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 March 31, 2020
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 MARCH 31, 2020
INDEX



Page 2



ITEM 1 – FINANCIAL STATEMENTS
TEEKAY CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(in thousands of U.S. Dollars, except share and per share amounts)
 
 
Three Months Ended March 31,
 
2020
 
2019
 
$
 
$
Revenues (note 3)
574,054

 
486,873

Voyage expenses
(121,564
)
 
(108,783
)
Vessel operating expenses
(153,293
)
 
(156,992
)
Time-charter hire expenses (note 6)
(27,056
)
 
(29,838
)
Depreciation and amortization
(72,917
)
 
(72,107
)
General and administrative expenses
(18,277
)
 
(22,972
)
Write-down and loss on sale (note 7)
(94,606
)
 
(3,328
)
Gain on commencement of sales-type lease (note 3)
44,943

 

Restructuring charges (note 14)
(2,388
)
 
(8,621
)
Income from vessel operations
128,896


84,232

Interest expense
(62,520
)

(73,671
)
Interest income
2,803

 
2,689

Realized and unrealized losses on non-designated derivative instruments (note 16)
(21,663
)
 
(5,423
)
Equity income (loss) (note 4 and 13b)
2,313

 
(61,653
)
Foreign exchange gain (loss) (notes 10 and 16)
6,646

 
(2,630
)
Other (loss) income
(681
)

28

Income (loss) before income taxes
55,794

 
(56,428
)
Income tax expense (note 17)
(3,792
)
 
(5,036
)
Net income (loss)
52,002

 
(61,464
)
Net income attributable to non-controlling interests
(101,807
)
 
(22,793
)
Net loss attributable to the shareholders of Teekay Corporation
(49,805
)
 
(84,257
)
Per common share of Teekay Corporation (note 18)
 
 
 
•  Basic loss attributable to shareholders of Teekay Corporation
(0.49
)
 
(0.84
)
•  Diluted loss attributable to shareholders of Teekay Corporation
(0.49
)
 
(0.84
)
Weighted average number of common shares outstanding (note 18)
 
 
 
•  Basic and Diluted
100,887,551

 
100,520,421


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 March 31,
 
2020
 
2019
 
$
 
$
Net income (loss)
52,002

 
(61,464
)
Other comprehensive loss:
 
 
 
Other comprehensive loss before reclassifications
 
 
 
Unrealized loss on qualifying cash flow hedging instruments
(57,552
)
 
(21,509
)
Pension adjustments, net of taxes
(15
)
 
(87
)
Amounts reclassified from accumulated other comprehensive loss relating to:
 
 
 
Realized loss (gain) on qualifying cash flow hedging instruments
 
 
 
To interest expense (note 16)
152

 
(251
)
To equity income (loss)
3,504

 
(500
)
Other comprehensive loss
(53,911
)
 
(22,347
)
Comprehensive loss
(1,909
)
 
(83,811
)
Comprehensive income attributable to non-controlling interests
(65,520
)
 
(7,693
)
Comprehensive loss attributable to shareholders of Teekay Corporation
(67,429
)
 
(91,504
)
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
March 31,
2020
 
As at
December 31,
2019
 
$
 
$
ASSETS

 
 
Current

 
 
Cash and cash equivalents (note 10 and 19)
564,401

 
353,241

Restricted cash – current (note 19)
40,444

 
56,777

Accounts receivable, including non-trade of $7,590 (2019 – $12,793)
205,548

 
199,957

Accrued revenue
66,900

 
107,111

Prepaid expenses and other (notes 3 and 16)
87,257

 
86,338

Current portion of net investments in direct financing and sales-type leases

80,720

 
273,986

Assets held for sale (note 20b)
50,818

 
65,458

Total current assets
1,096,088

 
1,142,868

Restricted cash – non-current (note 19)
83,408

 
44,849

Vessels and equipment (note 10)


 
 
At cost, less accumulated depreciation of $1,229,094 (2019 – $1,259,404) (notes 7 and 13)
2,448,226

 
2,654,466

Vessels related to finance leases, at cost, less accumulated amortization of $272,807 (2019 – $253,553) (note 6)
2,205,845

 
2,219,026

Operating lease right-of-use assets (note 6)
91,624

 
159,638

Total vessels and equipment
4,745,695

 
5,033,130

Net investment in direct financing and sales-type leases – non-current (notes 3 and 13b)
544,821

 
544,823

Investment in and loans to equity-accounted investments (notes 4,12a and 13b)
1,083,741

 
1,173,728

Goodwill, intangibles and other non-current assets (note 16)
130,051

 
133,466

Total assets
7,683,804

 
8,072,864

LIABILITIES AND EQUITY


 
 
Current


 
 
Accounts payable
133,215

 
135,496

Accrued liabilities and other (notes 8, 14 and 16)
294,425

 
295,001

Short-term debt (note 9)
55,000

 
50,000

Current portion of long-term debt (note 10)
418,293

 
523,312

Current obligations related to finance leases (note 6)
96,231

 
95,339

Current portion of operating lease liabilities (note 6)
36,879

 
61,431

Liabilities related to assets held for sale (note 20b)
2,535

 
2,980

Total current liabilities
1,036,578

 
1,163,559

Long-term debt (note 10)
2,155,125

 
2,303,840

Long-term obligations related to finance leases (note 6)
1,705,975

 
1,730,353

Long-term operating lease liabilities (note 6)
46,577

 
87,171

Other long-term liabilities (notes 8 and 16)
252,885

 
216,348

Total liabilities
5,197,140

 
5,501,271

Commitments and contingencies (notes 6, 9, 10, 12, and 16)


 


Equity


 
 
Common stock and additional paid-in capital ($0.001 par value; 725,000,000 shares authorized; 101,108,033 shares outstanding and issued (2019 – 100,784,422)) (note 11)
1,053,522

 
1,052,284

Accumulated deficit
(610,793
)
 
(546,684
)
Non-controlling interest
2,085,617

 
2,089,730

Accumulated other comprehensive loss (note 15)
(41,682
)
 
(23,737
)
Total equity
2,486,664

 
2,571,593

Total liabilities and equity
7,683,804

 
8,072,864

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)
 
Three Months Ended March 31,
 
2020
 
2019
 
$
 
$
Cash, cash equivalents and restricted cash provided by (used for)
 
 
 
OPERATING ACTIVITIES
 
 
 
Net income (loss)
52,002

 
(61,464
)
Non-cash and non-operating items:
 
 
 
Depreciation and amortization
72,917

 
72,107

Unrealized loss on derivative instruments (note 16)
68,236

 
5,642

Write-down and loss on sale (note 7)
94,606

 
3,328

Gain on commencement of sales-type lease (note 3)
(44,943
)
 

Equity loss, net of dividends received
4,187

 
68,661

Income tax expense (note 17)
3,792

 
5,036

Foreign currency exchange gain and other
(55,086
)
 
7,236

Direct financing lease payments received
264,072

 
3,025

Change in operating assets and liabilities
(18,525
)
 
16,295

Expenditures for dry docking
(2,299
)
 
(14,712
)
Net operating cash flow
438,959

 
105,154

FINANCING ACTIVITIES
 
 
 
Proceeds from issuance of long-term debt, net of issuance costs
870,639

 
138,082

Prepayments of long-term debt
(1,002,414
)
 
(176,581
)
Scheduled repayments of long-term debt (note 10)
(70,225
)
 
(54,877
)
Proceeds from short-term debt
135,000

 

Prepayment of short-term debt
(130,000
)
 

Proceeds from financing related to sale-leaseback of vessels

 
158,680

Repayments of obligations related to finance leases
(23,488
)
 
(23,199
)
Repurchase of Teekay LNG common units
(15,635
)
 
(9,497
)
Distributions paid from subsidiaries to non-controlling interests
(16,353
)
 
(13,892
)
Cash dividends paid

 
(5,523
)
Other financing activities

 
(24
)
Net financing cash flow
(252,476
)
 
13,169

INVESTING ACTIVITIES
 
 
 
Expenditures for vessels and equipment

(8,685
)
 
(124,540
)
Proceeds from sale of vessels and equipment (note 7)
60,915

 

Investment in equity-accounted investments

 
(2,864
)
Loan repayment by joint venture
2,000

 

Other investing activities
(6,430
)
 
(255
)
Net investing cash flow
47,800

 
(127,659
)
Increase (decrease) in cash, cash equivalents, restricted cash and cash held for sale
234,283

 
(9,336
)
Cash, cash equivalents, restricted cash and cash held for sale, beginning of the period
456,325

 
505,639

Cash, cash equivalents, restricted cash and cash held for sale, end of the period
690,608

 
496,303

Supplemental cash flow information (note 19)
 
 
 
The accompanying notes are an integral part of the unaudited consolidated financial statements.

Page 6


TEEKAY CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS 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, 2019
100,784

 
1,052,284

 
(546,684
)
 
(23,737
)
 
2,089,730

 
2,571,593

Net (loss) income

 

 
(49,805
)
 

 
101,807

 
52,002

Other comprehensive loss

 

 

 
(17,624
)
 
(36,287
)
 
(53,911
)
Dividends declared:
 
 
 
 
 
 
 
 
 
 
 
Other dividends

 

 

 

 
(16,353
)
 
(16,353
)
Employee stock compensation and other (note 11)
324

 
1,238

 

 

 

 
1,238

Change in accounting policy (note 2)

 

 
(17,216
)
 

 
(36,084
)
 
(53,300
)
Changes to non-controlling interest from equity contributions and other

 

 
2,912

 
(321
)
 
(17,196
)
 
(14,605
)
Balance as at March 31, 2020
101,108

 
1,053,522

 
(610,793
)
 
(41,682
)
 
2,085,617

 
2,486,664



 
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 11)
264

 
2,964

 

 

 

 
2,964

Change in accounting policy

 

 
606

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

 

 
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

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












Page 7

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 Teekay 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, 2019, included in the Company’s Annual Report on Form 20-F, filed with the U.S. Securities and Exchange Commission (or SEC) on April 8, 2020. 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 months ended March 31, 2020, 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.

In March 2020, the World Health Organization declared the outbreak of a novel coronavirus (or COVID-19) as a pandemic. Given the dynamic nature of these circumstances, the full extent to which the COVID-19 pandemic may have direct or indirect impact on the Company's business and the related financial reporting implications cannot be reasonably estimated at this time, though could materially affect the Company's business, results of operations and financial condition in the future. At this time, the Company has not yet experienced any material negative impacts to its business, results of operations, or financial position as a result of COVID-19, other than it being a contributing factor to the write-down of six of Teekay LNG's multi-gas vessels and one FPSO unit as described in Note 7 - Write-down and Loss on Sale.

Voyage expenses incurred that are recoverable from the Teekay Tankers' customers in connection with its voyage charter contracts are reflected in voyage charter revenues and voyage expenses. The Company recast prior periods to reflect this presentation. This had the impact of increasing both voyage charter revenues and voyage expenses by $5.7 million for the quarter ended March 31, 2019.
2. Recent Accounting Pronouncements
In June 2016, the Financial Accounting Standards Board (or 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 introduces a new credit loss methodology, which requires earlier recognition of potential credit losses, while also providing additional transparency about credit risk. This new credit loss methodology utilizes a lifetime “expected credit loss” measurement objective for the recognition of credit losses for loans, held-to-maturity debt securities and other receivables at the time the financial asset is originated or acquired. The expected credit losses are subsequently adjusted each period for changes in expected lifetime credit losses. This methodology replaces multiple impairment methods under previous GAAP for these type of assets, which generally required that a loss be incurred before it was recognized.

The Company adopted this update on January 1, 2020 with a modified-retrospective approach, whereby a cumulative-effect adjustment was made to reduce retained earnings on January 1, 2020 without any retroactive application to prior periods. The Company's net investment in direct financing and sales-type leases, loans to equity-accounted investments, guarantees of indebtedness of equity-accounted investments and receivables related to non-operating lease revenue arrangements are subject to ASU 2016-13. On adoption, the Company decreased the carrying value of investment in and loans to equity-accounted investments by $40.0 million, non-controlling interest by $36.1 million, retained earnings by $17.2 million and net investment in direct financing and sales-type leases by $11.2 million, and increased its other long-term liabilities by $2.1 million. The cumulative adjustment recorded on initial adoption of this update does not reflect an increase in credit risk exposure to the Company compared to previous periods presented.

In December 2019, the FASB issued ASU 2019-12 - Income Taxes (Topic 740) Simplifying the Accounting for Income Taxes (or ASU 2019-12), as part of its initiative to reduce complexity in the accounting standards. The amendments in ASU 2019-12 eliminate certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences, among other changes. The guidance becomes effective for annual reporting periods beginning after December 15, 2020 and interim periods within those fiscal years with early adoption permitted, including adoption in any interim period. The Company is currently evaluating the effect of adopting this new guidance.


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)

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 by providing corporate management services to such third-party 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, 2019.

Revenue Table
The following tables contain the Company’s revenue for the three months ended March 31, 2020 and 2019, by contract type, by segment and by business lines within segments.
 
Three Months Ended March 31, 2020
 
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
130,545


15,567


4,957



151,069

Voyage charters
7,317


317,478




324,795

FPSO contracts



45,933



45,933

Management fees and other
2,025


8,855


41,377


52,257

 
139,887


341,900

45,933

46,334


574,054


 
Three Months Ended March 31, 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
130,775

2,762

3,410


6,269


143,216

Voyage charters
9,160


222,077




231,237

Bareboat charters
6,062






6,062

FPSO contracts



49,438



49,438

Management fees and other
985


12,674


44,390

(1,129
)
56,920

 
146,982

2,762

238,161

49,438

50,659

(1,129
)
486,873


The following table contains the Company's total revenue for the three months ended March 31, 2020 and 2019, by those contracts or components of contracts accounted for as leases and by those contracts or components not accounted for as leases.
 
 
Three Months Ended March 31,
 
 
 
2020
 
2019
 
 
 
$
 
$
 
Lease revenue
 
 
 
 
 
Lease revenue from lease payments of operating leases
 
486,183

 
388,794

 
Interest income on lease receivables
 
12,666

 
12,794

 
Variable lease payments  cost reimbursements (1)
 
13,190

 
12,008

 
Variable lease payments – other (2)
 
5,218

 
10,832

 
 
 
517,257

 
424,428

 
Non-lease revenue
 
 
 
 
 
Non-lease revenue  related to sales-type or direct financing leases
 
4,540

 
5,525

 
Management fees and other income
 
52,257

 
56,920

 
 
 
56,797

 
62,445

 
Total
 
574,054

 
486,873

 
(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.

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)

(2)
Compensation from time-charter contracts based on spot market rates in excess of a base daily hire amount, production tariffs based on the volume of oil produced, the price of oil, and other monthly or annual operational performance measures.
Operating Leases

As at March 31, 2020, 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 $465.1 million (remainder of 2020), $545.1 million (2021), $442.0 million (2022), $334.9 million (2023) and $259.3 million (2024).

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 March 31, 2020, revenue from unexercised option periods of contracts that existed on March 31, 2020, 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 March 31, 2020 was $3.0 billion (December 31, 2019 $3.1 billion). At March 31, 2020, the cost and accumulated depreciation of such vessels were $3.8 billion (December 31, 2019 $3.9 billion) and $0.8 billion (December 31, 2019 $0.8 billion), respectively.

Net Investment in Direct Financing Leases and Sales-Type Leases
On March 27, 2020, the Company entered into a bareboat charter with Britoil Limited (or BP) a subsidiary of BP p.l.c. for the Petrojarl Foinaven FPSO for a period up to December 2030. BP may cancel the charter on six-months notice. Under the terms of this charter, Teekay received a cash payment of approximately $67 million in April 2020 and will receive a nominal per day rate over the life of the contract and a lump sum payment at the end of the contract period, which is expected to cover the costs of recycling the FPSO unit in accordance with the EU ship recycling regulations. The charter was classified and accounted for as a sales-type lease. Consequently, the Company recognized a net investment in sales-type lease of $81.9 million and an asset retirement obligation of $6.1 million, derecognized the carrying value of the Petrojarl Foinaven FPSO and related customer contract, and recognized a gain of $44.9 million in the three months ended March 31, 2020.

As at March 31, 2020, Teekay LNG had 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, 2019.

As at December 31, 2019, Teekay LNG had two additional LNG carriers, the WilForce and the WilPride, that were chartered to Awilco LNG ASA (or Awilco) and were accounted for as sales-type leases. In January 2020, Awilco purchased both carriers from Teekay LNG and paid Teekay LNG the associated purchase obligation and deferred hire amounts totaling over $260 million relating to these two vessels.

As at March 31, 2020, estimated minimum lease payments to be received related to direct financing and sales-type leases in each of the next five years were approximately $115.6 million (remainder of 2020), $64.6 million (2021), $64.6 million (2022), $64.4 million (2023), $64.7 million (2024) and an aggregate of $522.3 million thereafter. The leases are scheduled to end between 2025 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 March 31, 2020, December 31, 2019, March 31, 2019 and January 1, 2019, there were contract liabilities of $28.1 million, $32.4 million, $22.4 million and $26.4 million, respectively. During the three months ended March 31, 2020 and March 31, 2019, the Company recognized $32.4 million and $26.4 million of revenue, respectively, that was recognized as a contract liability at the beginning of such three-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 Altera Infrastructure L.P. (or Altera) (previously known as Teekay Offshore Partners L.P (or Teekay Offshore)), which included the Company’s 49% general partner interest, common units, warrants, and an outstanding $25 million loan from the Company to Altera (described below), for total cash proceeds of $100 million (or the 2019 Brookfield Transaction). Subsequent to the 2019 Brookfield Transaction, Altera is no longer a related party of Teekay.


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)

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

In March 2018, Altera 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 Altera was among the assets sold by Teekay to Brookfield in the 2019 Brookfield Transaction.

On September 25, 2017, Teekay, Altera and Brookfield completed a strategic partnership (or the 2017 Brookfield Transaction), which resulted in the deconsolidation of Altera as of that date. Until December 31, 2017, Teekay and its wholly-owned subsidiaries directly and indirectly provided substantially all of Altera’s ship management, commercial, technical, strategic, business development and administrative service needs. On January 1, 2018, as part of the 2017 Brookfield Transaction, Altera acquired a 100% ownership interest in seven subsidiaries (or the Transferred Subsidiaries) of Teekay at carrying value.

Subsequent to their transfer to Altera, 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 Altera.

Revenues recognized by the Company for services provided to Altera during the period that Altera was a related party to the Company from January 1, 2019 to May 8, 2019 was $7.6 million (three months ended March 31, 2019 – $5.3 million), which were recorded in revenues on the Company's unaudited consolidated statements of income (loss). Fees paid by the Company to Altera for services provided by Altera to the Company during the period that Altera was a related party to the Company from January 1, 2019 to May 8, 2019 was $9.6 million (three months ended March 31, 2019 – $6.3 million), which were recorded in vessel operating expenses and general and administrative expenses on the Company's unaudited consolidated statements of income (loss).

As at March 31, 2019, two shuttle tankers and three FSO units of Altera were employed on long-term time-charter-out or bareboat contracts to subsidiaries of Teekay. Time-charter hire expenses paid by the Company to Altera during the period that Altera was a related party to the Company from January 1, 2019 to May 8, 2019 was $20.8 million (three months ended March 31, 2019 $14.7 million).

In September 2018, Teekay LNG entered into an agreement with its 52%-owned joint venture with Marubeni Corporation (or the MALT Joint Venture) to charter in one of the MALT Joint Venture's LNG carriers, the Magellan Spirit, for a period of two years at a fixed-rate. Time-charter hire expenses for the three months ended March 31, 2020 was $5.9 million (three months ended March 31, 2019 $5.6 million).

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 months ended March 31, 2020, the Company earned $17.6 million (three months ended March 31, 2019 $15.8 million) 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, 2019. The Company allocates capital and assesses performance from the separate perspectives of its two publicly-traded subsidiaries Teekay LNG and Teekay Tankers (together, the 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 Altera, 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 Daughter Entities, Teekay Parent and, prior to the completion of the 2019 Brookfield Transaction, its equity-accounted investment in Altera, and its segments are presented accordingly on this basis. The Company (which excludes Altera) 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 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 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 includes the Company’s revenues by segment for the three months ended March 31, 2020 and 2019:
 
Three Months Ended March 31,
 
2020
2019
 
$
$
Teekay LNG
 
 
Liquefied Gas Carriers
139,887

146,982

Conventional Tankers

2,762

 
139,887

149,744

 
 
 
Teekay Tankers
 
 
Conventional Tankers(1)
341,900

238,161

 
 
 
Teekay Parent
 
 
Offshore Production
45,933

49,438

Other
46,334

50,659

 
92,267

100,097

 
 
 
Eliminations and other(1)

(1,129
)
 
574,054

486,873


(1)
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.

The following table includes the Company’s income (loss) from vessel operations by segment for the three months ended March 31, 2020 and 2019:
 
Income (Loss) from Vessel Operations(1)
 
Three Months Ended March 31,
 
2020
2019
 
$
$
Teekay LNG
 
 
Liquefied Gas Carriers
21,738

70,443

Conventional Tankers

(1,082
)
 
21,738

69,361

 
 
 
Teekay Tankers
 
 
Conventional Tankers
120,126

32,097

 
 
 
Teekay Parent
 
 
Offshore Production
(12,268
)
(12,557
)
Other
(700
)
(4,669
)
 
(12,968
)
(17,226
)
 
 
 
 
128,896

84,232


(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 Altera's general partner and common units using the equity method and recognized an equity loss of $68.0 million in respect of Altera for the three months ended March 31, 2019, primarily as a result of the write-down of the Altera investment to its publicly-traded unit price as described above.
A reconciliation of total segment assets to total assets presented in the accompanying unaudited consolidated balance sheets is as follows:

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)

 
March 31, 2020
December 31, 2019
 
$
$
Teekay LNG – Liquefied Gas Carriers
4,828,794

5,249,465

Teekay Tankers – Conventional Tankers
2,021,563

2,140,652

Teekay Parent – Offshore Production
108,664

161,096

Teekay Parent – Other
73,820

80,455

Cash and cash equivalents
564,401

353,241

Other assets not allocated
97,217

102,701

Eliminations
(10,655
)
(14,746
)
Consolidated total assets
7,683,804

8,072,864


6. Leases
Obligations Related to Finance Leases

March 31, 2020

December 31, 2019

$

$
Teekay LNG
 
 
 
LNG Carriers
1,393,524

 
1,410,904

Teekay Tankers
 
 
 
Suezmax Tankers
213,364

 
216,546

Aframax Tankers
170,663

 
173,284

LR2 Product Tanker
24,655

 
24,958

Total obligations related to finance leases
1,802,206

 
1,825,692

Less current portion
(96,231
)
 
(95,339
)
Long-term obligations related to finance leases
1,705,975

 
1,730,353


Teekay LNG

As at March 31, 2020, Teekay LNG was a party to finance leases on nine LNG carriers (December 31, 2019 nine LNG carriers). These nine LNG carriers were sold by Teekay LNG to third parties (or Lessors) and leased back under 7.5- to 15-year bareboat charter contracts ending in 2026 through 2034. At the inception of these leases, the weighted-average interest rate implicit in these leases was 5.1%. The bareboat charter contracts are presented as obligations related to finance leases on the Company's unaudited consolidated balance sheets and have purchase obligations at the end of the lease terms.

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 March 31, 2020, Teekay LNG was in compliance with all covenants in respect of the obligations related to its finance leases.

As at March 31, 2020, the remaining commitments related to the financial liabilities of these nine LNG carriers, including the amounts to be paid for the related purchase obligations, approximated $1.8 billion, including imputed interest of $453.0 million, repayable for the remainder of 2020 through 2034, as indicated below:


Commitments
 
 
At March 31, 2020
Year

$
Remainder of 2019

105,096
2021

138,601
2022

136,959
2023

135,459
2024

132,011
Thereafter

1,198,366


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)

Teekay Tankers

From 2017 to 2019, Teekay Tankers completed sale-leaseback financing transactions with financial institutions relating to 16 of Teekay Tankers' vessels. Under these arrangements, Teekay Tankers transferred the vessels to subsidiaries of the financial institutions (collectively, the Lessors), and leased the vessels back from the Lessors on bareboat charters ranging from 9- to 12-year terms. Teekay Tankers is obligated to purchase eight of the vessels upon maturity of their respective bareboat charters. Teekay Tankers also has the option to purchase each of the 16 vessels at various times starting between July 2020 and November 2021 until the end of their respective lease terms.

The bareboat charters related to 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 unaudited 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 March 31, 2020, this ratio was approximately 127% (December 31, 2019 122%).
 
Six of the bareboat charters require Teekay Tankers to maintain, for each vessel, a hull coverage ratio of 78% of the total outstanding principal balance during the first two years of the lease period, 80% for the following two years and 90% of the total outstanding principal balance thereafter. As at March 31, 2020, this ratio was approximately 115% (December 31, 2019 115%).
 
Four of the bareboat charters require Teekay Tankers to maintain, for each vessel, a hull overage ratio of 100% of the total outstanding principal balance. As at March 31, 2020, this ratio was approximately 161% (December 31, 2019 158%).

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 March 31, 2020, this ratio was approximately 111% (December 31, 2019 109%).

Such requirements are assessed annually with reference to vessel valuations compiled by one or more agreed upon third parties. As of the date these unaudited consolidated financial statements were issued, Teekay Tankers is 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 March 31, 2020 was 7.6% (December 31, 2019 7.6%).

As at March 31, 2020, the total remaining commitments related to the financial liabilities of Teekay Tankers' Suezmax tankers, Aframax tankers and LR2 product tankers, including the amounts to be paid for the related purchase obligations, approximated $587.7 million, including imputed interest of $179.0 million, repayable from 2020 through 2030, as indicated below:


Commitments
 
 
At March 31, 2020
Year

$



2020

42,364
2021

56,202
2022

56,193
2023

56,184
2024
 
56,328
Thereafter

320,388
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.

On March 27, 2020, concurrently with the Petrojarl Foinaven FPSO transaction with BP described in Note 3, the Company sold its subsidiary Golar-Nor (UK) Limited (or Golar-Nor) to Altera for a nominal amount plus outstanding working capital. Golar Nor was in-chartering the Petroatlantic and Petronordic shuttle tankers. This transaction resulted in the Company derecognizing right-of-use assets and lease liabilities totaling $50.7 million and $50.7 million, respectively.


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)

As at March 31, 2020, minimum commitments to be incurred by the Company under time-charter-in and bareboat charter contracts were approximately $53.7 million (remainder of 2020), $39.5 million (2021), $20.3 million (2022), $9.2 million (2023) and $5.7 million (2024).
7. Write-down and Loss on Sale
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, or is attempting to sell, to reduce exposure to a certain vessel class.

The following table contains the write-downs and losses on sales of vessels for the three months ended March 31, 2020 and 2019:
 
 
 
 
 
 
Three Months Ended March 31,
Segment

Asset Type

Completion of sale date

2020
$

2019
$
Teekay Parent Segment – Offshore Production (1)
 
1 FPSO unit
 
N/A
 

 
(3,328
)
Teekay Parent Segment - Offshore Production (2)
 
2 FPSO units
 
N/A
 
(46,519
)
 

Teekay LNG Segment - Liquefied Gas Carriers (3)
 
6 Multi-gas Carriers
 
N/A
 
(45,000
)
 

Teekay Tankers Segment – Conventional Tankers

 
3 Suezmaxes
 
Feb/Mar-2020
 
(2,627
)
 

Teekay Tankers Segment – Conventional Tankers

 
1 Suezmax
 
N/A
 
(460
)
 

Total
 
 
 
 
 
(94,606
)
 
(3,328
)
 
 
 
 
 
 
 
(1)
On March 27, 2020, the Company entered into a bareboat charter agreement for Petrojarl Foinaven FPSO unit which was accounted for as a sales-type lease. See Note 3.
(2)
During the first quarter of 2020, Teekay Parent recognized impairment charges of $46.5 million in respect of two of its FPSO units. In the first quarter of 2020, CNR International (U.K.) Limited (or CNR) provided formal notice to Teekay of its intention to cease production in June 2020 and decommission the Banff field shortly thereafter. As such, the Company expects to remove the Banff FPSO and Apollo FSO from the Banff field in 2020 and the subsea equipment in 2021. The Company expects to scrap the FPSO unit and subsea equipment and redeliver the FSO unit to its owner following removal from the field. Accordingly, the capitalized asset retirement obligation for the Petrojarl Banff FPSO unit was increased based on recent changes to cost estimates and the carrying value of the unit was then written down to its estimated residual value. The Company also made changes to its expected cash flows from the Hummingbird FPSO unit based on the current market environment and oil prices, and recent discussions with a potential buyer about the possible sale of the unit. This led to the write-down of the unit to its estimated fair value, using a discounted cash flow approach. See Note 13.
(3)
In March 2020, the carrying values for six of Teekay LNG's seven wholly-owned multi-gas carriers, were written down to their estimated fair values, using appraised values, primarily due to the lower near-term outlook for these type of vessels as a result of the current economic environment as well as Teekay LNG receiving notification that its commercial management agreement with a third-party commercial manager will dissolve in September 2020.
8. Accrued Liabilities and Other and Other Long-Term Liabilities
Accrued Liabilities and Other
 
March 31, 2020
 
December 31, 2019
 
$
 
$
Accrued liabilities
 
 
 
Voyage and vessel expenses
97,764

 
121,937

Interest
30,757

 
29,371

Payroll and related liabilities
28,706

 
33,494

Distributions payable and other
6,487

 
6,487

Deferred revenues – current
31,910

 
36,242

In-process revenue contracts – current

 
5,933

Current portion of derivative liabilities (note 16)

68,192

 
39,263

Office lease liability – current
3,130

 
3,627

Loans from equity-accounted investments

8,479

 
18,647

Asset retirement obligation - current
19,000

 

 
294,425

 
295,001



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)

Other Long-Term Liabilities
 
March 31, 2020
 
December 31, 2019
 
$
 
$
Deferred revenues and gains
27,856

 
28,612

Guarantee liabilities
12,804

 
10,113

Asset retirement obligation
30,782

 
31,068

Pension liabilities
6,842

 
7,238

In-process revenue contracts

 
11,866

Derivative liabilities (note 16)
97,546

 
51,914

Unrecognized tax benefits (note 17)
65,492

 
62,958

Office lease liability – long-term
9,630

 
10,254

Other
1,933

 
2,325

 
252,885

 
216,348

9. Short-Term Debt

In November 2018, Teekay Tankers Chartering Pte. Ltd. (or TTCL) a wholly-owned subsidiary of Teekay Tankers, entered into a working capital revolving loan facility (or the Working Capital Loan), which initially provided available aggregate borrowings of up to $40.0 million for TTCL, and had an initial maturity date in May 2019, subject to extension as described below. The aggregate borrowings were subsequently increased to $80.0 million, effective December 2019, with the next maturity date in May 2020. Proceeds of the Working Capital Loan are used to provide working capital in relation to certain vessels subject to revenue sharing agreements (or RSAs). The Working Capital Loan maturity date is continually extended for further periods of six months thereafter unless and until the lender gives notice in writing that no further extensions shall occur. Interest payments are based on LIBOR plus a margin of 3.5%.

The Working Capital Loan is collateralized by the assets of TTCL. The Working Capital Loan requires Teekay Tankers to maintain its paid-in capital contribution under the RSAs and the retained distributions of the RSA participants in an amount equal to the greater of (a) an amount equal to the minimum average capital contributed by the RSA counterparties per vessel in respect of the RSA (including cash, bunkers or other working capital contributions and amounts accrued to the RSA counterparties but unpaid) and (b) a minimum capital contribution ranging from $20.0 million to $30.0 million based on the amount borrowed. As at March 31, 2020, $55.0 million (December 31, 2019 $50.0 million) was owing under this facility, and the average interest rate on the facility was 3.6% (December 31, 2019 5.0%). As of the date these consolidated financial statements were issued, Teekay Tankers was in compliance with all covenants in respect of this facility.
10. Long-Term Debt
 
March 31, 2020
 
December 31, 2019
 
$
 
$
Revolving Credit Facilities
761,594

 
603,132

Senior Notes (8.5%) due January 15, 2020

 
36,712

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

 
250,000

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

 
125,000

Norwegian Krone-denominated Bonds due through August 2023
293,191

 
347,163

U.S. Dollar-denominated Term Loans due through 2030
1,026,519

 
1,336,437

Euro-denominated Term Loans due through 2024
160,292

 
165,376

Other U.S. Dollar-denominated loan
420

 
3,300

Total principal
2,617,016

 
2,867,120

Less unamortized discount and debt issuance costs
(43,598
)
 
(39,968
)
Total debt
2,573,418

 
2,827,152

Less current portion
(418,293
)
 
(523,312
)
Long-term portion
2,155,125

 
2,303,840



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)

As of March 31, 2020, the Company had four revolving credit facilities (collectively, the Revolvers) available. The four credit facilities, as at such date, provided for aggregate borrowings of up to $998.1 million, of which $236.5 million was undrawn. Interest payments are based on LIBOR plus a margin. The margins ranged between 1.40% and 3.95% at March 31, 2020 and at December 31, 2019. The aggregate amount available under the Revolvers is scheduled to decrease by $204.9 million (remainder of 2020), $115.8 million (2021), $410.8 million (2022), $65.3 million (2023) and $201.3 million (2024). The Revolvers are collateralized by first-priority mortgages granted on 33 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 5.0 million Class A common shares in Teekay Tankers to secure a $150 million credit facility.

The Company’s 8.5% senior unsecured notes were due January 15, 2020 with an original aggregate principal amount of $450 million (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 which were due on January 15, 2020 (or the Additional Notes) at 99.0% of face value, plus accrued interest from July 15, 2015. Prior to 2020, the Company repurchased $613.3 million in aggregate principal amount and in January 2020, the Company repaid all remaining 2020 Notes at maturity.

In May 2019, the Company issued $250.0 million in aggregate principal amount of 9.25% senior secured notes at par due November 2022 (or the 2022 Notes). 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 in 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 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.

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. 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.

As at March 31, 2020, Teekay LNG had a total of Norwegian Krone (or NOK) 3.1 billion in senior unsecured bonds issued in the Norwegian bond market that mature through August 2023. As of March 31, 2020, the total carrying amount of the senior unsecured bonds was $293.2 million (December 31, 2019 $347.2 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 16).

As of March 31, 2020, the Company had six U.S. Dollar-denominated term loans outstanding, which totaled $1.0 billion in aggregate principal amount (December 31, 2019 $1.3 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 4.47%. At March 31, 2020, the margins ranged between 0.30% and 3.25% and at December 31, 2019, the margins ranged between 0.30% and 3.25%. Term loans require payments in quarterly or semi-annual installments commencing three or six months after delivery of each newbuilding vessel financed thereby, and five of the term loans have balloon or bullet repayments due at maturity. The term loans are collateralized by first-priority mortgages on 20 (December 31, 2019 24) of the Company’s vessels, together with certain other security.
 
Teekay LNG has two Euro-denominated term loans outstanding, which, as at March 31, 2020, totaled 145.3 million Euros ($160.3 million) (December 31, 2019 147.5 million Euros ($165.4 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 March 31, 2020 and December 31, 2019, 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 gain of $6.6 million (2019 – loss of $2.6 million) during the three months ended March 31, 2020 and 2019, respectively.

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)


The weighted-average interest rate on the Company’s aggregate long-term debt as at March 31, 2020 was 4.4% (December 31, 2019 4.6%). This rate does not include the effect of the Company’s interest rate swap agreements (see Note 16).

Teekay has guaranteed obligations pursuant to a certain credit facility of Teekay Tankers. As at March 31, 2020, the outstanding balance on such credit facility was $89.8 million.

The aggregate annual long-term debt principal repayments required to be made by the Company subsequent to March 31, 2020 are $271.0 million (remainder of 2020), $545.8 million (2021), $686.8 million (2022), $384.7 million (2023), $302.9 million (2024) and $425.8 million (thereafter).

The Company’s long-term debt agreements generally provide for maintenance of minimum consolidated financial covenants and four loan agreements require the maintenance of vessel market value to loan ratios. As at March 31, 2020, these ratios ranged from 136% to 225% 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.

Teekay Tankers’ term loan, which is scheduled to mature between January 2021 and August 2021, is guaranteed by Teekay. This term loan contains covenants that require 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 and obligations related to finance leases (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 and obligations related to finance leases. 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 of the date these unaudited consolidated financial statements were issued, the Company is in compliance with all covenants under its credit facilities and other long-term debt.
11. Capital Stock
The authorized capital stock of Teekay at March 31, 2020 and December 31, 2019 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 March 31, 2020, 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 March 31, 2020.

The Company did not grant any stock options or restricted stock awards to employees and directors during the three months ended March 31, 2020.
12. Commitments and Contingencies
a)
Vessels Under Construction and Upgrades

Teekay LNG's share of commitments to fund newbuilding and other construction contract costs as at March 31, 2020 are as follows:
 
Total
$
Remainder of
2020
$
2021
$
2022
$
Certain consolidated LNG carriers (i)
43,091

5,764

22,169

15,158

Bahrain LNG Joint Venture (ii)
11,351

11,351



 
54,442

17,115

22,169

15,158


(i)
In June 2019, Teekay LNG entered into an agreement with a contractor to supply equipment on certain of Teekay LNG's LNG carriers in 2021 and 2022, for an estimated installed cost of $60.6 million. As at March 31, 2020, the estimated remaining cost of this installation is $43.1 million.

(ii)
Teekay LNG has a 30% ownership interest in the Bahrain LNG Joint Venture which has an LNG receiving and regasification terminal in Bahrain. As at March 31, 2020, Teekay LNG's proportionate share of the estimated remaining cost of $11.4 million relates to the final construction installment on the LNG terminal. The Bahrain LNG Joint Venture has remaining debt financing of $24 million, which is undrawn, of which $7 million relates to Teekay LNG's proportionate share of the construction commitments included in the table above.



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)

b)
Liquidity

Management is required to assess whether the Company will have sufficient liquidity to continue as a going concern for the one-year period following the issuance of its financial statements. The Company had a consolidated net income of $52.0 million and consolidated cash flows from operating activities of $439.0 million during the three months ended March 31, 2020 and had a working capital surplus of $59.5 million as at March 31, 2020.

Based on the Company’s liquidity at the date these unaudited consolidated financial statements were issued, the liquidity the Company expects to generate from operations over the following year and the dividends it expects to receive from its equity-accounted joint ventures, the Company expects that it will have sufficient liquidity to continue as a going concern for at least the one-year period following the issuance of these unaudited consolidated financial statements.

c)
Legal Proceedings and Claims

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

d)
Other

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

Teekay LNG guarantees its proportionate share of certain loan facilities and obligations on interest rate swaps for its equity-accounted joint ventures for which the aggregate principal amount of the loan facilities and fair value of the interest rate swaps as at March 31, 2020 was $1.5 billion. As of the date these consolidated financial statements were issued, Teekay LNG's equity-accounted joint ventures were in compliance with all covenants relating to these loan facilities that Teekay LNG guarantees.
13. Financial Instruments
a)
Fair Value Measurements

For a description of how the Company estimates fair value and for a description of the fair value hierarchy levels, see "Item 18 – Financial Statements: Note 12" in the Company’s Annual Report on Form 20-F for the year ended December 31, 2019.

The following table includes the estimated fair value and carrying value of those assets and liabilities that are measured at fair value on a recurring and non-recurring basis, as well as the estimated fair value of the Company’s financial instruments that are not accounted for at fair value on a recurring basis.

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)

 
 
 
March 31, 2020
 
December 31, 2019
 
Fair
Value
Hierarchy
Level
 
Carrying
Amount
Asset
(Liability)
$
 
Fair
Value
Asset
(Liability)
$
 
Carrying
Amount
Asset
(Liability)
$
 
Fair
Value
Asset
(Liability)
$
Recurring
 
 
 
 
 
 
 
 
 
Cash, cash equivalents and restricted cash (note 19)
Level 1
 
688,253

 
688,253

 
454,867

 
454,867

Derivative instruments (note 16)
 
 
 
 
 
 
 
 
 
Interest rate swap agreements – assets (1)
Level 2
 

 

 
3,099

 
3,099

Interest rate swap agreements – liabilities (1)
Level 2
 
(76,519
)
 
(76,519
)
 
(52,453
)
 
(52,453
)
Cross currency interest swap agreements – liabilities(1)
Level 2
 
(92,153
)
 
(92,153
)
 
(42,104
)
 
(42,104
)
Foreign currency contracts
Level 2
 

 

 
(202
)
 
(202
)
Forward freight agreements
Level 2
 
(174
)
 
(174
)
 
(86
)
 
(86
)
Non-recurring
 
 
 
 
 
 
 
 
 
Vessels and equipment (note 7)
Level 3
 
15,719

 
15,719

 

 

Vessels and equipment (note 7)
Level 2
 
101,085

 
101,085

 

 

Vessels held for sale (note 7)
Level 2
 
22,400

 
22,400

 
37,240

 
37,240

Other (2)
 
 
 
 
 
 
 
 
 
Short-term debt (note 9)
Level 2
 
(55,000
)
 
(55,016
)
 
(50,000
)
 
(50,000
)
Long-term debt – public (note 10)
Level 1
 
(531,139
)
 
(523,243
)
 
(619,794
)
 
(655,977
)
Long-term debt – non-public (note 10)
Level 2
 
(2,042,279
)
 
(1,981,686
)
 
(2,207,358
)
 
(2,180,440
)
Obligations related to finance leases, including current portion (note 6)
Level 2
 
(1,802,206
)
 
(1,882,207
)
 
(1,825,692
)
 
(1,877,558
)
 
(1)
The fair value of the Company's interest rate swap and cross currency swap agreements at March 31, 2020 includes $3.1 million (December 31, 2019 $3.4 million) accrued interest expense which is recorded in accrued liabilities on the unaudited consolidated balance sheets.

(2)
In the unaudited interim consolidated financial statements, the Company’s loans to and investments in equity-accounted investments form the aggregate carrying value of the Company’s interests in entities accounted for by the equity method. The fair value of the individual components of such aggregate interests is not determinable.

Vessels and equipment – Includes six multi-gas vessels which were written down to their estimated fair values, using appraised values, and one FPSO unit written down to scrap value, which was determined based on the price of steel, the light-weight tonnage of the vessel and selling costs. Also includes one FPSO unit which was written down its estimated fair value, using a discounted cash flow approach. The discounted cash flow approach used includes scenarios consisting of sale of the unit for scrap following expiration or early termination of the existing customer contract, and sale of the unit during 2020, weighted based on the likelihood of them occurring. Cash flow projections have been discounted at an estimated market participant rate of 9.8%. Cash flow projections are based on current and projected charter rates and operating costs. Estimated proceeds from the potential sale of the unit are based on prior discussions with potential buyers of the Company's FPSO units.

b) Credit Losses

The Company's exposure to potential credit losses includes Teekay Parent's one direct financing and sales-type leases (the Foinaven FPSO - see Note 3) and Teekay LNG's three direct financing and sales-type leases, its two loans to equity-accounted joint ventures and its guarantee of its proportionate share of secured loan facilities and finance leases of five of its equity-accounted joint ventures. Teekay LNG's three direct financing leases consist of a 70% ownership interest in two LNG carriers which commenced their 20-year time-charter contracts in 2009 and a 100% ownership interest in the Bahrain Spirit floating storage unit (or FSU) which commenced a 21-year time charter to Bahrain LNG in September 2018. Teekay LNG has loaned funds to two of its equity-accounted joint ventures, the Exmar LPG Joint Venture and the Bahrain LNG Joint Venture. Teekay LNG has guaranteed its share of secured loan facilities and finance leases of five equity-accounted joint ventures, the Exmar LPG Joint Venture, the Excalibur Joint Venture, the MALT Joint Venture, the Yamal LNG Joint Venture and the Angola Joint Venture.

In addition, Teekay LNG's exposure to potential credit losses includes direct financing and sales-types leases for 18 LNG carriers, one FSU and an LNG regasification terminal within five of its equity-accounted joint ventures, consisting of the Yamal LNG Joint Venture, the Bahrain LNG Joint Venture, the Pan Union Joint Venture, the RasGas III Joint Venture and the Angola Joint Venture. For a description of these equity-accounted investments, see "Item 18 – Financial Statements: Note 23" in the Company’s Annual Report on Form 20-F for the year ended December 31, 2019.

The following table includes the amortized cost basis of the Company's direct interests in financing receivables and net investment in direct financing leases by class of financing receivables and by period of origination and their associated credit quality.

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)

 
 
Amortized Cost Basis by Origination Year
 
 
 
 
Credit Quality Grade (1)
 
2020
 
2018
 
2016
 
Prior to 2016
 
Total (2)(3)
As at March 31, 2020
 
 
$
 
$
 
$
 
$
 
$
Direct financing and sales-type leases - Teekay Parent

 
 
 
 
 
 
 
 
 
 
 
 
  Foinaven FPSO
 
Performing
 
81,843

 

 

 

 
81,843

 
 
 
 
 
 
 
 
 
 
 
 
 
Direct financing and sales-type leases - Teekay LNG
 
 
 
 
 
 
 
 
 
 
 
 
  Tangguh Hiri and Tangguh Sago
 
Performing
 

 

 

 
341,181

 
341,181

  Bahrain Spirit
 
Performing
 

 
213,557

 

 

 
213,557


 
 
 

 
213,557

 

 
341,181

 
554,738

Loans to equity-accounted joint ventures
 
 
 
 
 


 


 


 


  Exmar LPG Joint Venture
 
Performing
 

 

 

 
52,266

 
52,266

  Bahrain LNG Joint Venture
 
Performing
 

 

 
73,375

 

 
73,375

 
 
 
 

 

 
73,375

 
52,266

 
125,641

 
 
 
 
81,843

 
213,557

 
73,375

 
393,447

 
762,222


(1)
The Company's credit quality grades are based on internal risk credit ratings whereby a credit quality grade of performing is consistent with a low likelihood of loss. The Company assesses the credit quality of its direct financing and sales-type leases and loan to the Exmar LPG Joint Venture on whether there are no past due payments, no concessions granted to the counterparties and whether the Company is aware of any other information that would indicate that there is a material increase of likelihood of loss. The same policy is applied by the equity-accounted joint ventures. As at March 31, 2020, all direct financing and sales-type leases held by Teekay LNG's equity-accounted joint ventures had a credit quality grade of performing. Teekay LNG assesses the credit quality of its loan to the Bahrain LNG Joint Venture based on whether there are any past due payments from the Bahrain LNG Joint Venture's primary customer, whether the Bahrain LNG Joint Venture has granted any concessions to its primary customer and whether Teekay LNG is aware of any other information that would indicate that there is a material increase of likelihood of loss.
(2)
The Company considers a financial asset to be past due when payment is not made with 30 days of it being owed, assuming there is no dispute or other uncertainty regarding the amount owing. As at and for the three months ended March 31, 2020, none of Teekay LNG's direct financing and sales-type leases and loans to equity-accounted joint ventures were past due.
(3)
The Company discontinues accrual of interest if collection of required payments is no longer probable, and in those situations recognizes payments received on non-accrual assets on a cash basis method, until collection of required payments becomes probable. As at and for the three months ended March 31, 2020, none of the Company's direct financing and sales-type leases and loans to equity-accounted joint ventures were on non-accrual status.
Changes in the allowance for credit losses of the Company's direct interest in direct financing and sales-type leases, loans to equity-accounted joint ventures, its guarantees of debt that are not otherwise accounted for at fair value each period end, and any such instruments or similar instruments that are held by Teekay LNG's equity-accounted investments for three months ended March 31, 2020 are as follows:
 
Direct financing and sales-type leases (1)
$
 
Direct financing and sales-type leases and other within equity-accounted joint ventures (1)
$
 
Loans to equity-accounted joint ventures (2)
$
 
Guarantees of debt (3)
$
 
Total
$
As at January 1, 2020

11,155

 
36,292

 
3,714

 
2,139

 
53,300

Provision for expected credit losses

(100
)
 
8,980

 

 

 
8,880

As at March 31, 2020

11,055

 
45,272

 
3,714

 
2,139


62,180


(1)
The credit loss provision related to the lease receivable component of the net investment in direct financing and sales-type leases is based on an internal historical loss rate, as adjusted when asset specific risk characteristics of the existing lease receivables at the reporting date are not consistent with those used to measure the internal historical loss rate and as further adjusted when management expects current conditions and reasonable and supportable forecasts to differ from the conditions that existed to measure the internal historical loss rate. As at January 1, 2020 and March 31, 2020, the internal historical loss rate was adjusted downwards on two LNG projects to reflect that the counterparties had investment grade credit ratings. In addition, the internal historical loss rate was adjusted upwards for one LNG project to reflect a lower credit rating for the counterparty, including consideration of the critical infrastructure nature of assets, and a second LNG project to reflect a larger risk of loss given default as the vessels servicing this project have fewer opportunities for redeployment compared to Teekay LNG's other LNG carriers. The credit loss provision for the residual value component is based on a reversion like methodology whereby the current estimated fair value of the vessel as depreciated to the end of the charter contract as compared to the expected carrying value, with such potential gain or loss on maturity being included in the credit loss provision in increasing magnitude on a straight-line basis the closer the contract is to its maturity. Risks related to the net investments in direct financing and sales-type leases consist of risks related to the underlying LNG projects and demand for LNG carriers at the end of the contracts. The provision for expected credit loss as at January 1, 2020 and March 31, 2020 has been developed in part based on Teekay LNG's understanding that LNG production is critical infrastructure.

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)

In addition, the provision for expected credit loss as at March 31, 2020, within Teekay LNG's equity-accounted joint ventures reflects the commencement of the sales-type lease for the Bahrain regasification terminal and associated FSU in January 2020. The credit loss provision of $9.0 million for the three months ended March 31, 2020 relating to the direct financing and sales-type leases and other within Teekay LNG's equity-accounted joint ventures are included in equity income. The credit loss provision recorded for Teekay LNG's direct financing and sale-type leases of $0.1 million for the three months ended March 31, 2020 are included in other (loss) income.
(2)
The determination of the credit loss provision for such loans is based an internal historical loss rate of Teekay LNG and its affiliates, as adjusted when asset specific risk characteristics of the existing loans at the reporting date are not consistent with those used to measure the internal historical loss rate and as further adjusted when management expects current conditions and reasonable and supportable forecasts to differ from the conditions that existed to measure the internal historical loss rate. These two loans rank behind secured debt in each equity-accounted joint venture. As such, they are similar to equity in terms of risk. The Exmar LPG Joint Venture owns and charters-in LPG carriers with a primary focus on mid-size gas carriers. Their vessels are trading on the spot market or short-term charters. Adverse changes in the spot market for mid-size LPG carriers, as well as operating costs for such vessels, may impact the ability of the Exmar LPG Joint Venture to repay its loan to Teekay LNG. The Bahrain LNG Joint Venture owns an LNG receiving and regasification terminal in Bahrain. The ability of Bahrain LNG Joint Venture to repay its loan to Teekay LNG is primarily dependent upon the Bahrain LNG Joint Venture’s customer, a company owned by the Kingdom of Bahrain, fulfilling its obligations under the 20-year agreement, as well as Bahrain LNG Joint Venture’s ability to operate the terminal in accordance with the agreed upon operating criteria.
(3)
The determination of the credit loss provision for such guarantees was based on a probability of default and loss given default methodology. The overall estimated loss from default as a percentage of the outstanding guaranteed share of secured loan facilities and finance leases considers current and future operational performance of the vessels securing the loan facilities and finance leases and current and future expectations of the proceeds that could be received from sale of the vessels securing the loan facilities and finance leases in comparison to the outstanding principal amount if Teekay LNG was called on its guarantees.
14. Restructuring Charges
During the three months ended March 31, 2020, the Company recorded restructuring charges of $2.4 million. The restructuring charges primarily related to severance costs resulting from the reorganization and realignment of resources of the Company's shared service function of which a portion of the costs were recovered from the customer, Altera (see Note 4), and the recovery is presented in revenue. The restructuring charges also relate to the termination of the contract for the Banff FPSO.

During the three months ended March 31, 2019, the Company recorded restructuring charges of $8.6 million. The restructuring charges primarily related to severance costs resulting from the termination of certain management contracts in Teekay Parent of which the costs were fully recovered from the customer and the recovery is presented in revenue, as well as from the termination of the charter contract for the Toledo Spirit Suezmax tanker in Teekay LNG upon the sale of the vessel in January 2019.

At March 31, 2020 and December 31, 2019, $2.9 million and $0.8 million, respectively, of restructuring liabilities were recorded in accrued liabilities and other on the unaudited consolidated balance sheets.

15. Accumulated Other Comprehensive Loss
As at March 31, 2020 and December 31, 2019, the Company’s accumulated other comprehensive loss consisted of the following components:
 
March 31,
 
December 31,
 
2020
 
2019
 
$
 
$
Unrealized loss on qualifying cash flow hedging instruments
(37,343
)
 
(19,408
)
Pension adjustments, net of tax recoveries
(4,339
)
 
(4,329
)
 
(41,682
)
 
(23,737
)

16. Derivative Instruments and Hedging Activities
The Company uses derivative instruments to manage certain risks in accordance with its overall risk management policies.

Foreign Exchange Risk

From time to time, the Company economically hedges portions of its forecasted expenditures denominated in foreign currencies with foreign currency forward contracts. As at March 31, 2020, the Company was not committed to any foreign currency forward contracts.


Page 22

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 enters into cross currency swaps, and pursuant to these swaps the Company receives the principal amount in NOK on the maturity dates of the swaps, in exchange for payment of a fixed U.S. Dollar amount. In addition, the cross currency swaps exchange a receipt of floating interest in NOK based on NIBOR plus a margin for a payment of U.S. Dollar fixed interest. The purpose of the cross currency swaps is to economically hedge the foreign currency exposure on the payment of interest and principal amounts of the Company’s NOK-denominated bonds due in 2020, 2021 and 2023. In addition, the cross currency swaps economically hedge the interest rate exposure on the NOK bonds due in 2020, 2021 and 2023. The Company has not designated, for accounting purposes, these cross currency swaps as cash flow hedges of its NOK-denominated bonds due in 2020, 2021 and 2023. As at March 31, 2020, the Company was committed to the following cross currency swaps:
 
 
 
 
 
 
 
 
 
 
Fair Value /
Carrying
Amount of
Asset /
(Liability)
$
 
 
Notional
Amount
NOK
 
Notional
Amount
USD
 
Floating Rate Receivable
 
 
 
 
 
 
 
Reference
Rate
 
Margin
 
Fixed Rate
Payable
 
 
Remaining
Term (years)
1,000,000
 
134,000

 
NIBOR
 
3.70%
 
5.92%
 
(37,785
)
 
0.1
1,200,000
 
146,500

 
NIBOR
 
6.00%
 
7.72%
 
(30,806
)
 
1.6
850,000
 
102,000

 
NIBOR
 
4.60%
 
7.89%
 
(23,562
)
 
3.4
 
 
 
 
 
 
 
 
 
 
(92,153
)
 
 

Interest Rate Risk

The Company enters into interest rate swap agreements, which exchange a receipt of floating interest for a payment of fixed interest, to reduce the Company’s exposure to interest rate variability on its outstanding floating-rate debt. The Company designates certain of its interest rate swap agreements as cash flow hedges for accounting purposes.
 
As at March 31, 2020, the Company was committed to the following interest rate swap agreements related to its LIBOR-based debt and EURIBOR-based debt, whereby certain of the Company’s floating-rate debts were swapped with fixed-rate obligations: 
 
Interest
Rate
Index
 
Principal
Amount
 
Fair Value /
Carrying
Amount of
Asset /
(Liability)
$
 
Weighted-
Average
Remaining
Term
(years)
 
Fixed
Interest
Rate
(%)(1)
LIBOR-Based Debt:
 
 
 
 
 
 
 
 
 
U.S. Dollar-denominated interest rate swaps (2)
LIBOR
 
857,862

 
(69,278
)
 
3.9
 
2.9

EURIBOR-Based Debt:
 
 
 
 
 
 
 
 
 
Euro-denominated interest rate swaps
EURIBOR
 
71,449

 
(7,241
)
 
3.4
 
3.8

 
 
 
 
 
(76,519
)
 
 
 
 

(1)
Excludes the margins the Company pays on its variable-rate debt, which, as of March 31, 2020, ranged from 0.3% to 3.95%.
(2)
Includes interest rate swaps with the notional amount reducing quarterly or semi-annually. Four interest rate swaps are subject to mandatory early termination in 2020, 2021 and 2024, at which time the swaps will be settled based on their fair value.
Stock Purchase Warrants

Prior to the 2019 Brookfield Transaction, Teekay held 15.5 million Brookfield Transaction Warrants and 1,755,000 Series D Warrants of Teekay Offshore (see Note 4). As part of the 2019 Brookfield Transaction, Teekay sold to Brookfield all of the Company’s remaining interests in Teekay Offshore, which included, among other things, both the Brookfield Transaction Warrants and Series D Warrants.


Page 23

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)

Tabular Disclosure

The following tables present the location and fair value amounts of derivative instruments, segregated by type of contract, on the Company’s unaudited consolidated balance sheets.
 
Prepaid Expenses and Other
 
Other Non-Current Assets
 
Accrued Liabilities and Other (1)
 
Accrued Liabilities and Other (2)
 
Other Long-Term Liabilities
 
$
 
$
 
$
 
$
 
$
As at March 31, 2020
 
 
 
 
 
 
 
 
 
Derivatives designated as a cash flow hedge:
 
 
 
 
 
 
 
 
 
Interest rate swap agreements

 

 
(40
)
 
(2,622
)
 
(10,861
)
Derivatives not designated as a cash flow hedge:
 
 
 
 
 
 
 
 
 
Interest rate swap agreements

 

 
(2,103
)
 
(22,055
)
 
(38,838
)
Cross currency swap agreements

 

 
(965
)
 
(43,341
)
 
(47,847
)
Forward freight agreements

 

 

 
(174
)
 

 

 

 
(3,108
)
 
(68,192
)
 
(97,546
)
 
 
Prepaid Expenses and Other
 
Other Non-Current Assets
 
Accrued Liabilities and Other (1)
 
Accrued Liabilities and Other (2)
 
Other Long-Term Liabilities
 
$
 
$
 
$
 
$
 
$
As at December 31, 2019
 
 
 
 
 
 
 
 
 
Derivatives designated as a cash flow hedge:
 
 
 
 
 
 
 
 
 
Interest rate swap agreements

 

 
(13
)
 
(836
)
 
(3,475
)
Derivatives not designated as a cash flow hedge:
 
 
 
 
 
 
 
 
 
Foreign currency forward contracts

 

 

 
(202
)
 

Interest rate swap agreements
932

 
1,916

 
(2,948
)
 
(15,478
)
 
(29,452
)
Cross currency swap agreements

 

 
(456
)
 
(22,661
)
 
(18,987
)
Forward freight agreements

 

 

 
(86
)
 

 
932

 
1,916

 
(3,417
)
 
(39,263
)
 
(51,914
)
(1)
Represents accrued interest related to derivative instruments recorded in accrued liabilities and other on the consolidated balance sheets (see Note 8).
(2)
Represents the current portion of derivative liabilities recorded in accrued liabilities and other on the consolidated balance sheets (see Note 8).

As at March 31, 2020, the Company had multiple interest rate swaps and cross currency swaps with the same counterparty that are subject to the same master agreements. Each of these master agreements provides for the net settlement of all derivatives subject to that master agreement through a single payment in the event of default or termination of any one derivative. The fair value of these derivatives is presented on a gross basis in the Company’s unaudited consolidated balance sheets. As at March 31, 2020, these derivatives had an aggregate fair value asset amount of nil and an aggregate fair value liability amount of $145.0 million. As at March 31, 2020, the Company had $72.1 million on deposit with the relevant counterparties as security for swap liabilities under certain master agreements. The deposit is presented in restricted cash – current and long-term on the consolidated balance sheets.

For the periods indicated, the following tables present the gains (losses) on interest rate swap agreements designated and qualifying as cash flow hedges (excluding such agreements in equity-accounted investments):

Three Months Ended March 31, 2020
 
Three Months Ended March 31, 2019
Amount of Loss Recognized in OCI
 
Amount of Loss Reclassified from Accumulated OCI to Interest Expense
 
Amount of Loss Recognized in OCI
 
Amount of Gain Reclassified from Accumulated OCI to Interest Expense
 
(9,171)
 
(152)
 
(2,832)
 
251
 


Page 24

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)


Realized and unrealized (losses) gains from derivative instruments that are not designated for accounting purposes as cash flow hedges are recognized in earnings and reported in realized and unrealized (losses) gains on non-designated derivatives in the unaudited consolidated statements of income (loss) as follows:
 
Three Months Ended March 31,
 
2020

2019
 
$
 
$
Realized (losses) relating to:
 
 
 
Interest rate swap agreements
(2,677
)

(1,688
)
Foreign currency forward contracts
(241
)


Forward freight agreements
(49
)

(13
)
 
(2,967
)

(1,701
)
Unrealized (losses) gains relating to:
 
 
 
Interest rate swap agreements
(18,812
)

(6,021
)
Foreign currency forward contracts
202



Stock purchase warrants


2,316

Forward freight agreements
(86
)

(17
)
 
(18,696
)

(3,722
)
Total realized and unrealized (losses) on derivative instruments
(21,663
)

(5,423
)

Realized and unrealized (losses) gains from cross currency swaps are recognized in earnings and reported in foreign exchange gain (loss) in the unaudited consolidated statements of income (loss) as follows:
 
Three Months Ended March 31,
 
2020
 
2019
 
$
 
$
Realized (losses)
(1,817
)