##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 20-F
  o
    
    REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) or (g) OF THE SECURITIES EXCHANGE ACT OF 1934
 OR
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2008
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 OR
 o
    
    SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 Date
of event requiring this shell company report
 For the transition period from  to
 Commission file number 1-12874
 TEEKAY CORPORATION
  
 th
 th
  Title of each class
    
    Name of each exchange on which registeredCommon Stock, par value of $0.001 per share
    
    New York Stock Exchange
        þ o
  o þ
  þ o
  o o
  Large Accelerated Filer þ
    
    Accelerated Filer o
    
    Non-Accelerated Filer o
  U.S. GAAP þ
    
    International Financial Reporting Standards
as 
issued by the International Accounting

Standards Board o
    
    Other o
  o o
  o þ




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##### 



TEEKAY CORPORATION
INDEX TO REPORT ON FORM 20-F
 PagePART I.Item 1. Identity of Directors, Senior Management and Advisors
    
    
    4Item 2. Offer Statistics and Expected Timetable
    
    
    4Item 3. Key Information
    
    
    4Item 4. Information on the Company
    
    
    14Item 4A. Unresolved Staff Comments
    
    
    27Item 5. Operating and Financial Review and Prospects
    
    
    27Item 6. Directors, Senior Management and Employees
    
    
    52Item 7. Major Shareholders and Related Party Transactions
    
    
    58Item 8. Financial Information
    
    
    58Item 9. The Offer and Listing
    
    
    59Item 10. Additional Information
    
    
    59Item 11. Quantitative and Qualitative Disclosures About Market Risk
    
    
    63Item 12. Description of Securities Other than Equity Securities
    
    
    65PART II.Item 13. Defaults, Dividend Arrearages and Delinquencies
    
    
    65Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds
    
    
    65Item 15. Controls and Procedures
    
    
    65Item 16A. Audit Committee Financial Expert
    
    
    66Item 16B. Code of Ethics
    
    
    66Item 16C. Principal Accountant Fees and Services
    
    
    66Item 16D. Exemptions from the Listing Standards for Audit Committees
    
    
    66Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers
    
    
    66PART III.Item 17. Financial Statements
    
    
    67Item 18. Financial Statements
    
    
    67Item 19. Exhibits
    
    
    67Signature
    
    
    69Exhibit 8.1Exhibit 12.1Exhibit 12.2Exhibit 13.1Exhibit 13.2Exhibit 23.1
   2




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##### Table of Contents



PART I
 This Annual Report should be read in conjunction with the consolidated financial statements and
accompanying notes included in this report.
 Unless otherwise indicated, references in this Annual Report to Teekay, we, us and our and
similar terms refer to Teekay Corporation and its subsidiaries.
  
    
    our future financial condition or results of operations and future revenues and
expenses;
 
    
    tanker market conditions and fundamentals, including the balance of supply and demand in
these markets and spot tanker charter rates and oil production;
 
    
    offshore, liquefied natural gas (or LNG) and liquefied petroleum gas (or LPG) market
conditions and fundamentals, including the balance of supply and demand in these markets;
 
    
    growth prospects of the tanker, offshore, LNG and LPG markets;
 
    
    our expected benefits of the OMI acquisition;
 
    
    the sufficiency of our working capital for short-term liquidity requirements;
 
    
    future capital expenditure commitments and the financing requirements for such
commitments;
 
    
    delivery dates of and financing for newbuildings, and the commencement of service of
newbuildings under long-term time-charter contacts;
 
    
    the adequacy of restricted cash deposits to fund capital lease obligations;
 
    
    compliance with financing agreements and the expected effect of restrictive covenants in
such agreements;
 
    
    operating expenses, availability of crew and crewing costs, number of off-hire days,
drydocking requirements and durations and the adequacy and cost of insurance;
 
    
    our ability to capture some of the value from the volatility of the spot tanker market
and from market imbalances by utilizing forward freight agreements;
 
    
    the ability of the counterparties to our derivative contracts to fulfill their
contractual obligations;
 
    
    growth prospects of the liquefied natural gas (or LNG) and liquefied petroleum gas (or
LPG) shipping sectors;
 
    
    our ability to maximize the use of our vessels, including the re-deployment or
disposition of vessels no longer under long-term contracts;
 
    
    the cost of, and our ability to comply with, governmental regulations and maritime
self-regulatory organization standards applicable to our business;
 
    
    the impact of future regulatory changes or environmental liabilities;
 
    
    taxation of our company and of distributions to our stockholders;
 
    
    the expected life-spans of our vessels;
 
    
    the expected impact of heightened environmental and quality concerns of insurance
underwriters, regulators and charterers;
 
    
    anticipated funds for liquidity needs and the sufficiency of cash flows;
 
    
    our hedging activities relating to foreign exchange, interest rate, spot market and
bunker fuel risks;
 
    
    the growth of the global economy and global oil demand;
 
    
    the recent economic downturn and financial crisis in the global market, including
disruptions in the global credit and stock markets and potential negative effects on our
customers ability to charter our vessels and pay for our services;
  3




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##### Table of Contents




    
    our exemption to tax on our U.S. source international transportation income;
 
    
    results of our discussions with a customer to adjust the rate under one of our floating
production, storage and offloading contracts and the potential of a required write-down of
the carrying cost of the vessel;
 
    
    our ability to competitively pursue new floating production, storage and offloading
projects; and
 
    
    our competitive positions in our markets;
 
    
    our business strategy and other plans and objectives for future operations; and
 
    
    our ability to pay dividends on our common stock.
   
 Item 1. Identity of Directors, Senior Management and Advisors
  
 Item 2. Offer Statistics and Expected Timetable
  
 Item 3. Key Information
 Selected Financial Data
  GAAP
  4




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##### Table of Contents



2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004(in thousands, except share and per common share data and ratios)Income Statement Data:Revenues (1)
    
    $
    3,193,655
    
    
    $
    2,395,507
    
    
    $
    2,013,737
    
    
    $
    1,957,732
    
    
    $
    2,217,139Total operating expenses (1)(2)
    
    
    (2,977,933
    )
    
    
    (1,985,382
    )
    
    
    (1,586,217
    )
    
    
    (1,326,801
    )
    
    
    (1,402,534
    )Income from vessel operations
    
    
    215,722
    
    
    
    410,125
    
    
    
    427,520
    
    
    
    630,931
    
    
    
    814,605Interest
expense (1)
    
    
    (994,966
    )
    
    
    (422,433
    )
    
    
    (100,089
    )
    
    
    (142,048
    )
    
    
    (180,778
    )Interest income (1)
    
    
    273,647
    
    
    
    110,201
    
    
    
    31,714
    
    
    
    33,943
    
    
    
    18,528Foreign exchange gain (loss)
    
    
    32,348
    
    
    
    (39,912
    )
    
    
    (50,416
    )
    
    
    61,635
    
    
    
    (43,508
    )Non-controlling interest expense
    
    
    (9,561
    )
    
    
    (8,903
    )
    
    
    (6,759
    )
    
    
    (13,475
    )
    
    
    (2,268
    )Equity (loss) income from joint ventures
    
    
    (36,085
    )
    
    
    (12,404
    )
    
    
    6,099
    
    
    
    11,897
    
    
    
    13,082Other  net
    
    
    (6,736
    )
    
    
    23,677
    
    
    
    3,566
    
    
    
    (19,054
    )
    
    
    105,534Income tax recovery (expense)
    
    
    56,176
    
    
    
    3,192
    
    
    
    (8,811
    )
    
    
    2,787
    
    
    
    (33,464
    )Net (loss) income
    
    
    (469,455
    )
    
    
    63,543
    
    
    
    302,824
    
    
    
    566,616
    
    
    
    691,731Per Common Share Data:Net (loss) income  basic (3)
    
    $
    (6.48
    )
    
    $
    0.87
    
    
    $
    4.14
    
    
    $
    7.25
    
    
    $
    8.35Net (loss) income  diluted (3)
    
    
    (6.48
    )
    
    
    0.85
    
    
    
    4.03
    
    
    
    6.78
    
    
    
    7.88Cash dividends declared (3)
    
    
    1.1413
    
    
    
    0.9875
    
    
    
    0.8600
    
    
    
    0.6200
    
    
    
    0.5125Balance Sheet Data (at end of year):Cash and cash equivalents
    
    $
    814,165
    
    
    $
    442,673
    
    
    $
    343,914
    
    
    $
    236,984
    
    
    $
    427,037Restricted cash
    
    
    650,556
    
    
    
    686,196
    
    
    
    679,992
    
    
    
    311,084
    
    
    
    448,812Vessels and equipment
    
    
    7,267,094
    
    
    
    6,846,875
    
    
    
    5,603,316
    
    
    
    3,721,674
    
    
    
    3,531,287Total assets
    
    
    10,215,001
    
    
    
    10,418,541
    
    
    
    8,110,329
    
    
    
    5,287,030
    
    
    
    5,503,740Total debt (including capital lease obligations)
    
    
    5,770,133
    
    
    
    6,120,864
    
    
    
    4,106,062
    
    
    
    2,432,978
    
    
    
    2,744,545Capital stock and paid-in capital
    
    
    642,911
    
    
    
    628,786
    
    
    
    596,712
    
    
    
    471,784
    
    
    
    534,938Total stockholders equity
    
    
    2,068,467
    
    
    
    2,655,954
    
    
    
    2,519,147
    
    
    
    2,238,818
    
    
    
    2,237,358Number of outstanding shares of common stock (3)
    
    
    72,512,291
    
    
    
    72,772,529
    
    
    
    72,831,923
    
    
    
    71,375,593
    
    
    
    82,951,275Other Financial Data:Net revenues(4)
    
    $
    2,435,267
    
    
    $
    1,868,199
    
    
    $
    1,490,780
    
    
    $
    1,538,661
    
    
    $
    1,784,462Net operating cash flow
    
    
    431,847
    
    
    
    255,018
    
    
    
    520,785
    
    
    
    594,949
    
    
    
    814,704Total debt to total capitalization (5) (6)
    
    
    68.7
    %
    
    
    65.7
    %
    
    
    57.9
    %
    
    
    49.1
    %
    
    
    54.9
    %Net debt to total net capitalization (6) (7)
    
    
    62.1
    %
    
    
    60.9
    %
    
    
    50.8
    %
    
    
    42.7
    %
    
    
    45.3
    %Capital expenditures:Vessel and equipment purchases, gross (8)
    
    $
    716,765
    
    
    $
    910,304
    
    
    $
    442,470
    
    
    $
    555,142
    
    
    $
    548,587
 
 (1)
    
    Unrealized gains (losses) on derivative instruments recorded in the consolidated statement of
income (loss) were as follows: 2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004(in thousands)Revenues
    
    $
    1,700
    
    
    $
    806
    
    
    $
    (409
    )
    
    $
    3,212
    
    
    $
    (3,558
    )Total operating expenses
    
    
    (43,477
    )
    
    
    20,044
    
    
    
    12,321
    
    
    
    (18,093
    )
    
    
    (4,201
    )Interest expense
    
    
    (648,751
    )
    
    
    (134,154
    )
    
    
    71,135
    
    
    
    (18,322
    )
    
    
    (61,177
    )Interest income
    
    
    182,206
    
    
    
    10,924
    
    
    
    (25,822
    )
    
    
    
    
    
    
    $
    (508,322
    )
    
    $
    (102,380
    )
    
    $
    57,225
    
    
    $
    (33,203
    )
    
    $
    (68,936
    )
 (2)
    
    Total operating expenses include the following: 2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004(in thousands)Gain on sale of vessels and equipment, net of
write-downs
    
    $
    60,015
    
    
    $
    16,531
    
    
    $
    1,341
    
    
    $
    139,184
    
    
    $
    79,254Unrealized (losses) gains on derivative instruments
    
    
    (43,477
    )
    
    
    20,044
    
    
    
    12,321
    
    
    
    (18,093
    )
    
    
    (4,201
    )Restructuring charges
    
    
    (15,629
    )
    
    
    
    
    
    
    (8,929
    )
    
    
    (2,882
    )
    
    
    (1,002
    )Goodwill
impairment charge
    
    
    (334,165
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (333,256
    )
    
    $
    36,575
    
    
    $
    4,733
    
    
    $
    118,209
    
    
    $
    74,051
 (3)
    
    On May 17, 2004, we effected a two-for-one stock split relating to our common stock. All
relevant per share data and number of outstanding shares of common stock give effect to this
stock split retroactively.(4)
    
    Consistent with general practice in the shipping industry, we use net revenues (defined as
revenues less voyage expenses) as a measure of equating revenues generated from voyage
charters to revenues generated from time-charters, which assists us in making operating
decisions about the deployment of our vessels and their performance. Under time-charters the
charterer pays the voyage expenses, which are all expenses unique to a particular voyage,
including any bunker fuel expenses, port fees, cargo loading and unloading expenses, canal
tolls, agency fees and commissions, whereas under voyage-charter contracts the ship-owner pays
these expenses. Some voyage expenses are fixed, and the remainder can be estimated. If we, as
the ship-owner, pay the voyage expenses, we typically pass the approximate amount of
these expenses on to our customers by charging higher rates under the contract or billing the
expenses to them. As a result, although revenues from different types of contracts may vary, the
net revenues after subtracting voyage expenses, which we call net revenues, are comparable
across the different types of contracts. We principally use net revenues, a non-GAAP financial
measure, because it provides more meaningful information to us than revenues, the most directly
comparable GAAP financial measure. Net revenues are also widely used by investors and analysts
in the shipping industry for comparing financial performance between companies and to industry
averages. The following table reconciles net revenues with revenues.  5




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2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004(in thousands)Revenues
    
    $
    3,193,655
    
    
    $
    2,395,507
    
    
    $
    2,013,737
    
    
    $
    1,957,732
    
    
    $
    2,217,139Voyage expenses
    
    
    (758,388
    )
    
    
    (527,308
    )
    
    
    (522,957
    )
    
    
    (419,071
    )
    
    
    (432,677
    )Net revenues
    
    $
    2,435,267
    
    
    $
    1,868,199
    
    
    $
    1,490,780
    
    
    $
    1,538,661
    
    
    $
    1,784,462
 (5)
    
    Total capitalization represents total debt, non-controlling interest and total stockholders
equity.(6)
    
    Until February 16, 2006, we had $143.7 million of Premium Equity Participating Security Units
due May 18, 2006 (or Equity Units)outstanding. If these Equity Units were presented as
equity, our total debt to total capitalization would have been 46.2% and 52.1% as of December
31, 2005 and 2004, respectively, and our net debt to total capitalization would have been
39.5% and 41.9% as of December 31, 2005 and 2004, respectively. We believe that this
presentation as equity for the purposes of these calculations is consistent with the
requirement that each Equity Unit holder purchase for $25 a specified fraction of a share of
our common stock on February 16, 2006.(7)
    
    Net debt represents total debt less cash, cash equivalents, restricted cash and short-term
marketable securities. Total net capitalization represents net debt, minority interest and
total stockholders equity.(8)
    
    Excludes vessels purchased in connection with our acquisitions of Navion AS in 2003, Teekay
Shipping Spain S.L. (or Teekay Spain)in 2004, Teekay Petrojarl ASA (or Teekay Petrojarl) in
2006, and 50% of OMI Corporation (or OMI) in 2007. Please read Item 5  Operating and
Financial Review and Prospects. The expenditures for vessels and equipment exclude non-cash
investing activities  Please Read Item 18  Financial Statements: Note 17 Supplemental Cash
Flow Information. Risk Factors
 The cyclical nature of the tanker industry may lead to volatile changes in charter rates, which may
adversely affect our earnings.
   
    
    demand for oil and oil products;
 
    
    supply of oil and oil products;
 
    
    regional availability of refining capacity;
 
    
    global and regional economic conditions;
 
    
    the distance oil and oil products are to be moved by sea; and
 
    
    changes in seaborne and other transportation patterns.
  
    
    the number of newbuilding deliveries;
 
    
    the scrapping rate of older vessels;
 
    
    conversion of tankers to other uses;
 
    
    the number of vessels that are out of service; and
 
    
    environmental concerns and regulations.
  The continuation of recent economic conditions, including disruptions in the global credit markets,
could adversely affect our results of operations
   6




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The recent economic downturn may affect our customers ability to charter our vessels and pay for
our services and may adversely affect our business and results of operations.
  Changes in the oil and natural gas markets could result in decreased demand for our vessels and
services.
  Terrorist attacks, piracy, increased hostilities or war could lead to further economic instability,
increased costs and disruption of our business.
  Our substantial operations outside the United States expose us to political, governmental and
economic instability, which could harm our operations.
  Our dependence on spot voyages may result in significant fluctuations in the utilization of our
vessels and our profitability.
   Reduction in oil produced from offshore oil fields could harm our shuttle tanker and FPSO
businesses.
 FPSO
 
    
    geologic factors, including general declines in production that occur naturally over
time;
 
    
    the rate of technical developments in extracting oil and related infrastructure and
implementation costs; and
 
    
    operator decisions based on revenue compared to costs from continued operations.
  7




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The redeployment risk of FPSO units is high given their lack of alternative uses and significant
costs.
  The duration of many of our shuttle tanker and FSO contracts is the life of the relevant oil field
or is subject to extension by the field operator or vessel charterer. If the oil field no longer
produces oil or is abandoned or the contract term is not extended, we will no longer generate
revenue under the related contract and will need to seek to redeploy affected vessels.
 FSO
 Over time, the value of our vessels may decline, which could adversely affect our operating
results.
  Our growth depends on continued growth in demand for LNG and LPG and LNG and LPG shipping as well
as offshore oil transportation, production, processing and storage services.
    
    
    decreases in the actual or projected price of oil, which could lead to a reduction in or
termination of production of oil at certain fields we service or a reduction in exploration
for or development of new offshore oil fields;
 
    
    increases in the production of oil in areas linked by pipelines to consuming areas, the
extension of existing, or the development of new, pipeline systems in markets we may serve,
or the conversion of existing non-oil pipelines to oil pipelines in those markets;
 
    
    decreases in the consumption of oil due to increases in its price relative to other
energy sources, other factors making consumption of oil less attractive or energy
conservation measures;
 
    
    availability of new, alternative energy sources; and
 
    
    negative global or regional economic or political conditions, particularly in oil
consuming regions, which could reduce energy consumption or its growth.
  8




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The intense competition in our markets may lead to reduced profitability or expansion
opportunities.
   The loss of any key customer could result in a significant loss of revenue in a given period.
  Our substantial debt levels may limit our flexibility in obtaining additional financing and in
pursuing other business opportunities.
  
    
    our ability to obtain additional financing, if necessary, for working capital, capital
expenditures, acquisitions or other purposes may be impaired or such financing may not be
available on favorable terms;
 
    
    we will need a substantial portion of our cash flow to make principal and interest
payments on our debt, reducing the funds that would otherwise be available for operations,
future business opportunities and dividends to stockholders;
 
    
    our debt level may make us more vulnerable than our competitors with less debt to
competitive pressures or a downturn in our industry or the economy generally; and
 
    
    our debt level may limit our flexibility in responding to changing business and economic
conditions.
  Financing agreements containing operating and financial restrictions may restrict our business and
financing activities.
  
    
    pay dividends;
 
    
    incur or guarantee indebtedness;
 
    
    change ownership or structure, including mergers, consolidations, liquidations and
dissolutions;
 
    
    grant liens on our assets;
 
    
    sell, transfer, assign or convey assets;
 
    
    make certain investments; and
 
    
    enter into a new line of business.
   9




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##### Table of Contents



Our operations are subject to substantial environmental and other regulations, which may
significantly increase our expenses.
   OPA 90 IMO
  EPA
  We may be unable to make or realize expected benefits from acquisitions, and implementing our
strategy of growth through acquisitions may harm our financial condition and performance.
  
    
    interruption of, or loss of momentum in, the activities of one or more of an acquired
companys businesses and our businesses;
 
    
    additional demands on members of our senior management while integrating acquired
businesses, which would decrease the time they have to manage our existing business,
service existing customers and attract new customers;
 
    
    difficulties in integrating the operations, personnel and business culture of acquired
companies;
 
    
    difficulties of coordinating and managing geographically separate organizations;
 
    
    adverse effects on relationships with our existing suppliers and customers, and those of
the companies acquired;
 
    
    difficulties entering geographic markets or new market segments in which we have no or
limited experience; and
 
    
    loss of key officers and employees of acquired companies.
   10




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The strain that growth places upon our systems and management resources may harm our business.
   Our insurance may not be sufficient to cover losses that may occur to our property or as a result
of our operations.
    Marine transportation is inherently risky, and an incident involving significant loss of or
environmental contamination by any of our vessels could harm our reputation and business.
  
    
    marine disaster;
 
    
    bad weather;
 
    
    mechanical failures;
 
    
    grounding, fire, explosions and collisions;
 
    
    piracy;
 
    
    human error; and
 
    
    war and terrorism.
  
    
    death or injury to persons, loss of property or environmental damage or pollution;
 
    
    delays in the delivery of cargo;
 
    
    loss of revenues from or termination of charter contracts;
 
    
    governmental fines, penalties or restrictions on conducting business;
 
    
    higher insurance rates; and
 
    
    damage to our reputation and customer relationships generally.
  Our operating results are subject to seasonal fluctuations.
   11




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We expend substantial sums during construction of newbuildings and the conversion of tankers to
FPSOs or FSOs without earning revenue and without assurance that they will be completed.
    We make substantial capital expenditures to expand the size of our fleet. Depending on whether we
finance our expenditures through cash from operations or by issuing debt or equity securities, our
financial leverage could increase or our stockholders could be diluted.
   Exposure to currency exchange rate and interest rate fluctuations results in fluctuations in our
cash flows and operating results.
   Many seafaring employees are covered by collective bargaining agreements and the failure to renew
those agreements or any future labor agreements may disrupt operations and adversely affect our
cash flows.
   12




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We may be unable to attract and retain qualified, skilled employees or crew necessary to operate
our business.
  Maritime claimants could arrest our vessels, which could interrupt our cash flow.
  We may not be exempt from United States tax on our United States source income, which would reduce
our net income and cash flow by the amount of the applicable tax.
  The preferential tax rates applicable to qualified dividend income are temporary, and the absence
of legislation extending the term would cause our dividends to be taxed at ordinary graduated tax
rates.
  U.S. tax authorities could treat us as a passive foreign investment company, which could have
adverse U.S. federal income tax consequences to U.S. holders.
 PFIC
 Tidewater Inc. v. United States Code IRS Tidewater Tidewater
   13




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##### Table of Contents



Item 4. Information on the Company
 A. Overview, History and Development
 Overview
 LNG LPG Teekay LNG Teekay Offshore Teekay
Tankers
 FSO FPSO dwt
    th
 Recent Business Acquisitions
 Acquisition of 50% of OMI Corporation
 TORM OMI
   Acquisition of Petrojarl ASA
 Teekay Petrojarl
  14




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##### Table of Contents



Public Offerings
 Public Offerings by Teekay Tankers Ltd.
   Public Offerings by Teekay Offshore Partners L.P.
 OPCO
 Public Offerings by Teekay LNG Partners L.P.
  B. Operations
 )
 
    
    Teekay Navion Shuttle Tankers and Offshore and Teekay Petrojarl provides marine
transportation, processing and storage services to the offshore oil industry, including
shuttle tanker, FSO and FPSO services. Our expertise and partnerships with third parties
allow us to create solutions for customers producing crude oil from offshore installations.
 
    
    Teekay Gas Services provides gas transportation services, primarily under
long-term fixed-rate contracts to major energy and utility companies. These services
currently include the transportation of LNG and LPG.
 
    
    Teekay Tanker Services is responsible for the commercial management of our
conventional crude oil and product tanker transportation services. We offer a full range of
shipping solutions through our worldwide network of commercial offices.
 Shuttle Tanker and FSO Segment and FPSO Segment
  
    
    offloading and transportation of cargo from oil field installations to onshore terminals
via dynamically positioned, offshore loading shuttle tankers;
 
    
    floating storage for oil field installations via FSO units; and
 
    
    floating production, processing and storage services via FPSO units.
  15




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##### Table of Contents



Shuttle Tankers
    FSO Units
    FPSO Units
    16




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##### Table of Contents



Liquefied Gas Segment
   th regasified
  cbm
   Spot Tanker Segment
     17




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##### Table of Contents



VLCCs
     Fixed-Rate Tanker Segment
  Our Fleet
  Number of VesselsOwned
    
    
    Chartered-in
    
    
    NewbuildingsVessels
    
    
    Vessels
    
    
    /Conversions
    
    
    TotalShuttle Tanker and FSO SegmentShuttle Tankers
    
    
    25
    (1)
    
    
    9
    (2)
    
    
    4
    
    
    
    38FSO Units
    
    
    4
    (3)
    
    
    
    
    
    
    
    
    
    
    4Total Shuttle Segment
    
    
    29
    
    
    
    9
    
    
    
    4
    
    
    
    42FPSO SegmentShuttle Tankers
    
    
    3
    (1)
    
    
    
    
    
    
    
    
    
    
    3FSO Unit
    
    
    1
    (3)
    
    
    
    
    
    
    
    
    
    
    1FPSO Units
    
    
    5
    (4)
    
    
    
    
    
    
    
    
    
    
    5Total FPSO Segment
    
    
    9
    
    
    
    
    
    
    
    
    
    
    
    9Fixed-Rate Tanker SegmentConventional Tankers
    
    
    17
    (5)
    
    
    6
    
    
    
    2
    
    
    
    25Total Fixed-Rate Tanker Segment
    
    
    17
    
    
    
    6
    
    
    
    2
    
    
    
    25Liquefied Gas SegmentLNG Carriers
    
    
    14
    (6)
    
    
    
    
    
    
    5
    (7)
    
    
    19LPG Carriers
    
    
    1
    (8)
    
    
    
    
    
    
    5
    (8)
    
    
    6Total Liquefied Gas Segment
    
    
    15
    
    
    
    
    
    
    
    10
    
    
    
    25Spot Tanker SegmentSuezmax Tankers
    
    
    8
    (9)
    
    
    6
    
    
    
    5
    
    
    
    19Aframax Tankers
    
    
    21
    (10)
    
    
    26
    
    
    
    
    
    
    
    47Panamax Tanker
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    1Large Product Tankers
    
    
    9
    (11)
    
    
    8
    
    
    
    1
    
    
    
    18Total Spot Tanker Segment
    
    
    38
    
    
    
    41
    
    
    
    6
    
    
    
    85Total
    
    
    108
    
    
    
    56
    
    
    
    22
    
    
    
    186
  18




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##### Table of Contents



(1)
    
    Includes 25 vessels owned by OPCO (including five through 50% controlled joint ventures), two
vessels owned by Teekay Offshore (including one through a 50% controlled joint venture), and
one owned by Teekay Petrojarl.(2)
    
    All nine vessels chartered-in by OPCO.(3)
    
    Includes four FSO units owned by OPCO (including one through 89% joint venture) and one FSO
unit owned by Teekay Offshore.(4)
    
    Includes five FPSO units owned by Teekay Petrojarl.
Teekay is required to offer to sell to Teekay Offshore any of these units that are servicing contracts
in excess of three years in length. Certain of our FPSO contracts
include the services of shuttle tankers and an FSO unit, and as such
these vessels are included in the FPSO segment.(5)
    
    Includes eight vessels owned by Teekay LNG, two vessels owned by OPCO, and two vessels owned
by Teekay Tankers.(6)
    
    Includes nine LNG carriers owned by Teekay LNG, a 70% interest in one LNG carrier, and 40%
interest in four LNG carriers.(7)
    
    Includes Teekays 70% interest in one LNG newbuilding and Teekays 33% interest in four LNG
newbuildings. Teekay is required to offer to sell these vessels to Teekay LNG.(8)
    
    All vessels owned by Teekay LNG.(9)
    
    Includes two Suezmax tankers that Teekay is required to offer Teekay Tankers.(10)
    
    Includes nine vessels owned by Teekay Offshore, all of which are chartered to Teekay and
seven vessels owned by Teekay Tankers.(11)
    
    Includes one product tanker owned by Teekay Tankers.     Safety, Management of Ship Operations and Administration
 QATO
  MOMS ISM Code ISO OHSAS DNV
   
    
    vessel maintenance (including repairs and drydocking) and certification;
 
    
    crewing by competent seafarers;
 
    
    procurement of stores, bunkers and spare parts;
 
    
    management of emergencies and incidents;
 
    
    supervision of shipyard and projects during new-building and conversions;
 
    
    insurance; and
 
    
    financial management services.
  19




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##### Table of Contents



TBW
 Risk of Loss and Insurance
    Operations Outside of the United States
   Customers
  Classification, Audits and Inspections
 Intermediate Survey Special Survey
   20




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##### Table of Contents




    
    adherence to our operating standards;
 
    
    the structural integrity of the vessel is being maintained;
 
    
    machinery and equipment is being maintained to give full reliability in service;
 
    
    we are optimizing performance in terms of speed and fuel consumption; and
 
    
    the vessels appearance will support our brand and meet customer expectations.
  Properties
  Organizational Structure
  
    
    illuminate higher value of fixed-rate cash flows to Teekay investors;
 
    
    realize advantages of a lower cost of equity when investing in new offshore or LNG
projects;
 
    
    enhance returns to Teekay through fee-based revenue and ownership of the limited
partnerships incentive distribution rights, which entitle the holder to disproportionate
distributions of available cash as cash distribution levels to unit
holders increase; and
 
    
    access to capital to grow
each of our businesses in offshore, LNG and conventional tankers.
  
 (1)
    
    The partnership is controlled by its general partner. Teekay Corporation has a 100%
beneficial ownership in the general partner. However in certain limited cases, approval of a
majority of the common unit holders is required to approve certain actions.(2)
    
    Proportion of voting power held is 53%.(3)
    
    Including our 100% interest in Teekay Petrojarl.  21




---



##### Table of Contents



C. Regulations
   RegulationInternational Maritime Organization (or IMO ).
 
    
    is the subject of a contract for a major conversion or original construction on or
after July 6, 1993;
 
    
    commences a major conversion or has its keel laid on or after January 6, 1994; or
 
    
    completes a major conversion or is a newbuilding delivered on or after July 6, 1996.
    22




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##### Table of Contents



SOLAS ISPS MARPOL
Convention IGC Code DP
    Environmental Regulations  United States Regulations. OPA 90 CERCLA
  
    
    natural resources damages and the related assessment costs;
 
    
    real and personal property damages;
 
    
    net loss of taxes, royalties, rents, fees and other lost revenues;
 
    
    lost profits or impairment of earning capacity due to property or natural resources
damage;
 
    
    net cost of public services necessitated by a spill response, such as protection from
fire, safety or health hazards; and
 
    
    loss of subsistence use of natural resources.
   Coast Guard
 COFR
  23




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##### Table of Contents




    
    address a worst case scenario and identify and ensure, through contract or other
approved means, the availability of necessary private response resources to respond to a
worst case discharge;
 
    
    describe crew training and drills; and
 
    
    identify a qualified individual with full authority to implement removal actions.
    Environmental RegulationOther Environmental Initiatives.
 CLC ,
 Annex VI
 EPA
   24




---



##### Table of Contents



VOC equipment)
 Vessel Security Regulation
 MTSA
 Shuttle Tanker, FSO Unit and FPSO Unit Regulation
  D. Taxation of the Company
 The following discussion is a summary of the principal United States, Bahamian, Bermudian, Marshall
Islands, Norwegian and Spanish tax laws applicable to us. The following discussion of tax matters,
as well as the conclusions regarding certain issues of tax law that are reflected in such
discussion, are based on current law. No assurance can be given that changes in or interpretation
of existing laws will not occur or will not be retroactive or that anticipated future factual
matters and circumstances will in fact occur. Our views have no binding effect or official status
of any kind, and no assurance can be given that the conclusions discussed below would be sustained
if challenged by taxing authorities.
 United States Taxation
 Code
 Taxation of Operating Income. Transportation Income
 U.S. Source International Transportation Income U.S. Source
Domestic Transportation Income
 Section 883 Exemption
  25




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##### Table of Contents



The Section 883 Exemption. Section 883 Regulations
 Equivalent Exemption Ownership Test
  The Net Basis Tax and Branch Profits Tax. Effectively Connected
Income
    The 4.0% Gross Basis Tax.
 Marshall Islands, Bahamian and Bermudian Taxation
  Norwegian Taxation
   Taxation of Norwegian Subsidiaries Engaged in Business Activities.
    26




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##### Table of Contents



Taxation of Dividends. i.e.
 Correction Income Tax. correction income
tax,
 i.e.
 Taxation of Interest Paid by Norwegian Entities.
 Taxation on Distributions by Norwegian Entities.
  Spanish Taxation
 CISSR TTR
    
 Item 4A. Unresolved Staff Comments
  
 Item 5. Operating and Financial Review and Prospects
 The following discussion should be read in conjunction with the financial statements and notes
thereto appearing elsewhere in this report.
  27




---



##### Table of Contents



Managements Discussion and Analysis of Financial Condition and Results of Operations
 General
  SIGNIFICANT DEVELOPMENTS IN 2008 AND EARLY 2009
 Acquisition of Remaining Shares of Teekay Petrojarl
  Strategic Transaction with ConocoPhillips
 VLCC
 Sale of LNG Vessels to Teekay LNG
 Kenai LNG Carriers
 Arctic Spirit MLCI Arctic Spirit Arctic Spirit
 Sale of RasGas 3 LNG Vessels to Teekay LNG
 RasGas 3 LNG Carriers Teekay Nakilat (III) RasGas
3 Joint Venture
 Sale of Suezmax Tankers to Teekay Tankers
  Sale of Aframax Lightering Tankers to Teekay Offshore
   28




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##### Table of Contents



Public Offerings by Teekay LNG Partners L.P.
   Public Offering by Teekay Offshore Partners L.P.
   Public Offering by Teekay Tankers Ltd.
  Contract Extension with Talisman Energy
 Petrojarl Varg Petrojarl Varg Petrojarl Varg Petrojarl Varg
 OTHER SIGNIFICANT PROJECTS
 Angola LNG Project
  IMPORTANT FINANCIAL AND OPERATIONAL TERMS AND CONCEPTS
  Revenues.
 Forward Freight Agreements. FFAs
  29




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##### Table of Contents



Voyage Expenses.
 Net Revenues. GAAP
 Vessel Operating Expenses.
 Income from Vessel Operations.
 Drydocking.
 Depreciation and Amortization.
 
    
    charges related to the depreciation and amortization of the historical cost of our fleet
(less an estimated residual value) over the estimated useful lives of our vessels;
 
    
    charges related to the amortization of drydocking expenditures over the estimated number
of years to the next scheduled drydocking; and
 
    
    charges related to the amortization of intangible assets, including the fair value of
the time-charters, contracts of affreightment, customer relationships and intellectual
property where amounts have been attributed to those items in acquisitions; these amounts
are amortized over the period in which the asset is expected to contribute to our future
cash flows.
 Time-charter Equivalent (TCE) Rates. TCE
 Revenue Days.
 Calendar-ship-days.
 Restricted Cash Deposits.
 RESULTS OF OPERATIONS
    30




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##### Table of Contents



Year Ended December 31, 2008 versus Year Ended December 31, 2007
 Shuttle Tanker and FSO Segment
   Twelve Months EndedDecember 31,(in thousands of U.S. dollars, except calendar-ship-days and percentages)
    
    2008
    
    
    2007
    
    
    % ChangeRevenues
    
    
    705,461
    
    
    
    642,047
    
    
    
    9.9Voyage expenses
    
    
    171,599
    
    
    
    117,571
    
    
    
    46.0Net revenues
    
    
    533,862
    
    
    
    524,476
    
    
    
    1.8Vessel operating expenses
    
    
    175,449
    
    
    
    127,372
    
    
    
    37.7Time-charter hire expense
    
    
    134,100
    
    
    
    160,993
    
    
    
    (16.7
    )Depreciation and amortization
    
    
    117,198
    
    
    
    104,936
    
    
    
    11.7General and administrative (1)
    
    
    58,725
    
    
    
    60,234
    
    
    
    (2.5
    )Gain on sale of vessels and equipment, net of write-downs
    
    
    (3,771
    )
    
    
    (16,531
    )
    
    
    (77.2
    )Restructuring charge
    
    
    10,645
    
    
    
    
    
    
    
    Income from vessel operations
    
    
    41,516
    
    
    
    87,472
    
    
    
    (52.5
    )Calendar-Ship-DaysOwned Vessels
    
    
    11,595
    
    
    
    11,015
    
    
    
    5.3Chartered-in Vessels
    
    
    3,765
    
    
    
    4,619
    
    
    
    (18.5
    )Total
    
    
    15,360
    
    
    
    15,634
    
    
    
    (1.8
    )
 (1)
    
    Includes direct general and administrative expenses and indirect general and administrative
expenses (allocated to the shuttle tanker and FSO segment based on estimated use of corporate
resources).  
    
    the transfer of the Navion Sagafrom the fixed-rate segment to the shuttle tanker and
FSO segment in connection with the completion of its conversion to an FSO unit in May 2007;
and
 
    
    the delivery of two new shuttle tankers, the Navion Bergenand the Navion Gothenburg, in
April and July 2007, respectively (collectively, the Shuttle Tanker Deliveries);
  
    
    a decline in the number of chartered-in shuttle tankers; and
 
    
    the sale of a 1987-built shuttle tanker in May 2007 (or the Shuttle Tanker Disposition).
 Net Revenues.
 
    
    an increase of $10.1 million from the Shuttle Tanker Deliveries;
 
    
    an increase of $9.6 million due to more revenue days for shuttle tankers servicing
contracts of affreightment and from shuttle tankers servicing contracts of affreightment in
the conventional spot tanker market, earning a higher average daily charter rate, compared
to the same period last year;
 
    
    an increase of $6.9 million from the transfer of the Navion Sagato the shuttle tanker
and FSO segment; and
 
    
    an increase of $2.5 million due to the redeployment of one shuttle tanker from servicing
contracts of affreightment to a time-charter effective October 2007, and earning a higher
average daily charter rate than for the same periods last year;
  31




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##### Table of Contents




    
    a decrease of $10.0 million, due to declining oil production at mature oil fields in the
North Sea which are serviced by certain shuttle tankers on contracts of affreightment;
 
    
    a decrease of $3.9 million due to an increased number of offhire days resulting from an
increase in scheduled drydockings and unexpected repairs performed compared to the same
period last year;
 
    
    a decrease of $3.4 million due to customer performance claims under the terms of charter
party agreements;
 
    
    a decrease of $3.0 million due to an increase in bunker costs which are not passed on to
the charterer under certain contracts; and
 
    
    a decrease of $3.0 million due to redeliver of an in-chartered shuttle tanker in May
2008.
 Vessel Operating Expenses.
 
    
    an increase of $33.2 million from increases in crew manning costs;
 
    
    an increase of $9.8 million relating to the unrealized change in fair value of our
foreign currency forward contracts;
 
    
    an increase of $5.0 million relating to the transfer of the Navion Sagato the shuttle
tanker and FSO segment; and
 
    
    an increase of $4.4 million, from the acquisition of an in-chartered shuttle tanker, the
Navion Oslo, which was delivered in late March 2008; and
 
    
    an increase of $0.5 million from increases in service costs and the price of
consumables, freight and lubricants
 Time-Charter Hire Expense.
 Depreciation and Amortization.
 
    
    an increase of $6.9 million relating to the transfer of the Navion Sagato the shuttle
tanker and FSO segment; and
 
    
    an increase of $2.8 million from the Shuttle Tanker Deliveries.
 Gain on Sale of Vessels and Equipment  Net of Write-downs.
 FPSO Segment
   Twelve Months EndedDecember 31,(in thousands of U.S. dollars, except calendar-ship-days and percentages)
    
    2008
    
    
    2007
    
    
    % ChangeRevenues
    
    
    383,752
    
    
    
    350,279
    
    
    
    9.6Vessel operating expenses
    
    
    227,651
    
    
    
    156,264
    
    
    
    45.7Depreciation and amortization
    
    
    91,734
    
    
    
    68,047
    
    
    
    34.8General and administrative (1)
    
    
    53,087
    
    
    
    36,927
    
    
    
    43.8Loss on sale of vessels and equipment, net of write-downs
    
    
    12,019
    
    
    
    
    
    
    
    Goodwill impairment charge
    
    
    334,165
    
    
    
    
    
    
    
    (Loss) income from vessel operations
    
    
    (334,904
    )
    
    
    89,041
    
    
    
    (476.1
    )Calendar-Ship-DaysOwned Vessels
    
    
    2,073
    
    
    
    1,825
    
    
    
    13.6Total
    
    
    2,073
    
    
    
    1,825
    
    
    
    13.6
 (1)
    
    Includes direct general and administrative expenses and indirect general and administrative
expenses (allocated to the FPSO segment based on estimated use of corporate resources). FPSO Delivery
 Net Revenues.
 
    
    an increase of $40.4 million from the FPSO Delivery;
  
    
    a decrease of $11.3 million in revenues from the FoinavenFPSO due to lower oil
production compared to the prior year and a production shutdown during August and September
2008.
  32




---



##### Table of Contents



Vessel Operating Expenses.
 
    
    an increase of $25.3 million relating to the unrealized change in fair value of our
foreign currency forward contracts;
 
    
    an increase of $24.2 million from the FPSO Delivery;
 
    
    an increase of $13.9 million from increases in service costs and the price of
consumables, freight and lubricants; and
 
    
    an increase of $7.3 million from increases in crew manning costs;
  
    
    a decrease of $1.8 million from lower insurance charges.
 Depreciation and Amortization.
 
    
    an increase of $13.8 million from the refinement of preliminary estimates of fair value
assigned to certain assets included in our acquisition of Teekay Petrojarl; and
 
    
    an increase of $9.9 million from the FPSO Delivery.
 Loss on Sale of Vessels and Equipment  Net of Write-downs.
 Goodwill impairment charge.
 Fixed-Rate Tanker Segment
   Twelve Months EndedDecember 31,(in thousands of U.S. dollars, except calendar-ship-days and percentages)
    
    2008
    
    
    2007
    
    
    % ChangeRevenues
    
    
    265,849
    
    
    
    195,942
    
    
    
    35.7Voyage expenses
    
    
    5,010
    
    
    
    2,707
    
    
    
    85.1Net revenues
    
    
    260,839
    
    
    
    193,235
    
    
    
    35.0Vessel operating expenses
    
    
    68,065
    
    
    
    51,458
    
    
    
    32.3Time-charter hire expense
    
    
    43,048
    
    
    
    25,812
    
    
    
    66.8Depreciation and amortization
    
    
    44,578
    
    
    
    36,018
    
    
    
    23.8General and administrative (1)
    
    
    20,740
    
    
    
    18,221
    
    
    
    13.8Loss on sale of vessels and equipment, net of write-downs
    
    
    4,401
    
    
    
    
    
    
    
    Restructuring charge
    
    
    1,991
    
    
    
    
    
    
    
    Income from vessel operations
    
    
    78,016
    
    
    
    61,725
    
    
    
    26.4Calendar-Ship-DaysOwned Vessels
    
    
    6,824
    
    
    
    5,390
    
    
    
    26.6Chartered-in Vessels
    
    
    2,363
    
    
    
    1,312
    
    
    
    80.1Total
    
    
    9,187
    
    
    
    6,702
    
    
    
    37.1
 (1)
    
    Includes direct general and administrative expenses and indirect general and administrative
expenses (allocated to the fixed-rate tanker segment based on estimated use of corporate
resources).  33




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##### Table of Contents




    
    the acquisition of two Suezmax tankers from OMI Corporation on August 1, 2007
(collectively, the OMI Acquisition);
 
    
    the addition of two new chartered-in Aframax tankers in January 2008 as part of the
multi-vessel transaction with ConocoPhillips, in which we acquired ConocoPhillips rights
in six double-hull Aframax tankers (collectively, the ConocoPhillips Acquisition);
 
    
    the delivery of two new Aframax tankers during January and March 2008 (collectively, the
Aframax Deliveries);
 
    
    the transfer of two product tankers from the spot tanker segment in April 2008 upon
commencement of long-term time-charters (the Product Tanker Transfers); and
 
    
    the transfer of four Aframax tankers, on a net basis during 2008, from the spot tanker
segment upon commencement of long-term time-charters (the Aframax Transfers).
  Net Revenues
 
    
    an increase of $17.6 million from the ConocoPhillips Acquisition;
 
    
    an increase of $17.0 million from the OMI Acquisition;
 
    
    an increase of $11.2 million from the Product Tanker Transfers;
 
    
    an increase of $9.8 million from the Aframax Transfers;
 
    
    a increase of $9.2 million from increased revenues earned by the Teide Spiritand the
Toledo Spirit(the time charters for both these vessels provide for additional revenues to
us beyond the fixed hire rate when spot tanker market rates exceed threshold amounts; the
time-charter for the Toledo Spirit also provides for a reduction in revenues to us when
spot tanker market rates are below threshold amounts); and
 
    
    an increase of $8.6 million from the Aframax Deliveries;
  
    
    a decrease of $3.3 million from lower charter rates earned on an in-chartered VLCC.
 Vessel Operating Expenses.
 
    
    an increase of $7.9 million from the ConocoPhillips acquisition;
 
    
    an increase of $4.6 million relating to higher crew manning and repairs, insurance, and
maintenance and consumables;
 
    
    an increase of $3.8 million from the Product Tanker Transfers;
 
    
    an increase of $1.7 million due to full year operations in 2008 of the Suezmax tankers
acquired in the OMI Acquisition; and
 
    
    an increase of $1.0 million due to the effect on our Euro-denominated vessel operating
expenses (primarily crewing costs for five of our Suezmax tankers) from the strengthening
of the Euro against the U.S. Dollar during such period compared to the same period last
year. A majority of our vessel operating expenses for five of our Suezmax tankers are
denominated in Euros, which is primarily a function of the nationality of our crew (our
Euro-denominated revenues currently generally approximate our Euro-denominated expenses and
Euro-denominated loan and interest payments);
  
    
    a decrease of $3.1 million from the Aframax Transfers.
 Time-Charter Hire Expense.
 
    
    an increase of $7.3 million from the ConocoPhillips acquisition.
 
    
    an increase of $5.6 million from the Aframax Transfers; and
 
    
    an increase of $4.9 million from the OMI Acquisition.
 Depreciation and Amortization.
 
    
    an increase of $5.1 million from the OMI Acquisition; and
 
    
    an increase of $2.8 million from the Aframax Deliveries.
 Loss on Sale of Vessels and Equipment  Net of Write-downs.
 Restructuring Charges. Samar Spirit
  34




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##### Table of Contents



Liquefied Gas Segment
   Twelve Months EndedDecember 31,(in thousands of U.S. dollars, except calendar-ship-days and percentages)
    
    2008
    
    
    2007
    
    
    % ChangeRevenues
    
    
    221,930
    
    
    
    166,981
    
    
    
    32.9Voyage expenses
    
    
    1,009
    
    
    
    109
    
    
    
    825.7Net revenues
    
    
    220,921
    
    
    
    166,872
    
    
    
    32.4Vessel operating expenses
    
    
    48,185
    
    
    
    30,239
    
    
    
    59.3Depreciation and amortization
    
    
    58,371
    
    
    
    46,018
    
    
    
    26.8General and administrative (1)
    
    
    23,072
    
    
    
    20,521
    
    
    
    12.4Restructuring charge
    
    
    634
    
    
    
    
    
    
    
    Income from vessel operations
    
    
    90,659
    
    
    
    70,094
    
    
    
    29.3Calendar-Ship-DaysOwned Vessels and Vessels under Capital Lease
    
    
    3,701
    
    
    
    2,899
    
    
    
    27.7
 (1)
    
    Includes direct general and administrative expenses and indirect general and administrative
expenses (allocated to the liquefied gas segment based on estimated use of corporate
resources).  
    
    the delivery of one new LNG carrier in November 2008 (the Tangguh Hiri);
 
    
    the delivery of two new LNG carriers in January and February 2007 (or the RasGas II
Deliveries); and
 
    
    our December 2007 acquisition of two 1993-built LNG vessels from a joint venture between
Marathon Oil Corporation and ConocoPhillips (or the Kenai LNG Carriers).
 Net Revenues.
 
    
    an increase of $38.3 million from the delivery of the Kenai LNG Carriers;
 
    
    an increase of $6.1 million from the RasGas II Deliveries;
 
    
    a relative increase of $5.5 million, due to the Madrid Spiritbeing off-hire during the
first half of 2007 after sustaining damage to its engine boilers; and
 
    
    an increase of $4.7 million due to the effect on our Euro-denominated revenues of the
strengthening of the Euro against the U.S. Dollar during 2008 compared to 2007;
  
    
    a decrease of $3.1 million, due to the Catalunya Spiritbeing off-hire for 34.3 days
during the first half of 2008 for scheduled drydocking.
 Vessel Operating Expenses.
 
    
    an increase of $10.8 million from the full year operations in 2008 of the Kenai LNG
Carriers delivered in 2007;
 
    
    an increase of $2.3 million due to the effect on our Euro-denominated vessel operating
expenses (primarily crewing costs) from the strengthening of the Euro against the U.S.
Dollar during 2008 compared to 2007 (a majority of our vessel operating expenses are
denominated in Euros, which is primarily a function of the nationality of our crew; our
Euro-denominated revenues currently generally approximate our Euro-denominated expenses and
Euro-denominated loan and interest payments);
 
    
    an increase of $1.2 million from the RasGas II Deliveries; and
 
    
    an increase of $0.7 million from the delivery of the Tangguh Hiri.
 Depreciation and Amortization.
 
    
    an increase of $9.9 million from the delivery of the Kenai LNG Carriers;
 
    
    an increase of $1.2 million from the RasGas II Deliveries;
 
    
    an increase of $0.6 million from the delivery of the Tangguh Hiri; and
 
    
    an increase of $0.3 million relating to the amortization of drydock expenditures
incurred during 2008.
  35




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##### Table of Contents



Spot Tanker Segment
    Twelve Months EndedDecember 31,(in thousands of U.S. dollars, except calendar-ship-days and percentages)
    
    2008
    
    
    2007
    
    
    % ChangeRevenues
    
    
    1,616,663
    
    
    
    1,040,258
    
    
    
    55.4Voyage expenses
    
    
    580,770
    
    
    
    406,921
    
    
    
    42.7Net revenues
    
    
    1,035,893
    
    
    
    633,337
    
    
    
    63.6Vessel operating expenses
    
    
    134,969
    
    
    
    81,813
    
    
    
    65.0Time-charter hire expense
    
    
    434,975
    
    
    
    279,676
    
    
    
    55.5Depreciation and amortization
    
    
    106,921
    
    
    
    74,094
    
    
    
    44.3General and administrative (1)
    
    
    88,898
    
    
    
    95,962
    
    
    
    (7.4
    )Gain on sale of vessels and equipment, net of write-downs
    
    
    (72,664
    )
    
    
    
    
    
    
    Restructuring charge
    
    
    2,359
    
    
    
    
    
    
    
    Income from vessel operations
    
    
    340,435
    
    
    
    101,792
    
    
    
    234.4Calendar-Ship-DaysOwned Vessels
    
    
    13,623
    
    
    
    11,764
    
    
    
    15.8Chartered-in Vessels
    
    
    17,647
    
    
    
    12,730
    
    
    
    38.6Total
    
    
    31,270
    
    
    
    24,494
    
    
    
    27.7
 (1)
    
    Includes direct general and administrative expenses and indirect general and administrative
expenses (allocated to the spot tanker segment based on estimated use of corporate resources).  
    
    the acquisition of twelve owned and five chartered-in vessels from OMI Corporation on
August 1, 2007 (collectively, the OMI Acquisition);
 
    
    the addition of two owned and two chartered-in Aframax tankers in January 2008 as part
of the multi-vessel transaction with ConocoPhillips, in which we acquired ConocoPhillips
rights in six double-hull Aframax tankers (collectively, the ConocoPhillips Acquisition);
 
    
    the delivery of two new large product tankers in February and May 2007 (or the Spot
Tanker Deliveries);
 
    
    the delivery of three new Suezmax tankers between May and October 2008 (or the Suezmax
Deliveries); and
 
    
    a net increase in the number of chartered-in vessels, primarily Aframax and product
tankers.
  Tanker Market and TCE Rates
  OPEC
  36




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##### Table of Contents



IMF OECD IEA
    STCs FFAs
 Year EndedDecember 31, 2008
    
    
    December 31, 2007
    
    
    December 31, 2006Net
    
    
    
    
    
    
    TCE
    
    
    Net
    
    
    
    
    
    
    TCE
    
    
    Net
    
    
    
    
    
    
    TCERevenues
    
    
    Revenue
    
    
    Rate
    
    
    Revenues
    
    
    Revenue
    
    
    Rate
    
    
    Revenues
    
    
    Revenue
    
    
    RateVessel Type
    
    ($000s)
    
    
    Days
    
    
    $
    
    
    ($000s)
    
    
    Days
    
    
    $
    
    
    ($000s)
    
    
    Days
    
    
    $Spot Fleet (1)Suezmax Tankers (2)
    
    
    121,393
    
    
    
    2,111
    
    
    
    57,505
    
    
    
    52,697
    
    
    
    1,496
    
    
    
    35,225
    
    
    
    56,981
    
    
    
    1,639
    
    
    
    34,766Aframax Tankers (2)
    
    
    609,150
    
    
    
    15,072
    
    
    
    40,416
    
    
    
    342,989
    
    
    
    11,681
    
    
    
    29,363
    
    
    
    398,522
    
    
    
    10,946
    
    
    
    36,408Large/Medium Product Tankers (2)
    
    
    149,842
    
    
    
    4,396
    
    
    
    34,086
    
    
    
    98,194
    
    
    
    3,746
    
    
    
    26,213
    
    
    
    96,782
    
    
    
    3,488
    
    
    
    27,747Small Product Tankers (2)
    
    
    44,008
    
    
    
    3,172
    
    
    
    13,874
    
    
    
    51,811
    
    
    
    3,596
    
    
    
    14,408
    
    
    
    58,530
    
    
    
    3,782
    
    
    
    15,476Time-Charter Fleet (1)Suezmax Tankers (2)
    
    
    85,674
    
    
    
    2,762
    
    
    
    31,019
    
    
    
    47,584
    
    
    
    1,666
    
    
    
    28,562
    
    
    
    
    
    
    
    
    
    
    
    Aframax Tankers (2)
    
    
    39,900
    
    
    
    1,224
    
    
    
    32,598
    
    
    
    5,734
    
    
    
    183
    
    
    
    31,334
    
    
    
    19,134
    
    
    
    729
    
    
    
    26,247Large/Medium Product Tankers (2)
    
    
    52,892
    
    
    
    1,971
    
    
    
    26,835
    
    
    
    42,482
    
    
    
    1,638
    
    
    
    25,935
    
    
    
    
    
    
    
    
    
    
    
    Other (3)
    
    
    (66,966
    )
    
    
    
    
    
    
    
    
    
    
    (8,154
    )
    
    
    
    
    
    
    
    
    
    
    (494
    )
    
    
    
    
    
    
    Totals
    
    
    1,035,893
    
    
    
    30,708
    
    
    
    33,734
    
    
    
    633,337
    
    
    
    24,006
    
    
    
    26,382
    
    
    
    629,455
    
    
    
    20,584
    
    
    
    30,580
 (1)
    
    Spot fleet includes short-term time-charters and fixed-rate contracts of affreightment
of less than 1 year and gains and losses from forward freight agreements (FFAs) less than 1
year; and time-charter fleet includes short-term time-charters and fixed-rate contracts of
affreightment of between 1-3 years and gains and losses from STCs and FFAs of between 1-3
years.(2)
    
    Includes realized gains and losses from STCs and FFAs.(3)
    
    Includes broker commissions, the cost of spot in-charter vessels servicing fixed-rate
contract of affreightment cargoes, unrealized gains and losses from STCs and FFAs, the
amortization of in-process revenue contracts and cost of fuel while offhire.  37




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##### Table of Contents



Net Revenues.
 
    
    an increase of $207.8 million from an increase in our average TCE rate during 2008
compared to 2007;
 
    
    an increase of $147.4 million from the OMI Acquisition;
 
    
    an increase of $52.6 million from a net increase in the number of chartered-in vessels;
 
    
    an increase of $42.0 million from the ConocoPhillips Acquisition;
 
    
    an increase of $19.5 million from the Spot Tanker Deliveries and the Suezmax Deliveries;
and
 
    
    an increase of $17.0 million from the transfer of two Aframax tankers from the
fixed-rate tanker segment in January 2008;
  
    
    a decrease of $54.2 million from the effect of STCs and FFAs;
 
    
    a decrease of $13.6 million from an increase in the number of days our vessels were
off-hire due to regularly scheduled maintenance; and
 
    
    a decrease of $5.0 million from the transfer of a Suezmax tanker to the offshore segment
in May 2007 and the transfer of an Aframax tanker to the fixed-rate tanker segment in
December 2007.
 Vessel Operating Expenses.
 
    
    an increase of $18.1 million from higher crew manning repairs, maintenance and
consumables costs, insurance costs, port expenses, safety inspections and non-recurring
damages;
 
    
    an increase of $17.2 million from the ConocoPhillips Acquisition;
 
    
    an increase of $10.1 million from the OMI Acquisition;
 
    
    an increase of $4.8 million from the transfer of two Aframax tankers from the fixed-rate
segment in January 2008; and
 
    
    an increase of $4.3 million from the Spot Tanker Deliveries and the Suezmax Deliveries;
  
    
    a decrease of $3.3 million from the transfer of a Suezmax tanker to the shuttle tanker
and FSO segment in May 2007 and the transfer of an Aframax tanker to the fixed-rate tanker
segment in December 2007.
 Time-Charter Hire Expense.
 
    
    an increase of $49.8 million from an increase in the number of chartered-in tankers
(excluding the OMI and ConocoPhillips vessels) compared to the same period in 2007;
 
    
    an increase of $42.7 million from an increase in the average in-charter rate;
 
    
    an increase of $39.8 million from the OMI Acquisition;
 
    
    an increase of $16.1 million from the ConocoPhillips Acquisition; and
 
    
    an increase of $6.9 million due to the sale and lease-back of three Aframax tankers
during April and July 2007.
 Depreciation and Amortization.
 
    
    an increase of $30.7 million from the OMI Acquisition;
 
    
    an increase of $6.3 million from the ConocoPhillips Acquisition; and
 
    
    an increase of $3.5 million from the Spot Tanker Deliveries and the Suezmax Deliveries;
  
    
    a decrease of $2.8 million from the sale and lease-back of three Aframax tankers during
April and July 2007; and
 
    
    a decrease of $2.2 million from the transfer of a Suezmax tanker to the shuttle tanker
and FSO segment in May 2007 and the transfer of an Aframax to the fixed-rate tanker segment
during December 2007.
 Gain on Sale of Vessels and Equipment  Net of Write-downs.
 
    
    a gain of $52.2 million from the sale of vessels; and
 
    
    a gain of $44.4 million from the sale of our 50% interest in the Swift Tanker Pool;
  
    
    a decrease of $23.9 million from the impairment write-down on two 1992-built Aframax
tankers.
  38




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##### Table of Contents



Other Operating Results
  Twelve Months EndedDecember 31,(in thousands of U.S. dollars, except percentages)
    
    2008
    
    
    2007
    
    
    % ChangeGeneral and administrative
    
    
    (244,522
    )
    
    
    (231,865
    )
    
    
    5.5Interest expense
    
    
    (994,966
    )
    
    
    (422,433
    )
    
    
    135.5Interest income
    
    
    273,647
    
    
    
    110,201
    
    
    
    148.3Foreign exchange gain (loss)
    
    
    32,348
    
    
    
    (39,912
    )
    
    
    (181.0
    )Equity loss from joint ventures
    
    
    (36,085
    )
    
    
    (12,404
    )
    
    
    190.9Income tax recovery
    
    
    56,176
    
    
    
    3,192
    
    
    
    1,659.9Non-controlling interest expense
    
    
    (9,561
    )
    
    
    (8,903
    )
    
    
    7.4Other (loss) income  net
    
    
    (6,736
    )
    
    
    23,677
    
    
    
    (128.4
    )
 General and Administrative Expenses.
 
    
    an increase of $26.5 million from the unrealized change in fair value of our foreign
currency forward contracts;
 
    
    an increase of $16.7 million in compensation for shore-based employees and other
personnel expenses, primarily due to increase in headcount and compensation levels
partially offset by the strengthening of the U.S. Dollar compared to other major
currencies;
 
    
    an increase of $10.3 million in corporate-related expenses, including costs associated
with Teekay Tankers becoming a public entity in December 2007; and
 
    
    an increase of $3.8 million in fleet overhead from the timing of seafarer training
initiatives and higher training activity in the liquefied gas segment;
  
    
    a decrease of $42.2 million relating to the costs associated with our equity-based
compensation and long-term incentive program for management; and
 
    
    a decrease of $2.8 million in office expenses and travel costs due to business
development and other project initiatives.
 Interest Expense.
 
    
    an increase of $508.4 million relating to the unrealized change in fair value of our
interest rate swaps and swaptions;
 
    
    an increase of $43.6 million due to additional debt drawn under long-term revolving
credit facilities and term loans relating to the Shuttle Tanker Deliveries, the Aframax
Deliveries, the Spot Tanker Deliveries and other investing activities;
 
    
    an increase of $9.3 million relating to debt of Teekay Nakilat (III) used by the RasGas
3 Joint Venture to fund shipyard construction installment payments (this increase in
interest expense from debt is offset by a corresponding increase in interest income from
advances to the joint venture); and
 
    
    an increase of $0.6 million relating to debt from the delivery of the Tangguh Hiri.
  Interest Income.
 
    
    an increase of $171.3 million relating to the unrealized change in fair value of our
interest rate swaps; and
 
    
    an increase of $4.5 million relating to interest-bearing loans made by us to the RasGas
3 Joint Venture for shipyard construction installment payments;
  
    
    a decrease of $8.9 million resulting from the repayment of interest-bearing loans we
made to a 50% joint venture between us and TORM, which were used during the second quarter
of 2007, together with comparable loans made by TORM, to acquire 100% of the outstanding
 shares of OMI; and
 
    
    a decrease of $2.4 million relating to a decrease in restricted cash used to fund
capital lease payments for the RasGas II Deliveries (please read Item 18  Financial
Statements: Note 10  Capital Leases and Restricted Cash).
  Foreign Exchange Gains (Losses).
  39




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##### Table of Contents



Non-controlling Interest Expense.
 
    
    an increase of $21.7 million from the initial public offering of Teekay Tankers in
December 2007; and
    
    an increase of $3.0 million from the operating results of the RasGas II joint venture;
  
    
    a decrease of $14.6 million from a decrease in earnings from Teekay Offshore partially
offset by the follow-on public offering of Teekay Offshore in June 2008; and
 
    
    a decrease of $7.3 million from a decrease in earnings from Teekay LNG which was
primarily the result of unrealized foreign exchange losses attributable to the revaluation
of its Euro-denominated term loans partially offset by the follow-on public offering of
Teekay LNG in April 2008.
 Equity Loss from Joint Ventures.
 Income Tax Recovery.
 Other (Loss) Income (Net).
  Net (Loss) Income.
 Year Ended December 31, 2007 versus Year Ended December 31, 2006
 Shuttle Tanker and FSO Segment
  Twelve Months EndedDecember 31,(in thousands of U.S. dollars, except calendar-ship-days and percentages)
    
    2007
    
    
    2006
    
    
    % ChangeRevenues
    
    
    642,047
    
    
    
    572,392
    
    
    
    12.2Voyage expenses
    
    
    117,571
    
    
    
    89,642
    
    
    
    31.2Net revenues
    
    
    524,476
    
    
    
    482,750
    
    
    
    8.6Vessel operating expenses
    
    
    127,372
    
    
    
    90,798
    
    
    
    40.3Time-charter hire expense
    
    
    160,993
    
    
    
    170,308
    
    
    
    (5.5
    )Depreciation and amortization
    
    
    104,936
    
    
    
    83,501
    
    
    
    25.7General and administrative (1)
    
    
    60,234
    
    
    
    46,220
    
    
    
    30.3(Gain) loss on sale of vessels
    
    
    (16,531
    )
    
    
    698
    
    
    
    (2,468.3
    )Income from vessel operations
    
    
    87,472
    
    
    
    91,225
    
    
    
    (4.1
    )Calendar-Ship-DaysOwned Vessels
    
    
    11,015
    
    
    
    9,050
    
    
    
    21.7Chartered-in Vessels
    
    
    4,619
    
    
    
    4,983
    
    
    
    (7.3
    )Total
    
    
    15,634
    
    
    
    14,033
    
    
    
    11.4
 (1)
    
    Includes direct general and administrative expenses and indirect general and administrative
expenses (allocated to the shuttle tanker and FSO segment based on estimated use of corporate
resources).  
    
    the consolidation of five 50%-owned subsidiaries, each of which owns one shuttle tanker,
effective December 1, 2006 upon amendments of the applicable operating agreements, which
granted us control of these entities, that were previously accounted for as joint ventures
using the equity method (or the Consolidation of 50%-owned Subsidiaries);
  40




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##### Table of Contents




    
    the transfer of the Navion Sagafrom the fixed-rate segment to the shuttle tanker and
FSO segment in connection with the completion of its conversion to an FSO unit in May 2007;
and
 
    
    the delivery of two new shuttle tankers, the Navion Bergenand the Navion Gothenburg, in
April and July 2007, respectively (or the Shuttle Tanker Deliveries);
  
    
    a decline in the number of chartered-in shuttle tankers; and
 
    
    the sale of one 1981-built shuttle tanker in July 2006 and one 1987-built shuttle tanker
in May 2007 (the Shuttle Tanker Dispositions).
 Net Revenues.
 
    
    an increase of $40.8 million due to the Consolidation of 50%-owned Subsidiaries;
 
    
    an increase of $23.0 million relating to the transfer of the Navion Sagato the shuttle
tanker and FSO segment;
 
    
    an increase of $12.3 million due to the Shuttle Tanker Deliveries; and
 
    
    an increase of $3.6 million due to the renewal of certain vessels on time-charter
contracts at higher daily rates during 2006;
  
    
    a decrease of $13.6 million in revenues due to (a) fewer revenue days for shuttle
tankers servicing contracts of affreightment during 2007 due to a decline in oil production
from mature oil fields in the North Sea and (b) the redeployment of idle shuttle tankers
servicing contracts of affreightment in the conventional spot tanker market at a lower
average charter rate during the fourth quarter of 2007 due to a weaker spot tanker market;
and
 
    
    a decrease of $3.4 million due to the drydocking of the FSO unit the Dampier Spirit
during the first half of 2007.
 Vessel Operating Expenses.
 
    
    an increase of $17.5 million from the Consolidation of 50%-owned Subsidiaries;
 
    
    an increase of $14.0 million in salaries for crew and officers primarily due to general
wage escalations from the renegotiation of seafarer contracts, change in crew composition,
a change in the crew rotation system and the weakening U.S. Dollar;
 
    
    an increase of $6.0 million relating to the transfer of the Navion Sagato the shuttle
tanker and FSO segment;
 
    
    an increase of $3.4 million relating to an increase in services, non-recurring repairs
and maintenance; and
 
    
    an increase of $0.2 million relating to the unrealized change in fair value of our
foreign currency forward contracts;
  
    
    a decrease of $2.1 million relating to the Shuttle Tanker Dispositions.
 Time-Charter Hire Expense.
 Depreciation and Amortization.
 
    
    an increase of $13.7 million from the Consolidation of 50%-owned Subsidiaries;
 
    
    an increase of $6.6 million from the transfer of the Navion Sagato the shuttle tanker
and FSO; and
 
    
    an increase of $3.8 million due to the Shuttle Tanker Deliveries;
  
    
    a decrease of $4.0 million relating to the Shuttle Tanker Dispositions.
 Gain on Sale of Vessels and Equipment  Net of Write-downs.
 
    
    a gain of $11.6 million from the sale of a 1987-built shuttle tanker and certain
equipment during May 2007; and
 
    
    a gain of $4.9 million from the sale of a 50% interest in a 2007-built shuttle tanker
during September 2007.
  41




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##### Table of Contents



FPSO Segment
  Twelve Months EndedDecember 31,(in thousands of U.S. dollars, except calendar-ship-days and percentages)
    
    2007
    
    
    2006
    
    
    % ChangeRevenues
    
    
    350,279
    
    
    
    95,455
    
    
    
    267.0Vessel operating expenses
    
    
    156,264
    
    
    
    36,158
    
    
    
    332.2Depreciation and amortization
    
    
    68,047
    
    
    
    22,360
    
    
    
    204.3General and administrative (1)
    
    
    36,927
    
    
    
    10,549
    
    
    
    250.1Income from vessel operations
    
    
    89,041
    
    
    
    26,388
    
    
    
    237.4Calendar-Ship-DaysOwned Vessels
    
    
    1,825
    
    
    
    460
    
    
    
    296.7Total
    
    
    1,825
    
    
    
    460
    
    
    
    296.7
 (1)
    
    Includes direct general and administrative expenses and indirect general and administrative
expenses (allocated to the FPSO segment based on estimated use of corporate resources).  Revenues.
  Vessel Operating Expenses.
 
    
    an increase of $125.3 million from the Teekay Petrojarl acquisition;
  
    
    a decrease of $4.0 million relating to the unrealized change in fair value of our
foreign currency forward contracts.
 Depreciation and Amortization.
 Fixed-Rate Tanker Segment
  Twelve Months EndedDecember 31,(in thousands of U.S. dollars, except calendar-ship-days and percentages)
    
    2007
    
    
    2006
    
    
    % ChangeRevenues
    
    
    195,942
    
    
    
    181,605
    
    
    
    7.9Voyage expenses
    
    
    2,707
    
    
    
    1,999
    
    
    
    35.4Net revenues
    
    
    193,235
    
    
    
    179,606
    
    
    
    7.6Vessel operating expenses
    
    
    51,458
    
    
    
    44,083
    
    
    
    16.7Time-charter hire expense
    
    
    25,812
    
    
    
    16,869
    
    
    
    53.0Depreciation and amortization
    
    
    36,018
    
    
    
    32,741
    
    
    
    10.0General and administrative (1)
    
    
    18,221
    
    
    
    15,843
    
    
    
    15.0Income from vessel operations
    
    
    61,726
    
    
    
    70,070
    
    
    
    (11.9
    )Calendar-Ship-DaysOwned Vessels
    
    
    5,390
    
    
    
    5,475
    
    
    
    (1.6
    )Chartered-in Vessels
    
    
    1,312
    
    
    
    728
    
    
    
    80.2Total
    
    
    6,702
    
    
    
    6,203
    
    
    
    8.0
 (1)
    
    Includes direct general and administrative expenses and indirect general and administrative
expenses (allocated to the fixed-rate tanker segment based on estimated use of corporate
resources).  42




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##### Table of Contents




    
    the acquisition of two Suezmax tankers from OMI Corporation on August 1, 2007 (or the
OMI Acquisition); and
 
    
    the transfer of two in-chartered Aframax tankers from the spot tanker segment in July
2007 and October 2007, respectively, upon commencement of three-year time-charters (or the
Aframax Transfers).
  Net Revenues
 
    
    an increase of $9.3 million from the OMI Acquisition;
 
    
    an increase of $8.1 million from the Aframax Transfers;
 
    
    an increase of $1.4 million due to adjustments to the daily charter rate based on
inflation and increases from rising interest rates in accordance with the time-charter
contracts for five Suezmax tankers. (However, under the terms of our capital leases for
these tankers we had a corresponding increase in our lease payments, which is reflected as
an increase to interest expense. Therefore, these and future interest rate adjustments do
not and will not affect our cash flow or net income); and
 
    
    a relative increase of $0.3 million because one of our Suezmax tankers was off-hire for
15.8 days for a scheduled drydocking during 2006;
  
    
    a decrease of $5.5 million from reduced revenues earned by the Teide Spiritand the
Toledo Spirit(the time-charters for both these vessels provide for additional revenues to
us beyond the fixed hire rate when spot tanker market rates exceed threshold amounts; the
time-charter for the Toledo Spirit also provides for a reduction in revenues to us when
spot tanker market rates are below threshold amounts).
 Vessel Operating Expenses.
 
    
    an increase of $4.1 million relating to higher crew manning and repairs, maintenance and
consumables;
 
    
    an increase of $1.6 million due to the effect on our Euro-denominated vessel operating
expenses (primarily crewing costs for five of our Suezmax tankers) from the strengthening
of the Euro against the U.S. Dollar during such period compared to the same period last
year. A majority of our vessel operating expenses on five of our Suezmax tankers are
denominated in Euros, which is primarily a function of the nationality of our crew (our
Euro-denominated revenues currently generally approximate our Euro-denominated expenses and
Euro-denominated loan and interest payments); and
 
    
    an increase of $1.1 million from the OMI Acquisition.
 Time-Charter Hire Expense.
 
    
    an increase of $4.7 million from the Aframax Transfers;
 
    
    an increase of $4.1 million from the OMI Acquisition; and
 
    
    an increase of $1.2 million due to the sale and lease-back of an Aframax tanker in July
2007.
 Depreciation and Amortization.
 
    
    an increase of $3.4 million from the OMI Acquisition; and
 
    
    an increase of $1.2 million from an increase in amortization of drydocking costs;
  
    
    a decrease of $1.1 million due to the sale and lease-back of an Aframax tanker in July
2007.
 Liquefied Gas Segment
  Twelve Months EndedDecember 31,(in thousands of U.S. dollars, except calendar-ship-days and percentages)
    
    2007
    
    
    2006
    
    
    % ChangeRevenues
    
    
    166,981
    
    
    
    104,489
    
    
    
    59.8Voyage expenses
    
    
    109
    
    
    
    975
    
    
    
    (88.8
    )Net revenues
    
    
    166,872
    
    
    
    103,514
    
    
    
    61.2Vessel operating expenses
    
    
    30,239
    
    
    
    18,912
    
    
    
    59.9Depreciation and amortization
    
    
    46,018
    
    
    
    33,160
    
    
    
    38.8General and administrative (1)
    
    
    20,521
    
    
    
    15,531
    
    
    
    32.1Income from vessel operations
    
    
    70,094
    
    
    
    35,911
    
    
    
    95.2Calendar-Ship-DaysOwned Vessels and Vessels under Capital Lease
    
    
    2,899
    
    
    
    1,887
    
    
    
    53.6
 (1)
    
    Includes direct general and administrative expenses and indirect general and administrative
expenses (allocated to the liquefied gas segment based on estimated use of corporate
resources).  43




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##### Table of Contents




    
    the delivery of the three RasGas II LNG Carriers between October 2006 and February 2007,
and
 
    
    our December 2007 acquisition of the two 1993-built Kenai LNG Carriers from a joint
venture between Marathon Oil Corporation and ConocoPhillips (or the Kenai LNG Carriers).
 Madrid Spirit Madrid Spirit
 Net Revenues.
 
    
    an increase of $59.8 million from the delivery of the RasGas II LNG Carriers;
 
    
    an increase of $6.8 million due to the effect on our Euro-denominated revenues from the
strengthening of the Euro against the U.S. Dollar during 2007 compared to 2006;
 
    
    a relative increase of $2.4 million due to the Catalunya Spiritbeing off-hire for 35.5
days during 2006 to complete repairs and for a scheduled drydock; and
 
    
    an increase of $2.0 million from the delivery of the Kenai LNG Carriers;
  
    
    a decrease of $5.8 million due to the Madrid Spiritbeing off-hire, as discussed above;
and
 
    
    a decrease of $2.0 million relating to 30.8 days of off-hire for a scheduled drydocking
for one of our LNG carriers during July 2007.
 Vessel Operating Expenses.
 
    
    an increase of $8.9 million from the delivery of the RasGas II LNG Carriers;
 
    
    an increase of $1.4 million due to the effect on our Euro-denominated vessel operating
expenses (primarily crewing costs) from the strengthening of the Euro against the U.S.
Dollar during such period compared to the same period last year (a majority of our vessel
operating expenses are denominated in Euros, which is primarily a function of the
nationality of our crew; our Euro-denominated revenues currently generally approximate our
Euro-denominated expenses and Euro-denominated loan and interest payments); and
 
    
    an increase of $0.8 million for repair costs for the Madrid Spiritincurred during the
second quarter of 2007 in excess of insurance recoveries;
  
    
    a relative decrease of $1.0 million relating to repair costs for the Catalunya Spirit
incurred during the second quarter of 2006 in excess of insurance recoveries.
 Depreciation and Amortization.
 
    
    an increase of $11.7 million from the delivery of the RasGas II LNG Carriers;
 
    
    an increase of $0.7 million relating to the amortization of drydock expenditures
incurred during 2007, and
 
    
    an increase of $0.5 million from the delivery of the Kenai LNG Carriers.
 Spot Tanker Segment
   44




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##### Table of Contents



Twelve Months EndedDecember 31,(in thousands of U.S. dollars, except calendar-ship-days and percentages)
    
    2007
    
    
    2006
    
    
    % ChangeRevenues
    
    
    1,040,258
    
    
    
    1,059,796
    
    
    
    (1.8
    )Voyage expenses
    
    
    406,921
    
    
    
    430,341
    
    
    
    (5.4
    )Net revenues
    
    
    633,337
    
    
    
    629,455
    
    
    
    0.6Vessel operating expenses
    
    
    81,813
    
    
    
    58,088
    
    
    
    40.8Time-charter hire expense
    
    
    279,676
    
    
    
    214,991
    
    
    
    30.1Depreciation and amortization
    
    
    74,094
    
    
    
    52,203
    
    
    
    41.9General and administrative (1)
    
    
    95,962
    
    
    
    93,357
    
    
    
    2.8Gain on sale of vessels
    
    
    
    
    
    
    (2,039
    )
    
    
    (100.0
    )Restructuring charge
    
    
    
    
    
    
    8,929
    
    
    
    (100.0
    )Income from vessel operations
    
    
    101,792
    
    
    
    203,926
    
    
    
    (50.1
    )Calendar-Ship-DaysOwned Vessels
    
    
    11,764
    
    
    
    9,541
    
    
    
    23.3Chartered-in Vessels
    
    
    12,730
    
    
    
    11,190
    
    
    
    13.8Total
    
    
    24,494
    
    
    
    20,731
    
    
    
    18.2
 (1)
    
    Includes direct general and administrative expenses and indirect general and administrative
expenses (allocated to the spot tanker segment based on estimated use of corporate resources).  
    
    the delivery of four new large product tankers between November 2006 and May 2007 (or
the Spot Tanker Deliveries);
 
    
    the acquisition of twelve vessels from OMI Corporation on August 1, 2007 (or the OMI
Acquisition); and
 
    
    a net increase in the number of chartered-in vessels, primarily Suezmax and product
tankers;
  
    
    the transfer of the Navion Sagato the shuttle tanker and FSO segment in connection with
the completion of its conversion to an FSO unit in May 2007.
  Net Revenues.
 
    
    an increase of $71.0 million relating to the OMI Acquisition;
 
    
    an increase of $31.9 million relating to the Spot Tanker Deliveries;
 
    
    an increase of $11.6 million from the effect of STCs and FFAs; and
 
    
    an increase of $4.5 million from a net increase in the number of chartered-in vessels
(excluding the effect of the sale and lease-back of two older Aframax tankers during April
2007 and the Aframax tanker during July 2007) compared to 2006;
  
    
    a decrease of $100.4 million from a 15.1% decrease in our average TCE rate during 2007
compared to 2006;
 
    
    a decrease of $6.5 million from the transfer of the Navion Sagato the offshore segment
in May 2007; and
 
    
    a decrease of $5.7 million from an increase in the number of days our vessels were
off-hire due to regularly scheduled maintenance.
 Vessel Operating Expenses.
 
    
    an increase of $12.7 million from the OMI Acquisition;
 
    
    an increase of $7.7 million from the Spot Tanker Deliveries; and
 
    
    an increase of $3.3 million relating to higher crew manning costs.
 Time-Charter Hire Expense.
 
    
    an increase of $32.3 million from a net increase in the average TCE rate of our
chartered-in fleet;
 
    
    an increase of $22.3 million from the OMI Acquisition;
 
    
    an increase of $7.5 million due to the sale and lease-back of the Aframax tankers during
April and July 2007; and
 
    
    an increase of $4.1 million from an increase in the number of chartered-in tankers
(excluding OMI vessels) compared to 2006.
  45




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##### Table of Contents



Depreciation and Amortization.
 
    
    an increase of $21.4 million from the OMI Acquisition; and
 
    
    an increase of $6.1 million from the Spot Tanker Deliveries;
  
    
    a decrease of $5.5 million from the sale and lease-back of the Aframax tankers during
April and July 2007; and
 
    
    a decrease of $1.7 million from the transfer of the Navion Sagato the shuttle tanker
and FSO segment.
 Other Operating Results
  Twelve Months EndedDecember 31,(in thousands of U.S. dollars, except percentages)
    
    2007
    
    
    2006
    
    
    % ChangeGeneral and administrative
    
    
    (231,865
    )
    
    
    (181,500
    )
    
    
    27.7Interest expense
    
    
    (422,433
    )
    
    
    (100,089
    )
    
    
    322.1Interest income
    
    
    110,201
    
    
    
    31,714
    
    
    
    247.5Foreign exchange loss
    
    
    (39,912
    )
    
    
    (50,416
    )
    
    
    (20.8
    )Equity (loss) income from joint ventures
    
    
    (12,404
    )
    
    
    6,099
    
    
    
    (303.4
    )Income tax recovery (expense)
    
    
    3,192
    
    
    
    (8,811
    )
    
    
    (136.2
    )Non-controlling interest expense
    
    
    (8,903
    )
    
    
    (6,759
    )
    
    
    31.7Other  net
    
    
    23,677
    
    
    
    3,566
    
    
    
    564.0
 General and Administrative Expenses.
 
    
    an increase of $26.0 million from our acquisition of Teekay Petrojarl in October 2006;
 
    
    an increase of $20.7 million from an increase in shore-based compensation and other
personnel expenses, primarily due to weakening of the U.S. Dollar compared to other major
currencies and increases in headcount and compensation levels;
 
    
    an increase of $6.7 million from an increase in corporate-related expenses, including
costs associated with Teekay Tankers and Teekay Offshore becoming public entities in
December 2007 and 2006, respectively;
 
    
    an increase of $5.8 million from higher travel costs, due to the integration of OMI and
Teekay Petrojarl, and an increase in costs due to the weakening of the U.S. Dollar compared
to other major currencies, and
 
    
    an increase of $4.3 million from an increase in crew training expenses, due to
integration of new seafarers and LNG training initiatives;
  
    
    a decrease of $5.6 million relating to the unrealized change in fair value of our
non-designated foreign currency forward contracts;
 
    
    a relative decrease of $6.7 million during 2007 relating to the costs associated with
our equity-based compensation and long-term incentive program for management; and
 
    
    a relative decrease of $2.1 million during 2007 from severance costs recorded in 2006.
 Interest Expense.
 
    
    an increase of $205.3 million relating to the unrealized change in fair value of our
non-designated interest rate swaps;
 
    
    an increase of $36.5 million resulting from interest incurred from financing our
acquisition of Teekay Petrojarl and interest incurred on debt we assumed from Teekay
Petrojarl;
 
    
    an increase of $33.3 million relating to the increase in capital lease obligations and
term loans in connection with the delivery of the RasGas II LNG Carriers;
 
    
    an increase of $31.6 million relating to the increase in debt used to finance our
acquisition of 50% of OMI Corporation;
 
    
    an increase of $26.7 million relating to additional debt of Teekay Nakilat (III) used by
the RasGas 3 Joint Venture to fund shipyard construction installment payments (this
increase in interest expense from debt is offset by a corresponding increase in interest
income from advances to joint venture); and
 
    
    an increase of $11.3 million relating to the Consolidation of 50%-owned Subsidiaries;
  
    
    a decrease of $6.2 million from scheduled capital lease repayments on two of our LNG
carriers.
  46




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##### Table of Contents



Interest Income.
 
    
    an increase of $36.7 million relating to the unrealized change in fair value of our
non-designated interest rate swaps;
 
    
    an increase of $26.8 million relating to interest-bearing loans made by us to the RasGas
3 Joint Venture for shipyard construction installment payments;
 
    
    an increase of $11.1 million resulting from $1.1 billion of interest-bearing loans we
made to Omaha Inc., a 50% joint venture between us and TORM, which were used, together with
comparable loans made by TORM, to acquire 100% of the outstanding shares of OMI Corporation
in June 2007;
 
    
    an increase of $6.9 million relating to additional restricted cash deposits that will be
used to pay for lease payments on the three RasGas II LNG Carriers; and
 
    
    an increase of $2.7 million from the interest we earned on cash we assumed as part of
the Teekay Petrojarl acquisition;
  
    
    a decrease of $7.3 million resulting from scheduled capital lease repayments on two of
our LNG carriers that were funded from restricted cash deposits (please read Item 18 
Financial Statements: Note 10- Capital Leases and Restricted Cash).
  Foreign Exchange Loss.
 Non-controlling Interest Expense.
 
    
    an increase of $2.7 million resulting from the Consolidation of 50%-owned Subsidiaries;
and
 
    
    an increase of $1.2 million from the initial public offering of Teekay Tankers in
December 2007;
  
    
    a decrease of $3.5 million from a minority owners share of a gain on the disposal of a
vessel in July 2006.
 Equity (Loss) Income from Joint Ventures.
 Income Tax Recovery (Expense).
 Other (Loss) Income (Net).
  Net (Loss) Income.
  47




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##### Table of Contents



LIQUIDITY AND CAPITAL RESOURCES
 Liquidity and Cash Needs
          Cash Flows
  2008
    
    
    2007($000s)
    
    
    ($000s)Net operating cash flows
    
    
    431,847
    
    
    
    255,018Net financing cash flows
    
    
    767,878
    
    
    
    2,114,199Net investing cash flows
    
    
    (828,233
    )
    
    
    (2,270,458
    )
  48




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##### Table of Contents



Operating Cash Flows
  Financing Cash Flows
     Investing Cash Flows
  
    
    incurred capital expenditures for vessels and equipment of $620.1 million, primarily for
shipyard construction installment payments on our newbuilding Suezmax tankers, Aframax
tankers, shuttle tankers and LNG carriers and for costs to convert a conventional tanker to
an FPSO unit;
 
    
    acquired an additional 35.3% interest in Teekay Petrojarl for a total cost of $304.9
million;
 
    
    loaned $211.5 million to the RasGas 3 Joint Venture for shipyard construction
installment payments;
 
    
    acquired two Aframax tankers for a total cost of approximately $72.5 million as part of
the multi-vessel transaction with ConocoPhillips;
 
    
    acquired a shuttle tanker for a total cost of $41.7 million;
 
    
    sold our 50% interest in Swift Tankers Management AS, which included our intermediate
vessel positions within the Swift Tanker pool for proceeds of $44.4 million; and
 
    
    received proceeds of $331.6 million from the sale of three Handysize product tankers,
one Aframax product tanker, one medium-range product tanker and one Suezmax tanker.
 COMMITMENTS AND CONTINGENCIES
  In millions of U.S. Dollars
    
    Total
    
    
    2009
    
    
    2010 and 2011
    
    
    2012 and 2013
    
    
    Beyond 2013U.S. Dollar-Denominated Obligations:Long-term debt (1)
    
    
    4,538.9
    
    
    
    225.5
    
    
    
    1,510.2
    
    
    
    510.8
    
    
    
    2,292.4Chartered-in vessels (operating leases)
    
    
    971.9
    
    
    
    424.1
    
    
    
    379.1
    
    
    
    139.7
    
    
    
    29.0Commitments under capital leases (2)
    
    
    226.8
    
    
    
    134.4
    
    
    
    92.4
    
    
    
    
    
    
    
    Commitments under capital leases (3)
    
    
    1,073.1
    
    
    
    24.0
    
    
    
    48.0
    
    
    
    48.0
    
    
    
    953.1Commitments
under operating leases
(8)
    
    
    501.3
    
    
    
    18.5
    
    
    
    50.1
    
    
    
    50.2
    
    
    
    382.5Newbuilding installments (4)
    
    
    840.3
    
    
    
    419.7
    
    
    
    420.6
    
    
    
    
    
    
    
    Asset retirement obligation
    
    
    10.0
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10.0Total U.S. Dollar-denominated obligations
    
    
    8,162.3
    
    
    
    1,246.2
    
    
    
    2,500.4
    
    
    
    748.7
    
    
    
    3,667.0Euro-Denominated Obligations:(5)Long-term debt (6)
    
    
    414.1
    
    
    
    11.8
    
    
    
    234.5
    
    
    
    14.7
    
    
    
    153.1Commitments under capital leases (2) (7)
    
    
    164.0
    
    
    
    35.8
    
    
    
    128.2
    
    
    
    
    
    
    
    Total Euro-denominated obligations
    
    
    578.1
    
    
    
    47.6
    
    
    
    362.7
    
    
    
    14.7
    
    
    
    153.1Total
    
    
    8,740.4
    
    
    
    1,293.8
    
    
    
    2,863.1
    
    
    
    763.4
    
    
    
    3,820.1
 (1)
    
    Excludes expected interest payments of $160.0 million (2009), $274.9 million (2010 and
2011), $169.9 million (2012 and 2013) and $188.9 million (beyond 2013). Expected interest
payments are based on the existing interest rates (fixed-rate loans) and LIBOR plus margins
that ranged up to 1.0% at December 31, 2008 (variable-rate loans). The expected interest
payments do not reflect the effect of related interest rate swaps that we have used as an
economic hedge of certain of our floating-rate debt.  49




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##### Table of Contents



(2)
    
    Includes, in addition to lease payments, amounts we are required to pay to purchase
certain leased vessels at the end of the lease terms. We are obligated to purchase five of
our existing Suezmax tankers upon the termination of the related capital leases, which will
occur at various times from late-2009 to 2011. The purchase price will be based on the
unamortized portion of the vessel construction financing costs for the vessels, which we
expect to range from $35.6 million to $39.2 million per vessel. We expect to satisfy the
purchase price by assuming the existing vessel financing, although we may be required to
obtain separate debt or equity financing to complete the purchases if the lenders do not
consent to our assuming the financing obligations. We are also obligated to purchase one of
our LNG carriers upon the termination of the related capital lease on December 31, 2011.
The purchase obligation has been fully funded with restricted cash deposits. Please read
Item 18  Financial Statements: Note 10  Capital Leases and Restricted Cash.(3)
    
    Existing restricted cash deposits of $487.4 million, together with the interest earned
on the deposits, will equal the remaining amounts we owe under the lease arrangements.(4)
    
    Represents remaining construction costs, including a joint venture partners 30%
interest, as applicable, but excluding capitalized interest and miscellaneous construction
costs, for four shuttle tankers, seven Suezmax tankers, five LPG carriers and one LNG
carriers. Please read Item 18  Financial Statements: Note 16  Commitments and
Contingencies  Vessels Under Construction.(5)
    
    Euro-denominated obligations are presented in U.S. Dollars and have been converted
using the prevailing exchange rate as at December 31, 2008.(6)
    
    Excludes expected interest payments of $13.9 million (2009), $23.0 million (2010 and
2011), $11.3 million (2012 and 2013) and $36.1 million (beyond 2013). Expected interest
payments are based on EURIBOR plus margins that ranged up to 0.66% at December 31, 2008, as
well as the prevailing U.S. Dollar/Euro exchange rate as at December 31, 2008. The expected
interest payments do not reflect the effect of related interest rate swaps that we have
used as an economic hedge of certain of our floating-rate debt.(7)
    
    Existing restricted cash deposits of $146.2 million, together with the interest earned
on the deposits, will equal the remaining amounts we owe under the lease arrangements,
including our obligation to purchase the vessels at the end of the lease terms.(8)
    
    We have corresponding leases
whereby we are the lessor and expect to receive $489.4 million for
these leases from 2009 to 2029.  Off-Balance Sheet Arrangements
  Critical Accounting Estimates
  Revenue Recognition
 Description
 Judgments and Uncertainties.
 Effect if Actual Results Differ from Assumptions.
  50




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##### Table of Contents



Vessel Lives and Impairment
 Description
 Judgments and Uncertainties.
  Effect if Actual Results Differ from Assumptions.
 Drydocking
 Description
 Judgments and Uncertainties.
 Goodwill and Intangible Assets
 Description
 Judgments and Uncertainties
 Valuation of Derivative Financial Instruments
 Description.
 Judgments and Uncertainties.
  51




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##### Table of Contents



Effect if Actual Results Differ from Assumptions.
 Recent Accounting Pronouncements
 FASB SFAS Recognition and Presentation of
Other-Than-Temporary Impairments
 Determining Fair Value When the Volume and Level of
Activity for the Asset or Liability has Significantly Decreased and Identifying Transactions that
are Not Orderly Fair Value Measurements Determining the Fair Value of a
Financial Asset When the Market for That Asset is Not Active
 Interim Disclosures About Fair Value of
Financial Instruments Disclosures
about Fair Value of Financial Instruments Interim Financial Reporting
 Accounting for Assets Acquired and Liabilities
Assumed in a Business Combination that Arise from Contingencies Business Combinations
 Determining the Fair Value of a Financial Asset in
a Market That Is Not Active
 Disclosures about Derivative Instruments and Hedging
Activities, an amendment of Statement of Financial Accounting Standards No. 133 SFAS 161
 Business Combinations SFAS 141(R) , Business Combinations
 Noncontrolling Interests in Consolidated Financial
Statements, an Amendment of Accounting Research Bulletin SFAS 160
  52




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##### Table of Contents



Item 6. Directors, Senior Management and Employees
 Directors and Senior Management
  Name
    
    Age
    
    PositionC. Sean Day
    
    
    59
    
    
    Director and Chair of the BoardBjorn Moller
    
    
    51
    
    
    Director, President and Chief Executive OfficerAxel Karlshoej
    
    
    68
    
    
    Director and Chair EmeritusDr. Ian D. Blackburne
    
    
    62
    
    
    DirectorJames R. Clark
    
    
    58
    
    
    DirectorPeter S. Janson
    
    
    61
    
    
    DirectorThomas Kuo-Yuen Hsu
    
    
    62
    
    
    DirectorEileen A. Mercier
    
    
    61
    
    
    DirectorTore I. Sandvold
    
    
    61
    
    
    DirectorArthur Bensler
    
    
    51
    
    
    EVP, Secretary and General CounselBruce Chan
    
    
    36
    
    
    President, Teekay Tanker Services, a division of TeekayPeter Evensen
    
    
    50
    
    
    EVP and Chief Strategy OfficerDavid Glendinning
    
    
    54
    
    
    President, Teekay Gas Services and Offshore, a division of TeekayKenneth Hvid
    
    
    40
    
    
    President, Teekay Navion Shuttle Tankers and Offshore, a division of TeekayVincent Lok
    
    
    40
    
    
    EVP and Chief Financial OfficerPeter Lytzen
    
    
    51
    
    
    President, Teekay Petrojarl ASA, a subsidiary of TeekayLois Nahirney
    
    
    45
    
    
    EVP, Corporate ResourcesGraham Westgarth
    
    
    54
    
    
    President, Teekay Marine Services, a division of Teekay
  C. Sean Day
 Bjorn Moller
 Axel Karlshoej
 Dr. Ian D. Blackburne
 James R. Clark
  53




---



##### Table of Contents



Peter S. Janson
 Thomas Kuo-Yuen Hsu
 Eileen A. Mercier
 Tore I. Sandvold
 Arthur Bensler
 Bruce Chan
 Peter Evensen
 David Glendinning
 Kenneth Hvid
 Vincent Lok
 Peter Lytzen
 Lois Nahirney
  54




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##### Table of Contents



Graham Westgarth
 Compensation of Directors and Senior Management
 Director Compensation
   Annual Executive Compensation
 Executive
Officers
 Long-Term Incentive Program
    Vision Incentive Plan
 VIP Economic
Profit MVA
   55




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##### Table of Contents



Options to Purchase Securities from Registrant or Subsidiaries
 Plans
 Board Practices
    NYSE
    
    
    the integrity of our financial statements;
 
    
    our compliance with legal and regulatory requirements;
 
    
    the independent auditors qualifications and independence; and
 
    
    the performance of our internal audit function and independent auditors.
   
    
    reviews and approves corporate goals and objectives relevant to the Chief Executive
Officers compensation, evaluates the Chief Executive Officers performance in light of
these goals and objectives and determines the Chief Executive Officers compensation;
 
    
    reviews and approves the evaluation process and compensation structure for executive
officers, other than the Chief Executive Officer, evaluates their performance and sets
their compensation based on this evaluation;
 
    
    reviews and makes recommendations to the Board regarding compensation for directors;
 
    
    establishes and administers long-term incentive compensation and equity-based plans; and
 
    
    oversees our other compensation plans, policies and programs.
   56




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##### Table of Contents




    
    identifies individuals qualified to become Board members;
 
    
    selects and recommends to the Board director and committee member candidates;
 
    
    develops and recommends to the Board corporate governance principles and policies
applicable to us, monitors compliance with these principles and policies and recommends to
the Board appropriate changes; and
 
    
    oversees the evaluation of the Board and management.
 Crewing and Staff
   ITF
  Share Ownership
  Identity of Person or Group
    
    Shares Owned
    
    
    Percent of ClassAll directors and Executive Officers (18 persons)
    
    
    2,015,293
    (1) (3)
    
    
    2.8
    %(2)
 (1)
    
    Includes 1,791,805 shares of common stock subject to stock options exercisable by May
14, 2009 under the Plans with a weighted-average exercise price of $35.13 that expire
between June 1, 2009 and March 10, 2018. Excludes (a) 1,507,293 shares of common stock
subject to stock options exercisable after May 14, 2009 under the Plans with a weighted
average exercise price of $25.19, that expire between March 13, 2017 and March 9, 2019 and
(b) 361,722 shares of restricted stock which vest after May 14, 2009.(2)
    
    Based on a total of approximately 72.5 million outstanding shares of our common stock
as of March 15, 2009. Each director and Executive Officer beneficially owns less than 1% of
the outstanding shares of common stock.(3)
    
    Each director is expected to have acquired shares having a value of at least four times
the value of the annual cash retainer paid to them for their Board service (excluding fees
for Chair or Committee service) no later than May 14, 2009 or the fifth anniversary of the
date on which the director joined the Board, whichever is later. In addition, each
Executive Officer is expected to acquire shares of Teekays common stock equivalent in
value to one to three times their annual base salary by 2010 or, for executive officers
subsequently joining Teekay or achieving a position covered by the guidelines, within five
years after the guidelines become applicable to them.  57




---



##### Table of Contents



Item 7. Major Shareholders and Related Party Transactions
 Major Shareholders
  Identity of Person or Group
    
    Shares Owned
    
    

Percent of Class (4)Resolute Investments, Ltd. (1)
    
    
    30,431,380
    
    
    
    42.0
    %Iridian Asset Management, LLC (2)
    
    
    7,283,310
    
    
    
    10.0
    %JPMorgan Chase & Co. (3)
    
    
    5,651,164
    
    
    
    7.8
    %
 
 (1)
    
    Includes shared voting and shared dispositive power as to 30,431,380 shares. The ultimate
controlling person of Resolute Investments, Ltd. (or Resolute) is Path Spirit Limited (or
Path), which is the trust protector for the trust that indirectly owns all of Resolutes
outstanding equity. This information is based on the Schedule 13D/A (Amendment No. 2) filed by
Resolute and Path with the SEC on April 2, 2008. Resolutes beneficial ownership was 41.8% on
December 31, 2007, and 44.8% on December 31, 2006. In 2008, there were no changes to the
number of shares of our common stock owned by Resolute. One of our directors, Thomas Kuo-Yuen
Hsu, is the President and a director of Resolute. Another of our directors, Axel Karlshoej, is
among the directors of Path. Please read Item 18  Financial Statements: Note 13  Related
Party Transactions.(2)
    
    Includes shared voting power and shared dispositive power as to 6,947,490 shares. This
information is based on the Schedule 13G/A filed by this investor with the SEC on April 7,
2009. Iridian Asset Managements beneficial ownership was 8.5% on March 15, 2008 and, 11.0% on
March 15, 2007.(3)
    
    Includes shared voting power and shared dispositive power as to 5,651,164 shares. This
information is based on the Schedule 13G/A filed by this investor with the SEC on January 27,
2009. JPMorgan Chase & Co.s beneficial ownership was 5.1% on March 15, 2008.(4)
    
    Based on a total of approximately 72.5 million outstanding shares of our common stock as of
March 15, 2009.  Resolute
 
 Item 8. Financial Information
 Consolidated Financial Statements and Notes
  Legal Proceedings
  Dividend Policy
   Significant Changes
   58




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##### Table of Contents



Item 9. The Offer and Listing
 (1)
 Dec. 31,
    
    
    Dec. 31,
    
    
    Dec. 31,
    
    
    Dec. 31,
    
    
    Dec. 31,Years Ended
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004High
    
    $
    53.30
    
    
    $
    62.66
    
    
    $
    45.80
    
    
    $
    50.01
    
    
    $
    54.45Low
    
    
    11.51
    
    
    
    42.52
    
    
    
    35.60
    
    
    
    37.25
    
    
    
    27.95
 Dec. 31,
    
    
    Sept. 30,
    
    
    June 30,
    
    
    Mar. 31,
    
    
    Dec. 31,
    
    
    Sept. 30,
    
    
    June 30,
    
    
    Mar. 31,Quarters Ended
    
    2008
    
    
    2008
    
    
    2008
    
    
    2008
    
    
    2007
    
    
    2007
    
    
    2007
    
    
    2007High
    
    $
    26.08
    
    
    $
    44.97
    
    
    $
    52.48
    
    
    $
    53.30
    
    
    $
    59.64
    
    
    $
    62.05
    
    
    $
    62.66
    
    
    $
    54.11Low
    
    
    11.51
    
    
    
    23.75
    
    
    
    42.88
    
    
    
    36.21
    
    
    
    47.20
    
    
    
    51.00
    
    
    
    54.36
    
    
    
    42.52
 May 31,
    
    
    Apr. 30,
    
    
    Mar. 31,
    
    
    Feb. 28,
    
    
    Jan. 31,
    
    
    Dec. 31,Months Ended
    
    2009
    
    
    2009
    
    
    2009
    
    
    2009
    
    
    2009
    
    
    2008High
    
    $
    16.98
    
    
    $
    14.18
    
    
    $
    16.63
    
    
    $
    20.08
    
    
    $
    22.03
    
    
    $
    19.65Low
    
    
    13.90
    
    
    
    12.86
    
    
    
    11.84
    
    
    
    15.79
    
    
    
    16.17
    
    
    
    13.94
 (1)
    
    On May 17, 2004, we effected a two-for-one stock split relating to our common stock;
applicable per-share information above gives effect to this stock split retroactively. 
 Item 10. Additional Information
 Memorandum and Articles of Association
      Material Contracts
  (a)
    
    Indenture dated June 22, 2001 among Teekay Corporation and The Bank of New York Trust Company
of Florida (formerly U.S. Trust Company of Texas, N.A.) for U.S. $250,000,000 8.875% Senior
Notes due 2011.
 (b)
    
    First Supplemental Indenture dated as of December 6, 2001, among Teekay Corporation and The
Bank of New York Trust Company of Florida, N.A. for U.S. $100,000,000 8.875% Senior Notes due
2011.
 (c)
    
    Agreement, dated June 26, 2003, for a U.S. $550,000,000 Secured Reducing Revolving Loan
Facility among Norsk Teekay Holdings Ltd., Den Norske Bank ASA and various other banks.
 (d)
    
    Agreement, dated September 1, 2004 for a U.S. $500,000,000 Credit Facility Agreement to be
made available to Teekay Nordic Holdings Incorporated by Nordea Bank Finland PLC, New York
Branch.
 (e)
    
    Supplemental Agreement dated September 30, 2004 to Agreement, dated June 26, 2003, for a U.S.
$550,000,000 Secured Reducing Revolving Loan Facility among Norsk Teekay Holdings Ltd., Den
Norske Bank ASA and various other banks.
 (f)
    
    Agreement, dated May 26, 2005 for a U.S. $550,000,000 Credit Facility Agreement to be made
available to Avalon Spirit LLC et al by Nordea Bank Finland PLC and others.
 (g)
    
    Agreement, dated October 2, 2006 for a U.S. $940,000,000 Secured Reducing Revolving Loan
Facility among Teekay Offshore Operating L.P., Den Norske Bank ASA and various other banks.
Please read Note 8 to the Consolidated Financial Statements of Teekay Corporation included
herein for a summary of certain contract terms relating to our revolving loan facilities.
  59




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##### Table of Contents



(h)
    
    Agreement, dated August 23, 2006 for a U.S. $330,000,000 Secured Reducing Revolving Loan
Facility among Teekay LNG Partners L.P., ING Bank N.V. and various other banks. Please read
Note 8 to the Consolidated Financial Statements of Teekay Corporation included herein for a
summary of certain contract terms relating to our revolving loan facilities.
 (i)
    
    Agreement, dated November 28, 2007 for a U.S. $845,000,000 Secured Reducing Revolving Loan
Facility among Teekay Corporation, Teekay Tankers Ltd., Nordea Bank Finland PLC and various
other banks. Please read Note 8 to the Consolidated Financial Statements of Teekay Corporation
included herein for a summary of certain contract terms relating to our revolving loan
facilities.
 (j)
    
    Agreement dated May 16, 2007 for a U.S. $700,000,000 Credit Facility Agreement to be made
available to Teekay Acquisition Holdings LLC et al by HSH NordBank AG and others.(k)
    
    Annual Executive Bonus Plan.(l)
    
    Vision Incentive Plan.(m)
    
    2003 Equity Incentive Plan.(n)
    
    Amended 1995 Stock Option Plan.(o)
    
    Rights Agreement, dated as of September 8, 2000, between Teekay Corporation and The Bank of New York, as Rights Agent.
 (p)
    
    Amended and Restated Omnibus Agreement dated as of December 19, 2006, among Teekay
Corporation, Teekay GP L.L.C., Teekay LNG Partners L.P., Teekay LNG Operating L.L.C., Teekay
Offshore GP L.L.C., Teekay Offshore Partners L.P., Teekay Offshore Operating GP. L.L.C. and
Teekay Offshore Operating L.P. govern, among other things, when Teekay Corporation, Teekay LNG
L.P. and Teekay Offshore L.P. may compete with each other and to provide the applicable
parties certain rights of first offer on LNG carriers, oil tankers, shuttle tankers, FSO units
and FPSO units.,
 Exchange Controls and Other Limitations Affecting Security Holders
   Taxation
  Material U.S. Federal Income Tax Considerations
 Code Treasury Regulations
   United States Federal Income Taxation of U.S. Holders
   60




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##### Table of Contents



Distributions
 PFICs
 U.S. Individual Holder
  Consequences of Possible PFIC Classification
   Tidewater Inc. v. United States IRS Tidewater Tidewater
  
    
    the excess distribution or gain will be allocated ratably over the stockholders
holding period;
 
    
    the amount allocated to the current taxable year and any year prior to the first year
in which we were a PFIC will be taxed as ordinary income in the current year;
 
    
    the amount allocated to each of the other taxable years in the stockholders holding
period will be subject to U.S. federal income tax at the highest rate in effect for the
applicable class of taxpayer for that year; and
 
    
    an interest charge for the deemed deferral benefit will be imposed with respect to
the resulting tax attributable to each such other taxable year.
    61




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##### Table of Contents



Consequences of Possible Controlled Foreign Corporation Classification
 United States Stockholder CFC
 Sale, Exchange or other Disposition of Common Stock
  United States Federal Income Taxation of Non-U.S. Holders
 Non-U.S. Holder
 Distributions
  Disposition of Common Stock
  Backup Withholding and Information Reporting
  
    
    fails to provide an accurate taxpayer identification number;
    
    is notified by the IRS that it has failed to report all interest or distributions
required to be shown on its U.S. federal income tax returns; or
    
    in certain circumstances, fails to comply with applicable certification requirements.
   Non-United States Tax Consequences
 Marshall Islands Tax Consequences.
 Bermudian Tax Consequences.
  62




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##### Table of Contents



Documents on Display
 th EDGAR www.sec.gov
 
 Item 11. Quantitative and Qualitative Disclosures About Market Risk
  Foreign Currency Fluctuation Risk
    Expected Maturity Date2009
    
    
    2010
    
    
    TotalContract
    
    
    Contract
    
    
    Contract
    
    
    Fair valueamount
    
    
    amount
    
    
    amount
    
    
    Asset (Liability)Norwegian Kroner:
    
    $
    202.1
    
    
    $
    139.5
    
    
    $
    341.6
    
    
    $
    (52.2
    )Average contractual exchange rate(2)
    
    
    5.73
    
    
    
    6.21
    
    
    
    5.93Euro:
    
    $
    77.6
    
    
    $
    35.6
    
    
    $
    113.2
    
    
    $
    (7.7
    )Average contractual exchange rate(2)
    
    
    0.66
    
    
    
    0.70
    
    
    
    0.67Canadian Dollar:
    
    $
    50.3
    
    
    $
    37.9
    
    
    $
    88.2
    
    
    $
    (10.9
    )Average contractual exchange rate(2)
    
    
    1.04
    
    
    
    1.10
    
    
    
    1.07British Pounds:
    
    $
    68.8
    
    
    $
    24.2
    
    
    $
    93.0
    
    
    $
    (19.5
    )Average contractual exchange rate(2)
    
    
    0.53
    
    
    
    0.58
    
    
    
    0.54Australian Dollar:
    
    $
    3.0
    
    
    
    
    
    
    $
    3.0
    
    
    $
    (0.7
    )Average contractual exchange rate(2)
    
    
    1.12
    
    
    
    
    
    
    
    1.12
 (1)
    
    Contract amounts and fair value amounts in millions of U.S. Dollars.(2)
    
    Average contractual exchange rate represents the contractual amount of foreign currency one
U.S. Dollar will buy.  Interest Rate Risk
     63




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##### Table of Contents



FairValueExpected Maturity Date
    
    
    Asset /2009
    
    
    2010
    
    
    2011
    
    
    2012
    
    
    2013
    
    
    Thereafter
    
    
    Total
    
    
    (Liability)
    
    
    Rate (1)(in millions of U.S. dollars, except percentages)Long-Term Debt:Variable Rate ($U.S.) (2)
    
    
    178.8
    
    
    
    377.7
    
    
    
    842.0
    
    
    
    197.7
    
    
    
    217.3
    
    
    
    2,011.7
    
    
    
    3,825.2
    
    
    
    (3,507.9
    )
    
    
    3.1
    %Variable Rate (Euro) (3) (4)
    
    
    11.8
    
    
    
    12.7
    
    
    
    221.9
    
    
    
    7.1
    
    
    
    7.6
    
    
    
    153.1
    
    
    
    414.2
    
    
    
    (359.1
    )
    
    
    3.4
    %Fixed-Rate Debt ($U.S.)
    
    
    46.7
    
    
    
    47.9
    
    
    
    242.0
    
    
    
    47.9
    
    
    
    47.9
    
    
    
    280.7
    
    
    
    713.1
    
    
    
    (670.2
    )
    
    
    6.1
    %Average Interest Rate
    
    
    5.1
    %
    
    
    5.1
    %
    
    
    5.1
    %
    
    
    8.0
    %
    
    
    5.1
    %
    
    
    5.1
    %
    
    
    6.1
    %Capital Lease Obligations(5) (6)Fixed-Rate ($U.S.) (7)
    
    
    120.4
    
    
    
    3.9
    
    
    
    80.1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    204.4
    
    
    
    (204.4
    )
    
    
    7.4
    %Average Interest Rate (8)
    
    
    8.8
    %
    
    
    5.4
    %
    
    
    5.5
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7.4
    %Interest Rate Swaps:Contract Amount ($U.S.) (6) (9)
    
    
    626.0
    
    
    
    358.9
    
    
    
    59.8
    
    
    
    60.9
    
    
    
    62.0
    
    
    
    2,571.3
    
    
    
    3,738.9
    
    
    
    (605.0
    )
    
    
    5.2
    %Average Fixed Pay Rate (2)
    
    
    4.7
    %
    
    
    4.9
    %
    
    
    5.2
    %
    
    
    5.2
    %
    
    
    5.2
    %
    
    
    5.3
    %
    
    
    5.2
    %Contract Amount (Euro) (4)(10)
    
    
    11.8
    
    
    
    12.7
    
    
    
    221.9
    
    
    
    7.1
    
    
    
    7.6
    
    
    
    153.0
    
    
    
    414.1
    
    
    
    (3.4
    )
    
    
    3.8
    %Average Fixed Pay Rate (3)
    
    
    3.8
    %
    
    
    3.8
    %
    
    
    3.8
    %
    
    
    3.8
    %
    
    
    3.8
    %
    
    
    3.8
    %
    
    
    3.8
    %
 
 (1)
    
    Rate refers to the weighted-average effective interest rate for our long-term debt and
capital lease obligations, including the margin we pay on our floating-rate debt and the
average fixed pay rate for our interest rate swap agreements. The average interest rate for
our capital lease obligations is the weighted-average interest rate implicit in our lease
obligations at the inception of the leases. The average fixed pay rate for our interest rate
swaps excludes the margin we pay on our floating-rate debt, which as of December 31, 2008
ranged from 0.3% to 0.8%.(2)
    
    Interest payments on U.S. Dollar-denominated debt and interest rate swaps are based on LIBOR.(3)
    
    Interest payments on Euro-denominated debt and interest rate swaps are based on EURIBOR.(4)
    
    Euro-denominated amounts have been converted to U.S. Dollars using the prevailing exchange
rate as of December 31, 2008.(5)
    
    Excludes capital lease obligations (present value of minimum lease payments) of 102.7 million
Euros ($143.5 million) on one of our existing LNG carriers with a weighted-average fixed
interest rate of 5.8%. Under the terms of this fixed-rate lease obligation, we are required to
have on deposit, subject to a weighted-average fixed interest rate of 5.0%, an amount of cash
that, together with the interest earned thereon, will fully fund the amount owing under the
capital lease obligation, including a vessel purchase obligation. As at December 31, 2008,
this amount was 104.7 million Euros ($146.2 million). Consequently, on a net basis we are not
subject to interest rate risk from these obligations or deposits.(6)
    
    Under the terms of the capital leases for the three RasGas II LNG Carriers (see Item 18 
Financial Statements: Note 9  Capital Leases and Restricted Cash), we are required to have
on deposit, subject to a variable rate of interest, an amount of cash that, together with
interest earned on the deposit, will equal the remaining amounts owing under the leases. The
deposits, which as at December 31, 2008 totaled $487.4 million, and the lease obligations,
which as at December 31, 2008 totaled $469.4 million, have been swapped for fixed-rate
deposits and fixed-rate obligations. Consequently, on a net basis we are not subject to
interest rate risk from these obligations and deposits and, therefore, the lease obligations,
cash deposits and related interest rate swaps have been excluded from the table above. As at
December 31, 2008, the contract amount, fair value and fixed interest rates of these interest
rate swaps related to the RasGas II LNG Carriers capital lease obligations and restricted cash
deposits were $478.8 million and $477.1 million, ($110.5) million and $167.4 million, and 4.9%
and 4.8%, respectively.(7)
    
    The amount of capital lease obligations represents the present value of minimum lease
payments together with our purchase obligation, as applicable.(8)
    
    The average interest rate is the weighted-average interest rate implicit in the capital lease
obligations at the inception of the leases.(9)
    
    The average variable receive rate for our interest rate swaps is set monthly at the 1-month
LIBOR or EURIBOR, quarterly at the 3-month LIBOR or semi-annually at the 6-month LIBOR.(10)
    
    Includes interest rate swaps of $408.5 million, $300.0 million and $200.0 million that have
inception dates of 2009, 2010 and 2011, respectively. Commodity Price Risk
  Spot Tanker Market Rate Risk
 FFA STC
  64




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##### Table of Contents



Item 12. Description of Securities Other than Equity Securities
  
 PART II
 
 Item 13. Defaults, Dividend Arrearages and Delinquencies
  
 Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds
  
 Item 15. Controls and Procedures
     Managements Report on Internal Control over Financial Reporting
   Internal Control  Integrated Framework
   65




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##### Table of Contents



Item 16A. Audit Committee Financial Expert
  
 Item 16B. Code of Ethics
 www.teekay.com
 
 Item 16C. Principal Accountant Fees and Services
  Fees
    
    2008
    
    
    2007Audit Fees (1)
    
    $
    6,744,000
    
    
    $
    3,156,900Audit-Related Fees (2)
    
    
    20,400
    
    
    
    189,400Tax Fees (3)
    
    
    235,400
    
    
    
    279,100All Other Fees (4)
    
    
    2,500
    
    
    
    1,500Total
    
    $
    7,002,300
    
    
    $
    3,626,900
 
 (1)
    
    Audit fees represent fees for professional services provided in connection with the audit of
our consolidated financial statements, review of our quarterly consolidated financial
statements and audit services provided in connection with other statutory or regulatory
filings for Teekay or our subsidiaries including professional services in connection with the
review of our regulatory filings for public offerings of our subsidiaries. Included in 2008
audit fees are fees of $1,854,000 related to the restatements of the financial statements of
Teekay, Teekay LNG and Teekay Offshore for the years 2005 to 2007. Audit fees for 2008 and
2007 include approximately $1,375,900 and $611,800, respectively, of fees paid to Ernst &
Young LLP by Teekay LNG that were approved by the Audit Committee of the Board of Directors of
the general partner of Teekay LNG. Audit fees for 2008 and 2007
include approximately $1,356,000 and $429,300, respectively, of fees paid to Ernst & Young LLP by our subsidiary Teekay
Offshore that were approved by the Audit Committee of the Board of Directors of the general
partner of Teekay Offshore. Audit fees for 2008 and 2007 include approximately $489,900 and
$303,800, respectively, of fees paid to Ernst & Young LLP by our subsidiary Teekay Tankers
that were approved by the Audit Committee of the Board of Directors of Teekay Tankers.(2)
    
    Audit-related fees consisted primarily of accounting consultations, employee benefit plan
audits, services related to business acquisitions, divestitures and other attestation
services.(3)
    
    For 2008 and 2007, respectively, tax fees principally included international tax planning
fees, corporate tax compliance fees and personal and expatriate tax services fees.(4)
    
    All other fees principally include subscription fees to an internet database of accounting
information.  
 Item 16D. Exemptions from the Listing Standards for Audit Committees
  
 Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers
   66




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Total Number of
    
    
    Maximum DollarShares Purchased as
    
    
    Value of Shares thatPart of Publicly
    
    
    May Yet BeTotal Number of
    
    
    Average Price Paid
    
    
    Announced Plans or
    
    
    Purchased Under theMonth of Repurchase
    
    Shares Purchased
    
    
    per Share
    
    
    Program
    
    
    Plans or ProgramMarch 2008
    
    
    499,200
    
    
    $
    41.09
    
    
    
    499,200
    
    
    None499,200
    
    
    $
    41.09
    
    
    
    499,200
 
 PART III
 
 Item 17. Financial Statements
  
 Item 18. Financial Statements
  PageReports of Independent Registered Public Accounting Firm
    
    F-1 and F-2Consolidated Financial StatementsConsolidated Statements of Income (Loss)
    
    
    F-3Consolidated Balance Sheets
    
    
    F-4Consolidated Statements of Cash Flows
    
    
    F-5Consolidated Statements of Changes in Stockholders Equity
    
    
    F-6Notes to the Consolidated Financial Statements
    
    
    F-7
  
 Item 19. Exhibits
  1.1
    
    Amended and Restated
Articles of Incorporation of Teekay Corporation. (16)1.2
    
    Articles of Amendment of
Articles of Incorporation of Teekay Corporation. (16)1.3
    
    Amended and Restated Bylaws of Teekay Corporation. (1)2.1
    
    Registration Rights Agreement among Teekay Corporation, Tradewinds Trust Co. Ltd., as Trustee for the Cirrus Trust, and
Worldwide Trust Services Ltd., as Trustee for the JTK Trust. (2)2.2
    
    Specimen of Teekay Corporation Common Stock Certificate. (2)2.3
    
    Indenture dated June 22, 2001 among Teekay Corporation and The Bank of New York Trust Company of Florida (formerly U.S.
Trust Company of Texas, N.A.) for U.S. $250,000,000 8.875% Senior Notes due 2011. (3)2.4
    
    First Supplemental Indenture dated as of December 6, 2001 among Teekay Corporation and The Bank of New York Trust Company
of Florida, N.A. for U.S. $100,000,000 8.875% Senior Notes due 2011. (4)2.5
    
    Exchange and Registration Rights Agreement dated June 22, 2001 among Teekay Corporation and Goldman, Sachs & Co., Morgan
Stanley & Co. Incorporated, Salomon Smith Barney Inc., Deutsche Banc Alex. Brown Inc. and Scotia Capital (USA) Inc. (3)2.6
    
    Exchange and Registration Rights Agreement dated December 6, 2001 between Teekay Corporation and Goldman, Sachs & Co. (4)2.7
    
    Specimen of Teekay Corporations 8.875% Senior Notes due 2011. (3)4.1
    
    1995 Stock Option Plan. (2)4.2
    
    Amendment to 1995 Stock Option Plan. (5)4.3
    
    Amended 1995 Stock Option Plan. (6)4.4
    
    2003 Equity Incentive Plan. (7)4.5
    
    Annual Executive Bonus Plan. (8)4.6
    
    Vision Incentive Plan. (9)4.7
    
    Form of Indemnification Agreement between Teekay and each of its officers and directors. (2)4.8
    
    Rights Agreement, dated as of September 8, 2000 between Teekay Corporation and The Bank of New York, as Rights Agent. (10)4.9
    
    Agreement dated June 26, 2003 for a U.S. $550,000,000 Secured Reducing Revolving Loan Facility among Norsk Teekay
Holdings Ltd., Den Norske Bank ASA and various other banks. (11)4.10
    
    Agreement dated September 1, 2004 for a U.S. $500,000,000 Credit Facility Agreement to be made available to Teekay Nordic
Holdings Incorporated by Nordea Bank Finland PLC. (8)4.11
    
    Supplemental Agreement dated September 30, 2004 to Agreement dated June 26, 2003, for a U.S. $550,000,000 Secured
Reducing Revolving Loan Facility among Norsk Teekay Holdings Ltd., Den Norske Bank ASA and various other banks. (8)
  67




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##### Table of Contents



4.12
    
    Agreement dated May 26, 2005 for a U.S. $550,000,000 Credit Facility Agreement to be made available to Avalon Spirit LLC
et al by Nordea Bank Finland PLC and others. (9)4.13
    
    Agreement dated October 2, 2006, for a U.S. $940,000,000 Secured Reducing Revolving Loan Facility among Teekay Offshore
Operating L.P., Den Norske Bank ASA and various other banks. (12)4.14
    
    Agreement dated August 23, 2006, for a U.S. $330,000,000 Secured Reducing Revolving Loan Facility among Teekay LNG
Partners L.P., ING Bank N.V. and various other banks. (12)4.15
    
    Agreement, dated November 28, 2007 for a U.S. $845,000,000 Secured Reducing Revolving Loan Facility among Teekay
Corporation, Teekay Tankers Ltd., Nordea Bank Finland PLC and various other banks. (13)4.16
    
    Agreement dated May 16, 2007 for a U.S. $700,000,000 Credit Facility Agreement to be made available to Teekay Acquisition
Holdings LLC et al by HSH NordBank AG and others. (14)4.17
    
    Amended and Restated Omnibus Agreement (15)8.1
    
    List of Significant Subsidiaries.12.1
    
    Rule 13a-14(a)/15d-14(a) Certification of Teekays Chief Executive Officer.12.2
    
    Rule 13a-14(a)/15d-14(a) Certification of Teekays Chief Financial Officer.13.1
    
    Teekay Corporation Certification of Bjorn Moller, Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.13.2
    
    Teekay Corporation Certification of Vincent Lok, Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.23.1
    
    Consent of Ernst & Young LLP, as independent registered public accounting firm.
 
 (1)
    
    Previously filed as an exhibit to the Companys Annual Report on Form 20-F (File No.1-12874),
filed with the SEC on March 30, 2000, and hereby incorporated by reference to such Annual
Report.(2)
    
    Previously filed as an exhibit to the Companys Registration Statement on Form F-1
(Registration No. 33-7573-4), filed with the SEC on July 14, 1995, and hereby incorporated by
reference to such Registration Statement.(3)
    
    Previously filed as an exhibit to the Companys Registration Statement on Form F-4
(Registration No. 333-64928), filed with the SEC on July 11, 2001, and hereby incorporated by
reference to such Registration Statement.(4)
    
    Previously filed as an exhibit to the Companys Registration Statement on Form F-4
(Registration No. 333-76922), filed with the SEC on January 17, 2002, and hereby incorporated
by reference to such Registration Statement.(5)
    
    Previously filed as an exhibit to the Companys Form 6-K (File No.1-12874), filed with the
SEC on May 2, 2000, and hereby incorporated by reference to such Report.(6)
    
    Previously filed as an exhibit to the Companys Annual Report on Form 20-F (File No.1-12874),
filed with the SEC on April 2, 2001, and hereby incorporated by reference to such Annual
Report.(7)
    
    Previously filed as an exhibit to the Companys Registration Statement on Form S-8 (File No.
333-119564), filed with the SEC on October 6, 2004, and hereby incorporated by reference to
such Registration Statement.(8)
    
    Previously filed as an exhibit to the Companys Report on Form 20-F (File No. 1-12874), filed
with the SEC on April 8, 2005, and hereby incorporated by reference to such Report.(9)
    
    Previously filed as an exhibit to the Companys Report on Form 20-F (File No. 1-12874), filed
with the SEC on April 10, 2006, and hereby incorporated by reference to such Report.(10)
    
    Previously filed as an exhibit to the Companys Form 8-A (File No.1-12874), filed with the
SEC on September 11, 2000, and hereby incorporated by reference to such Annual Report.(11)
    
    Previously filed as an exhibit to the Companys Report on Form 6-K (File No. 1-12874), filed
with the SEC on August 14, 2003, and hereby incorporated by reference to such Report.(12)
    
    Previously filed as an exhibit to the Companys Report on Form 6-K (File No. 1-12874), filed
with the SEC on December 21, 2006, and hereby incorporated by reference to such Report.(13)
    
    Previously filed as an exhibit to the Companys Report on Form 20-F (File No. 1-12874), filed
with the SEC on April 11, 2008, and hereby incorporated by reference to such Report.(14)
    
    Previously filed as an exhibit to the Companys Schedule TO  T/A, filed with the SEC on May
18, 2007, and hereby incorporated by reference to such schedule.(15)
    
    Previously filed as an exhibit to the Companys Report on Form 20-F (File No. 1-12874), filed
with the SEC on April 19, 2007, and hereby incorporated by reference to such Report.(16)
    
    Previously filed as an
exhibit to the Companys Report on Form 20-F (File No. 1-12874),
filed with the SEC on April 7, 2009, and hereby incorporated by
reference to such Report.  68




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SIGNATURE
  TEEKAY CORPORATIONBy:
    /s/ Vincent LokVincent LokExecutive Vice President and
Chief Financial Officer
(Principal Financial and Accounting Officer)   69




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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 TEEKAY CORPORATION
 Teekay Corporation and subsidiaries
   Share-Based
Payment.
 Accounting for Uncertainty in Income Taxes,
an Interpretation of FASB Statement No. 109
  Vancouver, Canada,
June 24, 2009
    
    /s/ ERNST & YOUNG LLP
Chartered Accountants
  F-1




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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 TEEKAY CORPORATION
 Internal ControlIntegrated Framework
      Vancouver, Canada,
June 24, 2009
    
    /s/ ERNST & YOUNG LLPChartered Accountants
  F-2




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TEEKAY
CORPORATION AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF INCOME (LOSS)
 (in thousands of U.S. dollars, except share amounts)
 Year Ended
    
    
    Year Ended
    
    
    Year EndedDecember 31,
    
    
    December 31,
    
    
    December 31,2008
    
    
    2007
    
    
    2006$
    
    
    $
    
    
    $REVENUES(note 15)
    
    
    3,193,655
    
    
    
    2,395,507
    
    
    
    2,013,737OPERATING EXPENSESVoyage expenses
    
    
    758,388
    
    
    
    527,308
    
    
    
    522,957Vessel operating expenses (note 15)
    
    
    654,319
    
    
    
    447,146
    
    
    
    248,039Time-charter hire expense (note 15)
    
    
    612,123
    
    
    
    466,481
    
    
    
    402,168Depreciation and amortization
    
    
    418,802
    
    
    
    329,113
    
    
    
    223,965General and administrative (note 15)
    
    
    244,522
    
    
    
    231,865
    
    
    
    181,500Gain on sale of vessels and equipment  net of write-downs (notes 18a and 18b)
    
    
    (60,015
    )
    
    
    (16,531
    )
    
    
    (1,341
    )Goodwill impairment charge (note 6)
    
    
    334,165
    
    
    
    
    
    
    
    Restructuring charge (note 22)
    
    
    15,629
    
    
    
    
    
    
    
    8,929Total operating expenses
    
    
    2,977,933
    
    
    
    1,985,382
    
    
    
    1,586,217Income from vessel operations
    
    
    215,722
    
    
    
    410,125
    
    
    
    427,520OTHER ITEMSInterest expense (note 15)
    
    
    (994,966
    )
    
    
    (422,433
    )
    
    
    (100,089
    )Interest income (note 15)
    
    
    273,647
    
    
    
    110,201
    
    
    
    31,714Foreign exchange gain (loss) (notes 8 and 15)
    
    
    32,348
    
    
    
    (39,912
    )
    
    
    (50,416
    )Equity (loss) income from joint ventures (note 16b)
    
    
    (36,085
    )
    
    
    (12,404
    )
    
    
    6,099Other (loss) income  net (note 14)
    
    
    (6,736
    )
    
    
    23,677
    
    
    
    3,566Total other items
    
    
    (731,792
    )
    
    
    (340,871
    )
    
    
    (109,126
    )(Loss) income before non-controlling interest
and income tax (expense) recovery
    
    
    (516,070
    )
    
    
    69,254
    
    
    
    318,394Income tax recovery (expense) (note 21)
    
    
    56,176
    
    
    
    3,192
    
    
    
    (8,811
    )(Loss) income before non-controlling interest
    
    
    (459,894
    )
    
    
    72,446
    
    
    
    309,583Non-controlling interest expense
    
    
    (9,561
    )
    
    
    (8,903
    )
    
    
    (6,759
    )Net (loss) income
    
    
    (469,455
    )
    
    
    63,543
    
    
    
    302,824Per common share amounts Basic net (loss) earnings (note 19)
    
    
    (6.48
    )
    
    
    0.87
    
    
    
    4.14 Diluted net (loss) earnings (note 19)
    
    
    (6.48
    )
    
    
    0.85
    
    
    
    4.03 Cash dividends declared
    
    
    1.1413
    
    
    
    0.9875
    
    
    
    0.8600Weighted average number of common shares(note 19) Basic
    
    
    72,493,429
    
    
    
    73,382,197
    
    
    
    73,180,193 Diluted
    
    
    72,493,429
    
    
    
    74,735,356
    
    
    
    75,128,724
 The accompanying notes are an integral part of the consolidated financial statements.
  F-3




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TEEKAY
CORPORATION AND SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEETS
 (in thousands of U.S. dollars)
 As at
    
    
    As atDecember 31,
    
    
    December 31,2008
    
    
    2007$
    
    
    $ASSETSCurrentCash and cash equivalents (note 8)
    
    
    814,165
    
    
    
    442,673Restricted cash (note 10)
    
    
    35,841
    
    
    
    33,479Accounts receivable, including non-trade of $46,422 (2007  $35,410)
    
    
    300,462
    
    
    
    262,420Vessels held for sale (note 18a)
    
    
    69,649
    
    
    
    79,689Net
investment in direct financing leases (note 9)
    
    
    22,941
    
    
    
    22,268Prepaid expenses
    
    
    117,651
    
    
    
    126,761Other assets
    
    
    33,794
    
    
    
    57,609Total current assets
    
    
    1,394,503
    
    
    
    1,024,899Restricted cash  long-term (note 10)
    
    
    614,715
    
    
    
    652,717Vessels and equipment(note 8)At cost, less accumulated depreciation of $1,351,786 (2007  $1,061,619)
    
    
    5,784,597
    
    
    
    5,295,751Vessels under capital leases, at cost, less accumulated amortization of $106,975 (2007  $74,442) (note
10)
    
    
    928,795
    
    
    
    934,058Advances on newbuilding contracts (note 16)
    
    
    553,702
    
    
    
    617,066Total vessels and equipment
    
    
    7,267,094
    
    
    
    6,846,875Net
investment in direct financing leases  non-current (note 9)
    
    
    56,567
    
    
    
    78,908Loans to
joint ventures, bearing interest between 4.4% to 8.0% (2007  6.4% to
8.0%)
    
    
    28,019
    
    
    
    729,429Derivative instruments (note 15)
    
    
    154,248
    
    
    
    39,381Investment in joint ventures (note 16)
    
    
    103,956
    
    
    
    135,515Other non-current assets
    
    
    127,940
    
    
    
    177,775Intangible assets  net (note 6)
    
    
    264,768
    
    
    
    298,452Goodwill (note 6)
    
    
    203,191
    
    
    
    434,590Total assets
    
    
    10,215,001
    
    
    
    10,418,541LIABILITIES AND STOCKHOLDERS EQUITYCurrentAccounts payable
    
    
    59,973
    
    
    
    89,691Accrued liabilities (note 7)
    
    
    315,987
    
    
    
    260,717Current portion of derivative liabilities (note 15)
    
    
    166,725
    
    
    
    17,870Current portion of long-term debt (note 8)
    
    
    245,043
    
    
    
    331,594Current obligation under capital leases (note 10)
    
    
    147,616
    
    
    
    150,791Current portion of in-process revenue contracts (note 6)
    
    
    74,777
    
    
    
    82,704Loan from joint venture partners
    
    
    21,019
    
    
    
    Total current liabilities
    
    
    1,031,140
    
    
    
    933,367Long-term debt (note 8)
    
    
    4,707,749
    
    
    
    4,931,990Long-term obligation under capital leases (note 10)
    
    
    669,725
    
    
    
    706,489Derivative instruments (note 15)
    
    
    676,540
    
    
    
    164,769Deferred income taxes (note 21)
    
    
    6,182
    
    
    
    74,975Asset retirement obligation (note 1)
    
    
    18,977
    
    
    
    24,549In-process revenue contracts (note 6)
    
    
    243,088
    
    
    
    205,429Other long-term liabilities
    
    
    209,195
    
    
    
    176,680Total liabilities
    
    
    7,562,596
    
    
    
    7,218,248Commitments and contingencies (notes 9, 10, 15 and 16)Non-controlling interest
    
    
    583,938
    
    
    
    544,339Stockholders equityCommon stock and additional paid-in capital ($0.001 par value; 725,000,000 shares authorized;
72,512,291 shares outstanding (2007 - 72,772,529); 73,011,488 shares issued
(2007 - 95,327,329)) (note 12)
    
    
    642,911
    
    
    
    628,786Retained earnings
    
    
    1,507,617
    
    
    
    2,022,601Accumulated other comprehensive (loss) income (note 1)
    
    
    (82,061
    )
    
    
    4,567Total stockholders equity
    
    
    2,068,467
    
    
    
    2,655,954Total liabilities and stockholders equity
    
    
    10,215,001
    
    
    
    10,418,541
 The accompanying notes are an integral part of the consolidated financial statements.
  F-4




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TEEKAY
CORPORATION AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (in thousands of U.S. dollars)
 Year Ended
    
    
    Year Ended
    
    
    Year EndedDecember 31,
    
    
    December 31,
    
    
    December 31,2008
    
    
    2007
    
    
    2006$
    
    
    $
    
    
    $Cash and cash equivalents provided by (used for)OPERATING ACTIVITIESNet (loss) income
    
    
    (469,455
    )
    
    
    63,543
    
    
    
    302,824Non-cash items:Depreciation and amortization
    
    
    418,802
    
    
    
    329,113
    
    
    
    223,965Amortization of in-process revenue contracts
    
    
    (74,425
    )
    
    
    (70,979
    )
    
    
    (22,404
    )Gain on sale of marketable securities
    
    
    (4,576
    )
    
    
    (9,577
    )
    
    
    (1,422
    )Gain on sale of vessels and other
    
    
    (100,392
    )
    
    
    (16,531
    )
    
    
    (9,041
    )Write-down of marketable securities
    
    
    20,157
    
    
    
    
    
    
    
    Write-down for impairment of goodwill
    
    
    334,165
    
    
    
    
    
    
    
    Write-down of intangible assets
    
    
    9,748
    
    
    
    
    
    
    
    Write-down of vessels and equipment
    
    
    40,377
    
    
    
    
    
    
    
    7,700Loss on repurchase of bonds
    
    
    1,310
    
    
    
    947
    
    
    
    375Equity loss (net of dividends received: December 31, 2008  $1,690;
December 31, 2007  $661; December 31, 2006  $6,585)
    
    
    30,352
    
    
    
    11,419
    
    
    
    486Income tax (recovery) expense
    
    
    (56,176
    )
    
    
    (3,192
    )
    
    
    8,811Employee stock option compensation
    
    
    14,117
    
    
    
    9,676
    
    
    
    9,297Foreign exchange (gain) loss and other  net
    
    
    (40,319
    )
    
    
    20,229
    
    
    
    63,131Unrealized (gains) losses on derivative instruments
    
    
    530,283
    
    
    
    99,055
    
    
    
    (57,246
    )Change in non-cash working capital items related to operating activities (note 17a)
    
    
    (28,816
    )
    
    
    (43,871
    )
    
    
    50,360Expenditures for drydocking
    
    
    (101,511
    )
    
    
    (85,403
    )
    
    
    (31,120
    )Distribution from subsidiaries to minority owners
    
    
    (91,794
    )
    
    
    (49,411
    )
    
    
    (24,931
    )Net operating cash flow
    
    
    431,847
    
    
    
    255,018
    
    
    
    520,785FINANCING ACTIVITIESProceeds from issuance of long-term debt
    
    
    2,208,715
    
    
    
    4,164,308
    
    
    
    2,220,336Debt issuance costs
    
    
    (8,425
    )
    
    
    (14,135
    )
    
    
    (19,424
    )Repayments of long-term debt
    
    
    (1,634,879
    )
    
    
    (2,178,464
    )
    
    
    (1,300,172
    )Repayments of capital lease obligations
    
    
    (33,176
    )
    
    
    (30,999
    )
    
    
    (153,395
    )Proceeds from loans from joint venture partner
    
    
    26,338
    
    
    
    44,185
    
    
    
    4,280Repayment of loans from joint venture partner
    
    
    (4,104
    )
    
    
    (68,968
    )
    
    
    Decrease (increase) in restricted cash
    
    
    23,955
    
    
    
    24,322
    
    
    
    (328,035
    )Net proceeds from sale of Teekay Offshore Partners L.P. units (note 5)
    
    
    141,484
    
    
    
    
    
    
    
    156,711Net proceeds from sale of Teekay LNG Partners L.P. units (note 5)
    
    
    148,345
    
    
    
    84,185
    
    
    
    Net proceeds from sale of Teekay Tankers Ltd. shares (note 5)
    
    
    
    
    
    
    208,186
    
    
    
    Issuance of Common Stock upon exercise of stock options
    
    
    4,224
    
    
    
    34,508
    
    
    
    15,325Repurchase of Common Stock (note 12)
    
    
    (20,512
    )
    
    
    (80,430
    )
    
    
    (233,305
    )Cash dividends paid
    
    
    (82,877
    )
    
    
    (72,499
    )
    
    
    (63,065
    )Other financing activities
    
    
    (1,210
    )
    
    
    
    
    
    
    Net financing cash flow
    
    
    767,878
    
    
    
    2,114,199
    
    
    
    299,256INVESTING ACTIVITIESExpenditures for vessels and equipment
    
    
    (716,765
    )
    
    
    (910,304
    )
    
    
    (442,470
    )Proceeds from sale of vessels and equipment
    
    
    331,611
    
    
    
    214,797
    
    
    
    326,901Purchases of marketable securities
    
    
    (542
    )
    
    
    (59,165
    )
    
    
    (549
    )Proceeds from sale of marketable securities
    
    
    11,058
    
    
    
    57,093
    
    
    
    8,898Proceeds from sale of interest in Swift Product Tanker Pool (note 18a)
    
    
    44,377
    
    
    
    
    
    
    
    Purchase of OMI Corporation, net of cash acquired of $577 (note 4)
    
    
    
    
    
    
    (1,108,216
    )
    
    
    Purchase of Petrojarl ASA (note 3)
    
    
    (304,949
    )
    
    
    (1,210
    )
    
    
    (464,823
    )Investment in joint ventures
    
    
    (1,204
    )
    
    
    (16,975
    )
    
    
    (9,868
    )Loans to joint ventures
    
    
    (260,424
    )
    
    
    (479,242
    )
    
    
    (152,020
    )Collections of loans from joint ventures
    
    
    30,484
    
    
    
    
    
    
    
    Investment in direct financing lease assets
    
    
    (535
    )
    
    
    (13,947
    )
    
    
    (13,420
    )Direct financing lease payments received
    
    
    22,203
    
    
    
    21,151
    
    
    
    19,323Other investing activities
    
    
    16,453
    
    
    
    25,560
    
    
    
    14,917Net investing cash flow
    
    
    (828,233
    )
    
    
    (2,270,458
    )
    
    
    (713,111
    )Increase in cash and cash equivalents
    
    
    371,492
    
    
    
    98,759
    
    
    
    106,930Cash and cash equivalents, beginning of the year
    
    
    442,673
    
    
    
    343,914
    
    
    
    236,984Cash and cash equivalents, end of the year
    
    
    814,165
    
    
    
    442,673
    
    
    
    343,914
 note 17b   The accompanying notes are an integral part of the consolidated financial statements.
  F-5




---



##### Table of Contents



TEEKAY
CORPORATION AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
 (in thousands of U.S. dollars)
 Accumu-Common
    
    
    
    
    
    
    lated OtherThousands
    
    
    Stock and
    
    
    
    
    
    
    Compre-
    
    
    Totalof
    
    
    Additional
    
    
    
    
    
    
    hensive
    
    
    Stock-Common
    
    
    Paid-in
    
    
    Retained
    
    
    Income
    
    
    holdersShares
    
    
    Capital
    
    
    Earnings
    
    
    (Loss)
    
    
    Equity#
    
    
    $
    
    
    $
    
    
    $
    
    
    $Balance as at December 31, 2005
    
    
    71,376
    
    
    
    471,784
    
    
    
    1,768,382
    
    
    
    (1,348
    )
    
    
    2,238,818Net income
    
    
    
    
    
    
    
    
    
    
    302,824
    
    
    
    
    
    
    
    302,824Other comprehensive income:Unrealized gain on marketable securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,370
    
    
    
    8,370Reclassification adjustment for gain on marketable securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,422
    )
    
    
    (1,422
    )Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    309,772Dividends declared
    
    
    
    
    
    
    
    
    
    
    (63,071
    )
    
    
    
    
    
    
    (63,071
    )Reinvested dividends
    
    
    1
    
    
    
    6
    
    
    
    
    
    
    
    
    
    
    
    6Exercise of stock options
    
    
    745
    
    
    
    15,325
    
    
    
    
    
    
    
    
    
    
    
    15,325Issuance of Common Stock (note 12)
    
    
    13
    
    
    
    429
    
    
    
    
    
    
    
    
    
    
    
    429Repurchase of Common Stock (note 12)
    
    
    (5,837
    )
    
    
    (42,132
    )
    
    
    (191,173
    )
    
    
    
    
    
    
    (233,305
    )Settlement of the Premium Equity Participating Security Units
    
    
    6,534
    
    
    
    142,003
    
    
    
    
    
    
    
    
    
    
    
    142,003Employee stock option compensation (note 12)
    
    
    
    
    
    
    9,297
    
    
    
    
    
    
    
    
    
    
    
    9,297Gain on public offering of Teekay Offshore (note 5)
    
    
    
    
    
    
    
    
    
    
    99,873
    
    
    
    
    
    
    
    99,873Balance as at December 31, 2006
    
    
    72,832
    
    
    
    596,712
    
    
    
    1,916,835
    
    
    
    5,600
    
    
    
    2,519,147Net income
    
    
    
    
    
    
    
    
    
    
    63,543
    
    
    
    
    
    
    
    63,543Other comprehensive income:Unrealized gain on marketable securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19,612
    
    
    
    19,612Pension adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,278
    )
    
    
    (6,278
    )Unrealized net gain on qualifying cash flow hedging
instruments (note 15)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,231
    
    
    
    6,231Reclassification adjustment for gain on marketable securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (17,887
    )
    
    
    (17,887
    )Realized net gain on qualifying cash flow hedging
instruments (note 15)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,711
    )
    
    
    (2,711
    )Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    62,510Dividends declared
    
    
    
    
    
    
    
    
    
    
    (72,508
    )
    
    
    
    
    
    
    (72,508
    )Reinvested dividends
    
    
    1
    
    
    
    9
    
    
    
    
    
    
    
    
    
    
    
    9Change in accounting policy (note 1)
    
    
    
    
    
    
    
    
    
    
    (1,011
    )
    
    
    
    
    
    
    (1,011
    )Exercise of stock options
    
    
    1,435
    
    
    
    34,508
    
    
    
    
    
    
    
    
    
    
    
    34,508Issuance of Common Stock (note 12)
    
    
    15
    
    
    
    589
    
    
    
    
    
    
    
    
    
    
    
    589Repurchase of Common Stock (note 12)
    
    
    (1,511
    )
    
    
    (12,708
    )
    
    
    (67,722
    )
    
    
    
    
    
    
    (80,430
    )Employee stock option compensation (note 12)
    
    
    
    
    
    
    9,676
    
    
    
    
    
    
    
    
    
    
    
    9,676Gain on public offerings of Teekay LNG and
Teekay Tankers and other (note 5)
    
    
    
    
    
    
    
    
    
    
    183,464
    
    
    
    
    
    
    
    183,464Balance as at December 31, 2007
    
    
    72,772
    
    
    
    628,786
    
    
    
    2,022,601
    
    
    
    4,567
    
    
    
    2,655,954Net loss
    
    
    
    
    
    
    
    
    
    
    (469,455
    )
    
    
    
    
    
    
    (469,455
    )Other comprehensive income (loss):Unrealized loss on marketable securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (21,449
    )
    
    
    (21,449
    )Pension adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (17,060
    )
    
    
    (17,060
    )Unrealized net loss on qualifying cash flow hedging
instruments (note 15)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (86,333
    )
    
    
    (86,333
    )Reclassification adjustment for loss on marketable securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14,123
    
    
    
    14,123Realized net loss on qualifying cash flow hedging
instruments (note 15)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    24,091
    
    
    
    24,091Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (556,083
    )Dividends declared
    
    
    
    
    
    
    
    
    
    
    (82,889
    )
    
    
    
    
    
    
    (82,889
    )Reinvested dividends
    
    
    1
    
    
    
    12
    
    
    
    
    
    
    
    
    
    
    
    12Exercise of stock options
    
    
    179
    
    
    
    4,224
    
    
    
    
    
    
    
    
    
    
    
    4,224Issuance of Common Stock (note 12)
    
    
    59
    
    
    
    1,252
    
    
    
    
    
    
    
    
    
    
    
    1,252Repurchase of Common Stock (note 12)
    
    
    (499
    )
    
    
    (4,228
    )
    
    
    (16,284
    )
    
    
    
    
    
    
    (20,512
    )Employee stock option compensation (note 12)
    
    
    
    
    
    
    12,865
    
    
    
    
    
    
    
    
    
    
    
    12,865Dilution gain on public offerings of Teekay Offshore and
Teekay LNG (note 5)
    
    
    
    
    
    
    
    
    
    
    53,644
    
    
    
    
    
    
    
    53,644Balance as at December 31, 2008
    
    
    72,512
    
    
    
    642,911
    
    
    
    1,507,617
    
    
    
    (82,061
    )
    
    
    2,068,467
 The accompanying notes are an integral part of the consolidated financial statements.
  F-6




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##### Table of Contents



TEEKAY CORPORATION AND SUBSIDIARIES
 
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 (all tabular amounts stated in thousands of U.S. dollars, other than share data)
 1.
    
    Summary of Significant Accounting Policies
 Basis of presentation
 Teekay Company VIEs
   Reporting currency
  Operating revenues and expenses
    Cash and cash equivalents
  Accounts receivable and allowance for doubtful accounts
   F-7




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##### Table of Contents



TEEKAY CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Contd)
(all tabular amounts stated in thousands of U.S. dollars, other than share data)
 Marketable securities
   Vessels and equipment
  LNG LPG
       Year Ended December 31,2008
    
    
    2007
    
    
    2006Balance at January 1,
    
    
    98,925
    
    
    
    57,030
    
    
    
    36,495Costs incurred for drydocking
    
    
    98,092
    
    
    
    71,181
    
    
    
    36,344Costs fully amortized
    
    
    (1,639
    )
    
    
    (3,979
    )
    
    
    Drydock amortization
    
    
    (40,765
    )
    
    
    (25,307
    )
    
    
    (15,809
    )Balance at December 31,
    
    
    154,613
    
    
    
    98,925
    
    
    
    57,030
  F-8




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##### Table of Contents



TEEKAY CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Contd)
(all tabular amounts stated in thousands of U.S. dollars, other than share data)
  Foinaven FPSO
 Direct financing leases
 VOC Equipment
 Investment in joint ventures
  Debt issuance costs
  Derivative instruments
    SFAS Accounting for Derivative
Instruments and Hedging Activities
 Goodwill and intangible assets
   F-9




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##### Table of Contents



TEEKAY CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Contd)
(all tabular amounts stated in thousands of U.S. dollars, other than share data)
  Asset retirement obligation
 ARO Petrojarl Banff
  Repurchase of common stock
  Issuance of shares or units by subsidiaries
  Accounting for share-based payments
 Share-Based Payment
   VIP Economic Profit MVA
    F-10




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##### Table of Contents



TEEKAY CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Contd)
(all tabular amounts stated in thousands of U.S. dollars, other than share data)
 Income taxes
  Comprehensive (loss) income
 Reporting Comprehensive Income
  December 31,
    
    
    December 31,
    
    
    December 31,2008
    
    
    2007
    
    
    2006$
    
    
    $
    
    
    $Unrealized (loss) gain on derivative instruments
    
    
    (58,723
    )
    
    
    3,520
    
    
    
    Pension adjustments
    
    
    (23,338
    )
    
    
    (6,278
    )
    
    
    Unrealized gain on marketable securities
    
    
    
    
    
    
    7,325
    
    
    
    5,600(82,061
    )
    
    
    4,567
    
    
    
    5,600
 Employee pension plans
   Employers
Accounting for Defined Benefit Pension and Other Postretirement Plans, an Amendment of FASB
Statement Nos. 87, 88, 106 and 132R SFAS 158
 Recent accounting pronouncements
 FASB SFAS Recognition and Presentation of
Other-Than-Temporary Impairments
 Determining Fair Value When the Volume and Level of
Activity for the Asset or Liability has Significantly Decreased and Identifying Transactions
that are Not Orderly Fair Value Measurements Determining the Fair Value of a
Financial Asset When the Market for That Asset is Not Active
 Interim Disclosures About Fair Value of
Financial Instruments Disclosures
about Fair Value of Financial Instruments Interim Financial Reporting
  F-11




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##### Table of Contents



TEEKAY CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Contd)
(all tabular amounts stated in thousands of U.S. dollars, other than share data)
 Accounting for Assets Acquired and Liabilities
Assumed in a Business Combination that Arise from Contingencies Business Combinations
 Determining the Fair Value of a Financial Asset in
a Market That Is Not Active
 Disclosures about Derivative Instruments and
Hedging Activities, an amendment of Statement of Financial Accounting Standards No. 133 SFAS
161
 Business Combinations SFAS 141(R , Business Combinations
 Noncontrolling Interests in Consolidated
Financial Statements, an Amendment of Accounting Research Bulletin No. 51 SFAS 160
 2.
    
    Segment Reporting
   Teekay Navion Shuttle
Tankers and Offshore Teekay Petrojarl Teekay Gas Services FSO
  F-12




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##### Table of Contents



TEEKAY CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Contd)
(all tabular amounts stated in thousands of U.S. dollars, other than share data)
  Shuttle
    
    
    
    
    
    
    FixedTanker
    
    
    
    
    
    
    Rate
    
    
    Liquefied
    
    
    Spotand FSO
    
    
    FPSO
    
    
    Tanker
    
    
    Gas
    
    
    TankerYear ended December 31, 2008
    
    Segment
    
    
    Segment
    
    
    Segment
    
    
    Segment
    
    
    Segment
    
    
    TotalRevenues
    
    
    705,461
    
    
    
    383,752
    
    
    
    265,849
    
    
    
    221,930
    
    
    
    1,616,663
    
    
    
    3,193,655Voyage expenses
    
    
    171,599
    
    
    
    
    
    
    
    5,010
    
    
    
    1,009
    
    
    
    580,770
    
    
    
    758,388Vessel operating expenses
    
    
    175,449
    
    
    
    227,651
    
    
    
    68,065
    
    
    
    48,185
    
    
    
    134,969
    
    
    
    654,319Time charter hire expense
    
    
    134,100
    
    
    
    
    
    
    
    43,048
    
    
    
    
    
    
    
    434,975
    
    
    
    612,123Depreciation and amortization
    
    
    117,198
    
    
    
    91,734
    
    
    
    44,578
    
    
    
    58,371
    
    
    
    106,921
    
    
    
    418,802General and administrative (1)
    
    
    58,725
    
    
    
    53,087
    
    
    
    20,740
    
    
    
    23,072
    
    
    
    88,898
    
    
    
    244,522Goodwill impairment charge
    
    
    
    
    
    
    334,165
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    334,165Loss (gain) on sale of vessels and equipment, net of
write-downs
    
    
    (3,771
    )
    
    
    12,019
    
    
    
    4,401
    
    
    
    
    
    
    
    (72,664
    )
    
    
    (60,015
    )Restructuring charge
    
    
    10,645
    
    
    
    
    
    
    
    1,991
    
    
    
    634
    
    
    
    2,359
    
    
    
    15,629Income (loss) from vessel operations
    
    
    41,516
    
    
    
    (334,904
    )
    
    
    78,016
    
    
    
    90,659
    
    
    
    340,435
    
    
    
    215,722Equity (loss) income
    
    
    
    
    
    
    (3,079
    )
    
    
    634
    
    
    
    (32,823
    )
    
    
    (817
    )
    
    
    (36,085
    )Investments in joint ventures at December 31, 2008
    
    
    
    
    
    
    
    
    
    
    5,166
    
    
    
    64,193
    
    
    
    34,597
    
    
    
    103,956Total assets of operating segments at December 31, 2008
    
    
    1,722,432
    
    
    
    1,331,325
    
    
    
    951,592
    
    
    
    2,919,194
    
    
    
    1,935,537
    
    
    
    8,860,080Expenditures for vessels and equipment (2)
    
    
    99,638
    
    
    
    28,205
    
    
    
    67,837
    
    
    
    192,955
    
    
    
    328,130
    
    
    
    716,765
 Shuttle
    
    
    
    
    
    
    Fixed-Tanker
    
    
    
    
    
    
    Rate
    
    
    Liquefied
    
    
    Spotand FSO
    
    
    FPSO
    
    
    Tanker
    
    
    Gas
    
    
    TankerYear ended December 31, 2007
    
    Segment
    
    
    Segment
    
    
    Segment
    
    
    Segment
    
    
    Segment
    
    
    TotalRevenues
    
    
    642,047
    
    
    
    350,279
    
    
    
    195,942
    
    
    
    166,981
    
    
    
    1,040,258
    
    
    
    2,395,507Voyage expenses
    
    
    117,571
    
    
    
    
    
    
    
    2,707
    
    
    
    109
    
    
    
    406,921
    
    
    
    527,308Vessel operating expenses
    
    
    127,372
    
    
    
    156,264
    
    
    
    51,458
    
    
    
    30,239
    
    
    
    81,813
    
    
    
    447,146Time charter hire expense
    
    
    160,993
    
    
    
    
    
    
    
    25,812
    
    
    
    
    
    
    
    279,676
    
    
    
    466,481Depreciation and amortization
    
    
    104,936
    
    
    
    68,047
    
    
    
    36,018
    
    
    
    46,018
    
    
    
    74,094
    
    
    
    329,113General and administrative (1)
    
    
    60,234
    
    
    
    36,927
    
    
    
    18,221
    
    
    
    20,521
    
    
    
    95,962
    
    
    
    231,865Gain on sale of vessels and equipment, net of write-downs
    
    
    (16,531
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (16,531
    )Income from vessel operations
    
    
    87,472
    
    
    
    89,041
    
    
    
    61,726
    
    
    
    70,094
    
    
    
    101,792
    
    
    
    410,125Equity loss
    
    
    
    
    
    
    
    
    
    
    (2,879
    )
    
    
    (130
    )
    
    
    (9,395
    )
    
    
    (12,404
    )Investments in joint ventures at December 31, 2007
    
    
    
    
    
    
    16
    
    
    
    4,490
    
    
    
    97,920
    
    
    
    33,089
    
    
    
    135,515Total assets of operating segments at December 31, 2007
    
    
    1,761,547
    
    
    
    1,426,088
    
    
    
    795,775
    
    
    
    3,366,049
    
    
    
    1,966,166
    
    
    
    9,315,625Expenditures for vessels and equipment (2)
    
    
    168,207
    
    
    
    160,792
    
    
    
    63,698
    
    
    
    392,779
    
    
    
    124,828
    
    
    
    910,304
 Shuttle
    
    
    
    
    
    
    Fixed-Tanker
    
    
    
    
    
    
    Rate
    
    
    Liquefied
    
    
    Spotand FSO
    
    
    FPSO
    
    
    Tanker
    
    
    Gas
    
    
    TankerYear ended December 31, 2006
    
    Segment
    
    
    Segment
    
    
    Segment
    
    
    Segment
    
    
    Segment
    
    
    TotalRevenues
    
    
    572,392
    
    
    
    95,455
    
    
    
    181,605
    
    
    
    104,489
    
    
    
    1,059,796
    
    
    
    2,013,737Voyage expenses
    
    
    89,642
    
    
    
    
    
    
    
    1,999
    
    
    
    975
    
    
    
    430,341
    
    
    
    522,957Vessel operating expenses
    
    
    90,798
    
    
    
    36,158
    
    
    
    44,083
    
    
    
    18,912
    
    
    
    58,088
    
    
    
    248,039Time charter hire expense
    
    
    170,308
    
    
    
    
    
    
    
    16,869
    
    
    
    
    
    
    
    214,991
    
    
    
    402,168Depreciation and amortization
    
    
    83,501
    
    
    
    22,360
    
    
    
    32,741
    
    
    
    33,160
    
    
    
    52,203
    
    
    
    223,965General and administrative (1)
    
    
    46,220
    
    
    
    10,549
    
    
    
    15,843
    
    
    
    15,531
    
    
    
    93,357
    
    
    
    181,500Loss (gain) on sale of vessels and equipment  net of
write-downs
    
    
    698
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,039
    )
    
    
    (1,341
    )Restructuring charge
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,929
    
    
    
    8,929Income from vessel operations
    
    
    91,225
    
    
    
    26,388
    
    
    
    70,070
    
    
    
    35,911
    
    
    
    203,926
    
    
    
    427,520Equity income (loss)
    
    
    6,231
    
    
    
    (114
    )
    
    
    831
    
    
    
    (226
    )
    
    
    (623
    )
    
    
    6,099Investments in joint ventures at December 31, 2006
    
    
    
    
    
    
    20
    
    
    
    5,132
    
    
    
    86,119
    
    
    
    33,024
    
    
    
    124,295Total assets of operating segments at December 31, 2006
    
    
    1,661,674
    
    
    
    1,419,503
    
    
    
    678,033
    
    
    
    2,481,378
    
    
    
    1,116,145
    
    
    
    7,356,733Expenditures for vessels and equipment (2)
    
    
    94,594
    
    
    
    23,861
    
    
    
    33,938
    
    
    
    5,092
    
    
    
    284,985
    
    
    
    442,470
 (1)
    
    Includes direct general and administrative expenses and indirect general and
administrative expenses (allocated to each segment based on estimated use of corporate
resources).(2)
    
    Excludes vessels purchased as part of the Companys acquisition of (a) 50% of OMI
Corporation in August 2007 and (b) Teekay Petrojarl in October 2006.  F-13




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##### Table of Contents



TEEKAY CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Contd)
(all tabular amounts stated in thousands of U.S. dollars, other than share data)
  December 31,
    
    
    December 31,2008
    
    
    2007$
    
    
    $Total assets of all operating segments
    
    
    8,860,080
    
    
    
    9,315,625Cash and restricted cash
    
    
    821,286
    
    
    
    446,102Accounts receivable and other assets
    
    
    533,635
    
    
    
    656,814Consolidated total assets
    
    
    10,215,001
    
    
    
    10,418,541
 3.
    
    Acquisition of Additional 35.3% of Teekay Petrojarl ASA
     At June 30,2008$ASSETSVessels and equipment
    
    
    211,021Other assets  long-term
    
    
    (3,575
    )Intangible assets subject to amortization
    
    
    353Goodwill (FPSO segment)
    
    
    105,842Total assets acquired
    
    
    313,641LIABILITIESIn-process revenue contracts
    
    
    (108,138
    )Other long-term liabilities
    
    
    (2,859
    )Total liabilities assumed
    
    
    (110,997
    )Non-controlling interest
    
    
    102,305Net assets acquired (cash consideration)
    
    
    304,949
   Pro Forma
    
    
    Pro Forma
    
    
    Pro FormaYear Ended
    
    
    Year Ended
    
    
    Year EndedDecember 31,
    
    
    December 31,
    
    
    December 31,2008
    
    
    2007
    
    
    2006(unaudited)
    
    
    (unaudited)
    
    
    (unaudited)$
    
    
    $
    
    
    $Revenues (1)
    
    
    3,193,655
    
    
    
    2,395,507
    
    
    
    2,284,498Net (loss) income
    
    
    (476,597
    )
    
    
    62,454
    
    
    
    315,304Earnings (loss) per common share- Basic
    
    
    (6.57
    )
    
    
    0.85
    
    
    
    4.31- Diluted
    
    
    (6.57
    )
    
    
    0.84
    
    
    
    4.20
 (1)
    
    Revenues from Teekay Petrojarl has been consolidated with the Companys results since
October 1, 2006.  F-14




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##### Table of Contents



TEEKAY CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Contd)
(all tabular amounts stated in thousands of U.S. dollars, other than share data)
 4.
    
    Acquisition of 50% of OMI Corporation
 TORM OMI
    Original at
    
    
    
    
    
    
    Revised atAugust 1, 2007
    
    
    Revisions
    
    
    August 1, 2007$
    
    
    $
    
    
    $ASSETSCash, cash equivalents and short-term restricted cash
    
    
    577
    
    
    
    
    
    
    
    577Other current assets
    
    
    67,159
    
    
    
    (43,003
    )
    
    
    24,156Vessels and equipment
    
    
    923,670
    
    
    
    
    
    
    
    923,670Other assets  long-term
    
    
    6,820
    
    
    
    50,160
    
    
    
    56,980Investment in joint venture
    
    
    64,244
    
    
    
    5,785
    
    
    
    70,029Intangible assets subject to amortization
    
    
    60,540
    
    
    
    8,407
    
    
    
    68,947Goodwill ($25.8 million spot tanker segment, and
$7.2 million fixed-rate tanker segment)
    
    
    31,961
    
    
    
    1,045
    
    
    
    33,006Total assets acquired
    
    
    1,154,971
    
    
    
    22,394
    
    
    
    1,177,365LIABILITIESCurrent liabilities
    
    
    21,006
    
    
    
    (1,429
    )
    
    
    19,577Other long-term liabilities
    
    
    
    
    
    
    15,873
    
    
    
    15,873In-process revenue contracts
    
    
    25,402
    
    
    
    (3,811
    )
    
    
    21,591Total liabilities assumed
    
    
    46,408
    
    
    
    10,633
    
    
    
    57,041Net assets acquired
    
    
    1,108,563
    
    
    
    11,761
    
    
    
    1,120,324
  Pro Forma
    
    
    Pro FormaYear Ended
    
    
    Year EndedDecember 31,
    
    
    December 31,2007
    
    
    2006(unaudited)
    
    
    (unaudited)$
    
    
    $Revenues
    
    
    2,533,951
    
    
    
    2,288,563Gain on sale of vessels and equipment  net of write-downs
    
    
    16,531
    
    
    
    79,558Net income
    
    
    59,352
    
    
    
    407,803Earnings per common share:- Basic
    
    
    0.81
    
    
    
    5.57- Diluted
    
    
    0.79
    
    
    
    5.43
  F-15




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##### Table of Contents



TEEKAY CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Contd)
(all tabular amounts stated in thousands of U.S. dollars, other than share data)
 5.
    
    Public Offerings
 Teekay LNG Teekay Offshore
  Teekay Tankers Teekay LNG
 Teekay
Offshore
  Teekay
    
    
    Teekay
    
    
    Teekay
    
    
    Teekay
    
    
    TeekayTankers
    
    
    Offshore
    
    
    Offshore
    
    
    LNG
    
    
    LNGInitial
    
    
    Follow-on
    
    
    Initial
    
    
    Follow-on
    
    
    Follow-onOffering
    
    
    Offering
    
    
    Offering
    
    
    Offering
    
    
    Offering2007
    
    
    2008
    
    
    2006
    
    
    2008
    
    
    2007$
    
    
    $
    
    
    $
    
    
    $
    
    
    $Proceeds received
    
    
    224,250
    
    
    
    212,500
    
    
    
    169,050
    
    
    
    154,531
    
    
    
    87,699Offering expenses
    
    
    16,064
    
    
    
    6,192
    
    
    
    13,788
    
    
    
    6,186
    
    
    
    3,494Net proceeds received
    
    
    208,186
    
    
    
    206,308
    
    
    
    155,262
    
    
    
    148,345
    
    
    
    84,205
  OPCO
    F-16




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##### Table of Contents



TEEKAY CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Contd)
(all tabular amounts stated in thousands of U.S. dollars, other than share data)
 6.
    
    Goodwill, Intangible Assets and In-Process Revenue Contracts
 Goodwill
  Shuttle
    
    
    
    
    
    
    
    
    
    
    Fixed-Tanker
    
    
    
    
    
    
    Liquefied
    
    
    Rate
    
    
    Spotand FSO
    
    
    FPSO
    
    
    Gas
    
    
    Tanker
    
    
    TankerSegment
    
    
    Segment
    
    
    Segment
    
    
    Segment
    
    
    Segment
    
    
    Other
    
    
    Total$
    
    
    $
    
    
    $
    
    
    $
    
    
    $
    
    
    $
    
    
    $Balance as of December 31, 2006
    
    
    130,908
    
    
    
    95,461
    
    
    
    35,631
    
    
    
    3,648
    
    
    
    
    
    
    
    1,070
    
    
    
    266,718Adjustment to goodwill acquired (note 3)
    
    
    
    
    
    
    132,862
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    132,862Goodwill acquired (note 4)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    36,080
    
    
    
    
    
    
    
    36,080Disposal of reporting unit
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,070
    )
    
    
    (1,070
    )Balance as of December 31, 2007
    
    
    130,908
    
    
    
    228,323
    
    
    
    35,631
    
    
    
    3,648
    
    
    
    36,080
    
    
    
    
    
    
    
    434,590Goodwill acquired (note 3)
    
    
    
    
    
    
    105,842
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    105,842Adjustment to goodwill acquired (note 4)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,076
    )
    
    
    
    
    
    
    (3,076
    )Goodwill impairment
    
    
    
    
    
    
    (334,165
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (334,165
    )Reallocation of goodwill acquired
between segments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,163
    
    
    
    (7,163
    )
    
    
    
    
    
    
    Balance as of December 31, 2008
    
    
    130,908
    
    
    
    
    
    
    
    35,631
    
    
    
    10,811
    
    
    
    25,841
    
    
    
    
    
    
    
    203,191
     Intangible Assets
  Weighted-Average
    
    
    Gross Carrying
    
    
    Accumulated
    
    
    Net CarryingAmortization Period
    
    
    Amount
    
    
    Amortization
    
    
    Amount(years)
    
    
    $
    
    
    $
    
    
    $Contracts of affreightment
    
    
    10.2
    
    
    
    124,251
    
    
    
    (78,961
    )
    
    
    45,290Time-charter contracts
    
    
    15.5
    
    
    
    233,678
    
    
    
    (60,875
    )
    
    
    172,803Other intangible assets
    
    
    2.8
    
    
    
    58,950
    
    
    
    (12,275
    )
    
    
    46,67513.1
    
    
    
    416,879
    
    
    
    (152,111
    )
    
    
    264,768
  Weighted-Average
    
    
    Gross Carrying
    
    
    Accumulated
    
    
    Net CarryingAmortization Period
    
    
    Amount
    
    
    Amortization
    
    
    Amount(years)
    
    
    $
    
    
    $
    
    
    $Contracts of affreightment
    
    
    10.2
    
    
    
    124,250
    
    
    
    (68,895
    )
    
    
    55,355Time-charter contracts
    
    
    16.0
    
    
    
    232,049
    
    
    
    (37,374
    )
    
    
    194,675Other intangible assets
    
    
    5.0
    
    
    
    49,297
    
    
    
    (875
    )
    
    
    48,42213.7
    
    
    
    405,596
    
    
    
    (107,144
    )
    
    
    298,452
   F-17




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##### Table of Contents



TEEKAY CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Contd)
(all tabular amounts stated in thousands of U.S. dollars, other than share data)
 In-Process Revenue Contracts
   7.
    
    Accrued Liabilities
 December 31,
    
    
    December 31,2008
    
    
    2007$
    
    
    $Voyage and vessel expenses
    
    
    196,899
    
    
    
    142,627Interest
    
    
    45,626
    
    
    
    40,839Payroll and benefits and other
    
    
    73,462
    
    
    
    77,251315,987
    
    
    
    260,717
 8.
    
    Long-Term Debt
 December 31,
    
    
    December 31,2008
    
    
    2007$
    
    
    $Revolving Credit Facilities
    
    
    2,656,658
    
    
    
    2,393,967Senior Notes (8.875%) due July 15, 2011
    
    
    194,642
    
    
    
    246,059USD-denominated Term Loans due through 2021
    
    
    1,670,005
    
    
    
    2,162,420Euro-denominated Term Loans due through 2023
    
    
    414,144
    
    
    
    443,992USD-denominated Unsecured Demand Loan due to Joint Venture Partners
    
    
    17,343
    
    
    
    17,1464,952,792
    
    
    
    5,263,584Less current portion
    
    
    245,043
    
    
    
    331,5944,707,749
    
    
    
    4,931,990
 Revolvers
 8.875% Notes
 QGTC 3
   F-18




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##### Table of Contents



TEEKAY CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Contd)
(all tabular amounts stated in thousands of U.S. dollars, other than share data)
      9.
    
    LeasesCharters-out
   Charters-in
  Direct
Financing Leases
  10.
    
    Capital Leases and Restricted Cash
 Capital Leases
 Suezmax Tankers.
 Year
    
    Commitment2009
    
    $134.4 million2010
    
    $8.4 million2011
    
    $84.0 million
 RasGas II LNG Carriers. RasGas II LNG Carriers RasGas II
   F-19




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##### Table of Contents



TEEKAY CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Contd)
(all tabular amounts stated in thousands of U.S. dollars, other than share data)
   Year
    
    Commitment2009
    
    $24.0 million2010
    
    $24.0 million2011
    
    $24.0 million2012
    
    $24.0 million2013
    
    $24.0 millionThereafter
    
    $953.1 million
 Spanish-Flagged LNG Carrier.
 Year
    
    Commitment2009
    
    25.6 million Euros ($35.8 million)2010
    
    26.9 million Euros ($37.6 million)2011
    
    64.8 million Euros ($90.6 million)
 FPSO Units. Petrojarl Foinaven, Petrojarl Banff Defeased Rental
Payments
 Petrojarl Foinaven
 Petrojarl Foinaven
 Restricted Cash
      F-20




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##### Table of Contents



TEEKAY CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Contd)
(all tabular amounts stated in thousands of U.S. dollars, other than share data)
 11.
    
    Fair Value MeasurementsEffective January 1, 2008, the Company adopted SFAS No. 157, Fair Value Measurements. In
accordance with Financial Accounting Standards Board Staff Position No. FAS 157-2, Effective
Date of FASB Statement No. 157(FSP 157-2), the Company deferred the adoption of SFAS No. 157
for its non-financial assets and non-financial liabilities, except those items recognized or
disclosed at fair value on an annual or more frequently recurring basis, until January 1, 2009.
The adoption of SFAS No. 157 did not have a material impact on the Companys fair value
measurements.SFAS No. 157 clarifies the definition of fair value, prescribes methods for measuring fair
value, establishes a fair value hierarchy based on the inputs used to measure fair value and
expands disclosures about the use of fair value measurements. The fair value hierarchy has three
levels based on the reliability of the inputs used to determine fair value as follows:Level 1. Observable inputs such as quoted prices in active markets;Level 2. Inputs, other than the quoted prices in active markets, that are observable either
directly or indirectly; andLevel 3. Unobservable inputs in which there is little or no market data, which require the
reporting entity to develop its own assumptions.The following tables present the Companys assets and liabilities that are measured at fair
value on a recurring basis and are categorized using the fair value hierarchy.Cash and cash equivalents and restricted cash The fair value of the Companys cash and cash
equivalents approximates their carrying amounts reported in the accompanying consolidated
balance sheets.Marketable securities The fair value of the Companys marketable securities has been
determined using the closing price on the date of determination for those securities.Loans to joint ventures The fair value of the Companys loans to joint ventures approximate
their carrying amounts reported in the accompanying consolidated balance sheet.Long-term debt The fair value of the Companys fixed-rate and variable-rate long-term debt is
either based on quoted market prices or estimated using discounted cash flow analyses, based on
current credit spreads available for debt with similar terms and remaining maturities.Derivative instruments The fair value of the Companys derivative instruments is the estimated
amount that the Company would receive or pay to terminate the agreements at the reporting date,
taking into account, as applicable, current interest rates, foreign exchange rates, bunker fuel
prices, spot tanker market rates for vessels, and the current credit worthiness of both the
Company and the swap counterparties. Given the current volatility in the credit markets, it is
reasonably possible that the amounts recorded as derivative assets and liabilities could vary by
material amounts in the near term.The estimated fair value of the Companys financial instruments is as follows:
 December 31,
    
    
    
    
    
    
    December 31,2008
    
    
    
    
    
    
    2007Carrying
    
    
    Fair
    
    
    Carrying
    
    
    FairFair Value
    
    Amount
    
    
    Value
    
    
    Amount
    
    
    ValueHierarchy
    
    Asset (Liability)
    
    
    Asset (Liability)
    
    
    Asset (Liability)
    
    
    Asset (Liability)Level
    
    $
    
    
    $
    
    
    $
    
    
    $Cash and cash equivalents, marketable
securities, and restricted cash
    
    Level 1
    
    
    1,477,788
    
    
    
    1,477,788
    
    
    
    1,175,360
    
    
    
    1,175,360Loans to joint ventures
    
    Level 2
    
    
    28,019
    
    
    
    28,019
    
    
    
    729,429
    
    
    
    729,429Long-term debt
    
    Level 1 and 2
    
    
    (4,952,792
    )
    
    
    (4,537,237
    )
    
    
    (5,263,584
    )
    
    
    (5,246,670
    )Derivative instruments (note 15)Interest rate swap agreements
    
    Level 2
    
    
    (718,871
    )
    
    
    (718,871
    )
    
    
    (154,148
    )
    
    
    (154,148
    )Interest rate swap agreements
    
    Level 2
    
    
    167,390
    
    
    
    167,390
    
    
    
    38,823
    
    
    
    38,823Interest rate swaptions
    
    Level 2
    
    
    (27,461
    )
    
    
    (27,461
    )
    
    
    (2,480
    )
    
    
    (2,480
    )Foreign currency contracts
    
    Level 2
    
    
    (90,966
    )
    
    
    (90,966
    )
    
    
    35,038
    
    
    
    35,038Bunker fuel swap contracts
    
    Level 2
    
    
    (3,142
    )
    
    
    (3,142
    )
    
    
    32
    
    
    
    32Forward freight agreements
    
    Level 2
    
    
    (604
    )
    
    
    (604
    )
    
    
    (5,478
    )
    
    
    (5,478
    )Foinaven embedded derivative
    
    Level 2
    
    
    (9,354
    )
    
    
    (9,354
    )
    
    
    (19,581
    )
    
    
    (19,581
    )
  F-21




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##### Table of Contents



TEEKAY CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Contd)
(all tabular amounts stated in thousands of U.S. dollars, other than share data)
 12.
    
    Capital StockThe authorized capital stock of Teekay at December 31, 2008 and 2007 was 25,000,000 shares of
Preferred Stock, with a par value of $1 per share, and 725,000,000 shares of Common Stock, with
a par value of $0.001 per share. During 2008, the Company issued 0.2 million shares upon the
exercise of stock options, and repurchased 0.5 million shares for a total cost of $20.5 million.
As at December 31, 2008, Teekay had 73,011,488 shares of Common Stock (2007  95,327,329) and no
 shares of Preferred Stock issued. As at December 31, 2008, Teekay had 72,512,291 shares of
Common Stock outstanding (2007  72,772,529).Dividends may be declared and paid out of surplus only, but if there is no surplus, dividends
may be declared or paid out of the net profits for the fiscal year in which the dividend is
declared and for the preceding fiscal year. Subject to preferences that may apply to any shares
of preferred stock outstanding at the time, the holders of common stock are entitled to share
equally in any dividends that the board of directors may declare from time to time out of funds
legally available for dividends.During 2008, Teekay announced that its Board of Directors had authorized the repurchase of up to
$200 million of shares of its Common Stock in the open market. As at December 31, 2008, Teekay
had not repurchased any shares of Common Stock pursuant to such authorizations. The total
remaining share repurchase authorization at December 31, 2008 was $200 million.During 2005 and June 2006, Teekay announced that its Board of Directors had authorized the
repurchase of up to $655 million and $150 million, respectively, of shares of its Common Stock
in the open market. Since the date of the authorized repurchase, Teekay had repurchased
18,930,600 shares of Common Stock subsequent to such authorizations at an average price of
$42.52 per share, for a total cost of $805 million.Stock-based CompensationAs at December 31, 2008, the Company had reserved pursuant to its 1995 Stock Option Plan and
2003 Equity Incentive Plan (collectively referred to as the Plans) 6,256,497 shares of Common
Stock (2007  6,435,911) for issuance upon exercise of options or equity awards granted or to be
granted. During the years ended December 31, 2008, 2007 and 2006, the Company granted options
under the Plans to acquire up to 1,476,100, 836,100, and 1,045,200 shares of Common Stock,
respectively, to certain eligible officers, employees and directors of the Company. The options
under the Plans have ten-year terms and vest equally over three years from the grant date. All
options outstanding as of December 31, 2008, expire between June 1, 2009 and September 12, 2018,
ten years after the date of each respective grant.During 2008, the Company granted 10,500 (2007  19,040 and 2006  20,090) shares of restricted
stock awards with a fair value of $0.4 million, based on the quoted market price, to certain of
the Companys directors. The shares of restricted stock are issued when granted.A summary of the Companys stock option activity and related information for the year ended
December 31, 2008, is as follows:
 December 31, 2008Options
    
    
    Weighted-Average(000s)
    
    
    Exercise Price#
    
    
    $Outstanding-beginning of year
    
    
    3,665
    
    
    
    35.42Granted
    
    
    1,476
    
    
    
    40.35Exercised
    
    
    (179
    )
    
    
    23.54Forfeited
    
    
    (149
    )
    
    
    38.03Outstanding-end of year
    
    
    4,813
    
    
    
    37.22Exercisable  end of year
    
    
    2,556
    
    
    
    32.41
    F-22




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##### Table of Contents



TEEKAY CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Contd)
(all tabular amounts stated in thousands of U.S. dollars, other than share data)
  Outstanding Options
    
    
    Exercisable OptionsWeighted-
    
    
    Weighted-
    
    
    
    
    
    
    Weighted-
    
    
    Weighted-Options
    
    
    Average
    
    
    Average
    
    
    Options
    
    
    Average
    
    
    AverageRange of Exercise
    
    (000s)
    
    
    Remaining Life
    
    
    Exercise Price
    
    
    (000s)
    
    
    Remaining Life
    
    
    Exercise PricePrices
    
    #
    
    
    (years)
    
    
    $
    
    
    #
    
    
    (years)
    
    
    $$8.44  $9.99
    
    
    40
    
    
    
    0.4
    
    
    
    8.44
    
    
    
    40
    
    
    
    0.4
    
    
    
    8.44$10.00  $14.99
    
    
    161
    
    
    
    1.2
    
    
    
    11.78
    
    
    
    161
    
    
    
    1.2
    
    
    
    11.78$15.00  $19.99
    
    
    602
    
    
    
    3.8
    
    
    
    19.57
    
    
    
    602
    
    
    
    3.8
    
    
    
    19.57$20.00  $29.99
    
    
    203
    
    
    
    2.3
    
    
    
    20.57
    
    
    
    203
    
    
    
    2.3
    
    
    
    20.57$30.00  $34.99
    
    
    390
    
    
    
    5.2
    
    
    
    33.63
    
    
    
    390
    
    
    
    5.2
    
    
    
    33.63$35.00  $39.99
    
    
    847
    
    
    
    7.3
    
    
    
    38.89
    
    
    
    495
    
    
    
    7.2
    
    
    
    38.94$40.00  $44.99
    
    
    1,393
    
    
    
    9.2
    
    
    
    40.41
    
    
    
    2
    
    
    
    6.4
    
    
    
    42.33$45.00  $49.99
    
    
    411
    
    
    
    6.2
    
    
    
    46.80
    
    
    
    411
    
    
    
    6.2
    
    
    
    46.80$50.00  $59.99
    
    
    763
    
    
    
    8.2
    
    
    
    51.40
    
    
    
    251
    
    
    
    8.2
    
    
    
    51.40$60.00  $64.99
    
    
    3
    
    
    
    8.3
    
    
    
    60.96
    
    
    
    1
    
    
    
    8.3
    
    
    
    60.964,813
    
    
    
    6.8
    
    
    
    37.22
    
    
    
    2,556
    
    
    
    5.1
    
    
    
    32.41
    13.
    
    Related Party Transactions
 Resolute
 14.
    
    Other (Loss) Income
  Year Ended
    
    
    Year Ended
    
    
    Year EndedDecember 31,
    
    
    December 31,
    
    
    December 31,2008
    
    
    2007
    
    
    2006$
    
    
    $
    
    
    $Gain on sale of marketable securities
    
    
    4,576
    
    
    
    9,577
    
    
    
    1,422Write-down of marketable securities
    
    
    (20,158
    )
    
    
    
    
    
    
    Gain (loss) on bond repurchase
    
    
    3,010
    
    
    
    (947
    )
    
    
    (375
    )Volatile organic compound emission plant lease income
    
    
    9,469
    
    
    
    10,960
    
    
    
    11,445Write-off of deferred debt issuance costs
    
    
    
    
    
    
    
    
    
    
    (2,790
    )Loss on expiry of options to construct LNG carriers
    
    
    
    
    
    
    
    
    
    
    (6,102
    )Miscellaneous (expense) income
    
    
    (3,633
    )
    
    
    4,087
    
    
    
    (34
    )Other
(loss) income  net
    
    
    (6,736
    )
    
    
    23,677
    
    
    
    3,566
 15.
    
    Derivative Instruments and Hedging Activities
  Foreign Currency Fluctuation Risk
   F-23




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##### Table of Contents



TEEKAY CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Contd)
(all tabular amounts stated in thousands of U.S. dollars, other than share data)
   Fair Value /Contract Amount in
    
    
    Average
    
    
    Carrying Amount
    
    
    Expected MaturityForeign Currency
    
    
    Contractual
    
    
    of Asset / (Liability)
    
    
    2009
    
    
    2010(millions)
    
    
    Exchange Rate (1)
    
    
    (in millions)
    
    
    (in millions of U.S. Dollars)Norwegian Kroner:
    
    
    2,024.6
    
    
    
    5.93
    
    
    $
    (52.2
    )
    
    $
    202.1
    
    
    $
    139.5Euro:
    
    
    75.9
    
    
    
    0.67
    
    
    $
    (7.7
    )
    
    $
    77.6
    
    
    $
    35.6Canadian Dollar:
    
    
    94.0
    
    
    
    1.07
    
    
    $
    (10.9
    )
    
    $
    50.3
    
    
    $
    37.9British Pounds:
    
    
    50.5
    
    
    
    0.54
    
    
    $
    (19.5
    )
    
    $
    68.8
    
    
    $
    24.2Australian Dollar:
    
    
    3.3
    
    
    
    1.12
    
    
    $
    (0.7
    )
    
    $
    3.0
    
    
    
    
 (1)
    
    Average contractual exchange rate represents the contractual amount of foreign currency one
U.S. Dollar will buy.  Interest Rate Risk
   Fair Value /
    
    
    Weighted-Carrying Amount
    
    
    Average
    
    
    FixedPrincipal
    
    
    of Asset /
    
    
    Remaining
    
    
    InterestInterest
    
    
    Amount
    
    
    (Liability)
    
    
    Term
    
    
    RateRate Index
    
    
    $
    
    
    $
    
    
    (years)
    
    
    (%) (1)LIBOR-Based Debt:U.S. Dollar-denominated interest rate swaps (2)
    
    LIBOR
    
    
    478,825
    
    
    
    (110,492
    )
    
    
    28.1
    
    
    
    4.9U.S. Dollar-denominated interest rate swaps
    
    LIBOR
    
    
    2,830,326
    
    
    
    (396,784
    )
    
    
    7.0
    
    
    
    5.1U.S. Dollar-denominated interest rate swaps (3)
    
    LIBOR
    
    
    908,536
    
    
    
    (208,227
    )
    
    
    18.6
    
    
    
    5.3LIBOR-Based Restricted Cash Deposit:U.S. Dollar-denominated interest rate swaps (2)
    
    LIBOR
    
    
    477,135
    
    
    
    167,390
    
    
    
    28.1
    
    
    
    4.8EURIBOR-Based Debt:Euro-denominated interest rate swaps (4) (5)
    
    EURIBOR
    
    
    414,144
    
    
    
    (3,368
    )
    
    
    15.5
    
    
    
    3.8
 
 (1)
    
    Excludes the margins the Company pays on its variable-rate debt, which at of
December 31, 2008 ranged from 0.3% to 1.0%.(2)
    
    Principal amount reduces quarterly.  F-24




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##### Table of Contents



TEEKAY CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Contd)
(all tabular amounts stated in thousands of U.S. dollars, other than share data)
 (3)
    
    Inception dates of swaps are 2009 ($408.5 million), 2010 ($300.0 million) and
2011 ($200.0 million).(4)
    
    Principal amount reduces monthly to 70.1 million Euros ($97.9 million) by the
maturity dates of the swap agreements.(5)
    
    Principal amount is the U.S. Dollar equivalent of 296.4 million Euro.  Interest
    
    PrincipalRate
    
    Amount (1)
    
    
    
    
    
    
    Remaining Term
    
    
    Fixed Interest RateIndex
    
    $
    
    
    Start Date
    
    
    (years)
    
    
    (%)LIBOR
    
    
    150,000
    
    
    August 31, 2009
    
    
    
    12.0
    
    
    
    4.3LIBOR
    
    
    109,375
    
    
    November 15, 2008
    
    
    
    10.3
    
    
    
    4.0
 (1)
    
    Principal amount reduces $5.0 million semi-annually ($150.0 million) and $2.6 million
quarterly ($109.4 million). Spot Tanker Market Risk
   Commodity Price Risk
  Counterparty Credit Risk
  16.
    
    Commitments and Contingencies
 a) Vessels Under Construction
   F-25




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##### Table of Contents



TEEKAY CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Contd)
(all tabular amounts stated in thousands of U.S. dollars, other than share data)
  b) Joint Ventures
   c) Legal proceedings and claims
  d) Other
  17.
    
    Supplemental Cash Flow Information
 a)
    
    The changes in non-cash working capital items related to operating activities for the
years ended December 31, 2008, 2007 and 2006 are as follows:
 Year Ended
    
    
    Year Ended
    
    
    Year EndedDecember 31,
    
    
    December 31,
    
    
    December 31,2008
    
    
    2007
    
    
    2006$
    
    
    $
    
    
    $Accounts receivable
    
    
    (50,851
    )
    
    
    (44,837
    )
    
    
    (15,417
    )Prepaid expenses and other assets
    
    
    30,161
    
    
    
    (28,655
    )
    
    
    (21,909
    )Accounts payable
    
    
    (29,718
    )
    
    
    18,588
    
    
    
    19,262Accrued and other liabilities
    
    
    21,592
    
    
    
    11,033
    
    
    
    68,424(28,816
    )
    
    
    (43,871
    )
    
    
    50,360
 b)
    
    On October 31, 2006, the first of the Companys three RasGas II LNG Carriers delivered
and commenced operations under a capital lease. During 2006, the Company recorded the
costs of two RasGas II LNG Carriers under construction and the related lease obligation
amounting to $295.2 million. Upon delivery of the two RasGas II LNG Carriers in 2007, the
remaining vessel costs and related lease obligations amounting to $15.3 million were
recorded. These transactions are treated as non-cash transactions in the Companys
consolidated statement of cash flows for the years ended December 31, 2006 and 2007,
respectively.
  F-26




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##### Table of Contents



TEEKAY CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Contd)
(all tabular amounts stated in thousands of U.S. dollars, other than share data)
 c)
    
    Cash interest paid during the years ended December 31, 2008, 2007 and 2006 totaled
$372.2 million, $320.6 million and $182.9 million, respectively.d)
    
    On December 31, 2008 Teekay Nakilat (III) and QGTC 3 assigned their interest rate swap
obligations to the RasGas 3 Joint Venture for no consideration. This transaction was
treated as a non-cash transaction in the Companys consolidated statement of cash flows.e)
    
    On December 31, 2008 Teekay Nakilat (III) and QGTC 3 assigned their external long-term
debt of $867.5 million and related deferred debt issuance costs of $4.1 million to the
RasGas 3 Joint Venture. As a result of this transaction, the Companys long-term debt
decreased by $867.5 million and other assets decreased by $4.1 million offset by a decrease
in the Companys advances to the RasGas 3 Joint Venture. These transactions were treated as
non-cash transactions in the Companys consolidated statement of cash flows.
 18.
    
    Vessel Sales and Write-downs on Vessels and Equipment
 a) Vessel Sales
         b) Vessels and Equipment Write-downs
  VOC
  F-27




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##### Table of Contents



TEEKAY CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Contd)
(all tabular amounts stated in thousands of U.S. dollars, other than share data)
 19.
    
    Earnings (Loss) Per Share
 Year Ended
    
    
    Year Ended
    
    
    Year EndedDecember 31,
    
    
    December 31,
    
    
    December 31,2008
    
    
    2007
    
    
    2006$
    
    
    $
    
    
    $Net (loss) income available for common stockholders
    
    
    (469,455
    )
    
    
    63,543
    
    
    
    302,824Weighted average number of common shares
    
    
    72,493,429
    
    
    
    73,382,197
    
    
    
    73,180,193Dilutive effect of employee stock options and restricted stock
awards
    
    
    
    
    
    
    1,317,879
    
    
    
    1,589,914Dilutive effect of equity units
    
    
    
    
    
    
    35,280
    
    
    
    358,617Common stock and common stock equivalents
    
    
    72,493,429
    
    
    
    74,735,356
    
    
    
    75,128,724Earnings (loss) per common share:- Basic
    
    
    (6.48
    )
    
    
    0.87
    
    
    
    4.14- Diluted
    
    
    (6.48
    )
    
    
    0.85
    
    
    
    4.03
  20.
    
    Valuation and Qualifying Accounts
 Balance at beginning
    
    
    Balance at end ofof year
    
    
    year$
    
    
    $Allowance for bad debts:Year ended December 31, 2007
    
    
    1,765
    
    
    
    1,256Year ended December 31, 2008
    
    
    1,256
    
    
    
    1,567Restructuring cost accrual:Year ended December 31, 2007
    
    
    2,147
    
    
    
    Year ended December 31, 2008
    
    
    
    
    
    
    
 21.
    
    Income Taxes
  Accounting for Uncertainty in Income
Taxes, an Interpretation of FASB Statement No. 109 FIN 48 Accounting for Income Taxes
  Year Ended December 31,2008
    
    
    2007Balance of unrecognized tax benefits as at January 1,
    
    
    8,630
    
    
    
    1,000Increase for positions taken in prior years
    
    
    
    
    
    
    Increases for positions related to the current year
    
    
    3,602
    
    
    
    7,630Amounts of decreases related to settlements
    
    
    (5,000
    )
    
    
    Reductions due to lapse of statues of limitations
    
    
    
    
    
    
    Balance of unrecognized tax benefits as at December 31,
    
    
    7,232
    
    
    
    8,630
     F-28




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##### Table of Contents



TEEKAY CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Contd)
(all tabular amounts stated in thousands of U.S. dollars, other than share data)
  December 31,
    
    
    December 31,2008
    
    
    2007$
    
    
    $Deferred tax assets:Vessels and equipment
    
    
    64,080
    
    
    
    124,970Tax losses carried forward (1)
    
    
    163,369
    
    
    
    223,836Other
    
    
    28,265
    
    
    
    24,941Total deferred tax assets
    
    
    255,714
    
    
    
    373,747Deferred tax liabilities:Vessels and equipment
    
    
    50,231
    
    
    
    84,198Long-term debt
    
    
    11,505
    
    
    
    94,071Unrealized foreign exchange
    
    
    
    
    
    
    17,215Total deferred tax liabilities
    
    
    61,736
    
    
    
    195,484Net deferred tax assets
    
    
    193,978
    
    
    
    178,263Valuation allowance
    
    
    (200,160
    )
    
    
    (253,238
    )Net deferred tax assets and liabilities(2)
    
    
    (6,182
    )
    
    
    (74,975
    )
 (1)
    
    Substantially all of the Companys net operating loss carryforwards of $630.0 million
relate to its Australian ship-owning subsidiaries and its Norwegian subsidiaries. These net
operating loss carryforwards are available to offset future taxable income in the
respective jurisdictions, and can be carried forward indefinitely.(2)
    
    The change in the net deferred tax liabilities is related to the change in temporary
differences and foreign exchange gains.  Year Ended
    
    
    Year Ended
    
    
    Year EndedDecember 31,
    
    
    December 31,
    
    
    December 31,2008
    
    
    2007
    
    
    2006$
    
    
    $
    
    
    $Current
    
    
    (796
    )
    
    
    (5,264
    )
    
    
    (8,386
    )Deferred
    
    
    56,972
    
    
    
    8,456
    
    
    
    (425
    )Income tax recovery (expense)
    
    
    56,176
    
    
    
    3,192
    
    
    
    (8,811
    )
  Year Ended
    
    
    Year Ended
    
    
    Year EndedDecember 31,
    
    
    December 31,
    
    
    December 31,2008
    
    
    2007
    
    
    2006$
    
    
    $
    
    
    $Net (loss) income before taxes
    
    
    (516,070
    )
    
    
    69,254
    
    
    
    318,394Net (loss) income not subject to taxes
    
    
    (712,237
    )
    
    
    122,170
    
    
    
    382,373Net income (loss) subject to taxes
    
    
    196,167
    
    
    
    (52,916
    )
    
    
    (63,979
    )At applicable statutory tax rates
    
    
    46,893
    
    
    
    (13,394
    )
    
    
    (23,096
    )Permanent differences and adjustments related
to currency differences
    
    
    (53,137
    )
    
    
    22,708
    
    
    
    12,682Temporary differences and adjustments to valuation
allowance
    
    
    (47,763
    )
    
    
    (7,285
    )
    
    
    19,030Other
    
    
    (2,169
    )
    
    
    (5,221
    )
    
    
    195Tax (recovery) charge related to current year
    
    
    (56,176
    )
    
    
    (3,192
    )
    
    
    8,811
  F-29




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##### Table of Contents



TEEKAY CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS  (Contd)
(all tabular amounts stated in thousands of U.S. dollars, other than share data)
 22.
    
    Restructuring ChargeDuring the year ended December 31, 2008, the Company incurred restructuring charges of $9.2
million relating to the closure of one of the Companys three offices in Norway, $3.1 million
relating to global staffing changes, $1.8 million relating to the reorganization of a business
unit, and $1.4 million relating to costs incurred to change the crew of the Samar Spiritfrom
Australian crew to International crew. The Company did not incur any significant restructuring
costs in 2007. During the year ended December 31, 2006, the Company incurred $8.9 million of
restructuring costs to complete the relocation of certain operational functions that commenced
in 2005.23.
    
    Subsequent Events
 a)
    
    In January 2009, the Company announced that its Board of Directors has approved the Companys
quarterly cash dividend of $0.31625 per share. This dividend was paid on January 30, 2009 to
shareholders of record as at January 16, 2009. In April 2009, the Company announced that its
Board of Directors has approved the Companys quarterly cash dividend of $0.31625 per share.
This dividend was paid on April 24, 2009 to shareholders of record as at April 10, 2009. In
June 2009, the Company announced that its Board of Directors has approved the Companys
quarterly cash dividend of $0.31625 per share. This dividend will be paid on July 24, 2009 to
shareholders of record as at July 10, 2009.b)
    
    On March 30, 2009, Teekay LNG completed a follow-on public offering of 4.0 million common
units at a price of $17.60 per unit, for gross proceeds of approximately $70.4 million. As a
result of the above transactions, Teekay LNG has raised gross equity proceeds of $71.8 million
(including the General Partners proportionate capital contribution), and Teekay Corporations
ownership of Teekay LNG has been reduced from 57.7% to 53.0% (including its 2% General Partner
interest). Teekay LNG used the total net offering proceeds of approximately $68.5 million to
prepay amounts outstanding on two of its revolving credit facilities.On June 24, 2009, Teekay Tankers completed a follow-on public offering of 7.0 million common
 shares at a price of $9.80 per share, for gross proceeds of $68.6 million. Teekay Tankers has
granted the underwriters a 30-day option to purchase up to an additional 1.05 million shares to
cover any over-allotments. As a result of the above transaction, Teekay Corporations ownership
of Teekay Tankers has been reduced from 54.0% to 42.2%. Teekay Tankers used the total net
offering proceeds of approximately $65.9 million to acquire a 2003-built Suezmax tanker from
Teekay Corporation for $57.0 million and to repay a portion of its outstanding debt under its
revolving credit facility.c)
    
    One of the Kenai vessels, the Arctic Spirit, has come off charter from the Marathon Oil
Corporation/ConocoPhillips joint venture on March 31, 2009, and the Company has entered into a
joint development and option agreement with Merrill Lynch Commodities, Inc. (MLCI), giving
MLCI the option to purchase the vessel for conversion to an LNG FPSO unit. The agreement
provides for a purchase price of $105 million if the Company chooses to participate in the
project, or $110 million if the Company chooses not to participate. Under the option
agreement, the Arctic Spiritis reserved for MLCI until December 31, 2009 and MLCI may extend
the option quarterly through 2010. If MLCI exercises the option and purchases the vessel from
the Company, it is expected that MLCI will convert the vessel to an FPSO unit (although it is
not required to do so) and charter it under a long-term charter contract to a third party. The
Company has the right to participate up to 50% in the conversion and charter project on terms
that will be determined as the project progresses. The agreement with MLCI also provides that
if the conversion of the Arctic Spiritto an FPSO unit proceeds, the Company will negotiate,
along with an equity investment, a similar option for a designee of MLCI to purchase the
second Kenai LNG carrier for $125 million when it comes off charter.d)
    
    During May 2009, the
Company sold a 2007-built product tanker and
a 2005-built product tanker. These vessels did not meet the held for sale criteria at December
31, 2008 and accordingly, are not presented on the December 31, 2008 balance sheet as vessels
held for sale. Both vessels are part of the Companys spot tanker segment. The Company expects
to realize a gain of approximately $28.5 million as a result of these transactions.During January and February 2009, the Company sold a 1993-built Aframax tanker through a sale
leaseback agreement and a 2009-built product tanker, respectively, which are presented on the
December 31, 2008 balance sheet as vessels held for sale. Both vessels were part of the
Companys spot tanker segment. The Company expects to realize a gain of approximately $16.8
million as a result of these transactions, of which $16.6 million will be deferred and amortized
over the 4 year term of the bareboat charter.
  F-30




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##### Table of Contents



EXHIBIT INDEX
 ExhibitNo.
    
    Description8.1
    
    
    List of Significant Subsidiaries12.1
    
    
    Rule 13a-14(a)/15d-14(a) Certification of Teekays Chief Executive Officer.12.2
    
    
    Rule 13a-14(a)/15d-14(a) Certification of Teekays Chief Financial Officer.13.1
    
    
    Teekay Corporation Certification of Bjorn Moller, Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.13.2
    
    
    Teekay Corporation Certification of Vincent Lok, Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.23.1
    
    

Consent
of Ernst & Young LLP, as independent registered public accounting firm.
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