 13,204 – 49,157 Gain on disposal of vessels and equipment (36,292) – (36,292) Restructuring charge 5,063 – 5,063 ——————————— Total operating expenses 364,288 (71,819) 661,773 ——————————— Income from vessel operations 114,780 – 217,471 ——————————— Net interest expense (28,544) – (115,747) Income tax recovery (expense) (10,206) – 19,304 Equity income (loss) 463 – (5,108) Equity in earnings of subsidiaries (1) 52,989 (52,989) – Foreign exchange gain (loss) (11,940) – 43,857 Minority interest income (expense) (2) (352) (41,412) (39,325) Other (net) (14,062) – (17,324) ——————————— Total other income (11,652) (94,401) (114,343) ——————————— ——————————— NET INCOME (LOSS) 103,128 (94,414) 103,128 ——————————— ——————————— ——————————— CASH FLOW FROM VESSEL OPERATIONS (3) 94,694 – 278,598 ——————————— ——————————— (1) Teekay Corporation’s proportionate share of the net earnings of its publicly-traded subsidiaries. (2) Minority interest income (expense) in the Teekay Offshore, Teekay LNG, Teekay Tankers and Teekay Petrojarl columns represent the joint venture partners’ share of the net income (loss) of the respective joint ventures. Minority interest income (expense) in the Consolidation Adjustments column represents the public’s share of the net income (loss) of Teekay’s publicly-traded subsidiaries. (3) Cash flow from vessel operations represents income from vessel operations before depreciation and amortization expense, vessel write- downs/(gain) loss on sale of vessels and unrealized gains or losses relating to derivatives. Cash flow from vessel operations is a non-GAAP financial measure used by certain investors to measure the financial performance of shipping companies. Please see the Company’s web site at www.teekay.com for a reconciliation of this non-GAAP financial measure as used in this release to the most directly comparable GAAP financial measure. ————————————————————————– TEEKAY CORPORATION APPENDIX B – SUPPLEMENTAL FINANCIAL INFORMATION SUMMARY STATEMENTS OF INCOME FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2008 (in thousands of U.S. dollars) ————————————————————————- (unaudited) Teekay Teekay Teekay Teekay Offshore LNG Tankers Petrojarl ————————————— Voyage revenues 653,015 214,133 111,317 293,611 ————————————— Voyage expenses 173,736 1,672 1,004 – Vessel operating expense 134,886 56,699 22,109 161,919 Time-charter hire expense 97,382 – – 19,686 Depreciation and amortization 102,335 56,767 17,026 67,759 General and administrative 45,089 14,367 6,965 37,188 Gain on disposal of vessels and equipment – – – – Restructuring charge – – – – ————————————— Total operating expenses 553,428 129,505 47,104 286,552 ————————————— Income from vessel operations 99,587 84,628 64,213 7,059 ————————————— Net interest expense (72,478) (68,279) (11,514) (15,225) Income tax recovery (expense) 36,830 248 – (311) Equity income (loss) – (3,413) – (3,849) Equity in earnings of subsidiaries (1) – – – – Foreign exchange gain (loss) (1,394) 14,647 (16) (6,154) Minority interest income (expense) (2) 327 1,740 – 23 Other (net) 6,192 (2,685) – (1,768) ————————————— Total other income (30,523) (57,742) (11,530) (27,284) ————————————— ————————————— NET INCOME (LOSS) 69,064 26,886 52,683 (20,225) ————————————— ————————————— ————————————— CASH FLOW FROM VESSEL OPERATIONS (3) 202,025 151,678 81,239 37,381 ————————————— ————————————— Consoli- Teekay dation Corp. Adjust- Standalone ments Total ——————————— Voyage revenues 1,313,359 (193,420) 2,392,015 ——————————— Voyage expenses 389,273 – 565,685 Vessel operating expense 97,423 – 473,036 Time-charter hire expense 521,644 (193,420) 445,292 Depreciation and amortization 69,013 – 312,900 General and administrative 81,069 – 184,678 Gain on disposal of vessels and equipment (39,713) – (39,713) Restructuring charge 11,180 – 11,180 ——————————— Total operating expenses 1,129,889 (193,420) 1,953,058 ——————————— Income from vessel operations 183,470 – 438,957 ——————————— Net interest expense (58,077) – (225,573) Income tax recovery (expense) (8,745) – 28,022 Equity income (loss) (3,518) – (10,780) Equity in earnings of subsidiaries (1) 75,787 (75,787) – Foreign exchange gain (loss) 2,975 – 10,058 Minority interest income (expense) (2) (1,056) (52,621) (51,587) Other (net) (9,418) (7,679) ——————————— Total other income (2,052) (128,408) (257,539) ——————————— ——————————— NET INCOME (LOSS) 181,418 (128,408) 181,418 ——————————— ——————————— ——————————— CASH FLOW FROM VESSEL OPERATIONS (3) 223,928 – 696,251 ——————————— ——————————— (1) Teekay Corporation’s proportionate share of the net earnings of its publicly-traded subsidiaries. (2) Minority interest income (expense) in the Teekay Offshore, Teekay LNG, Teekay Tankers and Teekay Petrojarl columns represent the joint venture partners’ share of the net income (loss) of the respective joint ventures. Minority interest income (expense) in the Consolidation Adjustments column represents the public’s share of the net income (loss) of Teekay’s publicly-traded subsidiaries. (3) Cash flow from vessel operations represents income from vessel operations before depreciation and amortization expense, vessel write- downs/(gain) loss on sale of vessels and unrealized gains or losses relating to derivatives. Cash flow from vessel operations is a non-GAAP financial measure used by certain investors to measure the financial performance of shipping companies. Please see the Company’s web site at www.teekay.com for a reconciliation of this non-GAAP financial measure as used in this release to the most directly comparable GAAP financial measure. ————————————————————————– TEEKAY CORPORATION APPENDIX C – SUPPLEMENTAL SEGMENT INFORMATION (in thousands of U.S. dollars) ————————————————————————– Three Months Ended September 30, 2008 ————————————- (unaudited) Fixed- Rate Liquefied Spot Offshore Tanker Gas Tanker Segment Segment Segment Segment Total ————————————————————————— Net revenues (1) 235,862 60,210 57,480 318,983 672,535 Vessel operating expenses 113,606 16,869 10,476 29,566 170,517 Time-charter hire expense 32,951 9,716 – 115,459 158,126 Depreciation and amortization 55,949 12,067 14,606 25,871 108,493 General and administrative 28,116 2,604 5,965 12,472 49,157 Gain on sale of vessels and equipment (621) – – (35,671) (36,292) Restructuring charge 3,173 335 393 1,162 5,063 ————————————————————————— Income from vessel operations 2,688 18,619 26,040 170,124 217,471 ————————————————————————— ————————————————————————— Three Months Ended June 30, 2008 ——————————– (unaudited) Fixed- Rate Liquefied Spot Offshore Tanker Gas Tanker Segment Segment Segment Segment Total ————————————————————————— Net revenues (1) 227,937 65,270 53,044 233,633 579,884 Vessel operating expenses 101,596 16,387 13,125 28,362 159,470 Time-charter hire expense 32,242 11,445 – 98,995 142,682 Depreciation and amortization 53,772 11,289 14,209 27,430 106,700 General and administrative 26,957 7,263 6,070 30,592 70,882 Gain on sale of vessels and equipment (3,150) – – 225 (2,925) Restructuring charge 3,327 58 221 1,011 4,617 ————————————————————————— Income from vessel operations 13,193 18,828 19,419 47,018 98,458 ————————————————————————— ————————————————————————— Three Months Ended September 30, 2007 ————————————- (unaudited) Fixed- Rate Liquefied Spot Offshore Tanker Gas Tanker Segment Segment Segment Segment Total ————————————————————————— Net revenues (1) 219,613 50,457 42,921 149,716 462,707 Vessel operating expenses 64,733 13,285 8,056 21,734 107,808 Time-charter hire expense 39,865 7,773 – 73,368 121,006 Depreciation and amortization 45,359 9,236 11,491 20,972 87,058 General and administrative 23,303 4,380 5,097 21,855 54,635 Gain on sale of vessels and equipment (5,973) – – – (5,973) ————————————————————————— Income from vessel operations 52,326 15,783 18,277 11,787 98,173 ————————————————————————— ————————————————————————— (1) Net revenues represents revenues less voyage expenses, which comprise all expenses relating to certain voyages, including bunker fuel expenses, port fees, canal tolls and brokerage commissions. Net revenues is a non-GAAP financial measure used by certain investors to measure the financial performance of shipping companies. Please see the Company’s web site at www.teekay.com for a reconciliation of this non- GAAP measure as used in this release to the most directly comparable GAAP financial measure. ————————————————————————— TEEKAY CORPORATION APPENDIX C – SUPPLEMENTAL SEGMENT INFORMATION (in thousands of U.S. dollars) ————————————————————————— Nine Months Ended September 30, 2008 ———————————— (unaudited) Fixed- Rate Liquefied Spot Offshore Tanker Gas Tanker Segment Segment Segment Segment Total ————————————————————————— Net revenues (1) 683,686 185,615 166,506 790,523 1,826,330 Vessel operating expenses 299,022 49,626 35,224 89,164 473,036 Time-charter hire expense 100,231 32,881 – 312,180 445,292 Depreciation and amortization 155,795 32,447 43,010 81,648 312,900 General and administrative 82,135 15,157 17,520 69,866 184,678 Gain on sale of vessels and equipment (3,771) – – (35,942) (39,713) Restructuring charge 6,500 1,893 614 2,173 11,180 ————————————————————————— Income from vessel operations 43,774 53,611 70,138 271,434 438,957 ————————————————————————— ————————————————————————— Nine Months Ended September 30, 2007 ———————————— (unaudited) Fixed- Rate Liquefied Spot Offshore Tanker Gas Tanker Segment Segment Segment Segment Total ————————————————————————— Net revenues (1) 649,931 139,681 118,881 458,211 1,366,704 Vessel operating expenses 194,348 36,797 22,395 53,361 306,901 Time-charter hire expense 120,298 15,591 – 184,432 320,321 Depreciation and amortization 126,708 25,964 33,856 47,888 234,416 General and administrative 71,371 13,486 15,260 69,763 169,880 Gain on sale of vessels and equipment (17,586) – – – (17,586) ————————————————————————— Income from vessel operations 154,792 47,843 47,370 102,767 352,772 ————————————————————————— ————————————————————————— (1) Net revenues represents revenues less voyage expenses, which comprise all expenses relating to certain voyages, including bunker fuel expenses, port fees, canal tolls and brokerage commissions. Net revenues is a non-GAAP financial measure used by certain investors to measure the financial performance of shipping companies. Please see the Company’s web site at www.teekay.com for a reconciliation of this non- GAAP measure as used in this release to the most directly comparable GAAP financial measure. /T/ FORWARD LOOKING STATEMENTS This release contains forward-looking statements (as defined in Section 21E of the Securities Exchange Act of 1934, as amended) which reflect management’s current views with respect to certain future events and performance, including statements regarding: tanker market fundamentals, including the balance of supply and demand in the tanker market, and spot tanker charter rates; the expected impact on the Company’s annual cash flow from vessels operations resulting from the contract extension for the FPSO Petrojarl Varg; the Company’s future capital expenditure commitments and the financing requirements for such commitments; and the commencement of charter contracts. The following factors are among those that could cause actual results to differ materially from the forward-looking statements, which involve risks and uncertainties, and that should be considered in evaluating any such statement: changes in production of or demand for oil, petroleum products, LNG and LPG, either generally or in particular regions; greater or less than anticipated levels of tanker newbuilding orders or greater or less than anticipated rates of tanker scrapping; changes in trading patterns significantly affecting overall vessel tonnage requirements; changes in applicable industry laws and regulations and the timing of implementation of new laws and regulations; changes in the typical seasonal variations in tanker charter rates; changes in the offshore production of oil or demand for shuttle tankers, FSOs and FPSOs; the potential for early termination of long-term contracts and inability of the Company to renew or replace long-term contracts; changes affecting the offshore tanker market; shipyard production delays; the Company’s future capital expenditure requirements; conditions in the United States capital markets; and other factors discussed in Teekay’s filings from time to time with the SEC, including its Report on Form 20-F for the fiscal year ended December 31, 2007. The Company expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the Company’s expectations with respect thereto or any change in events, conditions or circumstances on which any such statement is based.