Teekay Corporation — FY2021 Form 20-F
Reporting period: Fiscal year ended December 31, 2021; filed April 6, 2022. This is an annual report, not a standalone fourth-quarter filing. Financial statements use U.S. GAAP. The company’s 2021 results classify the Teekay Gas Business as discontinued operations following its sale, which closed January 13, 2022; comparisons should account for that presentation.
Business context and reporting period
Teekay operated principally through its controlled tanker subsidiary, Teekay Tankers, and Teekay Parent, which included marine services and FPSO operations. Tanker earnings were substantially exposed to spot rates. At year-end, Teekay owned 29.8% economically of Teekay Tankers and retained control through voting rights. The gas business generated substantial 2021 revenue and earnings but was sold after year-end.
Key financial metrics
| Metric | FY2021 | FY2020 |
|---|---|---|
| Continuing-operations revenue | $682.5 million | $1,146.3 million |
| Loss from vessel operations, continuing operations | $(185.4) million | $70.2 million |
| Loss from continuing operations | $(277.5) million | $(24.3) million |
| Income from discontinued operations | $274.1 million | $115.3 million |
| Net income (loss) | $(3.4) million | $91.0 million |
| Net income (loss) attributable to Teekay shareholders | $7.8 million | $(82.9) million |
| Cash from operating activities, continuing operations | $(141.9) million | $354.9 million |
| Cash from operating activities, discontinued operations | $220.0 million | $629.1 million |
| Cash and cash equivalents, consolidated balance sheet | $210.2 million | $348.8 million |
| Total debt, including finance leases and discontinued operations | $3,639.6 million | $3,766.1 million |
| Total equity | $2,432.5 million | $2,471.3 million |
| EBITDA / Adjusted EBITDA | $420.2 million / $721.3 million | $578.4 million / $1,086.1 million |
EBITDA and Adjusted EBITDA are non-GAAP measures and include continuing and discontinued operations. At December 31, 2021, continuing operations had $991.0 million of short- and long-term debt and finance-lease obligations. The company reported a $126.6 million continuing-operations working-capital deficit, including approximately $255.3 million of debt maturities and repayments due within 12 months. The consolidated balance sheet included $4.8 billion of current assets and $2.9 billion of current liabilities attributable to discontinued operations.
Teekay Tankers’ revenue was $542.4 million, down from $886.4 million; its loss from vessel operations was $194.1 million, versus income of $141.6 million. Teekay Parent revenue was $140.1 million, compared with $259.8 million, and vessel-operations income was $8.7 million, versus a $71.4 million loss. These segment figures exclude the gas business.
Material changes versus the prior comparable period
- Continuing-operations revenue fell about 40%, while vessel operations swung from income to a substantial loss. Management cited much lower tanker spot TCE rates, lower fixed charter earnings versus 2020 spot-market rates, weaker lightering results, and higher bunker costs and off-hire.
- Continuing-operations operating cash flow fell from $354.9 million to an outflow of $141.9 million, reflecting weaker operating results, working-capital movements and lower direct-financing-lease receipts. Total consolidated operating cash flow was $78.1 million, compared with $984.0 million in 2020.
- Continuing-operations impairment charges were $92.4 million, compared with $149.2 million in 2020. The 2021 charge included $85.0 million for seven tankers and $0.7 million for an operating-lease right-of-use asset. A separate $11.6 million write-down was recorded on Teekay Tankers’ High-Q joint-venture investment.
- Interest expense for continuing operations declined to $68.4 million from $89.1 million, primarily due to lower debt balances, lower rates and financing changes.
- Income from discontinued operations increased to $274.1 million from $115.3 million. The gas business itself reported $680.6 million of revenue and $274.1 million of income from discontinued operations; this business was sold in January 2022.
Outlook, risks and unusual items
- Sale and post-year-end financial position: Teekay received approximately $641 million gross cash proceeds from the sale of its Teekay Gas Business. It subsequently redeemed $243.4 million of 9.25% notes and repurchased most of its convertible notes. Management described Teekay Parent as net-debt-free after the sale, with net cash above $300 million. These are post-year-end developments, not December 31, 2021 balance-sheet amounts.
- Tanker outlook: Management said spot rates reached multi-decade lows in 2021 and expected recovery during 2022, with volatility and substantial uncertainty following Russia’s invasion of Ukraine. It considered the 2023 outlook positive, citing low tanker orderbook levels and expected fleet utilization improvements. These are expectations, not assured guidance.
- Liquidity: Management expected Teekay Parent and Teekay Tankers to have sufficient liquidity for at least 12 months from the filing’s issuance, considering the gas-business sale, vessel sales and financing transactions. Teekay Tankers’ assessment assumed weak 2021-level spot rates through the first half of 2022, recovery later in the year, and continued extension of its working-capital loan, although it stated liquidity would remain sufficient if the lender declined further extensions.
- Debt and covenants: At year-end, the company and Teekay Tankers reported compliance with applicable covenants. Teekay Tankers had $181.9 million of revolving-facility and term-loan maturities in 2023–2024, requiring refinancing or repayment. Vessel-value declines could pressure collateral coverage and liquidity covenants.
- FPSO exits and asset retirement: The Sevan Hummingbird charter was expected to terminate around May 2022, and the Petrojarl Foinaven was expected to be redelivered in August 2022 for recycling. Decommissioning and recycling costs may exceed estimates. The company recognized a $33.0 million gain in 2021 after a counterparty assumed remaining Banff decommissioning obligations.
- Other notable exposure: A disputed $7.3 million claim sought reimbursement of sale-leaseback breakage costs; Teekay Tankers recorded no provision. Unrecognized freight-tax benefits were $47.0 million for continuing operations and $26.4 million for discontinued operations. The filing highlights COVID-19, geopolitical and sanctions risks, volatile tanker rates, environmental regulation, fuel and crew costs, and a potential PFIC tax classification after the sale increased cash holdings.
- Dividends: Teekay had eliminated its regular common-stock dividend beginning in 2019. Any future dividend is at the board’s discretion; Teekay Tankers also prioritized balance-sheet deleveraging over distributions.
- Audit and controls: KPMG issued an unqualified opinion on the financial statements and internal control over financial reporting. Recoverability of conventional tankers was identified as a critical audit matter because impairment testing depends on estimates of future charter rates.
Most important facts for investors to verify
- Reconcile the reported continuing-operations results with discontinued gas-business results and confirm which metrics include both.
- Review the cash proceeds, debt repayments, transaction costs and resulting cash position after the January 2022 gas-business sale.
- Assess Teekay Tankers’ spot-rate sensitivity, 2022 liquidity assumptions, working-capital loan extension and 2023–2024 refinancing needs.
- Monitor tanker and FPSO impairments, vessel sales, recycling liabilities and the outcome of the disputed $7.3 million claim.
- Evaluate the company’s freight-tax exposures and the potential U.S. PFIC consequences arising from its post-sale cash balance.