Teekay LNG Partners Reports Third Quarter 2021 Results
11/04/2021 - 01:02 AM
Highlights
GAAP net income attributable to the partners and preferred unitholders of $67.0 million and GAAP net income per common unit of $0.68 in the third quarter of 2021. Adjusted net income(1) attributable to the partners and preferred unitholders of $54.7 million and adjusted net income per common unit of $0.54 in the third quarter of 2021 (excluding other items listed in Appendix A to this release). Total adjusted EBITDA(1) of $178.0 million in the third quarter of 2021. On October 4, 2021, announced agreement for Stonepeak to acquire 100 percent of Teekay LNG's outstanding common units and general partner units for $17.00 per unit. The Transaction (as defined below) is subject to certain closing conditions, including approval by the holders of a majority of Teekay LNG's outstanding common units. A special meeting of common unitholders to vote on the Transaction is scheduled for December 1, 2021; all common unitholders of record as of October 28, 2021 will be entitled to vote at the special meeting. On October 15, 2021, the Partnership declared a distribution of $0.2875 per common unit, payable on November 12, 2021 to all common unitholders of record on November 5, 2021. On October 27, 2021, the Partnership received sufficient bondholder consents to amend two of its Norwegian Bonds maturing in 2023 and 2025, which consents were among those required as part of the Transaction. HAMILTON, Bermuda, Nov. 04, 2021 (GLOBE NEWSWIRE) -- Teekay GP L.L.C., the general partner (the General Partner ) of Teekay LNG Partners L.P. (Teekay LNG or the Partnership ) (NYSE: TGP), today reported the Partnership’s results for the quarter ended September 30, 2021.
Consolidated Financial Summary
Three Months Ended September 30, 2021 June 30, 2021 September 30, 2020 (in thousands of U.S. Dollars, except per unit data) (unaudited) (unaudited) (unaudited) GAAP FINANCIAL COMPARISON Voyage revenues 146,577 148,769 148,935 Income from vessel operations 57,644 64,736 69,597 Equity income 39,238 28,940 24,346 Net income attributable to the partners and preferred unitholders 66,974 53,288 40,275 Limited partners’ interest in net income per common unit 0.68 0.53 0.38 NON-GAAP FINANCIAL COMPARISON Total adjusted EBITDA(1) 177,980 183,512 186,902 Distributable cash flow (DCF )(1) 74,677 78,979 79,168 Adjusted net income attributable to the partners and preferred unitholders(1) 54,704 57,017 58,933 Limited partners’ interest in adjusted net income per common unit 0.54 0.57 0.59
(1) These are non-GAAP financial measures. Please refer to “Definitions and Non-GAAP Financial Measures” and the Appendices to this release for definitions of these terms and reconciliations of these non-GAAP financial measures as used in this release to the most directly comparable financial measures under United States generally accepted accounting principles (GAAP ).
Third Quarter of 2021 Compared to Second Quarter of 2021
GAAP net income and non-GAAP adjusted net income attributable to the partners and preferred unitholders for the three months ended September 30, 2021, compared to the three months ended June 30, 2021, were impacted primarily by an increase in general and administrative expenses related to the Transaction with Stonepeak, an increase in scheduled off-hire days relating to vessel upgrades and dry dockings during the third quarter of 2021, and the redeployment of an LNG carrier in August 2021 at a lower rate. These decreases were partially offset by lower vessel operating expenses during the third quarter of 2021 due primarily to the timing of maintenance activities.
GAAP net income attributable to the partners and preferred unitholders for the three months ended September 30, 2021 was also positively impacted by foreign currency exchange gains and unrealized gains on non-designated derivative instruments in the third quarter of 2021 compared to foreign currency exchange losses and unrealized losses on non-designated derivative instruments in the second quarter of 2021.
Third Quarter of 2021 Compared to Third Quarter of 2020
GAAP net income and non-GAAP adjusted net income attributable to the partners and preferred unitholders for the three months ended September 30, 2021, compared to the same quarter of the prior year, were impacted primarily by an increase in general and administrative expenses related to the Transaction with Stonepeak, an increase in scheduled off-hire days relating to vessel upgrades and dry dockings during the third quarter of 2021, and the redeployment of two LNG carriers at lower rates in March 2021 and August 2021, respectively.
GAAP net income attributable to the partners and preferred unitholders was positively impacted by the reversal of certain unrealized credit loss provisions and foreign currency exchange gains in the third quarter of 2021 compared to an increase in unrealized credit loss provisions and foreign currency exchange losses in the third quarter of 2020.
CEO Commentary
“While we were once again well-served by our strong contract coverage, Teekay LNG's third quarter results were, as expected, negatively impacted by a heavier-than-normal drydock schedule, partially offset by lower operating expenses and stronger results in our multi-gas carrier fleet,” commented Mark Kremin, President and Chief Executive Officer of Teekay Gas Group Ltd.
Mr. Kremin continued, “In early-October, we announced that Teekay LNG had entered into a merger agreement with an affiliate of Stonepeak whereby the affiliate has agreed to acquire 100 percent of Teekay LNG's common units. We believe that the transaction will enable common unitholders to realize an attractive valuation and immediate liquidity on closing of the transaction. In addition, under Stonepeak's ownership, we expect Teekay LNG will have greater access to competitively priced capital for both fleet renewal and potential future growth, which has not been available to Teekay LNG through the public capital markets for many years."
(1) These are non-GAAP financial measures. Please refer to “Definitions and Non-GAAP Financial Measures” and the Appendices to this release for definitions of these terms and reconciliations of these non-GAAP financial measures as used in this release to the most directly comparable financial measures under United States generally accepted accounting principles (GAAP ).
Summary of Recent Events
Stonepeak Transaction
On October 4, 2021, the Partnership and an affiliate of Stonepeak, a leading alternative investment firm specializing in infrastructure and real assets, entered into an agreement and plan of merger (the Merger Agreement ), whereby the Partnership will become a wholly-owned subsidiary of such affiliate. Under the Merger Agreement and a separate agreement between such affiliate and Teekay Corporation (Teekay ), it will acquire (a) all the issued and outstanding common units of Teekay LNG, including approximately 36.0 million common units owned by Teekay, and (b) 100 percent of Teekay’s ownership in the General Partner, which includes an economic ownership interest equivalent to approximately 1.6 million Teekay LNG common units, in each case for $17.00 per common unit or common unit equivalent in cash (collectively, the Transaction ). The $17.00 per unit acquisition price represents a premium of 8.3 percent to the closing price of Teekay LNG’s common units on October 1, 2021, and premiums of 12.3 percent and 17.5 percent to the volume-weighted average prices of Teekay LNG’s common units over the prior 60 and 180 trading days, respectively. In addition, common unitholders of record on November 5, 2021 will receive the third quarter common unit distribution of $0.2875 per unit on November 12, 2021.
The Transaction remains subject to approval by the holders of a majority of Teekay LNG's outstanding common units and the satisfaction or waiver of other customary closing conditions. The Transaction is expected to close on or soon after December 31, 2021, and the Merger Agreement provides it will not close prior to such date. Teekay, which currently owns approximately 41 percent of Teekay LNG’s outstanding common units, has entered into a voting and support agreement with the Stonepeak affiliate by which Teekay has agreed, among other things and subject to certain conditions, to vote all its Teekay LNG common units in favor of the merger.
As part of the Transaction, Teekay has also agreed to transfer to Teekay LNG, following restructuring of such companies, the ownership of the management services companies that currently deliver the operations for Teekay LNG and certain of its joint ventures under existing management services contracts. Following this transfer, Teekay's remaining subsidiaries will continue to provide existing services to Teekay, its subsidiaries and other third parties.
After the completion of the Transaction, the common units of the Partnership will be delisted from the New York Stock Exchange. The Series A and B preferred units of the Partnership will continue to trade on the New York Stock Exchange following the completion of the Transaction.
Results of Norwegian Bondholder Meeting
On October 27, 2021, the Partnership held a bondholder meeting to approve certain amendments required to complete the Transaction. At the meeting, the Partnership received approval for the required amendments to the bonds maturing in 2023 and 2025, respectively. The Partnership and the bond trustee will amend the terms of the bonds accordingly.
Operating Results
The following table highlights certain financial information for Teekay LNG’s segments: the Liquefied Natural Gas Segment and the Liquefied Petroleum Gas Segment (please refer to the “Teekay LNG’s Fleet” section of this release below and Appendices D and E for further details).
Three Months Ended September 30, 2021 September 30, 2020 (in thousands of U.S. Dollars) (unaudited) (unaudited) Liquefied Natural Gas Segment Liquefied Petroleum Gas Segment Total Liquefied Natural Gas Segment Liquefied Petroleum Gas Segment Total GAAP FINANCIAL COMPARISON Voyage revenues 133,754 12,823 146,577 138,953 9,982 148,935 Income (loss) from vessel operations 58,000 (356 ) 57,644 70,313 (716 ) 69,597 Equity income 35,241 3,997 39,238 22,674 1,672 24,346 NON-GAAP FINANCIAL COMPARISON Consolidated adjusted EBITDA(i) 93,108 1,352 94,460 104,473 1,227 105,700 Adjusted EBITDA from equity-accounted vessels(i) 72,928 10,592 83,520 71,683 9,519 81,202 Total adjusted EBITDA(i) 166,036 11,944 177,980 176,156 10,746 186,902
(i) These are non-GAAP financial measures. Please refer to “Definitions and Non-GAAP Financial Measures” and the Appendices to this release for definitions of these terms and reconciliations of these non-GAAP financial measures as used in this release to the most directly comparable financial measures under GAAP.
Liquefied Natural Gas Segment
Income from vessel operations and consolidated adjusted EBITDA(1) for the LNG segment for the three months ended September 30, 2021, compared to the same quarter of the prior year, decreased primarily due to an increase in scheduled off-hire days relating to vessel upgrades and dry dockings during the third quarter of 2021, and the redeployment of two LNG carriers at lower charter rates in March 2021 and August 2021, respectively.
Equity income from equity-accounted vessels(1) for the LNG segment for the three months ended September 30, 2021, compared to the same quarter of the prior year, increased primarily due to lower interest expense due to lower debt balances and lower operational claims in certain of the Partnership's joint ventures during the third quarter of 2021. Equity income was also positively impacted by the reversal of certain unrealized credit loss provisions in the third quarter of 2021 compared to an increase in unrealized credit loss provisions in the third quarter of 2020
Liquefied Petroleum Gas Segment
Loss from vessel operations decreased and consolidated adjusted EBITDA(1) increased for the LPG segment for the three months ended September 30, 2021, compared to the same quarter of the prior year, primarily due to higher spot multi-gas rates earned during the third quarter of 2021.
Equity income and adjusted EBITDA from equity-accounted vessels(1) for the LPG segment for the three months ended September 30, 2021, compared to the same quarter of the prior year, increased primarily due to higher spot LPG rates earned and fewer scheduled dry dockings of LPG carriers in the Partnership's 50 percent-owned LPG joint venture with Exmar NV (the Exmar LPG Joint Venture ) during the third quarter of 2021. Equity income was also positively impacted by gains on the sale of two LPG carriers in the Exmar LPG Joint Venture during the third quarter of 2021.
(1) These are non-GAAP financial measures. Please refer to “Definitions and Non-GAAP Financial Measures” and the Appendices to this release for definitions of these terms and reconciliations of these non-GAAP financial measures as used in this release to the most directly comparable financial measures under GAAP.
Teekay LNG's Fleet
The following table summarizes the Partnership’s fleet as of November 1, 2021. In addition, the Partnership owns a 30 percent interest in an LNG regasification terminal in Bahrain.
Number of Vessels Owned and In-Chartered Vessels (i) LNG Carrier Fleet 47(ii) LPG/Multi-gas Carrier Fleet 28(iii) Total 75
(i) Includes vessels leased by the Partnership from third parties and accounted for as finance leases.
(ii) The Partnership’s ownership interests in these vessels range from 20 percent to 100 percent.
(iii) The Partnership’s ownership interests in these vessels range from 50 percent to 100 percent.
Liquidity
As of September 30, 2021, the Partnership had total liquidity of $335.0 million (comprised of $109.6 million in cash and cash equivalents and $225.4 million in undrawn credit facilities) compared to $381.9 million as of June 30, 2021.
About Teekay LNG Partners L.P.
Teekay LNG Partners is one of the world's largest independent owners and operators of LNG carriers, providing LNG and LPG services primarily under long-term, fee-based charter contracts through its interests in 47 LNG carriers, 21 mid-size LPG carriers, and seven multi-gas carriers. The Partnership's ownership interests in these vessels range from 20 to 100 percent. In addition, the Partnership owns a 30 percent interest in an LNG regasification terminal. Teekay LNG Partners is a publicly-traded master limited partnership formed by Teekay Corporation (NYSE: TK) as part of its strategy to expand its operations in the LNG and LPG shipping sectors.
Teekay LNG Partners’ common units and preferred units trade on the New York Stock Exchange under the symbols “TGP”, “TGP PR A” and “TGP PR B”, respectively.
For Investor Relations enquiries contact:
Ryan Hamilton
Tel: +1 (604) 609-2963www.teekay.com
Definitions and Non-GAAP Financial Measures
This release includes various financial measures that are non-GAAP financial measures as defined under the rules of the SEC. These non-GAAP financial measures which include Adjusted Net Income Attributable to the Partners and Preferred Unitholders, Distributable Cash Flow and Adjusted EBITDA, are intended to provide additional information and should not be considered substitutes for measures of performance prepared in accordance with GAAP. In addition, these measures do not have standardized meanings across companies, and may not be comparable to similar measures presented by other companies. These non-GAAP measures are used by management, and the Partnership believes that these supplementary metrics assist investors and other users of its financial reports in comparing financial and operating performance of the Partnership across reporting periods and with other companies.
Non-GAAP Financial Measures
Adjusted EBITDA represents net income before interest, taxes, and depreciation and amortization and is adjusted to exclude certain items whose timing or amount cannot be reasonably estimated in advance or that are not considered representative of core operating performance. Such adjustments include unrealized credit loss provisions or reversals, unrealized gains or losses on non-designated derivative instruments, write-downs of vessels, gains or losses on sales of vessels, foreign currency exchange gains or losses, adjustments for direct financing and sales-type leases to a cash basis, and certain other income or expenses. Adjusted EBITDA also excludes realized gains or losses on interest rate swaps as management, in assessing the Partnership's performance, views these gains or losses as an element of interest expense and realized gains or losses on derivative instruments resulting from amendments or terminations of the underlying instruments. Consolidated Adjusted EBITDA represents Adjusted EBITDA from vessels that are consolidated on the Partnership's financial statements. Adjusted EBITDA from Equity-Accounted Vessels represents the Partnership's proportionate share of Adjusted EBITDA from its equity-accounted vessels. The Partnership does not have the unilateral ability to determine whether the cash generated by its equity-accounted vessels is retained within the entity in which the Partnership holds the equity-accounted investments or distributed to the Partnership and other owners. In addition, the Partnership does not control the timing of any such distributions to the Partnership and other owners. Adjusted EBITDA is a non-GAAP financial measure used by certain investors and management to measure the operational performance of companies. Please refer to Appendices C and E of this release for reconciliations of Adjusted EBITDA to net income and equity income, respectively, which are the most directly comparable GAAP measures reflected in the Partnership’s consolidated financial statements.
Adjusted Net Income Attributable to the Partners and Preferred Unitholders excludes items of income or loss from GAAP net income that are typically excluded by securities analysts in their published estimates of the Partnership’s financial results. The Partnership believes that certain investors use this information to evaluate the Partnership’s financial performance, as does management. Please refer to Appendix A of this release for a reconciliation of this non-GAAP financial measure to net income, and refer to footnote (2) of the Consolidated Statements of Income for a reconciliation of adjusted equity income to equity income, the most directly comparable GAAP measure reflected in the Partnership’s consolidated financial statements.
Distributable Cash Flow (DCF ) represents GAAP net income adjusted for depreciation and amortization expense, deferred income tax and other non-cash items, estimated maintenance capital expenditures, unrealized gains and losses from non-designated derivative instruments, realized losses on interest rate swap termination, unrealized credit loss provisions and reversals, distributions relating to preferred units, adjustments for direct financing and sales-type leases to a cash basis, unrealized foreign currency exchange gains or losses, write-downs of vessels, gains or losses on sales of vessels, and the Partnership’s proportionate share of such items in its equity-accounted for investments. Maintenance capital expenditures represent those capital expenditures required to maintain over the long-term the operating capacity of, or the revenue generated by, the Partnership’s capital assets. DCF is a quantitative standard used in the publicly-traded partnership investment community and by management to assist in evaluating financial performance. Please refer to Appendix B of this release for a reconciliation of this non-GAAP financial measure to net income, the most directly comparable GAAP measure reflected in the Partnership’s consolidated financial statements.
Teekay LNG Partners L.P. Consolidated Statements of Income
Three Months Ended Nine Month ended September 30, June 30, September 30, September 30, September 30, 2021 2021 2020 2021 2020 (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) Voyage revenues 146,577 148,769 148,935 448,148 437,027 Voyage expenses (7,221 ) (6,360 ) (3,950 ) (20,764 ) (11,596 ) Vessel operating expenses (30,426 ) (32,536 ) (30,642 ) (93,051 ) (85,153 ) Time-charter hire expenses (5,665 ) (5,867 ) (5,980 ) (17,382 ) (17,270 ) Depreciation and amortization (33,002 ) (32,349 ) (32,601 ) (97,253 ) (96,869 ) General and administrative expenses (12,619 ) (6,921 ) (6,165 ) (26,707 ) (20,215 ) Write-down of vessels(1) — — — — (45,000 ) Income from vessel operations 57,644 64,736 69,597 192,991 160,924 Equity income(2) 39,238 28,940 24,346 105,694 56,874 Interest expense (29,513 ) (30,084 ) (30,528 ) (89,249 ) (102,375 ) Interest income 1,315 1,302 1,406 4,623 5,473 Realized and unrealized gain (loss) on non-designated derivative instruments(3) 101 (2,870 ) (1,327 ) 3,849 (30,314 ) Foreign currency exchange gain (loss)(4) 2,767 (2,843 ) (7,853 ) 6,884 (14,738 ) Other income (expense)(5) 1,000 (1,088 ) (14,149 ) (3,857 ) (15,189 ) Net income before income tax expense 72,552 58,093 41,492 220,935 60,655 Income tax expense (2,226 ) (1,815 ) (1,420 ) (3,264 ) (2,128 ) Net income 70,326 56,278 40,072 217,671 58,527 Non-controlling interest in net income (loss) 3,352 2,990 (203 ) 9,818 6,312 Preferred unitholders' interest in net income 6,425 6,425 6,425 19,275 19,275 General partner's interest in net income 1,062 823 595 3,311 519 Limited partners’ interest in net income 59,487 46,040 33,255 185,267 32,421 Limited partners' interest in net income per common unit: • Basic 0.68 0.53 0.38 2.13 0.40 • Diluted 0.68 0.53 0.38 2.12 0.39 Weighted-average number of common units outstanding: • Basic(6) 87,120,897 86,970,999 86,951,234 87,081,753 82,010,753 • Diluted 87,232,991 87,133,146 87,041,046 87,218,410 82,109,826 Total number of common units outstanding at end of period 87,010,420 86,984,843 86,951,234 87,010,420 86,951,234
(1) In 2020, the Partnership wrote-down six wholly-owned multi-gas carriers (the Pan Spirit , Unikum Spirit , Vision Spirit , Camilla Spirit , Sonoma Spirit and Cathinka Spirit ) to their estimated fair values. The total impairment charge of $45.0 million related to these six multi-gas carriers is included in write-down of vessels for the nine months ended September 30, 2020.
(2) The Partnership’s proportionate share of items within equity income as identified in Appendix A of this release are detailed in the table below. By excluding these items from equity income, the Partnership believes the resulting adjusted equity income is a normalized amount that can be used to better evaluate the financial performance of the Partnership’s equity-accounted investments. Adjusted equity income is a non-GAAP financial measure.
Three Months Ended Nine Month Ended September 30, June 30, September 30, September 30, September 30, 2021 2021 2020 2021 2020 Equity income 39,238 28,940 24,346 105,694 56,874 Proportionate share of unrealized (gain) loss on non-designated interest rate swaps (3,823 ) 2,310 (2,680 ) (16,923 ) 23,330 Proportionate share of unrealized credit loss (reversals) provisions (1,650 ) 635 7,099 5,662 15,656 Proportionate share of gain of sale of vessels (636 ) — — (636 ) — Other items (144 ) 182 1,167 (282 ) 990 Equity income adjusted for items in Appendix A 32,985 32,067 29,932 93,515 96,850
(3) The realized losses on non-designated derivative instruments relate to the amounts the Partnership actually paid to settle non-designated derivative instruments and the unrealized gains (losses) on non-designated derivative instruments relate to the change in fair value of such non-designated derivative instruments, as detailed in the table below:
Three Months Ended Nine Month Ended September 30, June 30, September 30, September 30, September 30, 2021 2021 2020 2021 2020 Realized losses relating to: Interest rate swap agreements (3,919 ) (3,925 ) (4,947 ) (12,317 ) (11,520 ) Interest rate swap agreements termination(i) — — — (18,012 ) — Foreign currency forward contracts — — — — (241 ) (3,919 ) (3,925 ) (4,947 ) (30,329 ) (11,761 ) Unrealized gains (losses) relating to: Interest rate swap agreements 4,020 1,055 3,620 34,178 (18,755 ) Foreign currency forward contracts — — — — 202 4,020 1,055 3,620 34,178 (18,553 ) Total realized and unrealized gains (losses) on non-designated derivative instruments 101 (2,870 ) (1,327 ) 3,849 (30,314 )
(i) The termination of an interest rate swap agreement during the nine months ended September 30, 2021 was in connection with a debt refinancing completed in February 2021 at a lower all-in interest rate.
(4) For accounting purposes, the Partnership is required to revalue all foreign currency-denominated monetary assets and liabilities based on the prevailing exchange rates at the end of each reporting period. This revaluation does not affect the Partnership’s cash flows or the calculation of distributable cash flow, but results in the recognition of unrealized foreign currency translation gains or losses in the Consolidated Statements of Income.
Foreign currency exchange gain (loss) includes realized gains (losses) relating to the amounts the Partnership paid to settle the Partnership’s Norwegian Krone (NOK ) denominated unsecured bonds and the associated non-designated cross currency swaps that were entered into as economic hedges in relation to the NOK denominated bonds. Foreign currency exchange gain (loss) also includes unrealized (losses) gains relating to the change in fair value of such derivative instruments and unrealized gains (losses) on the revaluation of the NOK bonds as detailed in the table below:
Three Months Ended Nine Month Ended September 30, June 30, September 30, September 30, September 30, 2021 2021 2020 2021 2020 Realized losses on cross-currency swaps (1,595 ) (1,293 ) (1,669 ) (4,233 ) (4,916 ) Realized losses on cross-currency swaps maturity — — — — (33,844 ) Realized gains on repurchase of NOK bonds — — — — 33,844 Unrealized (losses) gains on cross currency swaps (3,952 ) (2,262 ) 1,490 (1,085 ) (2,169 ) Unrealized gains (losses) on revaluation of NOK bonds 5,856 2,217 (1,836 ) 6,884 (1,657 )
(5) Includes unrealized credit loss reversals (provisions) of $1.3 million , ($0.7 million ) and ($14.4 million ) for the three months ended September 30, 2021, June 30, 2021 and September 30, 2020, respectively, and ($3.1 million ) and ($14.6 million ) for the nine months ended September 30, 2021 and September 30, 2020, respectively.
(6) Includes common units related to non-forfeitable unit-based compensation.
Teekay LNG Partners L.P. Consolidated Balance Sheets
As at September 30, As at June 30, As at December 31, 2021 2021 2020 (unaudited) (unaudited) (unaudited) ASSETS Current Cash and cash equivalents 109,596 144,206 206,762 Restricted cash – current 8,840 8,610 8,358 Accounts receivable 16,135 12,230 7,631 Prepaid expenses 13,056 11,948 9,259 Current portion of derivative assets 465 258 — Current portion of net investments in direct financing leases, net 14,632 14,285 13,969 Current portion of advances to equity-accounted joint ventures leases, net 8,162 8,160 10,991 Advances to affiliates 14,664 6,940 4,924 Other current assets 5,972 3,071 237 Total current assets 191,522 209,708 262,131 Restricted cash – long-term 37,191 37,384 42,823 Vessels and equipment At cost, less accumulated depreciation 1,194,238 1,197,551 1,220,355 Vessels related to finance leases, at cost, less accumulated depreciation 1,642,436 1,644,654 1,654,814 Operating lease right-of-use assets 10,338 13,887 20,750 Total vessels and equipment 2,847,012 2,856,092 2,895,919 Investments in and advances to equity-accounted joint ventures, net 1,154,202 1,117,271 1,056,792 Net investments in direct financing leases, net 484,507 487,276 500,101 Other assets 31,564 26,386 22,382 Derivative assets 5,253 6,925 4,505 Intangible assets, net 27,868 30,082 34,510 Goodwill 34,841 34,841 34,841 Total assets 4,813,960 4,805,965 4,854,004 LIABILITIES AND EQUITY Current Accounts payable 9,170 3,721 4,883 Accrued liabilities 66,414 64,113 81,706 Unearned revenue 19,488 17,800 30,254 Current portion of long-term debt 350,372 355,081 250,508 Current obligations related to finance leases 73,437 72,925 71,932 Current portion of operating lease liabilities 10,338 13,887 14,003 Current portion of derivative liabilities 27,023 26,375 56,925 Advances from affiliates 13,802 8,086 11,047 Total current liabilities 570,044 561,988 521,258 Long-term debt 1,035,320 1,062,298 1,221,705 Long-term obligations related to finance leases 1,213,607 1,232,130 1,268,990 Long-term operating lease liabilities — — 6,747 Other long-term liabilities 57,585 56,104 56,063 Derivative liabilities 25,910 29,131 32,971 Total liabilities 2,902,466 2,941,651 3,107,734 Equity Limited partners – common units 1,580,034 1,545,448 1,465,408 Limited partners – preferred units 285,159 285,159 285,159 General partner 48,230 47,613 46,182 Accumulated other comprehensive loss (63,706 ) (72,272 ) (103,836 ) Partners' equity 1,849,717 1,805,948 1,692,913 Non-controlling interest 61,777 58,366 53,357 Total equity 1,911,494 1,864,314 1,746,270 Total liabilities and total equity 4,813,960 4,805,965 4,854,004
Teekay LNG Partners L.P. Consolidated Statements of Cash Flows
Nine Months Ended September 30, September 30, 2021 2020 (unaudited) (unaudited) Cash, cash equivalents and restricted cash provided by (used for) OPERATING ACTIVITIES Net income 217,671 58,527 Non-cash and non-operating items: Unrealized (gain) loss on non-designated derivative instruments (34,178 ) 18,553 Depreciation and amortization 97,253 96,869 Write-down of vessels — 45,000 Unrealized foreign currency exchange (gain) loss including the effect of the settlement of cross currency swaps (13,125 ) 10,697 Equity income, net of distributions received $39,089 (2020 – $32,297) (66,605 ) (24,577 ) Amortization of deferred financing issuance costs included in interest expense 4,134 4,401 Change in unrealized credit loss provisions included in other expense 3,117 14,557 Other non-cash items 3,823 3,595 Change in operating assets and liabilities: Receipts from direct financing and sales-type leases 11,108 270,973 Expenditures for dry docking (10,818 ) (1,984 ) Other operating assets and liabilities (74,683 ) 15,960 Net operating cash flow 137,697 512,571 FINANCING ACTIVITIES Proceeds from issuance of long-term debt 237,691 561,127 Scheduled repayments of long-term debt and settlement of related swaps (174,415 ) (220,875 ) Prepayments of long-term debt (136,543 ) (687,061 ) Financing issuance costs (2,631 ) (5,111 ) Scheduled repayments of obligations related to finance leases (53,878 ) (52,419 ) Repurchase of common units — (15,635 ) Cash distributions paid (92,306 ) (75,845 ) Dividends paid to non-controlling interests (2,923 ) (3,390 ) Acquisition of non-controlling interest in certain of the Partnership's subsidiaries — (2,219 ) Net financing cash flow (225,005 ) (501,428 ) INVESTING ACTIVITIES Expenditures for vessels and equipment (25,338 ) (9,597 ) Proceeds from repayments of advances to equity-accounted joint ventures 10,330 — Net investing cash flow (15,008 ) (9,597 ) (Decrease) increase in cash, cash equivalents and restricted cash (102,316 ) 1,546 Cash, cash equivalents and restricted cash, beginning of the period 257,943 253,291 Cash, cash equivalents and restricted cash, end of the period 155,627 254,837 Supplemental cash flow information The accompanying notes are an integral part of the consolidated financial statements.
Teekay LNG Partners L.P. Appendix A - Reconciliation of Non-GAAP Financial Measures Adjusted Net Income
Three Months Ended September 30, June 30, September 30, 2021 2021 2020 (unaudited) (unaudited) (unaudited) Net income – GAAP basis 70,326 56,278 40,072 Less: net (income) loss attributable to non-controlling interests (3,352 ) (2,990 ) 203 Net income attributable to the partners and preferred unitholders 66,974 53,288 40,275 Add (subtract) specific items affecting net income: Foreign currency exchange (gains) losses(1) (4,362 ) 1,550 6,184 Unrealized credit loss (reversals) provisions, unrealized (gains) and losses on non-designated derivative instruments and other items from equity-accounted investees(2) (6,253 ) 3,127 5,586 Unrealized (gains) on non-designated derivative instruments and realized loss from interest rate swap termination(3) (4,020 ) (1,055 ) (3,620 ) Unrealized credit loss provisions and other items(4) 1,909 383 14,397 Non-controlling interests’ share of items above(5) 456 (276 ) (3,889 ) Total adjustments (12,270 ) 3,729 18,658 Adjusted net income attributable to the partners and preferred unitholders 54,704 57,017 58,933 Preferred unitholders' interest in adjusted net income 6,425 6,425 6,425 General partner's interest in adjusted net income 847 889 923 Limited partners’ interest in adjusted net income 47,432 49,703 51,585 Limited partners’ interest in adjusted net income per common unit, basic 0.54 0.57 0.59 Weighted-average number of common units outstanding, basic 87,120,897 86,970,999 86,951,234
(1) Foreign currency exchange (gains) losses primarily relate to the Partnership’s revaluation of all foreign currency-denominated monetary assets and liabilities based on the prevailing exchange rate at the end of each reporting period and unrealized losses (gains) on the cross-currency swaps economically hedging the Partnership’s NOK bonds. This amount excludes the realized losses relating to the cross currency swaps for the NOK bonds. See Note 4 to the Consolidated Statements of Income included in this release for further details.
(2) Reflects the proportionate share of unrealized credit loss (reversals) provisions and unrealized (gains) and losses due to changes in the mark-to-market value of derivative instruments that are not designated as hedges for accounting purposes in the Partnership's equity-accounted investees. See Note 2 to the Consolidated Statements of Income included in this release for further details.
(3) Reflects the unrealized gains due to changes in the mark-to-market value of the Partnership's derivative instruments that are not designated as hedges for accounting purposes and realized losses related to interest rate swap agreement termination. See Note 3 to the Consolidated Statements of Income included in this release for further details.
(4) Includes adjustments for unrealized credit loss provisions, adjustments relating to changes in deferred tax balances and, for the three months ended September 30, 2021, certain costs related to the Transaction with Stonepeak.
(5) Items affecting net income include items from the Partnership’s consolidated non-wholly-owned subsidiaries. The specific items affecting net income are analyzed to determine whether any of the amounts originated from a consolidated non-wholly-owned subsidiary. Each amount that originates from a consolidated non-wholly-owned subsidiary is multiplied by the non-controlling interests’ percentage share in this subsidiary to arrive at the non-controlling interests’ share of the amount. The amount identified as “non-controlling interests’ share of items above” in the table above is the cumulative amount of the non-controlling interests’ proportionate share of the other specific items affecting net income listed in the table.
Teekay LNG Partners L.P. Appendix B - Reconciliation of Non-GAAP Financial Measures Distributable Cash Flow (DCF )
Three Months Ended September 30, June 30, September 30, 2021 2021 2020 (unaudited) (unaudited) (unaudited) Net income 70,326 56,278 40,072 Add: Partnership’s share of equity-accounted joint ventures' DCF net of estimated maintenance capital expenditures(1) 41,782 40,356 38,065 Depreciation and amortization 33,002 32,349 32,601 Direct financing and sales-type lease payments received in excess of revenue recognized and other adjustments 3,814 3,694 3,502 Deferred income tax and other non-cash items 1,103 652 (709 ) Subtract: Unrealized credit loss (reversals) provisions (1,300 ) 744 14,397 Unrealized gains on non-designated derivative instruments (4,020 ) (1,055 ) (3,620 ) Foreign currency exchange (gain) loss (4,362 ) 1,550 6,184 Distributions relating to preferred units (6,425 ) (6,425 ) (6,425 ) Estimated maintenance capital expenditures (14,667 ) (14,511 ) (14,683 ) Equity income (39,238 ) (28,940 ) (24,346 ) Distributable Cash Flow before non-controlling interest 80,015 84,692 85,038 Non-controlling interests’ share of DCF before estimated maintenance capital expenditures (5,338 ) (5,713 ) (5,870 ) Distributable Cash Flow 74,677 78,979 79,168 Amount of cash distributions attributable to the General Partner (447 ) (447 ) (389 ) Limited partners' Distributable Cash Flow 74,230 78,532 78,779 Weighted-average number of common units outstanding, basic 87,120,897 86,970,999 86,951,234 Distributable Cash Flow per limited partner common unit 0.85 0.90 0.91
(1) The Partnership’s share of estimated maintenance capital expenditures relating to its equity-accounted joint ventures were $15.1 million , $15.2 million and $15.4 million for the three months ended September 30, 2021, June 30, 2021 and September 30, 2020, respectively.
Teekay LNG Partners L.P. Appendix C - Reconciliation of Non-GAAP Financial Measures Total Adjusted EBITDA
Three Months Ended September 30, June 30, September 30, 2021 2021 2020 (unaudited) (unaudited) (unaudited) Net income 70,326 56,278 40,072 Depreciation and amortization 33,002 32,349 32,601 Interest expense, net of interest income 28,198 28,782 29,122 Income tax expense 2,226 1,815 1,420 EBITDA 133,752 119,224 103,215 Add (subtract) specific income statement items affecting EBITDA: Foreign currency exchange (gain) loss (2,767 ) 2,843 7,853 Other (income) expense (1,000 ) 1,088 14,149 Equity income (39,238 ) (28,940 ) (24,346 ) Realized and unrealized (gain) loss on non-designated derivative instruments (101 ) 2,870 1,327 Direct financing lease payments received in excess of revenue recognized and other adjustments 3,814 3,694 3,502 Consolidated adjusted EBITDA 94,460 100,779 105,700 Adjusted EBITDA from equity-accounted vessels (See Appendix E ) 83,520 82,733 81,202 Total adjusted EBITDA 177,980 183,512 186,902
Teekay LNG Partners L.P. Appendix D - Reconciliation of Non-GAAP Financial Measures Consolidated Adjusted EBITDA by Segment
Three Months Ended September 30, 2021 (unaudited) Liquefied Natural Gas Segment Liquefied Petroleum Gas Segment Total Voyage revenues 133,754 12,823 146,577 Voyage expenses (1,778 ) (5,443 ) (7,221 ) Vessel operating expenses (25,326 ) (5,100 ) (30,426 ) Time-charter hire expenses (5,665 ) — (5,665 ) Depreciation and amortization (31,294 ) (1,708 ) (33,002 ) General and administrative expenses (11,691 ) (928 ) (12,619 ) Income (loss) from vessel operations 58,000 (356 ) 57,644 Depreciation and amortization 31,294 1,708 33,002 Direct financing lease payments received in excess of revenue recognized and other adjustments 3,814 — 3,814 Consolidated adjusted EBITDA 93,108 1,352 94,460 Three Months Ended September 30, 2020 (unaudited) Liquefied Natural Gas Segment Liquefied Petroleum Gas Segment Total Voyage revenues 138,953 9,982 148,935 Voyage expenses (427 ) (3,523 ) (3,950 ) Vessel operating expenses (25,871 ) (4,771 ) (30,642 ) Time-charter hire expenses (5,980 ) — (5,980 ) Depreciation and amortization (30,658 ) (1,943 ) (32,601 ) General and administrative expenses (5,704 ) (461 ) (6,165 ) Income (loss) from vessel operations 70,313 (716 ) 69,597 Depreciation and amortization 30,658 1,943 32,601 Direct financing lease payments received in excess of revenue recognized and other adjustments 3,502 — 3,502 Consolidated adjusted EBITDA 104,473 1,227 105,700
Teekay LNG Partners L.P. Appendix E - Reconciliation of Non-GAAP Financial Measures Adjusted EBITDA from Equity-Accounted Vessels
Three Months Ended September 30, 2021 September 30, 2020 (unaudited) (unaudited) At Partnership's At Partnership's 100 % Portion (1) 100 % Portion (1) Voyage revenues 249,353 107,741 246,488 106,626 Voyage expenses (832 ) (247 ) (2,815 ) (1,367 ) Vessel operating expenses, time-charter hire expenses and (77,765 ) (33,643 ) (74,398 ) (32,778 ) Depreciation and amortization (26,002 ) (12,973 ) (26,485 ) (13,328 ) Gain on sale of vessels 1,272 636 — — Income from vessel operations of equity-accounted vessels 146,026 61,514 142,790 59,153 Net interest expense (60,610 ) (24,471 ) (61,584 ) (25,133 ) Income tax expense (920 ) (360 ) (449 ) (235 ) Other items including realized and unrealized gain (loss) on 6,741 2,555 (26,623 ) (9,439 ) Net income / equity income of equity-accounted vessels 91,237 39,238 54,134 24,346 Net income / equity income of equity-accounted LNG vessels 83,091 35,241 50,627 22,674 Net income / equity income of equity-accounted LPG vessels 8,146 3,997 3,507 1,672 Net income / equity income of equity-accounted vessels 91,237 39,238 54,134 24,346 Depreciation and amortization 26,002 12,973 26,485 13,328 Net interest expense 60,610 24,471 61,584 25,133 Income tax expense 920 360 449 235 EBITDA from equity-accounted vessels 178,769 77,042 142,652 63,042 Add (subtract) specific income statement items affecting EBITDA: Other items including realized and unrealized (gain) loss on derivative instruments and unrealized credit loss (reversals) provisions (6,741 ) (2,555 ) 26,623 9,439 Gain on sale of vessels (1,272 ) (636 ) — — Direct financing and sales-type lease payments received in 29,218 10,625 26,752 9,677 Amortization of in-process contracts (1,758 ) (956 ) (1,759 ) (956 ) Adjusted EBITDA from equity-accounted vessels 198,216 83,520 194,268 81,202 Adjusted EBITDA from equity-accounted LNG vessels 177,033 72,928 175,231 71,683 Adjusted EBITDA from equity-accounted LPG vessels 21,183 10,592 19,037 9,519
(1) The Partnership's equity-accounted vessels for the three months ended September 30, 2021 and 2020 include: the Partnership’s 40 percent ownership interest in Teekay Nakilat (III) Corporation, which owns four LNG carriers; the Partnership’s 50 percent ownership interest in the Partnership’s joint venture with Exmar NV (the Excalibur Joint Venture ), which owns one LNG carrier; the Partnership’s 33 percent ownership interest in four LNG carriers servicing the Angola LNG project; the Partnership’s 52 percent ownership interest in the MALT Joint Venture, which owns six LNG carriers; the Partnership’s 50 percent ownership interest in the Exmar LPG Joint Venture, which owns and in-charters 21 LPG carriers as at September 30, 2021, compared to 23 owned and in-chartered LPG carriers as at September 30, 2020; the Partnership’s ownership interests ranging from 20 to 30 percent in four LNG carriers chartered to Shell (the Pan Union Joint Venture ); the Partnership’s 50 percent ownership interest in six ARC7 LNG carriers in the Yamal LNG Joint Venture; and the Partnership's 30 percent ownership interest in the Bahrain LNG Joint Venture, which owns an LNG receiving and regasification terminal in Bahrain.
Teekay LNG Partners L.P. Appendix F - Summarized Financial Information of Equity-Accounted Joint Ventures
As at September 30, 2021 As at December 31, 2020 (unaudited) (unaudited) At Partnership's At Partnership's 100 % Portion (1) 100 % Portion (1) Cash and restricted cash, current and non-current 662,675 283,200 549,454 225,049 Other current assets 71,737 28,864 67,580 25,415 Property, plant and equipment, including owned vessels, vessels related to finance leases and operating lease right-of-use assets 1,889,600 962,995 1,961,820 1,000,386 Net investments in sales-type and direct financing leases, current 5,285,026 2,039,742 5,384,652 2,077,707 Derivative assets 11,469 5,740 — — Other non-current assets 95,737 54,413 87,248 51,812 Total assets 8,016,244 3,374,954 8,050,754 3,380,369 Current portion of long-term debt and obligations related to finance leases and operating leases 323,604 138,589 306,185 129,538 Current portion of derivative liabilities 65,921 25,649 68,966 27,988 Other current liabilities 188,049 81,328 164,266 65,311 Long-term debt and obligations related to finance leases and 4,597,374 1,858,713 4,789,260 1,938,748 Shareholders' loans, current and non-current 335,864 115,102 341,113 121,778 Derivative liabilities 166,011 68,027 280,480 112,922 Other long-term liabilities 81,479 35,984 70,743 33,353 Equity 2,257,942 1,051,562 2,029,741 950,731 Total liabilities and equity 8,016,244 3,374,954 8,050,754 3,380,369 Investments in equity-accounted joint ventures 1,051,562 950,731 Advances to equity-accounted joint ventures 115,102 121,778 Unrealized credit loss provisions (4,300 ) (4,726 ) Investments in and advances, net to equity-accounted joint 1,162,364 1,067,783
(1) The Partnership's equity-accounted vessels as at September 30, 2021 and December 31, 2020 include: the Partnership’s 40 percent ownership interest in Teekay Nakilat (III) Corporation, which owns four LNG carriers; the Partnership’s 50 percent ownership interest in the Excalibur Joint Venture, which owns one LNG carrier; the Partnership’s 33 percent ownership interest in four LNG carriers servicing the Angola LNG project; the Partnership’s 52 percent ownership interest in the MALT Joint Venture, which owns six LNG carriers; the Partnership’s 50 percent ownership interest in the Exmar LPG Joint Venture, which owns and in-charters 21 LPG carriers as at September 30, 2021, compared to 23 owned and in-chartered LPG carriers as at December 31, 2020; the Partnership’s ownership interest ranging from 20 percent to 30 percent in four LNG carriers chartered to Shell in the Pan Union Joint Venture; the Partnership’s 50 percent ownership interest in six ARC7 LNG carriers in the Yamal LNG Joint Venture; and the Partnership's 30 percent ownership interest in the Bahrain LNG Joint Venture, which owns an LNG receiving and regasification terminal in Bahrain.
Forward-Looking Statements
This release contains forward-looking statements within the meaning of Section 27A of the U.S. Securities Act of 1933, as amended, and Section 21E of the U.S. Securities Exchange Act of 1934, as amended. All statements included in this report, other than statements of historical fact, are forward-looking statements. Statements about the expected timing, completion and effects of the proposed Merger (as defined below) and related transactions and all other statements in this report, other than historical facts, constitute forward-looking statements. When used in this report, the words “expect,” “believe,” “anticipate,” “plan,” “intend,” “estimate,” “may,” “will” or similar words are intended to identify forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements and any such forward-looking statements are qualified in their entirety by reference to the following cautionary statements. All forward-looking statements speak only as of the date hereof and are based on current expectations and involve a number of assumptions, risks and uncertainties that could cause actual results to differ materially from such forward-looking statements. The proposed acquisition by merger of the Partnership by an affiliate of Stonepeak (the Merger ) and other Transactions may not be completed on the terms described herein or other acceptable terms or at all because of a number of factors, including, among others: (1) the occurrence of any event, change or other circumstances that could give rise to the termination of the Merger Agreement or any other document relating to the Transaction (the Transaction Documents ), (2) the failure to obtain the common unitholder approval of the Merger or the failure to satisfy other closing conditions in the Merger Agreement or any other Transaction Document, (3) the potential for regulatory authorities to require divestitures, operational remedies or other concessions in order to obtain their approval of the proposed Merger, (4) risks related to disruption of management’s attention from the Partnership’s ongoing business operations due to the proposed Merger, (5) the effect of the announcement of the proposed Merger on (i) the ability of the Partnership or Teekay to retain and hire key personnel and maintain relationships with the Partnership’s customers, suppliers or (ii) the Partnership’s operating results and business generally, (6) the proposed Merger may involve unexpected costs, liabilities or delays, (7) the Partnership’s business may suffer as a result of the uncertainty surrounding the proposed Merger, including the timing of the consummation thereof, (8) the outcome of any legal proceeding relating to the proposed Merger, (9) the Partnership may be adversely affected by other economic, business or competitive factors, including, among others, those related to the COVID-19 pandemic, and (10) other risks to consummation of the proposed Merger, including the risk that it will not be consummated within the expected time period or at all, which may adversely affect the Partnership’s and/or Teekay’s business and the price of their common units or common shares. In addition, if the Merger is completed, the Partnership may not realize expected benefits for its customers, employees, joint venture partners or capital providers and Teekay may not realize expected benefits to it or its business.
Actual results may differ materially from those indicated by such forward-looking statements. In addition, the forward-looking statements represent the Partnership’s and Teekay’s respective views as of the date on which such statements were made. It is anticipated that subsequent events and developments may cause these views to change. However, although the Partnership or Teekay may elect to update these forward-looking statements at some point in the future, each specifically disclaims any obligation to do so. These forward-looking statements should not be relied upon as representing views as of any date subsequent to the date hereof. Additional factors that may affect the business or financial results of the Partnership or Teekay are described in the risk factors included in its filings with the SEC, including the Partnership’s and Teekay’s respective Annual Reports on Form 20-F for the year ended December 31, 2020, as updated by subsequent filings with or submissions to the SEC. Each of the Partnership and Teekay expressly disclaims a duty to provide updates to forward-looking statements, whether as a result of new information, future events or other occurrences, except as required by applicable law.
Additional Information and Where to Find It
This communication relates to the proposed Merger involving the Partnership. In connection with the proposed Merger, the Partnership has furnished a proxy statement and may file or furnish other relevant materials with the U.S. Securities and Exchange Commission (SEC ). The proxy statement and a form of proxy have also been mailed or otherwise furnished to the Partnership’s common unitholders. BEFORE MAKING ANY VOTING DECISION, TEEKAY LNG’S COMMON UNITHOLDERS ARE URGED TO READ THE PROXY STATEMENT IN ITS ENTIRETY WHEN IT BECOMES AVAILABLE AND ANY OTHER DOCUMENTS TO BE FILED WITH OR FURNISHED TO THE SEC IN CONNECTION WITH THE PROPOSED MERGER OR INCORPORATED BY REFERENCE IN THE PROXY STATEMENT, IF ANY, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED MERGER AND THE PARTIES TO THE PROPOSED MERGER. This communication is not a substitute for the proxy statement or any other document that the Partnership may file with or furnish to the SEC. Investors and unitholders will be able to obtain the documents (when available) free of charge at the SEC’s website, http://www.sec.gov , and the Partnership’s website, www.teekay.com . In addition, the documents (when available) may be obtained free of charge by directing a request by e-mail or telephone to: investor.relations@teekay.com and +1-604-609-2963.
Participants in the Solicitation
The Partnership, Teekay and certain of their respective directors, executive officers of applicable subsidiaries, certain other members of management and employees of the Partnership and Teekay or such subsidiaries and agents retained by the Partnership may be deemed to be participants in the solicitation of proxies from common unitholders of the Partnership in favor of the proposed Merger. Information about directors and executive officers of the Partnership or applicable affiliates and their beneficial ownership of the Partnership’s common units is set forth in the Partnership’s Annual Report on Form 20-F for the year ended December 31, 2020, as filed with the SEC on April 1, 2021. Other information regarding the participants in the proxy solicitation and a description of their direct and indirect interests, by security holdings or otherwise, will be contained in the proxy statement and other relevant materials when they become available.
