UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 6-K

Report of Foreign Private Issuer

Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934

TEEKAY CORPORATION

(Exact name of Registrant as specified in its charter)

4^th Floor, Belvedere Building
69 Pitts Bay Road
Hamilton, HM 08 Bermuda
(Address of principal executive office)

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.

Form 20-F þ     Form 40- F o

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1).

Yes o     No þ

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7).

Yes o     No þ

 

 

TEEKAY CORPORATION AND SUBSIDIARIES

REPORT ON FORM 6-K FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2009

INDEX

		PAGE
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Unaudited Consolidated Statements of Income for the three and six months ended June 30, 2009 and 2008			3
Unaudited Consolidated Balance Sheets as at June 30, 2009 and December 31, 2008			4
Unaudited Consolidated Statements of Cash Flows for the six months ended June 30, 2009 and 2008			5
Unaudited Consolidated Statements of Comprehensive Income for the six months ended June 30, 2009 and 2008			6
Notes to the Unaudited Consolidated Financial Statements			7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			21
Item 3. Quantitative and Qualitative Disclosures about Market Risk			37
PART II: OTHER INFORMATION			40
SIGNATURES			41

ITEM 1 — FINANCIAL STATEMENTS

TEEKAY CORPORATION AND SUBSIDIARIES

		Three Months Ended June 30,								Six Months Ended June 30,
		2009				2008				2009				2008
		$				$				$				$
REVENUES			532,473				810,832				1,149,024				1,551,247
OPERATING EXPENSES
Voyage expenses			62,925				189,515				153,594				358,976
Vessel operating expenses (note 16)			140,529				160,944				289,857				309,379
Time-charter hire expense			116,451				142,702				253,279				287,622
Depreciation and amortization			108,192				106,700				214,745				204,407
General and administrative (note 16)			52,695				71,298				103,835				140,363
Gain on sale of vessels and equipment — net of write-downs (note 13)			(11,083	)			(2,925	)			(11,201	)			(3,421	)
Restructuring charge (note 14a)			5,003				4,617				10,561				6,117
Total operating expenses			474,712				672,851				1,014,670				1,303,443
Income from vessel operations			57,761				137,981				134,354				247,804
OTHER ITEMS
Interest expense			(37,280	)			(63,253	)			(81,470	)			(151,959	)
Interest income			5,023				18,832				11,701				52,722
Realized and unrealized gain (loss) on non-designated derivative instruments (note 16)			157,485				116,263				204,730				(34,948	)
Equity income (loss) from joint ventures (note 11b)			27,380				(2,063	)			38,802				(5,672	)
Foreign exchange loss (notes 8 and 16)			(25,165	)			(3,014	)			(13,853	)			(36,595	)
Other income (note 14b)			3,823				6,294				5,405				10,482
Net income before income tax recovery (expense)			189,027				211,040				299,669				81,834
Income tax recovery (expense) (note 18)			4,598				11,201				(1,270	)			8,718
Net income			193,625				222,241				298,399				90,552
Less: Net income attributable to non-controlling interests			(34,266	)			(38,822	)			(57,535	)			(12,262	)
Net income attributable to stockholders of Teekay Corporation			159,359				183,419				240,864				78,290
Per common share of Teekay Corporation (note 17)
• Basic earnings			2.20				2.53				3.32				1.08
• Diluted earnings			2.19				2.50				3.30				1.07
• Cash dividends declared			0.31625				0.27500				0.63250				0.55000
Weighted average number of common shares outstanding (note 17)
• Basic			72,535,899				72,377,684				72,526,101				72,511,041
• Diluted			72,798,023				73,279,213				72,887,474				73,357,190

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

TEEKAY CORPORATION AND SUBSIDIARIES

		As at				As at
		June 30, 2009				December 31, 2008
		$				$
ASSETS
Current
Cash and cash equivalents (note 8)			472,671				814,165
Restricted cash (note 9)			35,440				35,841
Accounts receivable			189,388				300,462
Vessels held for sale (note 13)			34,970				69,649
Net investment in direct financing leases (note 4)			33,620				22,941
Prepaid expenses			99,872				117,651
Other assets			30,077				33,794
Total current assets			896,038				1,394,503
Restricted cash — long-term (note 9)			610,523				614,715
Vessels and equipment (note 8)
At cost, less accumulated depreciation of $1,516,538 (2008 — $1,351,786)			5,736,758				5,784,597
Vessels under capital leases, at cost, less accumulated amortization of $122,966 (2008 — $106,975) (note 9)			912,978				928,795
Advances on newbuilding contracts (note 11a)			231,220				553,702
Total vessels and equipment			6,880,956				7,267,094
Net investment in direct financing leases — non-current (note 4)			440,701				56,567
Loans to joint ventures			22,588				28,019
Derivative instruments (note 16)			37,279				154,248
Investment in joint ventures (note 11b)			126,315				103,956
Other non-current assets			136,488				127,940
Intangible assets — net (note 6)			246,640				264,768
Goodwill (note 6)			203,191				203,191
Total assets			9,600,719				10,215,001
LIABILITIES AND EQUITY
Current
Accounts payable			53,297				59,973
Accrued liabilities			240,859				315,987
Current portion of derivative liabilities (note 16)			151,810				166,725
Current portion of long-term debt (note 8)			204,549				245,043
Current obligation under capital leases (note 9)			149,285				147,616
Current portion of in-process revenue contracts (note 6)			66,593				74,777
Loan from joint venture partners			21,274				21,019
Total current liabilities			887,667				1,031,140
Long-term debt (note 8)			4,274,903				4,707,749
Long-term obligation under capital leases (note 9)			668,587				669,725
Derivative instruments (note 16)			265,858				676,540
Deferred income taxes (note 18)			6,244				6,182
Asset retirement obligation			22,238				18,977
In-process revenue contracts (note 6)			216,769				243,088
Other long-term liabilities			225,100				209,195
Total liabilities			6,567,366				7,562,596
Commitments and contingencies (notes 9, 11 and 16)
Equity
Common stock and additional paid-in capital (note 10)			649,138				642,911
Retained earnings			1,702,019				1,507,617
Non-controlling interest			727,391				583,938
Accumulated other comprehensive loss (note 15)			(45,195	)			(82,061	)
Total equity			3,033,353				2,652,405
Total liabilities and equity			9,600,719				10,215,001

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

TEEKAY CORPORATION AND SUBSIDIARIES

		Six Months Ended June 30,
		2009				2008
		$				$
Cash and cash equivalents provided by (used for)
OPERATING ACTIVITIES
Net income			298,399				90,552
Non-cash items:
Depreciation and amortization			214,745				204,407
Amortization of in-process revenue contracts			(37,769	)			(34,870	)
Gain on sale of marketable securities			—				(4,576	)
Gain on sale of vessels and equipment			(27,634	)			(3,421	)
Write-down of intangible assets			1,076				—
Write-down of vessels and equipment			16,433				—
Loss on repurchase of bonds			—				1,310
Equity (income) loss (net of dividends received)			(35,860	)			5,672
Income tax expense (recovery)			1,270				(8,718	)
Employee stock option compensation			6,059				6,183
Foreign exchange loss and other			7,920				16,736
Unrealized (gains) losses on derivative instruments			(271,471	)			29,472
Change in non-cash working capital items related to operating activities (note 7)			82,343				(75,554	)
Expenditures for drydocking			(26,243	)			(28,227	)
Net operating cash flow			229,268				198,966
FINANCING ACTIVITIES
Proceeds from issuance of long-term debt			(297,224	)			1,284,496
Debt issuance costs			(664	)			(5,108	)
Scheduled repayments of long-term debt			(137,777	)			(198,320	)
Prepayments of long-term debt			(632,910	)			(639,321	)
Repayments of capital lease obligations			(4,617	)			(4,495	)
Proceeds from loans from joint venture partner			—				1,041
Repayment of loans from joint venture partner			(4,973	)			—
Decrease (increase) in restricted cash			5,805				(11,503	)
Net proceeds from issuance of Teekay LNG Partners L.P. units (note 5)			67,095				148,345
Net proceeds from issuance of Teekay Offshore Partners L.P. units (note 5)			—				134,265
Net proceeds from issuance of Teekay Tankers Ltd. shares (note 5)			65,556				—
Issuance of Common Stock upon exercise of stock options			160				4,009
Repurchase of Common Stock			—				(20,512	)
Distribution from subsidiaries to non-controlling interests			(53,093	)			(34,546	)
Cash dividends paid			(45,861	)			(40,028	)
Other financing activities			—				(2,715	)
Net financing cash flow			(444,055	)			615,608
INVESTING ACTIVITIES
Expenditures for vessels and equipment			(344,888	)			(410,495	)
Proceeds from sale of vessels and equipment			198,837				79,224
Purchases of marketable securities			—				(542	)
Proceeds from sale of marketable securities			—				11,058
Acquisition of additional 30.1% of Teekay Petrojarl ASA (note 3)			—				(257,142	)
Investment in joint ventures			(7,522	)			—
Advances to joint ventures			(1,420	)			(211,491	)
Investment in direct financing lease assets			—				(30	)
Direct financing lease payments received			3,251				11,298
Other investing activities			25,035				19,806
Net investing cash flow			(126,707	)			(758,314	)
(Decrease) increase in cash and cash equivalents			(341,494	)			56,260
Cash and cash equivalents, beginning of the period			814,165				442,673
Cash and cash equivalents, end of the period			472,671				498,933

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

TEEKAY CORPORATION AND SUBSIDIARIES

		Three Months Ended June 30,								Six Months Ended June 30,
		2009				2008				2009				2008
		$				$				$				$
Net income			193,625				222,241				298,399				90,552
Other comprehensive income:
Unrealized gain (loss) on marketable securities			3,531				2,068				1,090				(3,766	)
Reclassification adjustment for gain on sale of marketable securities			—				(1,868	)			—				(4,575	)
Pension adjustments			437				—				874				1,058
Unrealized change on qualifying cash flow hedging instruments			21,046				446				20,929				6,577
Realized change on qualifying cash flow hedging instruments			5,943				(1,039	)			18,686				(4,061	)
Other comprehensive income (loss)			30,957				(393	)			41,579				(4,767	)
Comprehensive income			224,582				221,848				339,978				85,785
Less: Comprehensive income attributable to non-controlling interests			(37,020	)			(39,382	)			(62,246	)			(13,081	)
Comprehensive income attributable to stockholders of Teekay Corporation			187,562				182,466				277,732				72,704

TEEKAY CORPORATION AND SUBSIDIARIES

1. Summary of Significant Accounting Policies

Basis of Presentation

The unaudited interim consolidated financial statements have been prepared in conformity with United States generally accepted accounting principles. They include the accounts of Teekay Corporation (or Teekay), which is incorporated under the laws of the Republic of The Marshall Islands, and its wholly-owned or controlled subsidiaries (collectively, the Company). Certain information and footnote disclosures required by United States generally accepted accounting principles for complete annual financial statements have been omitted and, therefore, it is suggested that these interim financial statements be read in conjunction with the Company’s audited financial statements for the year ended December 31, 2008, included on Form 20-F filed on June 30, 2009. In the opinion of management, these financial statements reflect all adjustments, of a normal recurring nature, necessary to present fairly, in all material respects, the Company’s consolidated financial position, results of operations, and cash flows for the interim periods presented. The results of operations for the six months ended June 30, 2009 are not necessarily indicative of those for a full fiscal year.

Certain of the comparative figures have been reclassified to conform with the presentation adopted in the current period.

The Company evaluated events and transactions occurring after the balance sheet date and through the day the financial statements were issued. The date of issuance of the financial statements was October 1, 2009.

Changes in Accounting Policies

In December 2007, the Financial Accounting Standards Board (or FASB) issued Statement of Financial Accounting Standards (or SFAS) No. 160, Non-controlling Interests in Consolidated Financial Statements — an amendment of ARB No. 51 (SFAS No. 160). SFAS No. 160 amends Accounting Research Bulletin (or ARB) 51 to establish accounting and reporting standards for the non-controlling (minority) interest in a subsidiary and for the deconsolidation of a subsidiary. This statement provides 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. SFAS No. 160 states that the amount of consolidated net income attributable to the stockholders and to the non-controlling interest be clearly identified on the consolidated statements of income. The statement 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. On January 1, 2009, the Company adopted SFAS No. 160 prospectively. The Company has applied the presentation and disclosure provisions of SFAS No. 160 to its consolidated financial statements retrospectively.

The consolidated net income attributable to the stockholders of Teekay Corporation would be different in the three and six months ended June 30, 2009 had the previous requirements in paragraph 15 of ARB 51 continued to have been applied rather than SFAS 160. Under paragraph 15, losses attributable to the non-controlling interest that exceed its equity capital are charged against the majority interest, as there is no obligation of the non-controlling interest to cover such losses. However, if future earnings do materialize, the majority interest should be credited to the extent of such losses previously absorbed. Pro forma consolidated net income attributable to stockholders of Teekay Corporation and pro forma earnings per share had ARB 51 been applied are as follows:

		Three Months Ended				Six Months Ended
		June 30, 2009				June 30, 2009
		$				$
Pro forma net income attributable to the stockholders of Teekay Corporation			164,652				247,045
Pro forma earnings per share:
Basic			2.27				3.41
Diluted			2.26				3.39

In December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations (or SFAS No. 141 (R)). SFAS No. 141 (R) 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 Statement 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, SFAS No. 141 (R) 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. SFAS No. 141 (R) 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 Company’s adoption of SFAS No. 141(R) prospectively from January 1, 2009 did not have a material impact on the consolidated financial statements.

The Company also adopted Emerging Issues Task Force Issue 08-06 (or EITF 08-06), Equity Method Investment Accounting Considerations. This Issue addresses the impact that SFAS 141 (R) and SFAS 160 might have on the accounting for equity method investments, including accounting for changes in value and changes in ownership levels. The adoption of EITF 08-06 did not have a material impact on the consolidated financial statements.

TEEKAY CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. dollars, except share data)

In February 2008, the FASB issued FASB Staff Position No. 157-2 (or FSP 157-2) which delayed the effective date of SFAS No. 157, 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). For purposes of applying this FSP, nonfinancial assets and nonfinancial liabilities would include all assets and liabilities other than those meeting the definition of a financial asset or financial liability as defined in paragraph 6 of SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities. This FSP defers the effective date of SFAS No. 157 to fiscal years beginning after November 15, 2008, and the interim periods within those fiscal years for items within the scope of this FSP. The Company’s adoption of the provisions of SFAS No. 157 related to those items covered by FSP 157-2 from January 1, 2009 did not have a material impact on the Company’s consolidated financial statements. See Note 12 of the notes to the consolidated financial statements.

In March 2008, the FASB issued SFAS No. 161, Disclosures About Derivative Instruments and Hedging Activities — an amendment of FASB Statement No. 133 (or SFAS No. 161), which requires expanded disclosures about a company’s derivative instruments and hedging activities, including increased qualitative, and credit-risk disclosures to enable investors to better understand how these instruments and activities are accounted for; how and why they are used; and their effects on an entity’s financial position, financial performance, and cash flows. SFAS No. 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early adoption permitted. On January 1, 2009, the Company adopted the provisions of SFAS No. 161. See Note 16 of the notes to the consolidated financial statements.

In April 2008, the FASB issued FSP No. 142-3, Determination of the Useful Life of Intangible Assets. This FSP 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 under SFAS No. 142, Goodwill and Other Intangible Assets. This FSP is effective for the Company for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. Early adoption is prohibited. The adoption of FSP 142-3 did not have a material impact on the Company’s consolidated financial statements.

In April 2009, the FASB issued FSP 107-1 and Accounting Principles Board Opinion 28-1 (or APB 28-1), which extends the requirements of SFAS No. 107, Disclosures about Fair Value of Financial Instruments to interim financial statements of publicly-traded companies. Prior to FSP No. 107-1 and APB 28-1, fair values for these assets and liabilities were only disclosed once a year. FSP No. FAS 107-1 and APB 28-1 require 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 listed in SFAS No. 107. FSP No. FAS 107-1 and APB 28-1 are effective prospectively for interim reporting periods ending after June 15, 2009. On April 1, 2009, the Company adopted the provisions of FSP No. 107-1 and APB 28-1. See Note 12 of the notes to the consolidated financial statements.

In May 2009, the FASB issued SFAS No. 165, Subsequent Events (or SFAS No. 165). SFAS No. 165 is intended to establish 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. It 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. SFAS No. 165 is for interim and annual reporting periods ending after June 15, 2009. The Company adopted the provisions of SFAS No. 165. See Note 20 of the notes to the consolidated financial statements.

2. Segment Reporting

The Company is primarily engaged in the international marine transportation of crude oil and clean petroleum products through the operation of its tankers, and of liquefied natural gas (or LNG) and liquefied petroleum gas (or LPG) through the operation of its tankers and LNG and LPG carriers, and in the offshore processing and storage of crude oil. The Company’s revenues are earned in international markets.

The Company has four operating segments: its shuttle tanker and floating storage and offtake (or FSO) segment (or Teekay Navion Shuttle Tankers and Offshore), its floating production storage and offtake (or FPSO) segment (or Teekay Petrojarl), its liquefied gas segment (or Teekay Gas Services) and its conventional tanker segment (or Teekay Tanker Services). In order to provide investors with additional information about its conventional tanker segment, the Company has divided this operating segment into the fixed-rate tanker segment and the spot tanker segment. The Company’s shuttle tanker and FSO segment consists of shuttle tankers and FSO units. The Company’s FPSO segment consists of FPSO units and other vessels used to service its FPSO contracts. The Company’s liquefied gas segment consists of LNG and LPG carriers. The Company’s fixed-rate tanker segment consists of conventional crude oil and product tankers subject to long-term, fixed-rate time-charter contracts. The Company’s spot tanker segment consists of conventional crude oil tankers and product carriers operating in the spot tanker market or subject to time-charters or contracts of affreightment that are priced on a spot-market basis or are short-term, fixed-rate contracts. The Company considers contracts that have an original term of less than three years in duration to be short-term. Segment results are evaluated based on income from vessel operations. The accounting policies applied to the reportable segments are the same as those used in the preparation of the Company’s consolidated financial statements.

TEEKAY CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. dollars, except share data)

The following tables present results for these segments for the three and six months ended June 30, 2009 and 2008:

		Shuttle
		Tanker and								Liquefied				Fixed-Rate				Spot
		FSO				FPSO				Gas				Tanker				Tanker
Three Months ended June 30, 2009		Segment				Segment				Segment				Segment				Segment				Total
Revenues			138,324				97,572				57,265				76,011				163,301				532,473
Voyage expenses			16,167				—				(34	)			1,758				45,034				62,925
Vessel operating expenses			41,961				47,021				12,049				17,103				22,395				140,529
Time charter hire expense			25,695				—				—				11,913				78,843				116,451
Depreciation and amortization			28,738				25,745				15,471				14,009				24,229				108,192
General and administrative (1)			13,848				7,553				5,440				6,986				18,868				52,695
Loss (gain) on sale of vessels and equipment, net of write-downs			941				—				—				3,280				(15,304	)			(11,083	)
Restructuring charge			2,536				—				1,030				354				1,083				5,003
Income (loss) from vessel operations			8,438				17,253				23,309				20,608				(11,847	)			57,761

		Shuttle
		Tanker and								Liquefied				Fixed-Rate				Spot
		FSO				FPSO				Gas				Tanker				Tanker
Three Months ended June 30, 2008		Segment				Segment				Segment				Segment				Segment				Total
Revenues			183,176				90,785				53,496				66,218				417,157				810,832
Voyage expenses			46,024				—				452				948				142,091				189,515
Vessel operating expenses			45,417				57,418				13,125				16,387				28,597				160,944
Time charter hire expense			32,242				—				—				11,445				99,015				142,702
Depreciation and amortization			31,207				22,565				14,209				11,289				27,430				106,700
General and administrative (1)			15,739				11,509				6,070				7,263				30,717				71,298
(Gain) loss on sale of vessels and equipment, net of write-downs			(3,150	)			—				—				—				225				(2,925	)
Restructuring charge			3,327				—				221				58				1,011				4,617
Income (loss) from vessel operations			12,370				(707	)			19,419				18,828				88,071				137,981

		Shuttle
		Tanker and								Liquefied				Fixed-Rate				Spot
		FSO				FPSO				Gas				Tanker				Tanker
Six Months ended June 30, 2009		Segment				Segment				Segment				Segment				Segment				Total
Revenues			288,189				189,498				114,848				142,603				413,886				1,149,024
Voyage expenses			34,575				—				258				3,062				115,699				153,594
Vessel operating expenses			87,745				91,450				23,836				34,912				51,914				289,857
Time charter hire expense			57,873				—				—				22,903				172,503				253,279
Depreciation and amortization			57,991				51,525				30,068				26,300				48,862				214,746
General and administrative (1)			26,977				17,339				10,598				12,667				36,254				103,835
Loss (gain) on sale of vessels and equipment, net of write-downs			941				—				—				3,280				(15,422	)			(11,201	)
Restructuring charge			5,298				—				3,212				505				1,546				10,561
Income from vessel operations			16,789				29,184				46,876				38,974				2,530				134,353

		Shuttle
		Tanker and								Liquefied				Fixed-Rate				Spot
		FSO				FPSO				Gas				Tanker				Tanker
Six Months ended June 30, 2008		Segment				Segment				Segment				Segment				Segment				Total
Revenues			349,435				183,314				109,628				127,033				781,837				1,551,247
Voyage expenses			84,925				—				602				1,628				271,821				358,976
Vessel operating expenses			84,340				105,455				24,748				32,757				62,079				309,379
Time charter hire expense			67,280				—				—				23,165				197,177				287,622
Depreciation and amortization			59,278				40,568				28,404				20,962				55,195				204,407
General and administrative (1)			31,735				24,036				11,555				12,553				60,484				140,363
Gain on sale of vessels and equipment, net of write- downs			(3,150	)			—				—				—				(271	)			(3,421	)
Restructuring charge			3,327				—				221				1,558				1,011				6,117
Income from vessel operations			21,700				13,255				44,098				34,410				134,341				247,804

TEEKAY CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. dollars, except share data)

A reconciliation of total segment assets to amounts presented in the consolidated balance sheets is as follows:

		June 30, 2009				December 31, 2008
		$				$
Shuttle tanker and FSO segment			1,683,936				1,722,432
FPSO segment			1,285,098				1,331,325
Liquefied gas segment			2,676,786				2,919,194
Fixed-rate tanker segment			1,027,891				951,592
Spot tanker segment			2,048,691				1,935,537
Cash and portion of restricted cash			472,671				821,286
Accounts receivable and other assets			405,646				533,635
Consolidated total assets			9,600,719				10,215,001

3. Acquisition of Additional 35.3% of Teekay Petrojarl ASA

As of October 1, 2006, the Company acquired a 64.7% interest in Petrojarl ASA (subsequently renamed Teekay Petrojarl ASA, or Teekay Petrojarl). In June and July 2008, the Company acquired the remaining 35.3% interest (26.5 million common shares) in Teekay Petrojarl at a price between NOK 59 and NOK 62.95 per share. The total purchase price of approximately NOK 1.5 billion ($304.9 million) for this remaining interest was paid in cash. As a result of these transactions, the Company’s owns 100% of Teekay Petrojarl.

Teekay Petrojarl’s operating results are reflected in the Company’s consolidated financial statements from October 1, 2006, the designated effective date of the Company’s acquisition of the original 64.7% interest in Teekay Petrojarl, which was accounted for using the purchase method of accounting. The acquisition of the remaining 35.3% interest has also been accounted for using the purchase method of accounting, based upon estimates of fair value.

4. Net Investment in Direct Financing Leases

The Company commenced two time-charter contracts with 20-year terms in January and May 2009 and leases equipment that reduces volatile organic compound emissions (or VOC equipment). The two time charters and leasing of the VOC equipment are accounted for as direct financing leases. The following table lists the components of the net investments in direct financing leases:

		June 30,				December 31,
		2009				2008
		$				$
Total minimum lease payments to be received			838,726				94,409
Estimated residual value of leased property (unguaranteed)			188,233				—
Initial direct costs and other			1,324				674
Less: Unearned income			(553,962	)			(15,575	)
Net investments in direct financing leases			474,321				79,508

As at June 30, 2009, minimum lease payments to be received by the Company in each of the next five succeeding fiscal years are approximately $31.5 million (remainder of 2009), $59.0 million (2010), $56.7 million (2011), $52.3 million (2012) and $40.8 million (2013). The VOC equipment lease will end in 2014 and the time charter leases will both end in 2029.

5. Public Offerings

During June 2009, the Company’s subsidiary Teekay Tankers Limited (or Teekay Tankers) completed a follow-on public offering by issuing an additional 7.0 million shares of its Class A Common Stock at a price of $9.80 per share, for gross proceeds of $68.6 million. As a result of the above transactions, the Company’s ownership of Teekay Tankers has been reduced from 54.0 percent to 42.2 percent, and the Company recorded an increase to stockholders’ equity of $1.7 million, which represents the Company’s dilution gain from the issuance of shares. Teekay maintained voting control of Teekay Tankers and continues to consolidate the subsidiary. Teekay Tankers used the total net offering proceeds of approximately $65.6 million to acquire a 2003-built Suezmax tanker from Teekay Corporation for $57.0 million and to repay a portion of its outstanding debt under its revolving credit facility.

During March 2009, the Company’s subsidiary Teekay LNG Partners L.P. (or Teekay LNG) completed a follow-on public offering by issuing an additional 4.0 million of its common units at a price of $17.60 per unit, for gross equity proceeds of $71.8 million (including its general partner’s proportionate capital contribution). As a result of this, the Company’s ownership of Teekay LNG has been reduced from 57.7 percent to 53.0 percent (including the Company’s 2% general partner interest), and the Company recorded a decrease to stockholders’ equity of $2.3 million, which represents the Company’s dilution loss from the issuance of units. Teekay LNG used the total net offering proceeds of approximately $68.5 million to prepay amounts outstanding on two of its revolving credit facilities.

TEEKAY CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. dollars, except share data)

In connection with Teekay LNG’s initial public offering in May 2005, Teekay entered into an omnibus agreement with Teekay LNG, Teekay LNG’s general partner and others governing, among other things, when the Company and Teekay LNG may compete with each other and to provide the applicable parties certain rights of first offer on LNG carriers and Suezmax tankers. In December 2006, the omnibus agreement was amended in connection with the initial public offering of the Company’s subsidiary Teekay Offshore Partners L.P. (or Teekay Offshore) initial public offering to govern, among other things, when the Company, Teekay LNG and Teekay Offshore 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.

See Note 20(c) of the notes to the consolidated financial statements for the information about a follow-on public offering by Teekay Offshore Partners L.P. on August 4, 2009.

6. Goodwill, Intangible Assets and In-Process Revenue Contracts

Goodwill

There were no changes in the carrying amount of goodwill for the six months ended June 30, 2009 from December 31, 2008.

		Shuttle								Liquefied				Fixed-Rate				Spot
		Tanker and FSO				FPSO				Gas				Tanker				Tanker
		Segment				Segment				Segment				Segment				Segment				Total
		$				$				$				$				$				$
Balance as of December 31, 2008 and June 30, 2009			130,908				—				35,631				10,811				25,841				203,191

Intangible Assets

As at June 30, 2009, the Company’s intangible assets consisted of:

		Weighted-Average				Gross Carrying				Accumulated				Net Carrying
		Amortization Period				Amount				Amortization				Amount
		(Years)				$				$				$
Contracts of affreightment			10.2				124,250				(83,487	)			40,763
Time-charter contracts			10.4				232,602				(72,350	)			160,252
Other intangible assets			1.0				58,950				(13,325	)			45,625
			12.1				415,802				(169,162	)			246,640

As at December 31, 2008, the Company’s intangible assets consisted of:

		Weighted-Average				Gross Carrying				Accumulated				Net Carrying
		Amortization Period				Amount				Amortization				Amount
		(Years)				$				$				$
Contracts of affreightment			10.2				124,251				(78,961	)			45,290
Time-charter contracts			10.4				233,678				(60,875	)			172,803
Other intangible assets			1.0				58,950				(12,275	)			46,675
			12.1				416,879				(152,111	)			264,768

Aggregate amortization expense of intangible assets for the three and six months ended June 30, 2009 was $8.5 million ($12.0 million — 2008) and $17.1 million ($24.9 million — 2008), respectively. Amortization of intangible assets for the next five years is expected to be $17.0 million (remainder of 2009), $27.2 million (2010), $23.5 million (2011), $19.1 million (2012), $14.2 million (2013), and $145.7 million (thereafter).

In-Process Revenue Contracts

As part of the Company’s acquisitions of Teekay Petrojarl in 2006 and 2008 and of 50% of OMI Corporation (or OMI) in 2007, the Company assumed certain FPSO service contracts and charter-out contracts with terms that are less favorable than prevailing market terms at the time of acquisition. The Company has recognized a liability based on the estimated fair value of these contracts. The Company is amortizing this liability over the remaining term of the contracts on a weighted basis based on the projected revenue to be earned under the contracts.

Amortization of these in-process revenue contracts for the three and six months ended June 30, 2009 was $18.7 million ($13.7 million — 2008) and $37.8 million ($34.9 million — 2008), respectively, and is recorded in revenues. Amortization for the next five years is expected to be $36.1 million (remainder of 2009), $60.0 million (2010), $47.1 million (2011), $41.3 million (2012), $39.5 million (2013) and $59.4 million (thereafter).

TEEKAY CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. dollars, except share data)

7. Supplemental Cash Flow Information

The changes in non-cash working capital items related to operating activities for the six months ended June 30, 2009 and 2008 are as follows:

		Six Months Ended June 30,
		2009				2008
		$				$
Accounts receivable			111,074				(85,501	)
Prepaid expenses and other assets			25,080				(6,047	)
Accounts payable			(6,676	)			4,391
Accrued and other liabilities			(47,135	)			11,603
			82,343				(75,554	)

8. Long-Term Debt

		June 30, 2009				December 31, 2008
		$				$
Revolving Credit Facilities			2,031,537				2,656,658
Senior Notes (8.875%) due July 15, 2011			194,524				194,642
USD-denominated Term Loans due through 2021			1,827,205				1,670,005
Euro-denominated Term Loans due through 2023			410,139				414,144
USD-denominated Unsecured Demand Loan due to Joint Venture Partners			16,047				17,343
			4,479,452				4,952,792
Less current portion			204,549				245,043
			4,274,903				4,707,749

As of June 30, 2009, the Company had fourteen long-term revolving credit facilities (or the Revolvers) available, which, as at such date, provided for borrowings of up to $3.6 billion, of which $1.6 billion was undrawn. Interest payments are based on LIBOR plus margins; at June 30, 2009 and December 31, 2008, the margins ranged between 0.45% and 0.95%, respectively. At June 30, 2009 and December 31, 2008, the three-month LIBOR was 0.60% and 1.43%, respectively. The total amount available under the Revolvers reduces by $106.2 million (remainder of 2009), $218.0 million (2010), $803.3 million (2011), $233.8 million (2012), $301.3 million (2013) and $1,9 billion (thereafter). The Revolvers are collateralized by first-priority mortgages granted on 67 of the Company’s vessels, together with other related security, and include a guarantee from Teekay or its subsidiaries for all outstanding amounts.

The 8.875% Senior Notes due July 15, 2011 (or the 8.875% Notes) rank equally in right of payment with all of Teekay’s existing and future senior unsecured debt and senior to Teekay’s existing and future subordinated debt. The 8.875% Notes are not guaranteed by any of Teekay’s subsidiaries and effectively rank behind all existing and future secured debt of Teekay and other liabilities, secured and unsecured, of its subsidiaries. During the six months ended June 30, 2009, the Company repurchased nil (2008 — $19.7 million) principal amount of the 8.875% Notes (see also Note 14).

As of June 30, 2009, the Company had fourteen U.S. Dollar-denominated term loans outstanding, which totaled $1.8 billion. Certain of the term loans with a total outstanding principal balance of $485.4 million as at June 30, 2009, bear interest at a weighted-average fixed rate of 5.19%. Interest payments on the remaining term loans are based on LIBOR plus a margin. At June 30, 2009 and December 31, 2008, the margins ranged between 0.3% and 1.0%. At June 30, 2009, three-month LIBOR was 0.6% (December 31, 2008 — 1.43%). The term loan payments are made in quarterly or semi-annual payments commencing three or six months after delivery of each newbuilding vessel financed thereby, and twelve of the term loans also have balloon or bullet repayments due at maturity. The term loans are collateralized by first-priority mortgages on 29 of the Company’s vessels, together with certain other security. In addition, at June 30, 2009, all but $121.5 million (December 31, 2008 — $126.1 million) of the outstanding term loans were guaranteed by Teekay or its subsidiaries.

The Company has two Euro-denominated term loans outstanding, which, as at June 30, 2009 totaled 292.3 million Euros ($410.1 million). The Company repays the loans with funds generated by two Euro-denominated long-term time-charter contracts. Interest payments on the loans are based on EURIBOR plus a margin. At June 30, 2009 and December 31, 2008, the margins ranged between 0.6% and 0.66% and the one-month EURIBOR at June 30, 2009 was 0.75% (December 31, 2008 — 2.6%). The Euro-denominated term loans reduce in monthly payments with varying maturities through 2023 and are collateralized by first-priority mortgages on two of the Company’s vessels, together with certain other security, and are guaranteed by a subsidiary of Teekay.

Both Euro-denominated term loans are revalued at the end of each period using the then prevailing Euro/U.S. Dollar exchange rate. Due substantially to this revaluation, the Company recognized unrealized foreign exchange losses of $25.2 million and $13.9 million (2008 — losses of $3.0 million and $36.6 million) during the three and six months ended June 30, 2009, respectively.

TEEKAY CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. dollars, except share data)

The Company has two U.S. Dollar-denominated loans outstanding owing to joint venture partners, which, as at June 30, 2009, totaled $14.9 million and $1.1 million, respectively, including accrued interest. Interest payments on the first loan, which are based on a fixed interest rate of 4.84%, commenced in February 2008. This loan is repayable on demand no earlier than February 27, 2027.

Among other matters, the Company’s long-term debt agreements generally provide for maintenance of certain vessel market value-to-loan ratios and minimum consolidated financial covenants. Certain loan agreements require that a minimum level of free cash be maintained. As at June 30, 2009 and December 31, 2008, this amount was $100.0 million. Certain of the loan agreements also require that the Company maintain an aggregate level of free liquidity and undrawn revolving credit lines with at least six months to maturity, of at least 7.5% of total debt. As at June 30, 2009 and December 31, 2008, this amount was $263.8 million and $293.0 million, respectively. The Company was in compliance with debt covenants as at June 30, 2009.

9. Capital Leases and Restricted Cash

Capital Leases

Suezmax Tankers. As at June 30, 2009, the Company was a party, as lessee, to capital leases on five Suezmax tankers. Under the terms of the lease arrangements, the Company is required to purchase these vessels after the end of their respective lease terms for fixed prices as well as assuming the existing vessel financing upon the lenders consent. At their inception, the weighted-average interest rate implicit in these leases was 7.4%. These capital leases are variable-rate capital leases; however, any change in the lease payments resulting from changes in interest rates is offset by a corresponding change in the charter hire payments received by the Company. As at June 30, 2009, the remaining commitments under these capital leases, including the purchase obligations, approximated $214.8 million, including imputed interest of $14.9 million, repayable as follows:

Year		Commitment
Remainder of 2009		$122.4 million
2010		$8.4 million
2011		$84.0 million

RasGas II LNG Carriers. As at June 30, 2009, the Company was a party, as lessee, to 30-year capital lease arrangements for the three LNG carriers (or the RasGas II LNG Carriers) that operate under time-charter contracts with Ras Laffan Liquefied Natural Gas Co. Limited (II) (or RasGas II), a joint venture between Qatar Petroleum and ExxonMobil RasGas Inc., a subsidiary of ExxonMobil Corporation. All amounts below relating to the RasGas II LNG Carriers capital leases include the non-controlling interest’s 30% share.

Under the terms of the RasGas II LNG Carriers capital lease arrangements, the lessor claims tax depreciation on the capital expenditures it incurred to acquire these vessels. As is typical in these leasing arrangements, tax and change of law risks are assumed by the lessee.

Payments under the lease arrangements are based on tax and financial assumptions at the commencement of the leases. If an assumption proves to be incorrect, the lessor is entitled to increase the lease payments to maintain its agreed after-tax margin. During 2008 the Company has agreed under the terms of its tax lease indemnification guarantee to increase its capital lease payments for its three LNG carriers to compensate the lessor for losses suffered as a result of changes in tax rates. The estimated increase in lease payments is approximately $8.1 million over the term of the leases, with a carrying value of $8.0 million as at June 30, 2009. The Company’s carrying amount of this tax indemnification is $9.4 million. Both amounts are included as part of other long-term liabilities in the accompanying consolidated balance sheets. The tax indemnification is for the duration of the lease contract with the third party plus the years it would take for the lease payments to be statute barred. Although there is no maximum potential amount of future payments however, the Company may terminate the lease arrangements at any time. If the lease arrangements terminate, the Company would be required to pay termination sums to the lessor sufficient to repay the lessor’s investment in the vessels and to compensate it for the tax-effect of the terminations, including recapture of any tax depreciation.

At their inception, the weighted-average interest rate implicit in these leases was 5.2%. These capital leases are variable-rate capital leases. As at June 30, 2009, the commitments under these capital leases approximated $1.1 billion, including imputed interest of $0.6 billion, repayable as follows:

Year		Commitment
Remainder of 2009		$12.0 million
2010		$24.0 million
2011		$24.0 million
2012		$24.0 million
2013		$24.0 million
Thereafter		$953.1 million

TEEKAY CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. dollars, except share data)

Spanish-Flagged LNG Carrier. As at June 30, 2009, the Company was a party, as lessee, to a capital lease on one Spanish-flagged LNG carrier, which is structured as a “Spanish tax lease.” Under the terms of the Spanish tax lease, the Company will purchase the vessel at the end of the lease term in 2011. The purchase obligation has been fully funded with restricted cash deposits described below. At its inception, the implicit interest rate was 5.8%. As at June 30, 2009, the commitments under this capital lease, including the purchase obligation, approximated 117.4 million Euros ($164.7 million), including imputed interest of 11.7 million Euros ($16.4 million), repayable as follows:

Year		Commitment
Remainder of 2009		25.7 million Euros ($36.0 million)
2010		26.9 million Euros ($37.8 million)
2011		64.8 million Euros ($90.9 million)

FPSO Units. As at June 30, 2009, the Company was a party, as lessee, to capital leases on one FPSO unit, the Petrojarl Foinaven, and the topside production equipment for another FPSO unit, the Petrojarl Banff. However, prior to being acquired by Teekay Corporation, Teekay Petrojarl legally defeased its future charter obligations for these assets by making up-front, lump-sum payments to unrelated banks, which have assumed Teekay Petrojarl’s liability for making the remaining periodic payments due under the long-term charters (or Defeased Rental Payments) and termination payments under the leases.

The Defeased Rental Payments for the Petrojarl Foinaven were based on assumed Sterling LIBOR of 8% per annum. If actual interest rates are greater than 8% per annum, the Company receives rental rebates; if actual interest rates are less than 8% per annum, the Company is required to pay rentals in excess of the Defeased Rental Payments. For accounting purposes, this contract feature is an embedded derivative, and has been separated from the underlying lease and is separately accounted for as a derivative instrument.

As is typical for these types of leasing arrangements, the Company has indemnified the lessors of the Petrojarl Foinaven for the tax consequence resulting from changes in tax laws or interpretation of such laws or adverse rulings by authorities and for fluctuations in actual interest rates from those assumed in the leases.

Restricted Cash

Under the terms of the capital leases for the four LNG carriers described above in this Note 9, the Company is required to have on deposit with financial institutions an amount of cash that, together with interest earned on the deposits, will equal the remaining amounts owing under the leases, including the obligations to purchase the LNG carriers at the end of the lease periods, where applicable. These cash deposits are restricted to being used for capital lease payments and have been fully funded with term loans and, for one vessel, a loan from the Company’s joint venture partner (see Note 8).

As at June 30, 2009 and December 31, 2008, the amount of restricted cash on deposit for the three RasGas II LNG Carriers was $481.9 million and $487.4 million, respectively. As at June 30, 2009 and December 31, 2008, the weighted-average interest rates earned on the deposits were 1.2% and 4.8%, respectively.

As at June 30, 2009 and December 31, 2008, the amount of restricted cash on deposit for the Spanish-flagged LNG carrier was 107.3 million Euros ($150.6 million) and 104.7 million Euros ($146.2 million), respectively. As at June 30, 2009 and December 31, 2008, the weighted-average interest rate earned on these deposits was 5.0%.

The Company also maintains restricted cash deposits relating to certain term loans and other obligations, which cash deposits totaled $13.5 million and $17.0 million as at June 30, 2009 and December 31, 2008, respectively.

10. Capital Stock

The authorized capital stock of Teekay at June 30, 2009 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. As at June 30, 2009, Teekay had 73,047,006 shares of Common Stock (December 31, 2008 — 73,011,488) issued and no shares of Preferred Stock issued. As at June 30, 2009, Teekay had 72,547,809 shares of Common Stock outstanding (December 31 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. Subject to preferences that may apply to any shares of preferred stock outstanding at the time, the holders of common stock are entitled to share equally in any dividends that the board of directors may declare from time to time out of funds legally available for dividends.

During 2008, Teekay announced that its Board of Directors had authorized the repurchase of up to $200 million of shares of its Common Stock in the open market. As at June 30, 2009, Teekay had not repurchased any shares of Common Stock pursuant to such authorizations.

11. Commitments and Contingencies

a) Vessels Under Construction

As at June 30, 2009, the Company was committed to the construction of two Suezmax tankers, four LPG carriers, and four shuttle tankers. One Suezmax tanker was delivered in September 2009 with the remaining vessels scheduled for delivery between October 2009 and August 2011, at a total cost of approximately $753.7 million, excluding capitalized interest. As at June 30, 2009, payments made towards these commitments totaled $208.5 million (excluding $23.2 million of capitalized interest and other miscellaneous construction costs), and long-term financing arrangements existed for $545.2 million of the unpaid cost of these vessels. As at June 30, 2009, the remaining payments required to be made under these newbuilding contracts were $88.8 million (2009), $293.2 million (2010), and $163.2 million (2011).

TEEKAY CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. dollars, except share data)

b) Joint Ventures

The Company has a 33% interest in a consortium 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 consortium are Mitsui & Co., Ltd. and NYK Bulkship (Europe) Ltd., which hold 34% and 33% interests in the consortium, respectively. In connection with this award, the consortium 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 June 30, 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 June 30, 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 three and six months ended June 30, 2009, the Company recorded equity income of $17.6 million and $24.0 million, respectively, of its share of the Angola LNG Project earnings. This amount is included in equity income (loss) from joint ventures in the consolidated statement of income. Substantially all of the equity income related to unrealized gains on interest rate swaps.

One of the Kenai LNG Carriers, the Arctic Spirit, came off charter from the Marathon Oil Corporation/ConocoPhillips joint venture on March 31, 2009, and the Company has entered into a joint development and option agreement with Merrill Lynch Commodities, Inc. (MLCI), giving MLCI the option to purchase the vessel for conversion to an LNG floating production, storage and offload unit (FLNG). The agreement provides for a purchase price of $105 million if the Company chooses to participate in the project (as described below), or $110 million if the Company chooses not to participate. Under the option agreement, the Arctic Spirit is reserved for MLCI until December 31, 2009 and MLCI may extend the option quarterly through 2010. If MLCI exercises the option and purchases the vessel from the Company, it is expected that MLCI will convert the vessel to an FLNG (although it is not required to do so) and charter it under a long-term charter contract to a third party. The Company has the right to participate up to 50% in the conversion and charter project on terms that will be determined as the project progresses. The agreement with MLCI also provides that if the conversion of the Arctic Spirit to an FLNG proceeds, the Company will offer a similar option for a designee of MLCI to purchase the second Kenai LNG carrier for $125 million when it comes off charter.

c) Legal Proceedings and Claims

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

d) Other

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

12. Fair Value Measurements

SFAS No. 157 clarifies the definition of fair value, prescribes methods for measuring fair value, establishes a fair value hierarchy based on the inputs used to measure fair value and expands disclosures about the use of fair value measurements. The fair value hierarchy has three levels based on the reliability of the inputs used to determine fair value as follows:

Level 1.		Observable inputs such as quoted prices in active markets;
Level 2.		Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; 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 following tables present the Company’s assets and liabilities that are measured at fair value on a recurring basis and are categorized using the fair value hierarchy.

Cash and cash equivalents and restricted cash — The fair value of the Company’s cash and cash equivalents approximates their carrying amounts reported in the accompanying consolidated balance sheets.

Vessels held for sale — The fair value of the Company’s vessels held for sale approximates their carrying amounts reported in the accompanying consolidated balance sheets.

Loans to joint ventures — The fair value of the Company’s loans to joint ventures approximates their carrying amounts reported in the accompanying consolidated balance sheet.

TEEKAY CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. dollars, except share data)

Loans from joint venture partners — The fair value of the Company’s loans from joint venture partners approximates their carrying amounts reported in the accompanying consolidated balance sheet.

Long-term debt — The fair value of the Company’s fixed-rate and variable-rate long-term debt is either based on quoted market prices or estimated using discounted cash flow analyses, based on current credit spreads available for debt with similar terms and remaining maturities.

Derivative instruments — The fair value of the Company’s derivative instruments is the estimated amount that the Company would receive or pay to terminate the agreements at the reporting date, taking into account, as applicable, current interest rates, foreign exchange rates, bunker fuel prices, spot tanker market rates for vessels, and the current credit worthiness of both the Company and the swap counterparties. Given the current volatility in the credit markets, it is reasonably possible that the amounts recorded as derivative assets and liabilities could vary by material amounts in the near term.

The estimated fair value of the Company’s financial instruments and other non-financial assets carried at fair value are as follows:

						June 30, 2009
						Carrying				Fair
		Fair Value				Amount				Value
		Hierarchy				Asset (Liability)				Asset (Liability)
		Level				$				$
Cash and cash equivalents and restricted cash		Level 1					1,118,634				1,118,634
Vessels held for sale		Level 2					34,970				34,970
Loans to joint ventures		Level 2					22,588				22,588
Loan from joint venture partners		Level 2					(21,274	)			(21,274	)
Long-term debt		Level 1 and 2					(4,479,452	)			(4,076,282	)
Derivative instruments (1)
Interest rate swap agreements (2)		Level 2					(392,262	)			(392,262	)
Interest rate swap agreements (2)		Level 2					54,958				54,958
Interest rate swaption		Level 2					(8,242	)			(8,242	)
Foreign currency contracts		Level 2					(26,739	)			(26,739	)
Bunker fuel swap contracts		Level 2					(354	)			(354	)
Forward freight agreements		Level 2					1,531				1,531
Foinaven embedded derivative		Level 2					(11,771	)			(11,771	)

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 June 30, 2009. See Note 13(b) of the notes to the consolidated financial statements.

13. Vessel Sales and Write-downs of Vessels and Equipment

a) Vessel Sales

During January and February 2009, the Company sold a 1993-built Aframax tanker through a sale-leaseback agreement and a 2009-built product tanker, respectively, which were presented on the December 31, 2008 balance sheet as vessels held for sale. Both vessels were part of the Company’s spot tanker segment. The Company 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.

During May 2009, the Company sold a 2007-built product tanker and a 2005-built product tanker. Both vessels were part of the Company’s spot tanker segment. The Company realized a gain of approximately $29.8 million as a result of these transactions.

b) Vessels and Equipment Write-down

The Company’s June 30, 2009 consolidated financial statements include a $16.4 million write-down for impairment of three older vessels due to lower fair values compared to carrying values. The Company used recent sale prices of similar age and size of vessels to determine the fair value. These vessels are presented on the June 30, 2009 balance sheet as vessels held for sale.

TEEKAY CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. dollars, except share data)

14. Restructuring Charge and Other Income

a) Restructuring Charge

During the three and six months ended June 30, 2009, the Company incurred $5.0 million and $10.6 million of restructuring costs, respectively. The restructuring costs were primarily comprised of the reflagging of certain vessels, transfer of certain ship management functions from the Spain office to a subsidiary of Teekay, global staffing changes, closure of one of the Company’s three offices in Norway, and the reorganization of a business unit. The Company expects to incur approximately $1.0 million of additional restructuring costs relating to these changes in operations. At June 30, 2009, $2.1 million of restructuring liability is recorded in accrued liabilities on the balance sheet.

b) Other Income

		Three Months Ended June 30,								Six Months Ended June 30,
		2009				2008				2009				2008
		$				$				$				$
Gain on sale of marketable securities			—				1,868				—				4,576
Loss on bond repurchase			—				(712	)			—				(1,310	)
Volatile organic compound emission plant lease income			1,708				2,395				3,602				4,965
Miscellaneous income			2,115				2,743				1,803				2,251
Other income			3,823				6,294				5,405				10,482

15. Accumulated Other Comprehensive Loss

As at June 30, 2009 and December 31, 2008, the Company’s accumulated other comprehensive loss consisted of the following components:

		June 30,				December 31,
		2009				2008
		$				$
Unrealized loss on derivative instruments			(23,821	)			(58,723	)
Pension adjustments			(22,464	)			(23,338	)
Unrealized gain on marketable securities			1,090				—
			(45,195	)			(82,061	)

16. Derivative Instruments and Hedging Activities

The Company uses derivatives in accordance with its overall risk management policies. The following summarizes the Company’s risk strategies with respect to market risk from foreign currency fluctuations, changes in interest rates, spot tanker market rates for vessels and bunker fuel prices.

Foreign Currency Fluctuation Risk

The Company hedges portions of its forecasted expenditures denominated in foreign currencies with foreign currency forward contracts. Certain of these foreign currency forward contracts are designated as cash flow hedges of forecasted foreign currency expenditures. Where such instruments are designated and qualify as cash flow hedges for accounting purposes, the effective portion of the changes in their fair value is recorded in accumulated other comprehensive income (loss), until the hedged item is recognized in earnings. At such time, the respective amount in accumulated other comprehensive income (loss) is released to earnings and is recorded within operating expenses, based on the nature of the expense. The ineffective portion of these foreign currency forward contracts consists of a $1.5 million gain for the six months ended June 30, 2009 has also been reported as a reduction of operating expenses, based on the nature of the expense.

During the three and six months ended June 30, 2009, the Company recognized the following realized and unrealized gains (losses) relating to foreign currency forward contracts that are designated as cash flow hedges for accounting:

		Three Months Ended June 30,								Six Months Ended June 30,
		2009				2008				2009				2008
		$				$				$				$
Gains (losses) recognized in:
Vessel operating expenses			653				1,567				(10,291	)			1,777
General and administrative			(1,598	)			918				(4,226	)			1,691
Foreign exchange (loss) gain			—				(444	)			(3	)			9
Accumulated other comprehensive loss			21,050				447				21,991				6,577
Gains (losses) reclassified from:
Accumulated other comprehensive loss			5,942				(993	)			18,686				(4,020	)

TEEKAY CORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(all tabular amounts stated in thousands of U.S. dollars, except share data)

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. During the three and six months ended June 30, 2009, the Company recognized net realized and unrealized gains on foreign currency forward contracts of $3.9 million and $5.2 million, respectively. During the three and six months ended June 30, 2008, the Company recognized net realized and unrealized gains on foreign currency forward contracts of $3.1 million and $15.0 million, respectively. Realized and unrealized gains of $0.4 million and $4.7 million, respectively, relating to foreign currency forwards contracts for the three and six months ended June 30, 2008 were reclassified from general and administrative expenses to realized and unrealized gains (losses) on non-designated derivative instruments for comparative purposes. Realized and unrealized gains of $1.4 million and $6.7 million, respectively, relating to foreign currency forwards contracts for the three and six months ended June 30, 2008 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 $1.2 million and $3.6 million, respectively, relating to foreign currency forwards contracts for the three and six months ended June 30, 2008 were reclassified from time-charter hire and foreign exchange expenses to realized and unrealized gains (losses) on non-designated derivative instruments for comparative purposes.

As at June 30, 2009, the Company was committed to the following foreign currency forward contracts:

										Fair Value /
		Contract Amount								Carrying Amount
		in Foreign								of Asset / (Liability)
		Currency				Average Forward				(in millions of U.S.				Expected Maturity
		(millions)				Rate(1)				Dollars)				2009				2010				2011
														(in millions of U.S. Dollars)
Norwegian Kroner			1,440.7				6.03			$	(15.4)			$	99.5			$	139.5				—
Euro			50.4				0.68				(3.2)				34.9				36.8				2.3
Canadian Dollar			71.8				1.08				(4.6)				28.5				37.9				—
British Pound			36.7				0.58				(3.4)				32.7				31.1				—
Australian Dollar			1.4				1.13				(0.1)				1.3				—				—
										$	(26.7)			$	196.9			$	245.3			$	2.3

As at June 30, 2009, the Company’s accumulated other comprehensive loss included $23.8 million of unrealized losses on foreign currency forward contracts designated as cash flow hedges (December 31, 2008 — $58.7 million of unrealized losses). As at June 30, 2009, the Company estimated, based on current foreign exchange rates, that it would reclassify approximately $25.0 million of net losses on foreign currency forward contracts from accumulated other comprehensive loss to earnings during the next twelve months.

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. During the three and six months ended June 30, 2009, the Company recognized net realized and unrealized gains of $152.9 million and $195.0 million, respectively, relating to its interest rate swaps. During the three and six months ended June 30, 2008, the Company recognized net realized and unrealized gains (losses) of $156.2 million and $(10.6) million, respectively, relating to its interest rate swaps. The realized and unrealized gains (losses) of $156.2 million and $(10.6) million, respectively relating to interest rate swaps for the three and six months ended June 30, 2008 were reclassified from interest income and interest expense to realized and unrealized gain on non-designated derivative instruments for comparative purposes.

As at June 30, 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-				Fixed
		Interest				Principal				Carrying Amount				Average				Interest
		Rate				Amount				of Asset (Liability)				Remaining Term				Rate
		Index				$				$				(Years)				(%)(1)
LIBOR-Based Debt:
U.S. Dollar-denominated interest rate swaps (2)		LIBOR					465,554				(46,725	)			27.6				4.9
U.S. Dollar-denominated interest rate swaps		LIBOR					2,967,256				(271,427	)			8.2				5.1
U.S. Dollar-denominated interest rate swaps (3)		LIBOR					658,536				(70,654	)			18.0				5.4
LIBOR-Based Restricted Cash Deposit:
U.S. Dollar-denominated interest rate swaps (2)		LIBOR					475,352				54,958				27.6				4.8
EURIBOR-Based Debt:
Euro-denominated interest rate swaps (4) (5)		EURIBOR					410,138				(3,456	)			15.0				3.8