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Financial Instruments | 6 Months Ended
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Jun. 30, 2016
Fair Value Disclosures [Abstract] |
Financial Instruments | Financial Instruments
a. | Fair Value Measurements
For a description of how the Company estimates fair value and for a description of the fair value hierarchy levels, see Note 11 in the Company’s audited consolidated financial statements filed with its Annual Report on Form 20-F for the year ended December 31, 2015. The following table includes the estimated fair value and carrying value of those assets and liabilities that are measured at fair value on a recurring and non-recurring basis as well as the estimated fair value of the Company’s financial instruments that are not accounted for at fair value on a recurring basis.
|  |  | June 30, 2016 |  | December 31, 2015
| Fair Value Hierarchy Level |  | Carrying Amount Asset (Liability) $ |  | Fair Value Asset (Liability) $ |  | Carrying Amount Asset (Liability) $ |  | Fair Value Asset (Liability) $
Recurring |  |  |  |  |  |  |  |  |
Cash and cash equivalents, restricted cash, and marketable securities | Level 1 |  |  | 933,034 |  |  | 933,034 |  |  | 855,107 |  |  | 855,107 |
Derivative instruments (note 15) |  |  |  |  |  |  |  |  |
Interest rate swap agreements – assets(1) | Level 2 |  |  | 2,122 |  |  | 2,122 |  |  | 6,136 |  |  | 6,136 |
Interest rate swap agreements – liabilities(1) | Level 2 |  |  | (521,617 | ) |  | (521,617 | ) |  | (370,952 | ) |  | (370,952 | )
Cross currency interest swap agreement(1) | Level 2 |  |  | (258,568 | ) |  | (258,568 | ) |  | (312,110 | ) |  | (312,110 | )
Foreign currency contracts | Level 2 |  |  | (3,762 | ) |  | (3,762 | ) |  | (18,826 | ) |  | (18,826 | )
Stock purchase warrants | Level 3 |  |  | 1,833 |  |  | 1,833 |  |  | 10,328 |  |  | 10,328 |
Time charter swap agreement | Level 3 |  |  | 1,345 |  |  | 1,345 |  |  | — |  |  | — |
Logitel contingent consideration (see below) | Level 3 |  |  | — |  |  | — |  |  | (14,830 | ) |  | (14,830 | )
Non-recurring |  |  |  |  |  |  |  |  |
Vessels and equipment | Level 2 |  |  | — |  |  | — |  |  | 100,600 |  |  | 100,600 |
Vessels held for sale (note 7) | Level 2 |  |  | 75,562 |  |  | 75,562 |  |  | 55,450 |  |  | 55,450 |
Other |  |  |  |  |  |
Loans to equity-accounted investees and joint venture partners – Current | (2 | ) |  | 17,740 |  |  | (2 | ) |  | 7,127 |  |  | (2 | )
Loans to equity-accounted investees and joint venture partners – Long-term | (2 | ) |  | 191,271 |  |  | (2 | ) |  | 184,390 |  |  | (2 | )
Long-term receivable included in accounts receivable and other assets(3) | Level 3 |  |  | 14,406 |  |  | 14,366 |  |  | 16,453 |  |  | 16,427 |
Long-term debt – public (note 8) | Level 1 |  |  | (1,471,093 | ) |  | (1,299,169 | ) |  | (1,493,915 | ) |  | (1,161,729 | )
Long-term debt – non-public (note 8) | Level 2 |  |  | (5,529,544 | ) |  | (5,383,777 | ) |  | (5,890,171 | ) |  | (5,881,483 | )
(1) | The fair value of the Company's interest rate swap agreements at June 30, 2016 includes $18.1 million (December 31, 2015 - $21.7 million) accrued interest expense which is recorded in accrued liabilities on the consolidated balance sheets.
(2) | In the consolidated financial statements, the Company’s loans to and equity investments in equity-accounted investees form the aggregate carrying value of the Company’s interests in entities accounted for by the equity method. In addition, the loans to joint venture partners together with the joint venture partner’s equity investment in joint ventures form the net aggregate carrying value of the Company’s interest in the joint ventures. The fair value of the individual components of such aggregate interests is not determinable.
(3) | As at June 30, 2016 the estimated fair value of the non-interest bearing receivable from BG Norge Limited (or BG) was based on the remaining future fixed payments as well as an estimated discount rate. The estimated fair value of this receivable as of June 30, 2016 was $14.4 million (December 31, 2015 – $16.4 million) using a discount rate of 8.0%. As there is no market rate for the equivalent of an unsecured non-interest bearing receivable from BG, the discount rate is based on unsecured debt instruments of similar maturity held, adjusted for a liquidity premium. A higher or lower discount rate would result in a lower or higher fair value asset.
Time-charter swap agreement - Changes in fair value during the three and six months ended June 30, 2016 for Teekay Tankers' time-charter swap agreement, which is described below and is measured at fair value on the recurring basis using significant unobservable inputs (Level 3), are as follows:
|  | Three and Six Months
|  | Ended
|  | June 30, 2016
|  | $
Fair value asset - beginning of the period |  | —
Settlements |  | (126)
Realized and unrealized gain |  | 1,471
Fair value asset - at the end of the period |  | 1,345
The estimated fair value of the time-charter swap agreement is based in part upon the Company’s projection of future Aframax spot market tanker rates, which has been derived from current Aframax spot market tanker rates and estimated future rates, as well as an estimated discount rate. The estimated fair value of the time-charter swap agreement as of June 30, 2016 is based upon an estimated average daily tanker rate of approximately $21,500 over the remaining duration of the contract. In developing and evaluating this estimate, the Company considers the current tanker market fundamentals as well as the short and long-term outlook. A higher or lower average daily tanker rate would result in a higher or lower fair value liability or a lower or higher fair value asset. A higher or lower discount rate would result in a lower or higher fair value asset or liability. Stock purchase warrants – During January 2014, the Company received from Tanker Investments Ltd. (or TIL) stock purchase warrants entitling it to purchase up to 1.5 million shares of common stock of TIL (see note 15). The estimated fair value of the stock purchase warrants was determined using a Monte-Carlo simulation and is based, in part, on the historical price of common shares of TIL, the risk-free rate, vesting conditions and the historical volatility of comparable companies. The estimated fair value of these stock purchase warrants as of June 30, 2016 is based on the historical volatility of the comparable companies of 52.4%. A higher or lower volatility would result in a higher or lower fair value of this derivative asset. Changes in fair value during the three and six months ended June 30, 2016 and 2015 for the Company’s derivative instruments, the TIL stock purchase warrants, which are described below and are measured at fair value on the recurring basis using significant unobservable inputs (Level 3), are as follows:
| Three Months Ended June 30, |  | Six Months Ended June 30,
| 2016 |  | 2015 |  | 2016 |  | 2015
| $ |  | $ |  | $ |  | $
Fair value at the beginning of the period | 6,107 |  |  | 9,234 |  |  | 10,328 |  |  | 9,314 |
Unrealized (loss) gain included in earnings | (4,274 | ) |  | 1,817 |  |  | (8,495 | ) |  | 1,737 |
Fair value at the end of the period | 1,833 |  |  | 11,051 |  |  | 1,833 |  |  | 11,051 |
Contingent consideration liability – In August 2014, Teekay Offshore acquired 100% of the outstanding shares of Logitel, a Norway-based company focused on high-end UMS, from CeFront for $4.0 million, which was paid in cash at closing, plus an additional amount of up to $27.6 million, depending on certain performance criteria. During the second quarter of 2016, Teekay Offshore canceled the UMS construction contracts for its two remaining UMS newbuildings. This is expected to eliminate any future contingent consideration payments. Consequently, the contingent liability was reversed in the second quarter of 2016. The gain associated with this reversal is included in other loss on the Company's consolidated statements of (loss) income for the three and six months ended June 30, 2016. Changes in the estimated fair value of Teekay Offshore’s contingent consideration liability relating to the acquisition of Logitel, which is measured at fair value on a recurring basis using significant unobservable inputs (Level 3), during the three and six months ended June 30, 2016 and 2015 are as follows:
| Three Months Ended June 30, |  | Six Months Ended June 30,
| 2016 |  | 2015 |  | 2016 |  | 2015
| $ |  | $ |  | $ |  | $
Balance at beginning of period | (15,221 | ) |  | (21,562 | ) |  | (14,830 | ) |  | (21,448 | )
Adjustment to Liability | — |  |  | 2,569 |  |  | — |  |  | 2,569 |
Settlement of liability | — |  |  | 3,540 |  |  | — |  |  | 3,540 |
Gain included in Other income - net (note 13) | 15,221 |  |  | 161 |  |  | 14,830 |  |  | 47 |
Balance at end of period | — |  |  | (15,292 | ) |  | — |  |  | (15,292 | )
b. | Financing Receivables
The following table contains a summary of the Company’s financing receivables by type of borrower and the method by which the Company monitors the credit quality of its financing receivables on a quarterly basis.
Class of Financing Receivable |  | Credit Quality Indicator |  | Grade |  | June 30, 2016 |  | December 31, 2015
$ |  | $
Direct financing leases |  | Payment activity |  | Performing |  | 672,748 |  |  | 684,129 |
Other loan receivables |  |  |  |  |  |  |  |
Loans to equity-accounted investees and joint venture partners |  | Other internal metrics |  | Performing |  | 209,011 |  |  | 191,517 |
Long-term receivable included in other assets |  | Payment activity |  | Performing |  | 20,213 |  |  | 37,032 |
|  |  |  |  |  | 901,972 |  |  | 912,678 |

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- Definition The entire disclosure for financial instruments. This disclosure includes, but is not limited to, fair value measurements of short and long term marketable securities, international currencies forward contracts, and auction rate securities. Financial instruments may include hedging and non-hedging currency exchange instruments, derivatives, securitizations and securities available for sale at fair value. Also included are investment results, realized and unrealized gains and losses as well as impairments and risk management disclosures. + References No definition available. + Details
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