Business context and reporting period
Teekay Corporation’s Form 20-F is an audited annual report for the fiscal year ended December 31, 2013, filed April 28, 2014. The company provides crude oil and gas transportation and offshore production, storage and offloading services through its businesses and controlled public subsidiaries. It reports in U.S. dollars under U.S. GAAP. This is a full-year filing, not a standalone fourth-quarter report.
Key financial metrics
Unless noted otherwise, amounts are U.S. dollars. Figures below are consolidated; Teekay’s parent-company result is identified separately.
| Metric | 2013 | 2012 |
|---|---|---|
| Revenue | $1,830.1 million | $1,980.8 million |
| Net revenue (revenue less voyage expenses; non-GAAP) | $1,717.9 million | $1,842.5 million |
| Income (loss) from vessel operations | $62.7 million | $(150.4) million |
| Consolidated net income (loss) | $35.5 million | $(311.1) million |
| Net loss attributable to Teekay Corporation stockholders | $(114.7) million | $(160.2) million |
| Basic loss per share attributable to Teekay stockholders | $(1.63) | $(2.31) |
| EBITDA / Adjusted EBITDA (non-GAAP) | $641.1 million / $817.4 million | $291.8 million / $830.7 million |
| Net cash from operating activities | $292.6 million | $288.9 million |
| Cash and cash equivalents at year-end | $614.7 million | $639.5 million |
| Total debt, including capital leases | $6,707.8 million | $6,197.3 million |
| Total assets / total equity | $11,555.7 million / $3,203.1 million | $11,002.0 million / $3,191.5 million |
Restricted cash was $502.7 million at year-end 2013, much of it associated with LNG-carrier lease obligations. Total liquidity, including cash and undrawn credit facilities, was approximately $1.2 billion, down from $1.9 billion. The company reported debt-to-total-capitalization of 67.7% and net-debt-to-total-net-capitalization of 63.6%; it was in compliance with its debt covenants at year-end.
Material changes versus the prior comparable period
- Revenue fell 7.6% and net revenue fell 6.8%. The improvement in consolidated net income primarily reflects lower vessel impairments and better vessel-operating results, rather than a comparable increase in adjusted EBITDA.
- Asset impairments were $167.6 million, versus $432.2 million in 2012. 2013 charges included $76.8 million for shuttle tankers and $90.8 million for four Suezmax tankers designated for sale.
- Adjusted EBITDA declined slightly, from $830.7 million to $817.4 million, while reported EBITDA increased substantially, partly reflecting non-cash derivative valuation effects and other adjustments.
- Operating cash flow was nearly flat year over year. Cash from financing was $866.6 million and investing activities used $1,184.0 million, including $753.8 million of vessel and equipment expenditures and $308.0 million invested in direct-financing leases.
- Total debt including capital leases rose about $510.5 million. Interest expense increased to $181.4 million from $167.6 million.
- By segment, liquefied-gas vessel operating income was $145.1 million; shuttle tanker and FSO income was $11.6 million; FPSO operations recorded a $1.9 million loss; and the conventional tanker segment recorded a $92.0 million loss, including impairments.
Outlook, commentary, risks and unusual items
- Management described crude tanker spot rates as weak for most of 2013, but sharply stronger in the fourth quarter. Its internal 2014 outlook estimated net tanker fleet growth of about 1.2%, while forecast oil-demand growth was 1.2 million barrels per day. These are estimates, not company earnings guidance.
- Capital commitments remained significant: scheduled contractual obligations totaled $9.55 billion, including $1.70 billion of remaining newbuilding and conversion installments. The company disclosed $996.4 million of scheduled debt repayments due within 12 months of year-end and said it was arranging financing for remaining commitments.
- Operational issues included the Banff FPSO, still undergoing repairs after 2011 storm damage and expected to return in 2014; the company had no off-hire insurance for Banff and estimated related capital upgrades at about $155 million, with recovery from the charterer unresolved. The Foinaven FPSO also had compressor and subsea issues. The Voyageur Spirit compressor defect caused lost hire and indemnification obligations; final charterer acceptance was received in April 2014, retroactive to February 22, 2014.
- Teekay LNG estimated its 70% share of potential exposure from a UK tax challenge to the RasGas II leases at about $34 million, excluding possible financing and swap-termination costs. A letter-of-credit bank downgrade also prompted a reported $12.3 million net-present-value increase in lease payments, of which Teekay LNG’s share was about $8.6 million.
- The company paid $1.265 per common share in dividends during 2013 and said it intended to continue regular quarterly dividends, subject to results, board declaration, cash needs and financing restrictions. Future dividend capacity is not assured.
- Other principal risks include cyclical tanker rates and vessel values, customer concentration (three customers represented 37% of 2013 revenue), debt and refinancing needs, covenant and liquidity constraints, foreign-exchange and interest-rate exposure, environmental regulation, and reliance on joint ventures. KPMG gave an unqualified audit opinion; management and the auditor reported effective internal control over financial reporting.
Important facts for investors to verify
- Reconcile consolidated net income of $35.5 million with the $114.7 million loss attributable to Teekay Corporation stockholders, and assess subsidiary non-controlling interests.
- Review the composition and cash implications of Adjusted EBITDA, including realized swap losses and non-cash derivative gains; it is a non-GAAP measure and is not operating cash flow.
- Confirm the sources and timing of financing for the $996.4 million of near-term debt maturities and major construction commitments, and assess subsidiary-level restrictions on cash transfers.
- Track Banff cost recovery and restart, Foinaven repairs, Voyageur Spirit indemnification and charter status, and the RasGas II tax and lease-payment matters.
- Assess vessel impairment assumptions, especially market values below carrying values, and the exposure of debt covenants to further vessel-value declines.
- Evaluate whether the dividend remains supportable after debt service, capital spending and subsidiary distributions; the filing does not provide a firm earnings or dividend forecast.