Document
 
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

Date of Report: November 15, 2018

Commission file number 1-33867
_________________________

TEEKAY TANKERS LTD.
(Exact name of Registrant as specified in its charter)
_________________________

4th Floor, Belvedere Building, 69 Pitts Bay Road, Hamilton, HM 08, Bermuda
(Address of principal executive offices)
_________________________


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 ý           Form 40-F ¨
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 ¨           No ý
 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 ¨           No ý

















 



Item 1 — Information Contained in this Form 6-K Report

Attached as Exhibit 1 is a copy of an announcement of Teekay Tankers Ltd. dated November 15, 2018.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 
TEEKAY TANKERS LTD.
 
 
Date: November 15, 2018
By:
 
/s/ Stewart Andrade
 
 
 
Stewart Andrade
Chief Financial Officer
(Principal Financial and Accounting Officer)


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TEEKAY TANKERS LTD. REPORTS
THIRD QUARTER 2018 RESULTS

Highlights
•
Reported GAAP net loss of $17.5 million, or $0.07 per share, and adjusted net loss(1) of $18.0 million, or $0.07 per share, in the third quarter of 2018 (excluding items listed in Appendix A to this release).
•
Generated GAAP loss from operations of $2.2 million and total cash flow from vessel operations(1) of $27.8 million in the third quarter of 2018.
•
Crude spot tanker rates strengthened counter-seasonally during the third quarter of 2018 and have continued to increase in the fourth quarter of 2018 to-date.
•
Completed three previously-announced financings amounting to approximately $100 million of additional liquidity.

Hamilton, Bermuda, November 15, 2018 - Teekay Tankers Ltd. (Teekay Tankers or the Company) (NYSE: TNK) today reported the Company's results for the quarter ended September 30, 2018:
 
Three Months Ended
(in thousands of U.S. dollars, except per share data)
September 30,
2018
June 30,
2018
September 30,
2017
GAAP FINANCIAL COMPARISON
 
 
 
 
 
 
Total revenues
175,915

 
171,659

 
91,238

 
Loss from operations
(2,166
)
 
(13,415
)
 
(13,734
)
 
Net loss
(17,484
)
 
(27,413
)
 
(22,380
)
 
Loss per share
(0.07
)
 
(0.10
)
 
(0.12
)
 
NON-GAAP FINANCIAL COMPARISON
 
 
 
 
 
Total cash flow from vessel operations (1)
27,750

 
16,554

 
20,551

 
Adjusted net loss (1)
(18,001
)
 
(28,743
)
 
(13,966
)
 
Adjusted loss per share (1)
(0.07
)
 
(0.11
)
 
(0.08
)
 
Free cash flow (1)
12,558

 
1,980

 
11,947

 
(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).

GAAP net loss and non-GAAP adjusted net loss for the third quarter of 2018 compared to the same period of the prior year were negatively affected by the expiry of time-charter out contracts for various vessels which have subsequently traded in the spot market at lower rates, and costs associated with the sale-leaseback transactions relating to six Aframax tankers. These were partially offset by higher average spot tanker rates in the third quarter of 2018 compared to the same period in the prior year. GAAP net loss in the third quarter of 2017 included a loss on sales of vessels.
Compared to the second quarter of 2018, GAAP net loss and non-GAAP adjusted net loss for the third quarter of 2018 were primarily affected by higher average spot tanker rates.

1

Teekay Tankers Ltd. Investor Relations Tel: +1 604 844-6654 www.teekaytankers.com
4th Floor, Belvedere Building, 69 Pitts Bay Road, Hamilton, HM 08, Bermuda

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CEO Commentary
“Crude tanker rates strengthened counter-seasonally during the third quarter of 2018, which is typically the weakest quarter of the year, and exceeded our results from last quarter,” commented Kevin Mackay, Teekay Tankers’ President and Chief Executive Officer.  “In the fourth quarter to-date, crude tanker rates have continued to strengthen, driven primarily by very low fleet growth as a result of high scrapping activity and higher oil production from OPEC, Russia and the United States.  Higher oil production in the United States is also positive for mid-size tanker demand due to direct exports to Europe on Suezmax and Aframax tankers and reverse lightering demand in the U.S. Gulf.  Looking ahead, we are very encouraged by the recent strength in crude tanker rates, and we believe that we are at the beginning of a more sustained recovery in the tanker market.” 

“While the tanker market improves, we continue to work on various financing initiatives, including the recent completion of two sale-leaseback transactions and a loan to fund working capital in our revenue sharing agreement (RSA) pooling operations, all of which have further improved Teekay Tankers' liquidity and extended our debt maturity profile.”

Summary of Recent Developments
Completed Financings
In September and November 2018, Teekay Tankers completed two sale-leaseback transactions relating to six vessels and four vessels, respectively.
 
Also in November 2018, Teekay Tankers completed a loan to finance working capital for the Company's RSA pool management operations.
 
These transactions provide a total of approximately $100 million of liquidity after the repayment of outstanding debt related to the ten vessels, of which approximately $40 million of liquidity relates to transactions that closed after September 30, 2018. 
Tanker Market
Crude tanker spot rates firmed counter-seasonally during the third quarter of 2018, which is typically the weakest quarter of the year, as higher OPEC and Russian oil production, coupled with strong crude oil exports out of the U.S. Gulf, offset the impact of seasonally lower oil demand. Crude tanker rates during the third quarter of 2018 averaged higher than rates in the second quarter for the first time since 2014.

Crude tanker rates have continued to strengthen during the early part of the fourth quarter of 2018, particularly in the Atlantic Basin with Aframax tanker rates in this region attaining levels not seen since December 2016 and Suezmax tanker rates averaging the highest since March 2017. While the Pacific Aframax market has not risen as strongly, rates have trended higher than prior quarters. This strength in rates is being driven by high levels of global oil production in recent months, with OPEC adding a net 1.0 million barrels per day (mb/d) of crude oil production to the market since April 2018. Most of this increase has come from the Middle East and Libya, with increased production in these regions more than offsetting lower production from Venezuela and Iran. Russia has added 0.4 mb/d of oil production over the same time frame, which has increased mid-size tanker demand in the Baltic, Black Sea and Mediterranean. U.S. crude oil exports have also increased in recent months, and have averaged over 2 mb/d since May 2018. This is also positive for mid-size tanker demand, due to both direct exports to Europe on Aframaxes and Suezmaxes and through reverse lightering demand in the U.S. Gulf.

New U.S. sanctions on Iranian crude oil imports entered into force on November 5, 2018. However, it is becoming more apparent that the other members of OPEC have sufficient spare oil production capacity to be able to offset any decline in Iranian exports. In addition, the U.S. recently granted waivers to eight countries, allowing them to continue importing Iranian crude for the next six months. The resulting increase in oil production has pushed crude oil prices back below $70/bbl, which is positive for tanker earnings in the near-term due to lower bunker costs. However, it may cause OPEC to revisit production levels in the coming months, which could create some rate volatility through the early part of 2019.


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One of the key drivers behind the recent strengthening in crude tanker rates is the very low level of fleet growth seen year-to-date. During the first nine months of 2018, a total of 22.7 million deadweight tonnes (mdwt) of tankers were delivered into the fleet while 19.2 mdwt were removed for scrapping, resulting in net fleet growth of just 3.5 mdwt (or 0.6 percent). Looking ahead, the Company forecasts that fleet growth will increase moderately in 2019 due to a relatively lower level of scrapping, but is expected to remain below long-term average levels of approximately 3 percent. The Company expects that fleet growth will also remain low in 2020 based on the current orderbook and the very limited remaining slots available at shipyards in that year.

Global oil demand remains firm, though forecasting agencies have slightly revised down their outlook for 2019 based on expectations of a modest slowdown in the global economy. Nevertheless, the forecast of 1.4 mb/d oil demand growth in 2019 (average of IEA, EIA and OPEC forecasts), is only marginally lower than estimated growth of 1.5 mb/d in 2018, which is expected to help support crude tanker demand next year. According to the EIA, U.S. crude oil production is forecast to increase by 1.2 mb/d in 2019. Much of this additional production is anticipated to be available for export from the second half of 2019, when new pipeline capacity is due to come online bringing shale oil from the Permian region to the U.S. Gulf coast. Finally, the introduction of the new IMO regulations on sulphur content in bunker fuels due to come into force on January 1, 2020, is expected to be positive for tanker demand due to an increase in refinery throughput, the emergence of new long-haul trade routes, and the potential for floating storage demand for both crude and product tankers.
 




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Operating Results
The following table highlights the operating performance of the Company’s time-charter vessels and spot vessels trading in RSAs, voyage charters and full service lightering, in each case measured in net revenues(v) per revenue day, or time-charter equivalent (TCE) rates, before off-hire bunker expenses:
 
Three Months Ended
 
September 30, 2018(i)
June 30, 2018(i)
September 30, 2017(i)
Time Charter-Out Fleet
 
 
 
 
 
 
Suezmax revenue days 
162

 
182

 
390

 
Suezmax TCE per revenue day
$17,630
 
$21,508
 

$23,098

 
Aframax revenue days 
393

 
512

 
550

 
Aframax TCE per revenue day
$20,559
 
$21,269
 
$21,937
 
LR2 revenue days 
92

 
137

 
184

 
LR2 TCE per revenue day
$17,732
 
$17,214
 

$17,134

 
 
 
 
 
 
 
 
Spot Fleet
 
 
 
 
 
 
Suezmax revenue days 
2,476

 
2,516

 
1,415

 
Suezmax spot TCE per revenue day (ii)
$15,825
 
$12,745
 
$13,426
 
Aframax revenue days 
1,402

 
1,345

 
869

 
Aframax spot TCE per revenue day (iii)
$13,693
 
$12,113
 
$11,750
 
LR2 revenue days 
644

 
590

 
433

 
LR2 spot TCE per revenue day (iv)
$12,527
 
$10,854
 
$10,627
 
 
 
 
 
 
 
 
Total Fleet
 
 
 
 
 
 
Suezmax revenue days 
2,638

 
2,698

 
1,805

 
Suezmax TCE per revenue day
$15,936
 
$13,336
 
$15,516
 
Aframax revenue days 
1,795

 
1,857

 
1,419

 
Aframax TCE per revenue day
$15,197
 
$14,638
 
$15,566
 
LR2 revenue days 
736

 
727

 
617

 
LR2 TCE per revenue day
$13,178
 
$12,057
 
$12,568
 

(i)
Revenue days are the total number of calendar days the Company's vessels were in its possession during a period, less the total number of off-hire days during the period associated with major repairs, dry dockings or special or intermediate surveys. Consequently, revenue days represents the total number of days available for the vessel to earn revenue. Idle days, which are days when the vessel is available to earn revenue yet is not employed, are included in revenue days.
(ii)
Includes vessels trading in the Teekay Suezmax RSA and non-pool voyage charters.
(iii)
Includes vessels trading in the Teekay Aframax RSA, Teekay Aframax Classic RSA, non-pool voyage charters and full service lightering voyages.
(iv)
Includes vessels trading in the Teekay Taurus RSA and non-pool voyage charters.
(v)
Net revenues is a non-GAAP financial measure. Please refer to "Definitions and Non-GAAP Financial Measures" for a definition of this term.
Fourth Quarter of 2018 Spot Tanker Rates Update
Below is Teekay Tankers’ spot tanker fleet update for the fourth quarter of 2018 to-date:

•
The portion of the Suezmax fleet trading on the spot market has secured TCE per revenue day of approximately $19,000 per day on average with 59 percent of the available days fixed(1);
•
The portion of the Aframax fleet trading on the spot market has secured TCE per revenue day of approximately $19,900 per day on average with 54 percent of the available days fixed(2); and
•
The portion of the Long Range 2 (LR2) product tanker fleet trading on the spot market has secured TCE per revenue day of approximately $17,000 per day on average with 42 percent of the available days fixed(3).

(1) Combined average TCE rate includes Suezmax RSA and non-pool voyage charters.
(2) Combined average TCE rate includes Aframax RSA, non-pool voyage charters and full service lightering voyages.
(3) Combined average TCE rate includes Taurus RSA and non-pool voyage charters.

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Teekay Tankers’ Fleet
The following table summarizes the Company’s fleet as of November 1, 2018 (including one committed time charter-in contract for an Aframax tanker which is expected to commence during November 2018):
 
Owned and Capital Lease Vessels
Chartered-in Vessels
Total
Fixed-rate:



Suezmax Tankers
2
—
2
Aframax Tankers
3
—
3
LR2 Product Tanker
—
—
—
Total Fixed-Rate Fleet
5
—
5
Spot-rate:



Suezmax Tankers
28
—
28
Aframax Tankers(i)
14
2
16
LR2 Product Tankers
9
—
9
VLCC Tanker(ii)
1
—
1
Total Spot Fleet
52
2
54
Total Conventional Fleet
57
2
59
STS Support Vessels
3
3
6
Total Teekay Tankers' Fleet
60
5
65

(i)
Includes two Aframax tankers with charter-in contracts that are scheduled to expire in November 2019 and March 2021.

(ii)
The Company’s ownership interest in this vessel is 50 percent.
Liquidity Update
As at September 30, 2018, the Company had total liquidity of $89.2 million (comprised of $54.4 million in cash and cash equivalents and $34.8 million in undrawn revolving credit facilities), compared to total liquidity of $80.2 million as at June 30, 2018. The Company’s liquidity as of September 30, 2018 does not reflect the sale-leaseback transaction and working capital loan that were completed in November 2018, which total approximately $40 million of additional liquidity to Teekay Tankers.
Conference Call
The Company plans to host a conference call on Thursday, November 15, 2018 at 1:00 p.m. (ET) to discuss its results for the third quarter of 2018. All shareholders and interested parties are invited to listen to the live conference call by choosing from the following options:
•
By dialing (888) 220-8451 or (647) 484-0475, if outside of North America, and quoting conference ID code 1928190.
•
By accessing the webcast, which will be available on Teekay Tankers’ website at www.teekay.com (the archive will remain on the website for a period of one year).

An accompanying Third Quarter Earnings Presentation will also be available at www.teekay.com in advance of the conference call start time.


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About Teekay Tankers
Teekay Tankers currently owns a fleet of 46 double-hull tankers, including 26 Suezmax tankers, 11 Aframax tankers, and nine Long Range 2 (LR2) product tankers, and has four Suezmax tankers and six Aframax tankers related to capital leases and two contracted time charter-in vessels. Teekay Tankers’ vessels are typically employed through a mix of short- or medium-term fixed rate time charter contracts and spot tanker market trading. The Company also owns a Very Large Crude Carrier (VLCC) through a 50 percent-owned joint venture. In addition, Teekay Tankers owns a ship-to-ship transfer business. Teekay Tankers was formed in December 2007 by Teekay Corporation as part of its strategy to expand its conventional oil tanker business.
Teekay Tankers’ common stock trades on the New York Stock Exchange under the symbol “TNK.”

For Investor Relations
enquiries contact:

Ryan Hamilton
Tel: +1 (604) 609-2963
Website: www.teekay.com




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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 U.S. Securities and Exchange Commission. These non-GAAP financial measures, which include Adjusted Net (Loss) Income, Free Cash Flow, Net Revenues and Cash Flow from Vessel Operations, are intended to provide additional information and should not be considered a substitute for measures of performance prepared in accordance with GAAP. In addition, these measures do not have standardized definitions across companies, and therefore may not be comparable to similar measures presented by other companies. The Company believes that certain investors use this information to evaluate the Company’s financial performance, as does management.
Consolidated Financial Measures
Adjusted net (loss) income excludes items of income or loss from GAAP net income that are typically excluded by securities analysts in their published estimates of the Company’s financial results. The Company believes that certain investors use this information to evaluate the Company’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 (loss) income, the most directly comparable GAAP measure reflected in the Company’s consolidated financial statements.
Cash flow from vessel operations (CFVO) represents income (loss) from operations before depreciation and amortization expense, amortization of in-process revenue contracts, vessel write-downs, and gains or losses on the sale of vessels and equipment. CFVO - Consolidated represents CFVO from vessels that are consolidated on the Company’s financial statements. CFVO - Equity Investments represents the Company’s proportionate share of CFVO from its equity-accounted vessels and other investments. The Company does not control the equity-accounted vessels and investments, and as a result, the Company does not have the unilateral ability to determine whether the cash generated by its equity-accounted vessels and other investments is retained within the entity in which the Company holds the equity-accounted investment or distributed to the Company and other owners. In addition, the Company does not control the timing of such distributions to the Company and other owners. Consequently, readers are cautioned when using total CFVO as a liquidity measure as the amount contributed from CFVO - Equity Investments may not be available to the Company in the periods such CFVO is generated by its equity-accounted vessels and other investments. CFVO is a non-GAAP financial measure used by certain investors and management to measure the operational financial performance of companies. Please refer to Appendices C of this release for reconciliations of these non-GAAP financial measures to income from vessel operations and income from vessel operations of equity-accounted investments, respectively, the most directly comparable GAAP measures reflected in the Company’s consolidated financial statements.
Free cash flow (FCF) represents net income (loss), plus depreciation and amortization, unrealized losses from derivatives, certain non-cash items, FCF from equity-accounted investments, loss on sales of vessels, and any write-offs or other non-recurring items, less unrealized gains from derivatives, equity income from the equity-accounted investments, gain on sales of vessels and certain other non-cash items. The Company includes FCF from equity-accounted investments as a component of its FCF. FCF from the equity-accounted investments represents the Company’s proportionate share of FCF from its equity-accounted investments. The Company does not control its equity-accounted investments, and as a result, the Company does not have the unilateral ability to determine whether the cash generated by its equity-accounted investments is retained within the entity in which the Company holds the equity-accounted investment or distributed to the Company and other owners. In addition, the Company does not control the timing of such distributions to the Company and other owners. Consequently, readers are cautioned when using FCF as a liquidity measure as the amount contributed from FCF from the equity-accounted investments may not be available to the Company in the periods such FCF is generated by the equity-accounted investments. FCF is a non-GAAP financial measure used by certain investors and management to evaluate the Company’s financial and operating performance and to assess the Company’s ability to generate cash sufficient to repay debt, pay dividends and undertake capital and dry dock expenditures. Please refer to Appendix B to this release for a reconciliation of this non-GAAP financial measure to net (loss) income, the most directly comparable GAAP financial measure reflected in the Company’s consolidated financial statements.

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Entities under common control represent a transfer of a business between entities under common control. As a result, Teekay Tankers consolidated financial statements prior to the date the interests in these entities were actually acquired by the Company are retroactively adjusted to include the results of these entities during the periods they were under common control of Teekay Corporation and had begun operations.
Net revenues represent revenues less voyage expenses. Because the amount of voyage expenses the Company incurs for a particular charter depends upon the type of the charter, the Company uses net revenues to improve the comparability between periods of reported revenues that are generated by the different types of charters and contracts. The Company principally uses net revenues, a non-GAAP financial measure, because the Company believes it provides more meaningful information about the deployment of the Company's vessels and their performance than does revenues, the most directly comparable financial measure under GAAP.
Important Notice to Reader
Effective January 1, 2018, the Company adopted the new revenue accounting standard, which had no impact on net loss but a material effect on revenues and voyage expenses since adoption. The Company previously presented the net allocation for its vessels participating in RSAs as net pool revenues. The Company has determined that it is the principal in voyages its vessels perform that are included in the RSAs. As such, commencing January 1, 2018, the Company presents revenue from those voyages in voyage charter revenues and the difference between this amount and the Company's net allocation from the RSA is presented as voyage expenses. This had the effect of increasing both voyage charter revenues and voyage expenses for the three months ended September 30, 2018, and June 30, 2018 and the nine months ended September 30, 2018 by $73.6 million, $67.5 million, and $202.4 million, respectively.


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Teekay Tankers Ltd.
Summary Consolidated Statements of Loss
(in thousands of U.S. dollars, except share and per share data)

 
 
Three Months Ended
 
Nine Months Ended
 
 
September 30,
June 30,
September 30,
 
September 30,
September 30,
 
 
 
2018
2018
2017
 
2018
2017
 
 
 
(unaudited)
(unaudited)
(unaudited)(1)
 
(unaudited)
(unaudited)(1)
 
 
 
 
 
 
 
 
 
 
Voyage charter revenues (2)(4)
152,047

144,328

25,397

 
432,017

94,881

 
Time-charter revenues
12,326

17,384

24,681

 
51,820

85,102

 
Other revenues (3)
11,542

9,947

12,914

 
32,202

41,994

 
Net pool revenues (4)
—

—

28,246

 
—

108,535

 
Total revenues
175,915

171,659

91,238

 
516,039

330,512

 
 
 
 

 

 

 
 
 
 
Voyage expenses (2)(4)
(83,048
)
(86,933
)
(18,303
)
 
(249,974
)
(61,488
)
 
Vessel operating expenses
(52,161
)
(52,652
)
(40,958
)
 
(157,808
)
(131,949
)
 
Time-charter hire expense
(4,317
)
(5,697
)
(5,835
)
 
(14,697
)
(27,459
)
 
Depreciation and amortization
(29,595
)
(29,573
)
(24,328
)
 
(88,598
)
(73,652
)
 
General and administrative expenses
(8,747
)
(9,407
)
(7,622
)
 
(27,939
)
(24,875
)
 
Gain (loss) on sales of vessels
—

170

(7,926
)
 
170

(12,495
)
 
Restructuring charge
(213
)
(982
)
—

 
(1,195
)
—

 
Loss from operations
(2,166
)
(13,415
)
(13,734
)
 
(24,002
)
(1,406
)
 
 
 

 

 

 
 
 
 
Interest expense
(15,006
)
(13,931
)
(7,299
)
 
(41,666
)
(21,681
)
 
Interest income
250

160

305

 
568

744

 
Realized and unrealized gain (loss)
 
 
 
 
 
 
 
     on derivative instruments (5)
596

1,116

390

 
4,725

(709
)
 
Equity (loss) income (6)
(359
)
(70
)
(274
)
 
265

(27,174
)
 
Other expense
(799
)
(1,273
)
(1,768
)
 
(3,940
)
(5,918
)
 
Net loss
(17,484
)
(27,413
)
(22,380
)
 
(64,050
)
(56,144
)
 
 
 
 
 
 
 
 
 
Loss per share attributable
 
 
 
 
 
 
 
 
to shareholders of Teekay Tankers
 
 
 
 
 
 
 
 
- Basic and Diluted
(0.07
)
(0.10
)
(0.12
)
 
(0.24
)
(0.31
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted-average number of total common
 
 
 
 
 
 
 
shares outstanding
 
 
 
 
 
 
 
 
- Basic and Diluted (1)
268,558,556

268,558,556

179,224,094

 
268,470,804

178,853,698

 
 
 
 
 
 
 
 
 
 
Number of outstanding shares of common stock at the end of the period
268,558,556

268,558,556

179,224,094

 
268,558,556

179,224,094

 


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(1)
Prior to May 31, 2017, the Company owned 50 percent of Teekay Tanker Operations Ltd. (TTOL) and accounted for this investment using the equity method of accounting. The Company acquired the remaining 50 percent of TTOL on May 31, 2017 from Teekay Corporation, resulting in the Company owning 100 percent of TTOL and consolidating its results. Periods prior to May 31, 2017 have been recast to include 100 percent of TTOL's results on a consolidated basis in accordance with common control accounting as required under GAAP. As a result, the weighted-average number of common shares outstanding for periods prior to May 2017 has been retroactively adjusted to include the approximately 13.8 million shares of the Company's Class B common stock issued to Teekay Corporation as consideration for the acquisition. The impact of this recasting is referred to herein as the "Entities under Common Control", and such amounts are summarized for the respective periods in Appendix A.

(2)
Voyage charter revenues include revenues earned from full service lightering activities. Voyage expenses include certain costs associated with full service lightering activities, which include: short-term in-charter expenses, bunker fuel expenses and other port expenses totaling $12.4 million, $22.9 million and $17.0 million for the three months ended September 30, 2018, June 30, 2018 and September 30, 2017, respectively, and $56.7 million and $52.4 million for the nine months ended September 30, 2018 and September 30, 2017, respectively.

(3)
Other revenues include lightering support and liquefied natural gas services revenue, and pool management fee and commission revenues earned from TTOL.

(4)
Commencing January 1, 2018, the Company adopted Accounting Standards Update 2014-09 as required under GAAP. The Company previously presented the net allocation for its vessels participating in RSAs as net pool revenues. The Company has determined that it is the principal in voyages its vessels perform that are included in the RSAs. As such, commencing January 1, 2018, revenue from those voyages is presented in voyage charter revenues and the difference between this amount and the Company's net allocation from the RSA is presented as voyage expenses. This had the impact of increasing both voyage charter revenues and voyage expenses for the three months ended September 30, 2018 and June 30, 2018 and the nine months ended September 30, 2018 by $73.6 million, $67.5 million, and $202.4 million, respectively. This change has been adopted prospectively from January 1, 2018.

(5)
Includes realized losses and gains relating to interest rate swaps entered into by the Company. For the three months ended September 30, 2018, June 30, 2018 and September 30, 2017, the Company recognized a realized gain on its interest rate swaps of $0.7 million, a realized gain of $0.7 million and a realized loss of $0.2 million, respectively, and a realized gain of $1.6 million and a realized loss of $0.9 million for the nine months ended September 30, 2018 and 2017, respectively. The Company recognized realized gains relating to a time-charter swap agreement of $1.1 million for the nine months ended September 30, 2017.

(6)
Included in equity (loss) income are the Company’s 50 percent interest in the High-Q Investment Ltd. (High-Q) joint venture, which owns one VLCC tanker, its 50 percent interest in Gemini Tankers L.L.C. (until March 2018, when the remaining capital was returned to the Company), and its proportionate 11.3 percent share of earnings from its investment in Tanker Investments Ltd. (TIL) until November 27, 2017, when the Company completed a merger with TIL. From that date, TIL became a wholly-owned subsidiary of the Company, and it has been consolidated.

Components of equity (loss) income are detailed in the table below:
 
 
Three Months Ended
Nine Months Ended
 
 
September 30,
June 30,
September 30,
September 30,
September 30,
 
 
2018
2018
2017
2018
2017
High-Q Joint Venture
(359
)
 
(70
)
 
788

 
265

 
2,337

 
Tanker Investments Ltd.
—

 
—

 
(1,064
)
 
—

 
(1,384
)
 
Fair value adjustment of
 
 
 
 
 
 
 
 
 
 
 
Tanker Investments Ltd. (i)
—

 
—

 
—

 
—

 
(28,124
)
 
Gemini Tankers L.L.C.
—

 
—

 
2

 
—

 
(3
)
 
Total equity (loss) income
(359
)
 
(70
)
 
(274
)
 
265

 
(27,174
)
 

(i)
As part of the accounting for the TIL merger, GAAP treats the Company's existing equity investment in TIL as being disposed of at its existing fair value and concurrently repurchased at such fair value, which is included in the cost of the acquisition of the 100 percent controlling interest in TIL. In June 2017, it was determined at that time that recovery of the carrying value of the Company's investment in TIL prior to closing of the merger would be unlikely. Consequently, a non-cash impairment of $28.1 million was required under GAAP to be recognized in the three months ended June 30, 2017 based on the difference between the carrying value of the investment at June 30, 2017 and its fair value based on the TIL share price on that date.

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Teekay Tankers Ltd.
Summary Consolidated Balance Sheets
(in thousands of U.S. dollars)

 
As at
As at
As at
 
September 30,
June 30,
December 31,
 
2018
2018
2017
 
(unaudited)
(unaudited)
(unaudited)(1)
ASSETS
 
 
 
 
 
 
Cash and cash equivalents
54,361

 
48,457

 
71,439

 
Restricted cash
1,794

 
1,858

 
1,599

 
Pool receivable from affiliates
26,923

 
24,714

 
15,550

 
Accounts receivable
17,048

 
15,912

 
19,288

 
Due from affiliates
50,551

 
50,034

 
49,103

 
Current portion of derivative assets
3,075

 
2,728

 
1,016

 
Prepaid expenses
22,662

 
21,523

 
18,690

 
Other current assets
1,385

 
3,103

 
—

 
Restricted cash - long-term
2,672

 
2,672

 
2,672

 
Vessels and equipment – net
1,556,959

 
1,695,722

 
1,737,792

 
Vessels related to capital leases – net
340,961

 
221,825

 
227,722

 
Investment in and advances to equity-accounted
 
 
 
 
 
 
    investments
24,811

 
25,170

 
25,460

 
Derivative assets
5,531

 
5,797

 
4,226

 
Intangible assets – net
12,320

 
13,030

 
14,605

 
Other non-current assets
82

 
92

 
127

 
Goodwill
8,059

 
8,059

 
8,059

 
Total assets
2,129,194

 
2,140,696

 
2,197,348

 
 
 
 
 
 
 
 
LIABILITIES AND EQUITY
 
 
 
 
 
 
Accounts payable and accrued liabilities
41,069

 
39,885

 
42,468

 
Current portion of long-term debt
103,843

 
155,089

 
166,745

 
Current portion of derivative liabilities
—

 
16

 
—

 
Current obligation related to capital leases
15,839

 
7,454

 
7,227

 
Deferred revenue
89

 
61

 
557

 
Due to affiliates
18,391

 
39,422

 
19,717

 
Long-term debt
703,235

 
778,728

 
785,557

 
Long-term obligation related to capital leases
280,871

 
137,951

 
141,681

 
Other long-term liabilities
30,646

 
29,620

 
26,795

 
Equity
935,211

 
952,470

 
1,006,601

 
Total liabilities and equity
2,129,194

 
2,140,696

 
2,197,348

 

(1)
See note 1 to the Summary Consolidated Statements of Loss included in this release for further details.



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Teekay Tankers Ltd.
Summary Consolidated Statements of Cash Flows
(in thousands of U.S. dollars)
 
 
Nine Months Ended
 
 
September 30,
September 30,
 
 
2018
2017
 
 
(unaudited)
(unaudited)(1)
Cash, cash equivalents and restricted cash (used for) provided by
 
 
 
 
OPERATING ACTIVITIES
 
 
 

 
Net loss
(64,050
)
 
(56,144
)
 
Non-cash items:
 
 
 
 
Depreciation and amortization
88,598

 
73,652

 
(Gain) loss on sales of vessels
(170
)
 
12,495

 
Unrealized (gain) loss on derivative instruments
(3,287
)
 
1,268

 
Equity (income) loss
(265
)
 
27,174

 
Other
8,166

 
8,827

 
Change in operating assets and liabilities
(17,402
)
 
7,013

 
Expenditures for dry docking
(17,035
)
 
(6,448
)
 
Net operating cash flow
(5,445
)
 
67,837

 
FINANCING ACTIVITIES
 
 
 

 
Proceeds from long-term debt, net of issuance costs
46,128

 
14,919

 
Repayments of long-term debt
(92,380
)
 
(82,054
)
 
Prepayment of long-term debt
(102,717
)
 
(222,302
)
 
Proceeds from financing related to sales and leaseback of vessels
156,644

 
153,000

 
Scheduled repayments of obligation related to capital leases
(8,841
)
 
(2,312
)
 
Cash dividends paid
(8,052
)
 
(15,302
)
 
Proceeds from equity offerings, net of offering costs
—

 
8,565

 
Proceeds from issuance of Class A common stock
—

 
5,000

 
Other
(92
)
 
(241
)
 
Net financing cash flow
(9,310
)
 
(140,727
)
 
INVESTING ACTIVITIES
 

 
 

 
Proceeds from sales of vessels
589

 
45,859

 
Expenditures for vessels and equipment
(3,463
)
 
(3,503
)
 
Return of capital from equity-accounted investment
746

 
—

 
Loan repayments from equity-accounted investment
—

 
550

 
Net investing cash flow
(2,128
)
 
42,906

 
 
 
 
 
 
Decrease in cash, cash equivalents and restricted cash
(16,883
)
 
(29,984
)
 
Cash, cash equivalents and restricted cash, beginning of the period
75,710

 
94,907

 
Cash, cash equivalents and restricted cash, end of the period
58,827

 
64,923

 

(1)
See note 1 to the Summary Consolidated Statements of Loss included in this release for further details.



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Teekay Tankers Ltd.
Appendix A - Reconciliation of Non-GAAP Financial Measures
Adjusted Net Loss
(in thousands of U.S. dollars, except per share amounts)
 
 
 
Three Months Ended
 
 
 
September 30, 2018
 
September 30, 2017
 
 
 
 
(unaudited)
 
(unaudited)
 
 
 
 
$
$ Per Share(1)
 
$
$ Per Share(1)
 
Net loss - GAAP basis
(17,484
)
 

($0.07
)
 
(22,380
)
 

($0.12
)
 
 
 
 

 
 
 
 

 
 
 
Add specific items affecting net loss:
 

 
 
 
 
 
 
 
 
Loss on sales of vessels
—

 
—

 
7,926

 

$0.04

 
 
Unrealized gain on derivative instruments (2)
(4
)
 
—

 
(310
)
 
—

 
 
Other (3)
(513
)
 
—

 
798

 
—

 
Total adjustments
(517
)
 
—

 
8,414

 

$0.04

 
Adjusted net loss attributable to shareholders of Teekay
 

 
 
 
 

 
 
 
 
Tankers
(18,001
)
 

($0.07
)
 
(13,966
)
 

($0.08
)
 


(1)
Basic per share amounts.
(2)
Reflects unrealized gains or losses due to the changes in the mark-to-market value of derivative instruments that are not designated as hedges for accounting purposes, including unrealized gains or losses on interest rate swaps.
(3)
The amount recorded for the three months ended September 30, 2018 primarily relates to foreign exchange gains, debt issuance costs which were written off in connection with the refinancing of the Company's debt facilities and restructuring charges. The amount recorded for the three months ended September 30, 2017 includes the unrealized derivative gains and losses in joint ventures and foreign exchange gains and losses.



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Teekay Tankers Ltd.
Appendix B - Reconciliation of Non-GAAP Financial Measures
Free Cash Flow
(in thousands of U.S. dollars, except share data)
 
 
 
Three Months Ended
 
 
 
September 30, 2018
September 30, 2017
 
 
 
(unaudited)
(unaudited)
 
 
 
 
 
 
 
 
Net loss - GAAP basis
(17,484
)
 
(22,380
)
 
 
 
 
 

 
 

 
 
Add:
 

 
 

 
 
 
Depreciation and amortization
29,595

 
24,328

 
 
 
Proportionate share of free cash flow from equity-accounted investments
92

 
1,364

 
 
 
Loss on sales of vessels
—

 
7,926

 
 
 
Equity loss (1)
359

 
274

 
 
 
Other
—

 
745

 
 
 
 
 

 
 

 
 
Less:
 

 
 

 
 
 
Unrealized gain on derivative instruments
(4
)
 
(310
)
 
 
 
 
 

 
 

 
Free cash flow
12,558

 
11,947

 
 
 
 
 
 
 
 
Weighted-average number of common shares outstanding for the period - basic
268,558,556

 
179,224,094

 
 
 
 
 
 
(1)
Included in equity loss is the Company’s 50 percent interest in the High-Q joint venture, which owns one VLCC tanker. For the three months ended September 30, 2017, equity loss also included the Company's 50 percent interest in Gemini Tankers L.L.C. and its proportionate 11.3 percent share of earnings from its investment in TIL prior to the TIL merger.








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Teekay Tankers Ltd.
Appendix C - Reconciliation of Non-GAAP Financial Measures
Cash Flow from Vessel Operations - Consolidated
(in thousands of U.S. dollars)
 
Three Months Ended
 
September 30,
2018
June 30,
2018
September 30,
2017
 
(unaudited)
(unaudited)
(unaudited)
Loss from operations - GAAP basis
(2,166
)
(13,415
)
(13,734
)
Depreciation and amortization
29,595

29,573

24,328

(Gain) loss on sales of vessels
—

(170
)
7,926

CFVO – Consolidated
27,429

15,988

18,520

CFVO – Equity Investments (See this Appendix C)
321

566

2,031

Total CFVO
27,750

16,554

20,551



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Teekay Tankers Ltd.
Appendix C - Reconciliation of Non-GAAP Financial Measures
Cash Flow from Vessel Operations - Equity-Accounted Investments
(in thousands of U.S. dollars)

 
Three Months Ended
 
September 30, 2018
June 30, 2018
September 30, 2017
 
(unaudited)
(unaudited)
(unaudited)
 
At
Company's
At
Company's
At
Company's
 
100%
Portion (1)
100%
Portion (1)
100%
Portion (1)
Revenues
1,363

682

2,012

1,006

24,861

4,144

Vessel and other operating expenses
(722
)
(361
)
(880
)
(440
)
(16,463
)
(2,113
)
Depreciation and amortization
(903
)
(452
)
(849
)
(425
)
(9,740
)
(1,422
)
(Loss) income from vessel operations of equity-accounted investments
(262
)
(131
)
283

141

(1,342
)
609

Interest expense
(456
)
(228
)
(436
)
(218
)
(4,740
)
(686
)
Realized and unrealized gain (loss) on derivative instruments
—

—

13

7

(2
)
(1
)
Other
—

—

—

—

(1,756
)
(199
)
Equity loss of equity-accounted vessels
(718
)
(359
)
(140
)
(70
)
(7,840
)
(277
)
 
 
 
 
 
 
 
(Loss) income from vessel operations of equity-accounted investments
(262
)
(131
)
283

141

(1,342
)
609

Depreciation and amortization
903

452

849

425

9,740

1,422

Cash flow from vessel operations of equity-accounted investments
641

321

1,132

566

8,398

2,031


(1) The Company’s proportionate share of its equity-accounted vessels and other investments ranges from 11.3 percent to 50 percent.
Teekay Tankers Ltd.
Appendix C - Reconciliation of Non-GAAP Financial Measures
Cash Flow from Vessel Operations - Equity Accounted Investments
(in thousands of U.S. dollars)


(1) The Company’s proportionate share of its equity accounted vessels and other investments ranges from 10.9 percent to 50 percent.


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Forward Looking Statements
This release contains forward-looking statements (as defined in Section 21E of the Securities Exchange Act of 1934, as amended) which reflect management’s current views with respect to certain future events and performance, including, among other things, statements regarding: the effect of financing transactions recently completed on the Company’s liquidity and future debt maturity profile; expected contract commencement dates; and crude oil and refined product tanker market fundamentals, including the balance of supply and demand in the oil and tanker markets, the occurrence and expected timing of a more sustained tanker market recovery, forecasts of worldwide tanker fleet growth, the amount of tanker scrapping and newbuild tanker deliveries, estimated growth in global oil demand and supply, future tanker rates, future OPEC oil supply, the impact of U.S. crude oil production and exports on mid-size tanker demand, and estimated impact of IMO 2020 regulations on tanker demand. The following factors are among those that could cause actual results to differ materially from the forward-looking statements, which involve risks and uncertainties, and that should be considered in evaluating any such statement: the potential for early termination of charter contracts of existing vessels in the Company's fleet; the inability of charterers to make future charter payments; the inability of the Company to renew or replace charter contracts; changes in tanker rates; changes in the production of, or demand for, oil or refined products; changes in trading patterns significantly affecting overall vessel tonnage requirements; greater or less than anticipated levels of tanker newbuilding orders and deliveries and greater or less than anticipated rates of tanker scrapping; changes in global oil prices; changes in applicable industry laws and regulations and the timing of implementation of new laws and regulations and the impact of such changes; increased costs; and other factors discussed in Teekay Tankers’ filings from time to time with the United States Securities and Exchange Commission, including its Annual Report on Form 20-F for the fiscal year ended December 31, 2017. The Company expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the Company’s expectations with respect thereto or any change in events, conditions or circumstances on which any such statement is based.

17