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 June 30, 2019
Commission file number 1- 12874
  _________________________
TEEKAY CORPORATION
(Exact name of Registrant as specified in its charter)
  _________________________
Suite 2000, Bentall 5
550 Burrard Street
Vancouver, BC, V6C 2K2, Canada
(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   ý             Form 40- F   ¨
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   ¨             No    ý
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   ¨             No    ý







 

Page 1


TEEKAY CORPORATION AND SUBSIDIARIES
REPORT ON FORM 6-K FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2019
INDEX

 
PAGE
 
 


Page 2



ITEM 1 - FINANCIAL STATEMENTS
TEEKAY CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF LOSS
(in thousands of U.S. Dollars, except share and per share amounts)
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
 
$
 
$
 
$
 
$
Revenues ( note 3 )
457,667

 
405,642

 
938,880

 
799,664

Voyage expenses
(98,680
)
 
(94,912
)
 
(201,803
)
 
(180,789
)
Vessel operating expenses
(162,621
)
 
(161,787
)
 
(319,613
)
 
(319,222
)
Time-charter hire expenses ( note 6 )
(28,817
)
 
(20,648
)
 
(58,655
)
 
(40,059
)
Depreciation and amortization
(73,849
)
 
(67,960
)
 
(145,956
)
 
(135,271
)
General and administrative expenses
(20,868
)
 
(24,470
)
 
(43,840
)
 
(49,153
)
Write-down and loss on sales of vessels   (note 7)

 
(32,830
)
 
(3,328
)
 
(51,492
)
Restructuring charges (note 13)
(1,369
)
 
(1,114
)
 
(9,990
)
 
(3,252
)
Income from vessel operations
71,463

 
1,921

 
155,695

 
20,426

Interest expense
(70,205
)

(59,526
)
 
(143,876
)
 
(114,151
)
Interest income
2,233

 
2,095

 
4,922

 
3,772

Realized and unrealized (losses) gains on non-designated derivative instruments  (note 15 )
(10,964
)
 
10,723

 
(16,387
)
 
20,149

Equity (loss) income ( note 4 )
(6,284
)
 
837

 
(67,937
)
 
27,954

Foreign exchange (loss) gain (notes 9 and 15 )
(5,851
)
 
12,529

 
(8,481
)
 
12,551

Loss on deconsolidation of Teekay Offshore ( note 4 )

 

 

 
(7,070
)
Other (loss) income ( note 9 )
(11,099
)

520


(11,071
)

(395
)
Loss before income taxes
(30,707
)
 
(30,901
)
 
(87,135
)
 
(36,764
)
Income tax expense ( note 16 )
(3,404
)
 
(8,746
)
 
(8,440
)
 
(12,863
)
Net loss
(34,111
)
 
(39,647
)
 
(95,575
)
 
(49,627
)
Net (income) loss attributable to non-controlling interests
(5,374
)
 
11,323

 
(28,167
)
 
748

Net loss attributable to the shareholders of Teekay Corporation
(39,485
)
 
(28,324
)
 
(123,742
)
 
(48,879
)
Per common share of Teekay Corporation   (note 17)
 
 
 
 
 
 
 
•  Basic and diluted loss attributable to shareholders of Teekay Corporation
(0.39
)
 
(0.28
)
 
(1.23
)
 
(0.49
)
Weighted average number of common shares outstanding   (note 17)
 
 
 
 
 
 
 
•  Basic and diluted
100,783,496

 
100,434,512

 
100,652,685

 
98,892,574


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

Page 3


TEEKAY CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(in thousands of U.S. Dollars)
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
 
$
 
$
 
$
 
$
Net loss
(34,111
)
 
(39,647
)
 
(95,575
)
 
(49,627
)
Other comprehensive (loss) income:
 
 
 
 
 
 
 
Other comprehensive (loss) income before reclassifications
 
 
 
 
 
 
 
Unrealized (loss) gain on qualifying cash flow hedging instruments
(30,743
)
 
7,054

 
(52,252
)
 
9,676

Pension adjustments, net of taxes
(85
)
 
181

 
(172
)
 
376

Foreign exchange gain on currency translation

 
426

 

 
49

Amounts reclassified from accumulated other comprehensive (loss) income relating to:
 
 
 
 
 
 
 
Realized (gain) loss on qualifying cash flow hedging instruments
 
 
 
 
 
 
 
To interest expense  (note 15)
(157
)
 
(2
)
 
(408
)
 
248

To equity income
(197
)
 
(521
)
 
(697
)
 
(598
)
Loss on deconsolidation of Teekay Offshore ( note 4 )

 

 

 
7,720

Other comprehensive (loss) income
(31,182
)
 
7,138

 
(53,529
)
 
17,471

Comprehensive loss
(65,293
)
 
(32,509
)
 
(149,104
)
 
(32,156
)
Comprehensive loss (income) attributable to non-controlling interests
15,789

 
6,910

 
8,096

 
(5,664
)
Comprehensive loss attributable to shareholders of Teekay Corporation
(49,504
)
 
(25,599
)
 
(141,008
)
 
(37,820
)
The accompanying notes are an integral part of the unaudited consolidated financial statements.

Page 4


TEEKAY CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEETS
(in thousands of U.S. Dollars, except share amounts)
 
 
As at
June 30,
2019
 
As at
December 31,
2018
 
$
 
$
ASSETS

 
 
Current

 
 
Cash and cash equivalents (note 9 and 18)
235,199

 
424,169

Restricted cash – current ( note 18 )
50,798

 
40,493

Accounts receivable, including non-trade of $10,988 (2018 – $7,883) and related party balance of $18,014 (2018 – $57,062)
187,088

 
174,031

Accrued revenue
48,531

 
20,249

Prepaid expenses and other (notes 3 and 15)
108,274

 
69,882

Current portion of loans to equity-accounted investments (note 4)
93,924

 
169,197

Vessel held for sale (note 7)
12,300

 

Total current assets
736,114

 
898,021

Restricted cash – non-current ( note 18 )
36,886

 
40,977

Vessels and equipment  (note 9)


 
 
At cost, less accumulated depreciation of $1,348,665 (2018 – $1,270,460)
3,228,349

 
3,362,937

Vessels related to finance leases, at cost, less accumulated amortization of $214,256 (2018 – $178,178) (note 6)
2,234,194

 
2,067,254

Operating lease right-of-use assets ( notes 2 and 6 )
185,716

 

Advances on newbuilding contracts

 
86,942

Total vessels and equipment
5,648,259

 
5,517,133

Net investment in direct financing leases – non-current (notes 3 and 6)
551,603

 
562,528

Investment in and loans to equity-accounted investments (notes 4 and 11a)
1,011,530

 
1,193,741

Goodwill, intangibles and other non-current assets  (note 15)
141,626

 
179,270

Total assets
8,126,018

 
8,391,670

LIABILITIES AND EQUITY


 
 
Current


 
 
Accounts payable, accrued liabilities and other ( notes 8, 13 and 15 )
356,022

 
254,380

Loans from equity-accounted investments
27,607

 
75,292

Current portion of derivative liabilities (note 15)
28,481

 
12,205

Current portion of long-term debt (note 9 )
540,440

 
242,137

Current obligations related to finance leases ( note 6 )
89,922

 
102,115

Current portion of operating lease liabilities ( notes 2 and 6)
59,554

 

Total current liabilities
1,102,026

 
686,129

Long-term debt (note 9)
2,302,885

 
3,077,386

Long-term obligations related to finance leases ( note 6 )
1,736,810

 
1,571,730

Long-term operating lease liabilities ( notes 2 and 6 )
113,922

 

Derivative liabilities (note 15)
56,172

 
56,352

Other long-term liabilities (note 16 )
141,578

 
133,045

Total liabilities
5,453,393

 
5,524,642

Commitments and contingencies  (notes 6, 9, 11, and 15 )


 


Equity


 
 
Common stock and additional paid-in capital ($0.001 par value; 725,000,000 shares authorized; 100,784,431 shares outstanding and issued (2018 – 100,435,210)) (note 10)
1,049,531

 
1,045,659

Accumulated deficit
(361,162
)
 
(234,395
)
Non-controlling interest
2,005,399

 
2,058,037

Accumulated other comprehensive loss
(21,143
)
 
(2,273
)
Total equity
2,672,625

 
2,867,028

Total liabilities and equity
8,126,018

 
8,391,670

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

Page 5


TEEKAY CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands of U.S. Dollars)
 
Six Months Ended June 30,
 
2019
 
2018
 
$
 
$
Cash, cash equivalents and restricted cash provided by (used for)
 
 
 
OPERATING ACTIVITIES
 
 
 
Net loss
(95,575
)
 
(49,627
)
Non-cash and non-operating items:
 
 
 
Depreciation and amortization
145,956

 
135,271

Unrealized loss (gain) on derivative instruments and loss on sale of warrants ( note 15 )
14,933

 
(35,515
)
Write-down and loss on sales of vessels ( note 7 )
3,328

 
51,492

Equity loss (income), net of dividends received
85,211

 
(15,207
)
Income tax expense
8,440

 
12,863

Foreign currency exchange loss and other
26,304

 
9,269

Direct financing lease payments received
6,050

 

Change in operating assets and liabilities
18,427

 
14,325

Expenditures for dry docking
(34,150
)
 
(12,437
)
Net operating cash flow
178,924

 
110,434

FINANCING ACTIVITIES
 
 
 
Proceeds from issuance of long-term debt, net of issuance costs
376,658

 
409,793

Prepayments of long-term debt
(759,401
)
 
(295,914
)
Scheduled repayments of long-term debt (note 9)
(117,110
)
 
(171,433
)
Proceeds from short-term debt
65,000

 

Prepayment of short-term debt
(50,000
)
 

Proceeds from financing related to sale-leaseback of vessels
222,400

 
243,812

Repayments of obligations related to finance leases
(45,928
)
 
(28,819
)
Net proceeds from equity issuances of Teekay Corporation ( note 10 )

 
103,657

Repurchase of Teekay LNG common units
(12,056
)
 

Distributions paid from subsidiaries to non-controlling interests
(30,465
)
 
(33,872
)
Cash dividends paid
(5,523
)
 
(11,036
)
Other financing activities
(580
)
 
(566
)
Net financing cash flow
(357,005
)
 
215,622

INVESTING ACTIVITIES
 
 
 
Expenditures for vessels and equipment, net of warranty settlement $44,890 (2018 $nil) (note 11a)
(89,120
)
 
(315,348
)
Proceeds from sale of equity-accounted investments and related assets ( note 4 )
100,000

 
54,438

Investment in equity-accounted investments
(15,555
)
 
(27,629
)
Loans to joint ventures and joint venture partners

 
(24,971
)
Cash of transferred subsidiaries on sale, net of proceeds received ( note 4 )

 
(25,254
)
Other investing activities

 
5,560

Net investing cash flow
(4,675
)
 
(333,204
)
Decrease in cash, cash equivalents and restricted cash
(182,756
)
 
(7,148
)
Cash, cash equivalents and restricted cash, beginning of the period
505,639

 
552,174

Cash, cash equivalents and restricted cash, end of the period
322,883

 
545,026

Supplemental cash flow information ( note 18 )
 
 
 
The accompanying notes are an integral part of the unaudited consolidated financial statements.

Page 6


TEEKAY CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN TOTAL EQUITY
(in thousands of U.S. Dollars, except share amounts)
 
 
TOTAL EQUITY
 
Thousands
of Shares
of Common
Stock
Outstanding
#
 
Common
Stock and
Additional
Paid-in
Capital
$
 
Accumulated
Deficit
$
 
Accumulated
Other
Compre-
hensive
Loss
$
 
Non-
controlling
Interests
$
 
Total
$
Balance as at December 31, 2018
100,435

 
1,045,659

 
(234,395
)
 
(2,273
)
 
2,058,037

 
2,867,028

Net (loss) income

 

 
(84,257
)
 

 
22,793

 
(61,464
)
Other comprehensive loss

 

 

 
(7,247
)
 
(15,100
)
 
(22,347
)
Dividends declared:
 
 
 
 
 
 
 
 
 
 
 
Common stock ($0.055 per share)

 

 
(5,385
)
 

 

 
(5,385
)
Other dividends

 

 

 

 
(13,892
)
 
(13,892
)
Employee stock compensation and other ( note 10 )
264

 
2,964

 

 

 

 
2,964

Change in accounting policy ( note 2 )

 

 
606

 
(1,604
)
 
(1,993
)
 
(2,991
)
Changes to non-controlling interest from equity contributions and other ( note 2 )

 

 
1,526

 

 
(9,349
)
 
(7,823
)
Balance as at March 31, 2019
100,699

 
1,048,623

 
(321,905
)
 
(11,124
)
 
2,040,496

 
2,756,090

Net (loss) income

 

 
(39,485
)
 

 
5,374

 
(34,111
)
Other comprehensive loss

 

 

 
(10,019
)
 
(21,163
)
 
(31,182
)
Other dividends

 

 

 

 
(16,574
)
 
(16,574
)
Employee stock compensation and other ( note 10 )
85

 
908

 

 

 

 
908

Changes to non-controlling interest from equity contributions and other ( note 2 )

 

 
228

 

 
(2,734
)
 
(2,506
)
Balance as at June 30, 2019
100,784

 
1,049,531

 
(361,162
)
 
(21,143
)
 
2,005,399

 
2,672,625

























Page 7


TEEKAY CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN TOTAL EQUITY
(in thousands of U.S. Dollars, except share amounts)

 
TOTAL EQUITY
 
Thousands
of Shares
of Common
Stock
Outstanding
#
 
Common
Stock and
Additional
Paid-in
Capital
$
 
Accumulated
Deficit
$
 
Accumulated
Other
Compre-
hensive
(Loss) Income
$
 
Non-
controlling
Interests
$
 
Total
$
Balance as at December 31, 2017
89,127

 
919,078

 
(135,892
)
 
(5,995
)
 
2,102,465

 
2,879,656

Net (loss) income

 

 
(20,555
)
 

 
10,575

 
(9,980
)
Other comprehensive income

 

 

 
8,334

 
1,999

 
10,333

Dividends declared:
 
 
 
 
 
 
 
 
 
 
 
Common stock ($0.055 per share)

 

 
(5,445
)
 

 

 
(5,445
)
Other dividends

 

 

 

 
(19,824
)
 
(19,824
)
Employee stock compensation and other ( note 10 )
180

 
4,430

 

 

 

 
4,430

Proceeds from equity offerings, net of offering costs ( note 10 )
11,127

 
103,696

 

 

 

 
103,696

Equity component of convertible notes ( note 9 )

 
16,099

 

 

 

 
16,099

Changes to non-controlling interest from equity contributions and other

 

 
1,988

 
99

 
3,059

 
5,146

Balance as at March 31, 2018
100,434

 
1,043,303

 
(159,904
)
 
2,438

 
2,098,274

 
2,984,111

Net loss

 

 
(28,324
)
 

 
(11,323
)
 
(39,647
)
Other comprehensive income

 

 

 
2,725

 
4,413

 
7,138

Dividends declared:
 
 
 
 
 
 
 
 
 
 
 
Common stock ($0.055 per share)

 

 
(5,604
)
 

 

 
(5,604
)
Other dividends

 

 

 

 
(14,048
)
 
(14,048
)
Employee stock compensation and other ( note 10 )
1

 
1,488

 

 

 

 
1,488

Proceeds from equity offerings, net of offering costs ( note 10 )

 
(39
)
 

 

 

 
(39
)
Changes to non-controlling interest from equity contributions and other

 

 
81

 

 
133

 
214

Balance as at June 30, 2018
100,435

 
1,044,752

 
(193,751
)
 
5,163

 
2,077,449

 
2,933,613

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

Page 8

TEEKAY CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. Dollars, other than share and per share data)


1.
Basis of Presentation
The unaudited interim consolidated financial statements have been prepared in accordance 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, its wholly-owned or controlled subsidiaries and any variable interest entities (or VIEs ) of which it is the primary beneficiary (collectively, the Company ).

Certain of Teekay’s significant non-wholly owned subsidiaries are consolidated in these financial statements even though Teekay owns less than a  50% ownership interest in the subsidiaries. These significant subsidiaries include the publicly-traded subsidiaries Teekay LNG Partners L.P. (or  Teekay LNG ) and Teekay Tankers Ltd. (or  Teekay Tankers ).
 
Certain information and footnote disclosures required by GAAP for complete annual financial statements have been omitted from these unaudited interim consolidated financial statements and, therefore, these financial statements should be read in conjunction with the Company’s audited consolidated financial statements for the year ended December 31, 2018 , included in the Company’s Annual Report on Form 20-F, filed with the U.S. Securities and Exchange Commission (or SEC ) on April 1, 2019. In the opinion of management, these unaudited interim consolidated financial statements reflect all adjustments, consisting of a normal recurring nature, necessary to present fairly, in all material respects, the Company’s consolidated financial position, results of operations, cash flows and changes in total equity for the interim periods presented. The results of operations for the three and six months ended June 30, 2019 , are not necessarily indicative of those for a full fiscal year. Significant intercompany balances and transactions have been eliminated upon consolidation.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. It is possible that the amounts recorded as derivative assets and liabilities could vary by material amounts prior to their settlement.
2 . Recent Accounting Pronouncements
In February 2016, the Financial Accounting Standards Board (or FASB ) issued Accounting Standards Update 2016-02, Leases (or ASU 2016-02 ). ASU 2016-02 establishes a right-of-use model that requires a lessee to record a right-of-use asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. For lessees, leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. ASU 2016-02 requires lessors to classify leases as a sales-type, direct financing or operating lease. A lease is a sales-type lease if any one of five criteria are met, each of which indicate that the lease, in effect, transfers control of the underlying asset to the lessee. If none of those five criteria are met, but two additional criteria are both met, indicating that the lessor has transferred substantially all of the risks and benefits of the underlying asset to the lessee and a third party, the lease is a direct financing lease. All leases that are not sales-type leases or direct financing leases are operating leases. ASU 2016-02 became effective for the Company on January 1, 2019. FASB issued an additional accounting standards update in July 2018 that made further amendments to accounting for leases, including allowing the use of a transition approach whereby a cumulative effect adjustment is made as of the effective date, with no retrospective effect and providing an optional practical expedient to lessors not to separate lease and non-lease components of a contract if certain criteria are met. In addition, the Company early adopted ASU 2019-01, which provides an exception for lessors who are not manufacturers or dealers to determine the fair value of leased property using the underlying asset's cost, instead of fair value. The Company has elected to use this new optional transitional approach. To determine the cumulative effect adjustment, the Company has not reassessed lease classification, initial direct costs for any existing leases, or whether any expired or existing contracts are or contain leases. The Company identified the following differences:

The adoption of ASU 2016-02 results in a change in the accounting method for the lease portion of the daily charter hire for the chartered-in vessels by the Company and the Company's equity-accounted joint ventures accounted for as operating leases with firm periods of greater than one year, as well as a small number of office leases. On January 1, 2019, a right-of-use asset of $170.0 million and a lease liability of $170.0 million were recognized, equal to the present value of future minimum lease payments. On June 30, 2019 , the right-of-use asset relating to vessels was $173.5 million and the lease liability was $173.5 million . The carrying value of the Company's chartered-in vessels has also been reclassified from other non-current assets ( $12.2 million June 30, 2019 and $13.7 million January 1, 2019) and from other long-term liabilities ($ nil June 30, 2019 and $0.9 million January 1, 2019) to the right-of-use asset. In addition, on June 30, 2019 the right-of-use asset relating to office leases was $8.5 million and is presented in other non-current assets. The lease liability relating to office leases, presented in accounts payable, accrued liabilities and other and other long-term liabilities, was $8.7 million , and $0.2 million was reflected as a foreign exchange loss during the six months ended June 30, 2019 . Under ASU 2016-02, the Company and the Company's equity-accounted joint ventures recognize a right-of-use asset and a lease liability on the balance sheet for these charters and office leases based on the present value of future minimum lease payments, whereas previously no right-of-use asset or lease liability was recognized. This resulted in an increase in the Company's and its equity-accounted joint ventures' assets and liabilities. The pattern of expense recognition of chartered-in vessels is expected to remain substantially unchanged from the prior policy, unless the right-of-use asset becomes impaired.


Page 9

TEEKAY CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. Dollars, other than share and per share data)

The adoption of ASU 2016-02 results in the recognition of revenue from the reimbursement of scheduled dry-dock expenditures, where such charter contract is accounted for as an operating lease, occurring upon completion of the scheduled dry-dock, instead of ratably over the period between the previous scheduled dry-dock and the next scheduled dry-dock. This change decreased investment in and loans to equity-accounted investments by $3.0 million , and total equity by $3.0 million as at June 30, 2019 . The cumulative decrease to opening equity as at January 1, 2019 was $3.0 million .

The adoption of ASU 2016-02 results in direct financing lease payments received being presented as an operating cash inflow instead of an investing cash inflow in the consolidated statement of cash flows. Direct financing lease payments received during the three and six months ended June 30, 2019 were $3.0 million and $6.1 million , respectively ( three and six months ended June 30, 2018 $2.8 million and $5.2 million , respectively).

The adoption of ASU 2016-02 results in sale and leaseback transactions where the seller lessee has a fixed price repurchase option or other situations where the leaseback would be classified as a finance lease being accounted for as a failed sale of the vessel and a failed purchase of the vessel by the buyer lessor. Prior to the adoption of ASU 2016-02 such transactions were accounted for as a completed sale and a completed purchase. Consequently, for such transactions, the Company does not derecognize the vessel sold and continues to depreciate the vessel as if it was the legal owner. Proceeds received from the sale of the vessel are recognized as an obligation related to finance lease, and bareboat charter hire payments made by the Company to the lessor are allocated between interest expense and principal repayments on the obligation related to finance lease . The adoption of ASU 2016-02 has resulted in the sale and leaseback of the Yamal Spirit , the Cascade Spirit and the Aspen Spirit during the first half of 2019 being accounted for as failed sales and unlike the 22 sale-leaseback transactions entered in prior years, the Company is not considered as holding a variable interest in the buyer lessor entity and thus, does not consolidate the buyer lessor entity (see Note 6 ).

The Company's floating production, storage and offloading (or FPSO ) contracts, time charters and voyage charters include both a lease component, consisting of the lease of the vessel, and a non-lease component, consisting of the operation of the vessel for the customer. The Company has elected not to separate the non-lease component from the lease component for all such charters, where the lease component is classified as an operating lease and certain other required criteria are met, and to account for the combined component as an operating lease in accordance with Accounting Standards Codification (or ASC ) 842 Leases .

In August 2017, the FASB issued Accounting Standards Update 2017-12, Derivatives and Hedging - Targeted Improvements to Accounting for Hedging Activities (or ASU 2017-12 ). ASU 2017-12 eliminates the requirement to separately measure and report hedge ineffectiveness and generally requires, for qualifying hedges, the entire change in the fair value of a hedging instrument to be presented in the same income statement line as the hedged item. The guidance also modifies the accounting for components excluded from the assessment of hedge effectiveness, eases documentation and assessment requirements and modifies certain disclosure requirements. ASU 2017-12 became effective for the Company on January 1, 2019. This change decreased accumulated other comprehensive (loss) income by $4.8 million as at January 1, 2019, and correspondingly increased opening equity as at January 1, 2019 by $4.8 million .

In June 2016, the FASB issued Accounting Standards Update 2016-13,  Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments (or ASU 2016-13 ). ASU 2016-13 replaces the incurred loss impairment methodology with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. This update is effective for the Company on January 1, 2020, with a modified-retrospective approach. The Company is currently evaluating the effect of adopting this new guidance.
3 . Revenues
The Company’s primary source of revenue is chartering its vessels and offshore units to its customers. The Company utilizes four primary forms of contracts, consisting of time-charter contracts, voyage charter contracts, bareboat charter contracts and contracts for FPSO units. The Company also generates revenue from the management and operation of vessels owned by third parties and by equity-accounted investments as well as providing corporate management services to such entities. For a description of these contracts, see "Item 18 – Financial Statements: Note 2" in the Company’s Annual Report on Form 20-F for the year ended December 31, 2018 .


Page 10

TEEKAY CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. Dollars, other than share and per share data)

Revenue Table
The following tables contain the Company’s revenue for the three and six months ended June 30, 2019 and 2018 , by contract type, by segment and by business lines within segments.
 
Three Months Ended June 30, 2019
 
Teekay LNG
Liquefied
Gas
Carriers
Teekay LNG
Conventional
Tankers
Teekay
Tankers
Conventional
Tankers
Teekay
Parent
Offshore
Production
Teekay
Parent
Other
Eliminations
and Other
Total
 
 
 
$
$
$
$
$
$
$
Time charters
133,684

2,369

1,456


8,078

(2,487
)
143,100

Voyage charters
8,858


186,805




195,663

Bareboat charters
6,129






6,129

FPSO contracts



57,828



57,828

Management fees and other
2,020


14,016


39,911

(1,000
)
54,947

 
150,691

2,369

202,277

57,828

47,989

(3,487
)
457,667


 
Three Months Ended June 30, 2018
 
Teekay LNG
Liquefied
Gas
Carriers
Teekay LNG
Conventional
Tankers
Teekay
Tankers
Conventional
Tankers
Teekay
Parent
Offshore
Production
Teekay
Parent
Other
Eliminations
and Other
Total
 
 
 
$
$
$
$
$
$
$
Time charters
96,857

4,316

17,384


7,588

(1,439
)
124,706

Voyage charters
6,767

5,719

144,328




156,814

Bareboat charters
5,734






5,734

FPSO contracts



66,429



66,429

Management fees and other
2,814

108

9,947


38,595

495

51,959

 
112,172

10,143

171,659

66,429

46,183

(944
)
405,642

 
Six Months Ended June 30, 2019
 
Teekay LNG
Liquefied
Gas
Carriers
Teekay LNG
Conventional
Tankers
Teekay
Tankers
Conventional
Tankers
Teekay
Parent
Offshore
Production
Teekay
Parent
Other
Eliminations
and Other
Total
 
 
 
$
$
$
$
$
$
$
Time charters
264,459

5,131

4,866


14,347

(2,487
)
286,316

Voyage charters
18,018


403,222




421,240

Bareboat charters
12,191






12,191

FPSO contracts



107,266



107,266

Management fees and other
3,005


26,690


84,301

(2,129
)
111,867

 
297,673

5,131

434,778

107,266

98,648

(4,616
)
938,880

 
Six Months Ended June 30, 2018
 
Teekay LNG
Liquefied
Gas
Carriers
Teekay LNG
Conventional
Tankers
Teekay
Tankers
Conventional
Tankers
Teekay
Parent
Offshore
Production
Teekay
Parent
Other
Eliminations
and Other
Total
 
 
 
$
$
$
$
$
$
$
Time charters
190,316

9,714

39,494


20,682

(9,418
)
250,788

Voyage charters
10,390

10,470

279,970




300,830

Bareboat charters
11,111






11,111

FPSO contracts



132,399



132,399

Management fees and other
5,404

216

20,660


77,445

811

104,536

 
217,221

20,400

340,124

132,399

98,127

(8,607
)
799,664



Page 11

TEEKAY CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. Dollars, other than share and per share data)

The following table contains the Company's total revenue for the three and six months ended June 30, 2019 and 2018 , by contracts or components of contracts accounted for as leases and those not accounted for as leases.
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2019
 
2018
 
2019
 
2018
 
 
$
 
$
 
$
 
$
Lease revenue
 
 
 
 
 
 
 
 
Lease revenue from lease payments of operating leases
 
354,410

 
302,010

 
737,553

 
596,565

Interest income on lease receivables
 
12,969

 
9,954

 
25,763

 
19,914

Variable lease payments  cost reimbursements (1)
 
13,307

 
10,169

 
25,314

 
18,677

Variable lease payments – other   (2)
 
16,320

 
27,426

 
27,144

 
51,708

 
 
397,006

 
349,559

 
815,774

 
686,864

Non-lease revenue
 
 
 
 
 
 
 
 
Non-lease revenue  related to sales-type or direct financing leases
 
5,714

 
4,124

 
11,239

 
8,264

Management fees and other income
 
54,947

 
51,959

 
111,867

 
104,536

 
 
60,661

 
56,083

 
123,106

 
112,800

Total
 
457,667

 
405,642

 
938,880

 
799,664

(1)
Reimbursement for vessel operating expenditures and dry-docking expenditures received from the Company's customers relating to such costs incurred by the Company to operate the vessel for the customer.
(2)
Compensation from time-charter contracts based on spot market rates in excess of a base daily hire amount, production tariffs, which are based on the volume of oil produced, the price of oil, as well as other monthly or annual operational performance measures.
Operating Leases

As at June 30, 2019 , the minimum scheduled future rentals to be received by the Company in each of the next five years for the lease and non-lease elements related to time-charters, bareboat charters and FPSO contracts that were accounted for as operating leases were approximately $387.5 million (remainder of 2019 ), $647.4 million ( 2020 ), $533.2 million ( 2021 ), $429.7 million ( 2022 ) and $319.7 million ( 2023 ).

As at December 31, 2018 , the minimum scheduled future rentals to be received by the Company in each of the next five years for the lease and non-lease elements related to time-charters, bareboat charters and FPSO contracts that were accounted for as operating leases were approximately $630.8 million ( 2019 ), $524.6 million ( 2020 ), $457.5 million ( 2021 ), $382.0 million ( 2022 ) and $291.8 million ( 2023 ).

Minimum scheduled future revenues should not be construed to reflect total charter hire revenues for any of the years. Minimum scheduled future revenues do not include revenue generated from new contracts entered into after June 30, 2019 or after December 31, 2018 , as applicable, revenue from unexercised option periods of contracts that existed on June 30, 2019 or on December 31, 2018 , as applicable, revenue from vessels in the Company’s equity-accounted investments, or variable or contingent revenues accounted for under ASC 842 Leases. In addition, minimum scheduled future operating lease revenues presented in this paragraph have been reduced by estimated off-hire time for any periodic maintenance. The amounts may vary given unscheduled future events such as vessel maintenance.

The net carrying amount of the vessels employed on time-charter contracts, bareboat charter contracts and FPSO contracts that have been accounted for as operating leases at June 30, 2019 , was $3.5 billion ( December 31, 2018 $3.4 billion ). At June 30, 2019 , the cost and accumulated depreciation of such vessels were $4.3 billion ( December 31, 2018 $4.3 billion ) and $0.9 billion ( December 31, 2018 $0.8 billion ), respectively.


Page 12

TEEKAY CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. Dollars, other than share and per share data)

Net Investment in Direct Financing Leases
Teekay LNG's time-charter contracts accounted for as direct financing leases contain both a lease component (lease of the vessel) and a non-lease component (operation of the vessel). Teekay LNG has allocated the contract consideration between the lease component and non-lease component on a relative standalone selling price basis. The standalone selling price of the non-lease component has been determined using a cost-plus approach, whereby Teekay LNG estimates the cost to operate the vessel using cost benchmarking studies prepared by a third party, when available, or internal estimates when not available, plus a profit margin. The standalone selling price of the lease component has been determined using an adjusted market approach, whereby Teekay LNG calculates a rate excluding the operating component based on a market time-charter rate from published broker estimates, when available, or internal estimates when not available. Given that there are no observable standalone selling prices for either of these two components, judgment is required in determining the standalone selling price of each component.
Teekay LNG has three liquefied natural gas (or LNG ) carriers, excluding vessels in its equity-accounted joint ventures, which are accounted for as direct financing leases. For a description of Teekay LNG's LNG carriers accounted for as direct financing leases, see "Item 18 – Financial Statements: Note 2" to the Company's Annual Report on Form 20-F for the year ended December 31, 2018. The following table lists the components of Teekay LNG's net investments in direct financing leases:
 
June 30, 2019
 
December 31, 2018
 
$
 
$
Total minimum lease payments to be received
865,333

 
897,130

Estimated unguaranteed residual value of leased properties
291,098

 
291,098

Initial direct costs and other
312

 
329

Less unearned revenue
(592,058
)
 
(613,394
)
Total
564,685

 
575,163

Less current portion
(13,082
)
 
(12,635
)
Long-term portion
551,603

 
562,528


As at June 30, 2019 , estimated minimum lease payments to be received by Teekay LNG related to its direct financing leases in each of the next five years are approximately $32.3 million ( 2019 ), $64.2 million ( 2020 ), $64.2 million ( 2021 ), $64.2 million ( 2022 ), $64.0 million ( 2023 ) and an aggregate of $576.4 million thereafter. The leases are scheduled to end between 2029 and 2039.

As at December 31, 2018 , estimated minimum lease payments to be received by Teekay LNG related to its direct financing leases in each of the next five years are approximately $64.2 million ( 2019 ), $64.3 million ( 2020 ), $64.2 million ( 2021 ), $64.2 million ( 2022 ), $64.0 million ( 2023 ) and an aggregate of $576.2 million thereafter. The leases are scheduled to end between 2029 and 2039.
Contract Liabilities

The Company enters into certain customer contracts that result in situations where the customer will pay consideration upfront for performance to be provided in the following month or months. These receipts are contract liabilities and are presented as deferred revenue until performance is provided. As at June 30, 2019 , December 31, 2018 , June 30, 2018 and on transition to ASC 606 on January 1, 2018, there were contract liabilities of $27.2 million , $26.4 million , $23.3 million and $29.5 million , respectively. During the three months ended June 30, 2019 and June 30, 2018 , the Company recognized $20.4 million and $20.5 million of revenue, respectively, that was recognized as a contract liability at the beginning of such three-month periods. During the six months ended June 30, 2019 and June 30, 2018 , the Company recognized $26.4 million and $28.9 million of revenue, respectively, that was recognized as a contract liability at the beginning of such six-month periods.
4 . Related Party Transactions
On May 8, 2019, Teekay sold to Brookfield Business Partners L.P. (or Brookfield ) all of the Company’s remaining interests in Teekay Offshore (or the 2019 Brookfield Transaction ), which included the Company’s 49% general partner interest, common units, warrants, and an outstanding $25 million loan from the Company to Teekay Offshore (described below), for total cash proceeds of $100 million . Prior to the 2019 Brookfield Transaction, Teekay Offshore was a related party of Teekay.

Subsequent to the deconsolidation of Teekay Offshore in September 2017 and prior to the 2019 Brookfield Transaction, the Company accounted for its investment in Teekay Offshore's general partner and common units under the equity method of accounting. Based on the 2019 Brookfield Transaction, the Company remeasured its investment in Teekay Offshore to fair value at March 31, 2019 based on the Teekay Offshore publicly-traded unit price at that date, resulting in a write-down of $64.9 million reflected in equity loss on the Company's consolidated statements of loss for the six months ended June 30, 2019 . The Company recognized a loss on sale of $8.9 million on completion of the 2019 Brookfield Transaction in May 2019.


Page 13

TEEKAY CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. Dollars, other than share and per share data)

As at June 30, 2019 , Teekay Offshore is no longer a party related to Teekay. Advances from Teekay to Teekay Offshore as at December 31, 2018 were $83.1 million and advances from Teekay Offshore to Teekay as at December 31, 2018 were $59.3 million . Such amounts were included in current portion of loans to equity-accounted investments and loans from equity-accounted investments, respectively, on the Company's consolidated balance sheet as at December 31, 2018 . Advances from Teekay to Teekay Offshore and advances from Teekay Offshore to Teekay were included in accounts receivable and accounts payable, respectively, on the Company's consolidated balance sheet as at June 30, 2019 .

In March 2018, Teekay Offshore entered into a loan agreement for a $125.0 million senior unsecured revolving credit facility, of which up to $25.0 million was provided by Teekay and up to $100.0 million was provided by Brookfield. Teekay’s $25.0 million loan to Teekay Offshore was among the assets sold by Teekay to Brookfield in the 2019 Brookfield Transaction.

On September 25, 2017, Teekay, Teekay Offshore and Brookfield completed a strategic partnership (or the  2017 Brookfield Transaction ), which resulted in the deconsolidation of Teekay Offshore as of that date. Until December 31, 2017, Teekay and its wholly-owned subsidiaries directly and indirectly provided substantially all of Teekay Offshore’s ship management, commercial, technical, strategic, business development and administrative service needs. On January 1, 2018, as part of the 2017 Brookfield Transaction, Teekay Offshore acquired a 100% ownership interest in seven subsidiaries (or the Transferred Subsidiaries ) of Teekay at carrying value. The Company recognized a loss of $7.1 million for the six months ended June 30, 2018 related to the sale of the Transferred Subsidiaries and the resultant release of accumulated pension losses from accumulated other comprehensive income, which is recorded in loss on deconsolidation of Teekay Offshore on the Company's consolidated statements of loss . Specifically, the Transferred Subsidiaries provided ship management, commercial, technical, strategic, business development and administrative services to Teekay Offshore, primarily related to Teekay Offshore's FPSO units, shuttle tankers and floating storage and offtake (or FSO ) units.

Subsequent to their transfer to Teekay Offshore, the Transferred Subsidiaries continue to provide ship management, commercial, technical, strategic, business development and administrative services to Teekay, primarily related to Teekay's FPSO units. Teekay and certain of its subsidiaries, other than the Transferred Subsidiaries, continue to provide certain other ship management, commercial, technical, strategic and administrative services to Teekay Offshore.

Revenues recognized by the Company for services provided to Teekay Offshore for the periods from April 1, 2019 to May 8, 2019 and January 1, 2019 to May 8, 2019 were $2.3 million and $7.6 million , respectively ( three and six months ended June 30, 2018 $4.5 million and $11.1 million , respectively), which were recorded in revenues on the Company's consolidated statements of loss . Fees paid by the Company to Teekay Offshore for services provided by Teekay Offshore to the Company for the periods from April 1, 2019 to May 8, 2019 and January 1, 2019 to May 8, 2019 were $3.3 million and $9.6 million , respectively ( three and six months ended June 30, 2018 $6.8 million and $13.3 million , respectively), which were recorded in vessel operating expenses and general and administrative expenses on the Company's consolidated statements of loss .

As at June 30, 2019 , two shuttle tankers and three FSO units of Teekay Offshore were employed on long-term time-charter-out or bareboat contracts to subsidiaries of Teekay. Time-charter hire expenses paid by the Company to Teekay Offshore for the periods from April 1, 2019 to May 8, 2019 and January 1, 2019 to May 8, 2019 were $6.1 million and $20.8 million , respectively ( three and six months ended June 30, 2018 $14.0 million and $28.0 million , respectively).

In September 2018, Teekay LNG entered into an agreement with its 52% -owned joint venture with Marubeni Corporation (or the Teekay LNG-Marubeni Joint Venture ) to charter in one of Teekay LNG-Marubeni Joint Venture's LNG carriers, the Magellan Spirit , for a period of two years at a fixed-rate. Time-charter hire expense for the three and six months ended June 30, 2019 were $3.1 million and $8.7 million , respectively.

The Company provides ship management and corporate services to certain of its equity-accounted joint ventures that own and operate LNG carriers on long-term charters. In addition, the Company is reimbursed for costs incurred by the Company for its seafarers operating these LNG carriers. During the three and six months ended June 30, 2019 , the Company earned $16.8 million and $32.6 million , respectively ( three and six months ended June 30, 2018 $13.1 million and $25.7 million , respectively), of fees pursuant to these management agreements and reimbursement of costs.
5 . Segment Reporting
The Company’s segments are described in "Item 18 – Financial Statements: Note 3" to the Company’s Annual Report on Form 20-F for the year ended December 31, 2018 . The Company allocates capital and assesses performance from the separate perspectives of its two publicly-traded subsidiaries Teekay LNG and Teekay Tankers (together, the Controlled Daughter Entities ), Teekay and its remaining subsidiaries (or Teekay Parent ), and, prior to the completion of the 2019 Brookfield Transaction, its equity-accounted investment in Teekay Offshore, as well as from the perspective of the Company's lines of business. The primary focus of the Company’s organizational structure, internal reporting and allocation of resources by the chief operating decision maker is on the Controlled Daughter Entities, Teekay Parent and, prior to the completion of the 2019 Brookfield Transaction, its equity-accounted investment in Teekay Offshore, (the Legal Entity approach ), and its segments are presented accordingly on this basis. The Company (which excludes Teekay Offshore) has three primary lines of business: (1) offshore production (FPSO units), (2) LNG and liquefied petroleum gas (or LPG ) carriers, and (3) conventional tankers. The Company manages these businesses for the benefit of all stakeholders. The Company incorporates the primary lines of business within its segments, as in certain cases there is more than one line of business in each Controlled Daughter Entity and the Company believes this information allows a better understanding of the Company’s performance and prospects for future net cash flows.

Page 14

TEEKAY CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. Dollars, other than share and per share data)

The following table includes the Company’s revenues by segment for the three and six months ended June 30, 2019 and 2018 :
 
Revenues
 
Three Months Ended June 30,
Six Months Ended June 30,
 
2019
2018
2019
2018
 
$
$
$
$
Teekay LNG
 
 
 
 
Liquefied Gas Carriers (1)
150,691

112,172

297,673

217,221

Conventional Tankers
2,369

10,143

5,131

20,400

 
153,060

122,315

302,804

237,621

 
 
 
 
 
Teekay Tankers
 
 
 
 
Conventional Tankers (1)
202,277

171,659

434,778

340,124

 
 
 
 
 
Teekay Parent
 
 
 
 
Offshore Production
57,828

66,429

107,266

132,399

Other
47,989

46,183

98,648

98,127

 
105,817

112,612

205,914

230,526

 
 
 
 
 
Eliminations and other
(3,487
)
(944
)
(4,616
)
(8,607
)
 
457,667

405,642

938,880

799,664


(1)
The amounts in the table below represent revenue earned by each segment from other segments within the group. During 2019, Teekay Tankers' ship-to-ship transfer business provided operational and maintenance services to Teekay LNG Bahrain Operations L.L.C., an entity wholly-owned by Teekay LNG, for the LNG receiving and regasification terminal in Bahrain. Also during 2019, the Magellan Spirit was chartered by Teekay LNG to Teekay Parent. During 2018, certain vessels were chartered by Teekay LNG to Teekay Parent. Such intersegment revenue for the three and six months ended June 30, 2019 and 2018 is as follows:
 
Three Months Ended June 30,
Six Months Ended June 30,
 
2019
2018
2019
2018
 
$
$
$
$
Teekay LNG - Liquefied Gas Carriers
2,487

1,439

2,487

9,418

Teekay Tankers - Conventional Tankers
1,000


2,129


 
3,487

1,439

4,616

9,418


The following table includes the Company’s income (loss) from vessel operations by segment for the three and six months ended June 30, 2019 and 2018 :
 
Income (Loss) from Vessel Operations (1)
 
Three Months Ended June 30,
Six Months Ended June 30,
 
2019
2018
2019
2018
 
$
$
$
$
Teekay LNG
 
 
 
 
Liquefied Gas Carriers
74,244

9,445

144,687

53,990

Conventional Tankers
433

1,060

(649
)
(18,343
)
 
74,677

10,505

144,038

35,647

 
 
 
 
 
Teekay Tankers
 
 
 
 
Conventional Tankers
5,051

(13,415
)
37,148

(21,836
)
 
 
 
 
 
Teekay Parent
 
 
 
 
Offshore Production
(5,987
)
5,541

(18,544
)
12,423

Other
(2,278
)
(710
)
(6,947
)
(5,808
)
 
(8,265
)
4,831

(25,491
)
6,615

 
 
 
 
 
 
71,463

1,921

155,695

20,426



Page 15

TEEKAY CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. Dollars, other than share and per share data)

(1)
Includes direct general and administrative expenses and indirect general and administrative expenses (allocated to each segment based on estimated use of corporate resources).
Prior to its sale in May 2019, the Company accounted for its investment in Teekay Offshore's general partner and common units using the equity method and recognized equity losses in respect of Teekay Offshore for the periods from April 1, 2019 to May 8, 2019 and January 1, 2019 to May 8, 2019 of $ nil and $3.1 million , respectively ( three and six months ended June 30, 2018 – equity losses of $9.3 million and $8.7 million , respectively). The Company wrote-down the investment in Teekay Offshore by $64.9 million in the six months ended June 30, 2019 and recognized a loss on sale of $8.9 million in the three and six months ended June 30, 2019 .
A reconciliation of total segment assets to total assets presented in the accompanying unaudited consolidated balance sheets is as follows:
 
June 30, 2019
December 31, 2018
 
$
$
Teekay LNG – Liquefied Gas Carriers
5,207,739

5,188,088

Teekay LNG – Conventional Tankers
13,748

39,450

Teekay Tankers – Conventional Tankers
2,118,499

2,106,169

Teekay Parent – Offshore Production
361,785

311,550

Teekay Parent – Conventional Tankers

13,056

Teekay Parent – Other
91,683

25,224

Teekay Offshore

233,225

Cash and cash equivalents
235,199

424,169

Other assets not allocated
130,348

70,153

Eliminations
(32,983
)
(19,414
)
Consolidated total assets
8,126,018

8,391,670

6 . Leases
Obligations Related to Finance Leases

June 30, 2019

December 31, 2018

$

$
Teekay LNG
 
 
 
LNG Carriers
1,399,796

 
1,274,569

Suezmax Tanker

 
23,987

Teekay Tankers
 
 
 
Suezmax Tankers
222,859

 
165,145

Aframax Tankers
178,518

 
184,021

LR2 Product Tanker
25,559

 
26,123

Total obligations related to finance leases
1,826,732

 
1,673,845

Less current portion
(89,922
)
 
(102,115
)
Long-term obligations related to finance leases
1,736,810

 
1,571,730


Teekay LNG

As at June 30, 2019 , Teekay LNG was a party to finance leases on nine LNG carriers ( December 31, 2018 eight LNG carriers). Upon delivery of these nine LNG carriers between February 2016 and January 2019, Teekay LNG sold these vessels to third parties (or Lessors ) and leased them back under 10 - to 15 -year bareboat charter contracts ending in 2026 through to 2034. At the inception of these leases, the weighted-average interest rate implicit in these leases was 5.2% . The bareboat charter contracts are presented as obligations related to finance leases on the Company's consolidated balance sheets and have purchase obligations at the end of the lease terms.

Teekay LNG consolidates eight of the nine Lessors for financial reporting purposes as variable interest entities. Teekay LNG understands that these vessels and lease operations are the only assets and operations of the Lessors. Teekay LNG operates the vessels during the lease term and as a result, is considered to be, under GAAP, the Lessor's primary beneficiary.

The liabilities of the eight Lessors are loans and are non-recourse to Teekay LNG. The amounts funded to the eight Lessors in order to purchase the vessels materially match the funding to be paid by Teekay LNG's subsidiaries under the sale-leaseback transactions. As a result, the amounts due by Teekay LNG's subsidiaries to the eight Lessors have been included in obligations related to finance leases as representing the Lessors' loans.

Page 16

TEEKAY CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. Dollars, other than share and per share data)


During January 2019, Teekay LNG sold the Yamal Spirit and leased it back for a period of 15 years, with an option granted to Teekay LNG to extend the lease term by an additional five years. Teekay LNG is required to purchase the vessel at the end of the lease term. Subsequent to the adoption of ASU 2016-02 on January 1, 2019, sale-leaseback transactions where the lessee has a purchase obligation are treated as a failed sale. Consequently, Teekay LNG has not derecognized the vessel and continues to depreciate the asset as if Teekay LNG was the legal owner. Proceeds received from the sale are set up as a financial liability and bareboat charter hire payments made by Teekay LNG to the Lessor are allocated between interest expense and principal repayments on the financial liability.

The obligations of Teekay LNG under the bareboat charter contracts for the nine LNG carriers are guaranteed by Teekay LNG. In addition, the guarantee agreements require Teekay LNG to maintain minimum levels of tangible net worth and aggregate liquidity, and not to exceed a maximum amount of leverage. As at June 30, 2019 , Teekay LNG was in compliance with all covenants in respect of the obligations related to its finance leases.

As at June 30, 2019 and December 31, 2018 , the remaining commitments related to the financial liabilities of these nine LNG carriers ( December 31, 2018 eight LNG carriers) including the amounts to be paid for the related purchase obligations, approximated $1.9 billion ( December 31, 2018 $1.7 billion ), including imputed interest of $495.6 million ( December 31, 2018 $435.3 million ), repayable for the remainder of 2019 through 2034, as indicated below:


Commitments
 
 
At June 30, 2019
 
At December 31, 2018
Year

$
 
$
Remainder of 2019

67,962

 
119,517

2020

134,915

 
118,685

2021

133,542

 
117,772

2022

132,312

 
116,978

2023

131,237

 
116,338

Thereafter

1,295,440

 
1,120,670


As at December 31, 2018 , Teekay LNG was a party, as lessee, to a finance lease on one Suezmax tanker, the Toledo Spirit . As at December 31, 2018 , the remaining commitments related to the finance lease for the Suezmax tanker, including the related purchase obligation, approximated $24.2 million , including imputed interest of $0.2 million , repayable in 2019. In January 2019, the charterer, who is also the owner, sold the Toledo Spirit to a third party which resulted in Teekay LNG returning the vessel to its owner and the obligation related to finance lease concurrently being extinguished.

Teekay Tankers

In May 2019, Teekay Tankers completed a $63.7 million sale-leaseback financing transaction with a financial institution relating to two of Teekay Tankers' Suezmax tankers, the Aspen Spirit and Cascade Spirit .
In November 2018, Teekay Tankers completed an $84.7 million sale-leaseback financing transaction with a financial institution relating to four of Teekay Tankers' vessels, consisting of two Aframax tankers, one Suezmax tanker and one Long Range 2 (or LR2 ) product tanker, the Explorer Spirit , Navigator Spirit , Pinnacle Spirit and Trysil Spirit .

In September 2018, Teekay Tankers completed a $156.6 million sale-leaseback financing transaction with a financial institution relating to six of its Aframax tankers, the Blackcomb Spirit, Emerald Spirit, Garibaldi Spirit, Peak Spirit, Tarbet Spirit and Whistler Spirit .

In July 2017, Teekay Tankers completed a $153.0 million sale-leaseback financing transaction with a financial institution relating to four of its Suezmax tankers, the Athens Spirit , the Beijing Spirit , the Moscow Spirit and the Sydney Spirit .

Under these arrangements, Teekay Tankers transferred the vessels to subsidiaries of the financial institutions (or collectively, the Lessors ), and leased the vessels back from the Lessors on bareboat charters ranging from nine - to 12 -year terms. Teekay Tankers is obligated to purchase six of the Aframax vessels and two of the Suezmax vessels upon maturity of their respective bareboat charters. Teekay Tankers also has the option to purchase each of the 16 tankers at various times starting between July 2020 and November 2021 until the end of their respective lease terms.

Teekay Tankers consolidates 14 of the 16 Lessors for financial reporting purposes as VIEs. Teekay Tankers understands that these vessels and lease operations are the only assets and operations of the Lessors. Teekay Tankers operates the vessels during the lease terms, and as a result, is considered to be the Lessor's primary beneficiary.

The liabilities of the 14 Lessors are loans that are non-recourse to Teekay Tankers. The amounts funded to the 14 Lessors in order to purchase the vessels materially match the funding to be paid by Teekay Tankers' subsidiaries under these leaseback transactions. As a result, the amounts due by Teekay Tankers' subsidiaries to the 14 Lessors considered as VIEs have been included in obligations related to finance leases as representing the Lessors' loans.


Page 17

TEEKAY CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. Dollars, other than share and per share data)

Subsequent to the adoption of ASU 2016-02 on January 1, 2019, sale and leaseback transactions where the lessee has a purchase obligation are treated as a failed sale. Consequently, Teekay Tankers has not derecognized the Aspen Spirit and Cascade Spirit and continues to depreciate the assets as if it was the legal owner. Proceeds received from the sale are set up as an obligation related to finance lease and bareboat charter hire payments made by Teekay Tankers to the Lessor are allocated between interest expense and principal repayments on the obligation related to finance lease.

The bareboat charters related to each of these vessels require that Teekay Tankers maintain minimum liquidity (cash, cash equivalents and undrawn committed revolving credit lines with at least six months to maturity) of $35.0 million and at least 5.0% of Teekay Tankers' consolidated debt and obligations related to finance leases (excluding applicable security deposits reflected in restricted cash – non-current on the Company's consolidated balance sheets).

Four of the bareboat charters require Teekay Tankers to maintain, for each vessel, a hull coverage ratio of 90% of the total outstanding principal balance during the first three years of the lease period and 100% of the total outstanding principal balance thereafter. As at June 30, 2019 , this ratio was approximately 112% ( December 31, 2018 101% ).
 
Six of the bareboat charters require Teekay Tankers to maintain, for each vessel, a hull coverage ratio of 75% of the total outstanding principal balance during the first year of the lease period, 78% for the second year, 80% for the following two years and 90% of the total outstanding principal balance thereafter. As at June 30, 2019 , this ratio was approximately 102% ( December 31, 2018 91% ).
 
Four of the bareboat charters also require Teekay Tankers to maintain, for each vessel, a hull overage ratio of 100% of the total outstanding principal balance. As at June 30, 2019 , this ratio was approximately 133% ( December 31, 2018 122% ).

The remaining two bareboat charters also require Teekay Tankers to maintain, for each vessel, a minimum hull coverage ratio of 75% of the total outstanding principal balance during the first year of the lease period, 78% for the second year, 80% for the following two years and 90% of the total outstanding principal balance thereafter. As at June 30, 2019 , this ratio was approximately 97% .

Such requirements are assessed annually with reference to vessel valuations compiled by one or more agreed upon third parties. As at June 30, 2019 , Teekay Tankers was in compliance with all covenants in respect of its obligations related to finance leases.

The weighted average interest rate on Teekay Tankers’ obligations related to finance leases as at June 30, 2019 was 7.7% ( December 31, 2018 7.5% ).

As at June 30, 2019 and December 31, 2018 , the total remaining commitments related to the financial liabilities of Teekay Tankers' Suezmax, Aframax and LR2 product tankers, including the amounts to be paid for the related purchase obligations, approximated $632.0 million ( December 31, 2018 $557.1 million ), including imputed interest of $203.2 million ( December 31, 2018 $181.8 million ), repayable from 2019 through 2030, as indicated below:


Commitments
 
 
At June 30, 2019
 
At December 31, 2018
Year

$
 
$
Remainder of 2019

30,336

 
47,962

2020

56,364

 
47,373

2021

56,202

 
47,237

2022

56,193

 
47,230

2023

56,184

 
47,222

Thereafter

376,750

 
320,064

Operating Lease Liabilities

The Company charters-in vessels from other vessel owners on time-charter-in and bareboat charter contracts, whereby the vessel owner provides use of the vessel to the Company, and, in the case of time-charter-in contracts, also operates the vessel for the Company. A time-charter-in contract is typically for a fixed period of time, although in certain cases the Company may have the option to extend the charter. The Company typically pays the owner a daily hire rate that is fixed over the duration of the charter. The Company is generally not required to pay the daily hire rate for time-charters during periods the vessel is not able to operate.


Page 18

TEEKAY CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. Dollars, other than share and per share data)

The Company has determined that all of its time-charter-in contracts contain both a lease component (lease of the vessel) and a non-lease component (operation of the vessel). The Company has allocated the contract consideration between the lease component and non-lease component on a relative standalone selling price basis. The standalone selling price of the non-lease component has been determined using a cost-plus approach, whereby the Company estimates the cost to operate the vessel using cost benchmarking studies prepared by a third party, when available, or internal estimates when not available, plus a profit margin. The standalone selling price of the lease component has been determined using an adjusted market approach, whereby the Company calculates a rate excluding the operating component based on a market time-charter rate information from published broker estimates, when available, or internal estimates when not available. Given that there are no observable standalone selling prices for either of these two components, judgment is required in determining the standalone selling price of each component. The discount rate of the lease is determined using the Company’s incremental borrowing rate, which is based on the fixed interest rate the Company could obtain when entering into a secured loan facility of similar terms for an amount equal to the total minimum lease payments. The bareboat charter contracts contain only a lease component.

With respect to time-charter-in and bareboat charter contracts with an original term of more than one year, for the three and six months ended June 30, 2019 , the Company incurred $23.7 million and $48.8 million , respectively, of time-charter and bareboat hire expense related to these time-charter and bareboat charter contracts, of which $16.4 million and $33.7 million , respectively, were allocable to the lease component, and $7.3 million and $15.1 million , respectively, were allocable to the non-lease component. The amounts allocable to the lease component approximates the cash paid for the amounts included in lease liabilities and is reflected as a reduction in operating cash flows for the three and six months ended June 30, 2019 . Two of Teekay Tankers' time-charter-in contracts each have an option to extend the charter for an additional one-year term. Since it is not reasonably certain that Teekay Tankers will exercise the options, the lease components of the options are not recognized as part of the right-of-use assets and lease liabilities. As at June 30, 2019 , the weighted-average remaining lease term and weighted-average discount rate for these time-charter-in and bareboat charter contracts were 3.0 years and 6.2% , respectively.

The Company has elected to recognize the lease payments of short-term leases in its consolidated statements of loss on a straight-line basis over the lease term and variable lease payments in the period in which the obligation for those payments is incurred, which is consistent with the recognition of payment for the non-lease component. The Company considers as short-term leases those with an original term of one year or less, excluding leases with an option to extend the lease for greater than one year or an option to purchase the underlying asset where the lessee is deemed reasonably certain to exercise the applicable option. For the three and six months ended June 30, 2019 , the Company incurred $4.9 million and $9.2 million , respectively, of time-charter hire expense related to time-charter-in contracts classified as short-term leases.

During the six months ended June 30, 2019 , Teekay Tankers chartered in two LR2 vessels each for a period of 24 months , which resulted in the Company recognizing right-of-use assets of $14.7 million on the lease commencement dates.

A maturity analysis of the Company’s operating lease liabilities from time-charter-in and bareboat charter contracts (excluding short-term leases) at June 30, 2019 is as follows:

 
Lease Commitment

Non-Lease Commitment
 
Total Commitment
Year
 
$

$
 
$
Payments
 
 
 
 
 
 
Remainder of 2019
 
36,398

 
17,112

 
53,510

2020
 
65,362

 
33,659

 
99,021

2021
 
51,672

 
24,913

 
76,585

2022
 
22,978

 
8,189

 
31,167

2023
 
9,227

 

 
9,227

Thereafter
 
5,712

 

 
5,712

Total payments
 
191,349

 
83,873

 
275,222

Less: imputed interest
 
(17,873
)
 
 
 
 
Carrying value of operating lease liabilities
 
173,476

 
 
 
 
Less current portion
 
(59,554
)
 
 
 
 
Carrying value of long-term operating lease liabilities
 
113,922

 
 
 
 

As at June 30, 2019 , minimum commitments to be incurred by the Company under short-term time-charter-in contracts were approximately $6.0 million (remainder of 2019) and $0.6 million (2020).
As at December 31, 2018 , minimum commitments to be incurred by the Company under vessel operating leases by which the Company charters-in vessels were approximately $116.3 million ( 2019 ), $90.4 million ( 2020 ), $53.4 million ( 2021 ), $9.1 million ( 2022 ), $9.1 million ( 2023 ) and $5.6 million thereafter.
7 . Write-down and Loss on Sales of Vessels
The Company's write-downs and vessel sales generally relate to vessels approaching the end of their useful lives as well as other vessels it strategically sells to reduce exposure to a certain vessel class.


Page 19

TEEKAY CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. Dollars, other than share and per share data)

The following tables contain the write-downs and loss on sales of vessels for the three and six months ended June 30, 2019 and 2018 :
 
 
 
 
 
 
Three Months Ended June 30,
Segment

Asset Type

Completion of Sale Date

2019
$

2018
$
Teekay LNG Segment – Liquefied Gas Carriers (1)
 
4 Multi-gas Carriers
 
N/A
 

 
(33,000
)
Other
 
 
 
 
 

 
170

Total
 
 
 
 
 

 
(32,830
)

 
 
 
 
 
 
Six Months Ended June 30,
Segment
 
Asset Type
 
Completion of Sale Date
 
2019
$
 
2018
$
Teekay Parent Segment - Offshore Production (2)
 
FPSO
 
N/A
 
(3,328
)
 

Teekay LNG Segment - Conventional Tankers  (3)
 
Handymax
 
N/A
 

 
(13,000
)
Teekay LNG Segment - Liquefied Gas Carriers  (1)
 
4 Multi-gas Carriers
 
N/A
 

 
(33,000
)
Teekay LNG Segment - Conventional Tankers  (4)
 
2 Suezmaxes
 
Oct/Dec-2018
 

 
(5,662
)
Other
 
 
 
 
 

 
170

Total
 
 
 
 
 
(3,328
)
 
(51,492
)

(1)
In June 2018, the carrying value for four of Teekay LNG's seven wholly-owned Multi-gas carriers, the  Napa Spirit Pan Spirit Cathinka Spirit  and  Camilla Spirit , were written down to their estimated fair value, using appraised values, as a result of Teekay LNG's evaluation of alternative strategies for these assets, the current charter rate environment and the outlook for charter rates for these vessels.
(2)
In March 2019, the Company took an impairment charge in respect of certain of its FPSO-related assets.
(3)
In March 2018, the carrying value of the Alexander Spirit conventional tanker was written down to its estimated fair value, using an appraised value, as a result of changes in the Company's expectations of the vessel's future opportunities once its current charter contract ends in 2019. Teekay LNG commenced marketing the vessel for sale in 2019 and it is presented as held for sale in the consolidated balance sheets as at June 30, 2019 .
(4)
In June and August 2017, the charterer for the  European Spirit  and  African Spirit  Suezmax tankers gave formal notices to Teekay LNG that it would not exercise its one-year extension option under the charter contracts and redelivered the tankers in August 2017 and November 2017, respectively. Upon receiving these notifications, Teekay LNG commenced marketing the vessels for sale. Based on second-hand market comparable values at the time, Teekay LNG wrote down the vessels to their estimated resale values and they were presented as held for sale on the consolidated balance sheets as at December 31, 2017. During the six months ended June 30, 2018, Teekay LNG recorded a further write-down of the vessels to their estimated resale value. In the fourth quarter of 2018, Teekay LNG sold the  European Spirit and African Spirit for net proceeds of $15.7 million and $12.8 million , respectively, using the net proceeds from the sales primarily to repay its existing term loans associated with the vessels.
8 . Accounts Payable, Accrued Liabilities and Other
 
June 30, 2019
 
December 31, 2018
 
$
 
$
Accounts payable
117,408

 
31,201

Accrued liabilities
 
 
 
Voyage and vessel expenses
113,748

 
98,135

Interest
31,582

 
47,731

Payroll and related liabilities
31,623

 
34,849

Distributions payable
6,486

 
6,426

Short-term debt
15,000

 

Deferred revenues – current
31,012

 
30,108

In-process revenue contracts – current
5,933

 
5,930

Office lease liability – current ( note 2 )
3,230

 

 
356,022

 
254,380



Page 20

TEEKAY CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. Dollars, other than share and per share data)

9 . Long-Term Debt
 
June 30, 2019
 
December 31, 2018
 
$
 
$
Revolving Credit Facilities
500,930

 
642,997

Senior Notes (8.5%) due January 15, 2020
36,712

 
508,577

Senior Notes (9.25%) due November 15, 2022
250,000

 

Convertible Senior Notes (5%) due January 15, 2023
125,000

 
125,000

Norwegian Krone-denominated Bonds due through August 2023
357,454

 
352,973

U.S. Dollar-denominated Term Loans due through 2030
1,437,688

 
1,536,499

Euro-denominated Term Loans due through 2024
180,115

 
193,781

Other U.S. Dollar-denominated loan
3,300

 
3,300

Total principal
2,891,199

 
3,363,127

Less unamortized discount and debt issuance costs
(47,874
)
 
(43,604
)
Total debt
2,843,325

 
3,319,523

Less current portion
(540,440
)
 
(242,137
)
Long-term portion
2,302,885

 
3,077,386


As of June 30, 2019 , the Company had five revolving credit facilities (or the Revolvers ) available, which, as at such date, provided for aggregate borrowings of up to $886.8 million , of which $385.8 million was undrawn. Interest payments are based on LIBOR plus margins; the margins ranged between 1.40% and 3.95% at June 30, 2019 and at December 31, 2018 . The aggregate amount available under the Revolvers is scheduled to decrease by $17.4 million (remainder of 2019 ), $372.4 million ( 2020 ), $329.2 million ( 2021 ) and $167.8 million ( 2022 ). The Revolvers are collateralized by first-priority mortgages granted on 36 of the Company’s vessels, together with other related security, and include a guarantee from Teekay or its subsidiaries for all but one of the Revolvers' outstanding amounts. Included in other related security are 25.2 million common units in Teekay LNG and 40.3 million Class A common shares in Teekay Tankers to secure a $150 million credit facility.

The Company’s 8.5% senior unsecured notes are due January 15, 2020 with an original aggregate principal amount of $450 million (the Original Notes ). The Original Notes issued on January 27, 2010 were sold at a price equal to 99.2% of par. During 2014, the Company repurchased $57.3 million of the Original Notes. In November 2015, the Company issued an aggregate principal amount of $200 million of the Company’s 8.5% senior unsecured notes due on January 15, 2020 (or the Additional Notes ) at 99.01% of face value, plus accrued interest from July 15, 2015. The Additional Notes were an additional issuance of the Company's Original Notes (collectively referred to as the 2020 Notes ). The Additional Notes were issued under the same indenture governing the Original Notes, and are fungible with the Original Notes. The discount on the 2020 Notes is accreted through the maturity date of the notes using the effective interest rate of 8.67%  per year. During 2018, the Company repurchased  $84.1 million  in aggregate principal amount of the 2020 Notes. During the first quarter of 2019, the Company repurchased an additional $10.9 million in aggregate principal amount of the 2020 Notes.

In May 2019, the Company completed a cash tender offer and purchased $460.9 million in aggregate principal amount of the 2020 Notes and issued $250.0 million in aggregate principal amount of 9.25% senior secured notes at par due November 2022 (or the 2022 Notes ). The Company recognized a loss of $10.7 million on the purchase of the 2020 Notes in the second quarter of 2019 which is included in other (loss) income in the consolidated statements of loss . The 2022 Notes are guaranteed on a senior secured basis by certain of our subsidiaries and are secured by first-priority liens on two of Teekay's FPSO units, a pledge of the equity interests of Teekay's subsidiary that owns all of Teekay's common units of Teekay LNG Partners L.P. and all of Teekay’s Class A common shares of Teekay Tankers Ltd. and a pledge of the equity interests in Teekay's subsidiaries that own Teekay Parent's three FPSO units.

The 2020 Notes rank equally in right of payment with all of Teekay's existing and future senior unsecured debt and senior to any future subordinated debt of Teekay. The 2020 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 of its subsidiaries.
 
The Company may redeem the 2020 Notes in whole or in part at any time before their maturity date at a redemption price equal to the greater of (i)  100% of the principal amount of the 2020 Notes to be redeemed and (ii) the sum of the present values of the remaining scheduled payments of principal and interest on the 2020 Notes to be redeemed (excluding accrued interest), discounted to the redemption date on a semi-annual basis, at the treasury yield plus 50 basis points, plus accrued and unpaid interest to the redemption date.

The Company may redeem the 2022 Notes in whole or in part at any time prior to November 15, 2020 at a redemption price equal to 100% of the principal amount of the 2022 Notes to be redeemed, plus the greater of (i) 1.0% of the principal amount of such 2022 Notes and (ii) the excess, if any, of the sum of the present values of the remaining scheduled payments of principal and interest on the 2022 Notes to be redeemed (excluding accrued interest), discounted to the redemption date on a semi-annual basis, at the treasury yield plus 50 basis points over the principal amount of such 2022 Notes, plus accrued and unpaid interest to, but excluding, the redemption date.


Page 21

TEEKAY CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. Dollars, other than share and per share data)

The Company may redeem the 2022 Notes in whole or in part at a redemption price equal to a percentage of the principal amount of the 2022 Notes to be redeemed plus accrued and unpaid interest to, but excluding, the redemption date, as follows: 104.625% at any time on or after November 15, 2020, but prior to November 15, 2021; 102.313% at any time on or after November 15, 2021, but prior to August 15, 2022; and 100% at any time on or after August 15, 2022.

On January 26, 2018, Teekay Parent completed a private offering of $125.0 million in aggregate principal amount of 5% Convertible Senior Notes due January 15, 2023 (the Convertible Notes ). The Convertible Notes are convertible into Teekay’s common stock, initially at a rate of 85.4701 shares of common stock per $1,000 principal amount of Convertible Notes. This represents an initial effective conversion price of $11.70 per share of common stock. The initial conversion price represents a premium of 20% to the concurrent common stock offering price of $9.75 per share. The conversion rate is subject to customary adjustments for, among other things, payments of dividends by Teekay Parent beyond the current quarterly dividend of $0.055 per share of common stock. On issuance of the Convertible Notes, $104.6 million of the net proceeds was reflected in long-term debt, including unamortized discount, and is being accreted to $125.0 million over its five -year term through interest expense. The remaining amount of the net proceeds of $16.1 million was allocated to the conversion feature and reflected in additional paid-in capital.

Teekay LNG has a total of Norwegian Krone (or NOK ) 3.1 billion in senior unsecured bonds issued in the Norwegian bond market at June 30, 2019 that mature through August 2023. As of June 30, 2019 , the total carrying amount of the senior unsecured bonds was $357.5 million ( December 31, 2018 $353.0 million ). The bonds are listed on the Oslo Stock Exchange. The interest payments on the bonds are based on NIBOR plus a margin, which ranges from 3.70% to 6.00% . The Company entered into cross currency rate swaps to swap all interest and principal payments of the bonds into U.S. Dollars, with the interest payments fixed at rates ranging from 5.92% to 7.89% , and the transfer of the principal amount fixed at $382.5 million upon maturity in exchange for NOK 3.1 billion (see Note 15 ).

As of June 30, 2019 , the Company had 10 U.S. Dollar-denominated term loans outstanding, which totaled $1.4 billion in aggregate principal amount ( December 31, 2018 $1.5 billion ). Interest payments on the term loans are based on LIBOR plus a margin , of which two of the term loans have additional tranches with a weighted average fixed rate of 4.49% . At June 30, 2019 , the margins ranged between 0.30% and 3.25% and at December 31, 2018 , the margins ranged between 0.30% and 3.50% . Term loans require payments in quarterly or semi-annual installments commencing three or six months after delivery of each newbuilding vessel financed thereby, and eight of the term loans have balloon or bullet repayments due at maturity. The term loans are collateralized by first-priority mortgages on 24 ( December 31, 2018 24 ) of the Company’s vessels, together with certain other security.
 
Teekay LNG has two Euro-denominated term loans outstanding, which, as at June 30, 2019 , totaled 158.4 million Euros ( $180.1 million ) ( December 31, 2018 169.0 million Euros ( $193.8 million )). Teekay LNG is servicing 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 June 30, 2019 and December 31, 2018 , the margins ranged between 0.60% and 1.95% . The Euro-denominated term loans reduce in monthly and semi-annual payments with varying maturities through 2024, are collateralized by first-priority mortgages on two of Teekay LNG's vessels, together with certain other security, and are guaranteed by Teekay LNG and one of its subsidiaries.

Both Euro-denominated term loans and NOK-denominated bonds are revalued at the end of each period using the then-prevailing U.S. Dollar exchange rate. Due primarily to the revaluation of the Company’s NOK-denominated bonds, the Company’s Euro-denominated term loans and restricted cash, and the change in the valuation of the Company’s cross currency swaps, the Company recognized a foreign exchange loss of $5.9 million ( 2018 – gain of $12.5 million ) and a loss of $8.5 million ( 2018 – gain of $12.6 million ) during the three and six months ended June 30, 2019 and 2018 , respectively.

The weighted-average interest rate on the Company’s aggregate long-term debt as at June 30, 2019 was 4.9% ( December 31, 2018 5.1% ). This rate does not include the effect of the Company’s interest rate swap agreements (see Note 15 ).

Teekay has guaranteed obligations pursuant to certain credit facilities of Teekay Tankers. As at June 30, 2019 , the aggregate outstanding balance on such credit facilities was $155.8 million .

The aggregate annual long-term debt principal repayments required to be made by the Company subsequent to June 30, 2019 are $120.1 million (remainder of 2019 ), $703.8 million ( 2020 ), $826.8 million ( 2021 ), $373.1 million ( 2022 ), $339.0 million ( 2023 ) and $528.4 million (thereafter).

The Company’s long-term debt agreements generally provide for maintenance of minimum consolidated financial covenants and five loan agreements require the maintenance of vessel market value to loan ratios. As at June 30, 2019 , these ratios ranged from 135% to 511% compared to their minimum required ratios of 115% to 135% . The vessel values used in these ratios are the appraised values provided by third parties where available, or prepared by the Company based on second-hand sale and purchase market data. Changes in the LNG/LPG carrier and conventional tanker markets could negatively affect the Company's compliance with these ratios.


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TEEKAY CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. Dollars, other than share and per share data)

Two of Teekay Tankers’ term loans, which are scheduled to mature between January 2021 and August 2021 are guaranteed by Teekay. One of the term loans contains covenants that require Teekay Parent to maintain the greater of (a) free cash (cash and cash equivalents) and undrawn committed revolving credit lines with at least six months to maturity of at least $50.0 million and (b) an aggregate of free cash and undrawn committed revolving credit lines with at least six months to maturity of at least 5.0% of Teekay’s total consolidated debt (excluding the debt Teekay LNG and its subsidiaries and Teekay Tankers and its subsidiaries which is non-recourse to Teekay). The other term loan requires Teekay Parent and Teekay Tankers collectively to maintain the greater of (a) free cash (cash and cash equivalents) of at least $100.0 million and (b) an aggregate of free cash and undrawn committed revolving credit lines with at least six months to maturity of at least 7.5% of Teekay's total consolidated debt (excluding the debt of Teekay LNG). In addition, certain loan agreements require Teekay Tankers to maintain minimum liquidity (cash, cash equivalents and undrawn committed revolving credit lines with at least  six  months to maturity) of  $35.0 million  and at least  5.0%  of Teekay Tankers' total consolidated debt. Certain loan agreements require Teekay LNG to maintain a minimum level of tangible net worth, and minimum liquidity (cash, cash equivalents and undrawn committed revolving credit lines with at least six months to maturity) of $35.0 million , and not to exceed a maximum level of financial leverage.

As at June 30, 2019 , the Company was in compliance with all covenants under its credit facilities and other long-term debt.
10 . Capital Stock
The authorized capital stock of Teekay at June 30, 2019 and December 31, 2018 was 25 million shares of preferred stock, with a par value of $1 per share, and 725 million shares of common stock, with a par value of $0.001 per share. As at June 30, 2019 , Teekay had no shares of preferred stock issued.

In April 2019, Teekay filed a continuous offering program (or  COP ) under which Teekay may issue shares of its common stock, at market prices up to a maximum aggregate amount of $63.0 million . No shares of common stock have been issued under this COP as of June 30, 2019 .

During the six months ended June 30, 2018 , Teekay completed a public offering of 10.0 million common shares priced at $9.75 per share, raising net proceeds of approximately $93.0 million and issued 1.1 million shares of common stock as part of a COP initiated in 2016 generating net proceeds of $10.7 million .

During the six months ended June 30, 2019 and 2018 , the Company granted 2,646,903 and 1,048,916 stock options with exercise prices of $3.98 and $8.67 per share, respectively, 796,733 and 625,878 restricted stock units with fair values of $3.3 million and $5.4 million , respectively, and 144,441 and 79,869  shares of restricted stock awards with fair values of $0.5 million and $0.7 million , respectively, to certain of the Company’s employees and directors. Each stock option has a ten -year term and vests equally over three years from the grant date. Each restricted stock unit and restricted stock award is equal in value to one share of the Company’s common stock plus reinvested dividends from the grant date to the vesting date. The restricted stock units vest equally over three years from the grant date. Upon vesting, the value of the restricted stock units and restricted stock awards are paid to each grantee in the form of shares.

The weighted-average grant-date fair value of stock options granted during the six months ended June 30, 2019 was $1.47 per stock option. The fair value of each stock option granted was estimated on the grant date using the Black-Scholes option pricing model. The following weighted-average assumptions were used in computing the fair value of the stock options granted: expected volatility of 65.2% ; expected life of 5.5 years; dividend yield of 5.9% ; risk-free interest rate of 2.5% ; and estimated forfeiture rate of 6.0% . The expected life of the stock options granted was estimated using the historical exercise behavior of employees. The expected volatility was generally based on historical volatility as calculated using historical data during the five years prior to the grant date.

Share-based Compensation of Subsidiaries

During the six