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

For the quarterly period ended March 31, 2011

Commission file number 1-12874

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 MARCH 31, 2011

INDEX

		PAGE
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Unaudited Consolidated Statements of Income (Loss) for the three months ended March 31, 2011 and 2010			3
Unaudited Consolidated Balance Sheets as at March 31, 2011 and December 31, 2010			4
Unaudited Consolidated Statements of Cash Flows for the three months ended March 31, 2011 and 2010			5
Unaudited Consolidated Statement of Changes in Total Equity for the three months ended March 31, 2011			6
Unaudited Consolidated Statements of Comprehensive Income (Loss) for the three months ended March 31, 2011 and 2010			7
Notes to the Unaudited Consolidated Financial Statements			8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			19
Item 3. Quantitative and Qualitative Disclosures about Market Risk			33
PART II: OTHER INFORMATION			35
SIGNATURES			36

ITEM 1 -		FINANCIAL STATEMENTS

TEEKAY CORPORATION AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(in thousands of U. S. dollars, except share and per share amounts)

		Three Months Ended March 31,
		2011				2010
		$				$
REVENUES			488,024				572,875
OPERATING EXPENSES
Voyage expenses			45,126				72,550
Vessel operating expenses (note 15)			161,577				154,535
Time-charter hire expense			63,031				79,251
Depreciation and amortization			105,038				108,230
General and administrative (notes 9 and 15)			70,218				48,091
Loss on sale of vessels and equipment — net of write-downs of vessels and equipment (note 7)			3,593				760
Restructuring charges (note 12)			4,961				3,783
Total operating expenses			453,544				467,200
Income from vessel operations			34,480				105,675
OTHER ITEMS
Interest expense			(32,794	)			(32,152	)
Interest income			2,465				4,274
Realized and unrealized gain (loss) on non-designated derivative instruments (note 15)			23,257				(87,847	)
Equity income (loss) from joint ventures			6,394				(2,666	)
Foreign exchange (loss) gain (notes 8 and 15)			(20,340	)			29,026
Loss on notes repurchase (note 8)			—				(12,108	)
Other income (note 13)			94				2,422
Net income before income taxes			13,556				6,624
Income tax (expense) recovery (note 16)			(811	)			7,307
Net income			12,745				13,931
Less: Net income attributable to non-controlling interests			(42,402	)			(27,933	)
Net loss attributable to stockholders of Teekay Corporation			(29,657	)			(14,002	)
Per common share of Teekay Corporation (note 17)
• Basic loss attributable to stockholders of Teekay Corporation			(0.41	)			(0.19	)
• Diluted loss attributable to stockholders of Teekay Corporation			(0.41	)			(0.19	)
• Cash dividends declared			0.3163				0.3163
Weighted average number of common shares outstanding (note 17)
• Basic			71,946,997				72,788,591
• Diluted			71,946,997				72,788,591

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

TEEKAY CORPORATION AND SUBSIDIARIES

UNAUDITED CONSOLIDATED BALANCE SHEETS
(in thousands of U.S. dollars, except share and per share amounts)

		As at				As at
		March 31,				December 31,
		2011				2010
		$				$
ASSETS
Current
Cash and cash equivalents (note 8)			567,325				779,748
Restricted cash			92,733				86,559
Accounts receivable, including non-trade of $30,972 (2010 — $35,960)			283,303				244,879
Net investment in direct financing leases (note 5)			26,126				26,791
Prepaid expenses			128,563				94,282
Current portion of derivative assets (note 15)			41,293				27,215
Other assets			2,538				2,616
Total current assets			1,141,881				1,262,090
Restricted cash — non-current			493,633				489,712
Vessels and equipment (note 8)
At cost, less accumulated depreciation of $2,070,325 (2010 — $1,997,411)			5,618,789				5,692,812
Vessels under capital leases, at cost, less accumulated amortization of $177,866 (2010 — $172,113)			872,396				880,576
Advances on newbuilding contracts (note 10a)			261,335				197,987
Total vessels and equipment			6,752,520				6,771,375
Net investment in direct financing leases — non-current (note 5)			454,122				460,725
Marketable securities			22,849				21,380
Loans to joint ventures and joint venture partners, bearing interest between 4.4% to 8.0%			33,500				32,750
Derivative assets (note 15)			46,301				55,983
Deferred income tax asset (note 16)			17,268				17,001
Investment in joint ventures (note 10b)			220,563				207,633
Investment in term loans (note 4)			186,184				116,014
Other non-current assets			109,142				117,351
Intangible assets — net			151,306				155,893
Goodwill			203,191				203,191
Total assets			9,832,460				9,911,098
LIABILITIES AND EQUITY
Current
Accounts payable			52,709				44,990
Accrued liabilities			369,142				377,119
Current portion of derivative liabilities (note 15)			130,913				144,111
Current portion of long-term debt (note 8)			472,074				276,508
Current obligation under capital leases			270,945				267,382
Current portion of in-process revenue contracts			42,926				43,469
Loans from joint venture partners			14,500				59
Total current liabilities			1,353,209				1,153,638
Long-term debt, including amounts due to joint venture partners of $13,383 (2010 — $13,282) (note 8)			3,979,815				4,155,556
Long-term obligation under capital leases			470,910				470,752
Derivative liabilities (note 15)			245,504				387,124
Asset retirement obligation			24,092				23,018
In-process revenue contracts			142,313				152,637
Other long-term liabilities			192,343				194,640
Total liabilities			6,408,186				6,537,365
Commitments and contingencies (notes 5, 10 and 15)
Redeemable non-controlling interest (note 10d)			40,614				41,725
Equity
Common stock and additional paid-in capital ($0.001 par value; 725,000,000 shares authorized; 71,822,916 shares outstanding (2010 — 72,012,843); 74,142,366 shares issued (2010 — 73,749,793)) (note 9)			685,430				672,684
Retained earnings			1,157,117				1,313,934
Non-controlling interest			1,544,239				1,353,561
Accumulated other comprehensive loss (note 14)			(3,126	)			(8,171	)
Total equity			3,383,660				3,332,008
Total liabilities and equity			9,832,460				9,911,098

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

TEEKAY CORPORATION AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands of U.S. dollars)

		Three Months Ended March 31,
		2011				2010
		$				$
Cash and cash equivalents provided by (used for)
OPERATING ACTIVITIES
Net income			12,745				13,931
Non-cash items:
Depreciation and amortization			105,038				108,230
Amortization of in-process revenue contracts			(10,867	)			(13,435	)
Loss on sale of vessels and equipment			193				239
Write-down of vessels and equipment			3,400				521
Loss on repurchase of notes			—				12,108
Equity (income) loss			(6,394	)			2,666
Income tax expense (recovery)			811				(7,307	)
Share-based compensation			13,891				3,923
Unrealized foreign exchange loss (gain)			25,408				(22,556	)
Unrealized (gain) loss on derivative instruments			(148,468	)			49,763
Other			(1,813	)			(1,328	)
Change in operating assets and liabilities			(78,764	)			(48,279	)
Expenditures for drydocking			(7,854	)			(3,695	)
Net operating cash flow			(92,674	)			94,781
FINANCING ACTIVITIES
Proceeds from issuance of long-term debt (note 8)			227,005				771,249
Debt issuance costs			(1,320	)			(9,565	)
Scheduled repayments of long-term debt			(68,662	)			(38,413	)
Prepayments of long-term debt			(165,407	)			(609,928	)
Repayments of capital lease obligations			(1,172	)			(727	)
Proceeds from loans from joint venture partner			14,500				591
Repayment of loans from joint venture partner			(59	)			(1,164	)
Increase in restricted cash			(4,602	)			(428	)
Net proceeds from issuance of Teekay Offshore Partners L.P. units (note 6)			—				94,114
Net proceeds from issuance of Teekay Tankers Ltd. shares (note 6)			107,233				—
Issuance of Common Stock upon exercise of stock options			3,862				1,974
Repurchase of Common Stock (note 9)			(19,888	)			—
Distribution from subsidiaries to non-controlling interests			(48,110	)			(33,083	)
Cash dividends paid			(23,172	)			(22,999	)
Net financing cash flow			20,208				151,621
INVESTING ACTIVITIES
Expenditures for vessels and equipment			(76,112	)			(44,696	)
Proceeds from sale of vessels and equipment			5,055				10,045
Investment in term loan (note 4)			(70,170	)			—
Investment in joint ventures			(4,191	)			(145	)
Advances to joint ventures and joint venture partners			(1,830	)			651
Investment in direct financing lease assets			—				(4,199	)
Direct financing lease payments received			7,268				4,827
Other investing activities			23				(34	)
Net investing cash flow			(139,957	)			(33,551	)
(Decrease) increase in cash and cash equivalents			(212,423	)			212,851
Cash and cash equivalents, beginning of the period			779,748				422,510
Cash and cash equivalents, end of the period			567,325				635,361
Supplemental cash flow information (note 18)

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

TEEKAY CORPORATION AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN TOTAL EQUITY
(in thousands of U.S. dollars)

		TOTAL EQUITY
		Thousands				Common								Accumulated
		of Shares				Stock and								Other
		of Common				Additional								Comprehensive				Non-
		Stock				Paid-in				Retained				Income				controlling
		Outstanding				Capital				Earnings				(Loss)				Interest				Total
		#				$				$				$				$				$
Balance as at December 31, 2010			72,013				672,684				1,313,934				(8,171	)			1,353,561				3,332,008
Net (loss) income											(29,657	)							41,064				11,407
Other comprehensive income (loss):
Unrealized gain on marketable securities															1,468								1,468
Pension adjustments, net of taxes															192								192
Unrealized loss on qualifying cash flow hedging instruments (note 15)															4,042				1,456				5,498
Realized loss on qualifying cash flow hedging instruments (note 15)															(657	)			(328	)			(985	)
Comprehensive income																			42,192				17,580
Dividends declared											(23,175	)							(48,110	)			(71,285	)
Reinvested dividends			1				3																3
Exercise of stock options			393				3,862																3,862
Repurchase of Common Stock (note 9)			(583	)			(5,010	)			(14,878	)											(19,888	)
Employee stock option compensation (note 9)							13,891																13,891
Dilution gain on public offering of Teekay Tankers (note 6)											5,736												5,736
Sale of 49% interest of OPCO to Teekay Offshore (note 6)											(94,843	)							94,843				—
Increase to non-controlling interest from share and unit issuances of subsidiaries and other																			101,753				101,753
Balance as at March 31, 2011			71,824				685,430				1,157,117				(3,126	)			1,544,239				3,383,660

TEEKAY CORPORATION AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in thousands of U.S. dollars)

		Three Months Ended March 31,
		2011				2010
		$				$
Net income			12,745				13,931
Other comprehensive income (loss):
Unrealized gain (loss) on marketable securities			1,468				(1,777	)
Pension adjustments, net of taxes			192				349
Unrealized gain (loss) on qualifying cash flow hedging instruments			5,498				(3,940	)
Realized (gain) loss on qualifying cash flow hedging instruments			(985	)			1,013
Other comprehensive income (loss)			6,173				(4,355	)
Comprehensive income			18,918				9,576
Less: Comprehensive income attributable to non-controlling interests			(43,530	)			(27,476	)
Comprehensive loss attributable to stockholders of Teekay Corporation			(24,612	)			(17,900	)

TEEKAY CORPORATION AND SUBSIDIARIES

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

1. Basis of Presentation

The unaudited interim consolidated financial statements have been prepared in conformity with United States generally accepted accounting principles (or GAAP). 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 GAAP 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, 2010, included in the Company’s Annual Report on Form 20-F. In the opinion of management, these unaudited 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, cash flows and changes in total equity for the interim periods presented. The results of operations for the three months ended March 31, 2011, are not necessarily indicative of those for a full fiscal year. Significant intercompany balances and transactions have been eliminated upon consolidation.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Given the current credit markets, it is possible that the amounts recorded as derivative assets and liabilities could vary by material amounts.

Certain of the comparative figures have been reclassified to conform with the presentation adopted in the current period, relating to the reclassification of revenues of $8.3 million for the three months ended March 31, 2010 from time-charter hire expense to revenues in the consolidated statements of income (loss).

2. Adoption of New Accounting Policies

In January 2011, the Company adopted an amendment to Financial Accounting Standards Board (or FASB) Accounting Standards Codification (or ASC) 605, Revenue Recognition, that 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 became effective for the Company on January 1, 2011. The adoption of this standard did not have an impact on the Company’s consolidated financial statements.

3. Segment Reporting

The following tables present results for the Company’s four segments for the three months ended March 31, 2011 and 2010.

		Shuttle								Liquefied				Conventional
		Tanker and FSO				FPSO				Gas				Tanker
		Segment				Segment				Segment				Segment				Total
Three Months ended March 31, 2011		$				$				$				$				$
Revenues			151,212				104,618				64,633				167,561				488,024
Voyage expenses			19,329				—				49				25,748				45,126
Vessel operating expenses			53,614				52,722				11,077				44,164				161,577
Time-charter hire expense			19,627				—				—				43,404				63,031
Depreciation and amortization			30,619				23,731				14,856				35,832				105,038
General and administrative (2)			18,306				14,723				6,605				30,584				70,218
Loss on sale of vessels and equipment, net of write-downs of vessels and equipment			171				—				—				3,422				3,593
Restructuring charges			3,920				—				129				912				4,961
Income (loss) from vessel operations			5,626				13,442				31,917				(16,505	)			34,480
Segment assets			1,815,116				1,214,009				2,879,614				2,844,395				8,753,134

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

		Shuttle								Liquefied				Conventional
		Tanker and FSO				FPSO				Gas				Tanker
		Segment				Segment				Segment				Segment				Total
Three Months ended March 31, 2010		$				$				$				$				$
Revenues (1)			155,948				131,998				62,534				222,395				572,875
Voyage expenses			29,303				—				(27	)			43,274				72,550
Vessel operating expenses			43,321				47,965				11,370				51,879				154,535
Time charter hire expense			25,038				—				—				54,213				79,251
Depreciation and amortization			30,559				23,748				15,527				38,396				108,230
General and administrative (2)			12,145				8,826				4,771				22,349				48,091
Loss on sale of vessels and equipment, net of write-downs vessels and equipment			—				—				—				760				760
Restructuring charges			325				—				119				3,339				3,783
Income from vessel operations			15,257				51,459				30,774				8,185				105,675
Segment assets			1,700,867				1,201,301				2,836,617				2,844,239				8,583,024

(1)		FPSO segment includes $30.0 million in revenue for the three months ended March 31, 2010, related to operations in previous years as a result of executing a contract amendment in March 2010.
(2)		Includes direct general and administrative expenses and indirect general and administrative expenses (allocated to each segment based on estimated use of corporate resources).

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

		March 31,				December 31,
		2011				2010
		$				$
Total assets of all segments			8,753,134				8,673,337
Cash			567,325				779,748
Accounts receivable and other assets			512,001				458,013
Consolidated total assets			9,832,460				9,911,098

4. Investment in Term Loans

In February 2011, Teekay loaned $70 million to an unrelated ship-owner of a 2011-built Very Large Crude Carrier (or VLCC). The loan bears interest at 9% per annum and is payable quarterly. The loan is repayable in full in February 2014. However, it may be repaid prior to maturity at the option of the borrower. The loan is collateralized by a first priority mortgage on a 2011-built VLCC, together with other related collateral.

5. Vessel Charters

In addition to the Company’s minimum charter hire payments to be paid and received under the Head Leases and Subleases for the Tangguh LNG Carriers, which are described in Note 9 to the audited consolidated financial statements included in the Company’s Annual Report on Form 20-F for the year ended December 31, 2010, the additional minimum estimated charter hire payments in the next five fiscal years, as at March 31, 2011, for the Company’s vessels chartered-in and vessels chartered-out were as follows:

		Remainder
		of 2011				2012				2013				2014				2015
		(in millions of U.S. dollars)
Charters-in — operating leases			132.3				110.2				66.3				23.0				16.0
Charters-in — capital leases (1)			301.8				24.0				24.0				24.0				24.0
			434.1				134.2				90.3				47.0				40.0
Charters-out — operating leases (2)			875.8				948.8				718.2				602.7				560.3
Charters-out — direct financing leases			51.4				62.4				49.5				48.1				47.1
			927.2				1,011.2				767.7				650.8				607.4

(1)		As at March 31, 2011 and December 31, 2010, the Company had $565.3 million and $559.8 million, respectively of cash which, including any interest earned on such amounts, is restricted to being used for charter hire payments of certain vessels chartered-in under capital leases. The Company also maintains restricted cash deposits relating to certain term loans, which cash totaled $16.6 million and $12.3 million as at March 31, 2011 and December 31, 2010, respectively.
(2)		The minimum scheduled future charter hire payments for vessels chartered out should not be construed to reflect total charter hire revenues for any of the periods. In addition, minimum scheduled future revenues have been reduced by estimated off-hire time for period maintenance. The amounts may vary given unscheduled future events such as vessel maintenance.

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

6. Financing Transactions

In February 2011, Teekay’s subsidiary, Teekay Tankers Ltd. (or Teekay Tankers) completed a public offering of 9.9 million common shares of its Class A Common Stock (including 1.3 million common shares issued upon the exercise of the underwriters’ overallotment option) at a price of $11.33 per share, for gross proceeds of approximately $112.1 million. As a result, Teekay’s ownership of Teekay Tankers was reduced to 26.0%. Teekay maintains voting control of Teekay Tankers through its ownership of shares of Teekay Tankers’ Class A and Class B common stock and continues to consolidate this subsidiary. As a result of the offering, the Company recorded an increase to retained earnings of $5.7 million, which represents the Company’s dilution gain from the issuance of shares in Teekay Tankers during the three months ended March 31, 2011.

In March 2011, Teekay sold a 49% interest in Teekay Offshore Operating L.P. (or OPCO) to Teekay’s subsidiary, Teekay Offshore Partners L.P. (or Teekay Offshore), for a total purchase price of $386.3 million. The sale increased Teekay Offshore’s ownership in OPCO from 51% to 100%. The purchase price was paid with $175 million in cash (less $15 million in distributions made by OPCO to Teekay between December 31, 2010 and the date of acquisition) and 7.6 million newly issued Teekay Offshore common units. Teekay’s ownership in Teekay Offshore increased to 36.9% (including the Company’s 2% general partner interest). Consequently, the Company recognized a decrease to retained earnings and an increase in non-controlling interest of $94.8 million as the Company accounts for changes in its ownership interest in controlled subsidiaries as equity transactions.

See Note 19 to these unaudited consolidated financial statements for information relating to an equity offering by Teekay’s subsidiary, Teekay LNG Partners L.P. (or Teekay LNG) in April 2011.

7. Vessel Sale and Write-down

a) Vessel Sale

In March 2011, the Company sold a 1988-built floating storage and offtake (or FSO) unit. The FSO unit was part of the Company’s FSO and shuttle tanker segment. The Company realized a loss of $0.2 million from the sale of the FSO unit.

b) Vessel Write-down

The Company’s consolidated statements of income (loss) for the three months ended March 31, 2011, include a $3.4 million write-down for impairment of a 1993-built Aframax tanker to its estimated fair value of $14.5 million, as the vessel carrying value exceeded the estimated fair value. The fair value was calculated based on the value of its estimated discounted cash flows which primarily includes the estimated sales price. The write-down is included within the Company’s conventional tanker segment.

8. Long-Term Debt

		March 31, 2011				December 31, 2010
		$				$
Revolving Credit Facilities			1,723,469				1,697,237
Senior Notes (8.875%) due July 15, 2011			16,201				16,201
Senior Notes (8.5%) due January 15, 2020			446,623				446,559
Norwegian Kroner-denominated Bonds due November 2013			108,315				103,061
U.S. Dollar-denominated Term Loans due through 2021			1,752,359				1,782,423
Euro-denominated Term Loans due through 2023			391,539				373,301
U.S. Dollar-denominated Unsecured Demand Loans due to Joint Venture Partners			13,383				13,282
Total			4,451,889				4,432,064
Less current portion			472,074				276,508
Long-term portion			3,979,815				4,155,556

As of March 31, 2011, the Company had 15 long-term revolving credit facilities (or the Revolvers) available, which, as at such date, provided for aggregate borrowings of up to $3.3 billion, of which $1.6 billion was undrawn. Interest payments are based on LIBOR plus margins; at March 31, 2011 and December 31, 2010, the margins ranged between 0.45% and 3.25%. At March 31, 2011 and December 31, 2010, the three-month LIBOR was 0.30%. The total amount available under the Revolvers reduces by $223.3 million (remainder of 2011), $353.3 million (2012), $760.2 million (2013), $791.8 million (2014), $226.4 million (2015) and $930.4 million (thereafter). The Revolvers are collateralized by first-priority mortgages granted on 64 of the Company’s vessels, together with other related security, and include a guarantee from Teekay or its subsidiaries for all outstanding amounts.

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 January 2010, the Company completed a public offering of senior unsecured notes due January 15, 2020 (or the 8.5% Notes) with a principal amount of $450 million. The 8.5% Notes were sold at a price equal to 99.181% of par and the discount is accreted using the effective interest rate of 8.625% per year. The Company capitalized issuance costs of $9.4 million, which is recorded in other non-current assets in the consolidated balance sheet and is amortized to interest expense over the term of the senior unsecured notes. The 8.5% Notes and the 8.875% senior unsecured 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 any future subordinated debt of Teekay. The 8.5% Notes and 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 of its subsidiaries. In 2010, the Company repurchased a principal amount of $160.5 million of the 8.875% Notes, using a portion of the proceeds of the 8.5% Notes offering, and recognized a loss on repurchase of $12.6 million.

The Company may redeem the 8.5% Notes in whole or in part at any time before their maturity date at a redemption price equal to the greater of (i) 100% of the principal amount of the 8.5% Notes to be redeemed and (ii) the sum of the present values of the remaining scheduled payments of principal and interest on the 8.5% Notes to be redeemed (excluding accrued interest) discounted to the redemption date on a semi-annual basis, at the treasury yield plus 50 basis points, plus accrued and unpaid interest to the redemption date. In addition, at any time or from time to time prior to January 15, 2013, the Company may redeem up to 35% of the aggregate principal amount of the 8.5% Notes issued under the indenture with the net cash proceeds of one or more qualified equity offerings at a redemption price equal to 108.5% of the principal amount of the 8.5% Notes to be redeemed, plus accrued and unpaid interest, if any, to the redemption date, provided certain conditions are met. No such redemptions have been made as at March 31, 2011.

In November 2010, Teekay Offshore issued NOK 600 million in senior unsecured bonds that mature in November 2013 in the Norwegian bond market. Teekay Offshore capitalized issuance costs of $1.3 million, which is recorded in other non-current assets in the consolidated balance sheet and is amortized over the term of the senior unsecured bonds. The bonds are listed on the Oslo Stock Exchange. Interest payments on the senior unsecured bonds are based on NIBOR plus a margin of 4.75%. Teekay Offshore has entered into a cross currency swap arrangement to swap the interest payments from NIBOR into LIBOR and principal from Norwegian Kroner to U.S. dollars (see Note 15).

As of March 31, 2011, the Company had 14 U.S. Dollar-denominated term loans outstanding, which totaled $1.8 billion (December 31, 2010 — $1.8 billion). Certain of the term loans with a total outstanding principal balance of $406.2 million as at March 31, 2011 (December 31, 2010 — $417.4 million) bear interest at a weighted-average fixed rate of 5.3% (December 31, 2010 — 5.3%). Interest payments on the remaining term loans are based on LIBOR plus a margin. At March 31, 2011 and December 31, 2010, the margins ranged between 0.3% and 3.25%. At March 31, 2011 and December 31, 2010, the three-month LIBOR was 0.30%. 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 13 of the term loans have balloon or bullet repayments due at maturity. The term loans are collateralized by first-priority mortgages on 27 (December 31, 2010 — 28) of the Company’s vessels, together with certain other security. In addition, at March 31, 2011, all but $105.7 million (December 31, 2010 — $122.5 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 March 31, 2011, totaled 276.5 million Euros ($391.5 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 March 31, 2011 and December 31, 2010, the margins ranged between 0.6% and 0.66% and the one-month EURIBOR at March 31, 2011, was 0.97% (December 31, 2010 — 0.78%). 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 in part to this revaluation which is unrealized, the Company recognized a foreign exchange loss of $20.3 million during the three months ended March 31, 2011 (2010 — $29.0 million gain).

The Company has two U.S. Dollar-denominated loans outstanding owing to two joint venture partners, which, as at March 31, 2011, totaled $13.4 million (2010 — one loan totaling $13.8 million), including accrued interest. Interest payments on the 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.

The weighted-average effective interest rate on the Company’s long-term aggregate debt as at March 31, 2011 was 2.3% (December 31, 2010 — 2.3%). This rate does not include the effect of the Company’s interest rate swap agreements (see Note 15).

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 and as at March 31, 2011 and December 31, 2010, 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 March 31, 2011, this amount was $236.7 million (December 31, 2010 — $236.5 million).

The aggregate annual long-term debt principal repayments required to be made by the Company subsequent to March 31, 2011, are $222.7 million (remainder of 2011), $524.9 million (2012), $463.2 million (2013), $912.7 million (2014), $216.8 million (2015) and $2.1 billion (thereafter).

As at March 31, 2011, the Company was in compliance with all covenants in the credit facilities and long-term debt.

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

9. Capital Stock

The authorized capital stock of Teekay at March 31, 2011 and December 31, 2010, was 25 million shares of Preferred Stock, with a par value of $1 per share, and 725 million shares of Common Stock, with a par value of $0.001 per share. During the three months ended March 31, 2011, the Company issued 0.4 million shares of common stock upon the exercise of stock options, and repurchased 0.6 million shares. As at March 31, 2011, Teekay had 74,142,366 shares of Common Stock issued (December 31, 2010 — 73,749,793) and no shares of Preferred Stock issued. As at March 31, 2011, Teekay had 71,822,916 shares of Common Stock outstanding (December 31, 2010 — 72,012,843).

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 March 31, 2011, Teekay had repurchased approximately 1.8 million shares of Common Stock for $60 million pursuant to such authorization. The total remaining share repurchase authorization at March 31, 2011, was $140 million.

During March 2011, the Company granted 91,431 stock options with an exercise price of $34.93 per share, 358,180 restricted stock units with a fair value of $12.5 million, 73,349 performance shares with a fair value of $3.7 million and 29,663 shares of restricted stock with a fair value of $1.0 million to certain of the Company’s employees and directors. Each stock option has a ten-year term and vests equally over three years from the grant date. Each restricted stock unit and performance share 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 three years from the grant date and the performance shares vest three years from the grant date. Upon vesting, the value of the restricted stock units and performance shares are paid to each grantee in the form of shares. The number of performance share units that vest will range from zero to three times the original number granted, based on certain performance and market conditions.

In March 2011, the Company incurred a one-time $11.0 million increase to the pension plan benefits of Bjorn Moller, who retired from his position as the Company’s President and Chief Executive Officer on April 1, 2011. The additional pension benefit was in recognition of Mr. Moller’s service to the Company. In addition, the Company recognized a compensation expense of approximately $4.7 million which relates to the portion of Mr. Moller’s outstanding stock-based compensation grants that had not yet vested on the date of his retirement. The total compensation expense related to Mr. Moller’s retirement of $15.7 million was recorded in general and administrative expense in the consolidated statements of income (loss) for the three months ended March 31, 2011.

The weighted-average grant-date fair value of stock options granted during March 2011 was $11.27 per option. The fair value of each stock option granted was estimated on grant date using the Black-Scholes option pricing model. The following weighted-average assumptions were used in computing the fair value of the stock options granted: expected volatility of 53.6%; expected life of four years; dividend yield of 3.8%; risk-free interest rate of 2.1%; and estimated forfeiture rate of 11%. The expected life of the stock 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.

10. Commitments and Contingencies

a) Vessels Under Construction

In October 2010, the Company signed a contract with Petroleo Brasileiro SA (or Petrobras) to provide a floating, production, storage and offloading (or FPSO) unit for the Tiro and Sidon fields located in the Santos Basin offshore Brazil. The contract with Petrobras will be serviced by a newly converted FPSO unit, to be named the Petrojarl Cidade de Itajai, which is currently under conversion from an existing Aframax tanker, for a total estimated cost of approximately $345 million, excluding capitalized interest. In May 2011, the Company signed an agreement with Odebrecht Oil & Gas S.A. (or Odebrecht) to be a 50% partner in this project. The new FPSO is scheduled to be delivered in the second quarter of 2012. Upon delivery, the unit will commence operations under a nine-year, fixed-rate time-charter contract to Petrobras with six additional one-year extension options.

As at March 31, 2011, the Company was committed to the construction of three liquefied petroleum gas (or LPG) carriers, two shuttle tankers and the conversion of an existing Aframax tanker to an FPSO unit (as described above), at a total cost of approximately $702.4 million, excluding capitalized interest. One shuttle tanker delivered in May 2011 and the other shuttle tanker is scheduled for delivery in July 2011. The three LPG carriers are scheduled for delivery in 2011 and the FPSO unit is scheduled to be delivered in 2012. As at March 31, 2011, payments made towards these commitments totaled $236.1 million (excluding $22.3 million of capitalized interest and other miscellaneous construction costs), and long-term financing arrangements existed for $191.8 million of the unpaid cost of these vessels. As at March 31, 2011, the remaining payments required to be made under these newbuilding contracts were $403.2 million (remainder of 2011) and $63.1 million (2012).

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 joint venture that will charter four newbuilding 160,400-cubic meter liquefied natural gas (or 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 other 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 March 31, 2011, payments made towards these commitments by the joint venture company totaled $339.7 million (of which the Company’s 33% contribution was $112.1 million), excluding capitalized interest and other miscellaneous construction costs. As at March 31, 2011, the remaining payments required to be made under these contracts were $430.3 million (remainder of 2011) and $135.9 million (2012), of which the Company’s share is 33% of these amounts. In accordance with existing agreements, the Company is required to offer to its subsidiary Teekay LNG Partners L.P. (or 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. In February 2011, the Company offered to Teekay LNG its 33% ownership interest in these vessels and related charter contracts. The transaction was approved in March 2011 by the Board of Directors of Teekay LNG’s general partner and by its Conflicts Committee. The Company has also provided certain guarantees in relation to the performance of the joint venture company. The fair value of the guarantees were liabilities of $1.7 million and $1.8 million, respectively, as at March 31, 2011 and December 31, 2010 and are included as part of other long-term liabilities in the Company’s consolidated balance sheets.

In September 2010, Teekay Tankers entered into a joint venture arrangement (the Joint Venture) with Wah Kwong Maritime Transport Holdings Limited (or Wah Kwong) to have a VLCC newbuilding constructed, managed and chartered to third parties. Teekay Tankers has a 50% economic interest in the Joint Venture, which is jointly controlled by Teekay Tankers and Wah Kwong. The VLCC has an estimated purchase price of approximately $98 million (of which the Company’s 50% portion is $49 million), excluding capitalized interest and other miscellaneous construction costs. The vessel is expected to deliver during the second quarter of 2013. As at March 31, 2011, the remaining payments required to be made under this newbuilding contract, including Wah Kwong’s 50% share, was $nil (remainder of 2011), $39.2 million (2012) and $39.2 million (2013). As of March 31, 2011, the Joint Venture did not have any financing arrangements for these expenditures. Teekay Tankers and Wah Kwong have each agreed to finance 50% of the costs to acquire the VLCC that are not financed with commercial bank financing. As of March 31, 2011, Teekay Tankers had advanced $9.8 million to the Joint Venture and the amount is recorded in loans to joint ventures and joint venture partners in the consolidated balance sheet. A third party has agreed to time-charter the vessel following its delivery for a term of five years at a daily rate and has also agreed to pay the Joint Venture 50% of any additional amounts if the daily rate of any sub-charter earned by the third party exceeds a certain threshold.

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) Redeemable Non-Controlling Interest

During February 2010, an unrelated party contributed a shuttle tanker with a value of $35.0 million to a subsidiary of Teekay Offshore for a 33% equity interest in the subsidiary. The non-controlling interest owner of Teekay Offshore’s 67% owned subsidiary holds a put option which, if exercised, would obligate Teekay Offshore to purchase the non-controlling interest owner’s 33% share in the entity for cash in accordance with a defined formula. The redeemable non-controlling interest is subject to remeasurement if the formulaic redemption amount exceeds the carrying value. No remeasurement was required as at March 31, 2011.

e) 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.

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

11. Financial Instruments

a) Fair Value Measurements

For a description of how the Company estimates fair value, refer to Note 11 to the audited consolidated financial statements in the Company’s Annual Report on Form 20-F for the year ended December 31, 2010. 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:

		March 31, 2011												December 31, 2010
						Carrying				Fair				Carrying				Fair
		Fair Value				Amount				Value				Amount				Value
		Hierarchy				Asset (Liability)				Asset (Liability)				Asset (Liability)				Asset (Liability)
		Level(1)				$				$				$				$
Cash and cash equivalents, restricted cash, and marketable securities		Level 1					1,176,540				1,176,540				1,377,399				1,377,399
Investment in term loans and interest receivable (note 4)							188,493				191,031				117,825				120,837
Loans to joint ventures and joint venture partners							33,500				33,500				32,750				32,750
Loans from joint venture partners							(14,500	)			(14,500	)			(59	)			(59	)
Long-term debt							(4,451,889	)			(4,217,058	)			(4,432,064	)			(4,192,646	)
Derivative instruments (note 15)
Interest rate swap agreements (2)		Level 2					(394,964	)			(394,964	)			(557,991	)			(557,991	)
Interest rate swap agreements (2)		Level 2					55,631				55,631				66,869				66,869
Cross currency swap agreement		Level 2					10,503				10,503				4,233				4,233
Foreign currency contracts		Level 2					22,511				22,511				11,375				11,375
Forward freight agreements		Level 2					(7	)			(7	)			—				—
Foinaven embedded derivative		Level 2					(3,507	)			(3,507	)			(3,500	)			(3,500	)

(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 fair value of the Company’s interest rate swap agreements at March 31, 2011 includes $21.0 million (December 31, 2010 — $31.0 million) of net accrued interest which is recorded in accrued liabilities on the consolidated balance sheet.

Other than certain items disclosed in Note 7(b) to these consolidated financial statements, there are no other non-financial assets or non-financial liabilities carried at fair value at March 31, 2011.

b) Financing Receivables

The following table contains a summary of the Company’s financing receivables by type of borrower and the method by which the Company monitors the credit quality of its financing receivables on a quarterly basis.

						March 31,				December 31,
		Credit Quality				2011				2010
Class of Financing Receivable		Indicator		Grade		$				$
Direct financing leases		Payment activity		Performing			480,248				487,516
Other loan receivables
Investment in term loans and interest receivable		Collateral		Performing			188.493				117,825
Loans to joint ventures — current and long-term		Other internal metrics		Performing			34,682				33,932
Long-term receivable included in other assets		Payment activity		Performing			503				410
							703,926				639,683

12. Restructuring Charges

During the three months ended March 31, 2011, the Company incurred $5.0 million of restructuring costs. The restructuring costs primarily relate to the sale of an FSO unit, Karratha Spirit, and the termination of the time-charter for the Basker Spirit. The Company committed to plans for termination of the employment of certain seafarers of the two vessels. At March 31, 2011 and December 31, 2010, $3.8 and $0.1 million, respectively, of restructuring liabilities were recorded in accrued liabilities on the consolidated balance sheets.

13. Other Income

		Three Months Ended March 31,
		2011				2010
		$				$
Volatile organic compound emission plant lease income			903				1,430
Miscellaneous (loss) income			(809	)			992
Other income			94				2,422

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. Accumulated Other Comprehensive Loss

As at March 31, 2011 and December 31, 2010, the Company’s accumulated other comprehensive loss consisted of the following components:

		March 31,				December 31,
		2011				2010
		$				$
Unrealized gain on qualifying cash flow hedging instruments			5,692				2,307
Pension adjustments, net of tax recoveries			(17,359	)			(17,551	)
Unrealized gain on marketable securities			8,541				7,073
			(3,126	)			(8,171	)

15. Derivative Instruments and Hedging Activities

The Company uses derivatives to manage certain risks in accordance with its overall risk management policies.

Foreign Exchange Risk

The Company economically 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 March 31, 2011, the Company was committed to the following foreign currency forward contracts:

										Fair Value / Carrying Amount
		Contract Amount				Average				of Asset / (Liability)								Expected Maturity
		In Foreign				Forward												Remainder of
		Currency				Rate(1)				Hedge				Non-Hedge				2011				2012
		(millions)								(in millions of U.S. Dollars)
Norwegian Kroner			910.5				6.24			$	7.1			$	9.2			$	93.7			$	52.3
Euro			41.9				0.75				—				2.9				39.9				16.2
Canadian Dollar			22.5				1.03				1.3				—				14.3				7.4
British Pounds			30.1				0.65				0.5				1.5				32.2				13.9
										$	8.9			$	13.6			$	180.1			$	89.8

(1)		Average contractual exchange rate represents the contracted amount of foreign currency one U.S. Dollar will buy.

The Company incurs interest expense on its Norwegian Kroner-denominated bonds. The Company entered into a cross currency swap agreement to economically hedge the foreign exchange risk on the principal and interest. As at March 31, 2011, the Company was committed to one cross currency swap with the notional amounts of NOK 600 million and $98.5 million, which exchanges a receipt of floating interest based on NIBOR plus a margin of 4.75% with a payment of floating interest based on LIBOR plus a margin of 5.04%. In addition, the cross currency swap locks in the transfer of principal to $98.5 million upon maturity in exchange for NOK 600 million. The fair value of the cross currency swap agreement as at March 31, 2011 and December 31, 2010 was $10.5 million and $4.2 million, respectively.

Interest Rate Risk

The Company enters into interest rate swap agreements 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 swap agreements as cash flow hedges for accounting purposes.

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

As at March 31, 2011, 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				Fixed
						Principal				of Asset /				Remaining				Interest
		Interest				Amount				(Liability)				Term				Rate
		Rate Index				$				$				(Years)				(%)(1)
LIBOR-Based Debt:
U.S. Dollar-denominated interest rate swaps (2)		LIBOR					433,707				(50,108	)			25.8				4.9
U.S. Dollar-denominated interest rate swaps		LIBOR					3,257,937				(292,565	)			8.8				4.1
U.S. Dollar-denominated interest rate swaps (3)		LIBOR					200,000				(36,636	)			20.0				5.7
LIBOR-Based Restricted Cash Deposit:
U.S. Dollar-denominated interest rate swaps (2)		LIBOR					471,245				54,961				25.8				4.8
EURIBOR-Based Debt:
Euro-denominated interest rate swaps (4) (5)		EURIBOR					391,539				(14,985	)			13.2				3.8

(1)		Excludes the margins the Company pays on its variable-rate debt, which at of March 31, 2011 ranged from 0.30% to 3.25%.
(2)		Principal amount reduces quarterly.
(3)		Commencement dates of swaps are between June 2011 and September 2011 for a total principal amount of $200 million.
(4)		Principal amount reduces monthly to 70.1 million Euros ($99.2 million) by the maturity dates of the swap agreements.
(5)		Principal amount is the U.S. Dollar equivalent of 276.5 million Euros.

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 (or 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. These FFAs expire between April and June 2011. 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. As at March 31, 2011, the Company had no bunker fuel swap contract commitments. Net gains and losses from bunker fuel swap contracts are recorded within realized and unrealized gain (loss) on non-designated derivative instruments in the consolidated statements of income (loss).

Tabular Disclosure

The following table presents the location and fair value amounts of derivative instruments, segregated by type of contract, on the Company’s consolidated balance sheets.

		Current												Current
		Portion of												Portion of
		Derivative				Derivative				Accrued				Derivative				Derivative
		Assets				Assets				Liabilities				Liabilities				Liabilities
As at March 31, 2011:
Derivatives designated as a cash flow hedge:
Foreign currency contracts			6,890				2,030				—				(30	)			—
Derivatives not designated as a cash flow hedge:
Foreign currency contracts			10,952				2,906				—				(237	)			—
Interest rate swaps			16,889				33,798				(21,250	)			(123,265	)			(245,504	)
Cross currency swap agreement			2,695				7,567				241				—				—
Forward freight agreements			7				—				—				(14	)			—
Foinaven embedded derivative			3,860				—				—				(7,367	)			—
			41,293				46,301				(21,009	)			(130,913	)			(245,504	)
As at December 31, 2010:
Derivatives designated as a cash flow hedge:
Foreign currency contracts			3,437				1,546				—				(652	)			—
Derivatives not designated as a cash flow hedge:
Foreign currency contracts			4,988				3,172				—				(1,050	)			(66	)
Interest rate swap agreements			16,759				45,524				(31,174	)			(135,171	)			(387,058	)
Cross currency swap agreement			2,031				2,003				199				—				—
Foinaven embedded derivative			—				3,738				—				(7,238	)			—
			27,215				55,983				(30,975	)			(144,111	)			(387,124	)

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

For the periods indicated, the following table presents the effective portion of gains (losses) on foreign currency contracts designated and qualifying as cash flow hedges that was recognized in (1) accumulated other comprehensive income (or AOCI), (2) recorded in accumulated other comprehensive income (loss) during the term of the hedging relationship and reclassified to earnings, and (3) the ineffective portion of gains (losses) on derivative instruments designated and qualifying as cash flow hedges.

Three Months Ended March 31, 2011														Three Months Ended March 31, 2010
Balance														Balance
Sheet														Sheet
(AOCI)				Statement of Income (Loss)										(AOCI)				Statement of Income (Loss)
Effective				Effective				Ineffective						Effective				Effective				Ineffective
Portion				Portion				Portion						Portion				Portion				Portion
	5,498				152				(179	)		Vessel operating expenses			(3,940	)			(374	)			(2,082	)			Vessel operating expenses
					833				95			General and administrative expenses							(639	)			(892	)			General and administrative expenses
	5,498				985				(84	)					(3,940	)			(1,013	)			(2,974	)

Realized and unrealized (losses) gains from derivative instruments that are not designated for accounting purposes as cash flow hedges are recognized in earnings and reported in realized and unrealized (losses) gains on non-designated derivatives in the consolidated statements of income (loss). The effect of the (loss) gain on derivatives not designated as hedging instruments in the statements of income (loss) are as follows:

		Three Months Ended March 31,
		2011				2010
		$				$
Realized (losses) gains relating to:
Interest rate swap agreements			(33,997	)			(38,586	)
Interest rate swap agreement amendments			(92,672	)			—
Foreign currency forward contracts			1,325				(323	)
Forward freight agreements and bunker fuel swap contracts			49				(2,149	)
			(125,295	)			(41,058	)
Unrealized gains (losses) relating to:
Interest rate swap agreements			141,859				(45,806	)
Foreign currency forward contracts			6,707				(3,217	)
Forward freight agreements and bunker fuel swap contracts			(7	)			3,145
Foinaven embedded derivative			(7	)			(911	)
			148,552				(46,789	)
Total realized and unrealized gains (losses) on non-designated derivative instruments			23,257				(87,847	)