Business Context and Reporting Period
Company: Teekay LNG Partners L.P. (Note: Input metadata referenced "Seapeak LLC," but the filing text identifies Teekay LNG Partners L.P.)
Filing Type: Form 6-K (Report of Foreign Private Issuer)
Report Date: August 6, 2008
Reporting Period: Second Quarter ended June 30, 2008 (with restatements covering Q2 2004 through Q2 2008)
Key Financial Metrics
The filing text does not provide specific numerical values for revenue, profit, cash flow, margins, debt, or liquidity. The financial results included in the associated earnings release are designated as preliminary and do not reflect the accounting adjustments described below. Management states that the accounting change will not affect the Partnership's cash flows, distributable cash flow, liquidity, or total partners' equity at June 30, 2008.
Material Changes and Restatement
The Partnership announced a restatement of financial results from the second quarter of 2004 through the second quarter of 2008. The material change involves the accounting treatment of certain derivative transactions under SFAS 133 (Accounting for Derivative Instruments and Hedging Activities).
- Cause: Certain interest rate swaps and a profit-sharing swap agreement did not qualify for hedge accounting treatment because hedge documentation did not meet strict technical requirements.
- Adjustment: Changes in the fair value of these derivatives will be recognized through the statement of income (loss) rather than as a component of accumulated other comprehensive income (loss).
- Impact: This will result in greater fluctuations in reported net income (loss) for the restated periods.
Guidance, Outlook, and Risks
Management Commentary: Management believes the derivative transactions were consistent with risk management policies and that the overall hedging strategy remains sound. The change is strictly an accounting adjustment and does not alter the economics of the transactions.
Risks and Contingencies:
- Previously reported financial statements from 2004 through Q1 2008 should not be relied upon.
- Current preliminary results are subject to change once restatement amounts are finalized.
- Amendments to previous SEC filings will be required.
Outlook: The Partnership will finalize restatement amounts as soon as practicable. Ernst & Young LLP will complete its review of the financial statements following the completion of the restatements.
Investor Verification Checklist
- Verify the final restated net income figures once the Partnership releases amended results.
- Confirm the specific impact of the SFAS 133 adjustment on historical earnings per unit.
- Review the amended Form 10-K and 10-Q filings for periods between 2004 and 2008.
- Monitor the completion of the Ernst & Young LLP review of the June 30, 2008 financial statements.