##### 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, 2009
 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
    
    Other oissued by the International AccountingStandards Board o
  o o
  o þ




---



##### 



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
    
    
    16Item 4A. Unresolved Staff Comments
    
    
    29Item 5. Operating and Financial Review and Prospects
    
    
    29Item 6. Directors, Senior Management and Employees
    
    
    57Item 7. Major Shareholders and Certain Relationships and Related Party Transactions
    
    
    62Item 8. Financial Information
    
    
    66Item 9. The Offer and Listing
    
    
    66Item 10. Additional Information
    
    
    66Item 11. Quantitative and Qualitative Disclosures About Market Risk
    
    
    71Item 12. Description of Securities Other than Equity Securities
    
    
    73PART II.Item 13. Defaults, Dividend Arrearages and Delinquencies
    
    
    73Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds
    
    
    73Item 15. Controls and Procedures
    
    
    73Item 16A. Audit Committee Financial Expert
    
    
    74Item 16B. Code of Ethics
    
    
    74Item 16C. Principal Accountant Fees and Services
    
    
    74Item 16D. Exemptions from the Listing Standards for Audit Committees
    
    
    75Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers
    
    
    75Item 16F. Change in Registrants Certifying Accountant
    
    
    75Item 16G. Corporate Governance
    
    
    75PART III.Item 17. Financial Statements
    
    
    75Item 18. Financial Statements
    
    
    75Item 19. Exhibits
    
    
    75Signature
    
    
    78Exhibit 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;
 
    
    our future growth prospects;
 
    
    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;
 
    
    estimated costs and timing of implementation of the EU Directive to burn only low
sulphur fuel, and our ability to timely comply with this Directive;
 
    
    delivery dates of and financing for newbuildings, and the commencement of service of
newbuildings under long-term time-charter contracts;
 
    
    potential newbuildings order cancellations;
 
    
    construction and delivery delays in the tanker industry generally;
 
    
    the future valuation of goodwill;
 
    
    the adequacy of restricted cash deposits to fund capital lease obligations;
 
    
    our compliance with covenants under our credit facilities;
 
    
    our ability to fulfill our debt obligations;
 
    
    compliance with financing agreements and the expected effect of restrictive covenants in
such agreements;
 
    
    declining market values of our vessels and the effect on our liquidity;
 
    
    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;
 
    
    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;
  3




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##### Table of Contents




    
    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 effectiveness of our risk management policies and procedures;
 
    
    the growth of 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 of any
reoccurrence of such disruptions on our customers ability to charter our vessels and pay
for our services;
 
    
    our exemption from tax on our U.S. source international transportation income;
 
    
    the potential benefits to us of renegotiated contract for the Foinavenfloating
production, storage and offloading (or FPSO) unit;
 
    
    our ability to competitively pursue new FPSO projects;
 
    
    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.
 SEC
  
 Item 1. Identity of Directors, Senior Management and Advisors
  
 Item 2. Offer Statistics and Expected Timetable
  
 Item 3. Key Information
 Selected Financial Data
   4




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##### Table of Contents



GAAP
 2005
    
    
    2006
    
    
    2007
    
    
    2008
    
    
    2009(in thousands, except share and per common share data and ratios)Income Statement Data:Revenues
    
    $
    1,958,479
    
    
    $
    2,015,871
    
    
    $
    2,387,625
    
    
    $
    3,229,443
    
    
    $
    2,172,049Total operating expenses (1)
    
    
    (1,319,937
    )
    
    
    (1,601,528
    )
    
    
    (2,028,595
    )
    
    
    (2,969,324
    )
    
    
    (2,002,261
    )Income from vessel operations
    
    
    638,542
    
    
    
    414,343
    
    
    
    359,030
    
    
    
    260,119
    
    
    
    169,788Interest expense
    
    
    (111,189
    )
    
    
    (173,672
    )
    
    
    (294,848
    )
    
    
    (290,933
    )
    
    
    (141,448
    )Interest income
    
    
    33,943
    
    
    
    58,835
    
    
    
    101,199
    
    
    
    97,111
    
    
    
    19,999Realized and unrealized (loss) gain on non-designated
derivative instruments
    
    
    (38,470
    )
    
    
    55,646
    
    
    
    (45,322
    )
    
    
    (567,074
    )
    
    
    140,046Foreign exchange gain (loss)
    
    
    61,635
    
    
    
    (46,423
    )
    
    
    (61,571
    )
    
    
    24,727
    
    
    
    (20,922
    )Equity income (loss) from joint ventures
    
    
    11,897
    
    
    
    6,099
    
    
    
    (12,404
    )
    
    
    (36,085
    )
    
    
    52,242Other (loss) income
    
    
    (19,054
    )
    
    
    3,566
    
    
    
    23,170
    
    
    
    (3,935
    )
    
    
    12,961Income tax recovery (expense)
    
    
    2,787
    
    
    
    (8,811
    )
    
    
    3,192
    
    
    
    56,176
    
    
    
    (22,889
    )Net income (loss)
    
    
    580,091
    
    
    
    309,583
    
    
    
    72,446
    
    
    
    (459,894
    )
    
    
    209,777Less: Net income attributable to non-controlling interests
    
    
    (13,475
    )
    
    
    (6,759
    )
    
    
    (8,903
    )
    
    
    (9,561
    )
    
    
    (81,365
    )Net income (loss) attributable to stockholders of Teekay
Corp. (2)
    
    
    566,616
    
    
    
    302,824
    
    
    
    63,543
    
    
    
    (469,455
    )
    
    
    128,412Per Common Share Data:Net earnings (loss)  basic
    
    $
    7.25
    
    
    $
    4.14
    
    
    $
    0.87
    
    
    $
    (6.48
    )
    
    $
    1.77Net income (loss)  diluted
    
    
    6.78
    
    
    
    4.03
    
    
    
    0.85
    
    
    
    (6.48
    )
    
    
    1.76Cash dividends declared
    
    
    0.6200
    
    
    
    0.8600
    
    
    
    0.9875
    
    
    
    1.1413
    
    
    
    1.2650Balance Sheet Data (at end of year):Cash and cash equivalents
    
    $
    236,984
    
    
    $
    343,914
    
    
    $
    442,673
    
    
    $
    814,165
    
    
    $
    422,510Restricted cash
    
    
    311,084
    
    
    
    679,992
    
    
    
    686,196
    
    
    
    650,556
    
    
    
    615,311Vessels and equipment
    
    
    3,721,674
    
    
    
    5,603,316
    
    
    
    6,846,875
    
    
    
    7,267,094
    
    
    
    6,835,597Net investments in direct financing leases
    
    
    121,236
    
    
    
    108,396
    
    
    
    101,176
    
    
    
    79,508
    
    
    
    512,412Total assets
    
    
    5,287,030
    
    
    
    8,110,329
    
    
    
    10,418,541
    
    
    
    10,215,001
    
    
    
    9,510,916Total debt (including capital lease obligations)
    
    
    2,432,978
    
    
    
    4,106,062
    
    
    
    6,120,864
    
    
    
    5,770,133
    
    
    
    5,203,441Capital stock and additional paid-in capital
    
    
    471,784
    
    
    
    596,712
    
    
    
    628,786
    
    
    
    642,911
    
    
    
    656,193Non-controlling interest
    
    
    287,432
    
    
    
    461,887
    
    
    
    544,339
    
    
    
    583,938
    
    
    
    855,580Total equity
    
    
    2,526,250
    
    
    
    2,981,034
    
    
    
    3,200,293
    
    
    
    2,652,405
    
    
    
    3,095,670Number of outstanding shares of common stock
    
    
    71,375,593
    
    
    
    72,831,923
    
    
    
    72,772,529
    
    
    
    72,512,291
    
    
    
    72,694,345Other Financial Data:Net revenues(3)
    
    $
    1,537,721
    
    
    $
    1,493,816
    
    
    $
    1,856,552
    
    
    $
    2,471,055
    
    
    $
    1,877,958EBITDA (4)
    
    
    860,079
    
    
    
    657,196
    
    
    
    592,016
    
    
    
    96,554
    
    
    
    791,291Adjusted EBITDA (4)
    
    
    707,882
    
    
    
    630,408
    
    
    
    660,485
    
    
    
    892,616
    
    
    
    563,217Total debt to total capitalization(5) (6)
    
    
    49.1
    %
    
    
    57.9
    %
    
    
    65.7
    %
    
    
    68.5
    %
    
    
    62.7
    %Net debt to total net capitalization (6) (7)
    
    
    42.7
    %
    
    
    50.8
    %
    
    
    60.9
    %
    
    
    61.9
    %
    
    
    57.4
    %Capital expenditures:Vessel and equipment purchases (8)
    
    $
    555,142
    
    
    $
    442,470
    
    
    $
    910,304
    
    
    $
    716,765
    
    
    $
    495,214(1)   Total operating expenses include the following:2005
    
    
    2006
    
    
    2007
    
    
    2008
    
    
    2009(in thousands)Gain (loss) on sale of vessels and equipment, net
of write-downs
    
    $
    139,184
    
    
    $
    1,341
    
    
    $
    16,531
    
    
    $
    50,267
    
    
    $
    (12,629
    )Unrealized (losses) gains on derivative instruments
    
    
    
    
    
    
    
    
    
    
    (143
    )
    
    
    (8,325
    )
    
    
    14,915Restructuring charges
    
    
    (2,882
    )
    
    
    (8,929
    )
    
    
    
    
    
    
    (15,629
    )
    
    
    (14,444
    )Goodwill impairment charge
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (334,165
    )
    
    
    $
    136,302
    
    
    $
    (7,588
    )
    
    $
    16,388
    
    
    $
    (307,852
    )
    
    $
    (12,158
    )
  5




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##### Table of Contents



(2)
    
    In January 2009, we adopted an amendment to Financial Accounting Standards Board (or FASB)
Accounting Standards Codification (or ASC) 810, Consolidations, which requires us to change
the portion of net income (loss) that is attributable to the non-controlling interest. This
change was not applied retroactively, please read Item 18  Financial Statements: Note 1 
Adoption of New Accounting Pronouncements to see the pro forma net income attributable to the
stockholders of Teekay Corporation had we not adopted FASB ASC 810.(3)
    
    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. 2005
    
    
    2006
    
    
    2007
    
    
    2008
    
    
    2009(in thousands)Revenues
    
    $
    1,958,479
    
    
    $
    2,015,871
    
    
    $
    2,387,625
    
    
    $
    3,229,443
    
    
    $
    2,172,049Voyage expenses
    
    
    (420,758
    )
    
    
    (522,055
    )
    
    
    (531,073
    )
    
    
    (758,388
    )
    
    
    (294,091
    )Net revenues
    
    $
    1,537,721
    
    
    $
    1,493,816
    
    
    $
    1,856,552
    
    
    $
    2,471,055
    
    
    $
    1,877,958
 (4)
    
    EBITDA represents earnings before interest, taxes, depreciation and amortization. Adjusted
EBITDA represents EBITDA before restructuring charges, unrealized foreign exchange loss
(gain), loss (gain) on sale of vessels and equipment  net of write-downs, goodwill impairment
charge, amortization of in-process revenue contracts, unrealized (gains) losses on derivative
instruments, realized losses (gains) on interest rate swaps and share of realized and
unrealized (gains) losses on interest rate swaps in non-consolidated joint ventures. EBITDA
and Adjusted EBITDA are used as supplemental financial measures by management and by external
users of our financial statements, such as investors, as discussed below. 
    
    Financial and operating performance.EBITDA and Adjusted EBITDA assist our management
and security holders by increasing the comparability of our fundamental performance from
period to period and against the fundamental performance of other companies in our industry
that provide EBITDA or Adjusted EBITDA-based information. This increased comparability is
achieved by excluding the potentially disparate effects between periods or companies of
interest expense, taxes, depreciation or amortization (or other items in determining
Adjusted EBITDA), which items are affected by various and possibly changing financing
methods, capital structure and historical cost basis and which items may significantly
affect net income between periods. We believe that including EBITDA and Adjusted EBITDA as
a financial and operating measure benefits security holders in (a) selecting between
investing in us and other investment alternatives and (b) monitoring our ongoing financial
and operational strength and health in assessing whether to continue to hold our equity, or
debt securities, as applicable.
 
    
    Liquidity.EBITDA and Adjusted EBITDA allow us to assess the ability of assets to
generate cash sufficient to service debt, pay dividends and undertake capital expenditures.
By eliminating the cash flow effect resulting from our existing capitalization and other
items such as drydocking expenditures, working capital changes and foreign currency
exchange gains and losses (which may very significantly from period to period), EBITDA and
Adjusted EBITDA provide a consistent measure of our ability to generate cash over the long
term. Management uses this information as a significant factor in determining (a) our
proper capitalization (including assessing how much debt to incur and whether changes to
the capitalization should be made) and (b) whether to undertake material capital
expenditures and how to finance them, all in light of our dividend policy. Use of EBITDA
and Adjusted EBITDA as liquidity measures also permits security holders to assess the
fundamental ability of our business to generate cash sufficient to meet cash needs,
including dividends on shares of our common stock and repayments under debt instruments.
   6




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##### Table of Contents



2005
    
    
    2006
    
    
    2007
    
    
    2008
    
    
    2009(in thousands)Income statement data:Reconciliation of EBITDA and Adjusted EBITDA to Net incomeNet income (loss)
    
    $
    580,091
    
    
    $
    309,583
    
    
    $
    72,446
    
    
    $
    (459,894
    )
    
    $
    209,777Income tax (recovery) expense
    
    
    (2,787
    )
    
    
    8,811
    
    
    
    (3,192
    )
    
    
    (56,176
    )
    
    
    22,889Depreciation and amortization
    
    
    205,529
    
    
    
    223,965
    
    
    
    329,113
    
    
    
    418,802
    
    
    
    437,176Interest expense, net of interest income
    
    
    77,246
    
    
    
    114,837
    
    
    
    193,649
    
    
    
    193,822
    
    
    
    121,449EBITDA
    
    
    860,079
    
    
    
    657,196
    
    
    
    592,016
    
    
    
    96,554
    
    
    
    791,291Restructuring charge
    
    
    2,882
    
    
    
    8,929
    
    
    
    
    
    
    
    15,629
    
    
    
    14,444Foreign exchange (gain) loss
    
    
    (61,635
    )
    
    
    46,423
    
    
    
    61,571
    
    
    
    (24,727
    )
    
    
    20,922(Gain) loss on sale of vessels and equipment  net of write-downs
    
    
    (139,184
    )
    
    
    (1,341
    )
    
    
    (16,531
    )
    
    
    (50,267
    )
    
    
    12,629Goodwill impairment charge
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    334,165
    
    
    
    Amortization of in-process revenue contracts
    
    
    
    
    
    
    (22,404
    )
    
    
    (70,979
    )
    
    
    (74,425
    )
    
    
    (75,977
    )Unrealized losses (gains) on derivative instruments
    
    
    33,203
    
    
    
    (57,246
    )
    
    
    99,055
    
    
    
    530,283
    
    
    
    (293,174
    )Realized losses (gains) on interest rate swaps and foreign exchange
contracts
    
    
    12,537
    
    
    
    (1,149
    )
    
    
    (4,647
    )
    
    
    32,445
    
    
    
    127,936Unrealized losses (gains) on interest rate swaps in non-consolidated
joint ventures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    32,959
    
    
    
    (34,854
    )Adjusted EBITDA
    
    
    707,882
    
    
    
    630,408
    
    
    
    660,485
    
    
    
    892,616
    
    
    
    563,217Reconciliation of Adjusted EBITDA to net operating cash flowNet operating cash flow
    
    
    609,042
    
    
    
    545,716
    
    
    
    304,429
    
    
    
    523,641
    
    
    
    368,251Expenditures for drydocking
    
    
    20,668
    
    
    
    31,120
    
    
    
    85,403
    
    
    
    101,511
    
    
    
    78,005Interest expense, net of interest income
    
    
    77,246
    
    
    
    114,837
    
    
    
    193,649
    
    
    
    193,822
    
    
    
    121,449Change in
operating assets and liabilities
    
    
    8,644
    
    
    
    (50,360
    )
    
    
    43,871
    
    
    
    28,816
    
    
    
    (148,655
    )Gain on sale of marketable securities
    
    
    
    
    
    
    1,422
    
    
    
    9,577
    
    
    
    4,576
    
    
    
    Write-down of marketable securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (20,157
    )
    
    
    Loss on repurchase of bonds
    
    
    (13,255
    )
    
    
    (375
    )
    
    
    (947
    )
    
    
    (1,310
    )
    
    
    (566
    )Equity income (net of dividends received)
    
    
    2,670
    
    
    
    (486
    )
    
    
    (11,419
    )
    
    
    (30,352
    )
    
    
    49,299Other  net
    
    
    (12,552
    )
    
    
    (9,949
    )
    
    
    50,245
    
    
    
    25,153
    
    
    
    (837
    )Employee stock option compensation
    
    
    
    
    
    
    (9,297
    )
    
    
    (9,676
    )
    
    
    (14,117
    )
    
    
    (11,255
    )Restructuring charge
    
    
    2,882
    
    
    
    8,929
    
    
    
    
    
    
    
    15,629
    
    
    
    14,444Realized losses (gains) on interest rate swaps and foreign exchange
contracts
    
    
    12,537
    
    
    
    (1,149
    )
    
    
    (4,647
    )
    
    
    32,445
    
    
    
    127,936Unrealized losses (gains) on interest rate swaps in non-consolidated
joint ventures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    32,959
    
    
    
    (34,854
    )Adjusted EBITDA
    
    
    707,882
    
    
    
    630,408
    
    
    
    660,485
    
    
    
    892,616
    
    
    
    563,217
 (5)
    
    Total capitalization represents total debt and total 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% as of December 31, 2005
and our net debt to total capitalization would have been 39.5% as of December 31, 2005. 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 and restricted cash. Total net
capitalization represents net debt and total equity.(8)
    
    Excludes vessels purchased in connection with our acquisitions of 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.
   7




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##### Table of Contents




    
    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.
  Changes in the oil and natural gas markets could result in decreased demand for our vessels and
services.
  Changes in the spot tanker market 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.
  
    
    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.
   8




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##### Table of Contents



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
 Charter rates for conventional oil and product tankers may fluctuate substantially over time and
may be lower when we are attempting to recharter conventional oil or product tankers, which could
adversely affect our operating results. Any changes in charter rates for LNG or LPG carriers,
shuttle tankers or FSO or FPSO units could also adversely affect redeployment opportunities for
those vessels.
  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;
  9




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##### Table of Contents




    
    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.
  The intense competition in our markets may lead to reduced profitability or expansion
opportunities.
   The loss of any key customer or its inability to pay for our services could result in a significant
loss of revenue in a given period.
  A recurrence of recent adverse economic conditions, including disruptions in the global credit
markets, could adversely affect our results of operations.
  Our operations are subject to substantial environmental and other regulations, which may
significantly increase our expenses.
   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;
  10




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##### Table of Contents




    
    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.
  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;
  11




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##### Table of Contents




    
    higher insurance rates; and
 
    
    damage to our reputation and customer relationships generally.
  Our operating results are subject to seasonal fluctuations.
   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.
   12




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##### Table of Contents



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.
  We may be unable to attract and retain qualified, skilled employees or crew necessary to operate
our business.
  Terrorist attacks, piracy, increased hostilities or war could lead to further economic instability,
increased costs and disruption of business.
   Acts of piracy on ocean-going vessels have recently increased in frequency, which could adversely
affect our business.
  Our substantial operations outside the United States expose us to political, governmental and
economic instability, which could harm our operations.
  Maritime claimants could arrest our vessels, which could interrupt our cash flow.
   13




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##### Table of Contents



Declining market values of our vessels could adversely affect our liquidity and result in breaches
of our financing agreements.
  Climate change and greenhouse gas restrictions may adversely impact our operations and markets.
   We have substantial debt levels and may incur additional debt.
  
    
    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 obtaining additional financing, pursuing
other business opportunities and responding to changing business and economic conditions.
 Our ability to service our debt will depend on certain financial, business and other factors, many
of which are beyond our control.
   
    
    restructuring or refinancing our debt;
 
    
    seeking additional debt or equity capital;
 
    
    seeking bankruptcy protection;
 
    
    reducing distributions;
 
    
    reducing or delaying our business activities, acquisitions, investments or capital
expenditures; or
 
    
    selling assets.
   14




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##### Table of Contents



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.
  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 Tidewater Tidewater.
  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.
  Changes in the ownership of our stock may cause us and certain of our subsidiaries to be unable to
claim an exemption from United States tax on our United States source income.
 Code
  15




---



##### Table of Contents



We may be subject to taxes, which could affect our operating
results.
  
 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
 Petrojarl Teekay Petrojarl
  16




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##### Table of Contents



Equity Offerings by Subsidiaries
 Equity Offerings by Teekay Tankers Ltd.
     Equity Offerings by Teekay Offshore Partners L.P.
    OPCO
 Petrojarl Varg Falcon
Spirit
 Equity Offerings by Teekay LNG Partners L.P.
    17




---



##### Table of Contents



B. Operations
 )
 
    
    Teekay Navion Shuttle Tankers and Offshore; and Teekay Petrojarl provide 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.
 Shuttle Tankers
     18




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##### Table of Contents



FSO Units
    FPSO Units
    Liquefied Gas Segment
   th regasified
  19




---



##### Table of Contents



Conventional Tanker Segment
 a) Spot Tanker Sub-Segment
    VLCCs
    20




---



##### Table of Contents



b) Fixed-Rate Tanker Sub-Segment
  Our Fleet
  Number of VesselsOwnedVessels
    
    
    Chartered-in Vessels
    
    
    Newbuildings
    
    
    TotalShuttle Tanker and FSO SegmentShuttle Tankers
    
    
    25
    (1)
    
    
    8
    (2)
    
    
    4
    
    
    
    37FSO Units
    
    
    5
    (3)
    
    
    
    
    
    
    
    
    
    
    5Total Shuttle Segment
    
    
    30
    
    
    
    8
    
    
    
    4
    
    
    
    42FPSO SegmentShuttle Tankers
    
    
    2
    (1)
    
    
    
    
    
    
    
    
    
    
    2FSO Unit
    
    
    1
    (3)
    
    
    
    
    
    
    
    
    
    
    1FPSO Units
    
    
    5
    (4)
    
    
    
    
    
    
    
    
    
    
    5Total FPSO Segment
    
    
    8
    
    
    
    
    
    
    
    
    
    
    
    8Liquefied Gas SegmentLNG Carriers
    
    
    15
    (6)
    
    
    
    
    
    
    4
    (7)
    
    
    19LPG Carriers
    
    
    3
    
    
    
    
    
    
    
    3
    
    
    
    6Total Liquefied Gas Segment
    
    
    18
    
    
    
    
    
    
    
    7
    
    
    
    25Spot Tanker SegmentSuezmax Tankers
    
    
    9

(8)
    
    
    4
    
    
    
    
    
    
    
    13Aframax Tankers
    
    
    13

(9)
    
    
    12
    
    
    
    
    
    
    
    25Large Product Tankers
    
    
    4

(10)
    
    
    2
    
    
    
    
    
    
    
    6Total Spot Tanker Segment
    
    
    26
    
    
    
    18
    
    
    
    
    
    
    
    44Fixed-Rate Tanker SegmentConventional Tankers
    
    
    32
    (5)
    
    
    7
    
    
    
    
    
    
    
    39Total Fixed-Rate Tanker Segment
    
    
    32
    
    
    
    7
    
    
    
    
    
    
    
    39Total
    
    
    114
    
    
    
    33
    
    
    
    11
    
    
    
    158
  (1)
    
    Includes 25 vessels owned by OPCO (including five through 50% controlled subsidiaries) and
two vessels owned by Teekay Offshore (including one through a 50% controlled subsidiary).(2)
    
    All eight vessels chartered-in by OPCO.(3)
    
    Includes four FSO units owned by OPCO (including one through an 89% subsidiary) and one
FSO unit owned by Teekay Offshore.(4)
    
    Includes four 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. One FPSO is owned by Teekay Offshore. 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 five vessels owned
by Teekay Tankers.(6)
    
    Includes nine LNG carriers owned by Teekay LNG, a 70% interest in two LNG carriers, and 40%
interest in four LNG carriers.(7)
    
    Includes Teekays 33% interest in four LNG newbuildings. Teekay is required to offer to sell
these vessels to Teekay LNG.(8)
    
    Includes one Suezmax tanker that Teekay is required to offer Teekay Tankers.(9)
    
    Includes six vessels owned by Teekay Offshore, all of which are chartered to Teekay and five
vessels owned by Teekay Tankers.(10)
    
    Includes one product tanker owned by Teekay Tankers.  21




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##### Table of Contents



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.
  TBW
 Risk of Loss and Insurance
   22




---



##### Table of Contents



Operations Outside of the United States
   Customers
  Classification, Audits and Inspections
 Intermediate Survey Special Survey
    
    
    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.
    23




---



##### Table of Contents



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 51.6%.(3)
    
    Including our 100% interest in Teekay Petrojarl.   24




---



##### Table of Contents



C. Regulations
 General
  International Maritime Organization (or IMO)
  CLC
 SOLAS ISPS IGC Code DP
   25




---



##### Table of Contents



Annex
VI
  European Union (or EU)
   Directive LSMGO HFO
 North Sea
  VOC equipment)
 United States
 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;
  26




---



##### Table of Contents




    
    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
   
    
    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.
    EPA
   27




---



##### Table of Contents



Greenhouse Gas Regulation
 Kyoto Protocol
 Vessel Security
 MTSA
 D. Taxation of the Company
 The following discussion is a summary of the principal 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
 The Section 883 Exemption. Section 883 Regulations
 Equivalent Exemption Ownership Test
   28




---



##### Table of Contents



The Net Basis Tax and Branch Profits Tax. Effectively Connected
Income
    The 4.0% Gross Basis Tax.
 Marshall Islands Taxation
  Other Taxation
  
 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.
 Managements Discussion and Analysis of Financial Condition and Results of Operations
 Overview
 Teekay the Company LNG LPG Teekay LNG Teekay Offshore Teekay Petrojarl Teekay Tankers
  29




---



##### Table of Contents



SIGNIFICANT DEVELOPMENTS IN 2009 AND EARLY 2010
 Public Offering of $450 Million Senior Unsecured Notes
  Sale of Vessels to Teekay LNG
 Tangguh LNG Carriers
 Bermuda Spirit Hamilton Spirit Alexander Spirit Bermuda Spirit Hamilton Spirit Alexander Spirit
 Public Offerings by Teekay LNG Partners L.P.
   Public Offerings by and Sale of Vessels to Teekay Tankers Ltd.
  Yamuna Spirit Kaveri Spirit Helga Spirit
 Public Offerings by Teekay Offshore Partners L.P.
  Petrojarl Varg Falcon Spirit
  30




---



##### Table of Contents



Sale of FPSO Unit to Teekay Offshore
 Petrojarl Varg FPSO Petrojarl Varg Petrojarl Varg
 Petrojarl Varg Petrojarl Varg
 Long-term Charter to Caltex Australia Petroleum Pty Ltd.
 Alexander Spirit Alexander Spirit
 Foinaven FPSO Contract Amendment
 Foinaven Foinaven
 Foinaven
 Foinaven
 OTHER SIGNIFICANT PROJECTS
 Angola LNG Project
  IMPORTANT FINANCIAL AND OPERATIONAL TERMS AND CONCEPTS
  Revenues.
 Forward Freight Agreements. FFAs
 Voyage Expenses.
  31




---



##### Table of Contents



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 useful life of
the drydock; 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.
 ITEMS YOU SHOULD CONSIDER WHEN EVALUATING OUR RESULTS
  
    
    Our revenues are affected by cyclicality in the tanker markets.The cyclical nature of
the tanker industry causes significant increases or decreases in the revenue we earn from
our vessels, particularly those we trade in the spot market. This affects the amount of
dividends, if any, we pay on our common stock from period to period.
 
    
    Tanker rates also fluctuate based on seasonal variations in demand.Tanker markets are
typically stronger in the winter months as a result of increased oil consumption in the
northern hemisphere but weaker in the summer months as a result of lower oil consumption in
the northern hemisphere and increased refinery maintenance. In addition, unpredictable
weather patterns during the winter months tend to disrupt vessel scheduling, which
historically has increased oil price volatility and oil trading activities in the winter
months. As a result, revenues generated by our vessels have historically been weaker during
the quarters ended June 30 and September 30, and stronger in the quarters ended December 31
and March 31.
 
    
    The size of our fleet continues to change.Our results of operations reflect changes in
the size and composition of our fleet due to certain vessel deliveries and vessel
dispositions. Please read  Results of Operations below for further details about vessel
dispositions and deliveries. Due to the nature of our business, we expect our fleet to
continue to fluctuate in size and composition.
  32




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##### Table of Contents




    
    Our vessel operating expenses are facing industry-wide cost pressures.The oil shipping
industry is experiencing a global manpower shortage due to growth in the world fleet. This
shortage resulted in significant crew wage increases during 2007, 2008, and to a lesser
degree in 2009. We expect the trend of significant crew compensation increases to abate in
the short term. However, this could change if market conditions adjust. In addition,
factors such as pressure on raw material prices and changes in regulatory requirements
could also increase operating expenditures. We have taken various measures throughout 2009
in an effort to reduce costs, improve operational efficiencies, and mitigate the impact of
inflation and price increases and will continue this effort during 2010.
 
    
    Our net income is affected by fluctuations in the fair value of our derivatives. Our
interest rate swaps and some of our foreign currency forward contracts are not designated
as hedges for accounting purposes. Although we believe these derivative instruments are
economic hedges, the changes in their fair value are included in our statements of income
(loss) as unrealized gains or losses on non-designated derivatives. The changes in fair
value do not affect our cash flows or liquidity.
 
    
    The amount and timing of drydockings of our vessels can affect our revenues between
periods.Our vessels are offhire at various points of time due to scheduled and
unscheduled maintenance. During the years ended December 31, 2009 and 2008, we incurred 650
and 840 off-hire days relating to drydocking, respectively. The financial impact from these
periods of offhire, if material, is explained in further detail below in Results of
Operations. Twenty-six vessels are scheduled for drydocking in 2010.
 RESULTS OF OPERATIONS
   Year Ended December 31, 2009 versus Year Ended December 31, 2008
 Shuttle Tanker and FSO Segment
 Teekay Navion Shuttle Tankers and Offshore
  Twelve Months EndedDecember 31,(in thousands of U.S. dollars, except calendar-ship-days and percentages)
    
    2009
    
    
    2008
    
    
    % ChangeRevenues
    
    
    583,320
    
    
    
    705,461
    
    
    
    (17.3
    )Voyage expenses
    
    
    86,499
    
    
    
    171,599
    
    
    
    (49.6
    )Net revenues
    
    
    496,821
    
    
    
    533,862
    
    
    
    (6.9
    )Vessel operating expenses
    
    
    170,312
    
    
    
    173,067
    
    
    
    (1.6
    )Time-charter hire expense
    
    
    113,786
    
    
    
    134,100
    
    
    
    (15.1
    )Depreciation and amortization
    
    
    122,630
    
    
    
    117,198
    
    
    
    4.6General and administrative (1)
    
    
    54,074
    
    
    
    56,831
    
    
    
    (4.9
    )Loss (gain) on sale of vessels and equipment, net of write-downs
    
    
    1,902
    
    
    
    (3,771
    )
    
    
    (150.4
    )Restructuring charge
    
    
    7,032
    
    
    
    10,645
    
    
    
    (33.9
    )Income from vessel operations
    
    
    27,085
    
    
    
    45,792
    
    
    
    (40.9
    )Calendar-Ship-DaysOwned Vessels
    
    
    10,950
    
    
    
    10,463
    
    
    
    4.7Chartered-in Vessels
    
    
    2,727
    
    
    
    3,765
    
    
    
    (27.6
    )Total
    
    
    13,677
    
    
    
    14,228
    
    
    
    (3.9
    )
 (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). For further discussion, please read Other Operating Results  General and
Administrative.  33




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##### Table of Contents



Net Revenues.
 
    
    a decrease of $54.9 million due to fewer revenue days from shuttle tankers servicing
contracts of affreightment and from trading in the conventional spot market, and lower spot
rates achieved in the conventional spot market, compared the same period last year;
 
    
    a decrease from our FSO units of $2.9 million primarily due to unfavorable exchange
rates compared to the prior period;
    
    a decrease of $2.5 million from the Navion Sagabeing offhire for 43 days in 2009 due to
a scheduled drydock;
 
    
    a decrease of $1.8 million due to a decrease in the recovery of certain Norwegian
environmental taxes from our customers; and
 
    
    a decrease of $1.5 million due to declining oil production at mature oil fields in the
North Sea that are serviced by certain shuttle tankers on contracts of affreightment;
  
    
    an increase of $14.1 million for 2009 due to rate increases on certain contracts of
affreightment, partially offset by rate decreases in certain time-charter and bareboat
contracts;
 
    
    an increase of $5.3 million due to reduced non-reimbursable bunker costs resulting
primarily from decreased voyage days, as compared to the same period last year;
 
    
    an increase of $3.5 million due to a decrease in the number of offhire days resulting
from scheduled drydockings primarily in the time-chartered fleet, and unexpected repairs
compared to the same periods last year; and
 
    
    an increase of $3.5 million due to reduced customer performance claims paid in 2009
under the terms of charter party agreements compared to 2008.
 Vessel Operating Expenses.
 
    
    a decrease of $2.9 million in repairs and maintenance costs performed for certain
vessels in 2009 as compared to last year;
 
    
    a decrease of $1.1 million primarily due to a reduction in projects during 2009 as
compared to last year;
 
    
    a decrease of $0.8 million in crew and manning costs as compared to last year, resulting
primarily from cost savings initiatives that began in 2009; and
 
    
    a decrease of $0.6 million in FSO unit operating expenses of primarily due to the
offhire of one vessel in the third quarter of 2009;
  
    
    an increase of $3.6 million due to an increase in the number of vessels drydocked, and
the consumption and use of consumables, lube oil, and freight during 2009.
 Time-Charter Hire Expense.
 Depreciation and Amortization.
 (Loss) Gain on Sale of Vessels and Equipment  Net of Write-downs.
 Restructuring Charges.
 FPSO Segment
   34




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Twelve Months EndedDecember 31,(in thousands of U.S. dollars, except calendar-ship-days and percentages)
    
    2009
    
    
    2008
    
    
    % ChangeRevenues
    
    
    390,576
    
    
    
    383,752
    
    
    
    1.8Vessel operating expenses
    
    
    197,480
    
    
    
    216,998
    
    
    
    (9.0
    )Depreciation and amortization
    
    
    102,316
    
    
    
    91,734
    
    
    
    11.5General and administrative (1)
    
    
    37,652
    
    
    
    50,918
    
    
    
    (26.1
    )Goodwill impairment charge
    
    
    
    
    
    
    334,165
    
    
    
    (100.0
    )Loss on sale of vessels and equipment, net of write-downs
    
    
    
    
    
    
    12,019
    
    
    
    (100.0
    )Income (loss) from vessel operations
    
    
    53,128
    
    
    
    (322,082
    )
    
    
    (116.5
    )Calendar-Ship-DaysOwned Vessels
    
    
    3,101
    
    
    
    3,205
    
    
    
    (3.2
    )Total
    
    
    3,101
    
    
    
    3,205
    
    
    
    (3.2
    )
 (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). For
further discussion, please read Other Operating Results  General and Administrative.  Revenues.
 
    
    an increase of $5.7 million, primarily from the delivery of a new FPSO unit in February
2008 (or the FPSO Delivery) and the Petrojarl VargFPSO unit commencing a new four-year
fixed-rate contract extension with Talisman Energy beginning in the third quarter of 2009,
partially offset by lower revenues in other FPSO units due to lower oil production compared
to the prior periods and the conversion of a shuttle tanker to an FSO unit; and
 
    
    an increase of $1.1 million, from the amortization of contract value liabilities
relating to FPSO service contracts (as discussed below), which was recognized on the date
of the acquisition by us of a controlling interest in Teekay Petrojarl.
   35




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##### Table of Contents



Vessel Operating Expenses.
 
    
    a decrease of $18.2 million from decreases in service costs due to the timing of certain
projects, cost saving initiatives, and the strengthening of the U.S. Dollar against the
Norwegian Kroner; and
 
    
    a decrease of $1.3 million from lower insurance charges.
 Depreciation and Amortization.
 
    
    an increase of $5.6 million from the finalization of preliminary estimates of fair value
assigned to certain assets included in our acquisition of Teekay Petrojarl; and
 
    
    an increase of $5.0 million from the FPSO Delivery.
 Loss on Sale of Vessels and Equipment  Net of Write-downs.
 Goodwill Impairment Charge.
 Liquefied Gas Segment
 Teekay Gas Services
  Twelve Months EndedDecember 31,(in thousands of U.S. dollars, except calendar-ship-days and percentages)
    
    2009
    
    
    2008
    
    
    % ChangeRevenues
    
    
    246,472
    
    
    
    221,930
    
    
    
    11.1Voyage expenses
    
    
    1,018
    
    
    
    1,009
    
    
    
    0.9Net revenues
    
    
    245,454
    
    
    
    220,921
    
    
    
    11.1Vessel operating expenses
    
    
    49,466
    
    
    
    48,185
    
    
    
    2.7Depreciation and amortization
    
    
    59,868
    
    
    
    58,371
    
    
    
    2.6General and administrative (1)
    
    
    21,245
    
    
    
    23,072
    
    
    
    (7.9
    )Restructuring charge
    
    
    4,177
    
    
    
    634
    
    
    
    558.8Income from vessel operations
    
    
    110,698
    
    
    
    90,659
    
    
    
    22.1Calendar-Ship-DaysOwned Vessels and Vessels under Direct Financing Lease
    
    
    4,637
    
    
    
    3,701
    
    
    
    25.3
 (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). For further discussion, please read Other Operating Results  General and
Administrative. Tangguh LNG Deliveries) LPG Deliveries)
 Net Revenues.
 
    
    an increase of $35.6 million due to the commencement of the time-charters from the
Tangguh LNG Deliveries and the LPG Deliveries;
 
    
    an increase of $3.0 million due to the Catalunya Spiritbeing off-hire for 34.3 days
during 2008 for repairs; and
 
    
    an increase of $1.0 million due to the Polar Spiritbeing off-hire for 18.5 days during
2008 for a scheduled drydock;
  36




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##### Table of Contents




    
    a decrease of $6.9 million due to lower net revenues from the Arctic Spiritas a result
of a decrease in the time-charter rate;
 
    
    a decrease of $3.8 million due to the effect on our Euro-denominated revenues from the
weakening of the Euro against the U.S. Dollar compared to the same period last year;
 
    
    a decrease of $2.1 million due to the Madrid Spiritbeing off-hire for 25.2 days during
the third quarter of 2009 for a scheduled drydock; and
 
    
    a decrease of $1.8 million due to the Galicia Spiritbeing off-hire for 27.6 days during
the third quarter of 2009 for a scheduled drydock.
 Vessel Operating Expenses.
 
    
    an increase of $6.0 million from the Tangguh LNG Deliveries;
  
    
    a decrease of $4.1 million relating to lower crew manning, insurance, and repairs and
maintenance costs; and
 
    
    a decrease of $0.8 million due to the effect on our Euro-denominated vessel operating
expenses from the weakening of the Euro against the U.S. Dollar compared to the same
periods last year (a portion 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).
 Depreciation and Amortization.
 
    
    an increase of $1.1 million from the delivery of the Tangguh Sagoin March 2009 prior to
the commencement of the time-charter contract in May 2009 accounted for as a direct
financing lease;
 
    
    an increase of $1.0 million from the LPG Deliveries;
 
    
    an increase of $0.2 million due to the amortization of costs associated with vessel cost
expenditures during 2008; and
 
    
    an increase of $0.2 million relating to the amortization of drydock expenditures
incurred during 2009;
  
    
    a decrease of $1.3 million due to revised depreciation estimates for certain of our
vessels.
 Restructuring Charges.
 Conventional Tankers Segment
 a) Fixed-Rate Tanker Segment
 Teekay Tankers Services
  Twelve Months EndedDecember 31,(in thousands of U.S. dollars, except calendar-ship-days and percentages)
    
    2009
    
    
    2008
    
    
    % ChangeRevenues
    
    
    297,385
    
    
    
    265,849
    
    
    
    11.9Voyage expenses
    
    
    5,505
    
    
    
    5,010
    
    
    
    9.9Net revenues
    
    
    291,880
    
    
    
    260,839
    
    
    
    11.9Vessel operating expenses
    
    
    80,285
    
    
    
    68,065
    
    
    
    18.0Time-charter hire expense
    
    
    44,026
    
    
    
    43,048
    
    
    
    2.3Depreciation and amortization
    
    
    59,610
    
    
    
    44,578
    
    
    
    33.7General and administrative (1)
    
    
    27,949
    
    
    
    20,740
    
    
    
    34.8Loss on sale of vessels and equipment, net of write-downs
    
    
    14,044
    
    
    
    14,149
    
    
    
    Restructuring charge
    
    
    1,044
    
    
    
    1,991
    
    
    
    (47.6
    )Income from vessel operations
    
    
    64,922
    
    
    
    68,268
    
    
    
    (4.9
    )Calendar-Ship-DaysOwned Vessels
    
    
    9,143
    
    
    
    6,824
    
    
    
    34.0Chartered-in Vessels
    
    
    2,068
    
    
    
    2,363
    
    
    
    (12.5
    )Total
    
    
    11,211
    
    
    
    9,187
    
    
    
    22.0
 (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). For further discussion, please read Other Operating Results  General and
Administrative.  37




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##### Table of Contents




    
    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);
 
    
    the delivery of two new Suezmax tankers in June 2009 (collectively, the Suezmax
Deliveries);
 
    
    the transfer of one Suezmax tanker from the spot tanker segment in November 2009 (the
Suezmax Transfer);
 
    
    the purchase of a product tanker which commenced a 10-year fixed-rate time charter to
Caltex Australia Petroleum Pty Ltd. during September 2009; and
 
    
    the transfer of six Aframax tankers, on a net basis, from the spot tanker segment in
2008 and 2009 upon commencement of long-term time-charters (the Aframax Transfers).
  Net Revenues
 
    
    an increase of $31.3 million from the Aframax Transfers;
 
    
    an increase of $12.8 million from the Suezmax Deliveries;
 
    
    an increase of $4.1 million from the purchase of the new product tanker;
 
    
    an increase of $2.8 million from the Product Tanker Transfers;
 
    
    an increase of $1.9 million from the Suezmax Transfer;
 
    
    an increase of $1.4 million from the Aframax Deliveries; and
 
    
    an increase of $1.0 million as two of our Suezmax tankers were off-hire for 48 days for
scheduled drydockings during 2008;
  
    
    a decrease of $16.2 million from decreased 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 Spiritalso provides for a reduction in revenues to us when
spot tanker market rates are below threshold amounts); and
 
    
    a decrease of $6.3 million due to interest-rate adjustments to the daily charter rates
under the time-charter contracts for five Suezmax tankers (however, under the terms of the
capital lease for these vessels, we had corresponding decreases in our lease payments,
which are reflected as decreases to interest expense; therefore, these and future interest
rate adjustments do not and will not affect our cash flow or net (loss) income).
 Vessel Operating Expenses.
 
    
    an increase of $9.6 million from the Aframax Transfers;
 
    
    an increase of $2.5 million from the Suezmax Deliveries;
 
    
    an increase of $2.3 million from the purchase of the new product tanker;
 
    
    an increase of $1.4 million from the Product Tanker Transfers; and
 
    
    an increase of $0.7 million from the Suezmax Transfer;
  
    
    a decrease of $2.2 million due to the sale of a product tanker in the fourth quarter of
2009;
 
    
    a decrease of $0.9 million due to the effect on our Euro-denominated vessel operating
expenses from the weakening of the Euro against the U.S. Dollar compared to the same period
last year; and
 
    
    a decrease of $0.2 million relating to lower crew manning, insurance, and repairs and
maintenance costs.
  38




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##### Table of Contents



Time-Charter Hire Expense.
 Depreciation and Amortization.
 Loss on Sale of Vessels and Equipment  Net of Write-downs.
 Restructuring Charges.
 b) Spot Tanker Segment
 Teekay
Tankers Services
   Twelve Months EndedDecember 31,(in thousands of U.S. dollars, except calendar-ship-days and percentages)
    
    2009
    
    
    2008
    
    
    % ChangeRevenues
    
    
    654,296
    
    
    
    1,652,451
    
    
    
    (60.4
    )Voyage expenses
    
    
    201,069
    
    
    
    580,770
    
    
    
    (65.4
    )Net revenues
    
    
    453,227
    
    
    
    1,071,681
    
    
    
    (57.7
    )Vessel operating expenses
    
    
    104,574
    
    
    
    133,633
    
    
    
    (21.7
    )Time-charter hire expense
    
    
    271,509
    
    
    
    434,941
    
    
    
    (37.6
    )Depreciation and amortization
    
    
    92,752
    
    
    
    106,921
    
    
    
    (13.3
    )General and administrative (1)
    
    
    71,563
    
    
    
    89,009
    
    
    
    (19.6
    )Gain on sale of vessels and equipment, net of write-downs
    
    
    (3,317
    )
    
    
    (72,664
    )
    
    
    (95.4
    )Restructuring charge
    
    
    2,191
    
    
    
    2,359
    
    
    
    (7.1
    )(Loss) income from vessel operations
    
    
    (86,045
    )
    
    
    377,482
    
    
    
    (122.8
    )Calendar-Ship-DaysOwned Vessels
    
    
    11,802
    
    
    
    13,623
    
    
    
    (13.4
    )Chartered-in Vessels
    
    
    10,334
    
    
    
    17,647
    
    
    
    (41.4
    )Total
    
    
    22,136
    
    
    
    31,270
    
    
    
    (29.2
    )
 (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).
For further discussion, please read Other Operating Results  General and Administrative.  
    
    the transfer of two product tankers in April 2008 to the fixed tanker segment (or the
Spot Product Tanker Transfers);
 
    
    the transfer of four Aframax tankers in November 2008 and two Aframax tankers in
September 2009 to the fixed tanker segment (or the Spot Aframax Tanker Transfers);
 
    
    the sale of seven product tankers between March 2008 and May 2009 (or the Spot Product
Tanker Sales);
 
    
    the sale of one Suezmax tanker in November 2008 (or the Suezmax Tanker Sale) and one
Aframax tanker in November 2009;
 
    
    a net decrease in the number of chartered-in vessels, primarily from the sale of our 50%
interest in the Swift Product Tanker Pool in November 2008, which included our interest in
ten in-chartered intermediate product tankers; and
 
    
    the transfer of one Suezmax tanker in November 2009 to the fixed tanker segment;
  39




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##### Table of Contents




    
    the delivery of seven new Suezmax tankers between May 2008 and December 2009 (or the
Suezmax Deliveries); and
 
    
    the delivery of one large product tanker in October 2008.
  Tanker Market and TCE Rates
 OPEC
 GDP IEA mb/d
 STCs FFAs
 Year EndedDecember 31, 2009
    
    
    December 31, 2008
    
    
    December 31, 2007Net
    
    
    
    
    
    
    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
    
    
    77,634
    
    
    
    3,477
    
    
    
    22,328
    
    
    
    121,393
    
    
    
    2,111
    
    
    
    57,505
    
    
    
    52,697
    
    
    
    1,496
    
    
    
    35,225Aframax Tankers
    
    
    190,366
    
    
    
    11,044
    
    
    
    17,237
    
    
    
    609,150
    
    
    
    15,072
    
    
    
    40,416
    
    
    
    342,989
    
    
    
    11,681
    
    
    
    29,363Large/Medium Product Tankers
    
    
    45,645
    
    
    
    2,661
    
    
    
    17,153
    
    
    
    149,842
    
    
    
    4,396
    
    
    
    34,086
    
    
    
    98,194
    
    
    
    3,746
    
    
    
    26,213Small Product Tankers
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    44,008
    
    
    
    3,172
    
    
    
    13,874
    
    
    
    51,811
    
    
    
    3,596
    
    
    
    14,408Time-Charter Fleet (1)Suezmax Tankers
    
    
    62,608
    
    
    
    1,818
    
    
    
    34,438
    
    
    
    85,674
    
    
    
    2,762
    
    
    
    31,019
    
    
    
    47,584
    
    
    
    1,666
    
    
    
    28,562Aframax Tankers
    
    
    59,823
    
    
    
    1,863
    
    
    
    32,111
    
    
    
    39,900
    
    
    
    1,224
    
    
    
    32,598
    
    
    
    5,734
    
    
    
    183
    
    
    
    31,334Large/Medium Product Tankers
    
    
    21,474
    
    
    
    965
    
    
    
    22,253
    
    
    
    52,893
    
    
    
    1,971
    
    
    
    26,835
    
    
    
    42,483
    
    
    
    1,638
    
    
    
    25,935Other (2)
    
    
    (4,323
    )
    
    
    
    
    
    
    
    
    
    
    (31,179
    )
    
    
    
    
    
    
    
    
    
    
    (19,802
    )Totals
    
    
    453,227
    
    
    
    21,828
    
    
    
    20,764
    
    
    
    1,071,681
    
    
    
    30,708
    
    
    
    34,899
    
    
    
    621,690
    
    
    
    24,006
    
    
    
    25,897
 (1)
    
    Spot fleet includes short-term time-charters and fixed-rate contracts of affreightment
with a duration of less than 1 year and time-charter fleet includes short-term
time-charters and fixed-rate contracts of affreightment with a duration of between 1-3
years.(2)
    
    Includes the cost of spot in-charter vessels servicing fixed-rate contract of
affreightment cargoes, the amortization of in-process revenue contracts and cost of fuel
while offhire. Net Revenues.
 
    
    a decrease of $384.0 million primarily from decreases in our average TCE rate during
2009 compared to the same periods in 2008;
 
    
    a decrease of $146.0 million from a net decrease in the number of chartered-in vessels,
excluding small product tankers discussed below;
 
    
    a decrease of $68.1 million from the Spot Aframax Transfers and Spot Product Tanker
Transfers;
 
    
    a decrease of $44.0 million from a net decrease in the number of chartered-in small
product tankers primarily due to the sale of our interest in the Swift Tanker Pool in
November 2008;
 
    
    a decrease of $26.7 million from the Spot Product Tanker Sales; and
 
    
    a decrease of $6.8 million from the Suezmax Tanker Sale;
  40




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##### Table of Contents




    
    an increase of $31.3 million from a change in the number of days our vessels were
off-hire during 2009 due to regularly scheduled maintenance compared to 2008;
 
    
    an increase of $18.4 million from the Suezmax Deliveries; and
 
    
    an increase of $7.5 million from the delivery of one large product tanker.
 Vessel Operating Expenses.
 
    
    a decrease of $17.1 million from lower crew manning, repairs, maintenance and
consumables costs;
 
    
    a decrease of $12.0 million from the Spot Aframax Tanker Transfers; and
 
    
    a decrease of $10.2 million from the Spot Product Tanker Sales;
  
    
    an increase of $10.2 million from the Suezmax Deliveries; and
 
    
    an increase of $1.8 million from the product tanker that delivered in October 2008.
 Time-Charter Hire Expense.
 
    
    a decrease of $124.7 million primarily from the decrease in the number of chartered-in
vessels compared to the same period last year; and
 
    
    a decrease of $38.8 million from a decrease in the number of chartered-in small product
tankers from the sale of the Swift Tanker Pool in November 2008.
 Depreciation and Amortization.
 
    
    a decrease of $9.0 from the amortization of a non-compete agreement in the prior year,
which was fully amortized by the end of 2008;
 
    
    a decrease of $6.9, from the Spot Aframax Tanker Transfers;
 
    
    a decrease of $5.7 million from the Spot Product Tanker Sales;
 
    
    a decrease of $1.9 million from the sale of an Aframax tanker in November 2009, which
was written-down to fair value in the third quarter of 2009;
 
    
    a decrease of $1.2 million from the Spot Product Tanker Transfers; and
 
    
    a decrease of $1.1 million from the Suezmax Tanker Sale;
  
    
    an increase of $13.9 million from the Suezmax Tanker Deliveries and the delivery of one
new product tanker in October 2008.
 Gain on Sale of Vessels and Equipment  Net of Write-downs.
 Restructuring Charges.
  41




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Other Operating Results
  Twelve Months EndedDecember(in thousands of U.S. dollars, except percentages)
    
    2009
    
    
    2008
    
    
    % ChangeGeneral and administrative
    
    
    (212,483
    )
    
    
    (240,570
    )
    
    
    (11.7
    )Interest expense
    
    
    (141,448
    )
    
    
    (290,933
    )
    
    
    (51.4
    )Interest income
    
    
    19,999
    
    
    
    97,111
    
    
    
    (79.4
    )Realized and unrealized gains (losses) on non-designated derivative instruments
    
    
    140,046
    
    
    
    (567,074
    )
    
    
    (124.7
    )Foreign exchange (loss) gain
    
    
    (20,922
    )
    
    
    24,727
    
    
    
    (184.6
    )Equity income (loss) from joint ventures
    
    
    52,242
    
    
    
    (36,085
    )
    
    
    (244.8
    )Income tax (expense) recovery
    
    
    (22,889
    )
    
    
    56,176
    
    
    
    (140.7
    )Other income (loss)
    
    
    12,961
    
    
    
    (3,935
    )
    
    
    (429.4
    )
 General and Administrative Expenses.
 
    
    a decrease of $30.9 million in compensation for shore-based employees and other
personnel expenses primarily due to decreases in headcount and performance-based
compensation costs;
 
    
    a decrease of $15.7 million in corporate-related expenses;
 
    
    a decrease of $8.7 million from lower travel costs; and
 
    
    a decrease of $3.4 million relating to timing of seafarer training initiatives and lower
crew training activity;
  
    
    an increase of $30.4 million as there was a recovery recorded in the third quarter of
2008 relating to the reversal of accruals associated with our equity-based compensation and
long-term incentive program for management.
 Interest Expense.
 
    
    a decrease of $95.2 million primarily due to repayments of debt drawn under long-term
revolving credit facilities and term loans and decrease in interest rates relating to
long-term debt;
 
    
    a decrease of $35.1 million as the debt relating to Teekay Nakilat (III) was novated to
the RasGas 3 Joint Venture on December 31, 2008 (the interest expense on this debt is not
reflected in our 2009 consolidated interest expense as the RasGas 3 Joint Venture is
accounted for using the equity method);
 
    
    a decrease of $15.4 million from the scheduled loan payments on the LNG carrier
Catalunya Spirit, and scheduled capital lease repayments on the LNG carrier Madrid Spirit
(the Madrid Spiritis financed pursuant to a Spanish tax lease arrangement, under which we
borrowed under a term loan and deposited the proceeds into a restricted cash account and
entered into a capital lease for the vessel; as a result, this decrease in interest expense
from the capital lease is offset by a corresponding decrease in the interest income from
restricted cash);
 
    
    a decrease of $4.7 million from declining interest rates on our five Suezmax tanker
capital lease obligations; and
 
    
    a decrease of $1.6 million due to the effect on our Euro-denominated debt from the
weakening of the Euro against the U.S. Dollar during such period compared to the same
period last year;
  
    
    an increase of $2.5 million relating to debt to finance the purchase of the Tangguh LNG
Carriers as the interest on this debt was capitalized in 2008 while the LNG carriers were
under construction.
  Interest Income.
 
    
    a decrease of $33.5 million relating to interest-bearing advances made by us to the
RasGas 3 Joint Venture for shipyard construction installment payments repaid on December
31, 2008, when the external debt was novated to the RasGas 3 Joint Venture;
 
    
    a decrease of $29.5 million primarily relating to lower interest rates on our bank
account balances compared to the same periods last year;
  42




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##### Table of Contents




    
    a decrease of $13.4 million due to decreases in LIBOR rates relating to the restricted
cash used to fund capital lease payments for the RasGas II LNG Carriers (please read Item
18  Financial Statements: Note 10  Capital Leases and Restricted Cash);
 
    
    a decrease of $0.4 million due to the effect on our Euro-denominated deposits from the
weakening of the Euro against the U.S. Dollar compared to the same period last year; and
 
    
    a decrease of $0.3 million primarily from scheduled capital lease repayments on one of
our LNG carriers which was funded from restricted cash deposits.
  Realized and Unrealized Gains (Losses) on Non-designated Derivative Instruments.
 Year EndedDecember 31,(in thousands of U.S. Dollars)
    
    2009
    
    
    2008Realized (losses) gains relating to:Interest rate swaps
    
    
    (127,936
    )
    
    
    (39,949
    )Foreign currency forward contracts
    
    
    (8,984
    )
    
    
    34,990Bunkers, forward freight agreements (FFAs) and other
    
    
    (1,293
    )
    
    
    (32,971
    )(138,213
    )
    
    
    (37,930
    )Unrealized gains (losses) relating to:Interest rate swaps
    
    
    258,710
    
    
    
    (487,546
    )Foreign currency forward contracts
    
    
    14,797
    
    
    
    (45,728
    )Bunkers, FFAs and other
    
    
    4,752
    
    
    
    4,130278,259
    
    
    
    (529,144
    )Total realized and unrealized gains (losses) on non-designated derivative instruments
    
    
    140,046
    
    
    
    (567,074
    )
 Foreign
Exchange (Losses) Gains.
 Equity Income (Loss) from Joint Ventures.
 Income Tax (Expense) Recovery.
 Other (Loss) Income.
 Net Income (Loss).
  43




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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
    
    
    173,067
    
    
    
    127,691
    
    
    
    35.5Time-charter hire expense
    
    
    134,100
    
    
    
    160,993
    
    
    
    (16.7
    )Depreciation and amortization
    
    
    117,198
    
    
    
    104,936
    
    
    
    11.7General and administrative (1)
    
    
    56,831
    
    
    
    60,293
    
    
    
    (5.7
    )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
    
    
    45,792
    
    
    
    87,094
    
    
    
    (47.4
    )Calendar-Ship-DaysOwned Vessels
    
    
    10,463
    
    
    
    11,015
    
    
    
    (5.0
    )Chartered-in Vessels
    
    
    3,765
    
    
    
    4,619
    
    
    
    (18.5
    )Total
    
    
    14,228
    
    
    
    15,634
    
    
    
    (9.0
    )
 (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). For further discussion, please read Other Operating Results  General and
Administrative.  
    
    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;
  
    
    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 redelivery 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 $5.0 million relating to the transfer of the Navion Sagato the shuttle
tanker and FSO segment;
 
    
    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.
  44




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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
    
    
    216,998
    
    
    
    171,106
    
    
    
    26.8Depreciation and amortization
    
    
    91,734
    
    
    
    68,047
    
    
    
    34.8General and administrative (1)
    
    
    50,918
    
    
    
    40,173
    
    
    
    26.7Loss on sale of vessels and equipment, net of write-downs
    
    
    12,019
    
    
    
    
    
    
    
    Goodwill impairment charge
    
    
    334,165
    
    
    
    
    
    
    
    (Loss) income from vessel operations
    
    
    (322,082
    )
    
    
    70,953
    
    
    
    (553.9
    )Calendar-Ship-DaysOwned Vessels
    
    
    3,205
    
    
    
    2,920
    
    
    
    9.8Total
    
    
    3,205
    
    
    
    2,920
    
    
    
    9.8
 (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). For
further discussion, please read Other Operating Results  General and Administrative. 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.
  Vessel Operating Expenses.
 
    
    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.
  45




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Loss on Sale of Vessels and Equipment  Net of Write-downs.
 Goodwill Impairment Charge.
 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 Direct Financing 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). For further discussion, please read Other Operating Results  General and
Administrative.  
    
    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;
 
    
    an 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 portion 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;
  46




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
    
    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.
 Conventional Tanker Segment
 a) 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
    
    
    14,149
    
    
    
    
    
    
    
    Restructuring charge
    
    
    1,991
    
    
    
    
    
    
    
    Income from vessel operations
    
    
    68,268
    
    
    
    61,726
    
    
    
    10.6Calendar-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). For further discussion, please read Other Operating Results  General and
Administrative.  
    
    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 Spiritalso 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.
  47




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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
 b) Spot Tanker Segment
  Twelve Months EndedDecember 31,(in thousands of U.S. dollars, except calendar-ship-days and percentages)
    
    2008
    
    
    2007
    
    
    % ChangeRevenues
    
    
    1,652,451
    
    
    
    1,032,376
    
    
    
    60.1Voyage expenses
    
    
    580,770
    
    
    
    410,686
    
    
    
    41.4Net revenues
    
    
    1,071,681
    
    
    
    621,690
    
    
    
    72.4Vessel operating expenses
    
    
    133,633
    
    
    
    89,939
    
    
    
    48.6Time-charter hire expense
    
    
    434,941
    
    
    
    281,168
    
    
    
    54.7Depreciation and amortization
    
    
    106,921
    
    
    
    74,094
    
    
    
    44.3General and administrative (1)
    
    
    89,009
    
    
    
    107,326
    
    
    
    (17.1
    )Gain on sale of vessels and equipment, net of write-downs
    
    
    (72,664
    )
    
    
    
    
    
    
    Restructuring charge
    
    
    2,359
    
    
    
    
    
    
    
    Income from vessel operations
    
    
    377,482
    
    
    
    69,163
    
    
    
    445.8Calendar-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).
For further discussion, please read Other Operating Results  General and Administrative.  48




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##### Table of Contents




    
    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.
  Net Revenues.
 
    
    an increase of $190.1 million primarily 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 $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 $17.2 million from the ConocoPhillips Acquisition;
 
    
    an increase of $11.3 million from higher crew manning repairs, maintenance and
consumables costs, insurance costs, port expenses, safety inspections and non-recurring
damages;
 
    
    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 $89.9 million from an increase in the number of chartered-in tankers and
rates (excluding the OMI and ConocoPhillips vessels) compared to the same period in 2007;
 
    
    an increase of $39.8 million from the OMI Acquisition;
 
    
    an increase of $16.1 million from the ConocoPhillips Acquisition;
 
    
    an increase of $6.9 million due to the sale and lease-back of three Aframax tankers
during April and July 2007; and
 
    
    an increase of $2.6 million from an increase in the average in-charter rate.
 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;
  49




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##### Table of Contents




    
    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 write-down of $23.9 million from the impairment of two 1992-built Aframax tankers.
 Other Operating Results
  Twelve Months EndedDecember(in thousands of U.S. dollars, except percentages)
    
    2008
    
    
    2007
    
    
    % ChangeGeneral and administrative
    
    
    (240,570
    )
    
    
    (246,534
    )
    
    
    (2.4
    )Interest expense
    
    
    (290,933
    )
    
    
    (294,848
    )
    
    
    (1.3
    )Interest income
    
    
    97,111
    
    
    
    101,199
    
    
    
    (4.0
    )Realized and unrealized losses on non-designated derivative instruments
    
    
    (567,074
    )
    
    
    (45,322
    )
    
    
    1,151.2Foreign exchange gain (loss)
    
    
    24,727
    
    
    
    (61,571
    )
    
    
    (140.2
    )Equity loss from joint ventures
    
    
    (36,085
    )
    
    
    (12,404
    )
    
    
    190.9Income tax recovery
    
    
    56,176
    
    
    
    3,192
    
    
    
    1,659.9Other (loss) income
    
    
    (3,935
    )
    
    
    23,170
    
    
    
    (117.0
    )
 General and Administrative Expenses.
 
    
    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;
  
    
    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;
 
    
    an increase of $8.0 million from the unrealized change in fair value of our hedge
accounted foreign currency forward contracts; 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.
 Interest
Expense.
 
    
    a net decrease of $13.8 million primarily due to repayments of debt drawn under
long-term revolving credit facilities and term loans;
  
    
    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.
 
    
    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);
  50




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##### Table of Contents




    
    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.
 Realized and Unrealized Losses on Non-designated Derivative Instruments.
 Year EndedDecember 31,(in thousands of U.S. Dollars)
    
    2008
    
    
    2007Realized (losses) gains relating to:Interest rate swaps
    
    
    (39,949
    )
    
    
    4,648Foreign currency forward contracts
    
    
    34,990
    
    
    
    37,550Bunkers, forward freight agreements (FFAs) and other
    
    
    (32,971
    )
    
    
    8,281(37,930
    )
    
    
    50,479Unrealized (losses) gains relating to:Interest rate swaps
    
    
    (487,546
    )
    
    
    (122,679
    )Foreign currency forward contracts
    
    
    (45,728
    )
    
    
    23,512Bunkers, FFAs and other
    
    
    4,130
    
    
    
    3,366(529,144
    )
    
    
    (95,801
    )Total realized and unrealized losses on non-designated derivative instruments
    
    
    (567,074
    )
    
    
    (45,322
    )
 Foreign Exchange Gains (Losses).
 Equity Loss from Joint Ventures.
 Income Tax Recovery.
 Other (Loss) Income.
 Net Income (Loss).
 LIQUIDITY AND CAPITAL RESOURCES
 Liquidity and Cash Needs
     51




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Cash Flows
  2009
    
    
    2008($000s)
    
    
    ($000s)Net operating cash flows
    
    
    368,251
    
    
    
    523,641Net financing cash flows
    
    
    (452,782
    )
    
    
    676,084Net investing cash flows
    
    
    (307,124
    )
    
    
    (828,233
    )
  52




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##### Table of Contents



Operating Cash Flows
  Financing Cash Flows
        Investing Cash Flows
  
    
    incurred capital expenditures for vessels and equipment of $495.2 million, primarily for
the acquisition of one product tanker and shipyard construction installment payments on our
newbuilding Suezmax tankers, shuttle tankers, LNG and LPG carriers;
 
    
    received proceeds of $170.8 million from the sale of four product tankers;
 
    
    received proceeds of $32.7 million from the sale of a 1993-built Aframax tanker through
a sale-leaseback agreement; and
 
    
    received proceeds of $16.3 million from the sale of a 1992-built Aframax tanker.
  53




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##### Table of Contents



COMMITMENTS AND CONTINGENCIES
  In millions of U.S. Dollars
    
    Total
    
    
    2010
    
    
    2011 and 2012
    
    
    2013 and 2014
    
    
    Beyond 2014U.S. Dollar-Denominated Obligations:Long-term debt (1)
    
    
    4,006.9
    
    
    
    218.2
    
    
    
    755.3
    
    
    
    1,342.6
    
    
    
    1,690.8Chartered-in vessels (operating leases)
    
    
    637.0
    
    
    
    235.1
    
    
    
    269.9
    
    
    
    89.4
    
    
    
    42.6Commitments under capital leases (2)
    
    
    221.6
    
    
    
    23.7
    
    
    
    197.9
    
    
    
    
    
    
    
    Commitments under capital leases (3)
    
    
    1,049.1
    
    
    
    24.0
    
    
    
    48.0
    
    
    
    48.0
    
    
    
    929.1Commitments under operating leases(4)
    
    
    482.7
    
    
    
    25.1
    
    
    
    50.1
    
    
    
    50.1
    
    
    
    357.4Newbuilding installments (5)
    
    
    463.5
    
    
    
    311.8
    
    
    
    151.7
    
    
    
    
    
    
    
    Asset retirement obligation
    
    
    22.1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    22.1Total U.S. Dollar-denominated obligations
    
    
    6,882.9
    
    
    
    837.9
    
    
    
    1,472.9
    
    
    
    1,530.1
    
    
    
    3,042.0Euro-Denominated Obligations:(6)Long-term debt (7)
    
    
    412.4
    
    
    
    13.0
    
    
    
    234.7
    
    
    
    16.2
    
    
    
    148.5Commitments under capital leases (2) (8)
    
    
    131.4
    
    
    
    38.6
    
    
    
    92.8
    
    
    
    
    
    
    
    Total Euro-denominated obligations
    
    
    543.8
    
    
    
    51.6
    
    
    
    327.5
    
    
    
    16.2
    
    
    
    148.5Total
    
    
    7,426.7
    
    
    
    889.5
    
    
    
    1,800.4
    
    
    
    1,546.3
    
    
    
    3,190.5
 (1)
    
    Excludes expected interest payments of $75.1 million (2010), $115.6 million (2011 and
2012), $71.2 million (2013 and 2014) and $73.9 million (beyond 2014). Expected interest
payments are based on the existing interest rates (fixed-rate loans) and LIBOR plus margins
that ranged up to 3.25% at December 31, 2009 (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.(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 in 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 $31.7 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 existing LNG carriers
upon the termination of the related capital leases on December 31, 2011. The purchase
obligation has been fully funded with restricted cash deposits. Please read Item 18 
Financial Statements: Note 10  Capital Lease Obligations and Restricted Cash.(3)
    
    Existing restricted cash deposits of $479.4 million, together with the interest earned
on the deposits, will equal the remaining amounts we owe under the lease arrangements.(4)
    
    We have corresponding leases whereby we are the lessor and expect to receive $448.0
million for these leases from 2010 to 2029.(5)
    
    Represents remaining construction costs (excluding capitalized interest and
miscellaneous construction costs) for three LPG carriers and four shuttle tankers as of
December 31, 2009. Please read Item 18  Financial Statements: Note 16(a)  Commitments and
Contingencies  Vessels Under Construction.(6)
    
    Euro-denominated obligations are presented in U.S. Dollars and have been converted
using the prevailing exchange rate as at December 31, 2009.(7)
    
    Excludes expected interest payments of $4.4 million (2010), $4.9 million (2011 and
2012), $3.4 million (2013 and 2014) and $9.5 million (beyond 2014). Expected interest
payments are based on EURIBOR at December 31, 2009, plus margins that ranged up to 0.66%,
as well as the prevailing U.S. Dollar/Euro exchange rate as of December 31, 2009. 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.(8)
    
    Existing restricted cash deposits of $120.8 million, together with the interest earned
on the deposits, will be expected to equal the remaining amounts we owe under the lease
arrangement, including our obligation to purchase the vessel at the end of the lease term.  Off-Balance Sheet Arrangements
   54




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##### Table of Contents



Critical Accounting Estimates
  Revenue Recognition
 Description
 Judgments and Uncertainties.
 Effect if Actual Results Differ from Assumptions.
 Vessel Lives and Impairment
 Description
 Judgments and Uncertainties.
 Effect if Actual Results Differ from Assumptions.
 Drydocking
 Description
 Judgments and Uncertainties.
 Effect if Actual Results Differ from Assumptions.
  55




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##### Table of Contents



Goodwill and Intangible Assets
 Description
 Judgments and Uncertainties
  Effect if Actual Results Differ from Assumptions.
 Valuation of Derivative Financial Instruments
 Description.
 Judgments and Uncertainties.
 Effect if Actual Results Differ from Assumptions.
 Recent Accounting Pronouncements Not Yet Adopted
 FASB Consolidations
 Transfers and
  56




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##### Table of Contents



Revenue Recognition   Fair Value Measurements and
Disclosures
 
 Item 6. Directors, Senior Management and Employees
 Directors and Senior Management
  Name
    
    Age
    
    PositionC. Sean Day
    
    
    60
    
    
    Director and Chair of the BoardBjorn Moller
    
    
    52
    
    
    Director, President and Chief Executive OfficerAxel Karlshoej
    
    
    69
    
    
    Director and Chair EmeritusDr. Ian D. Blackburne
    
    
    63
    
    
    DirectorJames R. Clark
    
    
    59
    
    
    DirectorPeter S. Janson
    
    
    62
    
    
    DirectorThomas Kuo-Yuen Hsu
    
    
    63
    
    
    DirectorEileen A. Mercier
    
    
    62
    
    
    DirectorTore I. Sandvold
    
    
    62
    
    
    DirectorArthur Bensler
    
    
    52
    
    
    EVP, Secretary and General CounselBruce Chan
    
    
    37
    
    
    President, Teekay Tanker Services, a division of TeekayPeter Evensen
    
    
    51
    
    
    EVP and Chief Strategy OfficerDavid Glendinning
    
    
    55
    
    
    President, Teekay Gas Services and Offshore, a division of TeekayKenneth Hvid
    
    
    41
    
    
    President, Teekay Navion Shuttle Tankers and Offshore, a division of TeekayVincent Lok
    
    
    41
    
    
    EVP and Chief Financial OfficerPeter Lytzen
    
    
    52
    
    
    President, Teekay Petrojarl AS, a subsidiary of TeekayLois Nahirney
    
    
    46
    
    
    EVP, Corporate ResourcesGraham Westgarth
    
    
    55
    
    
    President, Teekay Marine Services, a division of Teekay
  C. Sean Day
 Bjorn Moller
 Axel Karlshoej
 Dr. Ian D. Blackburne
  57




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##### Table of Contents



James R. Clark
 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
  58




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##### Table of Contents



Peter Lytzen
 Lois Nahirney
 Graham Westgarth
 Compensation of Directors and Senior Management
 Director Compensation
   Annual Executive Compensation
 Executive
Officers
 Long-Term Incentive Program
     59




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##### Table of Contents



Vision Incentive Plan
 VIP Economic Profit MVA
  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.
   60




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##### Table of Contents




    
    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.
   
    
    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)
    
    
    2,718,455
    (1) (3)
    
    
    3.7
    %(2)
 (1)
    
    Includes 2,277,475 shares of common stock subject to stock options exercisable by May
14, 2010 under the Plans with a weighted-average exercise price of $35.98 that expire
between March 14, 2011 and March 8, 2019. Excludes (a) 1,378,619 shares of common stock
subject to stock options exercisable after May 14, 2010 under the Plans with a weighted
average exercise price of $22.34, that expire between March 10, 2018 and March 8, 2020 and
(b) 329,648 shares of restricted stock which vest after May 14, 2010, (c) 87,054
performance shares which vest after May 14, 2010.(2)
    
    Based on a total of approximately 72.7 million outstanding shares of our common stock
as of March 15, 2010. 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, 2010 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 2011 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.  61




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##### Table of Contents



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

Percent of Class(4)Resolute Investments, Ltd. (1)
    
    
    30,431,380
    
    
    
    41.9
    %Iridian Asset Management, LLC (2)
    
    
    5,797,089
    
    
    
    8.0
    %JPMorgan Chase & Co. (3)
    
    
    5,068,117
    
    
    
    6.9
    %
 
 (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. 3) filed by
Resolute and Path with the SEC on February 22, 2010. Resolutes beneficial ownership was 42.0%
on December 31, 2008, and 41.8% on December 31, 2007. In 2009, 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 5,797,089 shares. This
information is based on the Schedule 13G/A filed by this investor with the SEC on January 28,
2010. Iridian Asset Managements beneficial ownership was 10.0% on March 15, 2009, and 8.5% on
March 15, 2008.(3)
    
    Includes shared voting power and shared dispositive power as to 5,068,117 shares. This
information is based on the Schedule 13G/A filed by this investor with the SEC on January 22,
2010. JPMorgan Chase & Co.s beneficial ownership was 7.8% on March 15, 2009, and 5.1% on
March 15, 2008.(4)
    
    Based on a total of approximately 72.7 million outstanding shares of our common stock as of
March 15, 2010.   Our major shareholder
 Resolute Path
 Our directors and executive officers
    62




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##### Table of Contents



Relationships with our public company subsidiaries
 Teekay Tankers
    Teekay Offshore and Teekay LNG.
   Quarterly
cash distributions.
  
    
    first, 98% to the common unitholders, pro rata, and 2% to the general partner, until
Teekay Offshore or Teekay LNG, as applicable, distributes for each outstanding common unit
an amount equal to the minimum quarterly distribution for that quarter;
 
    
    second, 98% to the common unitholders, pro rata, and 2% to the general partner, until
Teekay Offshore or Teekay LNG, as applicable, distributes for each outstanding common unit
an amount equal to any arrearages in payment of the minimum quarterly distribution on the
common units for any prior quarters during the subordination period;
 
    
    third, 98% to the subordinated unitholders, pro rata, and 2% to the general partner,
until Teekay Offshore or Teekay LNG, as applicable, distributes for each subordinated unit
an amount equal to the minimum quarterly distribution for that quarter; and
 
    
    thereafter, in the manner described in Incentive distribution rights below.
   
    
    distributions of available cash from operating surplus on each of the outstanding
common units and subordinated units equaled or exceeded the minimum quarterly distribution
for each of the three, consecutive, non-overlapping four-quarter periods immediately
preceding that date;
 
    
    the adjusted operating surplus generated during each of the three consecutive,
non-overlapping four quarter periods immediately preceding that date equaled or exceeded
the sum of the minimum quarterly distributions on all of the outstanding common units and
subordinated units during those periods on a fully diluted basis and the related
distribution on the 2% general partner interest during those periods; and
 
    
    there are no arrearages in payment of the minimum quarterly distribution on the common
units.
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##### Table of Contents




    
    first, 98% to the common unitholders, pro rata, and 2% to the general partner, until
Teekay Offshore or
 
    
    thereafter, in the manner described in Incentive distribution rights below.
   
    
    Teekay Offshore or Teekay LNG has distributed available cash from operating surplus to
the common and subordinated unitholders in an amount equal to the minimum quarterly
distribution; and
 
    
    Teekay Offshore or Teekay LNG has distributed available cash from operating surplus on
outstanding common units in an amount necessary to eliminate any cumulative arrearages in
payment of the minimum quarterly distribution;
  
    
    first, 98% to all unitholders, pro rata, and 2% to the general partner, until each
unitholder has received a total of $0.4025 (Teekay Offshore) or $0.4625 (Teekay LNG) per
unit for that quarter;
 
    
    second, 85% to all unitholders, and 15% to the general partner, until each unitholder
has received a total of $0.4375 (Teekay Offshore) or $0.5375 (Teekay LNG) per unit for that
quarter;
 
    
    third, 75% to all unitholders, and 25% to the general partner, until each unitholder has
received a total of $0.525 (Teekay Offshore) or $0.65 (Teekay LNG) per unit for that
quarter; and
 
    
    thereafter, 50% to all unitholders and 50% to the general partner.
   Competition with Teekay Tankers, Teekay Offshore and Teekay LNG
   Sales of vessels and project interests by Teekay to Teekay Tankers, Teekay Offshore and Teekay LNG
   
    
    To sell to Teekay LNG a 33% interest in the Angola LNG Project.
 
    
    To sell to Teekay LNG for a total cost of approximately $94 million two technically
advanced 12,000-cubic meter multi-gas newbuildings capable of carrying LNG, LPG or
ethylene. This sale will occur upon delivery and purchase by Teekay of these vessels, which
is scheduled for the first half of 2011. Upon delivery, each vessel will commence service
under 15-year fixed-rate charters to I.M. Skaugen ASA.
  64




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##### Table of Contents




    
    To sell to Teekay Offshore existing FPSO units of Teekay Petrojarl that were servicing
contracts in excess of three years in length as of July 9, 2008, the date on which Teekay
Corporation acquired 100% of Teekay Petrojarl. Teekay Offshore, at its election, may
acquire these units at any time until July 9, 2010. The purchase price for any such
existing FPSO units would be its fair market value plus any additional tax or other similar
costs to Teekay Petrojarl that would be required to transfer the offshore vessels to Teekay
Offshore.
 
    
    To offer to Teekay Tankers a Suezmax tanker prior to June 18, 2010 at fair market value.
Teekay Tankers used the net proceeds from its follow-on public offering in April 2010 to
acquire from Teekay this additional Suezmax tanker, the Yamuna Spirit, in addition to two
other vessels: a Suezmax tanker, the Kaveri Spirit, and an Aframax tanker, the Helga Spirit
for the aggregate purchase price of approximately $168.7 million. As part of the purchase
price for these vessels, Teekay Tankers issued to Teekay 2.6 million of unregistered common
 shares valued on a per-share basis at the public offering price of $12.25. Please read Item 5
  Operating and Financial Review and Prospects  Public Offerings by and Sale of Vessels to
Teekay Tankers Ltd.
 Time
chartering and bareboat chartering arrangements
  
    
    Nine of OPCOs conventional tankers are chartered out to Teekay subsidiaries under
long-term time charters. Two of OPCOs shuttle tankers are chartered out to Teekay
subsidiaries under long-term bareboat charters. Pursuant to these charter contracts, OPCO
earned voyage revenues of $142.6 million, $159.3 million, and $127.1 million, respectively,
for 2007, 2008, and 2009.
 
    
    From December 2008 to June 2009, OPCO entered into a bareboat charter contract to
in-charter one shuttle tanker from a subsidiary Teekay. Pursuant to the charter contract,
OPCO incurred time-charter hire expenses of $0.2 million and $3.4 million for the years
ended December 31, 2008 and 2009, respectively.
 
    
    During 2008, two of OPCOs shuttle tankers were employed on single-voyage charters with
a subsidiary of Teekay. Pursuant to these charter contracts, OPCO earned voyage revenues of
$11.3 million for the year ended December 31, 2008.
 
    
    From August 2008,
Teekay has been chartering in from Teekay Tankers the tanker Nassau
Spirit under a fixed-rate time charter currently scheduled to expire in August 2010. During
2008 and 2009, Teekay Tankers earned revenues of $4.9 million and $13.4 million,
respectively, under this time-charter contract.
 Services, management and pooling arrangements
 Services agreements.
 Management agreement.
   Pooling arrangements.
  65




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##### Table of Contents



Item 8. Financial Information
 Consolidated Financial Statements and Notes
  Legal Proceedings
  Dividend Policy
   Significant Changes
  
 Item 9. The Offer and Listing
  Dec. 31,
    
    
    Dec. 31,
    
    
    Dec. 31,
    
    
    Dec. 31,
    
    
    Dec. 31,Years Ended
    
    2009
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005High
    
    $
    26.50
    
    
    $
    54.71
    
    
    $
    63.69
    
    
    $
    46.50
    
    
    $
    50.85Low
    
    
    11.35
    
    
    
    10.95
    
    
    
    42.20
    
    
    
    35.16
    
    
    
    36.50
 Mar. 31,
    
    
    Dec. 31,
    
    
    Sept. 30,
    
    
    June 30,
    
    
    Mar. 31,
    
    
    Dec. 31,
    
    
    Sept. 30,
    
    
    June 30,Quarters Ended
    
    2010
    
    
    2009
    
    
    2009
    
    
    2009
    
    
    2009
    
    
    2008
    
    
    2008
    
    
    2008High
    
    $
    27.14
    
    
    $
    26.50
    
    
    $
    22.50
    
    
    $
    23.83
    
    
    $
    23.13
    
    
    $
    26.29
    
    
    $
    45.17
    
    
    $
    53.52Low
    
    
    20.42
    
    
    
    19.19
    
    
    
    16.81
    
    
    
    12.50
    
    
    
    11.35
    
    
    
    10.95
    
    
    
    22.68
    
    
    
    42.69
 Mar. 31,
    
    
    Feb. 28,
    
    
    Jan. 31,
    
    
    Dec. 31,
    
    
    Nov. 30,
    
    
    Oct. 31,Months Ended
    
    2010
    
    
    2010
    
    
    2010
    
    
    2009
    
    
    2009
    
    
    2009High
    
    $
    25.19
    
    
    $
    25.49
    
    
    $
    27.14
    
    
    $
    25.67
    
    
    $
    25.59
    
    
    $
    26.50Low
    
    
    22.72
    
    
    
    20.42
    
    
    
    23.03
    
    
    
    23.19
    
    
    
    19.19
    
    
    
    20.63
 
 Item 10. Additional Information
 Memorandum and Articles of Association
 Form 20-F Form 20-F
   66




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##### Table of Contents



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.(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.(q)
    
    Indenture dated January 27, 2010 among Teekay Corporation and The Bank of New York Mellon
Trust Company, N.A. for U.S. $450,000,000 8.5% Senior Unsecured Notes due 2020.
 Exchange Controls and Other Limitations Affecting Security Holders
    67




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##### Table of Contents



Taxation
  Material U.S. Federal Income Tax Considerations
 Code
  
    
    dealers in securities or currencies,
 
    
    traders in securities that have elected the mark-to-market method of accounting for
their securities,
 
    
    persons whose functional currency is not the U.S. dollar,
 
    
    persons holding our common stock as part of a hedge, straddle, conversion or other
synthetic security or integrated transaction,
 
    
    certain U.S. expatriates,
 
    
    financial institutions,
 
    
    insurance companies,
 
    
    persons subject to the alternative minimum tax,
 
    
    persons that actually or under applicable constructive ownership rules own 10% or more
of our common stock; and
 
    
    entities that are tax-exempt for U.S. federal income tax purposes.
   United States Federal Income Taxation of U.S. Holders
 U.S. Holder
 Distributions
 PFICs
 U.S. Individual Holder
   68




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##### Table of Contents



Consequences of Possible PFIC Classification
  Tidewater Inc. v. United States Tidewater Tidewater.
  QEF
election
 Taxation of U.S. Holders Making a Timely QEF Election. Electing Holder
    69




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##### Table of Contents



Taxation of U.S. Holders Making a Mark-to-Market Election.
  Taxation of U.S. Holders Not Making a Timely QEF or Mark-to-Market Election. Non-Electing Holder i.e.
 
    
    the excess distribution or gain would be allocated ratably over the Non-Electing
Holders aggregate holding period for the common stock;
 
    
    the amount allocated to the current taxable year and any taxable year prior to the
taxable year we were first treated as a PFIC with respect to the Non-Electing Holder would
be taxed as ordinary income in the current taxable year;
 
    
    the amount allocated to each of the other taxable years would be subject to U.S. federal
income tax at the highest rate of tax in effect for the applicable class of taxpayers for
that year; and an interest charge for the deemed deferral benefit would be imposed with
respect to the resulting tax attributable to each such other taxable year.
  U.S. Holders are urged to consult their own tax advisors regarding the applicability, availability
and advisability of, and procedure for, making QEF, Mark-to-Market Elections and other available
elections with respect to us and our subsidiaries, and the U.S. federal income tax consequences of
making such elections.
 Sale, Exchange or other Disposition of Common Stock
   United States Federal Income Taxation of Non-U.S. Holders
 Non-U.S. Holder
 Distributions
  Sale, Exchange or other Disposition of Common Stock
   70




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##### Table of Contents



Backup Withholding and Information Reporting
  
    
    fails to timely 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.
 Documents on Display
 th EDGAR www.sec.gov
 
 Item 11. Quantitative and Qualitative Disclosures About Market Risk
  Foreign Currency Fluctuation Risk
    Expected Maturity Date2010
    
    
    2011
    
    
    Total
    
    
    TotalContract
    
    
    Contract
    
    
    Contract
    
    
    Fair value (1)Amount (1)
    
    
    Amount (1)
    
    
    Amount (1)
    
    
    Asset (Liability)Norwegian Kroner:
    
    $
    158.3
    
    
    $
    43.3
    
    
    $
    201.6
    
    
    $
    9.7Average contractual exchange rate(2)
    
    
    6.17
    
    
    
    5.96
    
    
    
    6.13Euro:
    
    $
    61.7
    
    
    $
    11.0
    
    
    $
    72.7
    
    
    $
    (0.7
    )Average contractual exchange rate(2)
    
    
    0.69
    
    
    
    0.69
    
    
    
    0.69Canadian Dollar:
    
    $
    45.3
    
    
    $
    3.9
    
    
    $
    49.2
    
    
    $
    2.0Average contractual exchange rate(2)
    
    
    1.10
    
    
    
    1.07
    
    
    
    1.10British Pounds:
    
    $
    45.8
    
    
    $
    7.4
    
    
    $
    53.2
    
    
    $
    (0.5
    )Average contractual exchange rate(2)
    
    
    0.61
    
    
    
    0.62
    
    
    
    0.61
 (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.  71




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##### Table of Contents



Interest Rate Risk
    FairValueExpected Maturity Date
    
    
    
    
    
    
   Asset /2010
    
    
    2011
    
    
    2012
    
    
    2013
    
    
    2014
    
    
    Thereafter
    
    
    Total
    
    
    (Liability)
    
    

Rate (1)(in millions of U.S. dollars, except percentages)Long-Term Debt:Variable Rate ($U.S.) (2)
    
    
    169.8
    
    
    
    251.4
    
    
    
    231.6
    
    
    
    399.8
    
    
    
    847.5
    
    
    
    1,433.2
    
    
    
    3,333.3
    
    
    
    (3,033.4
    )
    
    
    1.1
    %Variable Rate (Euro) (3) (4)
    
    
    12.9
    
    
    
    227.5
    
    
    
    7.3
    
    
    
    7.8
    
    
    
    8.4
    
    
    
    148.5
    
    
    
    412.4
    
    
    
    (368.2
    )
    
    
    1.1
    %Fixed-Rate Debt ($U.S.)
    
    
    48.5
    
    
    
    224.3
    
    
    
    48.0
    
    
    
    47.6
    
    
    
    47.6
    
    
    
    257.5
    
    
    
    673.5
    
    
    
    (653.8
    )
    
    
    6.1
    %Average Interest Rate
    
    
    5.2
    %
    
    
    8.0
    %
    
    
    5.2
    %
    
    
    5.2
    %
    
    
    5.2
    %
    
    
    5.2
    %
    
    
    6.1
    %Capital Lease Obligations(5) (6)Fixed-Rate ($U.S.) (7)
    
    
    9.6
    
    
    
    185.5
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    195.1
    
    
    
    (195.1
    )
    
    
    7.4
    %Average Interest Rate (8)
    
    
    7.5
    %
    
    
    7.4
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7.4
    %Interest Rate Swaps:Contract Amount ($U.S.) (6) (9)
    
    
    279.3
    
    
    
    170.3
    
    
    
    276.3
    
    
    
    82.5
    
    
    
    96.4
    
    
    
    2,742.1
    
    
    
    3,646.9
    
    
    
    (330.6
    )
    
    
    4.8
    %Average Fixed Pay Rate (2)
    
    
    4.3
    %
    
    
    3.5
    %
    
    
    3.1
    %
    
    
    4.9
    %
    
    
    4.8
    %
    
    
    5.3
    %
    
    
    4.8
    %Contract Amount (Euro) (4)(10)
    
    
    13.0
    
    
    
    227.4
    
    
    
    7.3
    
    
    
    7.8
    
    
    
    8.4
    
    
    
    148.5
    
    
    
    412.4
    
    
    
    (10.6
    )
    
    
    3.8
    %Average Fixed Pay Rate (3)
    
    
    3.8
    %
    
    
    3.8
    %
    
    
    3.7
    %
    
    
    3.7
    %
    
    
    3.7
    %
    
    
    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, which as of
December 31, 2009, ranged from 0.3% to 3.25%. 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.(2)
    
    Interest payments on U.S. Dollar-denominated debt and interest rate swaps are based on LIBOR.
The average fixed pay rate for our interest rate swaps excludes the margin we pay our
floating-rate debt.(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, 2009.(5)
    
    Excludes capital lease obligations (present value of minimum lease payments) of 83.1 million
Euros ($119.1 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, 2009,
this amount was 84.3 million Euros ($120.8 million). Consequently, we are not subject to
interest rate risk from these obligations or deposits.  72




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##### Table of Contents



(6)
    
    Under the terms of the capital leases for the RasGas II LNG Carriers (see Item 18  Financial
Statements: Note 10  Capital Lease Obligations 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 variable-rate
leases. The deposits, which as at December 31, 2009 totaled $479.4 million, and the lease
obligations, which as at December 31, 2009 totaled $470.1 million, have been swapped for
fixed-rate deposits and fixed-rate obligations. Consequently, 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, 2009, 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 $455.4 million and $473.8 million, ($37.3) million and $36.7 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 (see Item 18  Financial
Statements: Note 10  Capital Lease Obligations and Restricted Cash.(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 $300.0 million and $200.0 million that have commencement
dates of 2010 and 2011, respectively. Commodity Price Risk
  Spot Tanker Market Rate Risk
 FFA
  
 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
 Exchange Act
     73




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##### Table of Contents



Managements Report on Internal Control over Financial Reporting
      
 Item 16A. Audit Committee Financial Expert
  
 Item 16B. Code of Ethics
  
 Item 16C. Principal Accountant Fees and Services
  Fees
    
    2009
    
    
    2008Audit Fees (1)
    
    $
    6,082,000
    
    
    $
    6,744,000Audit-Related Fees (2)
    
    
    269,000
    
    
    
    20,400Tax Fees (3)
    
    
    120,000
    
    
    
    235,400All Other Fees (4)
    
    
    4,000
    
    
    
    2,500Total
    
    $
    6,475,000
    
    
    $
    7,002,300
 
 (1)
    
    Audit fees represent fees for professional services provided in connection with the audits of
our consolidated financial statements, reviews 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. Audit fees for 2009
and 2008 include approximately $1,060,000 and $1,375,900, 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 2009 and 2008 include approximately
$1,335,000 and $1,356,000, 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 2009 and 2008 include approximately
$383,000 and $489,900, 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 2009 and 2008, 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.  74




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##### Table of Contents



Item 16D. Exemptions from the Listing Standards for Audit Committees
  
 Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers
  
 Item 16F. Change in Registrants Certifying Accountant
  
 Item 16G. Corporate Governance
  
 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 Total 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)
  75




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##### Table of Contents



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)2.8
    
    
    Indenture dated as of January 27, 2010 among Teekay Corporation and The Bank of New York Mellon Trust Company, N.A. for
US $450,000,000 8.5% Senior Notes due 2020. (17)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)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.  76




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(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.(17)
    
    Previously filed as an exhibit to the Companys Report on Form 6-K (File No. 1-12874), filed
with the SEC on January 27, 2010, and hereby incorporated by reference to such Report.  77




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SIGNATURE
  TEEKAY CORPORATIONBy:
    /s/ Vincent LokVincent LokExecutive Vice President and Chief
Financial Officer
(Principal Financial and Accounting Officer)   78




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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 TEEKAY CORPORATION
 Teekay Corporation
   Consolidation
   Vancouver, Canada,
April 29, 2010
    
    /s/ ERNST & YOUNG LLP
Chartered Accountants
  F - 1




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 TEEKAY CORPORATION
 Internal ControlIntegrated Framework COSO criteria
    .
  Vancouver, Canada,
April 29, 2010
    
    /s/ ERNST & YOUNG LLP
Chartered Accountants
  F - 2




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##### Table of Contents



TEEKAY CORPORATION AND SUBSIDIARIES (NOTE 1)
 
 CONSOLIDATED STATEMENTS OF INCOME (LOSS)
 (in thousands of U.S. dollars, except share amounts)
 Year ended
    
    
    Year ended
    
    
    Year endedDecember 31,
    
    
    December 31,
    
    
    December 31,2009
    
    
    2008
    
    
    2007$
    
    
    $
    
    
    $REVENUES(note 2)
    
    
    2,172,049
    
    
    
    3,229,443
    
    
    
    2,387,625OPERATING EXPENSESVoyage expenses
    
    
    294,091
    
    
    
    758,388
    
    
    
    531,073Vessel operating expenses (note 15)
    
    
    602,117
    
    
    
    639,948
    
    
    
    470,433Time-charter hire expense (note 15)
    
    
    429,321
    
    
    
    612,089
    
    
    
    467,973Depreciation and amortization
    
    
    437,176
    
    
    
    418,802
    
    
    
    329,113General and administrative (note 15)
    
    
    212,483
    
    
    
    240,570
    
    
    
    246,534Loss (gain) on sale of vessels and equipment  net of write-downs (notes
18a and 18b)
    
    
    12,629
    
    
    
    (50,267
    )
    
    
    (16,531
    )Goodwill impairment charge (note 6)
    
    
    
    
    
    
    334,165
    
    
    
    Restructuring charge (note 20)
    
    
    14,444
    
    
    
    15,629
    
    
    
    Total operating expenses
    
    
    2,002,261
    
    
    
    2,969,324
    
    
    
    2,028,595Income from vessel operations
    
    
    169,788
    
    
    
    260,119
    
    
    
    359,030OTHER ITEMSInterest expense (note 15)
    
    
    (141,448
    )
    
    
    (290,933
    )
    
    
    (294,848
    )Interest income (note 15)
    
    
    19,999
    
    
    
    97,111
    
    
    
    101,199Realized and unrealized gain (loss) on non-designated derivative
instruments (note 15)
    
    
    140,046
    
    
    
    (567,074
    )
    
    
    (45,322
    )Equity income (loss) from joint ventures (note 16b)
    
    
    52,242
    
    
    
    (36,085
    )
    
    
    (12,404
    )Foreign exchange (loss) gain (notes 8 and 15)
    
    
    (20,922
    )
    
    
    24,727
    
    
    
    (61,571
    )Other income (loss) (note 14)
    
    
    12,961
    
    
    
    (3,935
    )
    
    
    23,170Net income (loss) before income taxes
    
    
    232,666
    
    
    
    (516,070
    )
    
    
    69,254Income tax (expense) recovery (note 21)
    
    
    (22,889
    )
    
    
    56,176
    
    
    
    3,192Net income (loss)
    
    
    209,777
    
    
    
    (459,894
    )
    
    
    72,446Less: Net income attributable to non-controlling interests
    
    
    (81,365
    )
    
    
    (9,561
    )
    
    
    (8,903
    )Net income (loss) attributable to stockholders of Teekay Corporation
    
    
    128,412
    
    
    
    (469,455
    )
    
    
    63,543Per common share of Teekay Corporation(note 19) Basic earnings (loss) attributable to stockholders of Teekay Corporation
    
    
    1.77
    
    
    
    (6.48
    )
    
    
    0.87 Diluted earnings (loss) attributable to stockholders of Teekay Corporation
    
    
    1.76
    
    
    
    (6.48
    )
    
    
    0.85 Cash dividends declared
    
    
    1.2650
    
    
    
    1.1413
    
    
    
    0.9875Weighted average number of common shares outstanding(note 19) Basic
    
    
    72,549,361
    
    
    
    72,493,429
    
    
    
    73,382,197 Diluted
    
    
    73,058,831
    
    
    
    72,493,429
    
    
    
    74,735,356
 The accompanying notes are an integral part of the consolidated financial statements.
  F - 3




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##### Table of Contents



TEEKAY CORPORATION AND SUBSIDIARIES (NOTE 1)
 
 CONSOLIDATED BALANCE SHEETS
 (in thousands of U.S. dollars)
 As at
    
    
    As atDecember 31, 2009
    
    
    December 31, 2008$
    
    
    $ASSETSCurrentCash and cash equivalents (note 8)
    
    
    422,510
    
    
    
    814,165Restricted cash (note 10)
    
    
    36,068
    
    
    
    35,841Accounts receivable, including non-trade of $19,521 (2008  $46,422)
    
    
    234,676
    
    
    
    300,462Vessels held for sale (note 18a)
    
    
    10,250
    
    
    
    69,649Net investment in direct financing leases (note 9)
    
    
    27,210
    
    
    
    22,941Prepaid expenses
    
    
    90,749
    
    
    
    117,651Current portion of derivative assets (note 15)
    
    
    29,996
    
    
    
    13,078Other assets
    
    
    12,919
    
    
    
    20,716Total current assets
    
    
    864,378
    
    
    
    1,394,503Restricted cash  long-term (note 10)
    
    
    579,243
    
    
    
    614,715Vessels and equipment(note 8)At cost, less accumulated depreciation of $1,673,380 (2008  $1,351,786)
    
    
    5,793,864
    
    
    
    5,784,597Vessels under capital leases, at cost, less accumulated amortization of $138,569 (2008  $106,975)
(note 10)
    
    
    903,521
    
    
    
    928,795Advances on newbuilding contracts (notes 16a and 16b)
    
    
    138,212
    
    
    
    553,702Total vessels and equipment
    
    
    6,835,597
    
    
    
    7,267,094Net investment in direct financing leases  non-current (note 9)
    
    
    485,202
    
    
    
    56,567Marketable securites
    
    
    18,904
    
    
    
    13,067Loans to joint ventures, bearing interest between 4.4% to 6.5% (2008  4.4% to 8.0%)
    
    
    21,998
    
    
    
    28,019Derivative assets (note 15)
    
    
    18,119
    
    
    
    154,248Investment in joint ventures (note 16b)
    
    
    139,790
    
    
    
    103,956Other non-current assets
    
    
    130,624
    
    
    
    114,873Intangible assets  net (note 6)
    
    
    213,870
    
    
    
    264,768Goodwill (note 6)
    
    
    203,191
    
    
    
    203,191Total assets
    
    
    9,510,916
    
    
    
    10,215,001LIABILITIES AND EQUITYCurrentAccounts payable
    
    
    57,242
    
    
    
    59,973Accrued liabilities (notes 7 and 20)
    
    
    321,890
    
    
    
    315,987Current portion of derivative liabilities (note 15)
    
    
    136,454
    
    
    
    166,725Current portion of long-term debt (note 8)
    
    
    231,209
    
    
    
    245,043Current obligation under capital leases (note 10)
    
    
    41,016
    
    
    
    147,616Current portion of in-process revenue contracts (note 6)
    
    
    56,758
    
    
    
    74,777Loan from joint venture partners
    
    
    1,294
    
    
    
    21,019Total current liabilities
    
    
    845,863
    
    
    
    1,031,140Long-term debt, including amounts due to joint venture partners of $16,410 (2008  $17,343) (note 8)
    
    
    4,187,962
    
    
    
    4,707,749Long-term obligation under capital leases (note 10)
    
    
    743,254
    
    
    
    669,725Derivative liabilities (note 15)
    
    
    223,025
    
    
    
    676,540Deferred income taxes (note 21)
    
    
    5,112
    
    
    
    6,182Asset retirement obligation
    
    
    22,092
    
    
    
    18,977In-process revenue contracts (note 6)
    
    
    187,602
    
    
    
    243,088Other long-term liabilities
    
    
    200,336
    
    
    
    209,195Total liabilities
    
    
    6,415,246
    
    
    
    7,562,596Commitments and contingencies (notes 9, 10, 15 and 16)EquityCommon stock and additional paid-in capital ($0.001 par value; 725,000,000 shares authorized;
72,694,345 shares outstanding (2008  72,512,291); 73,193,545 shares issued
(2008  73,011,488))(note 12)
    
    
    656,193
    
    
    
    642,911Retained earnings
    
    
    1,585,431
    
    
    
    1,507,617Non-controlling interest
    
    
    855,580
    
    
    
    583,938Accumulated other comprehensive loss (note 1)
    
    
    (1,534
    )
    
    
    (82,061
    )Total equity
    
    
    3,095,670
    
    
    
    2,652,405Total liabilities and equity
    
    
    9,510,916
    
    
    
    10,215,001
 The accompanying notes are an integral part of the consolidated financial statements.
  F - 4




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##### Table of Contents



TEEKAY CORPORATION AND SUBSIDIARIES (NOTE 1)
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (in thousands of U.S. dollars)
 Year Ended
    
    
    Year Ended
    
    
    Year EndedDecember 31,
    
    
    December 31,
    
    
    December 31,2009
    
    
    2008
    
    
    2007$
    
    
    $
    
    
    $Cash and cash equivalents provided by (used for)OPERATING ACTIVITIESNet income (loss)
    
    
    209,777
    
    
    
    (459,894
    )
    
    
    72,446Non-cash items:Depreciation and amortization
    
    
    437,176
    
    
    
    418,802
    
    
    
    329,113Amortization of in-process revenue contracts
    
    
    (75,977
    )
    
    
    (74,425
    )
    
    
    (70,979
    )Gain on sale of marketable securities
    
    
    
    
    
    
    (4,576
    )
    
    
    (9,577
    )Gain on sale of vessels and equipment
    
    
    (27,683
    )
    
    
    (100,392
    )
    
    
    (16,531
    )Write-down of marketable securities
    
    
    
    
    
    
    20,157
    
    
    
    Write-down for impairment of goodwill
    
    
    
    
    
    
    334,165
    
    
    
    Write-down of intangible assets and other
    
    
    16,105
    
    
    
    9,748
    
    
    
    Write-down of vessels and equipment
    
    
    24,221
    
    
    
    40,377
    
    
    
    Loss on repurchase of bonds
    
    
    566
    
    
    
    1,310
    
    
    
    947Equity (income) loss, net of dividends received
    
    
    (49,299
    )
    
    
    30,352
    
    
    
    11,419Income tax expense (recovery)
    
    
    22,889
    
    
    
    (56,176
    )
    
    
    (3,192
    )Employee stock option compensation
    
    
    11,255
    
    
    
    14,117
    
    
    
    9,676Foreign exchange loss (gain) and other
    
    
    21,745
    
    
    
    (49,880
    )
    
    
    11,325Unrealized (gains) losses on derivative instruments
    
    
    (293,174
    )
    
    
    530,283
    
    
    
    99,055Change in operating assets and liabilities (note 17a)
    
    
    148,655
    
    
    
    (28,816
    )
    
    
    (43,871
    )Expenditures for drydocking
    
    
    (78,005
    )
    
    
    (101,511
    )
    
    
    (85,403
    )Net operating cash flow
    
    
    368,251
    
    
    
    523,641
    
    
    
    304,428FINANCING ACTIVITIESProceeds from issuance of long-term debt
    
    
    1,194,037
    
    
    
    2,208,715
    
    
    
    4,164,308Debt issuance costs
    
    
    (11,745
    )
    
    
    (8,425
    )
    
    
    (14,135
    )Scheduled repayments of long-term debt
    
    
    (156,315
    )
    
    
    (328,570
    )
    
    
    (220,082
    )Prepayments of long-term debt
    
    
    (1,583,852
    )
    
    
    (1,306,309
    )
    
    
    (1,958,382
    )Repayments of capital lease obligations
    
    
    (37,248
    )
    
    
    (33,176
    )
    
    
    (30,999
    )Proceeds from loans from joint venture partner
    
    
    649
    
    
    
    26,338
    
    
    
    44,185Repayment of loans from joint venture partner
    
    
    (24,140
    )
    
    
    (4,104
    )
    
    
    (68,968
    )Decrease in restricted cash
    
    
    38,953
    
    
    
    23,955
    
    
    
    24,322Net proceeds from issuance of Teekay LNG Partners L.P. units (note 5)
    
    
    158,996
    
    
    
    148,345
    
    
    
    84,185Net proceeds from issuance of Teekay Offshore Partners L.P. units (note 5)
    
    
    102,009
    
    
    
    141,484
    
    
    
    Net proceeds from issuance of Teekay Tankers Ltd. Class A shares (note 5)
    
    
    65,556
    
    
    
    
    
    
    
    208,186Issuance of Common Stock upon exercise of stock options
    
    
    2,007
    
    
    
    4,224
    
    
    
    34,508Repurchase of Common Stock
    
    
    
    
    
    
    (20,512
    )
    
    
    (80,430
    )Distribution from subsidiaries to non-controlling interests
    
    
    (109,942
    )
    
    
    (91,794
    )
    
    
    (49,411
    )Cash dividends paid
    
    
    (91,747
    )
    
    
    (82,877
    )
    
    
    (72,499
    )Other financing activities
    
    
    
    
    
    
    (1,210
    )
    
    
    Net financing cash flow
    
    
    (452,782
    )
    
    
    676,084
    
    
    
    2,064,788INVESTING ACTIVITIESExpenditures for vessels and equipment
    
    
    (495,214
    )
    
    
    (716,765
    )
    
    
    (910,304
    )Proceeds from sale of vessels and equipment
    
    
    219,834
    
    
    
    331,611
    
    
    
    214,797Purchases of marketable securities
    
    
    
    
    
    
    (542
    )
    
    
    (59,165
    )Proceeds from sale of marketable securities
    
    
    
    
    
    
    11,058
    
    
    
    57,093Proceeds from sale of interest in Swift Product Tanker Pool (note 18a)
    
    
    
    
    
    
    44,377
    
    
    
    Purchase of 50% of OMI Corporation, net of cash acquired of $577 (note 4)
    
    
    
    
    
    
    
    
    
    
    (1,108,216
    )Acquisition of additional 35.3% of Teekay Petrojarl ASA (note 3)
    
    
    
    
    
    
    (304,949
    )
    
    
    (1,210
    )Investment in joint ventures
    
    
    (7,426
    )
    
    
    (1,204
    )
    
    
    (16,975
    )Advances to joint ventures
    
    
    (1,369
    )
    
    
    (260,424
    )
    
    
    (479,242
    )Collections of loans from joint ventures
    
    
    
    
    
    
    30,484
    
    
    
    Investment in direct financing lease assets
    
    
    (25,526
    )
    
    
    (535
    )
    
    
    (13,947
    )Direct financing lease payments received
    
    
    1,084
    
    
    
    22,203
    
    
    
    21,151Other investing activities
    
    
    1,493
    
    
    
    16,453
    
    
    
    25,560Net investing cash flow
    
    
    (307,124
    )
    
    
    (828,233
    )
    
    
    (2,270,458
    )(Decrease) increase in cash and cash equivalents
    
    
    (391,655
    )
    
    
    371,492
    
    
    
    98,758Cash and cash equivalents, beginning of the year
    
    
    814,165
    
    
    
    442,673
    
    
    
    343,914Cash and cash equivalents, end of the year
    
    
    422,510
    
    
    
    814,165
    
    
    
    442,672
 (note 17)   The accompanying notes are an integral part of the consolidated financial statements.
  F - 5




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##### Table of Contents



TEEKAY CORPORATION AND SUBSIDIARIES (NOTE 1)
 
 CONSOLIDATED STATEMENTS OF CHANGES IN TOTAL EQUITY
 (in thousands of U.S. dollars)
 TOTAL EQUITYCommon
    
    
    
    
    
    
    AccumulatedThousands
    
    
    Stock and
    
    
    
    
    
    
    Otherof Common
    
    
    Additional
    
    
    
    
    
    
    Comprehensive
    
    
    Non-Shares
    
    
    Paid-in
    
    
    Retained
    
    
    Income
    
    
    controllingOutstanding
    
    
    Capital
    
    
    Earnings
    
    
    (Loss)
    
    
    Interest
    
    
    Total#
    
    
    $
    
    
    $
    
    
    $
    
    
    $
    
    
    $Balance as at December 31, 2006
    
    
    72,832
    
    
    
    596,712
    
    
    
    1,916,835
    
    
    
    5,600
    
    
    
    461,887
    
    
    
    2,981,034Net income
    
    
    
    
    
    
    
    
    
    
    63,543
    
    
    
    
    
    
    
    8,903
    
    
    
    72,446Other comprehensive income:Unrealized gain on marketable securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19,612
    
    
    
    
    
    
    
    19,612Pension adjustments, net of taxes (notes 1 and 22)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,278
    )
    
    
    
    
    
    
    (6,278
    )Unrealized net gain on qualifying cash flow hedging
instruments (note 15)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,231
    
    
    
    149
    
    
    
    6,380Reclassification adjustment for gain on marketable securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (17,887
    )
    
    
    
    
    
    
    (17,887
    )Realized net gain on qualifying cash flow hedging
instruments (note 15)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,711
    )
    
    
    (31
    )
    
    
    (2,742
    )Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,021
    
    
    
    71,531Dividends declared
    
    
    
    
    
    
    
    
    
    
    (72,508
    )
    
    
    
    
    
    
    (49,411
    )
    
    
    (121,919
    )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
    
    
    15
    
    
    
    589
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    589Repurchase of Common Stock (note 12)
    
    
    (1,511
    )
    
    
    (12,708
    )
    
    
    (67,722
    )
    
    
    
    
    
    
    
    
    
    
    (80,430
    )Employee stock option compensation (note 12)
    
    
    
    
    
    
    9,676
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,676Dilution gain on public offerings of Teekay LNG and
Teekay Tankers and other (note 5)
    
    
    
    
    
    
    
    
    
    
    183,464
    
    
    
    
    
    
    
    
    
    
    
    183,464Addition of non-controlling interest from unit and share issuances and other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    122,842
    
    
    
    122,842Balance as at December 31, 2007
    
    
    72,772
    
    
    
    628,786
    
    
    
    2,022,601
    
    
    
    4,567
    
    
    
    544,339
    
    
    
    3,200,293Net (loss) income
    
    
    
    
    
    
    
    
    
    
    (469,455
    )
    
    
    
    
    
    
    9,561
    
    
    
    (459,894
    )Other comprehensive income (loss):Unrealized loss on marketable securities, net of realized gains
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (21,449
    )
    
    
    
    
    
    
    (21,449
    )Pension adjustments, net of taxes (notes 1 and 22)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (17,060
    )
    
    
    (1,058
    )
    
    
    (18,118
    )Unrealized net loss on qualifying cash flow hedging
instruments (note 15)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (86,333
    )
    
    
    (9,077
    )
    
    
    (95,410
    )Reclassification adjustment for loss on marketable securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14,123
    
    
    
    
    
    
    
    14,123Realized net loss on qualifying cash flow hedging
instruments (note 15)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    24,091
    
    
    
    424
    
    
    
    24,515Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (150
    )
    
    
    (556,233
    )Dividends declared
    
    
    
    
    
    
    
    
    
    
    (82,889
    )
    
    
    
    
    
    
    (91,794
    )
    
    
    (174,683
    )Reinvested dividends
    
    
    1
    
    
    
    12
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12Exercise of stock options
    
    
    179
    
    
    
    4,224
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,224Issuance of Common Stock
    
    
    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
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,865Petrojarl acquisition and other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (99,047
    )
    
    
    (99,047
    )Dilution gain on public offerings of Teekay Offshore and Teekay LNG (note 5)
    
    
    
    
    
    
    
    
    
    
    53,644
    
    
    
    
    
    
    
    
    
    
    
    53,644Addition of non-controlling interest from unit and share issuances and other issuances and other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    230,590
    
    
    
    230,590Balance as at December 31, 2008
    
    
    72,512
    
    
    
    642,911
    
    
    
    1,507,617
    
    
    
    (82,061
    )
    
    
    583,938
    
    
    
    2,652,405Net income
    
    
    
    
    
    
    
    
    
    
    128,412
    
    
    
    
    
    
    
    81,365
    
    
    
    209,777Other comprehensive income (loss):Unrealized gain on marketable securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,837
    
    
    
    
    
    
    
    5,837Pension adjustments, net of taxes (notes 1 and 22)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,044
    
    
    
    
    
    
    
    13,044Unrealized net gain on qualifying cash flow hedging instruments (note 15)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    39,279
    
    
    
    6,715
    
    
    
    45,994Realized net loss on qualifying cash flow hedging instruments (note 15)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    22,367
    
    
    
    2,280
    
    
    
    24,647Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    90,360
    
    
    
    299,299Dividends declared
    
    
    
    
    
    
    
    
    
    
    (91,767
    )
    
    
    
    
    
    
    (109,942
    )
    
    
    (201,709
    )Reinvested dividends
    
    
    2
    
    
    
    20
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20Exercise of stock options
    
    
    180
    
    
    
    2,007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,007Employee stock option compensation (note 12)
    
    
    
    
    
    
    11,255
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,255Dilution gain on public offerings of Teekay LNG, Teekay Offshore and Teekay Tankers (note 5)
    
    
    
    
    
    
    
    
    
    
    41,169
    
    
    
    
    
    
    
    
    
    
    
    41,169Addition of non-controlling interest from unit and share issuances and other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    291,224
    
    
    
    291,224Balance as at December 31, 2009
    
    
    72,694
    
    
    
    656,193
    
    
    
    1,585,431
    
    
    
    (1,534
    )
    
    
    855,580
    
    
    
    3,095,670
 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
 GAAP Teekay Company
    Reporting currency
  Operating revenues and expenses
 FPSO
   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 31,2009
    
    
    2008
    
    
    2007Balance at January 1,
    
    
    154,613
    
    
    
    98,925
    
    
    
    57,030Costs incurred for drydocking
    
    
    79,482
    
    
    
    98,092
    
    
    
    71,181Drydock amortization
    
    
    (62,042
    )
    
    
    (42,404
    )
    
    
    (29,286
    )Balance at December 31,
    
    
    172,053
    
    
    
    154,613
    
    
    
    98,925
   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)
  Direct financing leases
 VOC
Equipment
 Investment in joint ventures
  Debt issuance costs
  Derivative instruments
    Derivatives and Hedging
 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
   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
  FASB
  Accumulated other comprehensive (loss) income
  December 31, 
2009
    
    
    December 31, 
2008
    
    
    December 31, 
2007$
    
    
    $
    
    
    $Unrealized gain (loss) on derivative instruments
    
    
    2,923
    
    
    
    (58,723
    )
    
    
    3,520Pension adjustments, net of tax recoveries of $925 (2008 
$3,585, 2007  $76)
    
    
    (10,294
    )
    
    
    (23,338
    )
    
    
    (6,278
    )Unrealized gain on available for sale marketable securities
    
    
    5,837
    
    
    
    
    
    
    
    7,325(1,534
    )
    
    
    (82,061
    )
    
    
    4,567
 Employee pension plans
  Earnings per common share
   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)
 Adoption of New Accounting Pronouncements
 a)
    
    In January 2009, the Company adopted an amendment to Financial Accounting Standards
Board (or FASB) Accounting Standards Codification (or ASC) 810, Consolidation, which
requires the Company to make certain changes to the presentation of our financial
statements. This amendment requires that non-controlling interests in subsidiaries held by
parties other than the Company be identified, labeled and presented in the statement of
financial position within equity, but separate from the stockholders equity. This
amendment requires that the amount of consolidated net income (loss) attributable to the
stockholders and to the non-controlling interest be clearly identified on the consolidated
statements of income (loss). In addition, this amendment provides for consistency regarding
changes in stockholders ownership including when a subsidiary is deconsolidated. Any
retained non-controlling equity investment in the former subsidiary will be initially
measured at fair value. Except for the presentation and disclosure provisions of this
amendment, which were adopted retrospectively to the Companys consolidated financial
statements, this amendment was adopted prospectively.
 Consolidated net income (loss) attributable to the stockholders of Teekay Corporation would
have been different in the twelve months ended December 31, 2009, had the amendment to FASB
ASC 810 not been adopted. Losses attributable to the non-controlling interest that exceed the
entities equity capital would have been charged against the majority interest, as there was
no obligation of the non-controlling interest to cover such losses. However, if future
earnings do materialize, the majority interest should have been credited to the extent of
such losses previously absorbed. Pro forma consolidated net income attributable to the
stockholders of Teekay Corporation and pro forma earnings per share had the amendment to FASB
ASC 810 not been adopted are as follows:
 Twelve Months EndedDecember 31, 2009(Unaudited)$Pro forma net income attributable to the stockholders of Teekay Corporation
    
    
    136,803Pro forma earnings per share:Basic
    
    

    1.89Diluted
    
    
    1.87
 b)
    
    In January 2009, the Company adopted an amendment to FASB ASC 805, Business
Combinations. This amendment requires an acquirer to recognize the assets acquired, the
liabilities assumed, and any non-controlling interest in the acquiree at the acquisition
date, measured at their fair values as of that date. This amendment also requires that the
acquirer in a business combination achieved in stages to recognize the identifiable assets
and liabilities, as well as the non-controlling interest in the acquiree, at the full fair
values of the assets and liabilities as if they had occurred on the acquisition date. In
addition, this amendment requires that all acquisition related costs be expensed as
incurred, rather than capitalized as part of the purchase price and those restructuring
costs that an acquirer expected, but was not obligated to incur, to be recognized
separately from the business combination. This amendment applies prospectively to business
combinations for which the acquisition date is on or after the beginning of the first
annual reporting period beginning on or after December 15, 2008. The adoption of this
amendment did not have a material impact on the consolidated financial statements.
 c)
    
    In January 2009, the Company adopted an amendment to FASB ASC 323, Investments  Equity
Method and Joint Ventures, which addresses the accounting for the acquisition of equity
method investments for changes in ownership levels. The adoption of this amendment did not
have a material impact on the consolidated financial statements.
 d)
    
    In January 2009, the Company adopted an amendment to FASB ASC 820, Fair Value
Measurements and Disclosures, which defines fair value, establishes a framework for
measuring fair value, and expands disclosures about fair value measurements for
nonfinancial assets and nonfinancial liabilities, except for items that are recognized or
disclosed at fair value in the financial statements on a recurring basis (at least
annually). Non-financial assets and non-financial liabilities include all assets and
liabilities other than those meeting the definition of a financial asset or financial
liability. The Companys adoption of this amendment did not have a material impact on the
consolidated financial statements. See Note 11 of the notes to the consolidated financial
statements.
 e)
    
    In January 2009, the Company adopted an amendment to FASB ASC 815, Derivatives and
Hedging, which requires expanded disclosures about a companys derivative instruments and
hedging activities, including increased qualitative, and credit-risk disclosures. See Note
15 of the notes to the consolidated financial statements.
 f)
    
    In January 2009, the Company adopted an amendment to FASB ASC 350, Intangibles -
Goodwill and Other, which amends the factors that should be considered in developing
renewal or extension of assumptions used to determine the useful life of a recognized
intangible asset. The adoption of this amendment did not have a material impact on the
consolidated financial statements.
 g)
    
    In April 2009, the Company adopted an amendment to FASB ASC 825, Financial Instruments,
which requires disclosure of the fair value of financial instruments to be disclosed on a
quarterly basis and that disclosures provide qualitative and quantitative information on
fair value estimates for all financial instruments not measured on the balance sheet at
fair value, when practicable, with the exception of certain financial instruments. See Note
11 of the notes to the consolidated financial statements.
  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)
 h)
    
    In April 2009, the Company adopted an amendment to FASB ASC 855, Subsequent Events,
which established general standards of accounting for and disclosure of events that occur
after the balance sheet date but before financial statements are issued or are available to
be issued. This amendment requires the disclosure of the date through which an entity has
evaluated subsequent events and the basis for selecting that date, that is, whether that
date represents the date the financial statements were issued or were available to be
issued. This amendment is effective for interim and annual reporting periods ending after
June 15, 2009. In February 2010, the FASB further amended FASB ASC 855 to require a SEC
filer to evaluate subsequent events through the date the financial statements are issued
and to exempt a SEC filer from disclosing the date through which subsequent events have
been evaluated. The adoption of these amendments did not have a material impact on the
consolidated financial statements. See Note 24 of the notes to the consolidated financial
statements.
 i)
    
    In June 2009, the FASB issued the FASB ASC effective for financial statements issued
for interim and annual periods ending after September 15, 2009. The ASC identifies the
source of GAAP recognized by the FASB to be applied by nongovernmental entities. Rules and
interpretive releases of the SEC under authority of federal securities laws are also
sources of authoritative GAAP for SEC registrants. On the effective date, the ASC
superseded all then-existing non-SEC accounting and reporting standards. All other
non-grandfathered non-SEC accounting literature not included in the ASC will become
non-authoritative. The Company adopted the ASC on July 1, 2009, and incorporated it in the
notes to the consolidated financial statements.
 j)
    
    In August 2009, the FASB issued an amendment to FASB ASC 820 Fair Value Measurements
and Disclosuresthat clarifies the fair value measurement requirements for liabilities that
lack a quoted price in an active market and provides clarifying guidance regarding the
consideration of restrictions when estimating the fair value of a liability. This amendment
was effective for the Company on October 1, 2009. The adoption of this ASC did not have a
material impact on the consolidated financial statements.
 2.
    
    Segment Reporting
  FSO Teekay Navion Shuttle Tankers and Offshore Teekay
Petrojarl Teekay Gas Services Teekay Tanker Services
  Shuttle
    
    
    
    
    
    
    Liquefied
    
    
    ConventionalTanker and FSO
    
    
    FPSO
    
    
    Gas
    
    
    TankerYear ended December 31, 2009
    
    Segment
    
    
    Segment
    
    
    Segment
    
    
    Segment
    
    
    TotalRevenues
    
    
    583,320
    
    
    
    390,576
    
    
    
    246,472
    
    
    
    951,681
    
    
    
    2,172,049Voyage expenses
    
    
    86,499
    
    
    
    
    
    
    
    1,018
    
    
    
    206,574
    
    
    
    294,091Vessel operating expenses
    
    
    170,312
    
    
    
    197,480
    
    
    
    49,466
    
    
    
    184,859
    
    
    
    602,117Time-charter hire expense
    
    
    113,786
    
    
    
    
    
    
    
    
    
    
    
    315,535
    
    
    
    429,321Depreciation and amortization
    
    
    122,630
    
    
    
    102,316
    
    
    
    59,868
    
    
    
    152,362
    
    
    
    437,176General and administrative (1)
    
    
    54,074
    
    
    
    37,652
    
    
    
    21,245
    
    
    
    99,512
    
    
    
    212,483Loss on sale of vessels and equipment, net of
write-downs
    
    
    1,902
    
    
    
    
    
    
    
    
    
    
    
    10,727
    
    
    
    12,629Restructuring charge
    
    
    7,032
    
    
    
    
    
    
    
    4,177
    
    
    
    3,235
    
    
    
    14,444Income (loss) from vessel operations
    
    
    27,085
    
    
    
    53,128
    
    
    
    110,698
    
    
    
    (21,123
    )
    
    
    169,788Segment assets
    
    
    1,670,921
    
    
    
    1,227,438
    
    
    
    2,862,534
    
    
    
    2,879,422
    
    
    
    8,640,315
  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)
 Shuttle
    
    
    
    
    
    
    Liquefied
    
    
    ConventionalTanker and FSO
    
    
    FPSO
    
    
    Gas
    
    
    TankerYear ended December 31, 2008
    
    Segment
    
    
    Segment
    
    
    Segment
    
    
    Segment
    
    
    TotalRevenues
    
    
    705,461
    
    
    
    383,752
    
    
    
    221,930
    
    
    
    1,918,300
    
    
    
    3,229,443Voyage expenses
    
    
    171,599
    
    
    
    
    
    
    
    1,009
    
    
    
    585,780
    
    
    
    758,388Vessel operating expenses
    
    
    173,067
    
    
    
    216,998
    
    
    
    48,185
    
    
    
    201,698
    
    
    
    639,948Time-charter hire expense
    
    
    134,100
    
    
    
    
    
    
    
    
    
    
    
    477,989
    
    
    
    612,089Depreciation and amortization
    
    
    117,198
    
    
    
    91,734
    
    
    
    58,371
    
    
    
    151,499
    
    
    
    418,802General and administrative (1)
    
    
    56,831
    
    
    
    50,918
    
    
    
    23,072
    
    
    
    109,749
    
    
    
    240,570Goodwill impairment charge (note 6)
    
    
    
    
    
    
    334,165
    
    
    
    
    
    
    
    
    
    
    
    334,165(Gain) loss on sale of vessels and
equipment, net of write-downs
    
    
    (3,771
    )
    
    
    12,019
    
    
    
    
    
    
    
    (58,515
    )
    
    
    (50,267
    )Restructuring charge
    
    
    10,645
    
    
    
    
    
    
    
    634
    
    
    
    4,350
    
    
    
    15,629Income (loss) from vessel operations
    
    
    45,792
    
    
    
    (322,082
    )
    
    
    90,659
    
    
    
    445,750
    
    
    
    260,119Segment assets
    
    
    1,722,432
    
    
    
    1,334,642
    
    
    
    2,919,194
    
    
    
    2,887,129
    
    
    
    8,863,397
 Shuttle
    
    
    
    
    
    
    Liquefied
    
    
    ConventionalTanker and FSO
    
    
    FPSO
    
    
    Gas
    
    
    TankerYear ended December 31, 2007
    
    Segment
    
    
    Segment
    
    
    Segment
    
    
    Segment
    
    
    TotalRevenues
    
    
    642,047
    
    
    
    350,279
    
    
    
    166,981
    
    
    
    1,228,318
    
    
    
    2,387,625Voyage expenses
    
    
    117,571
    
    
    
    
    
    
    
    109
    
    
    
    413,393
    
    
    
    531,073Vessel operating expenses
    
    
    127,691
    
    
    
    171,106
    
    
    
    30,239
    
    
    
    141,397
    
    
    
    470,433Time-charter hire expense
    
    
    160,993
    
    
    
    
    
    
    
    
    
    
    
    306,980
    
    
    
    467,973Depreciation and amortization
    
    
    104,936
    
    
    
    68,047
    
    
    
    46,018
    
    
    
    110,112
    
    
    
    329,113General and administrative (1)
    
    
    60,293
    
    
    
    40,173
    
    
    
    20,521
    
    
    
    125,547
    
    
    
    246,534Gain on sale of vessels and equipment,
net of write-downs
    
    
    (16,531
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (16,531
    )Income from vessel operations
    
    
    87,094
    
    
    
    70,953
    
    
    
    70,094
    
    
    
    130,889
    
    
    
    359,030Segment assets
    
    
    1,761,547
    
    
    
    1,426,088
    
    
    
    3,366,049
    
    
    
    2,761,941
    
    
    
    9,315,625
 (1)
    
    Includes direct general and administrative expenses and indirect general and
administrative expenses (allocated to each segment based on estimated use of corporate
resources).  December 31,
    
    
    December 31,2009
    
    
    2008$
    
    
    $Total assets of all operating segments
    
    
    8,640,315
    
    
    
    8,863,397Cash and restricted cash
    
    
    422,510
    
    
    
    817,969Accounts receivable and other assets
    
    
    448,091
    
    
    
    533,635Consolidated total assets
    
    
    9,510,916
    
    
    
    10,215,001
  3.
    
    Acquisition of Additional 35.3% of Teekay Petrojarl ASA
 Teekay Petrojarl
  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)
  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
    
    
    313,641LIABILITIESIn-process revenue contracts
    
    
    (108,138
    )Other long-term liabilities
    
    
    (2,859
    )Total liabilities
    
    
    (110,997
    )Non-controlling interest
    
    
    102,305Purchase price
    
    
    304,949
 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 (conventional 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
  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)
  Pro FormaYear EndedDecember 31, 2007(Unaudited)$Revenues
    
    
    2,526,069Gain on sale of vessels and equipment  net of write-downs
    
    
    16,531Net income
    
    
    59,352Earnings per common share:- Basic
    
    
    0.81- Diluted
    
    
    0.79
 5.
    
    Equity Offerings by Subsidiaries
 Teekay Offshore
 Teekay Tankers
 Teekay LNG
     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)
  Teekay
    
    
    Teekay
    
    
    Teekay
    
    
    Teekay
    
    
    Teekay
    
    
    Teekay
    
    
    TeekayTankers
    
    
    Tankers
    
    
    Offshore
    
    
    Offshore
    
    
    LNG
    
    
    LNG
    
    
    LNGFollow-on
    
    
    Initial
    
    
    Follow-on
    
    
    Follow-on
    
    
    Follow-on
    
    
    Follow-on
    
    
    Follow-onOffering
    
    
    Offering
    
    
    Offering
    
    
    Offering
    
    
    Offerings
    
    
    Offering
    
    
    Offering2009
    
    
    2007
    
    
    2009
    
    
    2008
    
    
    2009
    
    
    2008
    
    
    2007$
    
    
    $
    
    
    $
    
    
    $
    
    
    $
    
    
    $
    
    
    $Total proceeds received
    
    
    68,600
    
    
    
    224,250
    
    
    
    107,042
    
    
    
    212,500
    
    
    
    170,237
    
    
    
    208,705
    
    
    
    89,489Less Teekay
Corporation portion
    
    
    
    
    
    
    
    
    
    
    (2,291
    )
    
    
    (64,824
    )
    
    
    (3,436
    )
    
    
    (54,174
    )
    
    
    (1,790
    )Offering expenses
    
    
    (3,044
    )
    
    
    (16,064
    )
    
    
    (2,742
    )
    
    
    (6,192
    )
    
    
    (7,805
    )
    
    
    (6,186
    )
    
    
    (3,514
    )Net proceeds received
    
    
    65,556
    
    
    
    208,186
    
    
    
    102,009
    
    
    
    141,484
    
    
    
    158,996
    
    
    
    148,345
    
    
    
    84,185
  OPCO
    6.
    
    Goodwill, Intangible Assets and In-Process Revenue Contracts
 Goodwill
  Shuttle Tanker
    
    
    
    
    
    
    
    
    
    
    Conventionaland FSO
    
    
    FPSO
    
    
    Liquefied Gas
    
    
    TankerSegment
    
    
    Segment
    
    
    Segment
    
    
    Segment
    
    
    Total$
    
    
    $
    
    
    $
    
    
    $
    
    
    $Balance as of December 31, 2008 and 2009
    
    
    130,908
    
    
    
    
    
    
    
    35,631
    
    
    
    36,652
    
    
    
    203,191
   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)
   Intangible Assets
  Weighted-Average
    
    
    Gross Carrying
    
    
    Accumulated
    
    
    Net CarryingAmortization Period
    
    
    Amount
    
    
    Amortization
    
    
    Amount(Years)
    
    
    $
    
    
    $
    
    
    $Contracts of affreightment
    
    
    10.2
    
    
    
    124,251
    
    
    
    (88,015
    )
    
    
    36,236Time-charter contracts
    
    
    16.0
    
    
    
    231,221
    
    
    
    (83,823
    )
    
    
    147,398Vessel purchase options and other
intangible assets
    
    
    1.3
    
    
    
    44,631
    
    
    
    (14,395
    )
    
    
    30,23612.6
    
    
    
    400,103
    
    
    
    (186,233
    )
    
    
    213,870
  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
    )
    
    
    172,803Vessel purchase options and other
intangible assets
    
    
    2.8
    
    
    
    58,950
    
    
    
    (12,275
    )
    
    
    46,67513.1
    
    
    
    416,879
    
    
    
    (152,111
    )
    
    
    264,768
  In-Process Revenue Contracts
   7.
    
    Accrued Liabilities
 December 31, 
2009
    
    
    December 31, 
2008$
    
    
    $Voyage and vessel expenses
    
    
    188,950
    
    
    
    196,899Interest
    
    
    51,920
    
    
    
    45,626Payroll and benefits and other
    
    
    81,020
    
    
    
    73,462321,890
    
    
    
    315,987
  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)
 8.
    
    Long-Term Debt
 December 31, 
2009
    
    
    December 31, 
2008$
    
    
    $Revolving Credit Facilities
    
    
    1,975,360
    
    
    
    2,656,658Senior Notes (8.875%) due July 15, 2011
    
    
    177,004
    
    
    
    194,642USD-denominated Term Loans due through 2021
    
    
    1,837,980
    
    
    
    1,670,005Euro-denominated Term Loans due through 2023
    
    
    412,417
    
    
    
    414,144USD-denominated Unsecured Demand Loan due to Joint Venture Partners
    
    
    16,410
    
    
    
    17,3434,419,171
    
    
    
    4,952,792Less current portion
    
    
    231,209
    
    
    
    245,0434,187,962
    
    
    
    4,707,749
 Revolvers
 8.875% Notes
         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)
 9.
    
    Operating and Direct Financing Leases
 Charters-out
   Charters-in
  Net Investment in Direct Financing Leases
 VOC equipment
 December 31,
    
    
    December 31,2009
    
    
    2008$
    
    
    $Total minimum lease payments to be received
    
    
    837,319
    
    
    
    94,409Estimated unguaranteed residual value of leased properties
    
    
    197,074
    
    
    
    Initial direct costs and other
    
    
    1,134
    
    
    
    674Less unearned revenue
    
    
    (523,115
    )
    
    
    (15,575
    )Total
    
    
    512,412
    
    
    
    79,508Less current portion
    
    
    27,210
    
    
    
    22,941Total
    
    
    485,202
    
    
    
    56,567
  Operating Lease Obligations
 Teekay Tangguh Subsidiary
 Tangguh LNG Carriers Head Leases Subleases
  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)
  Head Lease
    
    
    SubleaseYear
    

Receipts (1)
    
    

Payments (1)2010
    
    $
    28,892
    
    
    $
    25,0722011
    
    
    28,875
    
    
    
    25,0722012
    
    
    28,860
    
    
    
    25,0722013
    
    
    28,843
    
    
    
    25,0722014
    
    
    28,828
    
    
    
    25,072Thereafter
    
    
    303,735
    
    
    
    357,387Total
    
    $
    448,033
    
    
    $
    482,747
 (1)
    
    The Head Leases are fixed-rate operating leases while the Subleases are
variable-rate operating leases. 10.
    
    Capital Lease Obligations and Restricted Cash
 Capital Lease Obligations
 December 31,
    
    
    December 31,2009
    
    
    2008$
    
    
    $RasGas II LNG Carriers
    
    
    470,138
    
    
    
    469,551Spanish-Flagged LNG Carrier
    
    
    119,068
    
    
    
    143,429Suezmax Tankers
    
    
    195,064
    
    
    
    204,361Total
    
    
    784,270
    
    
    
    817,341Less current portion
    
    
    41,016
    
    
    
    147,616Total
    
    
    743,254
    
    
    
    669,725
 RasGas II LNG Carriers. RasGas II LNG Carriers RasGas II
    Year
    
    Commitment2010
    
     $
   24.0 million2011
    
     $
   24.0 million2012
    
     $
   24.0 million2013
    
     $
   24.0 million2014
    
     $
   24.0 millionThereafter
    
     $
   929.1 million
  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)
 Spanish-Flagged LNG Carrier.
 Year
    
    Commitment2010
    
    26.9 million Euros ($38.6 million)2011
    
    64.8 million Euros ($92.8 million)
 Suezmax Tankers.
 Year
    
    Commitment2010
    
    $
    23.7 million2011
    
    $
    197.9 million
 FPSO Units. Petrojarl Foinaven, Petrojarl Banff Defeased Rental
Payments
 Petrojarl Foinaven
 Petrojarl Foinaven
 Restricted Cash
     11.
    
    Fair Value Measurements
  Cash and cash equivalents, restricted cash and marketable securities
 Vessels held for sale
  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)
 Loans to and loans from joint ventures and joint venture partners The fair value of the
Companys loans to and loans from joint ventures and joint venture partners approximates their
carrying amounts reported in the accompanying consolidated balance sheets.
 Long-term debt The fair value of the Companys fixed-rate and variable-rate long-term debt is
either based on quoted market prices or estimated using discounted cash flow analyses, based on
current rates currently available for debt with similar terms and remaining maturities and the
current credit worthiness of the Company.
 Derivative instruments The fair value of the Companys derivative instruments is the estimated
amount that the Company would receive or pay to terminate the agreements at the reporting date,
taking into account, as applicable, current interest rates, foreign exchange rates, and the
current credit worthiness of both the Company and the derivative counterparties. Given the
current volatility in the credit markets, it is reasonably possible that the amounts recorded as
derivative assets and liabilities could vary by material amounts in the near term.
 The Company categorizes its fair value estimates using a fair value hierarchy based on the
inputs used to measure fair value. The fair value hierarchy has three levels based on the
reliability of the inputs used to determine fair value as follows:
 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; and
 Level 3. Unobservable inputs in which there is little or no market data, which require the
reporting entity to develop its own assumptions.
 The estimated fair value of the Companys financial instruments and other non-financial assets
and categorization using the fair value hierarchy for those financial instruments that are
measured at fair value on a recurring basis is as follows:
 December 31, 2009
    
    
    December 31, 2008Carrying
    
    
    Fair
    
    
    Carrying
    
    
    FairFair Value
    
    Amount
    
    
    Value
    
    
    Amount
    
    
    ValueHierarchy
    
    Asset (Liability)
    
    
    Asset (Liability)
    
    
    Asset (Liability)
    
    
    Asset (Liability)Level (1)
    
    $
    
    
    $
    
    
    $
    
    
    $Cash and cash equivalents, restricted
cash, and marketable securities
    
    Level 1
    
    
    1,056,725
    
    
    
    1,056,725
    
    
    
    1,477,788
    
    
    
    1,477,788Vessels held for sale
    
    
    
    
    10,250
    
    
    
    10,250
    
    
    
    69,649
    
    
    
    69,649Loans to joint ventures
    
    
    
    
    21,998
    
    
    
    21,998
    
    
    
    28,019
    
    
    
    28,019Loans from joint venture partners
    
    
    
    
    (1,294
    )
    
    
    (1,294
    )
    
    
    (22,255
    )
    
    
    (22,255
    )Long-term debt
    
    
    
    
    (4,419,171
    )
    
    
    (4,055,367
    )
    
    
    (4,952,792
    )
    
    
    (4,537,237
    )Derivative instruments (2)Interest rate swap agreements (3)
    
    Level 2
    
    
    (378,407
    )
    
    
    (378,407
    )
    
    
    (718,871
    )
    
    
    (718,871
    )Interest rate swap agreements (3)
    
    Level 2
    
    
    36,744
    
    
    
    36,744
    
    
    
    167,390
    
    
    
    167,390Interest rate swaptions
    
    Level 2
    
    
    
    
    
    
    
    
    
    
    (27,461
    )
    
    
    (27,461
    )Foreign currency contracts
    
    Level 2
    
    
    10,461
    
    
    
    10,461
    
    
    
    (90,966
    )
    
    
    (90,966
    )Bunker fuel swap contracts
    
    Level 2
    
    
    612
    
    
    
    612
    
    
    
    (3,142
    )
    
    
    (3,142
    )Forward freight agreements
    
    Level 2
    
    
    (504
    )
    
    
    (504
    )
    
    
    (604
    )
    
    
    (604
    )Foinaven embedded derivative
    
    Level 2
    
    
    (8,769
    )
    
    
    (8,769
    )
    
    
    (9,354
    )
    
    
    (9,354
    )
 (1)
    
    The fair value hierarchy level is only applicable to each financial instrument on the
consolidated balance sheets that are recorded at fair value on a recurring basis.(2)
    
    The Company transacts all of its derivative instruments through investment-grade rated
financial institutions at the time of the transaction and requires no collateral from these
institutions.(3)
    
    The fair value of the Companys interest rate swap agreements includes $28.5 million of
net accrued interest which is recorded in accrued liabilities on the balance sheet. The Company has determined that other than Vessels Held for Sale, there are no other
non-financial assets or non-financial liabilities carried at fair value at December 31, 2009.
See Note 18(b) of the notes to the consolidated financial statements.
 12.
    
    Capital Stock
 The authorized capital stock of Teekay at December 31, 2009 and 2008, was 25,000,000 shares of
Preferred Stock, with a par value of $1 per share, and 725,000,000 shares of Common Stock, with
a par value of $0.001 per share. During 2009, the Company issued 0.2 million common shares upon
the exercise of stock options, and had no share repurchases. During 2008, the Company issued 0.2
million common shares upon the exercise of stock options and repurchased 0.5 million common shares for a total cost of $20.5 million. As at December 31, 2009, Teekay had 73,193,545 shares
of Common Stock (2008  73,011,488) and no shares of Preferred Stock issued. As at December 31,
2009, Teekay had 72,694,345 shares of Common Stock outstanding (2008  72,512,291).
 Dividends may be declared and paid out of surplus only, but if there is no surplus, dividends
may be declared or paid out of the net profits for the fiscal year in which the dividend is
declared and for the preceding fiscal year. Surplus is the excess of the net assets of the
company over the aggregated par value of the issued shares of the Teekay. 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.
  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)
 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, subject to cancellation upon
approval by the Board of Directors. As at December 31, 2009, Teekay had not repurchased any
shares of Common Stock pursuant to such authorizations. The total remaining share repurchase
authorization at December 31, 2009, was $200 million.
 Stock-based Compensation
 As at December 31, 2009, the Company had reserved pursuant to its 1995 Stock Option Plan and
2003 Equity Incentive Plan (collectively referred to as the Plans) 6,092,077 shares of Common
Stock (2008  6,256,497) for issuance upon exercise of options or equity awards granted or to be
granted. During the years ended December 31, 2009, 2008 and 2007, the Company granted options
under the Plans to acquire up to 1,517,900, 1,476,100, and 836,100 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, 2009, expire between March 6, 2010 and March 9, 2019, ten
years after the date of each respective grant.
 A summary of the Companys stock option activity and related information for the years ended
December 31, 2009 and 2008, are as follows:
 December 31, 2009
    
    
    December 31, 2008Options
    
    
    Weighted-Average
    
    
    Options
    
    
    Weighted-Average(000s)
    
    
    Exercise Price
    
    
    (000s)
    
    
    Exercise Price#
    
    
    $
    
    
    #
    
    
    $Outstanding-beginning of year
    
    
    4,813
    
    
    
    37.22
    
    
    
    3,665
    
    
    
    35.42Granted
    
    
    1,518
    
    
    
    11.84
    
    
    
    1,476
    
    
    
    40.35Exercised
    
    
    (180
    )
    
    
    12.21
    
    
    
    (179
    )
    
    
    23.54Forfeited
    
    
    (168
    )
    
    
    35.16
    
    
    
    (149
    )
    
    
    38.03Outstanding-end of year
    
    
    5,983
    
    
    
    31.46
    
    
    
    4,813
    
    
    
    37.22Exercisable-end of year
    
    
    3,798
    
    
    
    33.26
    
    
    
    2,556
    
    
    
    32.41
 As of December 31, 2009, there was $9.0 million of total unrecognized compensation cost related
to non-vested stock options granted under the Plans. Recognition of this compensation is
expected to be $6.3 million (2010), $2.4 million (2011) and $0.3 million (2012). During the
years ended December 31, 2009. 2008 and 2007, the Company recognized $11.3 million, $12.9
million and $9.7 million, respectively, of compensation cost relating to stock options granted
under the Plans. The intrinsic value of options exercised during 2009 was $2.0 million (2008 -
$4.5 million; 2007  $42.9 million).
 As at December 31, 2009, the intrinsic value of the outstanding in the money stock options was
$20.4 million and exercisable stock options was $8.9 million. As at December 31, 2009, the
weighted-average remaining life of options vested and expected to vest was 6.7 years.
 Further details regarding the Companys outstanding and exercisable stock options at December
31, 2009 are as follows:
 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)
    
    
    $$10.00  $14.99
    
    
    1,568
    
    
    
    8.9
    
    
    
    11.84
    
    
    
    554
    
    
    
    8.3
    
    
    
    11.83$15.00  $19.99
    
    
    566
    
    
    
    2.8
    
    
    
    19.57
    
    
    
    566
    
    
    
    2.8
    
    
    
    19.57$20.00  $29.99
    
    
    183
    
    
    
    1.3
    
    
    
    20.57
    
    
    
    184
    
    
    
    1.3
    
    
    
    20.57$30.00  $34.99
    
    
    378
    
    
    
    4.3
    
    
    
    33.58
    
    
    
    372
    
    
    
    4.2
    
    
    
    33.61$35.00  $39.99
    
    
    812
    
    
    
    6.3
    
    
    
    38.97
    
    
    
    794
    
    
    
    6.2
    
    
    
    38.95$40.00  $44.99
    
    
    1,360
    
    
    
    8.2
    
    
    
    40.41
    
    
    
    450
    
    
    
    8.2
    
    
    
    40.42$45.00  $49.99
    
    
    396
    
    
    
    5.2
    
    
    
    46.80
    
    
    
    396
    
    
    
    5.2
    
    
    
    46.80$50.00  $59.99
    
    
    719
    
    
    
    7.2
    
    
    
    51.40
    
    
    
    481
    
    
    
    7.2
    
    
    
    51.40$60.00  $64.99
    
    
    1
    
    
    
    7.3
    
    
    
    60.96
    
    
    
    1
    
    
    
    7.3
    
    
    
    60.965,983
    
    
    
    6.8
    
    
    
    31.46
    
    
    
    3,798
    
    
    
    5.8
    
    
    
    33.26
 The weighted-average grant-date fair value of options granted during 2009 was $3.74 per option
(2008  $9.31, 2007  $13.72). The fair value of each option granted was estimated on the date
of the grant using the Black-Scholes option pricing model. The following weighted-average
assumptions were used in computing the fair value of the options granted: expected volatility of
45% in 2009, 30% in 2008 and 28% in 2007; expected life of four years; dividend yield of 2.3% in
2009, 2.5% in 2008 and 2.0% in 2007; risk-free interest rate of 2.0% in 2009, 2.4% in 2008, and
4.5% in 2007; and estimated forfeiture rate of 9.0% in 2009, 2008 and 2007. The expected life of
the options granted was estimated using the historical exercise behavior of employees. The
expected volatility was generally based on historical volatility as calculated using historical
data during the five years prior to the grant date.
 The Company grants restricted stock units to certain eligible officers, employees and directors
of the Company. Each restricted stock unit is equal in value to one share of the Companys
common stock plus reinvested dividends from the grant date to the vesting date. The restricted
stock units vest equally over two or three years from the grant date. Upon vesting, the value of
the restricted stock unit is paid to each grantee in the form of cash or shares.
  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)
 During 2009, the Company granted 568,342 restricted stock units with a total fair value of $8.2
million based on the quoted market price, to certain of the Companys employees and directors of which 187,400 were issued pursuant to the Companys VIP plan. A
total of 102,300 restricted stock units with a market value of $2.5 million vested and that
amount was paid to grantees by issuing 18,318 shares of common stock and $1.9 million in
cash. During 2008, 101,000 restricted stock units with a market value of $2.0 million
vested and that amount was paid to grantees by issuing 42,099 shares of common stock and
approximately $0.5 million in cash. During the year ended December 31, 2009, the Company
recorded an expense (recovery) of $4.0 million (2008  $(0.7) million, 2007- $7.6 million)
related to the restricted stock units.
 During 2009, the Company also granted 47,570 (2008  10,500 and 2007  19,040) shares of
restricted stock awards with a fair value of $0.6 million, based on the quoted market price, to
certain of the Companys directors. The shares of restricted stock are issued when granted.
 During March 2010, the Company granted 733,167 options at a weighted average exercise price of
$24.42 per share, 263,620 restricted stock units with a total fair value of $6.4 million, 87,054
performance shares with a total fair value of $2.1 million and 27,028 shares of restricted stock
awards with a total fair value of $0.7 million, based on the quoted market price, to certain of
the Companys employees and directors.
 13.
    
    Related Party Transactions
 As at December 31, 2009, Resolute Investments, Ltd. (or Resolute) owned 41.9% (December 31, 2008
 42.0% and December 31, 2007  41.8%) of the Companys outstanding Common Stock. One of the
Companys directors, Thomas Kuo-Yuen Hsu, is the President and a director of Resolute. Another
of the Companys directors, Axel Karlshoej, is among the directors of Path Spirit Limited, which
is the trust protector for the trust that indirectly owns all of Resolutes outstanding equity.
 14.
    
    Other Income (Loss)
 Year Ended
    
    
    Year Ended
    
    
    Year EndedDecember 31, 2009
    
    
    December 31, 2008
    
    
    December 31, 2007$
    
    
    $
    
    
    $Gain on sale of marketable securities
    
    
    
    
    
    
    4,576
    
    
    
    9,577Write-down of marketable securities
    
    
    
    
    
    
    (20,158
    )
    
    
    (Loss) gain on bond repurchase
    
    
    (566
    )
    
    
    3,010
    
    
    
    (947
    )Volatile organic compound emission plant lease income
    
    
    6,892
    
    
    
    9,469
    
    
    
    10,960Miscellaneous income (loss)
    
    
    6,635
    
    
    
    (832
    )
    
    
    3,580Other income (loss)
    
    
    12,961
    
    
    
    (3,935
    )
    
    
    23,170
 15.
    
    Derivative Instruments and Hedging Activities
 The Company uses derivatives to manage certain risks in accordance with its overall risk
management policies. The following summarizes the Companys risk strategies with respect to
market risk from foreign exchange, changes in interest rates, spot tanker market rates for
vessels and bunker fuel prices.
 Foreign Exchange Risk
 The Company hedges portions of its forecasted expenditures denominated in foreign currencies
with foreign currency forward contracts. Certain foreign currency forward contracts are
designated, for accounting purposes, as cash flow hedges of forecasted foreign currency
expenditures.
 As at December 31, 2009, the Company was committed to the following foreign currency forward
contracts:
 Fair Value / Carrying AmountContract Amount in
    
    
    Average
    
    
    of Asset / (Liability)
    
    
    Expected MaturityForeign Currency
    
    
    Contractual
    
    
    Hedge
    
    
    Non-Hedge
    
    
    2010
    
    
    2011(millions)
    
    

Exchange Rate (1)
    
    
    (in millions of U.S. Dollars)
    
    
    (in millions of U.S. Dollars)Norwegian Kroner
    
    
    1,235.3
    
    
    
    6.13
    
    
    $
    9.5
    
    
    $
    0.2
    
    
    $
    158.3
    
    
    $
    43.3Euro
    
    
    50.3
    
    
    
    0.69
    
    
    $
    (0.3
    )
    
    $
    (0.4
    )
    
    $
    61.7
    
    
    $
    11.0Canadian Dollar
    
    
    54.0
    
    
    
    1.10
    
    
    $
    2.0
    
    
    
    
    
    
    $
    45.3
    
    
    $
    3.9British Pounds
    
    
    32.6
    
    
    
    0.61
    
    
    $
    (1.3
    )
    
    $
    0.8
    
    
    $
    45.8
    
    
    $
    7.4$
    9.9
    
    
    $
    0.6
    
    
    $
    311.1
    
    
    $
    65.6
 (1)
    
    Average contractual exchange rate represents the contracted amount of foreign currency
one U.S. Dollar will buy.  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)
 Tabular disclosureThe effect of cash flow hedging relationships relating to foreign currency forward contracts on
the consolidated statements of income (loss) for the year ended December 31, 2009 is as follows:
 Effective Portion
    
    
    Ineffective PortionAmount of Gain(Loss) Recognized inOther
    
    
    Gain (loss) Reclassified from Accumulated OtherComprehensive
    
    
    Comprehensive LossIncome
    
    
    Location
    
    Amount
    
    
    Location

    
    Amount of Gain$
    45,994
    
    
    Vessel operating expenses
    
    $
    (13,769
    )
    
    Vessel operating expenses
    
    $
    9,155General and administrative
    
    $
    (10,878
    )
    
    General and administrative
    
    $
    5,760
 As at December 31, 2009, the Companys accumulated other comprehensive loss included
$2.9 million of unrealized gains on foreign currency forward contracts designated as cash flow
hedges. As at December 31, 2009, the Company estimated, based on then current foreign exchange
rates, that it would reclassify approximately $3.0 million of net gains on foreign currency
forward contracts from accumulated other comprehensive loss to earnings during the next 12
months.
 Realized and unrealized gains (losses) of foreign currency forward contracts that are not
designated for accounting purposes as cash flow hedges, are recognized in earnings and reported
in realized and unrealized gains (losses) on non-designated derivative instruments in the
consolidated statements of income (loss). During the years ended December 31, 2009, 2008 and
2007, the Company recognized net realized and unrealized gains (losses) on foreign currency
forward contracts of $5.8 million, $(10.7) million and $61.1 million, respectively.
 Realized and unrealized (losses) gains of $(4.2) million and $14.7 million, respectively,
relating to foreign currency forwards contracts for the years ended December 31, 2008 and 2007,
were reclassified from general and administrative expense to realized and unrealized gains
(losses) on non-designated derivative instruments for comparative purposes. Realized and
unrealized (losses) gains of $(14.5) million and $23.3 million, respectively, relating to
foreign currency forwards contracts for the years ended December 31, 2008 and 2007, were
reclassified from vessel operating expenses to realized and unrealized gains (losses) on
non-designated derivative instruments for comparative purposes. Realized and unrealized gains of
$8.0 million and $23.1 million, respectively, relating to foreign currency forwards contracts
for the years ended December 31, 2008 and 2007, were reclassified from time-charter hire and
foreign exchange expenses to realized and unrealized gains (losses) on non-designated derivative
instruments for comparative purposes.
 Interest Rate Risk
 The Company enters into interest rate swaps which exchange a receipt of floating interest for a
payment of fixed interest to reduce the Companys exposure to interest rate variability on its
outstanding floating-rate debt. In addition, the Company holds interest rate swaps which
exchange a payment of floating rate interest for a receipt of fixed interest in order to reduce
the Companys exposure to the variability of interest income on its restricted cash deposits.
The Company has not designated its interest rate swaps as cash flow hedges for accounting
purposes.
 Realized and unrealized gains (losses) relating to the Companys interest rate swaps have been
reported in realized and unrealized gains (losses) on non-designated derivative instruments in
the consolidated statements of income (loss). During the year December 31, 2009, the Company
recognized net realized and unrealized gains of $130.8 million, relating to its interest rate
swaps. During the years ended December 31, 2008 and 2007, the Company recognized net realized
and unrealized (losses) gains of $(527.5) million and $118.6 million, respectively, relating to
its interest rate swaps which were reclassified in these consolidated financial statements from
interest income and interest expense to realized and unrealized gain (loss) on non-designated
derivative instruments for comparative purposes.
 As at December 31, 2009, the Company was committed to the following interest rate swap
agreements related to its LIBOR-based debt, restricted cash deposits and EURIBOR-based debt,
whereby certain of the Companys floating-rate debt and restricted cash deposits were swapped
with fixed-rate obligations or fixed-rate deposits:
 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
    
    
    455,406
    
    
    
    (37,260
    )
    
    
    27.1
    
    
    
    4.9U.S. Dollar-denominated interest rate swaps
    
    LIBOR
    
    
    3,146,871
    
    
    
    (278,220
    )
    
    
    8.6
    
    
    
    4.6U.S. Dollar-denominated interest rate swaps (3)
    
    LIBOR
    
    
    500,000
    
    
    
    (52,339
    )
    
    
    20.0
    
    
    
    5.5LIBOR-Based Restricted Cash Deposit:U.S. Dollar-denominated interest rate swaps (2)
    
    LIBOR
    
    
    473,837
    
    
    
    36,744
    
    
    
    27.1
    
    
    
    4.8EURIBOR-Based Debt:Euro-denominated interest rate swaps (4) (5)
    
    EURIBOR
    
    
    412,417
    
    
    
    (10,588
    )
    
    
    14.5
    
    
    
    3.8
 
 (1)
    
    Excludes the margins the Company pays on its variable-rate debt, which at of
December 31, 2009 ranged from 0.30% to 3.25%.(2)
    
    Principal amount reduces quarterly.(3)
    
    Inception dates of swaps are 2010 ($300.0 million) and 2011 ($200.0 million).(4)
    
    Principal amount reduces monthly to 70.1 million Euros ($100.4 million) by the
maturity dates of the swap agreements.(5)
    
    Principal amount is the U.S. Dollar equivalent of 288.0 million Euros.  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)
 Spot Tanker Market Risk
 In order to reduce variability in revenues from fluctuations in certain spot tanker market
rates, from time to time, the Company has entered into forward freight agreements (FFAs). FFAs
involve contracts to move a theoretical volume of freight at fixed-rates, thus attempting to
reduce the Companys exposure to spot tanker market rates. As at December 31, 2009, the FFAs,
had an aggregate notional value of $30.5 million, which is an aggregate of both long and short
positions, and a net fair value liability of $0.5 million. The FFAs expire between January 2010
and December 2010. The Company has not designated these contracts as cash flow hedges for
accounting purposes. Net gains and losses from FFAs are recorded within realized and unrealized
gain (loss) on non-designated derivative instruments in the consolidated statements of income
(loss).
 Commodity Price Risk
 The Company enters into bunker fuel swap contracts relating to a portion of its bunker fuel
expenditures. The Company has not designated its bunker fuel swap contracts as cash flow hedges
for accounting purposes. As at December 31, 2009, the Company was committed to contracts
totalling 23,400 metric tonnes with a weighted-average price of $439.23 per tonne and a fair
value asset of $0.6 million. These bunker fuel swap contracts expire between January 2010 and
December 2010. As at December 31, 2008, the Company was committed to contracts totalling 13,500
metric tonnes with a weighted-average price of $470.8 per tonne and a fair value liability of
$3.1 million.
 The Company is exposed to credit loss in the event of non-performance by the counterparties to
the foreign currency forward contracts, interest rate swap agreements, FFAs and bunker fuel swap
contracts; however, the Company does not anticipate non-performance by any of the
counterparties. In order to minimize counterparty risk, the Company only enters into derivative
transactions with counterparties that are rated A- or better by Standard & Poors or A3 or
better by Moodys at the time of the transaction. In addition, to the extent possible and
practical, interest rate swaps are entered into with different counterparties to reduce
concentration risk.
 16.
    
    Commitments and Contingencies
 a) Vessels Under Construction
 As at December 31, 2009, the Company was committed to the construction of three LPG carriers and
four shuttle tankers scheduled for delivery between June 2010 and July 2011, at a total cost of
approximately $586.8 million, excluding capitalized interest. As at December 31, 2009, payments
made towards these commitments totaled $123.3 million (excluding $24.0 million of capitalized
interest and other miscellaneous construction costs), and long-term financing arrangements
existed for $463.5 million of the unpaid cost of these vessels. As at December 31, 2009, the
remaining payments required to be made under these newbuilding contracts were $311.8 million
(2010), and $151.7 million (2011).
 b) Joint Ventures
 The Company has a 33% interest in a joint venture that will charter four newbuilding
160,400-cubic meter LNG carriers for a period of 20 years to the Angola LNG Project, which is
being developed by subsidiaries of Chevron Corporation, Sociedade Nacional de Combustiveis de
Angola EP, BP Plc, Total S.A. and ENI SpA. Final award of the charter was made in December
2007. The vessels will be chartered at fixed rates, with inflation adjustments, commencing in
2011. The remaining members of the joint venture are Mitsui & Co., Ltd. and NYK Bulkship
(Europe) Ltd., which hold 34% and 33% interests in the joint venture, respectively. In
connection with this award, the joint venture has entered into agreements with Samsung Heavy
Industries Co. Ltd. to construct the four LNG carriers at a total cost of approximately $906.0
million (of which the Companys 33% portion is $299.0 million), excluding capitalized interest.
As at December 31, 2009, payments made towards these commitments by the joint venture company
totaled $181.2 million (of which the Companys 33% contribution was $59.8 million), excluding
capitalized interest and other miscellaneous construction costs. As at December 31, 2009, the
remaining payments required to be made under these contracts were $113.2 million (2010), $475.6
million (2011) and $135.9 million (2012). In accordance with existing agreements, the Company is
required to offer to Teekay LNG its 33% interest in these vessels and related charter contracts,
no later than 180 days before the scheduled delivery dates of the vessels. Deliveries of the
vessels are scheduled between August 2011 and January 2012. The Company has also provided
certain guarantees in relation to the performance of the joint venture company.
 For the year ended December 31, 2009, the Company recorded equity income (loss) of $52.2 million
(2008  $(36.1) million loss). This amount is included in equity income (loss) from joint
ventures in the consolidated statements of income (loss). The income or loss was primarily
comprised of the Companys share of the Angola LNG Project net income (loss) and the operations
of the Companys 40% interest in four RasGas 3 LNG Carriers, which were delivered between May
and July 2008. For the year ended December 31, 2009, $32.4 million of the income relates to the
Companys share of unrealized gain on interest rate swaps (2008
 loss of $33.0 million).
 c) Legal Proceedings and Claims
 The Company may, from time to time, be involved in legal proceedings and claims that arise in
the ordinary course of business. The Company believes that any adverse outcome of existing
claims, individually or in the aggregate, would not have a material effect on its financial
position, results of operations or cash flows, when taking into
account its insurance coverage and indemnifications from charterers.
  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)
 d) Other
 The Company enters into indemnification agreements with certain officers and directors. In
addition, the Company enters into other indemnification agreements in the ordinary course of
business. The maximum potential amount of future payments required under these indemnification
agreements is unlimited. However, the Company maintains what it believes is appropriate
liability insurance that reduces its exposure and enables the Company to recover future amounts
paid up to the maximum amount of the insurance coverage, less any deductible amounts pursuant to
the terms of the respective policies, the amounts of which are not considered material.
 17.
    
    Supplemental Cash Flow Information
 a)
    
    The changes in operating assets and liabilities for the years ended December 31, 2009,
2008 and 2007, are as follows:
 Year Ended
    
    
    Year Ended
    
    
    Year EndedDecember 31, 2009
    
    
    December 31, 2008
    
    
    December 31, 2007$
    
    
    $
    
    
    $Accounts receivable
    
    
    64,886
    
    
    
    (50,851
    )
    
    
    (44,837
    )Prepaid expenses and other assets
    
    
    35,006
    
    
    
    30,161
    
    
    
    (28,655
    )Accounts payable
    
    
    (2,731
    )
    
    
    (29,718
    )
    
    
    18,588Accrued and other liabilities
    
    
    26,240
    
    
    
    21,592
    
    
    
    11,033Other long-term liabilities
    
    
    25,254
    
    
    
    
    
    
    
    148,655
    
    
    
    (28,816
    )
    
    
    (43,871
    )
 b)
    
    Cash interest paid, including realized interest rate swap settlements, during the years
ended December 31, 2009, 2008, and 2007, totaled $263.1 million, $372.2 million and $320.6
million, respectively.
 c)
    
    On December 31, 2008, Teekay Nakilat (III) and QGTC Nakilat (1643-6) Holdings
Corporation (or 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.
 d)
    
    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
 During January and February 2009, the Company sold a 2009-built product tanker and a 1993-built
Aframax tanker through a sale-leaseback agreement, respectively, which were presented on the
December 31, 2008 balance sheet as vessels held for sale. Both vessels were part of the
Companys conventional tanker segment. The Company realized a gain of approximately $17.7
million as a result of these transactions, of which $17.6 million was deferred and will be
amortized over the four-year term of the bareboat charter leaseback.
 In May 2009, the Company sold a 2007-built product tanker and a 2005-built product tanker. Both
vessels were part of the Companys conventional tanker segment. The Company realized a gain of
approximately $29.8 million as a result of these transactions.
 In July 2009, the Company sold 1992-built Aframax tanker. The vessel was written-down by $7.1
million to its fair market value less costs to sell. In September 2009, the Company sold a
1989-built product tanker. The vessel was written-down by $4.0 million to its fair market value
less costs to sell. Both vessel sales were completed during the fourth quarter of 2009 and were
part of the Companys conventional tanker segment.
 During March 2008, the Company sold two Handy-size product tankers and sold a third Handy-size
product tanker upon the expiration of its time-charter in September 2008. All three vessels were
part of the Companys conventional tanker segment. As a result of these sales, the Company
realized a gain of $7.2 million. In June 2008, the Company entered into an agreement to sell an
Aframax tanker which delivered in September 2008. In September the Company sold a medium-range
product tanker upon the expiration of its time-charter. Both vessels were part of the Companys
conventional tanker segment. As a result of these sales, the Company realized a gain of $28.4
million. In November 2008, the Company sold its 50% interest in the Swift Product Tanker Pool,
which included the Companys interest in its ten in-chartered intermediate product tankers. The
Company realized a gain of $44.4 million. In addition, the Company sold a 2008-built Suezmax
tanker from its spot tanker segment. The Company realized a gain of $18.1 million.
 During April 2007, the Company sold two Aframax tankers from its spot tanker segment and
chartered them back under bareboat charters for a period of five years. The Company realized a
gain of $26.6 million, which has been deferred and is being amortized over the terms of the
bareboat charters. In May 2007, the Company sold a 1987-built shuttle tanker and certain
equipment, resulting in a gain of $11.6 million. The vessel was part of the shuttle tanker and
FSO segment. In July 2007, the Company sold two Aframax tankers. One of the vessels operates in
the Companys spot tanker segment and the second operates in the Companys fixed-rate tanker
segment. The vessels have been chartered back through bareboat charters for a period of four
years. The Company realized a gain of $33.1 million, which is deferred and being amortized over
the term of the bareboat charters.
  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)
 b) Vessels and Equipment Write-downs
 The Companys 2009 consolidated statements of income (loss) includes a $24.2 million write-down
for impairment of three older vessels due to lower fair values compared to carrying values, of
which two vessels were sold at the end of 2009. The Company used recent sale prices of similar
age and size of vessels to determine the fair value. The remaining vessel is presented on the
balance sheet as vessels held for sale.
 The Companys 2008 consolidated statements of income (loss) includes a $40.4 million write-down
for impairment of certain older vessels due to lower fair values compared to carrying values.
The Company used discounted cash flows to determine the fair value.
 19.
    
    Earnings (Loss) Per Share
 Year ended
    
    
    Year ended
    
    
    Year endedDecember 31, 2009
    
    
    December 31, 2008
    
    
    December 31, 2007$
    
    
    $
    
    
    $Net income (loss) attributable to stockholders of Teekay Corporation
    
    
    128,412
    
    
    
    (469,455
    )
    
    
    63,543Weighted average number of common shares
    
    
    72,549,361
    
    
    
    72,493,429
    
    
    
    73,382,197Dilutive effect of stock options
    
    
    509,470
    
    
    
    
    
    
    
    1,317,879Dilutive effect of equity units
    
    
    
    
    
    
    
    
    
    
    35,280Common stock and common stock equivalents
    
    
    73,058,831
    
    
    
    72,493,429
    
    
    
    74,735,356Earnings (loss) per common share:- Basic
    
    
    1.77
    
    
    
    (6.48
    )
    
    
    0.87- Diluted
    
    
    1.76
    
    
    
    (6.48
    )
    
    
    0.85
 For the years ended December 31, 2009, 2008, and 2007, the anti-dilutive effect of 4.3 million,
nil, and 1.0 million shares, respectively, attributable to outstanding stock options and the
Equity Units were excluded from the calculation of diluted earnings per share.
 20.
    
    Restructuring Charge
 During 2009, the Company incurred restructuring charges of $14.4 million. The restructuring
costs were primarily comprised of the reflagging of certain vessels, transfer of certain ship
management functions from the Companys office in Spain to a subsidiary of Teekay, global
staffing changes and closure of one of the Companys three offices in Norway. The Company does
not expect to incur additional restructuring costs relating to these changes in operations. At
December 31, 2009, $2.0 million of restructuring liability is recorded in accrued liabilities on
the consolidated balance sheet.
 During 2008, the Company incurred restructuring charges of $15.6 million. The restructuring
costs were primarily comprised of the closure of one of the Companys three offices in Norway,
global staffing changes, reorganization of a business unit, and the crew change on the Samar
Spiritfrom Australian crew to International crew. There was no restructuring liability as at
December 31, 2008. The Company did not incur any significant restructuring costs in 2007.
 21.
    
    Income Taxes
 The legal jurisdictions in which Teekay and several of its subsidiaries are incorporated do not
impose income taxes upon shipping-related activities. However, among others, the Companys
Australian ship-owning subsidiaries and its Norwegian subsidiaries are subject to income taxes.
 The following is a roll-forward of the Companys unrecognized tax benefits, recorded in accrued liabilities, for 2009 and 2008:
 Year Ended December 31,2009
    
    
    2008
    
    
    2007Balance of unrecognized tax benefits as at January 1,
    
    
    7,232
    
    
    
    8,630
    
    
    
    1,000Increase for positions taken in prior years
    
    
    24,011
    
    
    
    
    
    
    
    Increases for positions related to the current year
    
    
    2,508
    
    
    
    3,602
    
    
    
    7,630Amounts of decreases related to settlements
    
    
    (1,618
    )
    
    
    (5,000
    )
    
    
    Balance of unrecognized tax benefits as at December 31,
    
    
    32,133
    
    
    
    7,232
    
    
    
    8,630
 The majority of the increase for positions for 2009 relates to potential tax on freight income,
potential income tax on deemed income from guaranteeing and providing security for the debt of a
related party, potential non-deductibility of interest expense due to the capital structure of
a certain subsidiary, and potential repayment of a reinvestment tax credit received in prior
years. The reduction is a result of the Company reaching a settlement with the taxing authority
on withholding tax on bareboat charter hire payments received from a related party.
  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)
 The Company does not presently anticipate such uncertain tax positions will significantly
increase or decrease in the next 12 months; however actual developments could differ from those
currently expected. The tax years 2005 through 2009 remain open to examination by some of the
major taxing jurisdictions in which the Company is subject to tax.
 The Company recognizes interest and penalties related to uncertain tax positions in income tax
expense. The interest and penalties on unrecognized tax benefits are included in the
roll-forward schedule above and were approximately $8.5 million in 2009 and $1.4 million in
2008.
  December 31,
    
    
    December 31,2009
    
    
    2008$
    
    
    $Deferred tax assets:Vessels and equipment
    
    
    
    
    
    
    64,080Tax losses carried forward (1)
    
    
    233,659
    
    
    
    163,369Other
    
    
    81,283
    
    
    
    28,265Total deferred tax assets
    
    
    314,942
    
    
    
    255,714Deferred tax liabilities:Vessels and equipment
    
    
    109,884
    
    
    
    50,231Long-term debt
    
    
    29,599
    
    
    
    11,505Unrealized foreign exchange and other
    
    
    3,689
    
    
    
    Total deferred tax liabilities
    
    
    143,172
    
    
    
    61,736Net deferred tax assets
    
    
    171,770
    
    
    
    193,978Valuation allowance
    
    
    (176,882
    )
    
    
    (200,160
    )Net deferred tax assets and liabilities
    
    
    (5,112
    )
    
    
    (6,182
    )
 (1)
    
    Substantially all of the
Companys net operating loss carryforwards of $891.8 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.  Year Ended
    
    
    Year Ended
    
    
    Year EndedDecember 31, 2009
    
    
    December 31, 2008
    
    
    December 31, 2007$
    
    
    $
    
    
    $Current
    
    
    (28,312
    )
    
    
    (796
    )
    
    
    (5,264
    )Deferred
    
    
    5,423
    
    
    
    56,972
    
    
    
    8,456Income tax (expense) recovery
    
    
    (22,889
    )
    
    
    56,176
    
    
    
    3,192
 The Company operates in countries that have differing tax laws and rates. Consequently, a
consolidated weighted average tax rate will vary from year to year according to the source of
earnings or losses by country and the change in applicable tax rates. Reconciliations of the tax
charge related to the relevant year at the applicable statutory income tax rates and the actual
tax charge related to the relevant year are as follows:
 Year Ended
    
    
    Year Ended
    
    
    Year EndedDecember 31, 2009
    
    
    December 31, 2008
    
    
    December 31, 2007$
    
    
    $
    
    
    $Net income (loss) before taxes
    
    
    232,666
    
    
    
    (516,070
    )
    
    
    69,254Net income (loss) not subject to taxes
    
    
    550,299
    
    
    
    (712,237
    )
    
    
    122,170Net income (loss) subject to taxes
    
    
    (317,633
    )
    
    
    196,167
    
    
    
    (52,916
    )At applicable statutory tax rates
    
    
    (89,395
    )
    
    
    46,893
    
    
    
    (13,394
    )Permanent and currency differences
    
    
    109,857
    
    
    
    (46,426
    )
    
    
    15,078Adjustments
to valuation allowances and uncertain tax positions
    
    
    1,623
    
    
    
    (54,474
    )
    
    
    345Other
    
    
    804
    
    
    
    (2,169
    )
    
    
    (5,221
    )Tax expense (recovery) charge related to current year
    
    
    22,889
    
    
    
    (56,176
    )
    
    
    (3,192
    )
  F - 30




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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.
    
    Pension Benefits
 a) Defined Contribution Pension Plans
 With the exception of the Companys employees in Norway and certain of its employees in
Australia, the Companys employees are generally eligible to participate in defined contribution
plans. These plans allow for the employees to contribute a certain percentage of their base
salaries into the plans. The Company will match all or a portion of the employees
contributions, depending on how much each employee contributes. During the years ended December
31, 2009, 2008 and 2007, the amount of cost recognized for its defined contribution pension
plans was $15.0 million, $19.8 million and $11.4 million, respectively.
 b) Defined Benefit Pension Plans
 The Company has a number of defined benefit pension plans (or the Plans) which primarily cover
its employees in Norway and certain employees in Australia. As at December 31, 2009,
approximately 75% of the defined benefit pension assets are held by the Norwegian plans and approximately 25%
are held by the Australia plan. The pension assets in the Norwegian plans have been guaranteed a
minimum rate of return by the provider, thus reducing potential exposure to the Company to the
extent the counterparty honors its obligations. Potential exposure to the Company has also been
reduced, particularly for the Australian plans, as a result of certain of its time-charter and
management contracts that allow the Company, under certain conditions, to recover pension plan
costs from its customers. The following table provides information about changes in the benefit
obligation and the fair value of the Plans assets, a statement of the funded status, and amounts
recognized on the Companys balance sheets:
 December 31, 
2009
    
    
    December 31, 
2008$
    
    
    $Change in benefit obligation:Beginning balance
    
    
    107,771
    
    
    
    135,890Service cost
    
    
    9,406
    
    
    
    10,805Interest cost
    
    
    4,672
    
    
    
    5,899Contributions by plan participants
    
    
    215
    
    
    
    417Actuarial (gain) loss
    
    
    (16,474
    )
    
    
    11,564Benefits paid
    
    
    (10,299
    )
    
    
    (12,113
    )Plan amendments
    
    
    
    
    
    
    (2,683
    )Settlements and curtailments
    
    
    (2,957
    )
    
    
    (15,146
    )Foreign currency exchange rate changes
    
    
    22,332
    
    
    
    (28,878
    )Other
    
    
    (410
    )
    
    
    2,016Ending balance
    
    
    114,256
    
    
    
    107,771Change in fair value of plan assets:Beginning balance
    
    
    73,377
    
    
    
    119,972Actual return on plan assets
    
    
    2,968
    
    
    
    (11,332
    )Contributions by the employer
    
    
    14,833
    
    
    
    10,204Contributions by plan participants
    
    
    215
    
    
    
    417Benefits paid
    
    
    (9,650
    )
    
    
    (11,428
    )Settlements and curtailments
    
    
    (2,059
    )
    
    
    (13,437
    )Foreign currency exchange rate changes
    
    
    16,099
    
    
    
    (20,924
    )Other
    
    
    (288
    )
    
    
    (95
    )Ending balance
    
    
    95,495
    
    
    
    73,377Funded status
    
    
    (18,761
    )
    
    
    (34,394
    )Amounts recognized in the balance sheets:Other long-term liabilities
    
    
    18,761
    
    
    
    34,394Accumulated other comprehensive income (loss):Net actuarial losses (1)
    
    
    (10,893
    )
    
    
    (26,650
    )Transition obligation (asset)
    
    
    (67
    )
    
    
    (56
    )Prior service credit (costs)
    
    
    (259
    )
    
    
    (217
    )
 (1)
    
    As at December 31, 2009, the estimated amount that will be amortized from accumulated
other comprehensive income (loss) into net periodic benefit cost in 2010 is ($0.4)
million.  F - 31




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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)
 As of December 31, 2009 and 2008, the accumulated benefit obligation for the Plans was $84.6
million and $78.3 million, respectively. The following table provides information for those
pension plans with a benefit obligation in excess of plan assets and those pension plans with an
accumulated benefit obligation in excess of plan assets:
 December 31, 
2009
    
    
    December 31, 
2008$
    
    
    $Benefit obligation
    
    
    92,465
    
    
    
    103,438Fair value of plan assets
    
    
    71,714
    
    
    
    70,499Accumulated benefit obligation
    
    
    7,943
    
    
    
    47,686Fair value of plan assets
    
    
    2,496
    
    
    
    40,010
 The components of net periodic pension cost relating to the Plans for the years ended December
31, 2009, 2008 and 2007 consisted of the following:
 Year Ended
    
    
    Year Ended
    
    
    Year EndedDecember 31,
    
    
    December 31,
    
    
    December 31,2009
    
    
    2008
    
    
    2007$
    
    
    $
    
    
    $Net periodic pension cost:Service cost
    
    
    9,753
    
    
    
    11,230
    
    
    
    10,073Interest cost
    
    
    4,548
    
    
    
    5,901
    
    
    
    5,989Expected return on plan assets
    
    
    (4,624
    )
    
    
    (6,891
    )
    
    
    (6,882
    )Amortization of net actuarial loss (gain)
    
    
    1,394
    
    
    
    15
    
    
    
    598Prior service costs
    
    
    
    
    
    
    (2,682
    )
    
    
    13Other
    
    
    184
    
    
    
    62
    
    
    
    731Net cost
    
    
    11,255
    
    
    
    7,635
    
    
    
    10,522
 The components of other comprehensive income relating to the Plans for the years ended December
31, 2009, 2008 and 2007 consisted of the following:
 Year Ended
    
    
    Year Ended
    
    
    Year EndedDecember 31,
    
    
    December 31,
    
    
    December 31,2009
    
    
    2008
    
    
    2007$
    
    
    $
    
    
    $Other comprehensive (income) loss:Net loss (gain) arising during the period
    
    
    (13,524
    )
    
    
    20,705
    
    
    
    6,952Amortization of net actuarial (gain) loss
    
    
    (1,394
    )
    
    
    (15
    )
    
    
    (598
    )Other (gain) loss
    
    
    (785
    )
    
    
    (45
    )
    
    
    Total (income) loss
    
    
    (15,703
    )
    
    
    20,645
    
    
    
    6,354
 The Company estimates that it will make contributions into the Plans of $11.3 million during
2010. The following table provides the estimated future benefit payments, which reflect expected
future service, to be paid by the Plans:
 Pension BenefitPaymentsYear
    
    $2010
    
    
    6,8022011
    
    
    4,4682012
    
    
    5,7112013
    
    
    4,5782014
    
    
    5,8362015  2019
    
    
    25,563Total
    
    
    52,958
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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)
 The fair value of the plan assets, by category, as of December 31, 2009 and 2008 and were as
follows:
 December 31,
    
    
    December 31,2009
    
    
    2008$
    
    
    $Pooled Funds (1)
    
    
    71,883
    
    
    
    54,951Mutual Funds (2)Equity investments
    
    
    12,751
    
    
    
    11,417Debt securities
    
    
    6,487
    
    
    
    4,323Real estate
    
    
    1,630
    
    
    
    854Cash and money market
    
    
    625
    
    
    
    1,378Other
    
    
    2,119
    
    
    
    454Total
    
    
    95,495
    
    
    
    73,377
 (1)
    
    The Company has no control over the investment mix or strategy of the Pooled Funds. The
Pooled Funds guarantee a minimum rate of return. If actual investment returns are less than
the guarantee minimum rate, then the providers statutory reserves are used to top up the
shortfall. The Pooled Funds primarily invest in hold to maturity bonds, real estate and
other fixed income investments, which provide a stable rate of return.(2)
    
    The Mutual Funds primary aim is to provide investors with an exposure to a diversified
mix of predominantly growth oriented assets (70%) with moderate to high volatility and some
defensive assets (30%). The investment strategy for all plan assets is generally to actively manage a portfolio that is
diversified amongst asset classes, markets and regions. Certain of the investment funds do not
invest in companies that do not meet certain socially responsible investment criteria. In
addition to diversification, other risk management strategies employed by the investment funds
include gradual implementation of portfolio adjustments and hedging currency risks.
 The Companys plan assets are primarily invested in commingled funds holding equity and debt
securities, which are valued using the net asset value (or NAV), provided by the administrator
of the fund. The NAV is based on the value of the underlying assets owned by the fund, minus its
liabilities, and then divided by the number of shares or units outstanding. Commingled funds are
classified within Level 2 of the fair value hierarchy as the NAVs are not publicly available.
 The Company has a pension committee that is comprised of various members of senior management.
Among other things, the Companys pension committee oversees the investment and management of
the plan assets, with a view to ensuring the prudent and effective management of such plans. In
addition, the pension committee reviews investment manager performance results annually and
approves changes to the investment manager.
 The weighted average assumptions used to determine benefit obligations at December 31, 2008
and 2007 were as follows:
 December 31, 2009
    
    
    December 31, 
2008$
    
    
    $Discount rates
    
    
    5.0
    %
    
    
    4.1
    %Rate of compensation increase
    
    
    4.7
    %
    
    
    4.6
    %
 The weighted average assumptions used to determine net pension expense for the years ended
December 31, 2009, 2008 and 2007 were as follows:
 Year Ended
    
    
    Year Ended
    
    
    Year EndedDecember 31,
    
    
    December 31,
    
    
    December 31,2009
    
    
    2008
    
    
    2007$
    
    
    $
    
    
    $Discount rates
    
    
    5.0
    %
    
    
    4.1
    %
    
    
    4.9
    %Rate of compensation increase
    
    
    4.7
    %
    
    
    4.6
    %
    
    
    5.4
    %Expected long-term rates of return (1)
    
    
    6.0
    %
    
    
    6.0
    %
    
    
    5.3
    %
 (1)
    
    To the extent the expected return on plan assets varies from the actual return, an
actuarial gain or loss results. The expected long-term rates of return on plan assets are
based on the estimated weighted-average long-term returns of major asset classes. In
determining asset class returns, the Company takes into account long-term returns of major
asset classes, historical performance of plan assets, as well as the current interest rate
environment. The asset class returns are weighted based on the target asset allocations.  F - 33




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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)
 23.
    
    Accounting Pronouncements Not Yet Adopted
 a)
    
    In June 2009, the FASB issued an amendment to FASB ASC 810, Consolidationsthat eliminates
certain exceptions to consolidating qualifying special-purpose entities, contains new criteria
for determining the primary beneficiary, and increases the frequency of required reassessments
to determine whether a company is the primary beneficiary of a variable interest entity. This
amendment also contains a new requirement that any term, transaction, or arrangement that does
not have a substantive effect on an entitys status as a variable interest entity, a companys
power over a variable interest entity, or a companys obligation to absorb losses or its right
to receive benefits of an entity must be disregarded. The elimination of the qualifying
special-purpose entity concept and its consolidation exceptions means more entities will be
subject to consolidation assessments and reassessments. During February 2010, the scope of the
revised standard was modified to indefinitely exclude certain entities from the requirement to
be assessed for consolidation. This amendment is effective for fiscal years beginning after
November 15, 2009, and for interim periods within that first period, with earlier adoption
prohibited. The Company is currently assessing the potential impact, if any, of this statement
on its consolidated financial statements.
 b)
    
    In June 2009, the FASB issued an amendment to FASB ASC 860, Transfers andServicing that
eliminates the concept of a qualifying special-purpose entity, creates more stringent
conditions for reporting a transfer of a portion of a financial asset as a sale, clarifies
other sale-accounting criteria, and changes the initial measurement of a transferors interest
in transferred financial assets. This amendment will be effective for transfers of financial
assets in fiscal years beginning after November 15, 2009, and in interim periods within those
fiscal years with earlier adoption prohibited. The Company is currently assessing the
potential impacts, if any, on its consolidated financial statements.
 c)
    
    In September 2009, the FASB issued an amendment to FASB ASC 605,
Revenue Recognitionthat provides for a new methodology for
establishing the fair value for a deliverable in a multiple-element
arrangement. When vendor specific objective or third-party evidence
for deliverables in a multiple-element arrangement cannot be
determined, the Company will be required to develop a best estimate of
the selling price of separate deliverables and to allocate the
arrangement consideration using the relative selling price method.
This amendment will be effective for the Company on January 1, 2011.
The Company is currently assessing the potential impacts, if any, on
its consolidated financial statements.d)
    
    In January 2010, the FASB issued an amendment to FASB ASC 820 Fair
Value Measurements and Disclosures, which amends the guidance on fair
value to add new requirements for disclosures about transfers into and
out of Levels 1 and 2 and separate disclosures about purchases, sales,
issuances, and settlements relating to Level 3 measurements. It also
clarifies existing fair value disclosures about the level of
disaggregation and about inputs and valuation techniques used to
measure fair value. This amendment effective for the first reporting
period beginning after December 15, 2009, except for the requirement
to provide the Level 3 activity of purchases, sales, issuances, and
settlements on a gross basis, which will be effective for fiscal years
beginning after December 15, 2010, and for interim periods within
those fiscal years. The adoption will have no impact on the Companys
results of operations, financial position, or cash flows.
 24.
    
    Subsequent Events
 a)
    
    In January 2010, the Company completed a public offering of $450 million senior unsecured
notes due 2020, which bear interest at a rate of 8.5% per year. The senior unsecured notes
were sold at a price equal to 99.181% of par.
 The Company used a portion of the offering proceeds to repurchase a portion of its outstanding
8.875% Senior Notes due 2011, pursuant to a previously announced cash tender offer and consent
solicitation it commenced on January 12, 2010 and closed on February 9, 2010, for all of such
notes and the remainder to repay amounts outstanding under a term loan and a portion of
outstanding debt under one of its revolving credit facilities. As of December 31, 2009, $176.6
million aggregate principal amount of the 2011 Senior Notes was outstanding, of which $151.1
million was tendered during January 2010 and February 2010. The Company repaid $150.0 million
under one of its term loans in February 2010 and used the remainder of the offering proceeds to repay a portion of outstanding debt under
one of its revolving credit facilities.
 b)
    
    In March 2010, Teekay Offshore completed a follow-on public offering of 4.4 million common
units at a price of $19.48 per unit, for gross proceeds of $87.5 million (including the
general partners $1.7 million proportionate capital contribution). The underwriters
concurrently exercised their overallotment option to purchase an additional 660,000 units,
providing additional gross proceeds of $13.1 million (including the general partners $0.3
million proportionate capital contribution).
 c)
    
    In April 2010, Teekay Tankers completed a follow-on public offering of 7.7 million common
shares at a price of $12.25 per share, for gross proceeds of $94.3 million. The underwriters
subsequently exercised their overallotment option in part to purchase an additional 1,079,500
common shares, providing additional gross proceeds of $13.2 million.
  F - 34