ITEM 1A. RISK FACTORS
Important risk factors that could impact our ability to achieve our anticipated operating results and growth plan goals are presented below. The following risk factors should be read in conjunction with discussions of our business and the factors affecting our business located elsewhere in this Annual Report on Form 10-K and in our other filings with the SEC.
Summary Risk Factors
The following is a summary of some of the risks and uncertainties that could materially adversely affect our business, financial condition and results of operations. You should read this summary together with the more detailed description of each risk factor contained below.
21
Risks Related to Our Business and Industry
•Demand for our products and services depends on oil and gas industry activity and expenditure levels which are directly affected by trends inand the demand for and price of crude oil and natural gas.
•We operate in a highly competitive environmentCompetition and unanticipated changes relating to competitive factors in our industry, including ongoing industry consolidation, may impact our results of operations.
•Our success depends on our ability to develop, implement, and protect new technologies and services.
•Cumulative loss of several major contracts, customers, or alliances may have an adverse effect on us.
•The COVID-19 pandemic, the United Kingdom’s withdrawal from the European Union,and any resurgence thereof, and disruptions in the political, regulatory, economic, and social conditions of the countries in which we conduct business, could adversely affect our business or results of operations.
•DTC and EuroclearThe Depository Trust Company (“DTC”) may cease to act as a depository and clearing agenciesagency for our shares.
•Our existing and future debt may limit cash flowflows available to invest in the ongoing needs of our businessoperations and could prevent us from fulfilling our obligations underto service our outstanding debt.
•Our acquisition and divestiture activities involve substantial risks.
•Increasing scrutiny and expectations regearing Environmental, Social and Governance (“ESG”) matters could result in additional costs or risks or otherwise adversely affect our business.
•Uncertainties with respect to the energy transition may adversely affect our business.
Risks Related to Our Operations
•We may lose money on fixed-price contracts.
•We face risks relating to our reliance on subcontractors, suppliers, and our joint venture partners.
•A failure or breach of our IT infrastructure or that of our subcontractors, suppliers, or joint venture partners, including as a result of cyber-attacks, could adversely impact our business and results of operations.
•Pirates endanger our maritime employees and assets.
•New capital asset construction projects for vessels and manufacturing facilities are subject to risks, including delays and cost overruns.
Risks Related to Legal Proceedings, Tax, and Regulatory Matters
•The industries in which we operate or have operated expose us to potential liabilities, including the installation or use of our products, which may not be covered by insurance or may be in excess of policy limits, or for which expected recoveries may not be realized.
•Our operations require us to comply with numerousexisting and future laws and regulations, including those related to environmental protection and climate change, health and safety, privacy, data protection and data security, labor and employment, import/export controls, currency exchange, bribery and corruption, and taxation, violations of which could have a material adverse effect on our financial condition, results of operations, or cash flows.
•As an English public limited company, we must meet certain additional financial requirements before we may declare dividends or repurchase shares and certain capital structure decisions may require stockholder approval which may limit our flexibility to manage our capital structure.
•Uninsured claims and litigation against us including intellectual property litigation, could adversely impact our financial condition, results of operations, or cash flows.
22
•The IRS may not agree that we should be treated as a foreign corporation for U.S. federal tax purposes and may seek to impose an excise tax on gains recognized by certain individuals;
•U.S. tax laws and/or guidance could also affect our ability to engage in certain acquisition strategies and certain internal restructurings.
•We are subject to the tax laws of numerous jurisdictions; and challenges to the interpretation of, or future changes to, such laws could adversely affect us.
•We intend to be treated exclusively as a resident of the United Kingdom for tax purposes, but French or other tax authorities may seek to treat us as a tax resident of another jurisdiction, and we may not qualify for benefits under tax treaties entered into between the United Kingdom and other countries.
General Risk Factors
•Our businesses are dependent on the continuing services of our key managers and employees.
•Seasonal and weather conditions could adversely affect demand for our services and operations.
•Currency exchange rate fluctuations could adversely affect our financial condition, results of operations, or cash flows.
•We are exposed to risks in connection with our defined benefit pension plan commitments.
•We may be unable to obtain sufficient bonding capacity for certain contracts, and the need for performance and surety bonds could reduce availability under our credit facility.
•Our revenues and earnings could be adversely affected by high levels of inflation resulting in increased supply costs and impacts on pricing and demand.
•Our operating results, sales, profits, cash flows, liquidity, financial position, wage expenses, employee retention and capital expenditures could be adversely affected by rising interest rates, which have increased the cost of borrowing and increased volatility in the capital markets.
Risks Related to Our Business and Industry
Demand for our products and services depends on oil and gas industry activity and expenditure levels, which are directly affected by trends in the demand for and price of crude oil and natural gas.
We are substantially dependent on conditions in the oil and gas industry, including (i) the level of exploration, development and production activity and (ii) capital spending. Any substantial or extended decline in these expenditures may result in the reduced pace of discovery and development of new reserves of oil and gas and the reduced exploration of existing wells, which could adversely affect demand for our products and services and, in certain instances, result in the cancellation, modification, or re-scheduling of existing orders in our backlog. These factors could have an adverse effect on our revenue and profitability. The level of exploration, development, and production activity is directly affected by trends in oil and natural gas prices, which historically have been volatile and are likely to continue to be volatile in the future.
Factors affecting the prices of oil and natural gas include, but are not limited to, the following:
•demand for hydrocarbons, which is affected by worldwide population growth, economic growth rates, and general economic and business conditions, including reductions in travel and commerce relating to the COVID-19 pandemic;
•costs of exploring for, producing, and delivering oil and natural gas;
•political and economic uncertainty, socio-political unrest and socio-political unrest;geopolitical conflicts, including the continued conflict between Russia and Ukraine, which has resulted in substantial reduction of natural gas imports from Russia to Europe and significant volatility in the costs of both wholesale gas and power;
•governmental laws, policies, regulations and subsidies related to or affecting the production, use, and exportation/importation of oil and natural gas;
23
•the ability or willingness of the Organization of Petroleum Exporting Countries and the 10 other oil producing countries, including Russia, Mexico and Kazakhstan (“OPEC+”) to set and maintain production level for oil;
•oil refining and transportation capacity and shifts in end-customer preferences toward fuel efficiency and the use of natural gas;
•technological advances affecting energy consumption;
•development, exploitation, relative price, and availability of alternative sources of energy and our customers’ shift of capital to the development of these sources;
•volatility in, and access to, capital and credit markets, which may affect our customers’ activity levels, and spending for our products and services;
•decrease in investors’ interest in hydrocarbon producers because of environmental and sustainability initiatives; and
•natural disasters.
The oil and gas industry has historically experienced periodic downturns, which have been characterized by diminished demand for oilfield services and downward pressure on the prices we charge. The oil and natural gas market remains quite volatile, and price recovery and business activity levels are dependent on variables beyond our control, such as geopolitical stability, increasing attention to global climate change resulting in pressure upon shareholders, financial institutions and/or financial markets to modify their relationships with oil and gas companies and to limit investments and/or funding to such companies, increasing likelihood of governmental regulations, enforcement, and investigations and private litigation due to increasing attention to global climate change, OPEC+’s actions to regulate its production capacity, changes in demand patterns, and international sanctions and tariffs. Continued volatility or any future reduction in demand for oilfield services could further adversely affect our financial condition, results of operations, or cash flows.
We operate in a highly competitive environment and unanticipated changes relating to competitive factors in our industry, including ongoing industry consolidation, may impact our results of operations.
We compete on the basis of a number of different factors, such as product offerings, project execution, customer service, and price. In order to compete effectively we must develop and implement innovative technologies and
processes, and execute our clients’ projects effectively. We can give no assurances that we will continue to be able to compete effectively with the products and services or prices offered by our competitors.
Our industry, including our customers and competitors, has experienced unanticipated changes in recent years. Moreover, the industry is undergoing consolidation to create economies of scale and to control the value chain, which may affect demand for our products and services because of price concessions forfrom our competitors or decreased customer capital spending. This consolidation activity could impact our ability to maintain market share, maintain or increase pricing for our products and services or negotiate favorable contract terms with our customers and suppliers, which could have a significant negative impact on our financial condition, results of operations or cash flows. We are unable to predict what effect consolidations and other competitive factors in the industry may have on prices,pricing, capital spending by our customers, our selling strategies, our competitive position, our ability to retain customers or our ability to negotiate favorable agreements with our customers.
The COVID-19 pandemic, has significantly reduced demand for our products and services, and hasany resurgence thereof, have had, and may continue to have, an adverse impact on our financial condition, results of operations, and cash flows.
The COVID-19 pandemic, including actions taken by governments and businesses, has resulted in a significant reduction in global economic activity, including increased volatility in global oilany resurgence thereof, have had, and natural gas markets. Measures takenmay continue to address and limit the spread of the disease-such as stay-at-home orders, social distancing guidelines, and travel restrictions have adversely affectedan adverse impact on the economies and financial markets of many countries. The resulting disruption to our operations, communications, travel,countries and supply chain may continue or increase in the future, and could limit the ability of our employees, partners, or vendors to operate efficiently or at all, and has had, and is reasonably likely to continue to have, an adverse impact on our financial condition, operating results, and cash flows.
24
negatively impact our business results, operations, revenue, growth and overall financial condition. Additionally, shift from the pandemic-led contraction to economic growth has resulted in and may continue to cause high inflation and logistical bottlenecks.
Our success depends on our ability to develop, implement, and protect new technologies and services and the intellectual property related thereto.
Our success depends on the ongoing development and implementation of new product designs, including the processes used by us to produce and market our products.
We continually attempt to develop new technologies for use in our business. However, there is no guarantee of future demand for those technologies because customers may be reluctant or unwilling to adopt our new technologies. In addition, we may also have difficulty negotiating satisfactory terms that would provide acceptable returns on our investment in the research and development of new technologies.
Development of new technology is critical to maintaining our competitiveness. However, we cannot assure that we will be able to successfully develop technology that our customers demand. Demand for our products and services may decline if we cannot keep pace with technological advances. Technology that is unavailable to us or that does not work as we expect, could adversely affect us. New technologies, services or standards could render some of our products and services obsolete, which could reduce our competitiveness and have a material adverse impact on our business, financial condition, cash flows and results of operation.
Additionally, we are exploring opportunities in greenhouse gas removal, offshore floating renewables (wind, wave and tidal energy), and hydrogen. Many technologies involved in those projects are novel and will need to be further developed before we can determine whether a renewable energy project is technologically feasible.
Our success also depends on our ability to protect and maintain critical intellectual property assets related to these developments. If we are not able to obtain patents, maintain trade secrets or obtain other protection of our intellectual property rights, if our patents are unenforceable or the claims allowed under our patents are not sufficient to protect our technology, or if we are not able to adequately protect our patents or trade secrets, we may not be able to continue to develop our services, products and related technologies. Additionally, our competitors may be able to independently develop technology that is similar to ours without infringing on our patents or gaining access to our trade secrets. If any of these events occurs, we may be unable to meet evolving industry requirements or do so at prices acceptable to our customers, which could adversely affect our financial condition, results of operations, or cash flows.
Due to the types of contracts we enter into and the markets in which we operate, the cumulative loss of several major contracts, customers, or alliances may have an adverse effect on our results of operations.
We often enter into large, long-term contracts that, collectively, represent a significant portion of our revenue. These agreements, if terminated or breached, may have a larger impact on our operating results or our financial condition than shorter-term contracts due to the value at risk. Moreover, the global market for the production, transportation, and transformation of hydrocarbons and by-products, as well as the other industrial markets in which we operate, is dominated by a small number of companies. As a result, our business relies on a limited number of customers. If we were to lose several key contracts, customers, or alliances over a relatively short period of time, we could experience a significant adverse impact on our financial condition, results of operations, or cash flows.
Additionally, certain of our customers may require us to provide extended payment terms or other forms of financial support as a condition to obtaining commercial contracts.We have long-term contracts involving significant amounts to be paid by our customers toward the later stage of a project. Pursuant to these contracts, we may deliver products and services representing an important portion of the contract price before receiving any significant payment from the customer. Such arrangements could restrict the use of our cash and other resources for other projects and opportunities and our business could also be adversely affected if the financial condition of our customers erodes.
Disruptions in the political, regulatory, economic, and social conditions of the countries in which we conduct business could adversely affect our business or results of operations.
25
We operate in various countries across the world. Instability and unforeseen changes in any of the markets in which we conduct business, including economically and politically volatile areas or conflict or rumor of conflict could have an adverse effect on the demand for our services and products, our financial condition, or our results of operations. These factors include, but are not limited to, the following:
•nationalization and expropriation;
•potentially burdensome taxation;
•inflationary and recessionary markets, including capital and equity markets;
•volatility in economic conditions including tightening of credit markets, inflation, rising interest rates, and currency exchange rate fluctuations and devaluations;
•civil unrest, labor issues, political instability, disease outbreaks, terrorist attacks, cyber terrorism, military activity, and wars;wars, including the continued conflict between Russia and Ukraine;
•increasing attention to global climate change resulting in pressure from shareholders, financial institutions and/or financial markets;
•supply disruptions in key oil producing countries;
•the ability of OPEC+ to set and maintain production levels and pricing;
•trade restrictions, trade protection measures, price controls, or trade disputes;
•sanctions, such as prohibitions or restrictions by the United States against countries that are the targets of economic sanctions, or are designated as state sponsors of terrorism;
•foreign ownership restrictions;
•import or export licensing requirements;
•restrictions on operations, trade practices, trade partners (including as a result of the United Kingdom’s withdrawal from the European Union), and investment decisions resulting from domestic and foreign laws, and regulations;
•regime changes;
•changes in, and the administration of, treaties, laws, and regulations including in response to public health issues;
•inability to repatriate income or capital;
•reductions in the availability of qualified personnel;
•foreign currency fluctuations or currency restrictions; and
•fluctuations in the interest rate component of forward foreign currency rates.
DTC and Euroclear may cease to act as the depository and clearing agenciesagency for our shares.
Our shares were issued into the facilities of The Depository Trust Company (“DTC”) with respect to shares listed on the NYSE and Euroclear with respect to shares listed on Euronext Paris (DTC and Euroclear being referred to as the “Clearance Services”). The Clearance Services areNYSE. DTC is a widely used mechanismsmechanism that allowallows for rapid electronic transfers of securities between the participants in their respective systems, which include many large banks and brokerage firms. The Clearance Services haveDTC has general discretion to cease to act as athe depository and clearing agenciesagency for our shares. If either of the Clearance Services determineDTC determines at any time that our shares are not eligible for continued deposit and clearance within its facilities, then we believe that our shares would not be eligible for continued listing on the NYSE, or Euronext Paris, as applicable, and trading in our shares would be disrupted. Any such disruption could have a material adverse effect on the trading price of our shares.
Our existing and future debt may limit cash flowflows available to invest in the ongoing needs of our business and could prevent us from fulfilling our obligations under our outstanding debt.
26
We have substantial existing debt. As of December 31, 2020,2022, our total debt was $4.0$1.4 billion. In addition, in connection with Spin-off, we obtained commitments from a syndicate of financial institutions for a senior secured revolving credit facility of up to $1.0 billion. We will also have the capacity under our debt agreements to incur substantial additional debt.
Our level of debt could have important consequences. For example, it could:
•require us to dedicate a substantial portion of our cash flowflows from operations to the payment of debt service, reducing the availability of our cash flowflows to fund working capital, capital expenditures, acquisitions, distributions, and other general partnership purposes;
•increase our vulnerability to adverse economic or industry conditions;
•limit our ability to obtain additional financing to react to changes in our business; or
•place us at a competitive disadvantage compared to businesses in our industry that have less debt.
Additionally, any failure to meet required payments on our debt or to comply with any covenants in the instruments governing our debt, could result in an event of default under the terms of those instruments. In the event of such default, the holders of such debt could elect to declare all the amounts outstanding under such instruments to be due and payable. Such default could also trigger a cross default oron our other debt.
The terms of the agreements governing our existing indebtedness restrict our current and future operations, particularly our ability to respond to changes or to take certain actions.
The terms of the agreements governing our indebtedness contain a number of restrictive covenants that limit our flexibility in conducting our business and restrict our ability to take specific actions, including (subject to various exceptions) restrictions on incurring indebtedness, paying dividends, making certain loans and investments, selling assets or incurring liens which may limit our ability to compete effectively, or to take advantage of new business opportunities. In addition, the restrictive covenants in the credit agreement, dated February 16, 2021, (as amended) that governs our $1,000,000,000$1.0 billion three-year senior secured multicurrencymulti-currency revolving credit facility (the “Revolving Credit Facility”) require us to maintain specified financial ratios and satisfy other financial condition tests.
A breach of the covenants or restrictions under our existing indebtedness could result in an event of default under the applicable indebtedness. Such default may allow the creditors to accelerate the related debt and may result in the acceleration of any other debt to which a cross-acceleration or cross-default provision applies. An event of default under our Revolving Credit Facility would also permit the lenders to terminate all commitments to extend further credit under that facility. Furthermore, if we were unable to repay the amounts due and payable under our Revolving Credit Facility, lenders thereunder could proceed against the collateral granted to them to secure that indebtedness. In the event our lenders or noteholders accelerate the repayment of our borrowings, we and our subsidiaries may not have sufficient assets to repay that indebtedness.
These restrictions may affect our ability to grow in accordance with our strategy. In addition, our financial results, our substantial indebtedness and our credit ratings could adversely affect the availability and terms of our financing.
Our acquisition and divestiture activities involve substantial risks.
27
We have made and expect to continue to pursue acquisitions, dispositions, or other investments that may strategically fit our business and/or growth objectives. We cannot provide assurances that we will be able to locate suitable acquisitions, dispositions, or investments, or that we will be able to consummate any such transactions on terms and conditions acceptable to us. Even if we do successfully execute such transactions, they may not result in anticipated benefits, which could have a material adverse effect on our financial results. If we are unable to successfully integrate and develop acquired businesses, we could fail to achieve anticipated synergies and cost savings, including any expected increases in revenues and operating results. We may not be able to successfully cause a buyer of a divested business to assume the liabilities of that business or, even if such liabilities are assumed, we may have difficulties enforcing our rights, contractual or otherwise, against the buyer. We may invest in companies or businesses that fail, causing a loss of all or part of our investment. In addition, if we determine that an other-than-temporary decline in the fair value exists for a company in which we have invested, we may have to write down that investment to its fair value and recognize the related write-down as an investment loss.
In connection with the Spin-off, we agreed to indemnify Technip Energies for certain liabilities, and Technip Energies agreed to indemnify us for certain liabilities. If we are required to act on these indemnities to Technip Energies, our financial results could be negatively impacted. Additionally, any indemnity from Technip Energies may not be sufficient to insure us against the full amount of liabilities for which we are responsible and Technip Energies may not be able to satisfy its indemnification obligations in the future.
Increasing scrutiny and expectations regarding ESG matters could result in additional costs or risks or otherwiseadversely affect our business.
There has been increasing attention from stakeholders, investors, customers, regulators on renewable energy and ESG practices and disclosures, including practices and disclosures related to greenhouse gases and climate change, and diversity and inclusion initiatives and governance standards. If we are unable to meet the ESG standards, investment and/or lending criteria, or current and future regulatory requirements set by these investors, regulators, customers, or other stakeholders, we may lose investment and our ability to raise capital and our reputation may be negatively affected. In addition, negative attitudes toward or perceptions of fossil fuel products and their relationship to the environment and climate change may reduce the demand for production of oil and gas in areas of the world where our customers operate or otherwise limit our customers’ access to capital or ability to conduct operations, including via new regulation, and reduce future demand for our products and services.Any of these trends may, in turn, adversely affect our financial condition, results of operations and cash flows.
While we may at times engage in voluntary initiatives (such as voluntary disclosures, certifications, or goals, among others) or commitments to improve the ESG profile of our company and/or products, such initiatives or achievements of such commitments may be costly and may not have the desired effect. For example, expectations around company’s management of ESG matters continues to evolve rapidly, in many instances due to factors that are out of our control. In addition, we may commit to certain initiatives or goals and we may not ultimately be able to achieve such commitments or goals, either on the timeframes or costs initially anticipated or at all, due to factors that are within or outside of our control.Moreover, actions or statements that we may take based on based on expectations, assumptions, or third-party information that we currently believe to be reasonable may subsequently be determined to be erroneous or be subject to misinterpretation. Even if this is not the case, our current actions may subsequently be determined to be insufficient by various stakeholders, and we may be subject to investor or regulator engagement on our ESG initiatives and disclosures, even if such initiatives are currently voluntary. The increasing attention and pressure from the shareholders, financial institutions and/or financial markets could also increase the likelihood of governmental investigations and private litigation.
Additionally, certain market participants, including major institutional investors and capital providers, use third-party benchmarks and scores to assess companies’ ESG profiles in making investment or voting decisions. Unfavorable ESG ratings could lead to increased negative investor sentiment towards us or our industry, which could negatively impact our share price as well as our access to and cost of capital. To the extent ESG matters negatively impact our reputation, it may also impede our ability to compete as effectively to attract and retain employees or customers, which may adversely impact our operations. We also expect there to be increasing ESG-related regulations, disclosure-related and otherwise, which could magnify any of the risks identified in this risk factor. For more information, see our risk factor titled “Compliance with environmental and climate change-related laws and regulations may adversely affect our business and results of operations.” Our customers and suppliers may be subject to similar risks, which may also result in augmented or additional risks.
28
We are exploring investments in energy transition, and uncertainties with respect to these markets may adversely affect our business.
Uncertainties with respect to the energy transition may adversely affect our business. As a result of our evolution in the renewable energies arena, we are exploring opportunities in greenhouse gas removal, offshore floating renewables, and hydrogen. While we have subsea and surface expertise, as well as capabilities in project integration, we are exploring opportunities that are new to us, and therefore involve uncertainties and risks.
The market for renewable energy is also intensively competitive and rapidly evolving. If the demand for renewable energy fails to grow sufficiently, if new geopolitical, legislative or regulatory initiatives emerge and governments around the world reduce subsidies and economic incentives on renewable energy projects, or if market opportunities manifest themselves in areas that we do not focus on, our New Energy business may not succeed.
Limited operating experience or limited brand recognition in new energy markets may also limit our goals and targets on business expansion.
Risks Related to Our Operations
We may lose money on fixed-price contracts.
As is customary for some of our projects, we often agree to provide products and services under fixed-price contracts. We are subject to material risks in connection with such fixed-price contracts.contracts, including bearing greater risk of paying some, if not all, of any cost overruns. It is not possible to estimate with complete certainty the final cost or margin of a project at the time of bidding or during the early phases of its execution. Actual expenses incurred in executing these fixed-price contracts can vary substantially from those originally anticipated for several reasons including, but not limited to, the following:
•unforeseen additional costs related to the purchase of substantial equipment, material, and components necessary for contract fulfillment or labor shortages in the markets where the contracts are performed;
•mechanical failure of our production equipment and machinery;
•delays caused by local weather conditions and/or natural disasters (including earthquakes, floods and public health crises such as the COVID-19 pandemic);, which may become more frequent or severe as a result of climate change; and
•a failure of suppliers, subcontractors, or joint venture partners to perform their contractual obligations.
The realization of any material risks and unforeseen circumstances could also lead to delays in the execution schedule of a project. We may be held liable to a customer should we fail to meet project milestones or deadlines or to comply with other contractual provisions. Additionally, delays in certain projects could lead to delays in subsequent projects that were scheduled to use equipment and machinery still being utilized on a delayed project.
Pursuant to the terms of fixed-price contracts, we are not always able to increase the price of the contract to reflect factors that were unforeseen at the time our bid was submitted, and this risk may be heightened for projects with longer terms. Depending on the size of a project, variations from estimated contract performance, or variations in multiple contracts, could have a significant impact on our financial condition, results of operations or cash flows.
Our failure to timely deliver our backlog could affect future sales, profitability, and relationships with our customers.
Many of the contracts we enter into with our customers require long manufacturing lead times due to complex technical and logistical requirements. These contracts may contain clauses related to liquidated damages or financial incentives regarding on-time delivery, and a failure by us to deliver in accordance with customer expectations could subject us to liquidated damages or loss of financial incentives, reduce our margins on these contracts, or result in damage to existing customer relationships. The ability to meet customer delivery schedules for this backlog is dependent upon a number of factors, including, but not limited to, access to the raw materials required for production, an adequately trained and capable workforce, subcontractor performance, project engineering expertise and execution, sufficient manufacturing plant capacity, and appropriate planning and scheduling of
29
manufacturing resources. Failure to deliver backlog in accordance with expectations could negatively impact our financial performance.
We face risks relating to our reliance on subcontractors, suppliers, and our joint venture partners.
We generally rely on subcontractors, suppliers, and our joint venture partners for the performance of our contracts. Although we are not dependent upon any single supplier, certain geographic areas of our business or a project or group of projects may depend heavily on certain suppliers for raw materials or semi-finished goods.
Any difficulty in engaging suitable subcontractors or acquiring equipment and materials could compromise our ability to generate a significant margin on a project or to complete such project within the allocated time frame. If subcontractors, suppliers or joint venture partners refuse to adhere to their contractual obligations with us, or are unable to do so due to a deterioration of their financial condition, we may be unable to find a suitable replacement at a comparable price, or at all. Moreover, the failure of one of our joint venture partners to perform their obligations in a timely and satisfactory manner could lead to additional obligations and costs being imposed on us as we may be obligated to assume our defaulting partner’s obligations or compensate our customers.
Any delay, failure to meet contractual obligations, or other event beyond our control or not foreseeable by us, that is attributable to a subcontractor, supplier or joint venture partner, could lead to delays in the overall progress of the project and/or generate significant extra costs. Even if we are entitled to make a claim for these extra costs against the defaulting supplier, subcontractor or joint venture partner, we may be unable to recover the entirety of these costs and this could materially adversely affect our business, financial condition or results of operations.
A failure or breach of our IT infrastructure or that of our subcontractors, suppliers or joint venture partners, including as a result of cyber-attacks, could adversely impact our business and results of operations.
The efficient operation of our business is dependent on the security and integrity of our IT systems.systems, physical assets, and data that we process and maintain. Accordingly, we rely upon the capacity, reliability, and security of our IT hardware and software infrastructure and our ability to expand and update this infrastructure in response to changing needs.needs and evolving threats. We have been and are continuously subject to cyber-attacks, in the past, including phishing, malware, ransomware and ransomware.other security incidents. No such attack has had a material adverse effect on our business, however, this may not be the case with future attacks. Our systems and physical assets may be vulnerable to damages from such attacks, as well as from natural disasters, failures or security vulnerabilities in hardware or software, power fluctuations, unauthorized access to data and systems, theft, loss or destruction of data (including confidential customer, employee or contractor information), human error, and other similar disruptions, and we cannot give assurance that any security measures we have implemented or may in the future implement will be sufficient to identify and prevent or mitigate such disruptions. In responseHybrid working arrangements also present increased cybersecurity risks due to the COVID-19 pandemic, we have transitioned manyprevalence of our employeessocial engineering and other attacks in relation to remote working arrangements which presents increased cybersecurity risks.non-corporate and home workers. If a cyber-attack, power outage, connectivity issue, or other event occurred that impacted our employees’ ability to work remotely, it may be difficult or, in certain cases, impossible, for us to continue our business for a substantial period of time.
We rely on third parties to support the operation of our IT hardware, software infrastructure, and cloud services, and in certain instances, utilize web-based and software-as-a-service applications.applications, across a broad array of services and functions (e.g., human resources, finance, data transmission, communications, risk compliance, among others). The security and privacy measures implemented by such third parties, as well as the measures implemented by any entities we acquire or with whom we do business, may not be sufficient to identify or prevent cyber-attacks, and any such attacks may have a material adverse effect on our business. While our IT vendor agreements with third parties, such as vendors, typically contain provisions that seek to eliminate or limit our exposure to liability for damages from a cyber attack,cyber-attack, we cannot ensure such provisions will withstand legal challenges or cover all or any such damages.
Threats to our IT systems and to those of our subcontractors, suppliers and joint venture partners arise from numerous sources, not all of which are within our or their control, including fraud or malice on the part of insiders or third parties, accidental technological failure, electrical or telecommunication outages, failures of computer servers or other damage to our property or assets, outbreaks of hostilities, terrorist acts, and social engineering (e.g., phishing). The frequency and magnitude of cyberattacks and other security incidents is expected to increase in the future and attackers are becoming more sophisticated. We, as well as other critical business partners, may be unable to anticipate, detect or terrorist acts.prevent future attacks, particularly because the methodologies utilized by attackers change frequently or are not recognized until launched, and attackers are increasingly using techniques and tools designed to circumvent controls, to avoid detection, and to remove or obfuscate forensic evidence. The failure of
Pirates endanger our maritime employees and assets.
We face material piracy risks in the Gulf of Guinea, the Somali Basin, and the Gulf of Aden, and, to a lesser extent, in Southeast Asia, Malacca, and the Singapore Straits. Piracy represents a risk for both our projects and our vessels, which operate and transport through sensitive maritime areas. Such risks have the potential to significantly harm our crews and to negatively impact the execution schedule for our projects. If our maritime employees or assets are endangered, additional time may be required to find an alternative solution, which may delay project realization and negatively impact our business, financial condition, or results of operations.
New capital asset construction projects for vessels and manufacturing facilities are subject to risks, including delays and cost overruns, which could have a material adverse effect on our financial condition, or results of operations.
From time to time, we carry out capital asset construction projects to maintain, upgrade, and develop our asset base, and such projects are subject to risks of delay and cost overruns that are inherent in any large construction project, resulting from numerous factors including, but not limited to, the following:
•shortages of key equipment, materials or skilled labor;
•inflation, including rising costs of labor;
•delays in the delivery of ordered materials and equipment;
•design and engineering issues; and
•shipyard delays and performance issues.
Failure to complete construction in time, or the inability to complete construction in accordance with design specifications, may result in the loss of revenue. Additionally, capital expenditures for construction projects could materially exceed the initially planned investments, or there could be delays in putting such assets into operation.
Risks Related to Legal Proceedings, Tax and Regulatory Matters
The industries in which we operate or have operated expose us to potential liabilities, including as a result of the installation or use of our products, which may not be covered by insurance or may be in excess of policy limits, or for which expected recoveries may not be realized.
We are subject to potential liabilities arising from, among other possibilities, equipment malfunctions, equipment misuse, personal injuries, and natural disasters, any of which may result in hazardous situations, including uncontrollable flows of oil, gas or well fluids, or other sources of energy, fires, and explosions. Our insurance against these risks may not be adequate to cover our liabilities. Further, the insurance may not generally be available in the future or, if available, premiums may not be commercially justifiable. If we incur substantial liability and the damages are not covered by insurance or are in excess of policy limits, or if we were to incur liability at a time when we were not able to obtain liability insurance, such potential liabilities could have a material adverse effect on our business, results of operations, financial condition or cash flows.
Our operations require us to comply with numerous regulations, violations of which could have a material adverse effect on our financial condition, results of operations, or cash flows.
Our operations and manufacturing activities are governed by international, regional, transnational, and national laws and regulations in every place where we operate relating to matters such as environmental protection, health and safety, labor and employment, import/export controls, currency exchange, bribery and corruption, and taxation.
31
These laws and regulations are complex, frequently change, and have tended to become more stringent over time. In the event the scope of these laws and regulations expand in the future, the incremental cost of compliance could adversely impact our financial condition, results of operations, or cash flows.
Our international operations are subject to anti-corruption laws and regulations, such as the U.S. Foreign Corrupt Practices Act (“FCPA”), the U.K. Bribery Act of 2010 (the “Bribery Act”), the anti-corruption provisions of French law n° 2016-1691 dated December 9, 2016 relating to Transparency, Anti-corruption and Modernization of the Business Practice (“Sapin II Law”), the Brazilian law nº 12,846/13, or the Brazilian Anti-Bribery Act (also known as the Brazilian Clean Company Act), and economic and trade sanctions, including those administered by the United Nations, the European Union, the Office of Foreign Assets Control of the U.S. Department of the Treasury (“U.S. Treasury”), and the U.S. Department of State. The FCPA prohibits corruptly providing anything of value to foreign officials for the purposes of obtaining or retaining business or securing any improper business advantage. We may deal with both governments and state-owned business enterprises, the employees of which are considered foreign officials for purposes of the FCPA. The provisions of the Bribery Act extend beyond bribery of foreign public officials and are more onerous than the FCPA in a number of other respects, including jurisdiction, non-exemption of facilitation payments, and penalties. Economic and trade sanctions restrict our transactions or dealings with certain sanctioned countries, territories, and designated persons.
As a result of doing business in countries throughout the world, including through partners and agents, we are exposed to a risk of violating anti-corruption laws and sanctions regulations. Some of the international locations in which we currently operate or may operate, in the future, operate, have developing legal systems and may have higher levels of corruption than more developed nations. Our continued expansion and worldwide operations, including in developing countries, our development of joint venture relationships worldwide, and the employment of local agents in the countries in which we operate increasesincrease the risk of violations of anti-corruption laws and economic and trade sanctions. Violations of anti-corruption laws and economic and trade sanctions are punishable by civil penalties, including fines, denial of export privileges, injunctions, asset seizures, debarment from government contracts (and termination of existing contracts), and revocations or restrictions of licenses, as well as criminal fines and imprisonment. In addition, any major violations could have a significant impact on our reputation and, consequently, on our ability to win future business.
We have implemented internal controlspolicies and procedures designed to minimize and detect potential violations of laws and regulations in a timely manner but we can provide no assurance that such policies and procedures will be followed at all times or will effectively detect and prevent violations of the applicable laws by one or more of our employees, consultants, agents, or partners. The occurrence of any such violation could subject us to penalties and material adverse consequences on our business, financial condition, results of operations, or cash flows.
Compliance with environmental and climate change-related laws and regulations may adversely affect our business and results of operations.
Environmental laws and regulations in various countries affect the equipment, systems, and services we design, market, and sell, as well as the facilities where we manufacture our equipment and systems, and any other operations we undertake. We are required to invest financial and managerial resources to comply with environmental laws and regulations, and believe that we will continue to be required to do so in the future. Failure to comply with these laws and regulations may result in the assessment of administrative, civil, and criminal penalties, the imposition of remedial obligations, the issuance of orders enjoining our operations, or other claims and complaints. Additionally, our insurance and compliance costs may increase as a result of changes in environmental laws and regulations or changes in enforcement. These laws and regulations, as well as any new laws and regulations affecting exploration and development of drilling for crude oil and natural gas, are becoming increasingly strict and could adversely affect our business and operating results by increasing our costs, limiting the demand for our products and services, or restricting our operations.
Regulatory requirements related to Environmental, Social and Governance (ESG)ESG (including sustainability) matters have been, and are being, implemented in the European Union in particular, in relation to financial market participants. Such regulatory requirements are being implemented on a phased basis. We expect regulatory requirements related to, and investor focus on, ESG (including sustainability) matters to continue to expand in the EU, the United States, and more globally. We establish ESG objectives that align with our foundational beliefsFor example, in the United States, the SEC has proposed climate-related disclosure requirements addressing governance, strategy, risk management, emissions metrics, and corporate strategy with an aim toward reducing our carbon footprint, raising awarenessfinancial impacts, among other things, which could require us to incur additional costs for monitoring and making advancements in inclusion and diversity. If, in relation to ESG (including sustainability) matters, we are not able to meet current and future regulatory requirements, the reporting requirements of regulators, or the current and future expectations of investors, customers or other stakeholders, our business and ability to raise capital may be adversely affected.compliance.
32
Existing or future laws and regulations relating to greenhouse gas emissions and climate change may adversely affect our business.
Climate change continues to attract considerable public and scientific attention. As a result, numerous laws, regulations, and proposals have been made and are likely to continue to be made at the international, national, regional, and state levels of government to monitor and limit emissions of carbon dioxide, methane, and other “greenhouse gases” (“GHGs”). These efforts have included cap-and-trade programs, carbon taxes, GHG reporting and tracking programs and regulations that directly limit GHG emissions from certain sources. Such existing or future laws, regulations, and proposals concerning the release of GHGs or that concern climate change (including laws, regulations, and proposals that seek to mitigate the effects of climate change) may adversely impact demand for the equipment, systems and services we design, market and sell. For example, oil and natural gas exploration and production may decline as a result of such laws, regulations, and proposals, and as a consequence, demand for our equipment, systems and services may also decline. In addition, such laws, regulations, and proposals may also result in more onerous obligations with respect to our operations, including the facilities where we manufacture our equipment and systems. Such decline in demand for our equipment, systems and services and such onerous
obligations in respect of our operations may adversely affect our financial condition, results of operations, or cash flows.
As an English public limited company, we must meet certain additional financial requirements before we may declare dividends or repurchase shares and certain capital structure decisions may require stockholder approval which may limit our flexibility to manage our capital structure. We may not be able to pay dividends or repurchase shares of our ordinary shares in accordance with our announced intent, or at all.
Under English law, we will only be able to declare dividends, make distributions, or repurchase shares (other than out of the proceeds of a new issuance of shares for that purpose) out of “distributable profits.” Distributable profits are a company’s accumulated, realized profits, to the extent that they have not been previously utilized by distribution or capitalization, less its accumulated, realized losses, to the extent that they have not been previously written off in a reduction or reorganization of capital duly made. In addition, as a public limited company incorporated in England and Wales, we may only make a distribution if the amount of our net assets is not less than the aggregate of our called-up share capital and non-distributable reserves, and to the extent that the distribution does not reduce the amount of those assets to less than that aggregate.
Our articles of association permit us by ordinary resolution of the stockholders to declare dividends, provided that the directors have made a recommendation as to its amount. The dividend shall not exceed the amount recommended by the Board of Directors. The directors may also decide to pay interim dividends if it appears to them that the profits available for distribution justify thesuch payment. When recommending or declaring payment of a dividend, the directors are required under English law to comply with their duties, including considering our future financial requirements.
In addition, the Board of Directors’ determinations regarding dividends and share repurchases will depend on a variety of other factors, including our net income, cash flowflows generated from operations or other sources, liquidity position, and potential alternative uses of cash, such as acquisitions, as well as economic conditions and expected future financial results. Our ability to declare and pay future dividends and make future share repurchases will depend on our future financial performance, which in turn depends on the successful implementation of our strategy and on financial, competitive, regulatory, technical, general economic conditions, demand and selling prices for our products and services, and other factors specific to our industry or specific projects, many of which are beyond our control. Therefore, our ability to generate cash depends on the performance of our operations and could be limited by decreases in our profitability or increases in costs, regulatory changes, capital expenditures, or debt servicing requirements.
Any failure to pay dividends or repurchase shares of our ordinary shares could negatively impact our reputation, harm investor confidence in us, and cause the market price of our ordinary shares to decline.
Uninsured claims and litigation against us, including product liability and personal injury claims and intellectual property litigation, could adversely impact our financial condition, results of operations, or cash flows.
We could be impacted by the outcome of pending litigation, as well as unexpected litigation or proceedings. We have insurance coverage against operating hazards, including product liability claims and personal injury claims related to our products or operating environments in which our employees operate, to the extent deemed prudent by our management and to the extent insurance is available. However, our insurance policies are subject to exclusions,
33
limitations, and other conditions and may not apply in all cases, for example, where willful wrongdoing on our part is alleged. Additionally, the nature and amount of that insurance may not be sufficient to fully indemnify us against liabilities arising out of pending and future claims and litigation. Additionally, in individual circumstances, certain proceedings or cases may also lead to our formal or informal exclusion from tenders or the revocation or loss of business licenses or permits. Our financial condition, results of operations, or cash flows could be adversely affected by unexpected claims not covered by insurance.
In addition, the tools, techniques, methodologies, programs, and components we use to provide our services may infringe upon the intellectual property rights of others. Infringement claims generally result in significant legal and other costs. The resolution of these claims could require us to pay damages, enter into license agreements or develop alternative technologies. The development of these technologies or the payment of royalties under licenses from third parties, if available, would increase our costs. If a license were not available, or we are not able to
develop alternative technologies, we might not be able to continue providing a particular service or product, which could adversely affect our financial condition, results of operations, or cash flows.
We are subject to governmental regulation and other legal obligations related to privacy, data protection, and data security. Our actual or perceived failure to comply with such obligations could harm our business.
We are subject to international data protection laws, such as the General Data Protection Regulation 2016/679, or GDPR, in the European Economic Area, or EEA, and the United KingdomUK equivalent (“UK”UK GDPR”). The GDPR, and Data Protection Act 2018 in the UK. TheUK GDPR and implementing legislation in the EEA and UK impose several stringent requirements for controllers and processors of personal data which have increased our obligations, including, for example, by requiring more robust disclosures to individuals, notifications, in some cases, of data breaches to regulators and data subjects, and a record of processing and other policies and procedures to be maintained to adhere to the accountability principle.
In addition, we are subject to the GDPR and UK GDPR’s rules on transferring personal data outside of the EEA and UK (including to the United States), and recent legal developments in Europe have created complexity and uncertainty regarding such transfers. In addition,On July 16, 2020, the UK’s withdrawal fromCourt of Justice of the European Union (“CJEU”) invalidated the EU-US Privacy Shield Framework (“Privacy Shield”) under which personal data could be transferred from the EEA (and the UK) to US entities who had self-certified under the Privacy Shield scheme, and the decision cast uncertainly on when transfers could be made under the standard contractual clauses; compliance with such may mean that in futurerequire us to change processes by which we transfer data outside of the EEA and United Kingdom, including to the United States. We currently rely on the standard contractual clauses to transfer personal data outside the EEA and UK. The European Commission has published revised standard contractual clauses for data transfers from the EEA: the revised clauses have been mandatory for relevant, new transfers since September 27, 2021 and for relevant, existing transfers, since December 27, 2022. The U.K.’s Information Commissioner’s Office has published new data transfer standard contracts for transfers from the U.K. under the UK GDPR. This new documentation has been mandatory for relevant, new data transfers since September 21, 2022; existing standard contractual clauses arrangements must be migrated to the new documentation by March 21, 2024. We will be required to implement the latest UK data transfer documentation for data transfers subject to the UK GDPR within the relevant time frames. As the enforcement landscape further develops, and supervisory authorities issue further guidance on personal data export mechanisms, including circumstances where the standard contractual clauses cannot be used, and/or start taking enforcement action, we could suffer additional costs, complaints and/or regulatory investigations or fines, and/or if we are requiredotherwise unable to find alternative solutions for the compliant transfer of personal data intobetween and among countries and regions in which we operate, it could affect the UK.manner in which we provide our services, the geographical location or segregation of our relevant systems and operations, and could adversely affect our financial results.
We are also subject to evolving EU and UK privacy laws on cookies and e-marketing. Recent European court and regulator decisions are driving increased attention to cookies and tracking technologies, regulators are also increasingly focusing on compliance with requirements in the online behavioral advertising ecosystem, and current national laws that implement the ePrivacy Directive are highly likely to be replaced by an EU regulation known as the ePrivacy Regulation which will significantly increase fines for non-compliance. If regulators start to enforce the strict approach in recent guidance, this could lead to substantial costs, and require significant systems changes.
Failure to comply with the requirements of GDPR, UK GDPR and the local laws implementing or supplementing the GDPR could result in fines of(for example, non-compliance with the GDPR or UK GDPR, specifically, may result in administrative fines or monetary penalties, by each regime, up to €20,000,000the greater of €20,000,000/ £17,000,000 or up to 4%4 percent of the total worldwide annual turnover of the preceding financial year, whichever is higher, as well as other administrative penalties. The UK GDPR mirrors the fines under the GDPR.year). In addition, a breach of the GDPR or UK GDPR could result inwe may also face regulatory investigations and enforcement action, reputational damage, and civil claims including representative actions and other class action type litigation.litigation, potentially amounting to significant compensation or damages liabilities, as well as associated costs, diversion of internal resources, and reputational harm.
34
We are likely to be required to expend significant capital and other resources to ensure ongoing compliance with the GDPR, and UK GDPR and other applicable data protection legislation, and we may be required to put in place additional control mechanisms which could be onerous and adversely affect our business, financial condition, results of operations, or cash flows.
The IRS may not agree that we should be treated as a foreign corporation for U.S. federal tax purposes and may seek to impose an excise tax on gains recognized by certain individuals.
Although we are incorporated in the United Kingdom, the U.S. Internal Revenue Service (the “IRS”) may assert that we should be treated as a U.S. “domestic” corporation (and, therefore, a U.S. tax resident) for U.S. federal income tax purposes pursuant to Section 7874 of the U.S. Internal Revenue Code of 1986, as amended (the “Code”). For U.S. federal income tax purposes, a corporation (i) is generally considered a “domestic” corporation (or U.S. tax resident) if it is organized in the United States or of any state or political subdivision therein, and (ii) is generally considered a “foreign” corporation (or non-U.S. tax resident) if it is not considered a domestic corporation. Because we are a U.K. incorporated entity, we would be considered a foreign corporation (and, therefore, a non-U.S. tax resident) under these rules. Section 7874 of the Code (“Section 7874”) provides an exception under which a foreign incorporated entity may, in certain circumstances, be treated as a domestic corporation for U.S. federal income tax purposes.
We do not believe this exception applies. However, the Section 7874 rules are complex and subject to detailed regulations, the application of which is uncertain in various respects. It is possible that the IRS will not agree with our position. Should the IRS successfully challenge our position, it is also possible that an excise tax under Section 4985 of the Code (the “Section 4985 Excise Tax”) may be assessed against certain “disqualified individuals” (including former officers and directors of FMC Technologies, Inc.) on certain stock-based compensation held thereby. We may, if we determine that it is appropriate, provide disqualified individuals with a payment with respect to the Section 4985 Excise Tax, so that, on a net after-tax basis, they would be in the same position as if no such Section 4985 Excise Tax had been applied.
In addition, there can be no assurance that there will not be a change in law or interpretation, including with retroactive effect, that might cause us to be treated as a domestic corporation for U.S. federal income tax purposes.
U.S. tax laws and/or guidance could affect our ability to engage in certain acquisition strategies and certain internal restructurings.
Even if we are treated as a foreign corporation for U.S. federal income tax purposes, Section 7874, U.S. Treasury regulations, and other guidance promulgated thereunder may adversely affect our ability to engage in certain future
acquisitions of U.S. businesses or to restructure the non-U.S. members of our group. These limitations, if applicable, may affect the tax efficiencies that otherwise might be achieved in such potential future transactions or restructurings.
In addition, the IRS and the U.S. Treasury have issued final and temporary regulations providing that, even if we are treated as a foreign corporation for U.S. federal income tax purposes, certain intercompany debt instruments issued on or after April 4, 2016 will be treated as equity for U.S. federal income tax purposes, therefore limiting U.S. tax benefits and resulting in possible U.S. withholding taxes. Although recent guidance from the U.S. Treasury, through guidance, removes certain documentation requirements that would otherwise be imposed with respect to covered debt instruments, announces an intention to further modify and possibly withdraw certain classification rules relating to covered debt instruments, and further indicates that these rules generally are the subject of continuing study and may be further materially modified, the current regulations may adversely affect our future effective tax rate and could also impact our ability to engage in future restructurings if such transactions cause an existing intercompany debt instrument to be treated as reissued for U.S. federal income tax purposes.
We are subject to the tax laws of numerous jurisdictions; challenges to the interpretation of, or future changes to, such laws could adversely affect us.
We and our subsidiaries are subject to tax laws and regulations in the United Kingdom, the United States, France, and numerous other jurisdictions in which we and our subsidiaries operate. These laws and regulations are inherently complex, and we are, and will continue to be, obligated to make judgments and interpretations about the application of these laws and regulations to our operations and businesses. The interpretation and application of these laws and regulations could be challenged by the relevant governmental authorities, which could result in administrative or judicial procedures, actions, or sanctions, which could be material.
35
On December 22, 2017, the Tax Cuts and Jobs Act was signed into law in the United States, which made extensive changes to the U.S. taxation of multinational companies, and is subject to continuing regulatory and possible legislative changes, especially given the new Administration and Congress in the United States. In addition, the U.S. Congress, the U.K. Government, the European Union, the Organization for Economic Co-operation and Development (the “OECD”), and other government agencies in jurisdictions where we and our affiliates do business have had an extended focus on issues related to the taxation of multinational corporations. For instance, in October 2021, the OECD released additional proposals under Base Erosion and Profit Shifting that provide for a global minimum tax of 15 percent, and to date approximately 140 countries have tentatively signed a framework agreeing in principle to this initiative. The implementation of this global minimum tax, however, is contingent upon the independent actions of participating countries and is subject to further negotiation among OECD member states. New tax initiatives, directives, and rules, such as the U.S. Tax Cuts and Jobs Act, the OECD’s Base Erosion and Profit Shifting initiative, and the European Union’s Anti-Tax Avoidance Directives, may increase our tax burden and require additional compliance-related expenditures. As a result, our financial condition, results of operations, or cash flows may be adversely affected. Moreover, the U.S. government, and other jurisdictions in which we do business, may enact significant changes to the taxation of business entities including, among others, the imposition of minimum taxes or surtaxes on certain types of income. The likelihood of these changes being enacted or implemented is unclear. Further changes, including with retroactive effect, in the tax laws of the United States (such as the recent United States Inflation Reduction Act which, among other changes, introduced a 15 percent corporate minimum tax on certain United States corporations and a 1 percent excise tax on certain stock redemptions by United States corporations, which the U.S. Treasury indicated may also apply to certain stock redemptions by a foreign corporation funded by certain United States affiliates), the United Kingdom, the European Union, or other countries in which we and our affiliates do business could also adversely affect us.
We may not qualify for benefits under tax treaties entered into between the United Kingdom and other countries.
We operate in a manner such that we believe we are eligible for benefits under tax treaties between the United Kingdom and other countries. However, our ability to qualify for such benefits will depend on whether we are treated as a U.K. tax resident, the requirements contained in each treaty and applicable domestic laws, on the facts and circumstances surrounding our operations and management, and on the relevant interpretation of the tax authorities and courts. For example, because of Brexit, we may lose some or all of the benefits of tax treaties between the United States and the remaining members of the European Union, and face higher tax liabilities, which may be significant. Another example is the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (the “MLI”), which entered into force for participating jurisdictions on July 1, 2018. The MLI recommends that countries adopt a “limitation-on-benefit” (“LOB”) rule and/or a “principal purpose test” (“PPT”) rule with regards to their tax treaties. The application of the LOB rule or the PPT rule could deny us treaty benefits (such as a reduced rate of withholding tax) that were previously available and as such there remains uncertainty as to whether and, if so, to what extent such treaty benefits will continue to be available. The position is likely to remain uncertain for a number of years.
The failure by us or our subsidiaries to qualify for benefits under tax treaties entered into between the United Kingdom and other countries could result in adverse tax consequences to us (including an increased tax burden and increased filing obligations) and could result in certain tax consequences of owning and disposing of our shares.
We intend to be treated exclusively as a resident of the United Kingdom for tax purposes, but French or other tax authorities may seek to treat us as a tax resident of another jurisdiction.
We are incorporated in the United Kingdom. English law currently provides that we will be regarded as a U.K. resident for tax purposes from incorporation and shall remain so unless (i) we are concurrently a resident in another jurisdiction (applying the tax residence rules of that jurisdiction) that has a double tax treaty with the United Kingdom and (ii) there is a tiebreaker provision in that tax treaty which allocates exclusive residence to that other jurisdiction.
In this regard, we havehad a permanent establishment in France to satisfy certain French tax requirements imposed by the French Tax Code with respect to the Merger. The assets and liabilities pertaining to this permanent establishment were contributed on December 27, 2022 to one of our French subsidiaries with retroactive effect as of January 1, 2022, in accordance with a tax ruling issued by the French tax authorities, as a result of which this permanent establishment has been deregistered before the close of the 2022 fiscal year. Although it is intended that we will be treated as having our exclusive place of tax residence in the United Kingdom, the French tax authorities may claim, for the period prior to the reorganization, that we arewere a tax resident of France if we were to fail have failed
36
to maintain our “place of effective management” in the United Kingdom.Kingdom over that period as a result of the activities of such permanent establishment. Any such claim would be settled between the French and U.K. tax authorities pursuant to the mutual assistance procedure provided for by the tax treaty concluded between France and the United Kingdom. There is no assurance that these authorities would reach an agreement that we will remain exclusively a U.K. tax resident; an adverse determination could materially and adversely affect our business, financial condition, results of operations, or cash flows. A failure to maintain exclusive tax residency in the United Kingdom could result in adverse tax consequences to us and our subsidiaries and could result in certain adverse changes in the tax consequences of owning and disposing of our shares.
General Risk Factors
Our businesses are dependent on the continuing services of our key managers and employees.
We depend on key personnel. The loss of any key personnel could adversely impact our business if we are unable to implement key strategies or transactions in their absence. The loss of qualified employees or failure to retain and motivate additional highly-skilledhighly skilled employees required for the operation and expansion of our business could hinder our operation and expansion, as well as our ability to successfully conduct research activities and develop marketable products and services.
Seasonal and weather conditions could adversely affect demand for our services and operations.
Our business may be materially affected by variation from normal weather patterns, such as cooler or warmer summers and winters. Adverse weather conditions, such as hurricanestropical storms in the Gulf of Mexico or Indo-Pacific or extreme winter conditions in Canada, Russia, and the North Sea, may interrupt or curtail our operations, or our customers’ operations, cause supply disruptions or loss of productivity, and may result in a loss of revenue or damage to our equipment and facilities, which may or may not be insured. In addition, acute or chronic physical impacts of climate change, such as sea level rise, coastal storm surge, inland flooding from intense rainfall and hurricane-strength winds may damage our facilities or the facilities of key third parties. Increasing concentrations of greenhouse gases in the Earth’s atmosphere may produce climate changes that increase variation from normal weather patterns, such as increased frequency and severity of storms, floods, droughts, and other climatic events, as well as changes to temperature and precipitation patterns, which could further impact our operations. Significant physical effects of climate change could also have a direct effect on our operations and an indirect effect on our business by interrupting the operations of those with whom we do business. Any of these events or outcomes could have a material adverse effect on our business, financial condition, cash flows, or results of operations.
Currency exchange rate fluctuations could adversely affect our financial condition, results of operations, or cash flows.
We conduct operations around the world in many different currencies. Because a significant portionportions of our revenue isand expenses are denominated in currencies other than our reporting currency, the U.S. dollar, changes in exchange rates will produce fluctuations in our revenue, costs, and earnings, and may also affect the book value of our assets and liabilities and related equity. We hedge transaction impacts on margins and earnings where a transaction is not in the functional currency of the business unit, but we do not hedge translation impacts on earnings. Our efforts to minimize our currency exposure through such hedging transactions may not be successful depending on market and business conditions. Moreover, our ability to hedge certain currencies in which we conduct operations, specifically currencies in countries such as Angola and Nigeria, do not actively trade in the global foreign exchange markets and may be limited; therefore, we may be subject us to increased foreign currency exposures. As a result, fluctuations in foreign currency exchange rates may adversely affect our financial condition, results of operations, or cash flows.
We are exposed to risks in connection with our defined benefit pension plan commitments.
We have funded and unfunded defined benefit pension plans, which provide defined benefits based on years of service and salary. We are required to recognize the funded status of defined benefit post-retirement plans as an asset or liability in the consolidated balance sheet and recognize changes in that funded status in comprehensive income in the year in which the changes occur. Further, we are required to measure each plan’s assets and its obligations that determine its funded status as of the date of the consolidated balance sheet. Each
defined benefit pension plan’s assets are invested in different asset classes and their value may fluctuate in accordance with market conditions. Any deterioration in the value of the defined benefit pension plan assets could therefore increase our obligations. Any such increases in our net pension obligations could adversely affect our financial condition due to increased additional outflow of funds to finance the pension obligations.
37
In addition, applicable law and/or the terms of the relevant defined benefit pension plan may require us to make cash contributions or provide financial support upon the occurrence of certain events. We cannot predict whether, or to what extent, changing market or economic conditions, regulatory changes or other factors will further increase our pension expense or funding obligations. For further information regarding our pension liabilities, see Note 22 for further information.
We may be unable to obtain sufficient bonding capacity for certain contracts, and the need for performance and surety bonds could reduce availability under our credit facility.
In line with industry practice, we are often required to post standby letters of credit to customers or enter into surety bond arrangements in favor of customers. Those letters of credit and surety bond arrangements generally protect customers against our failure to perform our obligations under the applicable contracts. If we are unable to renew or obtain a sufficient level of bonding capacity in the future, we may be precluded from bidding for certain contracts or contracting with certain customers. Additionally, even if we are able to successfully renew or obtain performance or payment bonds, we may be required to post letters of credit in connection with the bonds. The letters of credit would reduce availability under our credit facility. Furthermore, under standard terms in the surety market, sureties issue bonds on a project-by-project basis and can decline to issue bonds at any time or require the posting of additional collateral as a condition to issuing or renewing any bonds. If we were to experience an interruption or reduction in the availability of bonding capacity as a result of these or any other reasons, we may be unable to compete for or work on projects that require bonding.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
Our corporate headquarters is in London,Newcastle, England. We also maintain corporate offices in Houston, Texas, and Paris, France, where significant worldwide global support activity occurs. In addition, we own or lease numerous properties throughout the world.
We believe our properties and facilities are suitable for their present and intended purposes and are operating at a level consistent with the requirements of the industry in which we operate. We also believe that our leases are at competitive or market rates and do not anticipate any difficulty in leasing suitable additional space upon expiration of our current lease terms.
The following table shows our principal properties by reporting segment as ofat December 31, 2020:2022:
| Location | Segment | |||||||
| Africa | ||||||||
| Subsea | ||||||||
| Subsea | ||||||||
| Malabo, Equatorial Guinea | Subsea | |||||||
| Port Harcourt, Nigeria | Subsea | |||||||
| Takoradi, Ghana | Subsea | |||||||
| Asia | ||||||||
| Chennai, India | ||||||||
| Surface | ||||||||
| Kuala Lumpur, Malaysia | Subsea | |||||||
| Subsea, | ||||||||
| Subsea, Surface | ||||||||
| Subsea | ||||||||
| Aberdeen, United Kingdom | Surface | |||||||
| Aktau, Kazakhstan | Subsea, Surface | |||||||
| Arnhem, The Netherlands | Surface | |||||||
| Atyrau, Kazakhstan | Subsea, Surface | |||||||
| Bergen, Norway | Subsea | |||||||
| Courbevoie (Paris - La Défense), France | Subsea | |||||||
| Dunfermline, United Kingdom | Subsea, Surface | |||||||
| Ellerbek, Germany | Surface | |||||||
| Evanton, United Kingdom | Subsea | |||||||
| Horten, Norway | Subsea | |||||||
| Kongsberg, Norway | Subsea, Surface | |||||||
| Krakow, Poland | Subsea | |||||||
| Le Trait, France | Subsea | |||||||
| Lisbon, Portugal | Subsea | |||||||
| Lysaker, Norway | Subsea | |||||||
| Newcastle, United Kingdom | Subsea | |||||||
| Orkanger, Norway | Subsea | |||||||
| Sens, France | Surface | |||||||
| Stavanger, Norway | Subsea, Surface | |||||||
| Veenoord, Netherlands | Surface | |||||||
| Westhill, United Kingdom | Subsea | |||||||
| Middle East | ||||||||
| Abu Dhabi, United Arab Emirates | Surface | |||||||
| Surface | ||||||||
| North America | ||||||||
| Brighton (Colorado), United States | Surface | |||||||
| Surface | ||||||||
| Davis (California), United States | Subsea | |||||||
| Erie (Pennsylvania), United States | Surface | |||||||
| Houston (Texas), United States | Subsea, Surface | |||||||
| Odessa (Texas), United States | Surface | |||||||
| San Antonio (Texas), United States | Surface | |||||||
| St. John’s (Newfoundland), Canada | Subsea | |||||||
| Stephenville (Texas), United States | Surface | |||||||
| Theodore (Alabama), United States | Subsea | |||||||
| South America | ||||||||
| Macaé, Brazil | Subsea | |||||||
| Neuquén, Argentina | Surface | |||||||
| Rio de Janeiro, Brazil | Subsea, Surface | |||||||
| São João da Barra, Brazil | Subsea | |||||||
| Veracruz, Mexico | Surface | |||||||
| Subsea | ||||||||
| Yopal, Columbia | Surface | |||||||
The following table shows marine vessels in which we held an interest or operated as of December 31, 2020:2022:
| Vessel Name | Vessel Type | Special Equipment | ||||||||||||
| Deep Blue | PLSV | Reeled pipelay/flexible pipelay/umbilical systems | ||||||||||||
| Deep Energy | PLSV | Reeled pipelay/flexible pipelay/umbilical systems | ||||||||||||
| Apache II | PLSV | Reeled pipelay/umbilical systems | ||||||||||||
| Deep Orient | HCV | Construction/installation systems | ||||||||||||
North Sea Atlantic | HCV | Construction/installation systems | ||||||||||||
Skandi Africa | HCV | Construction/installation systems | ||||||||||||
| Deep Arctic | DSV/HCV | Diver support systems | ||||||||||||
| Deep Discoverer | DSV/HCV | Diver support systems | ||||||||||||
| Deep Explorer | DSV/HCV | Diver support systems | ||||||||||||
| Skandi Vitória | PLSV | Flexible pipelay/umbilical systems | ||||||||||||
| Skandi Niterói | PLSV | Flexible pipelay/umbilical systems | ||||||||||||
| Coral do Atlantico | PLSV | Flexible pipelay/umbilical systems | ||||||||||||
| Deep Star | PLSV | Flexible pipelay/umbilical systems | ||||||||||||
| Skandi Açu | PLSV | Flexible pipelay/umbilical systems | ||||||||||||
| Skandi Búzios | PLSV | Flexible pipelay/umbilical systems | ||||||||||||
| Skandi Olinda | PLSV | Flexible pipelay/umbilical systems | ||||||||||||
| Skandi Recife | PLSV | Flexible pipelay/umbilical systems | ||||||||||||
PLSV: Pipelay Support Vessel
HCV: Heavy Duty Construction Vessel
DSV: Diving Support Vessel
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES3. LEGAL PROCEEDINGS
of Shares Purchased | Paid per Share | Shares Purchased as Part of Publicly Announced Plans or Programs | |||||||||||||||||||||
| December 31 | |||||||||||||||||||||||
| 2017 | 2018 | 2019 | 2020 | ||||||||||||||||||||
| TechnipFMC plc | $ | 87.76 | $ | 55.89 | $ | 62.63 | $ | 28.03 | |||||||||||||||
| S&P 500 Index | 119.82 | 114.56 | 150.62 | 178.32 | |||||||||||||||||||
| PHLX Oil Services Index | 82.00 | 44.93 | 44.68 | 25.88 | |||||||||||||||||||
| Year Ended December 31, | |||||||||||||||||||||||||||||||||||
| (In millions, except per share data) | 2020 | 2019 | 2018 | 2017 | 2016 | ||||||||||||||||||||||||||||||
| Statement of income data | |||||||||||||||||||||||||||||||||||
| Total revenue | $ | 13,050.6 | $ | 13,409.1 | $ | 12,552.9 | $ | 15,056.9 | $ | 9,199.6 | |||||||||||||||||||||||||
| Total costs and expenses | $ | 15,936.2 | $ | 14,935.8 | $ | 13,470.5 | $ | 14,091.7 | $ | 8,743.6 | |||||||||||||||||||||||||
| Net income (loss) | $ | (3,237.9) | $ | (2,412.1) | $ | (1,910.8) | $ | 134.2 | $ | 371.1 | |||||||||||||||||||||||||
| Net income (loss) attributable to TechnipFMC plc | $ | (3,287.6) | $ | (2,415.2) | $ | (1,921.6) | $ | 113.3 | $ | 393.3 | |||||||||||||||||||||||||
| Earnings (loss) per share from continuing operations attributable to TechnipFMC plc | |||||||||||||||||||||||||||||||||||
| Basic earnings (loss) per share | $ | (7.33) | $ | (5.39) | $ | (4.20) | $ | 0.24 | $ | 3.29 | |||||||||||||||||||||||||
| Diluted earnings (loss) per share | $ | (7.33) | $ | (5.39) | $ | (4.20) | $ | 0.24 | $ | 3.16 | |||||||||||||||||||||||||
| As of December 31, | |||||||||||||||||||||||||||||
| (In millions) | 2020 | 2019 | 2018 | 2017 | 2016 | ||||||||||||||||||||||||
| Balance sheet data | |||||||||||||||||||||||||||||
| Total assets | $ | 19,692.6 | $ | 23,518.8 | $ | 24,784.5 | $ | 28,263.7 | $ | 18,679.3 | |||||||||||||||||||
| Long-term debt, less current portion | $ | 3,317.7 | $ | 3,980.0 | $ | 4,124.3 | $ | 3,777.9 | $ | 1,869.3 | |||||||||||||||||||
| Total TechnipFMC plc stockholders’ equity | $ | 4,154.2 | $ | 7,659.3 | $ | 10,357.6 | $ | 13,345.9 | $ | 5,013.8 | |||||||||||||||||||
| Year Ended December 31, | ||||||||||||||||||||||||||||||||
| (In millions) | 2020 | 2019 | 2018 | 2017 | 2016 | |||||||||||||||||||||||||||
| Other financial information | ||||||||||||||||||||||||||||||||
| Capital expenditures | $ | 291.8 | $ | 454.4 | $ | 368.1 | $ | 255.7 | $ | 312.9 | ||||||||||||||||||||||
| Cash flows provided (required) by operating activities | $ | 656.9 | $ | 848.5 | $ | (185.4) | $ | 210.7 | $ | 493.8 | ||||||||||||||||||||||
| Net cash | $ | 853.9 | $ | 714.8 | $ | 1,348.3 | $ | 2,882.4 | $ | 3,716.4 | ||||||||||||||||||||||
| Order backlog | $ | 21,388.2 | $ | 24,251.1 | $ | 14,560.0 | $ | 12,982.8 | $ | 15,002.0 | ||||||||||||||||||||||
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS4. MINE SAFETY DISCLOSURES
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Our ordinary shares are listed on the NYSE and are traded under the symbol “FTI.”
As of February 20, 2023, according to return to the more robust levels seen in 2019, which further supportsdata provided by our viewtransfer agent, there were 3,640 shareholders of a sustainable recovery for deepwater. We expect at least 60% of the projects undergoing studies in 2021 to include an iEPCI solution,record. However, many of which could be directly awarded to our Company upon reaching final investment decision.
| Year Ended December 31, | Change | ||||||||||||||||||||||||||||||||||||||||
| (In millions, except percentages) | 2020 | 2019 | 2018 | 2020 vs. 2019 | 2019 vs. 2018 | ||||||||||||||||||||||||||||||||||||
| Revenue | $ | 13,050.6 | $ | 13,409.1 | $ | 12,552.9 | $ | (358.5) | (2.7) | % | $ | 856.2 | 6.8 | % | |||||||||||||||||||||||||||
| Costs and expenses | |||||||||||||||||||||||||||||||||||||||||
| Cost of sales | 11,209.4 | 10,950.7 | 10,273.0 | 258.7 | 2.4 | % | 677.7 | 6.6 | % | ||||||||||||||||||||||||||||||||
| Selling, general and administrative expense | 1,066.2 | 1,228.1 | 1,140.6 | (161.9) | (13.2) | % | 87.5 | 7.7 | % | ||||||||||||||||||||||||||||||||
| Research and development expense | 119.8 | 162.9 | 189.2 | (43.1) | (26.5) | % | (26.3) | (13.9) | % | ||||||||||||||||||||||||||||||||
| Impairment, restructuring and other expense | 3,501.3 | 2,490.8 | 1,831.2 | 1,010.5 | 40.6 | % | 659.6 | 36.0 | % | ||||||||||||||||||||||||||||||||
| Separation costs | 39.5 | 72.1 | — | (32.6) | (45.2) | % | 72.1 | n/a | |||||||||||||||||||||||||||||||||
| Merger transaction and integration costs | — | 31.2 | 36.5 | (31.2) | (100.0) | % | (5.3) | (14.5) | % | ||||||||||||||||||||||||||||||||
| Total costs and expenses | 15,936.2 | 14,935.8 | 13,470.5 | 1,000.4 | 6.7 | % | 1,465.3 | 10.9 | % | ||||||||||||||||||||||||||||||||
| Other income (expense), net | 31.1 | (220.7) | (323.9) | 251.8 | 114.1 | % | 103.2 | 31.9 | % | ||||||||||||||||||||||||||||||||
| Income from equity affiliates | 63.0 | 62.9 | 114.3 | 0.1 | 0.2 | % | (51.4) | (45.0) | % | ||||||||||||||||||||||||||||||||
| Net interest expense | (293.0) | (451.3) | (360.9) | 158.3 | 35.1 | % | (90.4) | (25.0) | % | ||||||||||||||||||||||||||||||||
| Loss before income taxes | (3,084.5) | (2,135.8) | (1,488.1) | (948.7) | (44.4) | % | (647.7) | (43.5) | % | ||||||||||||||||||||||||||||||||
| Provision for income taxes | 153.4 | 276.3 | 422.7 | (122.9) | (44.5) | % | (146.4) | (34.6) | % | ||||||||||||||||||||||||||||||||
| Net loss | (3,237.9) | (2,412.1) | (1,910.8) | (825.8) | (34.2) | % | (501.3) | (26.2) | % | ||||||||||||||||||||||||||||||||
| Net profit attributable to non-controlling interests | (49.7) | (3.1) | (10.8) | (46.6) | (1,503.2) | % | 7.7 | 71.3 | % | ||||||||||||||||||||||||||||||||
| Net loss attributable to TechnipFMC plc | $ | (3,287.6) | $ | (2,415.2) | $ | (1,921.6) | $ | (872.4) | (36.1) | % | $ | (493.6) | (25.7) | % | |||||||||||||||||||||||||||
| Year Ended December 31, | Favorable/(Unfavorable) | ||||||||||||||||||||||||||||||||||||||||
| (In millions, except %) | 2020 | 2019 | 2018 | 2020 vs. 2019 | 2019 vs. 2018 | ||||||||||||||||||||||||||||||||||||
| Revenue | $ | 5,471.4 | $ | 5,523.0 | $ | 4,840.0 | $ | (51.6) | (0.9) | % | $ | 683.0 | 14.1 | % | |||||||||||||||||||||||||||
| Operating loss | $ | (2,815.5) | $ | (1,447.7) | $ | (1,529.5) | $ | (1,367.8) | (94.5) | % | $ | 81.8 | 5.3 | % | |||||||||||||||||||||||||||
| Operating loss as a percentage of revenue | (51.5) | % | (26.2) | % | (31.6) | % | (25.3) | pts. | 5.4 | pts. | |||||||||||||||||||||||||||||||
| Year Ended December 31, | Favorable/(Unfavorable) | ||||||||||||||||||||||||||||||||||||||||
| (In millions, except %) | 2020 | 2019 | 2018 | 2020 vs. 2019 | 2019 vs. 2018 | ||||||||||||||||||||||||||||||||||||
| Revenue | $ | 6,520.0 | $ | 6,268.8 | $ | 6,120.7 | $ | 251.2 | 4.0 | % | $ | 148.1 | 2.4 | % | |||||||||||||||||||||||||||
| Operating profit | $ | 683.6 | $ | 959.6 | $ | 824.0 | $ | (276.0) | (28.8) | % | $ | 135.6 | 16.5 | % | |||||||||||||||||||||||||||
| Operating profit as a percentage of revenue | 10.5 | % | 15.3 | % | 13.5 | % | (4.8) | pts. | 1.8 | pts. | |||||||||||||||||||||||||||||||
| Year Ended December 31, | Favorable/(Unfavorable) | ||||||||||||||||||||||||||||||||||||||||
| (In millions, except %) | 2020 | 2019 | 2018 | 2020 vs. 2019 | 2019 vs. 2018 | ||||||||||||||||||||||||||||||||||||
| Revenue | $ | 1,059.2 | $ | 1,617.3 | $ | 1,592.2 | $ | (558.1) | (34.5)% | $ | 25.1 | 1.6 | % | ||||||||||||||||||||||||||||
| Operating profit (loss) | $ | (429.3) | $ | (656.1) | $ | 172.8 | $ | 226.8 | 34.6% | $ | (828.9) | (479.7) | % | ||||||||||||||||||||||||||||
| Operating profit (loss) as a percentage of revenue | (40.5) | % | (40.6) | % | 10.9 | % | 0.1 | pts. | (51.5) | pts. | |||||||||||||||||||||||||||||||
| Year Ended December 31, | Favorable/(Unfavorable) | ||||||||||||||||||||||||||||||||||||||||
| (In millions, except %) | 2020 | 2019 | 2018 | 2020 vs. 2019 | 2019 vs. 2018 | ||||||||||||||||||||||||||||||||||||
| Corporate expense | $ | (201.5) | $ | (393.4) | $ | (478.0) | $ | 191.9 | 49% | $ | 84.6 | 18% | |||||||||||||||||||||||||||||
| Year Ended | |||||||||||||||||||||||||||||||||||||||||
| December 31, 2020 | |||||||||||||||||||||||||||||||||||||||||
| Net income (loss) attributable to TechnipFMC plc | Net income (loss) attributable to non-controlling interests | Provision for income taxes | Net interest expense | Income (loss) before net interest expense and income taxes (Operating profit) | Depreciation and amortization | Earnings before net interest expense, income taxes, depreciation and amortization (EBITDA) | |||||||||||||||||||||||||||||||||||
| TechnipFMC plc, as reported | $ | (3,287.6) | $ | 49.7 | $ | 153.4 | $ | 293.0 | $ | (2,791.5) | $ | 447.2 | $ | (2,344.3) | |||||||||||||||||||||||||||
| Charges and (credits): | |||||||||||||||||||||||||||||||||||||||||
| Impairment and other charges | 3,271.0 | — | 16.4 | — | 3,287.4 | — | 3,287.4 | ||||||||||||||||||||||||||||||||||
| Restructuring and other charges | 96.1 | — | 16.0 | — | 112.1 | — | 112.1 | ||||||||||||||||||||||||||||||||||
| Direct COVID-19 expenses | 83.7 | — | 18.1 | — | 101.8 | — | 101.8 | ||||||||||||||||||||||||||||||||||
| Litigation settlement | (113.2) | — | — | — | (113.2) | — | (113.2) | ||||||||||||||||||||||||||||||||||
| Separation costs | 36.3 | — | 3.2 | — | 39.5 | — | 39.5 | ||||||||||||||||||||||||||||||||||
| Purchase price accounting adjustment | 6.5 | — | 2.0 | — | 8.5 | (8.5) | — | ||||||||||||||||||||||||||||||||||
| Valuation allowance | (3.5) | — | 3.5 | — | — | — | — | ||||||||||||||||||||||||||||||||||
| Adjusted financial measures | $ | 89.3 | $ | 49.7 | $ | 212.6 | $ | 293.0 | $ | 644.6 | $ | 438.7 | $ | 1,083.3 | |||||||||||||||||||||||||||
| Diluted earnings (loss) per share attributable to TechnipFMC plc, as reported | $ | (7.33) | |||||||||||||||||||||||||||||||||||||||
| Adjusted diluted earnings per share attributable to TechnipFMC plc | $ | 0.20 | |||||||||||||||||||||||||||||||||||||||
| Year Ended | |||||||||||||||||||||||||||||||||||||||||
| December 31, 2019 | |||||||||||||||||||||||||||||||||||||||||
| Net income (loss) attributable to TechnipFMC plc | Net income (loss) attributable to non-controlling interests | Provision for income taxes | Net interest expense | Income (loss) before net interest expense and income taxes (Operating profit) | Depreciation and amortization | Earnings before net interest expense, income taxes, depreciation and amortization (EBITDA) | |||||||||||||||||||||||||||||||||||
| TechnipFMC plc, as reported | $ | (2,415.2) | $ | (3.1) | $ | 276.3 | $ | (451.3) | $ | (1,684.5) | $ | 509.6 | $ | (1,174.9) | |||||||||||||||||||||||||||
| Charges and (credits): | |||||||||||||||||||||||||||||||||||||||||
| Impairment and other charges | 2,364.2 | — | 119.9 | — | 2,484.1 | — | 2,484.1 | ||||||||||||||||||||||||||||||||||
| Restructuring and other charges | 27.7 | — | 9.3 | — | 37.0 | — | 37.0 | ||||||||||||||||||||||||||||||||||
| Business combination transaction and integration costs | 23.1 | — | 8.1 | — | 31.2 | — | 31.2 | ||||||||||||||||||||||||||||||||||
| Separation costs | 54.2 | — | 17.9 | — | 72.1 | — | 72.1 | ||||||||||||||||||||||||||||||||||
| Reorganization | 17.2 | — | 8.1 | — | 25.3 | — | 25.3 | ||||||||||||||||||||||||||||||||||
| Legal provision, net | 46.3 | — | 8.3 | — | 54.6 | — | 54.6 | ||||||||||||||||||||||||||||||||||
| Purchase price accounting adjustment | 26.0 | — | 8.0 | — | 34.0 | (34.0) | — | ||||||||||||||||||||||||||||||||||
| Valuation allowance | 187.0 | — | (187.0) | — | — | — | — | ||||||||||||||||||||||||||||||||||
| Adjusted financial measures | $ | 330.5 | $ | 3.1 | $ | 268.9 | $ | 451.3 | $ | 1,053.8 | $ | 475.6 | $ | 1,529.4 | |||||||||||||||||||||||||||
| Diluted earnings per share attributable to TechnipFMC plc, as reported | $ | (5.39) | |||||||||||||||||||||||||||||||||||||||
| Adjusted diluted earnings per share attributable to TechnipFMC plc | $ | 0.74 | |||||||||||||||||||||||||||||||||||||||
| Year Ended | |||||||||||||||||||||||||||||||||||
| December 31, 2020 | |||||||||||||||||||||||||||||||||||
| Subsea | Technip Energies | Surface Technologies | Corporate Expense | Foreign Exchange, net | Total | ||||||||||||||||||||||||||||||
| Revenue | $ | 5,471.4 | $ | 6,520.0 | $ | 1,059.2 | $ | — | $ | — | $ | 13,050.6 | |||||||||||||||||||||||
| Operating profit (loss), as reported (pre-tax) | $ | (2,815.5) | $ | 683.6 | $ | (429.3) | $ | (201.5) | $ | (28.8) | $ | (2,791.5) | |||||||||||||||||||||||
| Charges and (credits): | |||||||||||||||||||||||||||||||||||
| Impairment and other charges | 2,854.5 | 10.3 | 419.3 | 3.3 | — | 3,287.4 | |||||||||||||||||||||||||||||
| Restructuring and other charges* | 52.9 | 39.3 | 13.2 | 6.7 | — | 112.1 | |||||||||||||||||||||||||||||
| Direct COVID-19 expenses | 50.1 | 44.0 | 7.7 | — | — | 101.8 | |||||||||||||||||||||||||||||
| Litigation settlement | — | (113.2) | — | — | — | (113.2) | |||||||||||||||||||||||||||||
| Separation costs | — | — | — | 39.5 | — | 39.5 | |||||||||||||||||||||||||||||
| Purchase price accounting adjustments | 8.5 | — | — | — | — | 8.5 | |||||||||||||||||||||||||||||
| Subtotal | 2,966.0 | (19.6) | 440.2 | 49.5 | — | 3,436.1 | |||||||||||||||||||||||||||||
| Adjusted Operating profit (loss) | 150.5 | 664.0 | 10.9 | (152.0) | (28.8) | 644.6 | |||||||||||||||||||||||||||||
| Adjusted Depreciation and amortization | 316.4 | 34.2 | 70.1 | 18.0 | — | 438.7 | |||||||||||||||||||||||||||||
| Adjusted EBITDA | $ | 466.9 | $ | 698.2 | $ | 81.0 | $ | (134.0) | $ | (28.8) | $ | 1,083.3 | |||||||||||||||||||||||
| Operating profit margin | (51.5) | % | 10.5 | % | (40.5) | % | (21.4) | % | |||||||||||||||||||||||||||
| Adjusted Operating profit margin | 2.8 | % | 10.2 | % | 1.0 | % | 4.9 | % | |||||||||||||||||||||||||||
| Adjusted EBITDA margin | 8.5 | % | 10.7 | % | 7.6 | % | 8.3 | % | |||||||||||||||||||||||||||
| Year Ended | |||||||||||||||||||||||||||||||||||
| December 31, 2019 | |||||||||||||||||||||||||||||||||||
| Subsea | Technip Energies | Surface Technologies | Corporate Expense | Foreign Exchange, net | Total | ||||||||||||||||||||||||||||||
| Revenue | $ | 5,523.0 | $ | 6,268.8 | $ | 1,617.3 | $ | — | $ | — | $ | 13,409.1 | |||||||||||||||||||||||
| Operating profit (loss), as reported (pre-tax) | $ | (1,447.7) | $ | 959.6 | $ | (656.1) | $ | (393.4) | $ | (146.9) | $ | (1,684.5) | |||||||||||||||||||||||
| Charges and (credits): | |||||||||||||||||||||||||||||||||||
| Impairment and other charges* | 1,798.6 | — | 685.5 | — | — | 2,484.1 | |||||||||||||||||||||||||||||
| Restructuring and other charges* | (46.4) | 17.0 | 39.8 | 26.6 | — | 37.0 | |||||||||||||||||||||||||||||
| Business combination transaction and integration costs | — | — | — | 31.2 | — | 31.2 | |||||||||||||||||||||||||||||
| Separation costs | — | — | — | 72.1 | — | 72.1 | |||||||||||||||||||||||||||||
| Reorganization | — | 25.3 | — | — | — | 25.3 | |||||||||||||||||||||||||||||
| Legal provision, net | — | — | — | 54.6 | — | 54.6 | |||||||||||||||||||||||||||||
| Purchase price accounting adjustments | 34.0 | — | — | — | — | 34.0 | |||||||||||||||||||||||||||||
| Subtotal | 1,786.2 | 42.3 | 725.3 | 184.5 | — | 2,738.3 | |||||||||||||||||||||||||||||
| Adjusted Operating profit (loss) | 338.5 | 1,001.9 | 69.2 | (208.9) | (146.9) | 1,053.8 | |||||||||||||||||||||||||||||
| Adjusted Depreciation and amortization | 311.6 | 38.7 | 107.9 | 17.4 | — | 475.6 | |||||||||||||||||||||||||||||
| Adjusted EBITDA | $ | 650.1 | $ | 1,040.6 | $ | 177.1 | $ | (191.5) | $ | (146.9) | $ | 1,529.4 | |||||||||||||||||||||||
| Operating profit margin | (26.2) | % | 15.3 | % | (40.6) | % | (12.6) | % | |||||||||||||||||||||||||||
| Adjusted Operating profit margin | 6.1 | % | 16.0 | % | 4.3 | % | 7.9 | % | |||||||||||||||||||||||||||
| Adjusted EBITDA margin | 11.8 | % | 16.6 | % | 11.0 | % | 11.4 | % | |||||||||||||||||||||||||||
| Inbound Orders Year Ended December 31, | |||||||||||
| (In millions) | 2020 | 2019 | |||||||||
| Subsea | $ | 4,003.0 | $ | 7,992.6 | |||||||
| Technip Energies | 5,001.3 | 13,080.5 | |||||||||
| Surface Technologies | 1,061.2 | 1,619.9 | |||||||||
| Total inbound orders | $ | 10,065.5 | $ | 22,693.0 | |||||||
| Order Backlog December 31, | |||||||||||
| (In millions) | 2020 | 2019 | |||||||||
| Subsea | $ | 6,876.0 | $ | 8,479.8 | |||||||
| Technip Energies | 14,098.7 | 15,298.1 | |||||||||
| Surface Technologies | 413.5 | 473.2 | |||||||||
| Total order backlog | $ | 21,388.2 | $ | 24,251.1 | |||||||
2020 | |||||
| (In millions) | December 31, 2020 | December 31, 2019 | |||||||||
| Cash and cash equivalents | $ | 4,807.8 | $ | 5,190.2 | |||||||
| Short-term debt and current portion of long-term debt | (636.2) | (495.4) | |||||||||
| Long-term debt, less current portion | (3,317.7) | (3,980.0) | |||||||||
| Net cash | $ | 853.9 | $ | 714.8 | |||||||
| Year Ended December 31, | |||||||||||||||||
| (In millions) | 2020 | 2019 | 2018 | ||||||||||||||
| Cash provided (required) by operating activities | $ | 656.9 | $ | 848.5 | $ | (185.4) | |||||||||||
| Cash required by investing activities | (180.6) | (419.8) | (460.2) | ||||||||||||||
| Cash required by financing activities | (1,082.2) | (784.4) | (444.8) | ||||||||||||||
| Effect of exchange rate changes on cash and cash equivalents | 223.5 | 5.9 | (107.0) | ||||||||||||||
| Decrease in cash and cash equivalents | $ | (382.4) | $ | (349.8) | $ | (1,197.4) | |||||||||||
| Working capital | $ | 54.0 | $ | (82.2) | $ | (759.0) | |||||||||||
| Free cash flow | $ | 365.1 | $ | 394.1 | $ | (553.5) | |||||||||||
| Year Ended December 31, | |||||||||||||||||
| (In millions) | 2020 | 2019 | 2018 | ||||||||||||||
| Cash provided (required) by operating activities | $ | 656.9 | $ | 848.5 | $ | (185.4) | |||||||||||
| Capital expenditures | (291.8) | (454.4) | (368.1) | ||||||||||||||
| Free cash flow | $ | 365.1 | $ | 394.1 | $ | (553.5) | |||||||||||
| (In millions) | December 31, | ||||||||||
| 2020 | 2019 | ||||||||||
| Commercial paper | $ | 1,525.9 | $ | 1,967.0 | |||||||
| Synthetic bonds due 2021 | 551.2 | 492.9 | |||||||||
| 3.45% Senior Notes due 2022 | 500.0 | 500.0 | |||||||||
| 5.00% Notes due 2020 | — | 224.6 | |||||||||
| 3.40% Notes due 2022 | 184.0 | 168.5 | |||||||||
| 3.15% Notes due 2023 | 159.5 | 146.0 | |||||||||
| 3.15% Notes due 2023 | 153.4 | 140.4 | |||||||||
| 4.50% Notes due 2025 | 245.4 | — | |||||||||
| 4.00% Notes due 2027 | 92.0 | 84.2 | |||||||||
| 4.00% Notes due 2032 | 122.7 | 112.3 | |||||||||
| 3.75% Notes due 2033 | 122.7 | 112.3 | |||||||||
| Bank borrowings and Other | 309.9 | 536.3 | |||||||||
| Unamortized debt issuance costs and discounts | (12.8) | (9.1) | |||||||||
| Total borrowings | $ | 3,953.9 | $ | 4,475.4 | |||||||
(In millions) Description | Amount | Debt Outstanding | Commercial Paper Outstanding (a) | Letters of Credit | Unused Capacity | Maturity | |||||||||||||||||||||||||||||
| Revolving credit facility | $ | 2,500.0 | $ | — | $ | 708.0 | $ | — | $ | 1,792.0 | January 2023 | ||||||||||||||||||||||||
| CCFF Program | £ | 600.0 | £ | — | £ | 600.0 | £ | — | £ | — | March 2021 | ||||||||||||||||||||||||
| Euro Facility | € | 500.0 | € | — | € | — | € | — | € | 500.0 | February 2021 | ||||||||||||||||||||||||
| Bilateral credit facility | € | 100.0 | € | — | € | — | € | — | € | 100.0 | May 2021 | ||||||||||||||||||||||||
| Payments Due by Period | |||||||||||||||||||||||||||||
| (In millions) | Total payments | Less than 1 year | 1-3 years | 3-5 years | After 5 years | ||||||||||||||||||||||||
Debt (a) | $ | 3,953.9 | $ | 636.2 | $ | 2,589.1 | $ | 294.0 | $ | 434.6 | |||||||||||||||||||
Interest on debt (a) | 242.3 | 58.1 | 69.3 | 42.9 | 72.0 | ||||||||||||||||||||||||
Operating leases (b) | 1,128.0 | 131.2 | 328.6 | 196.8 | 471.4 | ||||||||||||||||||||||||
Purchase obligations (c) | 5,709.4 | 4,587.5 | 1,008.9 | 112.0 | 1.0 | ||||||||||||||||||||||||
Pension and other post-retirement benefits (d) | 19.0 | 19.0 | — | — | — | ||||||||||||||||||||||||
Unrecognized tax benefits (e) | 56.1 | 4.2 | 4.2 | 47.6 | 0.1 | ||||||||||||||||||||||||
Other contractual obligations (f) | 246.6 | 141.9 | 104.7 | — | — | ||||||||||||||||||||||||
| Total contractual obligations | $ | 11,355.3 | $ | 5,578.1 | $ | 4,104.8 | $ | 693.3 | $ | 979.1 | |||||||||||||||||||
| Amount of Commitment Expiration per Period | |||||||||||||||||||||||||||||
| (In millions) | Total amount | Less than 1 year | 1-3 years | 3-5 years | After 5 years | ||||||||||||||||||||||||
Financial guarantees (a) | $ | 310.1 | $ | 204.1 | $ | 38.9 | $ | 24.7 | $ | 42.4 | |||||||||||||||||||
Performance guarantees (b) | 4,659.6 | 1,968.0 | 2,011.4 | 565.7 | 114.5 | ||||||||||||||||||||||||
| Total other off-balance sheet arrangements | $ | 4,969.7 | $ | 2,172.1 | $ | 2,050.3 | $ | 590.4 | $ | 156.9 | |||||||||||||||||||
| (In millions, except basis points) | Increase (Decrease) in 2020 Pension Expense Before Income Taxes | Increase (Decrease) in Projected Benefit Obligation as of December 31, 2020 | |||||||||
| 25 basis point decrease in discount rate | $ | 3.2 | $ | 66.8 | |||||||
| 25 basis point increase in discount rate | $ | (3.2) | $ | (63.5) | |||||||
| 25 basis point decrease in expected long-term rate of return on plan assets | $ | 3.7 | N/A | ||||||||
| 25 basis point increase in expected long-term rate of return on plan assets | $ | (1.6) | N/A | ||||||||
| 2020 | 2019 | 2018 | |||||||||||||||
| Year of cash flows before terminal value | 4 | 4 | 5 | ||||||||||||||
| Discount rates | 0.15 | 12.5% to 15.0% | 12.0% to 13.0% | ||||||||||||||
| EBITDA multiples | N/A | 6.0 - 8.5x | 7.0 - 8.5x | ||||||||||||||
We assess effectivenesshad no unregistered sales of forward foreign currency contracts designated as cash flow hedges basedequity securities during the year ended December 31, 2022.
Issuer Purchases of Equity Securities
The following table summarizes repurchases of our ordinary shares during the three months ended December 31, 2022:
ISSUER PURCHASES OF EQUITY SECURITIES
| Period | Total Number of Shares Purchased (a) | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Maximum Number of Shares That May Yet Be Purchased Under the Plans or Programs | |||||||||||||||||||
| October 1, 2022—October 31, 2022 | 175,000 | $ | 10.60 | 175,000 | 32,863,490 | ||||||||||||||||||
| November 1, 2022—November 30, 2022 | 2,975,000 | $ | 11.77 | 2,975,000 | 25,238,165 | ||||||||||||||||||
| December 1, 2022—December 31, 2022 | 1,082,047 | $ | 12.14 | 1,082,047 | 24,593,823 | ||||||||||||||||||
| Total | 4,232,047 | $ | 11.81 | 4,232,047 | 24,593,823 | ||||||||||||||||||
____________________
(a)In July 2022, we announced a repurchase plan approved by our Board of Directors authorizing up to $400.0 million to repurchase shares of our issued and outstanding ordinary shares through open market purchases. For the three months ended December 31, 2022, we repurchased 4,232,047 shares for a total cost of $50.1 million at an average price of $11.81 per share.
Performance Graph
The graph below compares the cumulative total shareholder return on changesour ordinary shares for the period from January 1, 2018 to December 31, 2022 with the Standard & Poor’s 500 Index (“S&P 500 Index”) and PHLX Oil Services Index. The comparison assumes $100 was invested, including reinvestment of dividends, if any, in fair value attributable to changesour ordinary shares on January 1, 2018 and in spot rates. We excludeboth of the impact attributable to changesindexes on the same date. The results shown in the difference between the spot rate and the forward rate for the assessmentgraph below are not necessarily indicative of hedge effectiveness and recognize the change in fair value of this component immediately in earnings. Considering that the difference between the spot rate and the forward rate is proportional to the differences in the interest rates of the countries of the currencies being traded, we do not have significant exposure in the unrealized valuation of our forward foreign currency contracts to relative changes in interest rates between countries in our results of operations. To the extent any one interest rate increases by 10% across all tenors and other countries’ interest rates remain fixed, and assuming no change in discount rates, we would expect to recognize a decrease of $1.5 million in unrealized earnings in the period of change. Based on our portfolio at December 31, 2020, we have material positions with exposure to interest rates in the United States, Canada, Australia, Brazil, the United Kingdom, Singapore, the European Community, and Norway.future performance.
| As of December 31, | |||||||||||||||||||||||||||||
| 2018 | 2019 | 2020 | 2021 | 2022 | |||||||||||||||||||||||||
| TechnipFMC plc | $ | 63.68 | $ | 71.37 | $ | 31.94 | $ | 27.03 | $ | 55.67 | |||||||||||||||||||
| S&P 500 Index | 95.61 | 125.70 | 148.82 | 191.50 | 156.78 | ||||||||||||||||||||||||
| PHLX Oil Services Index | 54.78 | 54.48 | 31.56 | 38.10 | 61.53 | ||||||||||||||||||||||||
ITEM 6. [RESERVED]
ITEM 8.7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL STATEMENTSCONDITION AND SUPPLEMENTARY DATARESULTS OF OPERATIONS
We are a global leader in energy projects, technologies, systems and services. We have manufacturing operations worldwide, strategically located to facilitate efficient delivery of Independent Registered Public Accounting Firm
A summarized description of our products and services and annual financial data for leaseseach segment can be found in 2019.
We focus on economic and industry-specific drivers and key risk factors affecting our business segments as we formulate our strategic plans and make decisions related to allocating capital and human resources. The results of our segments are primarily driven by changes in capital spending by oil and gas companies, which largely depend upon current and anticipated future crude oil and natural gas demand, production volumes, and consequently, commodity prices. We use crude oil and natural gas prices as an indicator of demand. Additionally, we use both onshore and offshore rig count as an indicator of demand, which consequently influences the level of worldwide production activity and spending decisions. We also focus on key risk factors when determining our overall strategy and making decisions for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Annual Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registeredcapital allocation. These factors include risks associated with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities lawsglobal economic outlook, product obsolescence and the applicable rulescompetitive environment. We address these risks in our business strategies, which incorporate continuing development of leading edge technologies and regulations of the Securities and Exchange Commission and the PCAOB.
Our audits ofSubsea segment is affected by changes in commodity prices and trends in deepwater oil and natural gas production and benefits from the consolidated financial statements included performing procedurescurrent market fundamentals supporting the demand for new liquefied natural gas facilities.
Our Surface Technologies segment is primarily affected by changes in commodity prices and trends in land-based and shallow water oil and natural gas production. We have developed close working relationships with our customers. Our results reflect our ability to assess the risks of material misstatement of the consolidated financial statements, whether duebuild long-term alliances with oil and natural gas companies and to error or fraud,provide solutions for their needs in a timely and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances.cost-effective manner. We believe that by closely working with our audits provide a reasonable basis forcustomers, we enhance our opinions.competitive advantage, improve our operating results and strengthen our market positions.
As we evaluate our operating results, we consider business segment performance indicators like segment revenue, operating profit and capital employed, in addition to the level of inbound orders and order backlog. A significant proportion of our revenue is recognized under the percentage of completion method of accounting. Cash receipts from such arrangements typically occur at milestones achieved under stated contract terms. Consequently, the timing of revenue recognition is not always correlated with the timing of customer payments. We aim to structure our contracts to receive advance payments that we typically use to fund engineering efforts and inventory purchases. Working capital (excluding cash) and net debt, are therefore, key performance indicators of cash flows.
The Spin-off
BUSINESS OUTLOOK
Overall Outlook – The global economy is forecast to grow in 2023. The pace of growth expected to be slower than the prior year, and rate hikes by central banks aimed at slowing high inflation will increase the risk of a mild recession in some economies. However, strength in Asia Pacific will likely offset any regional weakness and lead global growth higher, driven in part by the easing of pandemic restrictions in China. Higher global gross domestic product (GDP) will in turn support growth in energy demand.
We are in the midst of a multi-year growth cycle for energy demand. We believe that investment in new sources of oil and natural gas production will increase over the intermediate-term, fueled by an expansion of activity in international markets – largely offshore and the Middle East. Investment in the Middle East occurs in both offshore and surface environments, with capital spending expected to Completeaccelerate in support of longer-term production targets. TechnipFMC has leading positions in many of these international markets and is uniquely positioned to take full advantage of this growth opportunity. We are confident that conventional resources will remain an important part of the energy mix for Long-Term Contractsan extended period.
We are also committed to the energy transition, where we believe that offshore will play a meaningful role in the transition to renewable energy resources and reduction of carbon emissions. We are making real progress through our three main pillars of greenhouse gas removal, offshore floating renewables and hydrogen.
We have been successful in building on our partnerships and alliances to further position ourselves as the leading offshore energy architect, with several notable developments in 2022.
•We signed the Option to Lease Agreement for the ScotWind N3 area through our partnership in offshore renewables, Magnora Offshore Wind. The proposed development project will install 33 floating wind turbines with total capacity of approximately 500 megawatts – which could power more than 600,000 homes in the United Kingdom.
•We also signed an agreement with Shell to explore synergies with a shared goal of enabling offshore renewable energy generation and reducing total CO2 emissions – another example of how our long-standing partnerships extend to all areas of our business.
43
•Orbital Marine Power, which is collaborating with TechnipFMC to accelerate the global commercialization of its tidal stream turbine, was awarded two contracts for difference in the UK Allocation Round 4 multi-turbine projects in Eday, Orkney. Capable of delivering 7.2 megawatts of predictable clean energy to the grid once completed, these Orbital tidal stream energy projects will support the United Kingdom’s security of supply, energy transition and broader climate change objectives.
Subsea – Innovative approaches to subsea projects, like our iEPCI solution, have improved project economics, and many offshore discoveries can be developed economically well below today’s crude oil prices. We believe deepwater development is likely to remain a significant part of many of our customers’ portfolios.
Over the last several years, offshore economics have materially improved, and subsea cycle-times have become significantly shorter. This has resulted in new subsea investments coming much earlier in the cycle and more in parallel with U.S. land markets. We believe these changes are fundamental and sustainable as a result of new business models and technology pioneered by our company.
As describedthe subsea industry continues to evolve, we are driving simplification, standardization, and industrialization to reduce cycle times. The industrialization of our project business through the introduction of configure-to-order (CTO) is another way in Note 6which we are driving real change in our industry that further improves the economics of our customer’s projects while driving greater efficiencies for TechnipFMC.
With CTO, we have designed an environment, process, culture and tools which are scalable and, more importantly, are transformational to the consolidated financial statements, approximately 86%future of our company. Our customers require a product platform that provides them with choices which meet their unique and evolving needs, but also provides them with the significant speed, cost and efficiency benefits that come with product and process standardization. CTO has allowed us to redefine our sourcing strategy and transform our manufacturing flow, resulting in up to 25 percent lower product cost and a shortened 12-month delivery time for subsea production equipment – savings that are both real and sustainable. This has paved the way for other products to adopt a similar operating model, enabling an enterprise-wide way of working.
We continue to experience increased operator confidence in advancing subsea activity in response to both improved project economics and concerns regarding the security of energy supply. Brent crude oil averaged just under $100 per barrel in 2022. While closer to $80 per barrel at the start of the new year, prices are projected to stay elevated in the intermediate-term. The opportunity set of large subsea projects to be sanctioned over the next 24 months remains robust. The average project size has also risen due to an increasing number of large, greenfield opportunities in Brazil, Guyana, and Africa. We also expect increased tie-back activity, with growth from these smaller projects to come primarily from the North Sea, Gulf of Mexico and West Africa – all regions in which we have a strong presence and are well-positioned due to our extensive installed base.
There is also exploration activity occurring in new offshore frontiers. Recent oil and gas discoveries have been announced by operators in basins near countries such as Suriname, Namibia and Colombia, and we believe additional countries will become producers of deepwater resources during this decade. These examples demonstrate the strength of the current investment cycle and support our view that investment in conventional energy resources will continue.
Our Subsea inbound orders grew to $6.7 billion in 2022, an increase of 36 percent versus the prior year. We see further growth in the year ahead, with inbound orders expected to exceed $8 billion. Growth in the current year is expected to include a significant increase in the value of integrated project awards. We also anticipate growth in Subsea Services revenue to $1.3 billion given the continued expansion in our installed base. When taken together, we expect direct awards, iEPCI and Subsea Services to represent more than 70 percent of inbound orders in 2023.
Surface Technologies – Our performance is typically driven by variations in global drilling activity, creating a dynamic environment. Operating results can be further impacted by stimulation activity and the completions intensity of shale applications in North America.
Activity in North America increased in 2022 due to higher drilling and completion activity and an improved pricing environment. We continue to progress well on our E-Mission solution for onshore production facilities. The digital offering uses proprietary process automation to provide the industry’s only real-time monitoring and control system that both reduces methane flaring by up to 50 percent and maximizes oil production.
44
International markets continued to represent a significant portion of total segment revenue in 2022, totaling 55 percent. Our growing backlog also provides us with greater visibility for growth in 2023. TechnipFMC’s unique capabilities in these markets, which demand higher specification equipment, global services and local content, provide a platform for us to extend our leadership positions.
Drilling activity in international markets is less cyclical than North America as most activities are undertaken by national oil companies which tend to maintain a longer-term view that exhibits less variability in capital spend. Additionally, we continue to benefit from our exposure to the North Sea, Asia Pacific and the Middle East.
We have commenced work on a 10-year framework agreement awarded by Abu Dhabi National Oil Company in 2021 to provide wellheads, trees and associated services. We have also added new manufacturing capabilities in Saudi Arabia, where the country is expected to increase its sustainable oil capacity and significantly expand its natural gas production over the next decade. Our new facility also supports our commitment to develop a diverse and capable workforce as part of $13.1 billionAramco’s In-Kingdom Total Value Add Program and Saudi Vision 2030. The Middle East remains one of our largest market opportunities in the current decade.
45
CONSOLIDATED RESULTS OF OPERATIONS
This section of this Annual Report on Form 10-K generally discusses 2022 and 2021 items and year-to-year comparisons between 2022 and 2021. Discussions of 2020 items and year-to-year comparisons between 2021 and 2020 that are not included in this Annual Report on Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2021.
We report our results of operations in U.S. dollars; however, our earnings are generated in various currencies worldwide. In order to provide worldwide consolidated results, the earnings of subsidiaries functioning in their local currencies are translated into U.S. dollars based upon the average exchange rate during the period. While the U.S. dollar results reported reflect the actual economics of the period reported upon, the variances from prior periods include the impact of translating earnings at different rates.
| Year Ended December 31, | Change | ||||||||||||||||||||||||||||||||||||||||
| (In millions, except percentages) | 2022 | 2021 | 2020 | 2022 vs. 2021 | 2021 vs. 2020 | ||||||||||||||||||||||||||||||||||||
| Revenue | $ | 6,700.4 | $ | 6,403.5 | $ | 6,530.6 | $ | 296.9 | 4.6 | % | $ | (127.1) | (1.9) | % | |||||||||||||||||||||||||||
| Costs and expenses | |||||||||||||||||||||||||||||||||||||||||
| Cost of sales | 5,804.1 | 5,579.6 | 5,835.8 | 224.5 | 4.0 | % | (256.2) | (4.4) | % | ||||||||||||||||||||||||||||||||
| Selling, general and administrative expense | 616.8 | 644.9 | 724.1 | (28.1) | (4.4) | % | (79.2) | (10.9) | % | ||||||||||||||||||||||||||||||||
| Research and development expense | 67.0 | 78.4 | 75.3 | (11.4) | (14.5) | % | 3.1 | 4.1 | % | ||||||||||||||||||||||||||||||||
| Impairment, restructuring and other expense | 15.2 | 66.7 | 3,402.0 | (51.5) | (77.2) | % | (3,335.3) | (98.0) | % | ||||||||||||||||||||||||||||||||
| Total costs and expenses | 6,503.1 | 6,369.6 | 10,037.2 | 133.5 | 2.1 | % | (3,667.6) | (36.5) | % | ||||||||||||||||||||||||||||||||
| Other income, net | 5.4 | 46.6 | 25.1 | (41.2) | (88.4) | % | 21.5 | 85.7 | % | ||||||||||||||||||||||||||||||||
| Income from equity affiliates | 44.6 | 0.6 | 64.6 | 44.0 | 7,333.3 | % | (64.0) | (99.1) | % | ||||||||||||||||||||||||||||||||
| Income (loss) from investment in Technip Energies | (27.7) | 322.2 | — | (349.9) | (108.6) | % | 322.2 | — | % | ||||||||||||||||||||||||||||||||
| Loss on early extinguishment of debt | (29.8) | (61.9) | — | 32.1 | 51.9 | % | (61.9) | — | % | ||||||||||||||||||||||||||||||||
| Net interest expense | (120.9) | (143.3) | (81.8) | 22.4 | 15.6 | % | (61.5) | (75.2) | % | ||||||||||||||||||||||||||||||||
| Income (loss) before income taxes | 68.9 | 198.1 | (3,498.7) | (129.2) | (65.2) | % | 3,696.8 | 105.7 | % | ||||||||||||||||||||||||||||||||
| Provision for income taxes | 105.4 | 111.1 | 19.4 | (5.7) | (5.1) | % | 91.7 | 472.7 | % | ||||||||||||||||||||||||||||||||
| Income (loss) from continuing operations | (36.5) | 87.0 | (3,518.1) | (123.5) | (142.0) | % | 3,605.1 | 102.5 | % | ||||||||||||||||||||||||||||||||
| (Income) loss from continuing operations attributable to non-controlling interests | (25.4) | 0.8 | (34.5) | (26.2) | (3,275.0) | % | 35.3 | 102.3 | % | ||||||||||||||||||||||||||||||||
| Income (loss) from continuing operations attributable to TechnipFMC plc | (61.9) | 87.8 | (3,552.6) | (149.7) | (170.5) | % | 3,640.4 | 102.5 | % | ||||||||||||||||||||||||||||||||
| Loss from discontinued operations | (45.3) | (72.6) | 280.2 | 27.3 | 37.6 | % | (352.8) | (125.9) | % | ||||||||||||||||||||||||||||||||
| Income from discontinued operations attributable to non-controlling interests | — | (1.9) | (15.2) | 1.9 | 100.0 | % | 13.3 | 87.5 | % | ||||||||||||||||||||||||||||||||
| Net income (loss) attributable to TechnipFMC plc | $ | (107.2) | $ | 13.3 | $ | (3,287.6) | $ | (120.5) | (906.0) | % | $ | 3,300.9 | 100.4 | % | |||||||||||||||||||||||||||
Results of Operations in 2022 Compared to 2021
Revenue
Revenue increased by $296.9 million in 2022, compared to 2021. Subsea revenue increased year-over-year, as a result of higher project and services activity. Surface Technologies revenue increased, as a result of the increase in operator activity in North America, driven by an increase in U.S. rig count year-over-year.
46
Gross Profit
Gross profit (revenue less cost of sales) as a percentage of sales increased to 13.4% in 2022 compared to 12.9% in 2021. Subsea gross profit increased year over year due to improved margins in backlog and an increase in installation and services activity. Surface Technologies gross profit increased year-over-year, mostly due to an increase in volume of activities and increases in pricing in North America.
Selling, General and Administrative Expense
Selling, general and administrative expense decreased by $28.1 million year-over-year, driven by a decrease in costs associated with our support functions.
Impairment, Restructuring and Other Expense
We incurred $15.2 million of restructuring, impairment and other expenses in 2022, compared to $66.7 million in 2021, largely related to exiting our operations in Russia and Canada. Impairment, restructuring and other charges incurred in 2021 included $49.1 million of impairment charges relating to our operating lease right-of-use assets and property, plant and equipment. See Note 19 to our consolidated financial statements for further details.
Other Income, Net
Other income, and losses, including gains and losses associated with the remeasurement of net cash positions, gains and losses on sales of property, plant and equipment and non-operating gains and losses. Other income decreased by $41.2 million year-over-year, due to impact of foreign currency, which was a net loss of $23.9 million in 2022 and a net gain of $15.8 million in 2021. The change in foreign exchange gains and losses is due to various factors, including exposure to certain currencies with limited derivative hedging markets.
Income from Equity Affiliates
For the years ended December 31, 2022 and 2021, we recorded an income of $44.6 million and $0.6 million, respectively, from equity method affiliates. Income generated by our equity method investments during 2022 increased year-over-year, driven by an increase in operational activity of our equity method investments. Income generated by our equity method investments during 2021 was offset by a $36.7 million impairment of our Magma Global equity method investment. See Note 3 to our consolidated financial statements for further details.
Income (Loss) from Investment in Technip Energies
For the years ended December 31, 2022 and 2021, we recorded a $27.7 million loss and $322.2 million of income, respectively, as a result of our investment in Technip Energies. The amounts recognized represent fair value revaluation gains (losses) of our investment. See Note 12 to our consolidated financial statements for further details.
Loss on Early Extinguishment of Debt
We recognized $29.8 million of loss on early extinguishment of debt during the year ended December 31, 2022, which related to premium paid and write-off of debt issuance costs in connection with the repurchase of the 2021 Notes. We recognized $61.9 million of loss on early extinguishment of debt for the year ended December 31, 2021, which related to premium paid and write-off of debt issuance costs in connection with the repurchase of the 2021 Notes and the repayment of our 3.45% Senior Notes due 2022. See Note 16 to our consolidated financial statements for further details.
Net Interest Expense
Net interest expense decreased by $22.4 million in 2022, compared to 2021, largely due to the reduction in outstanding debt.
Provision for Income Taxes
Our provision for income taxes for 2022 and 2021 reflected effective tax rates of 153.0% and 56.1%, respectively. The year-over-year increase in the effective tax rate was largely due to the change in geographical profit mix year over year.
47
Our effective tax rate can fluctuate depending on our country mix of earnings, since our foreign earnings are generally subject to higher tax rates than in the United Kingdom.
Discontinued Operations
Loss from discontinued operations, net of income taxes, was $45.3 million and $72.6 million for the years ended December 31, 2022 and 2021, respectively. See Note 25 to our consolidated financial statements for further details.
OPERATING RESULTS OF BUSINESS SEGMENTS
Segment operating profit is defined as total segment revenue less segment operating expenses. Certain items have been excluded in computing segment operating profit and are included in corporate items. See Note 6 to our consolidated financial statements for further details.
Subsea
| Year Ended December 31, | Favorable/(Unfavorable) | ||||||||||||||||||||||||||||||||||||||||
| (In millions, except %) | 2022 | 2021 | 2020 | 2022 vs. 2021 | 2021 vs. 2020 | ||||||||||||||||||||||||||||||||||||
| Revenue | $ | 5,461.2 | $ | 5,329.1 | $ | 5,471.4 | $ | 132.1 | 2.5 | % | $ | (142.3) | (2.6) | % | |||||||||||||||||||||||||||
| Operating profit (loss) | $ | 317.6 | $ | 141.4 | $ | (2,815.5) | $ | 176.2 | 124.6 | % | $ | 2,956.9 | 105.0 | % | |||||||||||||||||||||||||||
| Operating profit (loss) as a percentage of revenue | 5.8 | % | 2.7 | % | (51.5) | % | 3.1 | pts. | 54.2 | pts. | |||||||||||||||||||||||||||||||
Subsea revenue increased by $132.1 million, due to higher project installation activity in Brazil and the United Kingdom, which was partially offset by the negative impact of foreign exchange.
Subsea operating profit for the year ended December 31, 2022, increased versus the prior year, due to the improved margins in backlog and an increased mix of installation and service activities.
Surface Technologies
| Year Ended December 31, | Favorable/(Unfavorable) | ||||||||||||||||||||||||||||||||||||||||
| (In millions, except %) | 2022 | 2021 | 2020 | 2022 vs. 2021 | 2021 vs. 2020 | ||||||||||||||||||||||||||||||||||||
| Revenue | $ | 1,239.2 | $ | 1,074.4 | $ | 1,059.2 | $ | 164.8 | 15.3 | % | $ | 15.2 | 1.4 | % | |||||||||||||||||||||||||||
| Operating profit (loss) | $ | 58.3 | $ | 42.0 | $ | (429.3) | $ | 16.3 | 38.8 | % | $ | 471.3 | 109.8 | % | |||||||||||||||||||||||||||
| Operating profit (loss) as a percentage of revenue | 4.7 | % | 3.9 | % | (40.5) | % | 0.8 | pts. | 44.4 | pts. | |||||||||||||||||||||||||||||||
Surface Technologies revenue increased by $164.8 million, or 15.3% year-over-year, driven by an increase in North America activity. Approximately 55% of total segment revenue was generated outside of North America for the year ended December 31, 2022.
Surface Technologies operating profit increased versus the prior year, due to an increase in volume of activities and increase in pricing in North America.
Corporate Items
| Year Ended December 31, | Favorable/(Unfavorable) | ||||||||||||||||||||||||||||||||||||||||
| (In millions, except %) | 2022 | 2021 | 2020 | 2022 vs. 2021 | 2021 vs. 2020 | ||||||||||||||||||||||||||||||||||||
| Corporate expense | $ | (104.7) | $ | (118.1) | $ | (131.9) | $ | 13.4 | 11.3 | % | $ | 13.8 | 10.5 | % | |||||||||||||||||||||||||||
Corporate expense decreased by $13.4 million or 11.3% year-over-year, driven by the decreased costs associated with our support functions.
48
INBOUND ORDERS AND ORDER BACKLOG
Inbound orders - Inbound orders represent the estimated sales value of confirmed customer orders received during the reporting period.
| Inbound Orders Year Ended December 31, | |||||||||||
| (In millions) | 2022 | 2021 | |||||||||
| Subsea | $ | 6,738.3 | $ | 4,960.9 | |||||||
| Surface Technologies | 1,340.8 | 1,793.3 | |||||||||
| Total inbound orders | $ | 8,079.1 | $ | 6,754.2 | |||||||
Order backlog - Order backlog is calculated as the estimated sales value of unfilled, confirmed customer orders at the reporting date. Backlog reflects the current expectations for the timing of project execution. See Note 5 to our consolidated financial statements for further details.
| Order Backlog December 31, | |||||||||||
| (In millions) | 2022 | 2021 | |||||||||
| Subsea | $ | 8,131.5 | $ | 6,533.0 | |||||||
| Surface Technologies | 1,221.5 | 1,124.7 | |||||||||
| Total order backlog | $ | 9,353.0 | $ | 7,657.7 | |||||||
Subsea - Order backlog for Subsea as of December 31, 2022, increased by $1.6 billion from December 31, 2021. Subsea backlog of $8.1 billion as of December 31, 2022, was composed of various subsea projects, including Petrobras Buzios 6, Mero I, Mero II and Marlim; Total Energies Mozambique LNG, Lapa North East and Clov 3; ExxonMobil Yellowtail and Payara; Shell Jackdaw and Gumusut; Husky West White Rose; Equinor Halten East; Tullow Jubilee South East; Wintershall Maria and Dvalin; and Harbour Talbot.
Surface Technologies - Order backlog for Surface Technologies as of December 31, 2022 increased by $96.8 million, compared to December 31, 2021.
LIQUIDITY AND CAPITAL RESOURCES
Most of our cash is managed centrally and flows through bank accounts controlled and maintained by TechnipFMC globally in various jurisdictions to best meet the liquidity needs of our global operations.
Net Debt - Net debt, is a non-GAAP financial measure reflecting cash and cash equivalents, net of debt. Management uses this non-GAAP financial measure to evaluate our capital structure and financial leverage. We believe net debt is a meaningful financial measure that may assist investors in understanding our financial condition and recognizing underlying trends in our capital structure. Net debt should not be considered an alternative to, or more meaningful than, cash and cash equivalents as determined in accordance with GAAP or as an indicator of our operating performance or liquidity.
The following table provides a reconciliation of our cash and cash equivalents to net debt, utilizing details of classifications from our consolidated balance sheets.
| Year Ended December 31, | |||||||||||
| (In millions) | 2022 | 2021 | |||||||||
| Cash and cash equivalents | $ | 1,057.1 | $ | 1,327.4 | |||||||
| Short-term debt and current portion of long-term debt | (367.3) | (277.6) | |||||||||
| Long-term debt, less current portion | (999.3) | (1,727.3) | |||||||||
| Net debt | $ | (309.5) | $ | (677.5) | |||||||
49
Cash Flows
Cash flows for the years ended December 31, 2022, 2021 and 2020 were as follows:
| Year Ended December 31, | |||||||||||||||||
| (In millions) | 2022 | 2021 | 2020 | ||||||||||||||
| Cash provided by operating activities from continuing operations | $ | 352.1 | $ | 715.0 | $ | 772.4 | |||||||||||
| Cash provided (required) by investing activities from continuing operations | 162.2 | 821.8 | (120.8) | ||||||||||||||
| Cash required by financing activities from continuing operations | (796.7) | (1,447.3) | (651.9) | ||||||||||||||
| Net cash attributable to discontinued operations | — | (3,555.9) | (605.6) | ||||||||||||||
| Effect of exchange rate changes on cash and cash equivalents | 12.1 | (14.0) | 223.5 | ||||||||||||||
| Decrease in cash and cash equivalents | $ | (270.3) | $ | (3,480.4) | $ | (382.4) | |||||||||||
| (Increase) decrease in working capital from continuing operations | $ | (81.1) | $ | 497.5 | $ | 717.7 | |||||||||||
| Free cash flow from continuing operations | $ | 194.2 | $ | 523.3 | $ | 516.3 | |||||||||||
Operating cash flows from continuing operations - During 2022 and 2021, we generated $352.1 million and $715.0 million, respectively, in operating cash flows from continuing operations. The decrease of $362.9 million in cash generated by operating activities from continuing operations in 2022, as compared to 2021, was due to timing differences on project milestones, vendor payments for inventory, and timing of income tax refund.
Investing cash flows from continuing operations - Investing activities from continuing operations provided $162.2 million in 2022 and $821.8 million of cash in 2021. The decrease of $659.6 million in cash provided by investing activities was due to a $612.4 million decrease in proceeds received from sales of our investment in Technip Energies and a decrease in proceeds from sales of assets, partially offset by a decrease in capital expenditures during 2022.
Financing cash flows from continuing operations - Financing activities from continuing operations used $796.7 million and $1,447.3 million in 2022 and 2021, respectively. The decrease of $650.6 million in cash used for financing activities was due to the decreased debt pay down and issuance activity of $742.9 million, partially offset by $100.2 million of share repurchases during 2022.
The change in working capital represents total changes in operating current assets and liabilities.
Free cash flow from continuing operations is generateddefined as operating cash flows from continuing operations less capital expenditures. The following table reconciles cash provided by operating activities from continuing operations, which is the most directly comparable financial measure determined in accordance with GAAP, to free cash flow (non-GAAP measure).
| Year Ended December 31, | |||||||||||||||||
| (In millions) | 2022 | 2021 | 2020 | ||||||||||||||
| Cash provided by operating activities from continuing operations | $ | 352.1 | $ | 715.0 | $ | 772.4 | |||||||||||
| Capital expenditures | (157.9) | (191.7) | (256.1) | ||||||||||||||
| Free cash flow from continuing operations | $ | 194.2 | $ | 523.3 | $ | 516.3 | |||||||||||
Debt and Liquidity
We are committed to maintaining a capital structure that provides sufficient cash resources to support future operating and investment plans. During 2022, we reduced our total debt position as follows:
•We repaid $161.0 million of our 3.40% 2012 Private placement notes; and
•We completed a tender offer and purchased for cash $430.2 million of the outstanding 2021 Notes. We paid a cash premium of $21.5 million to the tendering note holders and wrote-off $8.3 million of debt issuance costs. Concurrent with the tender offer, the Company obtained consents of holders with respect to the 2021 Notes to certain proposed amendments (“Proposed Amendments”) to the indenture governing these notes. The Proposed Amendments, among other things, eliminated substantially all of the restrictive covenants and certain event of default triggers in the indenture.
50
Availability of borrowings under the Revolving Credit Facility is reduced by the outstanding letters of credit issued against the facility. As of December 31, 2022 there were $45.4 million letters of credit outstanding and availability of borrowings under the Revolving Credit Facility was $954.6 million.
As of December 31, 2022 TechnipFMC was in compliance with all debt covenants. See Note 16 to our consolidated financial statements for further detail.
Credit Ratings - Our credit ratings with Standard and Poor’s (“S&P”) are BB+ for our long-term unsecured, guaranteed debt (2021 Notes) and BB for our long-term unsecured debt (the Private Placement notes). Our credit rating with Moody’s is Ba1 for our long-term unsecured, guaranteed debt. See Note 16 for further details regarding our debt.
Credit Risk Analysis
For the purposes of mitigating the effect of the changes in exchange rates, we hold derivative financial instruments. Valuations of derivative assets and liabilities reflect the fair value of the instruments, including the values associated with counterparty risk. These values must also take into account our credit standing, thus including the valuation of the derivative instrument and the value of the net credit differential between the counterparties to the derivative contract. Adjustments to our derivative assets and liabilities related to credit risk were not material for any period presented.
The income approach was used as the valuation technique to measure the fair value of foreign currency derivative instruments on a recurring basis. This approach calculates the present value of the future cash flow by measuring the change from the derivative contract rate and the published market indicative currency rate, multiplied by the contract notional values. Credit risk is then incorporated by reducing the derivative’s fair value in asset positions by the result of multiplying the present value of the portfolio by the counterparty’s published credit spread. Portfolios in a liability position are adjusted by the same calculation; however, a spread representing our credit spread is used.
Our credit spread, and the credit spread of other counterparties not publicly available, are approximated using the spread of similar companies in the same industry, of similar size, and with the same credit rating. See Notes 23 and 24 to our consolidated financial statements for further details.
At this time, we have no credit-risk-related contingent features in our agreements with the financial institutions that would require us to post collateral for derivative positions in a liability position.
Contractual and Other Obligations
The Company’s principal contractual commitments include purchase obligations, repayments of long-term debt and related interest, and payments under operating leases. As of December 31, 2022, we had $1.2 billion of purchase obligations, more than 90 percent of which is short-term. Substantially all of these commitments are associated with purchases made to fulfill our customer’s orders, the costs associated with these agreements will ultimately be reflected in cost of sales in our consolidated statement of income.
Refer to respective notes to the consolidated financial statements for further information about our share repurchase program (Note 18), long-term debt obligations (Note 16), guarantees (Notes 12 and 20) and lease payments obligations (Note 4).
Financial Position Outlook
We are committed to a strong balance sheet. We continue to maintain sufficient liquidity to support the needs of the business through growth, cyclicality and unforeseen events. We continue to maintain and drive sustainable leverage to preserve access to capital throughout the cycle. Our capital expenditures can be adjusted and managed to match market demand and activity levels. Based on current market conditions and our future expectations, our capital expenditures for 2023 are estimated to be approximately $250 million. Projected capital expenditures do not include any contingent capital that may be needed to respond to contract awards. In maintaining our commitment to sustainable leverage and liquidity, we expect to be able to continue to generate free cash flow available for investment in growth and distribution to shareholders through the business cycle.
51
CRITICAL ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with GAAP requires management to make certain estimates, judgments and assumptions about future events that affect the reported amounts of assets and liabilities at the date of the financial statements, the reported amounts of revenue and expenses during the periods presented and the related disclosures in the accompanying notes to the financial statements. Management has reviewed these critical accounting estimates with the Audit Committee of our Board of Directors. We believe the following critical accounting estimates used in preparing our financial statements address all important accounting areas where the nature of the estimates or assumptions is material due to the levels of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change. See Note 1 to our consolidated financial statements for further details.
Revenue Recognition
The majority of our revenue is derived from long-term contracts. As disclosed by management,contracts that can span several years. We account for revenue in accordance with Accounting Standard Codification (“ASC”) Topic 606, Revenues from Contracts with Customers. The unit of account in ASC Topic 606 is a performance obligation. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. Our performance obligations are satisfied over time as work progresses or at a point in time.
A significant portion of our total revenue recognized over time relates to our Subsea segment, for the Company’s long-term contracts, becausesubsea exploration and production equipment projects that involve the design, engineering, manufacturing, construction, and assembly of complex systems. Because of control transferring over time, revenue is recognized based on the extent of progress towards completion of the performance obligation. The selection of the method to measure progress towards completion requires judgment and is based on the nature of the products or services to be provided. The CompanyWe generally usesuse the cost-to-cost measure of progress for itsour contracts because it best depicts the transfer of control to the customer whichthat occurs as the Company incurswe incur costs on theour contracts. Under the cost-to-cost measure of progress, the extent of progress towards completion is measured based on the ratio of costs incurred to date to the total estimated costs at completion of the performance obligation. Revenues including estimated fees or profits, are recorded proportionally as costs are incurred.
Due to the nature of the work required to be performed on many of theour performance obligations, management’sthe estimation of total revenue and cost at completion is complex, subject to many variables, and requires significant judgment. It is common for our long-term contracts to contain award fees, incentive fees, or other provisions that can either increase or decrease the transaction price. We include estimated amounts in the transaction price when we believe we have an enforceable right to the modification, the amount can be estimated reliably, and its realization is probable. The estimated amounts are included in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved.
We execute contracts with our customers that clearly describe the equipment, systems, and/or services. After analyzing the drawings and specifications of the contract requirements, our project engineers estimate total contract costs based on their experience with similar projects and then adjust these estimates for specific risks associated with each project, such as technical risks associated with a new design. Costs associated with specific risks are estimated by assessing the probability that conditions arising from these specific risks will affect our total cost to complete the project. After work on a project begins, assumptions that form the basis for our calculation of total project cost are examined on a regular basis and our estimates are updated to reflect the most current information and management’s best judgment.
Adjustments to estimates of contract revenue, total contract cost, or extent of progress toward completion are often required as work progresses under the contract and as experience is gained, even though the scope of work required under the contract may not change. The nature of accounting for long-term contracts is such that refinements of the estimating process for changing conditions and new developments are continuous and characteristic of the process. Consequently, the amount of revenue recognized over time is sensitive to changes in our estimates of total contract costs. There are many factors, including, but not limited to, the ability to properly execute the engineering and design phases consistent with our customers’ expectations, the availability and costs of labor and materialsmaterial resources, productivity, and weather, all of which can affect the accuracy of our cost estimates, and ultimately, our future profitability.
Accounting for Income Taxes
Our income tax expense, deferred tax assets and liabilities, and reserves for uncertain tax positions reflect management’s best assessment of estimated future taxes to be paid. We are subject to income taxes in the United Kingdom and numerous foreign jurisdictions. Significant judgments and estimates are required in determining our consolidated income tax expense.
In determining our current income tax provision, we assess temporary differences resulting from differing treatments of items for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are recorded in our consolidated balance sheets. When we maintain deferred tax assets, we must assess the likelihood that these assets will be recovered through adjustments to future taxable income. To the extent we believe recovery is not likely, we establish a valuation allowance. We record a valuation allowance to reduce the asset to a value we believe will be recoverable based on our expectation of future taxable income. We believe the accounting estimate related to the valuation allowance is a critical accounting estimate because it is highly susceptible to change from period to period, requires management to make assumptions about our future income over the lives of the deferred tax assets, and finally, the impact of increasing or decreasing the valuation allowance is potentially material to our results of operations.
Forecasting future income requires us to use a significant amount of judgment. In estimating future income, we use our internal operating budgets and long-range planning projections. We develop our budgets and long-range projections based on recent results, trends, economic and industry forecasts influencing our segments’ performance, our backlog, planned timing of new product launches and customer sales commitments. Significant changes in our judgment related to the expected realizability of a deferred tax asset results in an adjustment to the associated valuation allowance.
As of December 31, 2022, we have provided a valuation allowance against the related deferred tax assets where we believe it is not more likely than not that we will generate future taxable income sufficient to realize such assets.
The calculation of our income tax expense involves dealing with uncertainties in the application of complex tax laws and regulations in numerous jurisdictions in which we operate. We recognize tax benefits related to uncertain tax positions when, in our judgment, it is more likely than not that such positions will be sustained on examination, including resolutions of any related appeals or litigation, based on the technical merits. We adjust our liabilities for uncertain tax positions when our judgment changes as a result of new information previously unavailable. Due to the complexity of some of these uncertainties, their ultimate resolution may result in payments that are materially different from our current estimates. Any such differences will be reflected as adjustments to income tax expense in the periods in which they are determined.
Accounting for Pension and Other Post-retirement Benefit Plans
The determination of the projected benefit obligations of our pension and other post-retirement benefit plans are important to the recorded amounts of such obligations in our consolidated balance sheets and to the amount of $88.4 millionpension expense in our consolidated statements of income. In order to measure the obligations and $82.0 million, respectively. Management conducts impairment testsexpense associated with our pension benefits, management must make a variety of estimates, including discount rates used to value certain liabilities, expected return on long-livedplan assets whenever eventsset aside to fund these costs, rate of compensation increase, employee turnover rates, retirement rates, mortality rates and other factors. We update these estimates on an annual basis or changesmore frequently upon the occurrence of significant events. These accounting estimates bear the risk of change due to the uncertainty and difficulty in circumstances indicate the carrying value may not be recoverable. The carrying valueestimating these measures. Different estimates used by management could result in our recognition of an asset group is not recoverable if it exceeds the sumdifferent amounts of the undiscounted cash flows expected to result from the use and eventual dispositionexpense over different periods of the asset. If it is determined that an impairment loss has occurred, the impairment loss is measured as the amount by which the carrying value of the long-lived asset exceeds its fair value. time.
Due to the substantial declinespecialized and statistical nature of these calculations which attempt to anticipate future events, we engage third-party specialists to assist management in global demand for oil caused by the COVID-19 pandemic, management reviewed the corresponding impact on the asset group’s service potential and determined the carrying amount of the asset groups exceeded their fair value. As disclosed by management, the determination of future cash flowsevaluating our assumptions as well as appropriately measuring the estimated fair valuecosts and obligations associated with these pension benefits. The discount rate and expected long-term rate of long-livedreturn on plan assets involves significant estimates on the part of management. The expected future cash flows used for impairment reviews and related fair value calculations are based on judgmental assessmentsinvestment yields available and the historical performance of future revenue, forecasted utilization, operating costs,our plan assets, respectively. The timing and capital decisions and all available information at the dateamount of review.
| Year Ended | |||||||||||||||||
| (In millions, except per share data) | 2020 | 2019 | 2018 | ||||||||||||||
| Revenue | |||||||||||||||||
| Service revenue | $ | 9,708.2 | $ | 9,789.7 | $ | 9,057.6 | |||||||||||
| Product revenue | 3,200.4 | 3,352.9 | 3,272.6 | ||||||||||||||
| Lease revenue | 142.0 | 266.5 | 222.7 | ||||||||||||||
| Total revenue | 13,050.6 | 13,409.1 | 12,552.9 | ||||||||||||||
| Costs and expenses | |||||||||||||||||
| Cost of service revenue | 8,261.9 | 7,767.2 | 7,452.7 | ||||||||||||||
| Cost of product revenue | 2,830.8 | 3,015.6 | 2,676.9 | ||||||||||||||
| Cost of lease revenue | 116.7 | 167.9 | 143.4 | ||||||||||||||
| Selling, general and administrative expense | 1,066.2 | 1,228.1 | 1,140.6 | ||||||||||||||
| Research and development expense | 119.8 | 162.9 | 189.2 | ||||||||||||||
| Impairment, restructuring and other expense (Note 19) | 3,501.3 | 2,490.8 | 1,831.2 | ||||||||||||||
| Separation costs (Note 3) | 39.5 | 72.1 | 0 | ||||||||||||||
| Merger transaction and integration costs | — | 31.2 | 36.5 | ||||||||||||||
| Total costs and expenses | 15,936.2 | 14,935.8 | 13,470.5 | ||||||||||||||
| Other income (expense), net | 31.1 | (220.7) | (323.9) | ||||||||||||||
| Income from equity affiliates (Note 12) | 63.0 | 62.9 | 114.3 | ||||||||||||||
| Loss before interest income, interest expense and income taxes | (2,791.5) | (1,684.5) | (1,127.2) | ||||||||||||||
| Interest income | 56.6 | 116.5 | 121.4 | ||||||||||||||
| Interest expense | (349.6) | (567.8) | (482.3) | ||||||||||||||
| Loss before income taxes | (3,084.5) | (2,135.8) | (1,488.1) | ||||||||||||||
| Provision for income taxes (Note 21) | 153.4 | 276.3 | 422.7 | ||||||||||||||
| Net loss | (3,237.9) | (2,412.1) | (1,910.8) | ||||||||||||||
| Net profit attributable to non-controlling interests | (49.7) | (3.1) | (10.8) | ||||||||||||||
| Net loss attributable to TechnipFMC plc | $ | (3,287.6) | $ | (2,415.2) | $ | (1,921.6) | |||||||||||
| Earnings (loss) per share attributable to TechnipFMC plc (Note 8) | |||||||||||||||||
| Basic | $ | (7.33) | $ | (5.39) | $ | (4.20) | |||||||||||
| Diluted | $ | (7.33) | $ | (5.39) | $ | (4.20) | |||||||||||
| Weighted average shares outstanding (Note 8) | |||||||||||||||||
| Basic | 448.7 | 448.0 | 458.0 | ||||||||||||||
| Diluted | 448.7 | 448.0 | 458.0 | ||||||||||||||
| Year Ended | |||||||||||||||||
| (In millions) | 2020 | 2019 | 2018 | ||||||||||||||
| Net loss | $ | (3,237.9) | $ | (2,412.1) | $ | (1,910.8) | |||||||||||
| Foreign currency translation adjustments | |||||||||||||||||
| Net gain (losses) arising during the period | (169.1) | 15.6 | (183.3) | ||||||||||||||
| Reclassification adjustment for net gains included in net income | — | (12.0) | (41.1) | ||||||||||||||
Foreign currency translation adjustments(a) | (169.1) | 3.6 | (224.4) | ||||||||||||||
| Net gains (losses) on hedging instruments | |||||||||||||||||
| Net gains (losses) arising during the period | 25.4 | 8.9 | (58.7) | ||||||||||||||
| Reclassification adjustment for net losses (gains) included in net income | 13.0 | 18.2 | (2.0) | ||||||||||||||
Net gains (losses) on hedging instruments (b) | 38.4 | 27.1 | (60.7) | ||||||||||||||
| Pension and other post-retirement benefits | |||||||||||||||||
| Net losses arising during the period | (88.3) | (81.5) | (72.4) | ||||||||||||||
| Prior service cost arising during the period | (4.6) | (0.7) | (2.1) | ||||||||||||||
| Reclassification adjustment for settlement losses (gains) included in net income | 1.4 | 0.2 | (2.5) | ||||||||||||||
| Reclassification adjustment for amortization of prior service cost included in net income | 0.9 | 2.0 | 1.2 | ||||||||||||||
| Reclassification adjustment for amortization of net actuarial loss included in net income | 6.9 | 0.8 | 0.3 | ||||||||||||||
Net pension and other post-retirement benefits (c) | (83.7) | (79.2) | (75.5) | ||||||||||||||
| Other comprehensive loss, net of tax | (214.4) | (48.5) | (360.6) | ||||||||||||||
| Comprehensive loss | (3,452.3) | (2,460.6) | (2,271.4) | ||||||||||||||
| Comprehensive income attributable to non-controlling interest | (50.4) | (2.4) | (6.2) | ||||||||||||||
| Comprehensive loss attributable to TechnipFMC plc | $ | (3,502.7) | $ | (2,463.0) | $ | (2,277.6) | |||||||||||
TECHNIPFMC PLC AND CONSOLIDATED SUBSIDIARIES CONSOLIDATED BALANCE SHEETS | |||||||||||
| (In millions, except par value data) | December 31, | ||||||||||
| Assets | 2020 | 2019 | |||||||||
| Cash and cash equivalents | $ | 4,807.8 | $ | 5,190.2 | |||||||
| Trade receivables, net of allowances of $108.9 in 2020 and $95.4 in 2019 | 2,289.8 | 2,287.1 | |||||||||
| Contract assets, net of allowances of $1.0 in 2020 and $2.5 in 2019 | 1,267.6 | 1,520.0 | |||||||||
| Inventories, net (Note 9) | 1,268.5 | 1,416.0 | |||||||||
| Derivative financial instruments (Note 23) | 301.4 | 101.9 | |||||||||
| Income taxes receivable | 313.4 | 264.6 | |||||||||
| Advances paid to suppliers | 203.6 | 242.9 | |||||||||
| Other current assets (Note 10) | 992.6 | 863.7 | |||||||||
| Total current assets | 11,444.7 | 11,886.4 | |||||||||
| Investments in equity affiliates (Note 12) | 358.9 | 300.4 | |||||||||
| Property, plant and equipment, net (Note 14) | 2,861.8 | 3,162.0 | |||||||||
| Operating lease right-of-use assets (Note 5) | 1,016.7 | 892.6 | |||||||||
| Finance lease right-of-use assets (Note 5) | 27.5 | 0 | |||||||||
| Goodwill (Note 15) | 2,512.5 | 5,598.3 | |||||||||
| Intangible assets, net (Note 15) | 981.1 | 1,086.6 | |||||||||
| Deferred income taxes (Note 21) | 217.9 | 260.5 | |||||||||
| Derivative financial instruments (Note 23) | 35.9 | 39.5 | |||||||||
| Other assets | 235.6 | 292.5 | |||||||||
| Total assets | $ | 19,692.6 | $ | 23,518.8 | |||||||
| Liabilities and equity | |||||||||||
| Short-term debt and current portion of long-term debt (Note 16) | $ | 636.2 | $ | 495.4 | |||||||
| Operating lease liabilities (Note 5) | 247.0 | 275.1 | |||||||||
| Finance lease liabilities (Note 5) | 26.9 | 0 | |||||||||
| Accounts payable, trade | 2,740.3 | 2,659.8 | |||||||||
| Contract liabilities | 4,736.1 | 4,585.1 | |||||||||
| Accrued payroll | 418.8 | 411.5 | |||||||||
| Derivative financial instruments (Note 23) | 167.2 | 141.3 | |||||||||
| Income taxes payable | 74.1 | 75.7 | |||||||||
| Other current liabilities (Note 10) | 1,368.6 | 1,494.5 | |||||||||
| Total current liabilities | 10,415.2 | 10,138.4 | |||||||||
| Long-term debt, less current portion (Note 16) | 3,317.7 | 3,980.0 | |||||||||
| Operating lease liabilities, less current portion (Note 5) | 881.0 | 681.7 | |||||||||
| Deferred income taxes (Note 21) | 79.5 | 138.2 | |||||||||
| Accrued pension and other post-retirement benefits, less current portion (Note 22) | 420.8 | 368.6 | |||||||||
| Derivative financial instruments (Note 23) | 23.3 | 52.7 | |||||||||
| Other liabilities | 297.1 | 430.0 | |||||||||
| Total liabilities | 15,434.6 | 15,789.6 | |||||||||
| Commitments and contingent liabilities (Note 20) | 0 | 0 | |||||||||
| Mezzanine equity | |||||||||||
| Redeemable non-controlling interest | 43.7 | 41.1 | |||||||||
| Stockholders’ equity (Note 17) | |||||||||||
| Ordinary shares, $1 par value; 618.3 shares authorized in 2020 and 2019; 449.5 shares and 447.1 shares issued and outstanding in 2020 and 2019, respectively; NaN and 4.0 shares canceled in 2020 and 2019, respectively | 449.5 | 447.1 | |||||||||
| Capital in excess of par value of ordinary shares | 10,242.4 | 10,182.8 | |||||||||
| Accumulated deficit | (4,915.2) | (1,563.1) | |||||||||
| Accumulated other comprehensive loss | (1,622.5) | (1,407.5) | |||||||||
| Total TechnipFMC plc stockholders’ equity | 4,154.2 | 7,659.3 | |||||||||
| Non-controlling interests | 60.1 | 28.8 | |||||||||
| Total equity | 4,214.3 | 7,688.1 | |||||||||
| Total liabilities and equity | $ | 19,692.6 | $ | 23,518.8 | |||||||
| Year Ended December 31, | |||||||||||||||||
| (In millions) | 2020 | 2019 | 2018 | ||||||||||||||
| Cash provided (required) by operating activities | |||||||||||||||||
| Net loss | $ | (3,237.9) | $ | (2,412.1) | $ | (1,910.8) | |||||||||||
| Adjustments to reconcile net income to cash provided (required) by operating activities | |||||||||||||||||
| Depreciation | 323.5 | 383.5 | 367.8 | ||||||||||||||
| Amortization | 123.7 | 126.1 | 182.6 | ||||||||||||||
| Impairments (Note 19) | 3,287.4 | 2,484.1 | 1,792.6 | ||||||||||||||
| Employee benefit plan and share-based compensation costs | 47.5 | 63.3 | 22.4 | ||||||||||||||
| Deferred income tax provision (benefit), net | (6.7) | (75.4) | 48.8 | ||||||||||||||
| Unrealized loss (gain) on derivative instruments and foreign exchange | (41.2) | 32.5 | 102.7 | ||||||||||||||
| Income from equity affiliates, net of dividends received | (58.1) | (58.8) | (110.7) | ||||||||||||||
| Other | 195.5 | 364.4 | 291.8 | ||||||||||||||
| Changes in operating assets and liabilities, net of effects of acquisitions | |||||||||||||||||
| Trade receivables, net and contract assets | 348.1 | (39.7) | (664.1) | ||||||||||||||
| Inventories, net | 82.8 | (169.6) | (339.4) | ||||||||||||||
| Accounts payable, trade | 18.4 | 26.1 | (1,248.7) | ||||||||||||||
| Contract liabilities | (75.2) | 520.1 | 762.7 | ||||||||||||||
| Income taxes payable (receivable), net | (52.8) | 12.7 | (190.7) | ||||||||||||||
| Other current assets and liabilities, net | (267.3) | (431.8) | 921.2 | ||||||||||||||
| Other noncurrent assets and liabilities, net | (30.8) | 23.1 | (213.6) | ||||||||||||||
| Cash provided (required) by operating activities | 656.9 | 848.5 | (185.4) | ||||||||||||||
| Cash required by investing activities | |||||||||||||||||
| Capital expenditures | (291.8) | (454.4) | (368.1) | ||||||||||||||
| Payment to acquire debt securities | (3.9) | (71.6) | 0 | ||||||||||||||
| Proceeds from sale of debt securities | 51.5 | 18.9 | 0 | ||||||||||||||
| Acquisition of equity securities | (17.9) | 0 | 0 | ||||||||||||||
| Acquisitions, net of cash acquired | 0 | 16.0 | (104.9) | ||||||||||||||
| Cash received from (used by) divestitures | 8.8 | (2.1) | (6.7) | ||||||||||||||
| Proceeds from sale of assets | 46.0 | 7.8 | 19.5 | ||||||||||||||
| Proceeds from repayment of advance to joint venture | 26.7 | 62.0 | — | ||||||||||||||
| Other | — | 3.6 | 0 | ||||||||||||||
| Cash required by investing activities | (180.6) | (419.8) | (460.2) | ||||||||||||||
| Cash required by financing activities | |||||||||||||||||
| Net decrease in short-term debt | (24.4) | (49.6) | (34.9) | ||||||||||||||
| Net increase (decrease) in commercial paper | (554.5) | 57.3 | 496.6 | ||||||||||||||
| Proceeds from issuance of long-term debt | 223.2 | 96.2 | — | ||||||||||||||
| Repayments of long-term debt | (423.9) | 0 | 0 | ||||||||||||||
| Purchase of ordinary shares | — | (92.7) | (442.6) | ||||||||||||||
| Dividends paid | (59.2) | (232.8) | (238.1) | ||||||||||||||
| Payments related to taxes withheld on share-based compensation | (7.4) | — | 0 | ||||||||||||||
| Settlements of mandatorily redeemable financial liability | (224.2) | (562.8) | (225.8) | ||||||||||||||
| Acquisition of non-controlling interest | (11.8) | 0 | 0 | ||||||||||||||
| Cash required by financing activities | (1,082.2) | (784.4) | (444.8) | ||||||||||||||
| Effect of changes in foreign exchange rates on cash and cash equivalents | 223.5 | 5.9 | (107.0) | ||||||||||||||
| Decrease in cash and cash equivalents | (382.4) | (349.8) | (1,197.4) | ||||||||||||||
| Cash and cash equivalents, beginning of year | 5,190.2 | 5,540.0 | 6,737.4 | ||||||||||||||
| Cash and cash equivalents, end of year | $ | 4,807.8 | $ | 5,190.2 | $ | 5,540.0 | |||||||||||
| Year Ended December 31, | |||||||||||||||||
| (In millions) | 2020 | 2019 | 2018 | ||||||||||||||
| Supplemental disclosures of cash flow information | |||||||||||||||||
| Cash paid for interest (net of interest capitalized) | $ | 107.0 | $ | 109.4 | $ | 99.0 | |||||||||||
| Cash paid for income taxes (net of refunds received) | $ | 219.7 | $ | 374.5 | $ | 410.6 | |||||||||||
The accompanying notes are an integral part of the consolidated financial statements.
| (In millions) | Ordinary Shares | Ordinary Shares Held in Treasury and Employee Benefit Trust | Capital in Excess of Par Value of Ordinary Shares | Retained Earnings (Accumulated Deficit) | Accumulated Other Comprehensive Income (Loss) | Non- controlling Interest | Total Stockholders’ Equity | ||||||||||||||||||||||||||||||||||
| Balance as of December 31, 2017 | $ | 465.1 | $ | (4.8) | $ | 10,483.3 | $ | 3,406.0 | $ | (1,003.7) | $ | 21.5 | $ | 13,367.4 | |||||||||||||||||||||||||||
| Adoption of accounting standards (Note 6) | — | — | — | (91.5) | — | 0.1 | (91.4) | ||||||||||||||||||||||||||||||||||
| Net income (loss) | — | — | — | (1,921.6) | — | 10.8 | (1,910.8) | ||||||||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | — | — | (356.0) | (4.6) | (360.6) | ||||||||||||||||||||||||||||||||||
| Cancellation of treasury shares (Note 17) | (14.8) | — | (333.5) | (94.5) | — | — | (442.8) | ||||||||||||||||||||||||||||||||||
| Issuance of ordinary shares | 0.2 | — | — | — | — | — | 0.2 | ||||||||||||||||||||||||||||||||||
| Net sales of ordinary shares for employee benefit trust | — | 2.4 | — | — | — | — | 2.4 | ||||||||||||||||||||||||||||||||||
| Cash dividends declared ($0.52 per share) (Note 17) | — | — | — | (238.1) | — | — | (238.1) | ||||||||||||||||||||||||||||||||||
| Share-based compensation (Note 18) | — | — | 49.1 | — | — | — | 49.1 | ||||||||||||||||||||||||||||||||||
| Other | — | — | (1.9) | 11.9 | — | 3.5 | 13.5 | ||||||||||||||||||||||||||||||||||
| Balance as of December 31, 2018 | $ | 450.5 | $ | (2.4) | $ | 10,197.0 | $ | 1,072.2 | $ | (1,359.7) | $ | 31.3 | $ | 10,388.9 | |||||||||||||||||||||||||||
| Adoption of accounting standards (Note 5) | — | — | — | 1.8 | — | — | 1.8 | ||||||||||||||||||||||||||||||||||
| Net income (loss) | — | — | — | (2,415.2) | — | 3.1 | (2,412.1) | ||||||||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | — | — | (47.8) | (0.7) | (48.5) | ||||||||||||||||||||||||||||||||||
| Cancellation of treasury shares (Note 17) | (4.0) | — | (88.7) | — | — | — | (92.7) | ||||||||||||||||||||||||||||||||||
| Issuance of ordinary shares | 0.6 | — | — | — | — | — | 0.6 | ||||||||||||||||||||||||||||||||||
| Net sales of ordinary shares for employee benefit trust | — | 2.4 | — | — | — | — | 2.4 | ||||||||||||||||||||||||||||||||||
| Cash dividends declared ($0.52 per share) (Note 17) | — | — | — | (232.8) | — | — | (232.8) | ||||||||||||||||||||||||||||||||||
| Share-based compensation (Note 18) | — | — | 74.5 | — | — | — | 74.5 | ||||||||||||||||||||||||||||||||||
| Other | — | — | — | 10.9 | — | (4.9) | 6.0 | ||||||||||||||||||||||||||||||||||
| Balance as of December 31, 2019 | $ | 447.1 | $ | 0 | $ | 10,182.8 | $ | (1,563.1) | $ | (1,407.5) | $ | 28.8 | $ | 7,688.1 | |||||||||||||||||||||||||||
| Adoption of accounting standards (Note 4) | — | — | — | (7.8) | — | — | (7.8) | ||||||||||||||||||||||||||||||||||
| Net income (loss) | — | — | — | (3,287.6) | — | 49.7 | (3,237.9) | ||||||||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | — | — | (215.0) | 0.6 | (214.4) | ||||||||||||||||||||||||||||||||||
| Issuance of ordinary shares | 2.4 | — | (9.4) | — | — | — | (7.0) | ||||||||||||||||||||||||||||||||||
| Cash dividends declared ($0.13 per share) (Note 17) | — | — | — | (59.2) | — | — | (59.2) | ||||||||||||||||||||||||||||||||||
| Share-based compensation (Note 18) | — | — | 69.0 | — | — | — | 69.0 | ||||||||||||||||||||||||||||||||||
| Acquisition of non-controlling interest | — | — | — | (9.4) | — | (2.1) | (11.5) | ||||||||||||||||||||||||||||||||||
| Other | — | — | — | 11.9 | — | (16.9) | (5.0) | ||||||||||||||||||||||||||||||||||
| Balance as of December 31, 2020 | $ | 449.5 | $ | 0 | $ | 10,242.4 | $ | (4,915.2) | $ | (1,622.5) | $ | 60.1 | $ | 4,214.3 | |||||||||||||||||||||||||||
The following table illustrates the carrying valuesensitivity of the investments may not be fully recoverable. When such a condition is subjectively determined to be other than temporary, the carrying value of the investment is written down to fair value. Management’s assessment as to whether any decline in value is other than temporary is based on our ability and intent to hold the investment and whether evidence indicating the carrying value of the investment is recoverable within a reasonable period of time outweighs evidence to the contrary. Management generally considers our investments in equity method investees to be strategic, long-term investments and completes its assessments for impairment with a long-term viewpoint.
| (In millions, except basis points) | Increase (Decrease) in 2022 Pension Expense Before Income Taxes | Increase (Decrease) in Projected Benefit Obligation as of December 31, 2022 | |||||||||
| 25 basis point decrease in discount rate | $ | 1.4 | $ | — | |||||||
| 25 basis point increase in discount rate | $ | (1.4) | $ | — | |||||||
| 25 basis point decrease in expected long-term rate of return on plan assets | $ | 2.8 | N/A | ||||||||
| 25 basis point increase in expected long-term rate of return on plan assets | $ | (2.8) | N/A | ||||||||
Impairment of Long-Lived and Intangible Assets
OTHER MATTERS
On March 28, 2016, FMC Technologies received an inquiry from the estimated useful lives do not exceed 3 years.
In late 2016, Technip S.A. was contacted by the DOJ regarding its investigation of offshore platform projects awarded between 2003 and 2007, performed in Brazil by a joint venture company in which Technip S.A. was a minority participant, and also raised with the DOJ certain other projects performed by Technip S.A. subsidiaries in Brazil between 2002 and 2013. The DOJ also inquired about projects in Ghana and Equatorial Guinea that were awarded to Technip S.A. subsidiaries in 2008 and 2009, respectively. We cooperated with the DOJ in its investigation into potential violations of the debt. Loan origination costs for revolving credit facilities are recorded as an assetFCPA in connection with these projects. We contacted and amortized over the life of the underlying debt.
As part of this resolution, we entered into a three-year Deferred Prosecution Agreement (“DPA”) with the DOJ related to charges of conspiracy to violate the FCPA related to conduct in pricingBrazil and with Unaoil. In addition, Technip USA, Inc., a U.S. subsidiary, pled guilty to one count of conspiracy to violate the asset or liability.FCPA related to conduct in Brazil. We also provided the DOJ reports on our anti-corruption program during the term of the DPA.
In Brazil, on June 25, 2019 our subsidiaries Technip Brasil - Engenharia, Instalações E Apoio Marítimo Ltda. and Flexibrás Tubos Flexíveis Ltda. entered into leniency agreements with both the MPF and the CGU/AGU. We made, as part of those agreements, certain enhancements to the compliance programs in Brazil during the two-year self-reporting period, which aligned with our commitment to cooperation and transparency with the compliance community in Brazil and globally.
In September 2019, the SEC approved our previously disclosed agreement in principle with the SEC Staff and issued an Administrative Order, pursuant to which we paid the SEC $5.1 million, which was included in the global resolution of $301.3 million.
On December 8, 2022, the Company received notice of the official release from all obligations and charges by CGU, having successfully completed all of the self-reporting requirements in the leniency agreements and the case was closed. On December 27, 2022, the DOJ filed a Motion to Dismiss the charges against TechnipFMC related to conspiracy to violate the FCPA, noting to the Court that the Company had fully met and completed all of its obligations under the DPA. The Dismissal Order was signed by the Court on January 4, 2023, thereby closing the case. All obligations to regulatory authorities related to the enforcement matters in the United States and Brazil have been completed and the Company has been unconditionally released by both jurisdictions.
There is no certainty that a settlement with PNF will be reached or affiliates to the extent we have determined that the earnings are indefinitely reinvested. Income taxes are provided onsettlement will not exceed current accruals. The PNF has a broad range of potential sanctions under anti-corruption laws and regulations that it may seek to impose in appropriate circumstances including, but not limited to, fines, penalties, confiscations and modifications to business practices and compliance programs. Any of these measures, if applicable to us, as well as potential customer reaction to such earnings in the period in which we can no longer support that such earnings are indefinitely reinvested.
RECENTLY ISSUED ACCOUNTING STANDARDS
See Note 2 to our consolidated financial statements.statements for further details.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are subject to financial market risks, including fluctuations in foreign currency exchange rates and interest rates. In order to manage and mitigate our exposure to these risks, we may use derivative financial instruments in accordance with established policies and procedures. We do not use derivative financial instruments for speculative purposes. As of December 31, 2022 and 2021, substantially all of our derivative holdings consisted of foreign currency forward contracts and foreign currency instruments embedded in purchase and sale contracts.
These disclosures only address potential impacts from market risks as they affect our financial instruments and do not include other potential effects that could impact our business as a result of changes in foreign currency exchange rates, interest rates, commodity prices or equity prices.
We conduct operations around the world in a number of different currencies. Many of our significant foreign subsidiaries have designated the local currency as their functional currency. Our earnings are, recognizedtherefore, subject to change due to fluctuations in foreign currency exchange rates when the earnings in foreign currencies are translated into U.S. dollars. We do not hedge this translation impact on the consolidated balance sheets at fair value, with classification as currentearnings. A 10% increase or non-current based upon the maturity of the derivative instrument. Changesdecrease in the fair valueaverage exchange rates of all foreign currencies as of December 31, 2022, would have changed our revenue and income before income taxes attributable to TechnipFMC by approximately $318.6 million and $2.1 million, respectively.
When transactions are denominated in currencies other than our subsidiaries’ respective functional currencies, we manage these exposures through the use of derivative instruments. We use foreign currency forward contracts to hedge the foreign currency fluctuation associated with firmly committed and forecasted foreign currency denominated payments and receipts. The derivative instruments associated with these anticipated transactions are usually designated and qualify as cash flow hedges, and as such the gains and losses associated with these instruments are recorded in current earnings or deferred in accumulated other comprehensive income (loss), depending onuntil such time that the type of hedging transaction and whether a derivative is designated as, and is effective as, a hedge. Each instrument is accounted for individually and assets and liabilitiesunderlying transactions are not offset.
For our foreign currency forward contractcontracts hedging anticipated transactions that are accounted for as cash flow hedges, are assesseda 10% increase in the value of the U.S. dollar would have resulted in an additional loss of $61.9 million in the net fair value of cash flow hedges reflected in our consolidated balance sheet as of December 31, 2022.
Interest Rate Risk
We assess effectiveness of forward foreign currency contracts designated as cash flow hedges based solely on changes in fair value attributable to changes in spot rates. We exclude the changeimpact attributable to changes in the difference between the spot rate. The change inrate and the fair value of the contract related to the change in forward rates is excluded fromrate for the assessment of hedge effectiveness. Changes in this excluded component ofeffectiveness and recognize the derivative instrument, along with any ineffectiveness identified, are recorded in earnings as incurred. We document our risk management strategy and hedge effectiveness at the inception of, and during the term of, each hedge.
56
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of TechnipFMC plc
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of TechnipFMC plc and its subsidiaries (the “Company”) as of December 31, 2022 and 2021, and the related consolidated statements of income, of comprehensive income, of changes in stockholders’ equity and of cash flows for each of the three years in the period ended December 31, 2022, including the related notes and financial statement schedule listed in the index appearing under Item 15(a)(2) (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.
Basis for Opinions
The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Annual Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we signedplan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a Memorandumtest basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of Understandingthe consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with McPhy Energy S.A. (“McPhy”),generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable
57
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a leading manufacturermaterial effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and supplierthat (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of carbon-free hydrogen productioncritical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and distribution equipment, pursuantwe are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which we will jointly work on technology development and project implementation. In October 2020, we subscribedit relates.
Revenue Recognition - Determination of Estimated Costs to 638,297 sharesComplete for €15 million that represents 2.29% of McPhy’s capital. The investment was recorded atLong-Term Contracts
As described in Note 1 to the fair value.
The principal considerations for our determination that performing procedures relating to revenue recognition - determination of estimated costs to complete for long-term contracts is a critical audit matter are the significant judgment by management when determining the estimated costs to complete for long-term contracts, which in Technip Odebrecht PLSV CV (“TOP CV”). TOP CV was formed asturn led to a joint venture between Technip SAhigh degree of auditor judgment, subjectivity and Ocyan SAeffort in performing procedures and evaluating management’s significant assumptions related to provide pipeline installation shipsthe estimated costs to Petroleo Brasileiro SA (“Petrobras”) for their workcomplete.
Addressing the matter involved performing procedures and evaluating audit evidence in oil and gas fields offshore Brazil with results reported in our Subsea segment using the equity method of accounting. Subsequent to this transaction the investment became a fully consolidated entity. In connection with forming our overall opinion on the acquisition, we acquired $391.0 million in assets,consolidated financial statements. These procedures included testing the effectiveness of controls relating to the revenue recognition process, including two vessels valued at $335.2 million. In addition, we assumed $239.9 millioncontrols over the determination of liabilities, includingestimated costs to complete for long-term contracts. These procedures also included, among others, testing management’s process for determining the estimated costs to complete for a $203.1 million term loan. As a resultselection of long-term contracts by (i) obtaining executed purchase orders and agreements; (ii) evaluating the appropriateness of the acquisition, we recorded a net loss of $0.9 million. The net loss on acquisition was comprisedmethod to measure progress towards completion; (iii) testing the completeness and accuracy of the impairment chargeunderlying data used by management; and (iv) evaluating the reasonableness of $84.2 million and a gain on bargain purchase of $83.3 million included within restructuring and other charges in our consolidated statement of income.
/s/ PricewaterhouseCoopers LLP
Houston, Texas
February 24, 2023
We have served as the Company’s auditor since 2017.
59
TECHNIPFMC PLC AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
| Year Ended | |||||||||||||||||
| (In millions, except per share data) | 2022 | 2021 | 2020 | ||||||||||||||
| Revenue | |||||||||||||||||
| Service revenue | $ | 3,628.3 | $ | 3,440.7 | $ | 3,266.8 | |||||||||||
| Product revenue | 2,857.0 | 2,804.4 | 3,121.8 | ||||||||||||||
| Lease revenue | 215.1 | 158.4 | 142.0 | ||||||||||||||
| Total revenue | 6,700.4 | 6,403.5 | 6,530.6 | ||||||||||||||
| Costs and expenses | |||||||||||||||||
| Cost of service revenue | 3,042.2 | 3,084.7 | 2,946.9 | ||||||||||||||
| Cost of product revenue | 2,595.7 | 2,366.5 | 2,772.2 | ||||||||||||||
| Cost of lease revenue | 166.2 | 128.4 | 116.7 | ||||||||||||||
| Selling, general and administrative expense | 616.8 | 644.9 | 724.1 | ||||||||||||||
| Research and development expense | 67.0 | 78.4 | 75.3 | ||||||||||||||
| Impairment, restructuring and other expense (Note 19) | 15.2 | 66.7 | 3,402.0 | ||||||||||||||
| Total costs and expenses | 6,503.1 | 6,369.6 | 10,037.2 | ||||||||||||||
| Other income, net | 5.4 | 46.6 | 25.1 | ||||||||||||||
| Income from equity affiliates (Note 12) | 44.6 | 0.6 | 64.6 | ||||||||||||||
| Income (loss) from Investment in Technip Energies | (27.7) | 322.2 | — | ||||||||||||||
| Income (loss) before net interest expense and income taxes | 219.6 | 403.3 | (3,416.9) | ||||||||||||||
| Interest income | 17.8 | 14.0 | 52.3 | ||||||||||||||
| Interest expense | (138.7) | (157.3) | (134.1) | ||||||||||||||
| Loss on early extinguishment of debt | (29.8) | (61.9) | — | ||||||||||||||
| Income (loss) before income taxes | 68.9 | 198.1 | (3,498.7) | ||||||||||||||
| Provision for income taxes (Note 21) | 105.4 | 111.1 | 19.4 | ||||||||||||||
| Income (loss) from continuing operations | (36.5) | 87.0 | (3,518.1) | ||||||||||||||
| (Income) loss from continuing operations attributable to non-controlling interests | (25.4) | 0.8 | (34.5) | ||||||||||||||
| Income (loss) from continuing operations attributable to TechnipFMC plc | (61.9) | 87.8 | (3,552.6) | ||||||||||||||
| Income (loss) from discontinued operations (Note 25) | (45.3) | (72.6) | 280.2 | ||||||||||||||
| Income from discontinued operations attributable to non-controlling interests | — | (1.9) | (15.2) | ||||||||||||||
| Net income (loss) attributable to TechnipFMC plc | $ | (107.2) | $ | 13.3 | $ | (3,287.6) | |||||||||||
| Earnings (loss) per share from continuing operations attributable to TechnipFMC plc | |||||||||||||||||
| Basic and diluted | $ | (0.14) | $ | 0.19 | $ | (7.92) | |||||||||||
| Earnings (loss) per share from discontinued operations attributable to TechnipFMC | |||||||||||||||||
| Basic | $ | (0.10) | $ | (0.17) | $ | 0.59 | |||||||||||
| Diluted | $ | (0.10) | $ | (0.16) | $ | 0.59 | |||||||||||
| Total earnings (loss) per share attributable to TechnipFMC plc | |||||||||||||||||
| Basic and diluted | $ | (0.24) | $ | 0.03 | $ | (7.33) | |||||||||||
| Weighted average shares outstanding (Note 7) | |||||||||||||||||
| Basic | 449.5 | 450.5 | 448.7 | ||||||||||||||
| Diluted | 449.5 | 454.6 | 448.7 | ||||||||||||||
The accompanying notes are an integral part of the consolidated financial statements.
60
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
| Year Ended | |||||||||||||||||
| (In millions) | 2022 | 2021 | 2020 | ||||||||||||||
| Net income (loss) attributable to TechnipFMC plc | $ | (107.2) | $ | 13.3 | $ | (3,287.6) | |||||||||||
| (Income) loss from continuing operations attributable to non-controlling interests | (25.4) | 0.8 | (34.5) | ||||||||||||||
| Income from discontinued operations attributable to non-controlling interests | — | (1.9) | (15.2) | ||||||||||||||
| Net income (loss) attributable to TechnipFMC plc, including non-controlling interests | (81.8) | 14.4 | (3,237.9) | ||||||||||||||
| Foreign currency translation adjustments | |||||||||||||||||
| Net gains (losses) arising during the period | (20.2) | 27.6 | (169.1) | ||||||||||||||
| Reclassification adjustment for net gains included in net loss | (3.2) | — | — | ||||||||||||||
Foreign currency translation adjustments (a) | (23.4) | 27.6 | (169.1) | ||||||||||||||
| Net gains (losses) on hedging instruments | |||||||||||||||||
| Net gains (losses) arising during the period | (25.1) | (19.8) | 25.4 | ||||||||||||||
| Reclassification adjustment for net (gains) losses included in net income | 25.3 | (11.8) | 13.0 | ||||||||||||||
Net gains (losses) on hedging instruments (b) | 0.2 | (31.6) | 38.4 | ||||||||||||||
| Pension and other post-retirement benefits | |||||||||||||||||
| Net gains (losses) arising during the period | 13.3 | 71.2 | (88.3) | ||||||||||||||
| Prior service cost arising during the period | — | (0.4) | (4.6) | ||||||||||||||
| Reclassification adjustment for settlement losses included in net income | 0.6 | 2.7 | 1.4 | ||||||||||||||
| Reclassification adjustment for amortization of prior service cost included in net income | 0.2 | 0.4 | 0.9 | ||||||||||||||
| Reclassification adjustment for amortization of net actuarial loss included in net income | 8.3 | 14.9 | 6.9 | ||||||||||||||
Net pension and other post-retirement benefits (c) | 22.4 | 88.8 | (83.7) | ||||||||||||||
| Other comprehensive income (loss), net of tax | (0.8) | 84.8 | (214.4) | ||||||||||||||
| Comprehensive income (loss) | (82.6) | 99.2 | (3,452.3) | ||||||||||||||
| Comprehensive (income) loss attributable to non-controlling interests | (21.3) | 0.5 | (50.3) | ||||||||||||||
| Comprehensive income (loss) attributable to TechnipFMC plc | $ | (103.9) | $ | 99.7 | $ | (3,502.6) | |||||||||||
(a)Net of the Technip Energies business segment. The transaction was structured as a spin-off (the “Spin-off”), which occurred by wayincome tax (expense) benefit of a pro rata dividend (the “Distribution”) to our shareholdersnil for each of 50.1 percent of the outstanding shares in Technip Energies N.V. Each of our shareholders received 1 ordinary share of Technip Energies N.V. for every 5 ordinary shares of TechnipFMC held at 5:00 p.m., New York City time on the record date, February 17, 2021. Technip Energies N.V. is now an independent public company and its shares trade under the ticker symbol “TE” on the Euronext Paris stock exchange.
(b)Net of income tax (expense) benefit of $(8.0) million, $8.8 million and $72.1$(9.7) million for the years ended December 31, 2022, 2021 and 2020, respectively.
(c)Net of separation costs associated withincome tax (expense) benefit of $(9.6) million, $(19.6) million and $25.5 million for the Spin-off transaction,years ended December 31, 2022, 2021 and 2020, respectively.
61
TECHNIPFMC PLC AND CONSOLIDATED SUBSIDIARIES CONSOLIDATED BALANCE SHEETS | |||||||||||
| (In millions, except par value data) | December 31, | ||||||||||
| Assets | 2022 | 2021 | |||||||||
| Cash and cash equivalents | $ | 1,057.1 | $ | 1,327.4 | |||||||
| Trade receivables, net of allowances of $34.1 in 2022 and $38.1 in 2021 | 966.5 | 911.9 | |||||||||
| Contract assets, net of allowances of $1.1 in 2022 and 2021 | 981.6 | 966.0 | |||||||||
| Inventories, net (Note 9) | 1,039.7 | 1,031.9 | |||||||||
| Derivative financial instruments (Note 23) | 282.7 | 110.3 | |||||||||
| Income taxes receivable | 125.3 | 85.0 | |||||||||
| Advances paid to suppliers | 80.8 | 79.4 | |||||||||
| Other current assets (Note 10) | 455.0 | 512.3 | |||||||||
| Investment in Technip Energies | — | 317.3 | |||||||||
| Total current assets | 4,988.7 | 5,341.5 | |||||||||
| Investments in equity affiliates (Note 12) | 325.0 | 292.4 | |||||||||
| Property, plant and equipment, net (Note 14) | 2,354.9 | 2,597.2 | |||||||||
| Operating lease right-of-use assets (Note 4) | 801.9 | 707.9 | |||||||||
| Finance lease right-of-use assets (Note 4) | 51.6 | 52.2 | |||||||||
| Intangible assets, net (Note 15) | 716.0 | 813.7 | |||||||||
| Deferred income taxes (Note 21) | 72.5 | 74.3 | |||||||||
| Derivative financial instruments (Note 23) | 7.2 | 10.5 | |||||||||
| Other assets | 126.5 | 130.4 | |||||||||
| Total assets | $ | 9,444.3 | $ | 10,020.1 | |||||||
| Liabilities and equity | |||||||||||
| Short-term debt and current portion of long-term debt (Note 16) | $ | 367.3 | $ | 277.6 | |||||||
| Operating lease liabilities (Note 4) | 136.1 | 126.2 | |||||||||
| Finance lease liabilities (Note 4) | 51.9 | 0.7 | |||||||||
| Accounts payable, trade | 1,282.8 | 1,294.3 | |||||||||
| Contract liabilities | 1,156.4 | 1,012.9 | |||||||||
| Accrued payroll | 175.6 | 194.1 | |||||||||
| Derivative financial instruments (Note 23) | 346.6 | 161.0 | |||||||||
| Income taxes payable | 96.7 | 124.6 | |||||||||
| Other current liabilities (Note 10) | 560.9 | 660.4 | |||||||||
| Total current liabilities | 4,174.3 | 3,851.8 | |||||||||
| Long-term debt, less current portion (Note 16) | 999.3 | 1,727.3 | |||||||||
| Operating lease liabilities, less current portion (Note 4) | 735.7 | 646.8 | |||||||||
| Finance lease liabilities (Note 4) | 1.4 | 51.1 | |||||||||
| Deferred income taxes (Note 21) | 55.5 | 47.5 | |||||||||
| Accrued pension and other post-retirement benefits, less current portion (Note 22) | 59.7 | 113.4 | |||||||||
| Derivative financial instruments (Note 23) | 3.6 | 15.5 | |||||||||
| Other liabilities | 138.1 | 148.3 | |||||||||
| Total liabilities | 6,167.6 | 6,601.7 | |||||||||
| Commitments and contingent liabilities (Note 20) | |||||||||||
| Stockholders’ equity (Note 17) | |||||||||||
| Ordinary shares, $1 par value; 618.3 shares authorized in 2022 and 2021; 442.2 shares and 450.7 shares issued and outstanding in 2022 and 2021, respectively | 442.2 | 450.7 | |||||||||
| Capital in excess of par value of ordinary shares | 9,109.7 | 9,160.8 | |||||||||
| Accumulated deficit | (5,010.0) | (4,903.8) | |||||||||
| Accumulated other comprehensive loss | (1,301.7) | (1,305.0) | |||||||||
| Total TechnipFMC plc stockholders’ equity | 3,240.2 | 3,402.7 | |||||||||
| Non-controlling interests | 36.5 | 15.7 | |||||||||
| Total equity | 3,276.7 | 3,418.4 | |||||||||
| Total liabilities and equity | $ | 9,444.3 | $ | 10,020.1 | |||||||
TECHNIPFMC PLC AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
| Year Ended December 31, | |||||||||||||||||
| (In millions) | 2022 | 2021 | 2020 | ||||||||||||||
| Cash provided (required) by operating activities | |||||||||||||||||
| Net income (loss) | $ | (81.8) | $ | 14.4 | $ | (3,237.9) | |||||||||||
| Net (income) loss from discontinued operations | 45.3 | 72.6 | (280.2) | ||||||||||||||
| Adjustments to reconcile net loss to cash provided (required) by operating activities | |||||||||||||||||
| Depreciation and amortization | 377.2 | 385.4 | 412.1 | ||||||||||||||
| Impairments (Note 19) | 4.7 | 49.1 | 3,273.8 | ||||||||||||||
| Employee benefit plan and share-based compensation costs | 33.5 | 34.3 | 36.4 | ||||||||||||||
| Deferred income tax benefit | (13.0) | (95.1) | (31.8) | ||||||||||||||
| (Income) loss from investment in Technip Energies | 27.7 | (322.2) | — | ||||||||||||||
| Unrealized (gain) loss on derivative instruments and foreign exchange | 54.0 | 30.8 | (13.3) | ||||||||||||||
| Income from equity affiliates, net of dividends received | (31.9) | (0.6) | (58.2) | ||||||||||||||
| Loss on early extinguishment of debt | 29.8 | 61.9 | — | ||||||||||||||
| Other | 6.7 | (5.5) | (32.7) | ||||||||||||||
| Changes in operating assets and liabilities, net of effects of acquisitions | |||||||||||||||||
| Trade receivables, net and contract assets | (160.2) | (73.1) | 433.4 | ||||||||||||||
| Inventories, net | (35.0) | 197.7 | 87.4 | ||||||||||||||
| Accounts payable, trade | 52.1 | 93.8 | (236.4) | ||||||||||||||
| Contract liabilities | 164.5 | 0.9 | (61.8) | ||||||||||||||
| Income taxes payable (receivable), net | (62.1) | 214.7 | (56.1) | ||||||||||||||
| Other current assets and liabilities, net | (40.4) | 63.5 | 551.2 | ||||||||||||||
| Other non-current assets and liabilities, net | (19.0) | (7.6) | (13.5) | ||||||||||||||
| Cash provided by operating activities from continuing operations | 352.1 | 715.0 | 772.4 | ||||||||||||||
| Cash provided (required) by operating activities from discontinued operations | — | 66.3 | (115.5) | ||||||||||||||
| Cash provided by operating activities | 352.1 | 781.3 | 656.9 | ||||||||||||||
| Cash provided (required) by investing activities | |||||||||||||||||
| Capital expenditures | (157.9) | (191.7) | (256.1) | ||||||||||||||
| Payment to acquire debt securities | — | (29.1) | (3.9) | ||||||||||||||
| Proceeds from sale of debt securities | 9.7 | 27.4 | 51.5 | ||||||||||||||
| Acquisitions, net of cash acquired | — | (15.3) | — | ||||||||||||||
| Proceeds from sale of assets | 30.2 | 104.6 | 45.5 | ||||||||||||||
| Proceeds from sales of investment in Technip Energies | 288.5 | 900.9 | — | ||||||||||||||
| Proceeds from repayment of advance to joint venture | 12.5 | 25.0 | 26.7 | ||||||||||||||
| Other | (20.8) | — | 15.5 | ||||||||||||||
| Cash provided (required) by investing activities from continuing operations | 162.2 | 821.8 | (120.8) | ||||||||||||||
| Cash required by investing activities from discontinued operations | — | (4.5) | (59.8) | ||||||||||||||
| Cash provided (required) by investing activities | 162.2 | 817.3 | (180.6) | ||||||||||||||
| Cash required by financing activities | |||||||||||||||||
| Decrease in short-term debt | (200.4) | (62.0) | (31.9) | ||||||||||||||
| Cash settlement for derivative hedging debt | (80.5) | — | — | ||||||||||||||
| Net decrease in commercial paper | — | (974.3) | (340.9) | ||||||||||||||
| Proceeds from issuance of long-term debt | 60.9 | 1,164.4 | 223.2 | ||||||||||||||
| Repayments of long-term debt | (451.7) | (1,462.2) | (423.9) | ||||||||||||||
| Payments for debt issuance cost | — | (60.4) | — | ||||||||||||||
| Share repurchases | (100.2) | — | — | ||||||||||||||
| Dividends paid | — | — | (59.2) | ||||||||||||||
| Acquisition of non-controlling interest | — | (48.6) | — | ||||||||||||||
| Other | (24.8) | (4.2) | (19.2) | ||||||||||||||
| Cash required by financing activities from continuing operations | (796.7) | (1,447.3) | (651.9) | ||||||||||||||
| Cash required by financing activities from discontinued operations | — | (3,617.7) | (430.3) | ||||||||||||||
| Cash required by financing activities | (796.7) | (5,065.0) | (1,082.2) | ||||||||||||||
| Effect of changes in foreign exchange rates on cash and cash equivalents | 12.1 | (14.0) | 223.5 | ||||||||||||||
| Decrease in cash and cash equivalents | (270.3) | (3,480.4) | (382.4) | ||||||||||||||
| Cash and cash equivalents in the statement of cash flows, beginning of year | 1,327.4 | 4,807.8 | 5,190.2 | ||||||||||||||
| Cash and cash equivalents in the statement of cash flows, end of year | $ | 1,057.1 | $ | 1,327.4 | $ | 4,807.8 | |||||||||||
63
| Year Ended December 31, | |||||||||||||||||
| (In millions) | 2022 | 2021 | 2020 | ||||||||||||||
| Supplemental disclosures of cash flow information attributable to continuing operations | |||||||||||||||||
| Cash paid for interest (net of interest capitalized) | $ | 109.2 | $ | 104.1 | $ | 96.0 | |||||||||||
| Cash paid for income taxes (net of refunds received) | $ | 189.2 | $ | 25.1 | $ | 107.8 | |||||||||||
The following table provides a reconciliation of cash and cash equivalents reported in the consolidated balance sheets to the total of the amounts in the consolidated statements of cash flows:
| Year Ended December 31, | |||||||||||||||||
| (In millions) | 2022 | 2021 | 2020 | ||||||||||||||
| Cash and cash equivalents | $ | 1,057.1 | $ | 1,327.4 | $ | 1,269.2 | |||||||||||
| Cash and cash equivalents attributable to discontinued operations | — | — | 3,538.6 | ||||||||||||||
| Total cash and cash equivalents in the statement of cash flows | $ | 1,057.1 | $ | 1,327.4 | $ | 4,807.8 | |||||||||||
The accompanying notes are an integral part of the consolidated financial statements.
64
TECHNIPFMC PLC AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
| (In millions) | Ordinary Shares | Capital in Excess of Par Value of Ordinary Shares | Retained Earnings (Accumulated Deficit) | Accumulated Other Comprehensive Income (Loss) | Non- controlling Interest | Total Stockholders’ Equity | |||||||||||||||||||||||||||||
| Balance as of December 31, 2019 | $ | 447.1 | $ | 10,182.8 | $ | (1,563.1) | $ | (1,407.5) | $ | 28.8 | $ | 7,688.1 | |||||||||||||||||||||||
| Adoption of accounting standards | — | — | (7.8) | — | — | (7.8) | |||||||||||||||||||||||||||||
| Net income (loss) | — | — | (3,287.6) | — | 49.7 | (3,237.9) | |||||||||||||||||||||||||||||
| Other comprehensive income (loss) | — | — | — | (215.0) | 0.6 | (214.4) | |||||||||||||||||||||||||||||
| Issuance of ordinary shares | 2.4 | (9.4) | — | — | — | (7.0) | |||||||||||||||||||||||||||||
| Cash dividends declared ($0.13 per share) (Note 17) | — | — | (59.2) | — | — | (59.2) | |||||||||||||||||||||||||||||
| Share-based compensation (Note 18) | — | 69.0 | — | — | — | 69.0 | |||||||||||||||||||||||||||||
| Distributions to non-controlling interest | — | — | (9.4) | — | (2.1) | (11.5) | |||||||||||||||||||||||||||||
| Other | — | — | 11.9 | — | (16.9) | (5.0) | |||||||||||||||||||||||||||||
| Balance as of December 31, 2020 | $ | 449.5 | $ | 10,242.4 | $ | (4,915.2) | $ | (1,622.5) | $ | 60.1 | $ | 4,214.3 | |||||||||||||||||||||||
| Net income | — | — | 13.3 | — | 1.1 | 14.4 | |||||||||||||||||||||||||||||
| Other comprehensive income (loss) | — | — | — | 86.4 | (1.6) | 84.8 | |||||||||||||||||||||||||||||
| Issuance of ordinary shares | 1.2 | — | — | — | — | 1.2 | |||||||||||||||||||||||||||||
| Share-based compensation (Note 18) | — | 26.8 | — | — | — | 26.8 | |||||||||||||||||||||||||||||
| Spin-off of Technip Energies (Note 25) | — | (1,108.4) | — | 231.1 | (19.9) | (897.2) | |||||||||||||||||||||||||||||
| Accrued distributions to non-controlling interest | — | — | — | — | (15.0) | (15.0) | |||||||||||||||||||||||||||||
| Other | — | — | (1.9) | — | (9.0) | (10.9) | |||||||||||||||||||||||||||||
| Balance as of December 31, 2021 | $ | 450.7 | $ | 9,160.8 | $ | (4,903.8) | $ | (1,305.0) | $ | 15.7 | $ | 3,418.4 | |||||||||||||||||||||||
| Net income (loss) | — | — | (107.2) | — | 25.4 | (81.8) | |||||||||||||||||||||||||||||
| Other comprehensive income (loss) | — | — | — | 3.3 | (4.1) | (0.8) | |||||||||||||||||||||||||||||
| Issuance of ordinary shares | 1.6 | (1.5) | — | — | — | 0.1 | |||||||||||||||||||||||||||||
| Share-based compensation (Note 18) | — | 40.5 | — | — | — | 40.5 | |||||||||||||||||||||||||||||
| Shares repurchased and cancelled | (10.1) | (90.1) | — | — | — | (100.2) | |||||||||||||||||||||||||||||
| Other | — | — | 1.0 | — | (0.5) | 0.5 | |||||||||||||||||||||||||||||
| Balance as of December 31, 2022 | $ | 442.2 | $ | 9,109.7 | $ | (5,010.0) | $ | (1,301.7) | $ | 36.5 | $ | 3,276.7 | |||||||||||||||||||||||
The accompanying notes are an integral part of the consolidated financial statements.
65
TECHNIPFMC PLC AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of operations - TechnipFMC plc and consolidated subsidiaries (“TechnipFMC,” “we,” “us” or “our”) is a global leader in oil and gas projects, technologies, systems and services through our business segments: Subsea and Surface Technologies. We have manufacturing operations worldwide, strategically located to facilitate delivery of our products, systems and services to our customers.
Basis of presentation - Our consolidated financial statements were prepared in U.S. dollars and in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and rules and regulations of the Securities and Exchange Commission (“SEC”) pertaining to annual financial information. The preparation of financial statements in conformity with these accounting principles requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Ultimate results could differ from our estimates.
Principles of consolidation - The consolidated financial statements include the accounts of TechnipFMC and its majority-owned subsidiaries and affiliates. Intercompany accounts and transactions are eliminated in consolidation.
Use of estimates - The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Such estimates include, but are not limited to, estimates of total contract profit or loss on long-term construction-type contracts; estimated realizable value on excess and obsolete inventory; estimates related to pension accounting; estimates related to fair value for purposes of assessing long-lived assets and intangible assets for impairment and estimates related to income taxes.
Investments in the common stock of unconsolidated affiliates - The equity method of accounting is used to account for investments in unconsolidated affiliates where we have the ability to exert significant influence over the affiliates’ operating and financial policies. We measure equity investments not accounted for under the equity method at fair value and recognize any changes in fair value in net income. Intercompany balances and transactions have been eliminated in preparing the consolidated financial statements.
Investments in unconsolidated affiliates are assessed for impairment whenever events or changes in facts and circumstances indicate the carrying value of the investments may not be fully recoverable. When such a condition is subjectively determined to be other than temporary, the carrying value of the investment is written down to fair value. Management’s assessment as to whether any decline in value is other than temporary is based on our ability and intent to hold the investment and whether evidence indicating the carrying value of the investment is recoverable within a reasonable period of time outweighs evidence to the contrary. Management generally considers our investments in equity method investees to be strategic, long-term investments and completes its assessments for impairment with a long-term viewpoint.
Investments in which ownership is less than 20% or that do not represent significant investments are reported in other assets in the consolidated balance sheets. Where no active market exists and where no other valuation method can be used, these financial assets are maintained at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer.
We determine whether investments involve a variable interest entity (“VIE”) based on the characteristics of the subject entity. If the entity is determined to be a VIE, then management determines if we are the primary beneficiary of the entity and whether or not consolidation of the VIE is required. The primary beneficiary consolidating the VIE must normally have both (i) the power to direct the activities that most significantly affect the VIE’s economic performance and (ii) the obligation to absorb significant losses of or the right to receive significant benefits from the VIE. If we are deemed to be the primary beneficiary, the VIE is consolidated and the other party’s equity interest in the VIE is accounted for as a non-controlling interest. Our unconsolidated VIEs are accounted for using the equity method of accounting.
66
| (In millions) | As reported as of December 31, 2019 | Impact of ASC 326 | Balance as of January 1, 2020 | ||||||||||||||
| Trade receivables, net | $ | 2,287.1 | $ | (3.8) | $ | 2,283.3 | |||||||||||
| Loans receivable, net | 138.5 | (1.5) | 137.0 | ||||||||||||||
| Security deposits and other, net | 36.6 | (1.0) | 35.6 | ||||||||||||||
| Held-to-maturity | |||||||||||||||||
| Debt securities at amortized cost | 71.9 | (1.1) | 70.8 | ||||||||||||||
| Total financial assets | $ | 2,534.1 | $ | (7.4) | $ | 2,526.7 | |||||||||||
| Non-financial assets | |||||||||||||||||
| Contract assets, net | $ | 1,520.0 | $ | (2.5) | $ | 1,517.5 | |||||||||||
| (In millions) | Year of origination | Balance as of December 31, 2020 | |||||||||
| Loans receivables, security deposits and other | |||||||||||
| Moody’s rating Ba2 | 2019 | $ | 133.0 | ||||||||
| Debt securities at amortized cost | |||||||||||
| Moody’s rating B3 | 2019 | 23.7 | |||||||||
| Total financial assets | $ | 156.7 | |||||||||
| Balance as of December 31, 2020 | |||||||||||||||||||||||||||||
| (In millions) | Trade receivables | Contract assets | Loans receivable | Security deposit and other | Held-to-maturity debt securities | ||||||||||||||||||||||||
| Beginning balance in allowance for credit losses | $99.2 | $5.0 | $9.5 | $1.6 | $1.1 | ||||||||||||||||||||||||
| Current period provision for expected credit losses | 54.3 | (0.2) | (0.1) | 0.9 | (0.6) | ||||||||||||||||||||||||
| Write-offs charged against the allowance | (46.9) | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||
| Recoveries | 2.3 | (3.8) | (0.9) | (1.4) | 0 | ||||||||||||||||||||||||
| Ending balance in the allowance for credit losses | $ | 108.9 | $ | 1.0 | $ | 8.5 | $ | 1.1 | $ | 0.5 | |||||||||||||||||||
We determine if an arrangement is a lease at inception by assessing whether an identified asset exists and if we have the right to control the use of the identified asset. Operating leases are included in Operating lease right-of-use assets, Operating lease liabilities (current), and Operating lease liabilities (non-current) in our consolidated balance sheets. Right-of-use assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease right-of-use assets and liabilities are recognized at the commencement date based on the present value of the remaining lease payments over the lease term. With the exception of rare cases in which the implicit rate is readily determinable, we use our incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. The Operating lease right-of-use assets also includes any lease prepayments made and excludes lease incentives we received from the lessor. Lease cost for lease payments is recognized on a straight-line basis over the lease term. Several of our leases provide for certain guarantees of residual value. We estimate and include in the determination of lease payments any amount probable of being owed under these residual value guarantees.
Lease terms within our lessee arrangements may include options to extend/renew or terminate the lease and/or purchase the underlying asset when it is reasonably certain that we will exercise that option. TechnipFMC applies a portfolio approach by asset class to determine lease term renewals. The leases within these portfolios are categorized by asset class and have initial lease terms that vary depending on the asset class. The renewal terms range from 60 days1 year to 5 years for asset classes such as temporary residential housing, forklifts, vehicles, vessels, office and IT equipment, and tool rentals, and up to 15 years or more for commercial real estate. Short-term leases with an initial term of 12 months or less that do not include a purchase option are not recorded on the balance sheet. Lease costs for short-term leases are recognized on a straight-line basis over the lease term and amounts related to short-term leases are disclosed within our financial statements.
TechnipFMC has variable lease payments, including adjustments to lease payments based on an index or rate (such as the Consumer Price Index), fair value adjustments to lease payments, and common area maintenance, real estate taxes, and insurance payments in triple-net real estate leases. Variable lease payments that depend on an index or a rate (such as the Consumer Price Index or a market interest rate) are included when measuring consideration within our lease arrangements using the payments’ base ratepayments with a fixed increase amount or index. Variable payments that do not depend on an index or rateprovided in the contract. Variable payments are recognized in the consolidated income statements and are disclosed as “variable lease costs” in the period during which they are incurred.
We adopted the practical expedient to not separate lease and non-lease components for all asset classes except for vessels, which have significant non-lease components.
| Year Ended December 31, | |||||||||||
| (In millions) | 2020 | 2019 | |||||||||
| Operating lease costs including variable costs | $ | 312.1 | $ | 362.4 | |||||||
| Short-term lease costs | 13.7 | 20.8 | |||||||||
| Less: sublease income | 7.3 | 8.9 | |||||||||
| Net lease cost | $ | 318.5 | $ | 374.3 | |||||||
| Year Ended December 31, | |||||||||||
| (In millions) | 2020 | 2019 | |||||||||
| Cash paid for amounts included in the measurement of lease liabilities | |||||||||||
| Operating cash flows from operating leases | $ | 314.2 | $ | 384.7 | |||||||
| Right-of-use assets obtained in exchange for lease liabilities | |||||||||||
| Operating leases | $ | 535.9 | $ | 125.4 | |||||||
| December 31, | |||||||||||
| (In millions, except lease term and discount rate) | 2020 | 2019 | |||||||||
| Weighted average remaining lease term | |||||||||||
| Operating leases | 11.8 years | 7.5 years | |||||||||
| Finance leases | 0.6 years | $ | — | ||||||||
| Weighted average discount rate | |||||||||||
| Operating leases | 5.1 | % | 4.4 | % | |||||||
| Finance leases | 2.1 | % | — | % | |||||||
| (In millions) | Operating Leases | ||||
| 2021 | $ | 252.5 | |||
| 2022 | 191.5 | ||||
| 2023 | 137.1 | ||||
| 2024 | 117.6 | ||||
| 2025 | 79.2 | ||||
| Thereafter | 471.4 | ||||
| Total lease payments | 1,249.3 | ||||
Less: Imputed interest (a) | 121.3 | ||||
Total lease liabilities (b) | $ | 1,128.0 | |||
| Year Ended December 31, | |||||||||||
| (In millions) | 2020 | 2019 | |||||||||
| Operating lease revenue including variable revenue | $ | 142.0 | $ | 266.5 | |||||||
| (In millions) | Operating Leases | ||||
| 2021 | $ | 21.4 | |||
| 2022 | 14.3 | ||||
| 2023 | 1.0 | ||||
| 2024 | 0 | ||||
| 2025 | 0 | ||||
| Thereafter | 0 | ||||
| Total undiscounted cash flows | $ | 36.7 | |||
The majority of our revenue is derived from long-term contracts associatedthat can span several years. We account for revenue in accordance with designing and manufacturing products and systems and providing services to customers involved in exploration and production of crude oil and natural gas. On January 1, 2018, we adoptedASC Topic 606, of GAAP using the modified retrospective method applied to those contracts that were not completed as of January 1, 2018 resulting in a $91.5 million reduction to retained earnings.
Allocation of transaction price to performance obligations - A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue, when, or as, the performance obligation is satisfied. To determine the proper revenue recognition method, we evaluate whether two or more contracts should be combined and accounted for as one single contract and whether the combined or single contract should be accounted for as more than one performance obligation. This evaluation requires significant judgment; somecertain of our contracts have a single performance obligation as the promise to transfer the individual goods or services is not separately identifiable from other promises in the contracts and, therefore, not distinct.
Variable consideration - Due to the nature of the work required to be performed on many of our performance obligations, the estimation of total revenue and cost at completion is complex, subject to many variables and requires significant judgment. It is common for our long-term contracts to contain variable considerations that can either increase or decrease the transaction price. Variability in the transaction price arises primarily due to liquidated damages. We consider our experience with similar transactions and expectations regarding the contract in estimating the amount of variable consideration to which we will be entitled, and determining whether the estimated variable consideration should be constrained. We include estimated amounts in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. Our estimates of variable consideration are based largely on an assessment of our anticipated performance and all information (historical, current and forecasted) that is reasonably available to us.
67
Payment terms - Progress billings are generally issued upon completion of certain phases of the work as stipulated in the contract. Payment terms may either be fixed, lump-sum or driven by time and materials (e.g., daily or hourly rates, plus materials). Because typically the customer retains a small portion of the contract price until completion of the contract, our contracts generally result in revenue recognized in excess of billings which we present as contract assets on the balance sheet. Amounts billed and due from our customers are classified as receivables in the consolidated balance sheets. The portion of the payments retained by the customer until the final contract settlement is not considered a significant financing component because the intent is to protect the customer. For some contracts, we may be entitled to receive an advance payment. We recognize a liability for these advance payments in excess of revenue recognized and present it as contract liabilities in the consolidated balance sheets. The advance payment typically is not considered a significant financing component because it is used to meet working capital demands that can be higher in the early stages of a contract and to protect us from the other party failing to adequately complete some or all of its obligations under the contract.
Warranty - Certain contracts include an assurance-type warranty clause, typically between 18 to 36 months, to guarantee that the products comply with agreed specifications. A service-type warranty may also be provided to the customer; in such a case, management allocates a portion of the transaction price to the warranty based on the estimated stand-alone selling price of the service-type warranty.
Revenue recognized over time - Our performance obligations are satisfied over time either as work progresses or at a point in time.time. Revenue from products and services transferred to customers over time accounted for approximately 86.0%63%, 81.7%68% and 82.4%72% of our revenue for the years ended December 31, 2020, 20192022, 2021 and 2018,2020, respectively. Typically, revenue is recognized over time using an input measure (e.g., costs incurred to date relative to total estimated costs at completion)completion) to measure progress.
Cost-to-cost method - For our long-term contracts, because of control transferring over time, revenue is recognized based on the extent of progress towards completion of the performance obligation. We generally use the cost-to-cost measure of progress for our contracts because it best depicts the transfer of control to the customer which occurs as we incur costs on our contracts. Under the cost-to-cost measure of progress, the extent of progress towards completion is measured based on the ratio of costs incurred to date to the total estimated costs at completion of the performance obligation. Revenues including estimated fees or profits, are recorded proportionally as costs are incurred. Any expected losses on construction-type contracts in progress are charged to earnings, in total, in the period during which the losses are identified.
Right to invoice practical expedient - The right-to-invoice practical expedient can be applied to a performance obligation satisfied over time if we have a right to invoice the customer for an amount that corresponds directly with the value transferred to the customer for our performance completed to date. When this practical expedient is used, we do not estimate variable consideration at the inception of the contract to determine the transaction price or for disclosure purposes. We have contracts which have payment terms dictated by daily or hourly rates where some contracts may have mixed pricing terms which include a fixed fee portion. For contracts in which we charge the customer a fixed rate based on the time or materials spent during the project that correspond to the value transferred to the customer, we recognize revenue in the amount to which we have the right to invoice.
Contract modifications - Contracts are often modified to account for changes in contract specifications and requirements. We consider contract modifications to exist when the modification either creates new, or changes the existing, enforceable rights and obligations. Most of our contract modifications are for goods or services that are not distinct from the existing contract due to the significant integration service provided in the context of the contract and are accounted for as if they were part of that existing contract. The effect of a contract modification on the transaction price and our measure of progress for the performance obligation to which it relates is recognized as an adjustment to revenue (either as an increase in or a reduction of revenue) on a cumulative catch-up basis.
See Note 5 for subsea applicationsfurther details.
Cash equivalents - Cash equivalents are highly engineered to meet the unique demandsliquid, short-term investments with original maturities of our customers’ field properties and are typically ordered one to two years prior to installation. We often receive advance payments and progress billingsthree months or less from our customers in order to fund initial development and working capital requirements.
Trade receivables, net of allowances - An allowance for credit losses is provided on receivables equal to the estimated uncollectible amounts and is calculated based on loss rates from historical data. We havedevelop loss-rate statistics on the basis of the amount written off over the life of the receivable and adjust these historical credit loss trends for forward-looking factors specific to the debtors and the economic environment to determine lifetime expected losses.
Inventories - Inventories are stated at the lower of cost or net realizable value, except as it relates to inventory measured using the last-in, first-out (“LIFO”) method, for which the inventories are stated at the lower of cost or market. Inventory costs include those costs directly attributable to products, including all manufacturing overhead, but excluding costs to distribute. Cost for a significant portion of the U.S. domiciled inventories is determined on the LIFO method. The first-in, first-out (“FIFO”) or weighted average methods are used to determine the cost for the remaining inventories. Write-down of inventories is recorded when the net realizable value of inventories is lower than their net book value.
Property, plant and equipment - Property, plant, and equipment is recorded at cost. Depreciation is principally provided on the straight-line basis over the estimated useful lives of the assets (vessels - 10 to 30 years; buildings - 10 to 50 years; and machinery and equipment - 3 to 20 years). Gains and losses are realized upon the sale or retirement of assets and are recorded in other income (expense), net on our consolidated statements of income. Maintenance and repair costs are expensed as incurred. Expenditures that extend the useful lives of property, plant and equipment are capitalized and depreciated over the estimated new remaining life of the asset.
Impairment of property, plant and equipment - Property, plant and equipment are reviewed for impairment whenever events or changes in circumstances indicate the carrying value of the long-lived asset may not be recoverable. The carrying value of an asset group is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. If it is determined that contracts of this nature have one performance obligation. In these contracts,an impairment loss has occurred, the final productimpairment loss is highly customized tomeasured as the specificationsamount by which the carrying value of the field andlong-lived asset exceeds its fair value.
Long-lived assets classified as held for sale are reported at the customer’s requirements. We have determined that the customer obtains controllower of the assetcarrying value or fair value less cost to sell.
Intangible assets - Our acquired intangible assets are generally amortized on a straight-line basis over time, and thus revenue is recognized over time as the customized productstheir estimated useful lives, which generally range from 2 to 20years. Our acquired intangible assets do not have indefinite lives. Intangible assets are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of the intangible asset may not be recoverable. The carrying amount of an alternativeintangible asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use for us and we have an enforceable right to payment plus reasonable profit for performance completed to date. Subsequent toeventual disposition of the Spin-off, we operate under two reporting segments: Subsea and Surface Technologies, for further details see Note 3 for further details.
Debt instruments - Debt instruments include senior and private placement notes and other borrowings. Issuance fees and redemption premium on debt instruments are included in the cost of debt in the consolidated balance sheets, as an adjustment to the nominal amount of the debt. Loan origination costs for each reportable segment forrevolving credit facilities are recorded as an asset and amortized over the years ended December 31, 2020, 2019life of the underlying debt.
Fair value measurements - Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date. The fair value framework requires the categorization of assets and 2018:
| Reportable Segments | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Year Ended December 31, | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2020 | 2019 | 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| (In millions) | Subsea | Technip Energies | Surface Technologies | Subsea | Technip Energies | Surface Technologies | Subsea | Technip Energies | Surface Technologies | ||||||||||||||||||||||||||||||||||||||||||||
| Europe, Russia, Central Asia | $ | 1,641.9 | $ | 3,111.6 | $ | 188.2 | $ | 1,745.2 | $ | 2,813.1 | $ | 236.7 | $ | 1,528.1 | $ | 3,506.1 | $ | 227.7 | |||||||||||||||||||||||||||||||||||
| Americas | 1,957.7 | 982.6 | 373.1 | 1,770.0 | 766.2 | 732.1 | 1,721.5 | 365.1 | 865.5 | ||||||||||||||||||||||||||||||||||||||||||||
| Asia Pacific | 753.2 | 1,094.3 | 123.4 | 659.9 | 1,152.5 | 189.3 | 532.9 | 1,236.1 | 123.2 | ||||||||||||||||||||||||||||||||||||||||||||
| Africa | 893.9 | 884.4 | 45.8 | 824.8 | 526.0 | 61.1 | 758.1 | 252.7 | 57.9 | ||||||||||||||||||||||||||||||||||||||||||||
| Middle East | 169.8 | 447.1 | 241.6 | 407.1 | 1,011.0 | 247.6 | 181.2 | 760.7 | 213.4 | ||||||||||||||||||||||||||||||||||||||||||||
| Total products and services revenue | $ | 5,416.5 | $ | 6,520.0 | $ | 972.1 | $ | 5,407.0 | $ | 6,268.8 | $ | 1,466.8 | $ | 4,721.8 | $ | 6,120.7 | $ | 1,487.7 | |||||||||||||||||||||||||||||||||||
•Level 1: Unadjusted quoted prices in active markets for identical assets and liabilities.
•Level 2: Observable inputs other than quoted prices included in Level 1. For example, quoted prices for similar assets or liabilities in active markets or quoted prices for identical assets or liabilities in inactive markets.
•Level 3: Unobservable inputs reflecting management’s own assumptions about the assumptions market participants would use in pricing the asset or liability.
Income taxes - Current income taxes are provided on income reported for financial statement purposes, adjusted for transactions that do not enter into the computation of income taxes payable in the same year. Deferred tax assets and liabilities are measured using enacted tax rates for the expected future tax consequences of temporary differences between the carrying amounts and the tax basis of assets and liabilities. A valuation allowance is established whenever management believes that it is more likely than not that deferred tax assets may not be realizable.
Income taxes are not provided on our equity in undistributed earnings of foreign subsidiaries or affiliates to the extent we have determined that the earnings are indefinitely reinvested. Income taxes are provided on such earnings in the period in which we can no longer support that such earnings are indefinitely reinvested.
Tax benefits related to uncertain tax positions are recognized when it is more likely than not, based on the technical merits, that the position will be sustained upon examination.
We classify interest expense and penalties recognized on underpayments of income taxes as income tax expense.
Share-based compensation - The following table represents revenue by contract typemeasurement of share-based compensation expense on restricted share awards and performance share awards is based on the market price at the grant date and the number of shares awarded. We use Black-Scholes options pricing model to measure the fair value of stock options granted on or after January 1, 2017. The stock-based compensation expense for each reportable segmentaward is recognized ratably over the applicable service period or the period beginning at the start of the service period and ending when an employee becomes eligible for the years ended December 31, 2020, 2019 and 2018:
| Reportable Segments | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Year Ended December 31, | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2020 | 2019 | 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| (In millions) | Subsea | Technip Energies | Surface Technologies | Subsea | Technip Energies | Surface Technologies | Subsea | Technip Energies | Surface Technologies | ||||||||||||||||||||||||||||||||||||||||||||
| Services | $ | 3,121.1 | $ | 6,436.9 | $ | 150.2 | $ | 3,244.5 | $ | 6,268.8 | $ | 276.4 | $ | 2,687.1 | $ | 6,120.7 | $ | 249.8 | |||||||||||||||||||||||||||||||||||
| Products | 2,295.4 | 83.1 | 821.9 | 2,162.5 | 0 | 1,190.4 | 2,034.7 | 0 | 1,237.9 | ||||||||||||||||||||||||||||||||||||||||||||
| Total products and services revenue | 5,416.5 | 6,520.0 | 972.1 | 5,407.0 | 6,268.8 | 1,466.8 | 4,721.8 | 6,120.7 | 1,487.7 | ||||||||||||||||||||||||||||||||||||||||||||
Lease and other(a) | 54.9 | 0 | 87.1 | 116.0 | 0 | 150.5 | 118.2 | 0 | 104.5 | ||||||||||||||||||||||||||||||||||||||||||||
| Total revenue | $ | 5,471.4 | $ | 6,520.0 | $ | 1,059.2 | $ | 5,523.0 | $ | 6,268.8 | $ | 1,617.3 | $ | 4,840.0 | $ | 6,120.7 | $ | 1,592.2 | |||||||||||||||||||||||||||||||||||
| December 31, | |||||||||||||||||||||||
| (In millions) | 2020 | 2019 | $ change | % change | |||||||||||||||||||
| Contract assets | $ | 1,267.6 | $ | 1,520.0 | $ | (252.4) | (16.6) | ||||||||||||||||
| Contract (liabilities) | (4,736.1) | (4,585.1) | (151.0) | (3.3) | |||||||||||||||||||
| Net contract liabilities | $ | (3,468.5) | $ | (3,065.1) | $ | (403.4) | (13.2) | ||||||||||||||||
Hedge accounting is only applied when the derivative is deemed to be highly effective at offsetting changes in anticipated cash flows of the hedged item or transaction. Changes in fair value of derivatives that are designated as cash flow hedges are deferred in accumulated other comprehensive income (loss) until the underlying transactions are recognized in earnings. At such time, related deferred hedging gains or losses are recorded in earnings on the same line as the hedged item. Effectiveness is assessed at the inception of the hedge and on a quarterly basis. Effectiveness of forward contract cash flow hedges are assessed based solely on changes in fair value attributable to the Remaining Unsatisfied Performance Obligationschange in the spot rate. The change in the fair value of the contract related to the change in forward rates is excluded from the assessment of hedge effectiveness. Changes in this excluded component of the derivative instrument, along with any ineffectiveness identified, are recorded in earnings as incurred. We document our risk management strategy and hedge effectiveness at the inception of, and during the term of, each hedge.
Reclassifications - Certain prior-year amounts have been reclassified to conform to the base transaction price, variable consideration and changes in transaction price. The order backlog table does not include contracts for which we recognize revenue at the amount to which we have the right to invoice for services performed. The transaction price of order backlog related to unfilled, confirmed customer orders is estimated at each reporting date. As of December 31, 2020, the aggregate amount of the transaction price allocated to order backlog was $21,388.2 million. TechnipFMC expects to recognize revenue on approximately 51.2% of the order backlog through 2021 and 48.8% thereafter.
| (In millions) | 2021 | 2022 | Thereafter | ||||||||||||||
| Subsea | $ | 3,585.4 | $ | 2,217.2 | $ | 1,073.4 | |||||||||||
| Technip Energies | 7,016.2 | 4,081.7 | 3,000.8 | ||||||||||||||
| Surface Technologies | 343.6 | 69.4 | 0.5 | ||||||||||||||
| Total remaining unsatisfied performance obligations | $ | 10,945.2 | $ | 6,368.3 | $ | 4,074.7 | |||||||||||
current year’s presentation.
NOTE 7.2. NEW ACCOUNTING STANDARDS
Recently Adopted Accounting Standards under GAAP
In August 2020, the FASB issued ASU No. 2020-06, “Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815 – 40).” This update simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts in an entity’s own equity. The amendments to this update are effective for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years, with early adoption permitted no earlier than fiscal years beginning after December 15, 2020. We adopted this amendment as of January 1, 2022, which did not have a material impact on our consolidated financial statements.
Recently Issued Accounting Standards under GAAP
In March 2020, the FASB issued ASU No. 2020-04, “Facilitation of the Effects of Reference Rate Reform on Financial Reporting (Topic 848).” In addition, in January 2021, FASB issued ASU No. 2021-01, “Reference Rate Reform (Topic 848): Scope” and in December 2022 issued ASU 2022-06, “Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848” which clarifies the scope of Topic 848 and defers the sunset date of Topic 848 to December 31, 2024. The amendments in these updates apply only to contracts, hedging relationships, and other transactions that reference the London interbank offered rate (“LIBOR”) or another reference rate expected to be discontinued because of reference rate reform. We do not anticipate the adoption of this update to have a material impact on our consolidated financial statements.
In October 2021, the FASB issued ASU No. 2021-08, “Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers.” This ASU requires entities to apply Topic 606 to recognize and measure contract assets and contract liabilities in a business combination. The amendments are effective for public business entities for fiscal years, including interim periods within those fiscal years, beginning after December 15, 2022. The amendment in this update should be applied with early adoption permitted. We do not anticipate the adoption of this update to have a material impact on our consolidated financial statements.
We consider the applicability and impact of all ASUs. We assessed ASUs not listed above and determined that they either were not applicable or were not expected to have a material impact on our financial statements.
71
NOTE 3. BUSINESS SEGMENTSCOMBINATION AND OTHER TRANSACTIONS
2021
Magma Global Ltd.
In 2018, we entered into a collaboration agreement with Magma Global Ltd. (“Magma Global”) to develop a new generation of hybrid flexible pipe for use in the traditional and new energy industries. As part of the collaboration, we purchased a minority ownership interest in Magma Global.
In October 2021, we entered into a transaction to purchase the remaining ownership interest in Magma Global for $64.0 million. The cash consideration is being paid to the shareholders of Magma Global in three annual installments. The first payment of $23.9 million was paid on October 12, 2021 and the second payment of $18.5 million was paid on October 12, 2022. Magma technology enables the manufacture of Thermoplastic Composite Pipe (TCP) using Polyether Ether Ketone (PEEK) polymer, which is highly resistant to corrosive compounds, such as CO2.
With the step acquisition of the remaining outstanding shares of Magma Global and our resulting control of the company, we recorded a $36.7 million impairment during the third quarter of 2021 to adjust our equity method investment to its estimated fair market value. The impairment charge is included in income/loss from equity affiliates line in our consolidated statement of income.
As a result of the purchase price allocation of the remaining interest, we recognized $50.2 million of intangible assets consisting of in-process research and development and trademarks, which are being amortized on a straight-line basis over 15 years. The fair value of the identifiable intangible assets has been estimated using an income approach.
TIOS
In accordance with the Share Purchase Agreement between Technip-Coflexip UK Holdings Limited (“TUK”) and Island Offshore Management AS (“Island Offshore”) that was executed on March 12, 2018, whereby TUK initially purchased 51% of the shares of TIOS AS (“TIOS”), a joint venture between TUK and Island Offshore, TUK acquired the remaining 49% interest in TIOS at a total price of $48.6 million during the third quarter of 2021.
NOTE 4. LEASES
Lessee Arrangements
We lease real estate, including land, buildings and warehouses, machinery/equipment, vessels, vehicles, and various types of manufacturing and data processing equipment, from a lessee perspective. Leases of real estate generally provide for payment of property taxes, insurance, and repairs by us. Substantially all our leases are classified as operating leases.
The following table is a summary of the Company’s components of net lease cost for the years ended December 31, 2022, 2021, and 2020:
| Year Ended December 31, | |||||||||||||||||
| (In millions) | 2022 | 2021 | 2020 | ||||||||||||||
| Operating and Finance lease costs | $ | 177.9 | $ | 175.9 | $ | 195.6 | |||||||||||
| Short-term lease costs | 14.0 | 5.2 | 11.0 | ||||||||||||||
Less: sublease income (1) | 3.6 | 2.4 | 2.8 | ||||||||||||||
| Net lease cost | $ | 188.3 | $ | 178.7 | $ | 203.8 | |||||||||||
(1) TechnipFMC currently subleases certain of its leased real estate and vessels to third parties.
72
Supplemental cash flow information related to leases for the years ended December 31, 2022, and 2021 is as follows:
| Year Ended December 31, | |||||||||||
| (In millions) | 2022 | 2021 | |||||||||
| Cash paid for amounts included in the measurement of lease liabilities | |||||||||||
| Operating cash flows from leases | $ | 171.0 | $ | 176.5 | |||||||
| Right-of-use assets obtained in exchange for lease liabilities | |||||||||||
| Operating leases | $ | 279.4 | $ | 114.9 | |||||||
| Finance leases | $ | 8.6 | $ | 24.6 | |||||||
Supplemental balance sheet information related to leases as of December 31, 2022 and 2021 is as follows:
| December 31, | |||||||||||
| (In millions, except lease term and discount rate) | 2022 | 2021 | |||||||||
| Weighted average remaining lease term | |||||||||||
| Operating leases | 11.5 years | 13.3 years | |||||||||
| Finance leases | 0.6 years | 1.1 years | |||||||||
| Weighted average discount rate | |||||||||||
| Operating leases | 5.8 | % | 5.9 | % | |||||||
| Finance leases | 3.2 | % | 1.2 | % | |||||||
Maturities of operating and finance lease liabilities as of December 31, 2022 are as follows:
| (In millions) | Maturity of Operating Lease Liabilities | Maturity of Finance Lease Liabilities | |||||||||
| 2023 | $ | 184.3 | $ | 105.3 | |||||||
| 2024 | 148.7 | 2.7 | |||||||||
| 2025 | 118.9 | 2.7 | |||||||||
| 2026 | 96.2 | 1.9 | |||||||||
| 2027 | 84.9 | 0.3 | |||||||||
| Thereafter | 640.6 | — | |||||||||
| Total lease payments | 1,273.6 | 112.9 | |||||||||
| Less: Imputed interest | 401.8 | 59.6 | |||||||||
Total lease liabilities (a) | $ | 871.8 | $ | 53.3 | |||||||
(a)Includes the current portion of $188.0 million.
Lessor Arrangements
We lease real estate including land, buildings and warehouses, machinery/equipment, and vessels from a lessor perspective. We determine if an arrangement is a lease at inception by assessing whether an identified asset exists and if the customer has the right to control the use of the identified asset. We use our implicit rate for our lessor arrangements. We have elected the practical expedient available for lessors to not separate lease and non-lease components for vessels. If the non-lease component is predominant in our contracts, we account for the contracts under the revenue recognition guidance in ASU 2014-09, “Revenue from Contracts with Customers” (Topic 606). If the lease component is predominant in our contracts, we account for the contracts under the lease guidance in Topic842. We estimate the amount we expect to derive from the underlying asset following the end of the lease term based on remaining economic life. Our lessor arrangements generally do not include any residual value guarantees. We recognize lessee payments of lessor costs such as taxes and insurance on a net basis when the lessee pays those costs directly to a third party or when the amount paid by the lessee is not readily determinable.
Our operating lease revenue, including variable revenue, was $215.1 million, $158.4 million and $142.0 million for the years ended December 31, 2022, 2021 and 2020, respectively. During the next five years, we expect to receive
73
$36.6 million in total undiscounted cash flows, of which $23.8 million is expected to be received in 2023 and $3.0 million is expected to be received in 2024.
NOTE 5. REVENUE
The majority of our reporting segments was made on the basis of our strategic priorities within each segmentrevenue is from long-term contracts associated with designing and the differences in themanufacturing products and systems and providing services we provide, which corresponds to the mannercustomers involved in which our Chairmanexploration and Chief Executive Officer, as our chief operating decision maker, reviewsproduction of crude oil and evaluates operating performance to make decisions about resources to be allocated to the segment.natural gas.
Subsea
Our Subsea - designssegment manufactures and manufacturesdesigns products and systems, performs engineering, procurement and project management and provides services used by oil and gas companies involved in offshore exploration and production of crude oil and natural gas.
Under Subsea engineering, procurement, construction and installation contracts, revenue is principally generated from long-term contracts with customers. We have determined these contracts generally have one performance obligation as the delivered product is highly customized to customer and field specifications. We generally recognize revenue over time for such contracts as the customized products do not have an alternative use for TechnipFMC and we have an enforceable right to payment plus a reasonable profit for performance completed to date.
Our Subsea segment also performs an array of subsea services including (i) installation services, (ii) asset management services (iii) product optimization, (iv) inspection, maintenance and repair services, and (v) well access and intervention services, where revenue is generally earned through the execution of either installation-type or maintenance-type contracts. For either contract type, management has determined that will support the world’s energy transition.performance of the service generally represents one single performance obligation. We have determined that revenue from these contracts is recognized over time as the customer simultaneously receives and consumes the benefit of the services.
Our Surface Technologies - designs and manufactures products and systems and provides services used by oil and gas companies involved in land and shallow water exploration and production of crude oil and natural gas;segment designs, manufactures and supplies technologically advanced high-pressurewellhead systems and high pressure valves and fittingspumps used in stimulation activities for oilfield service companies;companies and also provides installation, flowback and other services for exploration and production companies.
We provide a full range of drilling, completion and production wellhead systems for both standard and custom-engineered applications. Under pressure control product contracts, we design and manufacture flowline products, under the Weco®/Chiksan® trademarks, articulating frac arm manifold trailers, well testing services.service pumps, compact valves and reciprocating pumps used in well completion and stimulation activities by major oilfield service companies. Performance obligations within these systems are satisfied either through delivery of a standardized product or equipment or the delivery of a customized product or equipment.
For contracts with a customized product or equipment performance obligation, the revenue is recognized over time, as the manufacturing of our separation transaction,product does not create an asset with an alternative use for us and we renamed our Onshore/Offshore segmenthave an enforceable right to Technip Energies, which includes our Loading Systems business that was previously reported in the Surface Technologies segment and our process automation business, Cybernetix, that was previously reported in the Subsea segment. Prior year information has not been restated duepayment plus a reasonable profit for performance completed to these businesses not being material. Subsequent to the Spin-off, we operate under two reporting segments: Subsea and Surface Technologies, for further details see Note 3 for further details.
Revenue from standard measurement equipment contracts is recognized at a point in time, while maintenance-type contracts are typically priced at a daily or hourly rate. We have determined that revenue for these contracts is recognized over time because the customer simultaneously receives and consumes the benefit of the services.
Disaggregation of Revenue
We disaggregate revenue by businessgeographic location and contract type. The following table presents total revenue by geography for each reportable segment
| Year Ended December 31, | |||||||||||||||||
| (In millions) | 2020 | 2019 | 2018 | ||||||||||||||
| Segment revenue | |||||||||||||||||
| Subsea | $ | 5,471.4 | $ | 5,523.0 | $ | 4,840.0 | |||||||||||
| Technip Energies | 6,520.0 | 6,268.8 | 6,120.7 | ||||||||||||||
| Surface Technologies | 1,059.2 | 1,617.3 | 1,592.2 | ||||||||||||||
| Total revenue | $ | 13,050.6 | $ | 13,409.1 | $ | 12,552.9 | |||||||||||
| Segment operating profit (loss) | |||||||||||||||||
| Subsea | $ | (2,815.5) | $ | (1,447.7) | $ | (1,529.5) | |||||||||||
| Technip Energies | 683.6 | 959.6 | 824.0 | ||||||||||||||
| Surface Technologies | (429.3) | (656.1) | 172.8 | ||||||||||||||
| Total segment operating loss | (2,561.2) | (1,144.2) | (532.7) | ||||||||||||||
| Corporate items | |||||||||||||||||
| Impairment, restructuring and other expenses | (10.0) | (17.4) | (18.9) | ||||||||||||||
| Separation costs | (39.5) | (72.1) | 0 | ||||||||||||||
| Merger transaction and integration costs | — | (31.2) | (36.5) | ||||||||||||||
| Legal expenses | — | (54.6) | (280.0) | ||||||||||||||
Other corporate expenses (a) | (152.0) | (218.1) | (142.6) | ||||||||||||||
| Corporate expense | (201.5) | (393.4) | (478.0) | ||||||||||||||
| Interest income | 56.6 | 116.5 | 121.4 | ||||||||||||||
| Interest expense | (349.6) | (567.8) | (482.3) | ||||||||||||||
| Foreign exchange losses | (28.8) | (146.9) | (116.5) | ||||||||||||||
| Total corporate items | (523.3) | (991.6) | (955.4) | ||||||||||||||
Loss before income taxes (b) | $ | (3,084.5) | $ | (2,135.8) | $ | (1,488.1) | |||||||||||
| Reportable Segments | |||||||||||||||||||||||||||||||||||
| Year Ended December 31, | |||||||||||||||||||||||||||||||||||
| 2022 | 2021 | 2020 | |||||||||||||||||||||||||||||||||
| (In millions) | Subsea | Surface Technologies | Subsea | Surface Technologies | Subsea | Surface Technologies | |||||||||||||||||||||||||||||
| Europe, Central Asia | $ | 1,550.1 | $ | 166.7 | $ | 1,404.4 | $ | 191.5 | 1,664.1 | 192.7 | |||||||||||||||||||||||||
| Latin America | 1,460.1 | 112.1 | 1,157.7 | 86.7 | 1,042.4 | 76.6 | |||||||||||||||||||||||||||||
| Africa | 865.6 | 37.6 | 1,057.3 | 44.0 | 908.6 | 46.9 | |||||||||||||||||||||||||||||
| North America | 780.6 | 552.0 | 753.6 | 372.7 | 899.7 | 367.9 | |||||||||||||||||||||||||||||
| Asia Pacific | 687.5 | 97.2 | 927.4 | 104.2 | 772.1 | 131.0 | |||||||||||||||||||||||||||||
| Middle East | 117.3 | 273.6 | 28.7 | 275.3 | 184.5 | 244.1 | |||||||||||||||||||||||||||||
| Total revenue | $ | 5,461.2 | $ | 1,239.2 | $ | 5,329.1 | $ | 1,074.4 | $ | 5,471.4 | $ | 1,059.2 | |||||||||||||||||||||||
The following table represents revenue from Yamal LNG exceeded 10% of our consolidated revenue.by contract type for each reportable segment for the years ended December 31, 2022, 2021 and 2020:
| December 31, | |||||||||||
| (In millions) | 2020 | 2019 | |||||||||
| Segment assets | |||||||||||
| Subsea | $ | 6,796.6 | $ | 10,824.2 | |||||||
| Technip Energies | 5,058.3 | 4,448.8 | |||||||||
| Surface Technologies | 1,758.3 | 2,246.4 | |||||||||
| Total segment assets | 13,613.2 | 17,519.4 | |||||||||
Corporate (a) | 6,079.4 | 5,999.4 | |||||||||
| Total assets | $ | 19,692.6 | $ | 23,518.8 | |||||||
| Reportable Segments | |||||||||||||||||||||||||||||||||||
| Year Ended December 31, | |||||||||||||||||||||||||||||||||||
| 2022 | 2021 | 2020 | |||||||||||||||||||||||||||||||||
| (In millions) | Subsea | Surface Technologies | Subsea | Surface Technologies | Subsea | Surface Technologies | |||||||||||||||||||||||||||||
| Services | $ | 3,410.4 | $ | 217.9 | $ | 3,282.0 | $ | 158.7 | $ | 3,121.1 | $ | 150.2 | |||||||||||||||||||||||
| Products | 1,993.8 | 863.2 | 2,002.5 | 801.9 | 2,295.4 | 821.9 | |||||||||||||||||||||||||||||
Lease(a) | 57.0 | 158.1 | 44.6 | 113.8 | 54.9 | 87.1 | |||||||||||||||||||||||||||||
| Total revenue | $ | 5,461.2 | $ | 1,239.2 | $ | 5,329.1 | $ | 1,074.4 | $ | 5,471.4 | $ | 1,059.2 | |||||||||||||||||||||||
(a)Corporate includesRepresents revenue not subject to ASC Topic 606.
Contract Balances
The timing of revenue recognition, billings and cash LIFO adjustments, deferred income tax balances, property, plantcollections results in billed accounts receivable, costs and equipmentestimated earnings in excess of billings on uncompleted contracts (contract assets), and intercompany eliminationsbillings in excess of costs and estimated earnings on uncompleted contracts (contract liabilities) in the consolidated balance sheets. Any expected contract losses are recorded in the period in which they become probable.
Contract Assets -Contract Assets include unbilled amounts typically resulting from sales under long-term contracts when revenue is recognized over time and revenue recognized exceeds the amount billed to the customer, and right to payment is not associated with a specific segment, pension assetsjust subject to the passage of time. Amounts may not exceed their net realizable value. Costs and the fair valueestimated earnings in excess of derivative financial instruments.billings on uncompleted contracts are generally classified as current.
Contract Liabilities - We sometimes receive advances or deposits from our customers, before revenue is recognized, resulting in contract liabilities.
| Capital Expenditures | Depreciation and Amortization | Research and Development Expense | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Year Ended December 31, | Year Ended December 31, | Year Ended December 31, | |||||||||||||||||||||||||||||||||||||||||||||||||||
| (In millions) | 2020 | 2019 | 2018 | 2020 | 2019 | 2018 | 2020 | 2019 | 2018 | ||||||||||||||||||||||||||||||||||||||||||||
| Subsea | $ | 213.6 | $ | 287.7 | $ | 223.2 | $ | 324.9 | $ | 345.6 | $ | 440.4 | $ | 66.5 | $ | 134.4 | $ | 145.2 | |||||||||||||||||||||||||||||||||||
| Technip Energies | 13.0 | 22.6 | 7.6 | 34.2 | 38.7 | 38.2 | 44.5 | 13.2 | 29.7 | ||||||||||||||||||||||||||||||||||||||||||||
| Surface Technologies | 38.5 | 96.6 | 111.9 | 70.1 | 107.9 | 66.6 | 8.8 | 15.3 | 14.3 | ||||||||||||||||||||||||||||||||||||||||||||
| Corporate | 26.7 | 47.5 | 25.4 | 18.0 | 17.4 | 5.2 | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Total | $ | 291.8 | $ | 454.4 | $ | 368.1 | $ | 447.2 | $ | 509.6 | $ | 550.4 | $ | 119.8 | $ | 162.9 | $ | 189.2 | |||||||||||||||||||||||||||||||||||
| Year Ended December 31, | |||||||||||||||||
| (In millions) | 2020 | 2019 | 2018 | ||||||||||||||
| Revenue | |||||||||||||||||
| Russia | $ | 2,451.5 | $ | 2,378.0 | $ | 2,773.3 | |||||||||||
| United States | 2,141.4 | 1,931.2 | 1,275.8 | ||||||||||||||
| Norway | 1,393.5 | 1,371.1 | 1,202.6 | ||||||||||||||
| Brazil | 698.8 | 1,099.7 | 1,478.7 | ||||||||||||||
| United Kingdom | 513.8 | 540.8 | 442.1 | ||||||||||||||
| Angola | 488.5 | 447.8 | 385.7 | ||||||||||||||
| Egypt | 445.9 | 177.6 | 13.2 | ||||||||||||||
| Mozambique | 391.4 | 166.1 | 116.2 | ||||||||||||||
| India | 386.4 | 518.0 | 214.0 | ||||||||||||||
| Senegal | 353.0 | 176.5 | 1.2 | ||||||||||||||
| Vietnam | 340.7 | 72.1 | 34.7 | ||||||||||||||
| Israel | 333.6 | 757.0 | 243.8 | ||||||||||||||
| Guyana | 330.1 | 7.2 | 7.6 | ||||||||||||||
| Australia | 320.8 | 372.8 | 926.6 | ||||||||||||||
| Singapore | 312.2 | 64.9 | 23.4 | ||||||||||||||
| Indonesia | 286.9 | 237.6 | 130.7 | ||||||||||||||
| Malaysia | 281.7 | 283.8 | 362.3 | ||||||||||||||
| France | 186.9 | 92.8 | 138.9 | ||||||||||||||
| China | 151.4 | 272.9 | 112.3 | ||||||||||||||
| United Arab Emirates | 147.9 | 327.2 | 460.3 | ||||||||||||||
| All other countries | 1,094.2 | 2,114.0 | 2,209.5 | ||||||||||||||
| Total revenue | $ | 13,050.6 | $ | 13,409.1 | $ | 12,552.9 | |||||||||||
| December 31, | |||||||||||
| (In millions) | 2020 | 2019 | |||||||||
| Long-lived assets | |||||||||||
| United Kingdom | $ | 936.2 | $ | 957.1 | |||||||
| United States | 467.5 | 558.1 | |||||||||
| Netherlands | 419.5 | 493.0 | |||||||||
| Norway | 312.2 | 333.0 | |||||||||
| Brazil | 260.0 | 313.2 | |||||||||
| All other countries | 466.4 | 507.6 | |||||||||
| Total long-lived assets | $ | 2,861.8 | $ | 3,162.0 | |||||||
| Year Ended December 31, | |||||||||||||||||
| (In millions, except per share data) | 2020 | 2019 | 2018 | ||||||||||||||
| Net loss attributable to TechnipFMC plc | $ | (3,287.6) | $ | (2,415.2) | $ | (1,921.6) | |||||||||||
| Weighted average number of shares outstanding | 448.7 | 448.0 | 458.0 | ||||||||||||||
| Dilutive effect of restricted stock units | — | 0 | 0 | ||||||||||||||
| Dilutive effect of performance shares | — | — | 0 | ||||||||||||||
| Total shares and dilutive securities | 448.7 | 448.0 | 458.0 | ||||||||||||||
| Basic loss per share attributable to TechnipFMC plc | $ | (7.33) | $ | (5.39) | $ | (4.20) | |||||||||||
| Diluted loss per share attributable to TechnipFMC plc | $ | (7.33) | $ | (5.39) | $ | (4.20) | |||||||||||
| Year Ended December 31, | |||||||||||||||||
| (millions of shares) | 2020 | 2019 | 2018 | ||||||||||||||
| Share option awards | 4.6 | 4.0 | 3.5 | ||||||||||||||
| Restricted share units | 1.8 | 0 | 0 | ||||||||||||||
| Performance shares | 1.9 | 1.6 | 0 | ||||||||||||||
| Total | 8.3 | 5.6 | 3.5 | ||||||||||||||
| December 31, | |||||||||||
| (In millions) | 2020 | 2019 | |||||||||
| Raw materials | $ | 272.4 | $ | 347.5 | |||||||
| Work in process | 245.2 | 290.2 | |||||||||
| Finished goods | 750.9 | 778.3 | |||||||||
| Inventories, net | $ | 1,268.5 | $ | 1,416.0 | |||||||
| December 31, | |||||||||||||||||||||||
| (In millions) | 2022 | 2021 | $ change | % change | |||||||||||||||||||
| Contract assets | $ | 981.6 | $ | 966.0 | $ | 15.6 | 1.6 | ||||||||||||||||
| Contract (liabilities) | (1,156.4) | (1,012.9) | (143.5) | (14.2) | |||||||||||||||||||
| Net contract (liabilities) | $ | (174.8) | $ | (46.9) | $ | (127.9) | (272.7) | ||||||||||||||||
The increase in our contract assets from December 31, 2020 and 2019, respectively. The current replacement costs of LIFO inventories exceeded their recorded values by $11.6 million and $10.9 million as of2021 to December 31, 2020 and 2019, respectively. There2022 was 0 reductiondue to the base LIFO inventorytiming of project milestones.
The increase in 2020.our contract liabilities was driven from an overall portfolio and client mix enabling an acceleration of cash payments in advance.
| December 31, | |||||||||||
| (In millions) | 2020 | 2019 | |||||||||
| Value - added tax receivables | $ | 450.5 | $ | 395.2 | |||||||
| Sundry receivables | 179.3 | 69.6 | |||||||||
| Prepaid expenses | 111.7 | 66.8 | |||||||||
| Other taxes receivables | 90.1 | 100.7 | |||||||||
| Assets held for sale | 47.3 | 25.8 | |||||||||
| Current financial assets at amortized cost | 40.6 | 42.0 | |||||||||
| Held-to-maturity investments | 24.2 | 49.7 | |||||||||
| Other | 48.9 | 113.9 | |||||||||
| Total other current assets | $ | 992.6 | $ | 863.7 | |||||||
| December 31, | |||||||||||
| (In millions) | 2020 | 2019 | |||||||||
| Warranty accruals and project contingencies | 285.9 | 310.1 | |||||||||
| Value - added tax and other taxes payable | $ | 221.3 | $ | 240.4 | |||||||
| Legal provisions | 188.5 | 183.6 | |||||||||
| Redeemable financial liability | 141.9 | 129.1 | |||||||||
| Social security liability | 108.9 | 116.5 | |||||||||
| Provisions | 75.5 | 86.6 | |||||||||
| Compensation accrual | 54.3 | 89.6 | |||||||||
| Current portion of accrued pension and other post-retirement benefits | 13.9 | 14.9 | |||||||||
| Liabilities classified as held for sale | 0 | 9.3 | |||||||||
| Other accrued liabilities | 278.4 | 314.4 | |||||||||
| Total other current liabilities | $ | 1,368.6 | $ | 1,494.5 | |||||||
| Year Ended December 31, | |||||||||||
| (In millions) | 2020 | 2019 | |||||||||
| Balance at beginning of period | $ | 193.5 | $ | 234.4 | |||||||
| Warranty expenses | 95.6 | 78.8 | |||||||||
| Adjustment to existing accruals | (86.2) | (57.5) | |||||||||
| Claims paid | (28.1) | (62.2) | |||||||||
| Balance at end of period | $ | 174.8 | $ | 193.5 | |||||||
| December 31 | |||||||||||||||||
| 2020 | 2019 | ||||||||||||||||
| (In millions, except %) | Percentage Owned | Carrying Value | |||||||||||||||
| Dofcon Brasil AS | 50.0 | % | 234.7 | 167.4 | |||||||||||||
| Magma Global Limited | 25.0 | % | 51.4 | 50.2 | |||||||||||||
| Serimax Holdings SAS | 20.0 | % | 18.8 | 21.5 | |||||||||||||
| Other | 54.0 | 61.3 | |||||||||||||||
| Investments in equity affiliates | $ | 358.9 | $ | 300.4 | |||||||||||||
Transaction Price Allocated to the Remaining Unsatisfied Performance Obligations
Remaining unsatisfied performance obligations (“RUPO” or “order backlog”) represent the transaction price for products and services for which we have a joint venture between TechnipFMCmaterial right, but work has not been performed. Transaction price of the order backlog includes the base transaction price, variable consideration and DOF Subsea and was foundedchanges in 2006. Dofcon provides Pipe-Laying Support Vessels (PLSVs) for work in oil and gas fields offshore Brazil. Dofcon is considered a VIE because ittransaction price. The order backlog table does not include contracts for which we recognize revenue at the amount to which we have sufficient equitythe right to finance its activities without additional subordinated financial support from other parties. We are notinvoice for services performed. The transaction price of order backlog related to unfilled, confirmed customer orders is estimated at each reporting date. As of December 31, 2022, the primary beneficiaryaggregate amount of the VIE. As such, we have accounted for our 50% investment using the equity method of accounting with results reported in our Subsea segment.
The following table details the order backlog for our 25% investment using the equity method investmenteach business segment as of accounting with results reported in our Subsea segment.December 31, 2022:
| Year Ended December 31, | ||||||||||||||||||||||||||||||||||
| (In millions) | (In millions) | 2020 | 2019 | 2018 | (In millions) | 2023 | 2024 | Thereafter | ||||||||||||||||||||||||||
| Subsea | Subsea | $ | 64.6 | $ | 59.8 | $ | 80.9 | Subsea | $ | 3,919.0 | $ | 2,900.6 | $ | 1,311.9 | ||||||||||||||||||||
| Technip Energies | (1.6) | 3.1 | 33.4 | |||||||||||||||||||||||||||||||
| Income from equity affiliates | $ | 63.0 | $ | 62.9 | $ | 114.3 | ||||||||||||||||||||||||||||
| Surface Technologies | Surface Technologies | 537.4 | 126.8 | 557.3 | ||||||||||||||||||||||||||||||
| Total remaining unsatisfied performance obligations | Total remaining unsatisfied performance obligations | $ | 4,456.4 | $ | 3,027.4 | $ | 1,869.2 | |||||||||||||||||||||||||||
NOTE 13. RELATED PARTY TRANSACTIONS6. BUSINESS SEGMENTS
| December 31, | |||||||||||
| (In millions) | 2020 | 2019 | |||||||||
| TP JGC Coral France SNC | $ | 38.1 | $ | 40.1 | |||||||
| Equinor ASA | 24.1 | 0 | |||||||||
| TTSJV W.L.L. | 14.9 | 22.4 | |||||||||
| Novarctic SNC | 9.7 | 0 | |||||||||
| Dofcon Navegacao | 4.2 | 0 | |||||||||
| Techdof Brasil AS | 8.0 | 4.3 | |||||||||
| Storengy | 6.1 | 3.1 | |||||||||
| Others | 8.4 | 6.9 | |||||||||
| Total trade receivables | $ | 113.5 | $ | 76.8 | |||||||
•Subsea - designs and manufactures products and systems, performs engineering, procurement and project management, and provides services used by oil and gas companies involved in offshore exploration and production of Directors serves on the Boardcrude oil and natural gas.
•Surface Technologies - designs and manufactures products and systems and provides services used by oil and gas companies involved in land and shallow water exploration and production of Directorscrude oil and natural gas; designs, manufactures, and supplies technologically advanced high-pressure valves and fittings for Storengy. In October 2020, we added a new member of our Board of Directors who is an executive of Equinor ASA.
| December 31, | |||||||||||
| (In millions) | 2020 | 2019 | |||||||||
| Chiyoda | $ | 14.2 | $ | 24.8 | |||||||
| Nipigas | 14.2 | — | |||||||||
| Saipem | 23.7 | — | |||||||||
| JGC Corporation | 1.9 | 15.1 | |||||||||
| IFP Energies nouvelles | — | 2.4 | |||||||||
| Dofcon Navegacao | 1.5 | 2.1 | |||||||||
| Others | 5.7 | 6.7 | |||||||||
| Total trade payables | $ | 61.2 | $ | 51.1 | |||||||
| Year Ended December 31, | |||||||||||||||||
| (In millions) | 2020 | 2019 | 2018 | ||||||||||||||
| TTSJV W.L.L. | $ | 47.2 | $ | 127.9 | $ | 0 | |||||||||||
| TP JGC Coral France SNC | 44.2 | 110.4 | 118.2 | ||||||||||||||
| Equinor ASA | 81.1 | 0 | 0 | ||||||||||||||
| Equinor Brasil | 38.5 | 0 | 0 | ||||||||||||||
| Anadarko Petroleum Company | — | 67.1 | 124.8 | ||||||||||||||
| TOP CV | — | 11.9 | 7.2 | ||||||||||||||
| Storengy | 10.7 | 8.8 | — | ||||||||||||||
| Novarctic SNC | 10.7 | 0.4 | 0 | ||||||||||||||
| Dofcon Navegacao | 3.4 | 8.4 | 2.9 | ||||||||||||||
| Techdof Brasil AS | 11.2 | 8.3 | 7.0 | ||||||||||||||
| JGC Corporation | — | 6.7 | 0 | ||||||||||||||
| Others | 27.2 | 29.7 | 33.2 | ||||||||||||||
| Total revenue | $ | 274.2 | $ | 379.6 | $ | 293.3 | |||||||||||
Information by business segment
Segment revenue and segment operating profit (loss) were as follows:
| Year Ended December 31, | |||||||||||||||||
| (In millions) | 2022 | 2021 | 2020 | ||||||||||||||
| Segment revenue | |||||||||||||||||
| Subsea | $ | 5,461.2 | $ | 5,329.1 | $ | 5,471.4 | |||||||||||
| Surface Technologies | 1,239.2 | 1,074.4 | 1,059.2 | ||||||||||||||
| Total revenue | $ | 6,700.4 | $ | 6,403.5 | $ | 6,530.6 | |||||||||||
| Segment operating profit (loss) | |||||||||||||||||
| Subsea | $ | 317.6 | $ | 141.4 | $ | (2,815.5) | |||||||||||
| Surface Technologies | 58.3 | 42.0 | (429.3) | ||||||||||||||
| Total segment operating profit (loss) | 375.9 | 183.4 | (3,244.8) | ||||||||||||||
| Corporate items | |||||||||||||||||
Corporate expense (a) | (104.7) | (118.1) | (131.9) | ||||||||||||||
| Net interest expense | (120.9) | (143.3) | (81.8) | ||||||||||||||
| Loss on early extinguishment of debt | (29.8) | (61.9) | — | ||||||||||||||
| Income (loss) from investment in Technip Energies | (27.7) | 322.2 | — | ||||||||||||||
| Foreign exchange gains (losses) | (23.9) | 15.8 | (40.2) | ||||||||||||||
| Total corporate items | (307.0) | 14.7 | (253.9) | ||||||||||||||
Income (loss) before income taxes(b) | $ | 68.9 | $ | 198.1 | $ | (3,498.7) | |||||||||||
(a)Corporate expense includes corporate staff expenses, share-based compensation expenses and other employee benefits.
(b)Includes amounts attributable to non-controlling interests.
Segment assets were as follows:
| December 31, | |||||||||||
| (In millions) | 2022 | 2021 | |||||||||
| Segment assets | |||||||||||
| Subsea | $ | 6,455.1 | $ | 6,532.5 | |||||||
| Surface Technologies | 1,334.5 | 1,420.0 | |||||||||
| Total segment assets | 7,789.6 | 7,952.5 | |||||||||
Corporate (a) | 1,654.7 | 2,067.6 | |||||||||
| Total assets | $ | 9,444.3 | $ | 10,020.1 | |||||||
(a)Corporate includes cash, investment in Technip Energies, LIFO adjustments, deferred income tax balances, property, plant and equipment and intercompany eliminations not associated with a specific segment, pension assets and the fair value of Directors (the “Director”) servedderivative financial instruments.
77
Other business segment information is as follows:
| Capital Expenditures | Depreciation and Amortization | Research and Development Expense | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Year Ended December 31, | Year Ended December 31, | Year Ended December 31, | |||||||||||||||||||||||||||||||||||||||||||||||||||
| (In millions) | 2022 | 2021 | 2020 | 2022 | 2021 | 2020 | 2022 | 2021 | 2020 | ||||||||||||||||||||||||||||||||||||||||||||
| Subsea | $ | 120.2 | $ | 149.4 | $ | 213.6 | $ | 304.3 | $ | 317.2 | $ | 324.9 | $ | 62.2 | $ | 73.2 | $ | 66.5 | |||||||||||||||||||||||||||||||||||
| Surface Technologies | 31.9 | 36.8 | 38.5 | 70.0 | 64.8 | 70.1 | 4.8 | 5.2 | 8.8 | ||||||||||||||||||||||||||||||||||||||||||||
| Corporate | 5.8 | 5.5 | 4.0 | 2.9 | 3.4 | 17.1 | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Total | $ | 157.9 | $ | 191.7 | $ | 256.1 | $ | 377.2 | $ | 385.4 | $ | 412.1 | $ | 67.0 | $ | 78.4 | $ | 75.3 | |||||||||||||||||||||||||||||||||||
Information by geography
Revenue by geography was identified based on the Board of Directors of Anadarko Petroleum Company (“Anadarko”) until August 2019. In August 2019, Anadarko was acquiredcountry where our products and services were delivered, and is as follows:
| Year Ended December 31, | |||||||||||||||||
| (In millions) | 2022 | 2021 | 2020 | ||||||||||||||
| Revenue | |||||||||||||||||
| United States | $ | 1,348.4 | $ | 1,137.2 | $ | 1,320.1 | |||||||||||
| Brazil | 1,047.3 | 767.8 | 600.6 | ||||||||||||||
| Norway | 907.6 | 979.9 | 1,216.6 | ||||||||||||||
| United Kingdom | 710.3 | 542.5 | 489.0 | ||||||||||||||
| Guyana | 369.1 | 314.7 | 330.1 | ||||||||||||||
| Australia | 295.4 | 419.8 | 122.5 | ||||||||||||||
| Mozambique | 284.4 | 472.0 | 320.4 | ||||||||||||||
| Angola | 247.9 | 406.3 | 482.8 | ||||||||||||||
| Malaysia | 228.5 | 206.9 | 190.0 | ||||||||||||||
| Ghana | 184.7 | 73.4 | 34.0 | ||||||||||||||
| Singapore | 126.5 | 216.3 | 219.9 | ||||||||||||||
| India | 121.4 | 109.8 | 26.8 | ||||||||||||||
| United Arab Emirates | 117.8 | 49.4 | 39.2 | ||||||||||||||
| Israel | 117.3 | 26.8 | 179.3 | ||||||||||||||
| Indonesia | 42.6 | 224.9 | 280.0 | ||||||||||||||
| Trinidad | 6.7 | 78.1 | 106.3 | ||||||||||||||
| All other countries | 544.5 | 377.7 | 573.0 | ||||||||||||||
| Total revenue | $ | 6,700.4 | $ | 6,403.5 | $ | 6,530.6 | |||||||||||
Long-lived assets by Occidental Petroleum Corporation (“Occidental”). As a result, the Director no longer servesgeography represent property, plant and equipment, net, and are as a member of the Board of Directors of Anadarko. The Director is not an officer or director of Occidental.follows:
| Year Ended December 31, | |||||||||||||||||
| (In millions) | 2020 | 2019 | 2018 | ||||||||||||||
| Chiyoda | $ | 1.4 | $ | 25.1 | $ | 53.0 | |||||||||||
| JGC Corporation | 0.4 | 20.8 | 81.2 | ||||||||||||||
| Arkema S.A. | 5.3 | 18.9 | 2.6 | ||||||||||||||
| Serimax Holdings SAS | 0.4 | 17.7 | 0.1 | ||||||||||||||
| Saipem | 26.8 | 0 | 0 | ||||||||||||||
| Nipigas | 36.8 | 0 | 0 | ||||||||||||||
| Magma Global Limited | 14.0 | 7.3 | 3.0 | ||||||||||||||
| TP JGC Coral France SNC | — | 5.0 | — | ||||||||||||||
| Jumbo Shipping | 16.0 | 4.5 | — | ||||||||||||||
| Dofcon Navegacao | 24.0 | 1.8 | 0 | ||||||||||||||
| Others | 24.6 | 41.3 | 14.8 | ||||||||||||||
| Total expenses | $ | 149.7 | $ | 142.4 | $ | 154.7 | |||||||||||
| December 31, | |||||||||||
| (In millions) | 2022 | 2021 | |||||||||
| Long-lived assets | |||||||||||
| United Kingdom | $ | 741.6 | $ | 882.9 | |||||||
| Netherlands | 387.0 | 414.7 | |||||||||
| United States | 357.2 | 383.4 | |||||||||
| Brazil | 306.4 | 265.5 | |||||||||
| Norway | 225.3 | 271.9 | |||||||||
| All other countries | 337.4 | 378.8 | |||||||||
| Total long-lived assets | $ | 2,354.9 | $ | 2,597.2 | |||||||
NOTE 14. PROPERTY, PLANT AND EQUIPMENT7. EARNINGS (LOSS) PER SHARE
| December 31, | |||||||||||
| (In millions) | 2020 | 2019 | |||||||||
| Land and land improvements | $ | 88.4 | $ | 108.4 | |||||||
| Buildings | 611.0 | 626.9 | |||||||||
| Vessels | 1,968.1 | 2,091.9 | |||||||||
| Machinery and equipment | 1,919.4 | 1,930.6 | |||||||||
| Office fixtures and furniture | 292.0 | 285.0 | |||||||||
| Construction in process | 148.1 | 130.9 | |||||||||
| Other | 243.5 | 277.1 | |||||||||
| 5,270.5 | 5,450.8 | ||||||||||
| Accumulated depreciation | (2,408.7) | (2,288.8) | |||||||||
| Property, plant and equipment, net | $ | 2,861.8 | $ | 3,162.0 | |||||||
| Year Ended December 31, | |||||||||||||||||
| (In millions, except per share data) | 2022 | 2021 | 2020 | ||||||||||||||
| Income (loss) from continuing operations attributable to TechnipFMC plc | $ | (61.9) | $ | 87.8 | $ | (3,552.6) | |||||||||||
| Income (loss) from discontinued operations attributable to TechnipFMC plc | (45.3) | (74.5) | 265.0 | ||||||||||||||
| Net income (loss) attributable to TechnipFMC plc | $ | (107.2) | $ | 13.3 | $ | (3,287.6) | |||||||||||
| Weighted average number of shares outstanding | 449.5 | 450.5 | 448.7 | ||||||||||||||
| Dilutive effect of restricted stock units | — | 4.1 | — | ||||||||||||||
| Total shares and dilutive securities | 449.5 | 454.6 | 448.7 | ||||||||||||||
| Basic and diluted earnings (loss) per share attributable to TechnipFMC plc: | |||||||||||||||||
| Earnings (loss) per share from continuing operations attributable to TechnipFMC plc | |||||||||||||||||
| Basic and diluted | $ | (0.14) | $ | 0.19 | $ | (7.92) | |||||||||||
| Earnings (loss) per share from discontinued operations attributable to TechnipFMC plc | |||||||||||||||||
| Basic | $ | (0.10) | $ | (0.17) | $ | 0.59 | |||||||||||
| Diluted | $ | (0.10) | $ | (0.16) | $ | 0.59 | |||||||||||
| Total earnings (loss) per share attributable to TechnipFMC plc | |||||||||||||||||
| Basic and diluted | $ | (0.24) | $ | 0.03 | $ | (7.33) | |||||||||||
For the carrying amount of certain of our long-lived assets exceeded their fair value and recorded an impairment. See Note 19 for further details.
Weighted average shares of $7.1 million, which is included in other income (expense), net in our consolidated statementsthe following share-based compensation awards were excluded from the calculation of income.diluted weighted average number of shares where the assumed proceeds exceed the average market price from the calculation of diluted weighted average number of shares, because their effect would be anti-dilutive:
| Year Ended December 31, | |||||||||||||||||
| (millions of shares) | 2022 | 2021 | 2020 | ||||||||||||||
| Share option awards | 1.5 | 1.7 | 4.6 | ||||||||||||||
| Restricted share units | — | 0.1 | 1.8 | ||||||||||||||
| Performance shares | — | — | 1.9 | ||||||||||||||
| Total | 1.5 | 1.8 | 8.3 | ||||||||||||||
NOTE 15. GOODWILL AND INTANGIBLE ASSETS
We testmanage our goodwillreceivables portfolios using published default risk as a key credit quality indicator for impairment by comparing the fair valueour loans and receivables. Our loans receivable and security deposits were related to sales of eachlong-lived assets or businesses, loans to related parties for capital expenditure purposes, or security deposits for lease arrangements.
We manage our held-to-maturity debt securities using published credit ratings as a key credit quality indicator as our held-to-maturity debt securities consist of our reporting units to their net carrying value. Our impairment analysis is quantitative; however, it includes subjective estimates based on assumptions regarding future growth rates, interest rates and operating expenses.
The income approach estimates fair valuetable below summarizes the amortized cost basis of financial assets by discounting each reporting unit’s estimated future cash flows using a weighted-average costyears of capital that reflects current market conditionsorigination and credit quality. The key credit quality indicator is updated as of December 31, 2022.
| December 31, 2022 | December 31, 2021 | ||||||||||||||||||||||||||||||||||
| (In millions) | Credit rating | Year of origination | Balance | Credit rating | Year of origination | Balance | |||||||||||||||||||||||||||||
| Loans receivables and other | Moody’s rating Aa3 - Ba2 | 2020-2022 | $ | 51.0 | Moody’s rating Ba2 | 2019-2020 | $ | 50.9 | |||||||||||||||||||||||||||
| Debt securities at amortized cost | Moody’s rating B3 | 2021 | 16.2 | Moody’s rating B3 | 2019-2021 | 24.0 | |||||||||||||||||||||||||||||
| Total financial assets | $ | 67.2 | $ | 74.9 | |||||||||||||||||||||||||||||||
Credit Losses
For contract assets and trade receivables we have elected to calculate an expected credit loss based on loss rates from historical data. We develop loss-rate statistics on the basis of the amount written-off over the life of the financial assets and contract assets and adjust these historical credit loss trends for forward-looking factors specific to the debtors and the economic environment to determine lifetime expected losses.
For loans receivable, held-to-maturity debt securities at amortized cost, and security deposits and other, we evaluate whether these securities are considered to have low credit risk profile ofat the reporting unit. To arrive at our future cash flows, we use estimatesdate using available, reasonable and supportable information.
The table below shows the roll-forward of economic and market assumptions, including growth rates in revenues, costs, estimates of future expected changes in operating margins, tax rates and cash expenditures. Future revenues are also adjusted to match changes in our business strategy. We believe this approach is an appropriate valuation method. Under the market multiple approach, we determine the estimated fair value of each of our reporting units by applying transaction multiples to each reporting unit’s projected EBITDA and then averaging that estimate with similar historical calculations using either a one, two or three year average. Our reporting unit valuations were determined primarily by utilizing the income approach and the market multiple approach.
| Balance as of December 31, 2022 | |||||||||||||||||||||||
| (In millions) | Trade receivables | Contract assets | Loans receivables and other | Held-to-maturity debt securities | |||||||||||||||||||
| Allowance for credit losses at December 31, 2021 | $ | 38.1 | $ | 1.1 | $ | 0.6 | $ | 2.7 | |||||||||||||||
| Current period provision (release) for expected credit losses | 0.7 | — | (0.3) | (2.5) | |||||||||||||||||||
| Recoveries | (4.7) | — | — | — | |||||||||||||||||||
| Allowance for credit losses at December 31, 2022 | $ | 34.1 | $ | 1.1 | $ | 0.3 | $ | 0.2 | |||||||||||||||
| Balance as of December 31, 2021 | |||||||||||||||||||||||
| (In millions) | Trade receivables | Contract assets | Loans receivables and other | Held-to-maturity debt securities | |||||||||||||||||||
| Allowance for credit losses at December 31, 2020 | $ | 40.2 | $ | 2.4 | $ | 7.9 | $ | 0.5 | |||||||||||||||
| Current period provision (release) for expected credit losses | 3.5 | (1.3) | (7.3) | 2.2 | |||||||||||||||||||
| Recoveries | (5.6) | — | — | — | |||||||||||||||||||
| Allowance for credit losses at December 31, 2021 | $ | 38.1 | $ | 1.1 | $ | 0.6 | $ | 2.7 | |||||||||||||||
Certain trade receivables are due in our market capitalization as well as those of our peers and customers. The fair value for our reporting units for the interim testing was valued using a market approach. An appropriate control premium was considered for each of the reporting units and applied to the output of the market approach. An interim impairment test during the first quarter of 2020 resulted in $2,747.5 million and $335.9 million of goodwill impairment charges recorded in our Subsea and Surface Technologies segments, respectively.one year or less.
| 2020 | 2019 | 2018 | |||||||||||||||
| Year of cash flows before terminal value | 4 | 4 | 5 | ||||||||||||||
| Discount rates | 15.0% | 12.5% to 15.0% | 12.0% to 13.0% | ||||||||||||||
| EBITDA multiples | N/A | 6.0 - 8.5x | 7.0 - 8.5x | ||||||||||||||
Inventories consisted of the year ended December 31, 2020, the significant estimates used by management in determining the fair value described above relate to Technip Energies reporting unit only. The fair value over carrying amount for our Technip Energies segment was in excess of 300% of its carrying amount at October 31, 2020.following:
| December 31, | |||||||||||
| (In millions) | 2022 | 2021 | |||||||||
| Raw materials | $ | 317.4 | $ | 250.1 | |||||||
| Work in process | 152.0 | 178.7 | |||||||||
| Finished goods | 570.3 | 603.1 | |||||||||
| Inventories, net | $ | 1,039.7 | $ | 1,031.9 | |||||||
| (In millions) | Subsea | Technip Energies | Surface Technologies | Total | |||||||||||||||||||
| December 31, 2018 | 4,142.4 | 2,447.7 | 1,017.5 | 7,607.6 | |||||||||||||||||||
| Impairments | (1,321.9) | — | (666.8) | (1,988.7) | |||||||||||||||||||
| Purchase accounting adjustment | — | — | 9.9 | 9.9 | |||||||||||||||||||
| Other | — | (17.7) | — | (17.7) | |||||||||||||||||||
| Translation | (6.4) | (6.4) | — | (12.8) | |||||||||||||||||||
| December 31, 2019 | 2,814.1 | 2,423.6 | 360.6 | 5,598.3 | |||||||||||||||||||
| Impairments | (2,747.5) | 0 | (335.9) | (3,083.4) | |||||||||||||||||||
Transfers (a) | (21.2) | 46.1 | (24.9) | — | |||||||||||||||||||
| Translation | (45.4) | 42.8 | 0.2 | (2.4) | |||||||||||||||||||
| December 31, 2020 | $ | — | $ | 2,512.5 | $ | — | $ | 2,512.5 | |||||||||||||||
Net inventories accounted for under the LIFO method totaled $391.7 million and $3,371.7$350.1 million as of December 31, 2022 and 2021, respectively.
| December 31, | |||||||||||||||||||||||
| 2020 | 2019 | ||||||||||||||||||||||
| (In millions) | Gross Carrying Amount | Accumulated Amortization | Gross Carrying Amount | Accumulated Amortization | |||||||||||||||||||
| Acquired technology | $ | 247.1 | $ | 98.1 | $ | 246.7 | $ | 73.6 | |||||||||||||||
| Backlog | 0 | 0 | 175.0 | 175.0 | |||||||||||||||||||
| Customer relationships | 285.4 | 114.4 | 285.4 | 85.9 | |||||||||||||||||||
| Licenses, patents and trademarks | 816.8 | 264.0 | 811.1 | 227.6 | |||||||||||||||||||
| Software | 232.1 | 178.9 | 215.9 | 151.1 | |||||||||||||||||||
| Other | 120.2 | 65.1 | 115.9 | 50.2 | |||||||||||||||||||
| Total intangible assets | $ | 1,701.6 | $ | 720.5 | $ | 1,850.0 | $ | 763.4 | |||||||||||||||
NOTE 16. DEBT10. OTHER CURRENT ASSETS & OTHER CURRENT LIABILITIES
| December 31, | |||||||||||
| (In millions) | 2020 | 2019 | |||||||||
| Bank borrowings and other | $ | 85.0 | $ | 270.8 | |||||||
| Synthetic bonds due 2021 | 551.2 | 0 | |||||||||
| 5.00% 2010 Private placement notes due 2020 | 0 | 224.6 | |||||||||
| Total short-term debt and current portion of long-term debt | $ | 636.2 | $ | 495.4 | |||||||
| December 31, | |||||||||||
| (In millions) | 2020 | 2019 | |||||||||
| Commercial paper | $ | 1,525.9 | $ | 1,967.0 | |||||||
| Synthetic bonds due 2021 | 551.2 | 492.9 | |||||||||
| 3.45% Senior Notes due 2022 | 500.0 | 500.0 | |||||||||
| 5.00% 2010 Private placement notes due 2020 | 0 | 224.6 | |||||||||
| 3.40% 2012 Private placement notes due 2022 | 184.0 | 168.5 | |||||||||
| 3.15% 2013 Private placement notes due 2023 | 159.5 | 146.0 | |||||||||
| 3.15% 2013 Private placement notes due 2023 | 153.4 | 140.4 | |||||||||
| 4.50% 2020 Private placement notes due 2025 | 245.4 | 0 | |||||||||
| 4.00% 2012 Private placement notes due 2027 | 92.0 | 84.2 | |||||||||
| 4.00% 2012 Private placement notes due 2032 | 122.7 | 112.3 | |||||||||
| 3.75% 2013 Private placement notes due 2033 | 122.7 | 112.3 | |||||||||
| Bank borrowings and other | 309.9 | 536.3 | |||||||||
| Unamortized debt issuance costs and discounts | (12.8) | (9.1) | |||||||||
| Total debt | 3,953.9 | 4,475.4 | |||||||||
| Less: current borrowings | 636.2 | 495.4 | |||||||||
| Long-term debt | $ | 3,317.7 | $ | 3,980.0 | |||||||
| December 31, | |||||||||||
| (In millions) | 2022 | 2021 | |||||||||
| Value - added tax receivables | $ | 185.6 | $ | 222.4 | |||||||
| Withholding tax and other receivables | 137.8 | 176.7 | |||||||||
| Prepaid expenses | 61.9 | 50.7 | |||||||||
| Assets held for sale | 18.6 | 5.0 | |||||||||
| Held-to-maturity investments | 15.1 | 8.8 | |||||||||
| Current financial assets at amortized cost | 12.4 | 21.9 | |||||||||
| Other | 23.6 | 26.8 | |||||||||
| Total other current assets | $ | 455.0 | $ | 512.3 | |||||||
Other current liabilities consisted of the following:
| December 31, | |||||||||||
| (In millions) | 2022 | 2021 | |||||||||
| Legal provisions | $ | 116.7 | $ | 121.7 | |||||||
| Warranty accruals and project contingencies | 87.6 | 119.5 | |||||||||
| Social security liability | 70.9 | 70.4 | |||||||||
| Compensation accrual | 70.8 | 85.7 | |||||||||
| Value - added tax and other taxes payable | 65.3 | 71.0 | |||||||||
| Provisions | 9.1 | 23.6 | |||||||||
| Current portion of accrued pension and other post-retirement benefits | 2.5 | 5.2 | |||||||||
| Other accrued liabilities | 138.0 | 163.3 | |||||||||
| Total other current liabilities | $ | 560.9 | $ | 660.4 | |||||||
| Payments Due by Period | |||||||||||||||||||||||||||||
| (In millions) | Total payments | Less than 1 year | 1-3 years | 3-5 years | After 5 years | ||||||||||||||||||||||||
| Total debt | $ | 3,953.9 | $ | 636.2 | $ | 2,589.1 | $ | 294.0 | $ | 434.6 | |||||||||||||||||||
A reconciliation of warranty obligations for the years ended December 31, 2022, 2021 and 2020 is as follows:
| Year Ended December 31, | |||||||||||||||||
| (In millions) | 2022 | 2021 | 2020 | ||||||||||||||
| Balance at beginning of period | $ | 86.2 | $ | 109.6 | $ | 121.7 | |||||||||||
| Warranty expenses | 18.2 | 54.0 | 52.0 | ||||||||||||||
| Adjustment to existing accruals | (19.0) | (56.5) | (48.2) | ||||||||||||||
| Claims paid | (11.2) | (20.9) | (15.9) | ||||||||||||||
| Balance at end of period | $ | 74.2 | $ | 86.2 | $ | 109.6 | |||||||||||
81
NOTE 12. INVESTMENTS
Equity Method Investments
The equity method of accounting is used to account for investments in unconsolidated affiliates where we can have the ability to exert significant influence over the affiliates operating and 2019.financial policies.
Our equity investments were as follows as of December 31, 2022 and 2021:
| December 31, | |||||||||||||||||
| 2022 | 2021 | ||||||||||||||||
| (In millions, except %) | Percentage Owned | Carrying Value | |||||||||||||||
| Dofcon Brasil AS | 50.0 | % | 312.8 | 276.9 | |||||||||||||
| Serimax Holdings SAS | 20.0 | % | 8.6 | 15.0 | |||||||||||||
| Other | 3.6 | 0.5 | |||||||||||||||
| Investments in equity affiliates | $ | 325.0 | $ | 292.4 | |||||||||||||
Our income from equity affiliates for the years ended December 31, 2022, 2021 and 2020, was $44.6 million, $0.6 million and $64.6 million, respectively and included within our Subsea segment.
We assess investments for impairment whenever events or changes in circumstances indicate that the carrying value of an investment may not be recoverable. During 2022, we did not record any impairments of our equity method investments. During 2021, we recorded a $36.7 million impairment, in connection with the step acquisition of the remaining outstanding shares of Magma Global and our resulting control of the company. See Note 3 for further details.
Our major equity method investments are as follows:
Dofcon Brasil AS - is an affiliated company in the form of a joint venture between TechnipFMC and DOF Subsea and was founded in 2006. Dofcon Brasil AS is a holding company, which owns and controls TechDof Brasil AS and Dofcon Navegacao Ltda, collectively referred to as “Dofcon.” Dofcon provides Pipe-Laying Support Vessels (PLSVs) for work in oil and gas fields offshore Brazil. Dofcon is considered a VIE because it does not have sufficient equity to finance its activities without additional subordinated financial support from other parties. We are not the primary beneficiary of the VIE. As such, we have accounted for our 50% investment using the equity method of accounting with results reported in our Subsea segment.
Dofcon has debt related to loans on its vessels. TechnipFMC and DOF ASA, the parent of DOF Subsea, provide guarantees for the debt and our share of the guarantees was $441.0 million as of December 31, 2022. DOF ASA is in the process of restructuring its debt (unrelated and outside of the joint venture) which triggered cross default provisions in certain credit facilities within the joint venture associated with the guarantees provided by the Company and DOF Subsea. The lenders have made no claims under the guarantees and the acceleration clauses within the debt instruments are not currently enforceable as TechnipFMC obtained waivers or consents from the lenders. Dofcon continues to service the credit facilities as per the terms of the agreements. As a result, TechnipFMC has not recognized a liability related to its guarantees.
Serimax Holdings SAS (“Serimax”) -Commercial paper borrowings are issued at market interest rates. is an affiliated company in the form of a joint venture between TechnipFMC and Vallourec SA and was founded in 2016. Serimax is headquartered in Paris, France and provides rigid pipes welding services for work in oil and gas fields around the world. We have accounted for our 20% investment using the equity method of accounting with results reported in our Subsea segment.
Other includes Magnora Offshore Wind AS -During the first quarter of 2022, we entered into Magnora Offshore Wind AS, a partnership with Magnora ASA, in order to develop floating offshore wind projects. As of December 31, 2020, our commercial paper borrowings had a weighted average interest rate of 0.34% on2022, the U.S. dollar denominated borrowingsequity method investment balance was $3.4 million and (0.06)% on the Euro denominated borrowings. As of December 31, 2020, we had $708.0 million of outstanding commercial paper borrowings under this program.
NOTE 17. STOCKHOLDERS’ EQUITY13. RELATED PARTY TRANSACTIONS
Trade receivables consisted of trade receivables due from the following related parties:
| December 31, | |||||||||||
| (In millions) | 2022 | 2021 | |||||||||
| Dofcon | $ | 16.6 | $ | 27.2 | |||||||
| Others | 1.3 | 2.5 | |||||||||
| Total trade receivables | $ | 17.9 | $ | 29.7 | |||||||
Dofcon is our equity method investment. As of December 31, 2021, we had a note receivable of $12.6 million with Dofcon, which was included in other assets in our consolidated balance sheet. During 2022, this note was repaid.
As of December 31, 2022 and 2021, we did not have any material accounts payable outstanding with our related parties.
Revenue consisted of amounts from the following related parties:
| Year Ended December 31, | |||||||||||||||||
| (In millions) | 2022 | 2021 | 2020 | ||||||||||||||
| Dofcon | $ | 21.3 | $ | 25.7 | $ | 14.6 | |||||||||||
| Equinor ASA | — | — | 119.6 | ||||||||||||||
| Others | 7.8 | 14.0 | 18.5 | ||||||||||||||
| Total revenue | $ | 29.1 | $ | 39.7 | $ | 152.7 | |||||||||||
Expenses consisted of amounts to following related parties:
| Year Ended December 31, | |||||||||||||||||
| (In millions) | 2022 | 2021 | 2020 | ||||||||||||||
| Dofcon | $ | 14.4 | $ | 26.7 | $ | 24.0 | |||||||||||
| Jumbo Shipping | 11.5 | — | 16.0 | ||||||||||||||
| Serimax Holdings SAS | — | 7.6 | 0.4 | ||||||||||||||
| Magma Global Limited | — | 8.8 | 14.0 | ||||||||||||||
| Others | 20.3 | 22.3 | 22.7 | ||||||||||||||
| Total expenses | $ | 46.2 | $ | 65.4 | $ | 77.1 | |||||||||||
In October 2020, 2019 and 2018 were $59.2 million, $232.8 million and $238.1 million, respectively. In April 2020,we added a new member to our Board of Directors announced its decision to lower the annual dividend by 75% to $0.13 per share.
| (Number of shares in millions) | Ordinary Shares Issued | Ordinary Shares Held in Employee Benefit Trust | Treasury Stock | ||||||||||||||
| December 31, 2017 | 465.1 | — | — | ||||||||||||||
| Stock awards | 0.2 | — | — | ||||||||||||||
| Treasury stock purchases | — | — | 14.8 | ||||||||||||||
| Treasury stock cancellation | (14.8) | — | (14.8) | ||||||||||||||
| Net stock purchased for employee benefit trust | — | 0.1 | — | ||||||||||||||
| December 31, 2018 | 450.5 | 0.1 | — | ||||||||||||||
| Stock awards | 0.6 | — | — | ||||||||||||||
| Treasury stock purchases | — | — | 4.0 | ||||||||||||||
| Treasury stock cancellation | (4.0) | — | (4.0) | ||||||||||||||
| Net stock purchased for employee benefit trust | — | (0.1) | — | ||||||||||||||
| December 31, 2019 | 447.1 | — | — | ||||||||||||||
| Stock awards | 2.4 | — | — | ||||||||||||||
| December 31, 2020 | 449.5 | — | — | ||||||||||||||
| (In millions) | Foreign Currency Translation | Hedging | Defined Pension and Other Post-Retirement Benefits | Accumulated Other Comprehensive Loss Attributable to TechnipFMC plc | Accumulated Other Comprehensive Loss Attributable to Non-Controlling Interest | ||||||||||||||||||||||||||||||
| December 31, 2018 | $ | (1,234.4) | $ | (32.9) | $ | (92.4) | $ | (1,359.7) | $ | (4.0) | |||||||||||||||||||||||||
| Other comprehensive income (loss) before reclassifications, net of tax | 16.3 | 8.9 | (82.2) | (57.0) | (0.7) | ||||||||||||||||||||||||||||||
| Reclassification adjustment for net (gains) losses included in net income, net of tax | (12.0) | 18.2 | 3.0 | 9.2 | — | ||||||||||||||||||||||||||||||
| Other comprehensive income (loss), net of tax | 4.3 | 27.1 | (79.2) | (47.8) | (0.7) | ||||||||||||||||||||||||||||||
| December 31, 2019 | (1,230.1) | (5.8) | (171.6) | (1,407.5) | (4.7) | ||||||||||||||||||||||||||||||
| Other comprehensive income (loss) before reclassifications, net of tax | (171.1) | 26.8 | (92.9) | (237.2) | 0.6 | ||||||||||||||||||||||||||||||
| Reclassification adjustment for net (gains) losses included in net income, net of tax | — | 13.0 | 9.2 | 22.2 | — | ||||||||||||||||||||||||||||||
| Other comprehensive income (loss), net of tax | (171.1) | 39.8 | (83.7) | (215.0) | 0.6 | ||||||||||||||||||||||||||||||
| December 31, 2020 | $ | (1,401.2) | $ | 34.0 | $ | (255.3) | $ | (1,622.5) | $ | (4.1) | |||||||||||||||||||||||||
| Year Ended December 31, | ||||||||||||||||||||||||||
| (In millions) | 2020 | 2019 | 2018 | |||||||||||||||||||||||
| Details about Accumulated Other Comprehensive Loss Components | Amount Reclassified out of Accumulated Other Comprehensive Loss | Affected Line Item in the Consolidated Statement of Income | ||||||||||||||||||||||||
| Gains on foreign currency translation | $ | 0 | $ | 12.0 | $ | 41.1 | Other income (expense), net | |||||||||||||||||||
| Gains (losses) on hedging instruments | ||||||||||||||||||||||||||
| Foreign exchange contracts | $ | (83.7) | $ | (26.6) | $ | (2.4) | Revenue | |||||||||||||||||||
| 68.5 | 12.0 | 3.4 | Costs of sales | |||||||||||||||||||||||
| (0.4) | 0 | (0.1) | Selling, general and administrative expense | |||||||||||||||||||||||
| (4.4) | (9.1) | 1.0 | Other Income (expense), net | |||||||||||||||||||||||
| (20.0) | (23.7) | 1.9 | Income (loss) before income taxes | |||||||||||||||||||||||
| (7.0) | (5.5) | (0.1) | Provision (benefit) for income taxes | |||||||||||||||||||||||
| $ | (13.0) | $ | (18.2) | $ | 2.0 | Net income (loss) | ||||||||||||||||||||
| Pension and other post-retirement benefits | ||||||||||||||||||||||||||
| Settlements and curtailments | (2.2) | (0.3) | 3.0 | (a) | ||||||||||||||||||||||
| Amortization of actuarial gain (loss) | (9.0) | (2.5) | (0.6) | (a) | ||||||||||||||||||||||
| Amortization of prior service credit (cost) | (1.2) | (1.0) | (1.3) | (a) | ||||||||||||||||||||||
| (12.4) | (3.8) | 1.1 | Income (loss) before income taxes | |||||||||||||||||||||||
| (3.2) | (0.8) | 0.1 | Provision (benefit) for income taxes | |||||||||||||||||||||||
| $ | (9.2) | $ | (3.0) | $ | 1.0 | Net income (loss) | ||||||||||||||||||||
details.
| Year Ended December 31, | |||||||||||||||||
| (In millions) | 2020 | 2019 | 2018 | ||||||||||||||
| Share-based compensation expense | $ | 69.0 | $ | 74.5 | $ | 49.1 | |||||||||||
| Income tax benefits related to share-based compensation expense | $ | 18.6 | $ | 20.1 | $ | 13.2 | |||||||||||
| (Shares in thousands) | Shares | Weighted-Average Grant Date Fair Value | |||||||||
| Non-vested as of December 31, 2019 | 4,525.9 | $ | 27.44 | ||||||||
| Granted | 3,836.0 | $ | 9.27 | ||||||||
| Vested | (1,909.1) | $ | 27.16 | ||||||||
| Cancelled/forfeited | (330.9) | $ | 15.71 | ||||||||
| Non-vested as of December 31, 2020 | 6,121.9 | $ | 18.43 | ||||||||
| Year Ended December 31, | |||||||||||||||||
| 2020 | 2019 | 2018 | |||||||||||||||
Weighted-average fair value (a) | $10.02 | $29.04 | $41.97 | ||||||||||||||
Expected volatility (b) | 38.30 | % | 34.00 | % | 34.00 | % | |||||||||||
Risk-free interest rate (c) | 0.40 | % | 2.42 | % | 2.37 | % | |||||||||||
Expected performance period in years (d) | 3.0 | 3.0 | 3.0 | ||||||||||||||
| (Shares in thousands) | Shares | Weighted-Average Grant Date Fair Value | |||||||||
| Non-vested as of December 31, 2019 | 3,817.7 | $ | 28.52 | ||||||||
| Granted | 2,828.4 | $ | 10.02 | ||||||||
| Vested | (1,364.4) | $ | 31.65 | ||||||||
| Cancelled/forfeited | (441.0) | $ | 20.62 | ||||||||
| Non-vested as of December 31, 2020 | 4,840.7 | $ | 17.55 | ||||||||
| Year Ended December 31, | |||||||||||||||||
| 2020 | 2019 | 2018 | |||||||||||||||
Weighted-average fair value (a) | $ | 0 | $ | 5.64 | $ | 9.07 | |||||||||||
Expected volatility (b) | 0 | % | 32.5 | % | 32.5 | % | |||||||||||
Risk-free interest rate (c) | 0 | % | 2.5 | % | 2.7 | % | |||||||||||
Expected dividend yield (d) | 0 | % | 2.6 | % | 2.0 | % | |||||||||||
Expected term in years (e) | 0 | 6.5 | 6.5 | ||||||||||||||
| Number of Shares | Weighted average exercise price | Weighted average remaining life (in years) | |||||||||||||||||||||
| Balance as of December 31, 2019 | 4,842.4 | $ | 29.68 | 5.3 | |||||||||||||||||||
| Granted | 0 | $ | 0 | ||||||||||||||||||||
| Exercised | 0 | $ | 0 | ||||||||||||||||||||
| Cancelled | (244.0) | $ | 28.08 | ||||||||||||||||||||
| Balance as of December 31, 2020 | 4,598.4 | $ | 29.77 | 4.2 | |||||||||||||||||||
| Exercisable as of December 31, 2020 | 3,460.8 | $ | 31.47 | 3.0 | |||||||||||||||||||
| Options Outstanding | Options Exercisable | ||||||||||||||||||||||||||||
| Exercise Price Range | Number of options (in thousands) | Weighted average remaining life (in years) | Weighted average exercise price | Number of options (in thousands) | Weighted average exercise price | ||||||||||||||||||||||||
| $20.00-$33.00 | 4,087.2 | 4.6 | $ | 26.68 | 2,949.5 | $ | 26.90 | ||||||||||||||||||||||
| $45.00-$51.00 | 33.0 | 1.0 | $ | 45.49 | 33.0 | $ | 45.49 | ||||||||||||||||||||||
| $55.00-$57.00 | 478.2 | 0.4 | $ | 56.93 | 478.3 | $ | 56.93 | ||||||||||||||||||||||
| Total | 4,598.4 | 4.2 | $ | 29.77 | 3,460.8 | $ | 31.47 | ||||||||||||||||||||||
NOTE 14. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following:
| December 31, | |||||||||||
| (In millions) | 2022 | 2021 | |||||||||
| Land and land improvements | $ | 68.2 | $ | 79.4 | |||||||
| Buildings | 441.6 | 471.6 | |||||||||
| Vessels | 1,854.7 | 1,979.0 | |||||||||
| Machinery and equipment | 1,810.0 | 1,849.0 | |||||||||
| Office fixtures and furniture | 119.2 | 121.9 | |||||||||
| Construction in process | 116.7 | 110.5 | |||||||||
| Other | 200.0 | 189.8 | |||||||||
| 4,610.4 | 4,801.2 | ||||||||||
| Accumulated depreciation | (2,255.5) | (2,204.0) | |||||||||
| Property, plant and equipment, net | $ | 2,354.9 | $ | 2,597.2 | |||||||
Depreciation expense was $285.2 million, $291.3 million and $308.7 million in 2022, 2021 and 2020, respectively. The amount of interest cost capitalized was not material for the years presented.
During 2022 and 2021, we determined the carrying amount of certain of our long-lived assets exceeded their fair value and recorded impairments. See Note 19 for further details.
NOTE 15. INTANGIBLE ASSETS
The components of intangible assets were as follows:
| December 31, | |||||||||||||||||||||||
| 2022 | 2021 | ||||||||||||||||||||||
| (In millions) | Gross Carrying Amount | Accumulated Amortization | Gross Carrying Amount | Accumulated Amortization | |||||||||||||||||||
| Acquired technology | $ | 246.3 | $ | 146.5 | $ | 247.0 | $ | 122.4 | |||||||||||||||
| Customer relationships | 285.4 | 171.6 | 285.4 | 142.9 | |||||||||||||||||||
| Licenses, patents and trademarks | 692.1 | 250.9 | 694.6 | 220.7 | |||||||||||||||||||
| Software | 107.0 | 89.2 | 108.2 | 84.8 | |||||||||||||||||||
| Other | 49.0 | 5.6 | 54.0 | 4.7 | |||||||||||||||||||
| Total intangible assets | $ | 1,379.8 | $ | 663.8 | $ | 1,389.2 | $ | 575.5 | |||||||||||||||
We recorded $92.0 million, $94.1 million and $103.4 million in amortization expense related to intangible assets during the years ended December 31, 2022, 2021 and 2020, respectively. During the years 2023 through 2026, annual amortization expense is expected to be $87.4 million in each of the four years, $35.1 million for 2027.
84
NOTE 16. DEBT
Overview
Long-term debt consisted of the following:
| December 31, | |||||||||||
| (In millions) | 2022 | 2021 | |||||||||
| 3.40% 2012 Private placement notes due 2022 | $ | — | $ | 169.9 | |||||||
| 3.15% 2013 Private placement notes due 2023 | 272.2 | 288.8 | |||||||||
| 5.75% 2020 Private placement notes due 2025 | 213.5 | 226.5 | |||||||||
| 6.50% Senior notes due 2026 | 202.9 | 633.1 | |||||||||
| 4.00% 2012 Private placement notes due 2027 | 80.1 | 84.9 | |||||||||
| 4.00% 2012 Private placement notes due 2032 | 106.7 | 113.3 | |||||||||
| 3.75% 2013 Private placement notes due 2033 | 106.7 | 113.3 | |||||||||
| Bank borrowings and other | 394.9 | 397.4 | |||||||||
| Unamortized debt issuance costs and discounts | (10.4) | (22.3) | |||||||||
| Total debt | 1,366.6 | 2,004.9 | |||||||||
| Less: current borrowings | 367.3 | 277.6 | |||||||||
| Long-term debt | $ | 999.3 | $ | 1,727.3 | |||||||
Debt maturities as of December 31, 2022, are as follows:
| Payments Due by Period | |||||||||||||||||||||||||||||
| (In millions) | Total payments | Less than 1 year | 1-3 years | 3-5 years | After 5 years | ||||||||||||||||||||||||
| Total debt | $ | 1,366.6 | $ | 367.3 | $ | 386.1 | $ | 360.4 | $ | 252.8 | |||||||||||||||||||
Credit Facilities and Debt
Revolving Credit Facility - On February 16, 2021, we entered into a credit agreement, which provides for a $1.0 billion three-year senior secured multi-currency Revolving Credit Facility including a $450.0 million letter of credit sub-facility. We incurred $34.8 million of debt issuance costs in connection with the Revolving Credit Facility. These debt issuance costs are deferred and are included in other assets in our consolidated balance sheets. The deferred debt issuance costs are amortized to interest expense over the term of the Revolving Credit Facility.
Availability of borrowings under the Revolving Credit Facility is reduced by the outstanding letters of credit issued against the facility.As of December 31, 2022, there were $45.4 million letters of credit outstanding and availability of borrowings under the Revolving Credit Facility was $954.6 million.
Borrowings under the Revolving Credit Facility bear interest at the following rates, plus an applicable margin, depending on currency:
•U.S. dollar-denominated loans bear interest, at the Company’s option, at a base rate or an adjusted rate linked to the London interbank offered rate (“Adjusted LIBOR”); and
•Euro-denominated loans bear interest on an adjusted rate linked to the Euro interbank offered rate.
The applicable margin for borrowings under the Revolving Credit Facility ranges from 2.50% to 3.50% for Eurocurrency loans and 1.50% to 2.50% for base rate loans, depending on a total leverage ratio. The Revolving Credit Facility is subject to customary representations and warranties, covenants, events of default, mandatory repayment provisions and financial covenants.
85
2021 Notes - On January 29, 2021, we issued $1.0 billion of 6.50% senior notes due 2026. The interest on the 2021 Notes is paid semi-annually on February 1 and August 1 of each year, beginning on August 1, 2021. The 2021 Notes are senior unsecured obligations and are guaranteed on a senior unsecured basis by substantially all of our wholly owned U.S. subsidiaries and non-U.S. subsidiaries in Brazil, the Netherlands, Norway, Singapore and the United Kingdom. We incurred $25.7 million of debt issuance costs in connection with issuance of the 2021 Notes.These debt issuance costs are deferred and are included in long-term debt in our consolidated balance sheets. The deferred debt issuance costs are amortized to interest expense over the term of the 2021 Notes, which approximates the effective interest method.
During 2022, we completed a tender offer and purchased for cash $430.2 million of the outstanding 2021 Notes. We paid a cash premium of $21.5 million to the tendering note holders and wrote off $8.3 million of debt issuance costs. Concurrent with the tender offer, the Company obtained consents of holders with respect to the 2021 Notes to certain proposed amendments (“Proposed Amendments”) to the indenture governing these notes. The Proposed Amendments, among other things, eliminated substantially all of the restrictive covenants and certain event of default triggers in the indenture.
During 2021, we completed two tender offers and purchased for cash $366.9 million of the outstanding 2021 Notes.We paid a cash premium of $29.5 million to the note holders who tendered and wrote off $8.9 million of bond issuance costs.
As of December 31, 2022, TechnipFMC was in compliance with all debt covenants.
Private Placement Notes
2020 Issuance:
During 2020, we completed the private placement of €200 million aggregate principal amount of the 2020 Private Placement Notes. The 2020 Private Placement Notes bear interest of 5.75% and are due June 2025. Interest on the notes is payable annually in arrears on June 30 of each year beginning June 30, 2020. The 2020 Private Placement Notes contain usual and customary covenants and events of default for notes of this type.
2013 Issuances:
In October 2013, we completed the private placement of €355.0 million aggregate principal amount of senior notes. The notes were issued in three tranches with €100.0 million bearing interest at 3.75% and due October 2033 (the “Tranche A 2033 Notes”), €130.0 million bearing interest of 3.15% and due October 2023 (the “Tranche B 2023 Notes) and €125.0 million bearing interest of 3.15% and due October 2023 (the “Tranche C 2023 Notes” and, collectively with the “Tranche A 2033 Notes” and the “Tranche B 2023 Notes”, the “2013 Private Placement Notes”).
Interest on the Tranche A 2033 Notes is payable annually in arrears on October 7 each year, beginning October 7, 2014. Interest on the Tranche B 2023 Notes is payable annually in arrears on October 16 of each year beginning October 16, 2014. Interest on the Tranche C 2023 Notes is payable annually in arrears on October 18 of each year, beginning October 18, 2014.
2012 Issuances:
In June 2012, we completed the private placement of €325.0 million aggregate principal amount of notes. The notes were issued in three tranches with €150.0 million bearing interest at 3.40% and due June 2022 (the “Tranche A 2022 Notes”), €75.0 million bearing interest of 4.0% and due June 2027 (the “Tranche B 2027 Notes”) and €100.0 million bearing interest of 4.0% and due June 2032 (the “Tranche C 2032 Notes” and, collectively with the “Tranche A 2022 Notes” and the “Tranche B 2027 Notes,” the “2012 Private Placement Notes”). Interest on the Tranche A 2022 Notes and the Tranche C 2032 Notes is payable annually in arrears on June 14 of each year beginning on June 14, 2013. Interest on the Tranche B 2027 Notes is payable annually in arrears on June 15 of each year, beginning on June 15, 2013. During 2022, we repaid $161.0 million of our 3.40% 2012 Private placement notes.
The 2013 and 2012 Private Placement Notes contain usual and customary covenants and events of default for notes of this type. In the event of a change of control resulting in a downgrade in the rating of the notes below BBB-, the 2013 and 2012 Private Placement Notes may be redeemed early at the request of any bondholder, at its sole discretion. The 2013 and 2012 Private Placement Notes are our unsecured obligations. The 2013 and 2012 Private Placement Notes will rank equally in right of payment with all of our existing and future unsubordinated debt.
86
Term loan - In December 2016, we entered into a £160.0 million term loan agreement to finance the Deep Explorer, a diving support vessel (“DSV”), maturing in December 2028. Under the loan agreement, interest accrues at an annual rate of 2.813%. This loan agreement contains usual and customary covenants and events of default for loans of this type.
Bank borrowings - In January 2019, we executed a sale-leaseback transaction to finance the purchase of a deepwater dive support vessel, Deep Discoverer (the “Vessel”) for the full transaction price of $116.8 million. The sale-leaseback agreement (“Charter”) was entered into with a French joint-stock company, owned by Credit Industrial et Commercial (“CIC”) which was formed for the sole purpose to purchase and act as the lessor of the Vessel. It is a variable interest entity, which is fully consolidated in our consolidated financial statements. The transaction was funded through debt of $96.2 million and expiring on January 8, 2031.
Foreign committed credit - We have committed credit lines at many of our international subsidiaries for immaterial amounts. We utilize these facilities for asset financing and to provide a more efficient daily source of liquidity. The effective interest rates depend upon the local national market.
NOTE 19. IMPAIRMENT, RESTRUCTURING AND OTHER EXPENSES17. STOCKHOLDERS’ EQUITY
| Year Ended December 31, | |||||||||||||||||
| (In millions) | 2020 | 2019 | 2018 | ||||||||||||||
| Subsea | $ | 2,957.5 | $ | 1,752.2 | $ | 1,801.9 | |||||||||||
| Technip Energies | 93.6 | 17.0 | (3.4) | ||||||||||||||
| Surface Technologies | 440.2 | 704.2 | 13.8 | ||||||||||||||
| Corporate and other | 10.0 | 17.4 | 18.9 | ||||||||||||||
| Total impairment, restructuring and other expenses | $ | 3,501.3 | $ | 2,490.8 | $ | 1,831.2 | |||||||||||
| Year Ended December 31, | |||||||||||||||||
| (In millions) | 2020 | 2019 | 2018 | ||||||||||||||
| Subsea | $ | 2,854.5 | $ | 1,798.6 | $ | 1,784.2 | |||||||||||
| Technip Energies | 10.3 | 0 | 0 | ||||||||||||||
| Surface Technologies | 419.3 | 685.5 | 4.5 | ||||||||||||||
| Corporate and other | 3.3 | 0 | 3.9 | ||||||||||||||
| Total impairments | $ | 3,287.4 | $ | 2,484.1 | $ | 1,792.6 | |||||||||||
As an English public limited company, we are required under U.K. law to have available “distributable reserves” to conduct share repurchases or pay dividends to shareholders. Distributable reserves are a statutory requirement and are not linked to a GAAP reported amount (e.g., retained earnings). The declaration and payment of $88.4 million attributabledividends require the authorization of our Board of Directors, provided that such dividends on issued share capital may be paid only out of our “distributable reserves” on our statutory balance sheet. Therefore, we are not permitted to plant, equipmentpay dividends out of share capital, which includes share premium. On November 27, 2019, we redeemed 50,000 redeemable shares of £1 each and various machinery infrastructurecancelled one deferred ordinary share of £1 in our Subsea operating segment; $82.0 million mainly related to building and surface equipment in our Surface reportable segment; and $33.6 millionthe capital of operating lease right-of-use assets impairments.TechnipFMC.
The prolonged downturn in the energy market and its corresponding impact on our business outlook in 2019 led us to conclude the carrying amount of certainfollowing is a summary of our assets in our Subsea and Surface Technologies segments exceeded their fair value as of December 31, 2019. Duringcapital stock activity for the 2019 year we recorded $1,988.7 million and $495.4 million, respectively, related to goodwill and long-lived assets impairments. The $495.4 million of long-lived asset impairments during the yearyears ended December 31, 2019 primarily consisted of $153.8 million related to vessels in our Subsea operating segment2022, 2021 and $168.9 million related to our flexible pipe and umbilical manufacturing facilities in our Surface reportable segment due to the prolonged downturn in the energy market and its corresponding impact on our business outlook.
| Year Ended December 31, | |||||||||||||||||||||||
| 2020 | 2019 | 2018 | |||||||||||||||||||||
| (In millions) | Restructuring and other charges | COVID-19 expenses | Restructuring and other charges | Restructuring and other charges | |||||||||||||||||||
| Subsea | $ | 52.9 | $ | 50.1 | $ | (46.4) | $ | 17.7 | |||||||||||||||
| Technip Energies | 39.3 | 44.0 | 17.0 | (3.4) | |||||||||||||||||||
| Surface Technologies | 13.2 | 7.7 | 18.7 | 9.3 | |||||||||||||||||||
| Corporate and other | 6.7 | 0 | 17.4 | 15.0 | |||||||||||||||||||
| Total | $ | 112.1 | $ | 101.8 | $ | 6.7 | $ | 38.6 | |||||||||||||||
| ( | Ordinary Shares Issued | |||||
| December 31, 2019 | 447.1 | |||||
| Stock awards | 2.4 | |||||
| December 31, 2020 | ||||||
| Stock awards | ||||||
| Shares repurchased and cancelled | (10.1) | |||||
| December 31, 2022 | 442.2 | |||||
| (In millions) | Foreign Currency Translation | Hedging | Defined Pension and Other Post-Retirement Benefits | Accumulated Other Comprehensive Loss Attributable to TechnipFMC plc | Accumulated Other Comprehensive Loss Attributable to Non-Controlling Interest | ||||||||||||||||||||||||||||||
| December 31, 2020 | $ | (1,401.2) | $ | 34.0 | $ | (255.3) | $ | (1,622.5) | $ | (4.1) | |||||||||||||||||||||||||
| Other comprehensive income (loss) before reclassifications, net of tax | 29.2 | (19.8) | 70.8 | 80.2 | (1.6) | ||||||||||||||||||||||||||||||
| Reclassification adjustment for net (gains) losses included in net income, net of tax | — | (11.8) | 18.0 | 6.2 | — | ||||||||||||||||||||||||||||||
| Other comprehensive income (loss), net of tax | 29.2 | (31.6) | 88.8 | 86.4 | (1.6) | ||||||||||||||||||||||||||||||
| Spin-off of Technip Energies | 213.6 | (19.7) | 37.2 | 231.1 | $ | — | |||||||||||||||||||||||||||||
| December 31, 2021 | $ | (1,158.4) | $ | (17.3) | $ | (129.3) | $ | (1,305.0) | $ | (5.7) | |||||||||||||||||||||||||
| Other comprehensive income (loss) before reclassifications, net of tax | (16.1) | (25.1) | 13.3 | (27.9) | (4.1) | ||||||||||||||||||||||||||||||
| Reclassification adjustment for net (gains) losses included in net income, net of tax | (3.2) | 25.3 | 9.1 | 31.2 | — | ||||||||||||||||||||||||||||||
| Other comprehensive income (loss), net of tax | (19.3) | 0.2 | 22.4 | 3.3 | (4.1) | ||||||||||||||||||||||||||||||
| December 31, 2022 | $ | (1,177.7) | $ | (17.1) | $ | (106.9) | $ | (1,301.7) | $ | (9.8) | |||||||||||||||||||||||||
Reclassifications out of accumulated other comprehensive income (loss) consisted of the following:
| Year Ended December 31, | ||||||||||||||||||||||||||
| (In millions) | 2022 | 2021 | 2020 | |||||||||||||||||||||||
| Details about Accumulated Other Comprehensive Loss Components | Amount Reclassified out of Accumulated Other Comprehensive Loss | Affected Line Item in the Consolidated Statement of Income | ||||||||||||||||||||||||
| Gains on foreign currency translation | $ | (3.2) | $ | — | $ | — | Other income (expense), net | |||||||||||||||||||
| Gains (losses) on hedging instruments | ||||||||||||||||||||||||||
| Foreign exchange contracts | $ | (7.4) | $ | (29.7) | $ | (83.7) | Revenue | |||||||||||||||||||
| (14.5) | 10.7 | 68.5 | Costs of sales | |||||||||||||||||||||||
| (0.3) | 0.2 | (0.4) | Selling, general and administrative expense | |||||||||||||||||||||||
| (13.1) | 32.9 | (4.4) | Other Income (expense), net | |||||||||||||||||||||||
| (35.3) | 14.1 | (20.0) | Income (loss) before income taxes | |||||||||||||||||||||||
| (10.0) | 2.3 | (7.0) | Provision (benefit) for income taxes | |||||||||||||||||||||||
| $ | (25.3) | $ | 11.8 | $ | (13.0) | Net income (loss) | ||||||||||||||||||||
| Pension and other post-retirement benefits | ||||||||||||||||||||||||||
| Settlements and curtailments | $ | (0.8) | $ | (3.3) | $ | (2.2) | Other income (expense), net (a) | |||||||||||||||||||
| Amortization of actuarial gain (loss) | (11.8) | (18.2) | (9.0) | Other income (expense), net (a) | ||||||||||||||||||||||
| Amortization of prior service credit (cost) | (0.3) | (0.5) | (1.2) | Other income (expense), net (a) | ||||||||||||||||||||||
| (12.9) | (22.0) | (12.4) | Income (loss) before income taxes | |||||||||||||||||||||||
| (3.8) | (4.0) | (3.2) | Provision (benefit) for income taxes | |||||||||||||||||||||||
| $ | (9.1) | $ | (18.0) | $ | (9.2) | Net income (loss) | ||||||||||||||||||||
(a) These accumulated other comprehensive income components are included in the computation of net periodic pension cost (See Note 22 for further details).
NOTE 18. SHARE-BASED COMPENSATION
Under the Amended and Restated TechnipFMC plc Incentive Award Plan (the “2017 Plan”), we were able to grant certain incentives and awards to our contracts contain provisions that require us to pay liquidated damages ifofficers, employees, non-employee directors and consultants of the Company and its subsidiaries. Awards included share options, share appreciation rights, performance stock units, restricted stock units, restricted shares or other awards authorized under the 2017 Plan. On April 28, 2022, we are responsibleadopted the TechnipFMC plc 2022 Incentive Award Plan (the “Plan”), which replaces the 2017 Plan. Under the Plan, 8.9 million ordinary shares were authorized for the failure to meet specified contractual milestone datesawards, and the applicable customer asserts a conforming claimremaining available shares from the 2017 Plan were added to the authorized amount under these provisions. These contracts define the conditions under which our customers may make claims against us for liquidated damages. Based upon the evaluation of our performance and other commercial and legal analysis, management believes we have appropriately recognized probable liquidated damages as of December 31, 2020 and 2019, and that the ultimate resolution of such matters will not materially affect our consolidated financial position, results of operations, or cash flows.Plan.
| Year Ended December 31, | |||||||||||||||||
| (In millions) | 2020 | 2019 | 2018 | ||||||||||||||
| United States | $ | (3,073.5) | $ | (1,406.5) | $ | (197.0) | |||||||||||
| Outside United States | $ | (11.5) | $ | (729.3) | $ | (1,291.1) | |||||||||||
| Loss before income taxes | $ | (3,085.0) | $ | (2,135.8) | $ | (1,488.1) | |||||||||||
| Year Ended December 31, | |||||||||||||||||
| (In millions) | 2020 | 2019 | 2018 | ||||||||||||||
| Current | |||||||||||||||||
| United States | $ | (4.7) | $ | 34.7 | $ | 52.1 | |||||||||||
| Outside United States | 164.8 | 317.0 | 321.8 | ||||||||||||||
| Total current income taxes | 160.1 | 351.7 | 373.9 | ||||||||||||||
| Deferred | |||||||||||||||||
| United States | (3.1) | 2.6 | 19.5 | ||||||||||||||
| Outside United States | (3.6) | (78.0) | 29.3 | ||||||||||||||
| Total deferred income taxes | (6.7) | (75.4) | 48.8 | ||||||||||||||
| Provision for income taxes | $ | 153.4 | $ | 276.3 | $ | 422.7 | |||||||||||
Under the Plan, our Board of Directors has the authority to grant non-employee directors share options, restricted shares, restricted share units and liabilities were as follows:
| December 31, | |||||||||||
| (In millions) | 2020 | 2019 | |||||||||
| Deferred tax assets attributable to | |||||||||||
| Accrued expenses | $ | 147.8 | $ | 124.4 | |||||||
| Capital loss | 21.1 | 21.1 | |||||||||
| Non-deductible interest | 77.0 | 84.7 | |||||||||
| Foreign tax credit carryforwards | 145.8 | 135.3 | |||||||||
| Other tax credits | 166.8 | 113.2 | |||||||||
| Net operating loss carryforwards | 489.0 | 430.5 | |||||||||
| Inventories | 16.5 | 6.3 | |||||||||
| Research and development credit | 3.4 | 7.6 | |||||||||
| Foreign exchange | — | 20.4 | |||||||||
| Provisions for pensions and other long-term employee benefits | 96.1 | 84.1 | |||||||||
| Contingencies | 43.4 | 163.3 | |||||||||
| Margin recognition on construction contracts | 113.9 | 115.9 | |||||||||
| Leases | 254.9 | 219.8 | |||||||||
| Revenue in excess of billings on contracts accounted for under the percentage of completion method | 0 | 10.9 | |||||||||
| Other | — | 6.9 | |||||||||
| Deferred tax assets | 1,575.7 | 1,544.4 | |||||||||
| Valuation allowance | (935.3) | (916.9) | |||||||||
| Deferred tax assets, net of valuation allowance | 640.4 | 627.5 | |||||||||
| Deferred tax liabilities attributable to | |||||||||||
| Revenue in excess of billings on contracts accounted for under the percentage of completion method | 42.6 | — | |||||||||
| U.S. tax on foreign subsidiaries’ undistributed earnings not indefinitely reinvested | 4.2 | 10.4 | |||||||||
| Property, plant and equipment, intangibles and other assets | 185.8 | 279.6 | |||||||||
| Foreign exchange | 27.8 | 0 | |||||||||
| Leases | 237.0 | 215.2 | |||||||||
| Other | 4.7 | 0 | |||||||||
| Deferred tax liabilities | 502.1 | 505.2 | |||||||||
| Net deferred tax assets | $ | 138.3 | $ | 122.3 | |||||||
The measurement of share-based compensation expense on restricted share awards is based on the market price and fair value at the grant date and the number of shares awarded. The fair value of performance shares is estimated using a combination of the closing stock price on the grant date and the Monte Carlo simulation model. We use the Black-Scholes options pricing model to measure the fair value of stock options granted on or after January 1, 2017.
The share-based compensation expense for each award is recognized ratably over the applicable service period or the period beginning at the start of the service period and ending when an employee becomes eligible for retirement (currently age 62 under the Plan), after taking into account estimated forfeitures.
We recognize compensation expense and the corresponding tax benefits relating to net operating loss carryforwards. If not utilized, these net operating loss carryforward will begin to expire in 2021. Except in Norway (net operating lossesfor awards under the Plan. The compensation expense under the Plan for continuing operations was as follows:
| Year Ended December 31, | |||||||||||||||||
| (In millions) | 2022 | 2021 | 2020 | ||||||||||||||
| Share-based compensation expense | $ | 40.5 | $ | 26.8 | $ | 38.3 | |||||||||||
| Income tax benefits related to share-based compensation expense | 8.8 | 7.2 | 10.3 | ||||||||||||||
As of $373.7 million), management believes it is more likely than not that we will not be able to utilize these operating loss carryforwards before expiration; thus, we have established a valuation allowance against the related deferred tax assets (inclusive of NOL’s generated in United Kingdom, Saudi Arabia, Netherlands, Mexico, Brazil, Canada, United States, Luxembourg, and Germany). Except in Canada, Mexico, and Netherlands, all of these tax loss carryforwards extend indefinitely.
| December 31, 2022 | ||||||||||||||||||
State and Foreign Tax | ||||||||||||||||||
| $ | ||||||||||||||||||
A summary of the non-vested restricted share units’ activity is as follows:
| (Shares in thousands) | Shares | Weighted-Average Grant Date Fair Value | |||||||||
| Non-vested as of December 31, 2021 | 9,589.5 | $ | 11.35 | ||||||||
| Granted | 2,874.1 | $ | 7.89 | ||||||||
| Vested | (2,193.8) | $ | 16.57 | ||||||||
| Cancelled/forfeited | (548.1) | $ | 7.99 | ||||||||
| Non-vested as of December 31, 2022 | 9,721.7 | $ | 7.81 | ||||||||
The amounts reported above for uncertain tax positions excludes interest and penaltiestotal grant date fair value of $3.7 million, $0.1 million, and $2.8 million forrestricted stock share units vested during the years ended December 31, 2022, 2021 and 2020 2019,was $36.4 million, $25.1 million and 2018,$51.8 million, respectively. Interest
89
Performance Share Units
The Board of Directors has granted certain employees, senior executives and penalties relatingdirectors performance share units that vest subject to these uncertain tax positions were included in income tax expense in our consolidated statementsachieving satisfactory performances. For performance share units issued on or after January 1, 2017, performance is based on results of income. Itreturn on invested capital and total shareholder return (“TSR”).
For the performance share units which vest based on TSR, the fair value of performance shares is reasonably possible that within twelve months, $4.2 million of liabilities for unrecognized tax benefits will be settled. This amount is reflected in income taxes payable, the remaining balanceestimated using a combination of the unrecognized tax benefits is recorded in other long term liabilities.
| Year Ended December 31, | |||||||||||||||||
| 2022 | 2021 | 2020 | |||||||||||||||
Weighted-average fair value (a) | $11.34 | $11.50 | $10.02 | ||||||||||||||
Expected volatility (b) | 65.90 | % | 62.70 | % | 38.30 | % | |||||||||||
Risk-free interest rate (c) | 1.78 | % | 0.35 | % | 0.40 | % | |||||||||||
Expected performance period in years (d) | 3.0 | 2.9 | 3.0 | ||||||||||||||
(a) The weighted-average fair value was based on performance share units granted during the period.
(b) Expected volatility is based on normalized historical volatility of our shares over a preceding period commensurate with the expected term of the performance share units.
(c) The risk-free rate for the expected term of the performance share units is based on the U.S. Treasury yield curve in effect at any given time. Most notably, the following tax years and thereafter remaintime of grant.
(d) For awards subject to examination: 2010service-based vesting, due to the lack of historical exercise and post-vesting termination patterns of the post-Merger employee base, the expected term was estimated using a simplified method for Norway, 2016 for Nigeria, 2016 for Brazil,all awards granted in 2022, 2021 and 2020.
A summary of the non-vested performance share units’ activity is as follows:
| (Shares in thousands) | Shares | Weighted-Average Grant Date Fair Value | |||||||||
| Non-vested as of December 31, 2021 | 2,309.6 | $ | 13.26 | ||||||||
| Granted | 2,427.0 | $ | 11.10 | ||||||||
| Cancelled/forfeited | (223.6) | $ | 11.46 | ||||||||
| Non-vested as of December 31, 2022 | 4,513.0 | $ | 11.29 | ||||||||
The total grant date fair value of performance share units vested during years ended December 31, 2021 and 2020 was $3.4 million and $43.2 million, respectively.
Share Option Awards
The fair value of each share option award is estimated as of the date of grant using the Black-Scholes options pricing model.
Share options awarded prior to 2017 for France,were granted subject to performance criteria based upon certain targets, such as TSR, return on capital employed, and 2016 for the United States.operating income from recurring activities. Subsequent share options granted are time-based awards vesting over three years.
The following is a public limited company incorporated undersummary of share option transactions during the laws of England and Wales. Therefore, our earnings are subject to the U.K. statutory rate which is 19.0% for 2020, 2019, and 2018.year ended December 31, 2022:
| Number of Shares | Weighted average exercise price | Weighted average remaining life (in years) | |||||||||||||||||||||
| Balance as of December 31, 2021 | 1,576.1 | $ | 20.17 | 6.3 | |||||||||||||||||||
| Cancelled | (134.9) | $ | 20.84 | ||||||||||||||||||||
| Balance as of December 31, 2022 | 1,441.2 | $ | 20.31 | 5.3 | |||||||||||||||||||
| Exercisable as of December 31, 2022 | 1,441.2 | $ | 20.31 | 5.3 | |||||||||||||||||||
The effective income tax rateaggregate intrinsic value of stock options outstanding and stock options exercisable as of December 31, 2022 was differentnil and nil, respectively.
Cash received from the statutory U.K. income tax rate due toshare option exercises was nil, during each of the following:
| Year Ended December 31, | |||||||||||||||||
| 2020 | 2019 | 2018 | |||||||||||||||
| Statutory income tax rate | 19.0 | % | 19.0 | % | 19.0 | % | |||||||||||
| Net difference resulting from | |||||||||||||||||
| Foreign earnings subject to different tax rates | (1.5) | % | 0.3 | % | (9.7) | % | |||||||||||
| Adjustments to prior year taxes | (1.3) | % | (0.4) | % | (0.7) | % | |||||||||||
| Changes in valuation allowance | 0 | % | (8.8) | % | (14.4) | % | |||||||||||
| Deferred tax asset/liability revaluation for tax rate change | — | % | (0.5) | % | (1.7) | % | |||||||||||
| Impairments | (22.5) | % | (21.9) | % | (16.5) | % | |||||||||||
| Non-deductible legal provision | 0 | % | (0.8) | % | (3.8) | % | |||||||||||
| Other | 1.3 | % | 0.2 | % | (0.6) | % | |||||||||||
| Effective income tax rate | (5.0) | % | (12.9) | % | (28.4) | % | |||||||||||
The following summarizes significant ranges of outstanding and exercisable share options as of December 31, 2022:
| Options Outstanding and Exercisable | |||||||||||||||||
| Exercise Price Range | Number of options (in thousands) | Weighted average remaining life (in years) | Weighted average exercise price | ||||||||||||||
| $16.00-$19.00 | 578.0 | 6.2 | $ | 16.46 | |||||||||||||
| $20.00-$24.00 | 678.7 | 4.6 | $ | 22.22 | |||||||||||||
| $25.00-$26.00 | 184.5 | 4.7 | $ | 25.31 | |||||||||||||
| Total | 1,441.2 | 5.3 | $ | 20.31 | |||||||||||||
NOTE 22. PENSION19. IMPAIRMENT, RESTRUCTURING AND OTHER POST-RETIREMENT BENEFIT PLANSEXPENSES
| Year Ended December 31, | |||||||||||||||||
| (In millions) | 2022 | 2021 | 2020 | ||||||||||||||
| Subsea | $ | 1.1 | $ | 53.5 | $ | 2,957.5 | |||||||||||
| Surface Technologies | 10.4 | 7.6 | 440.2 | ||||||||||||||
| Corporate and other | 3.7 | 5.6 | 4.3 | ||||||||||||||
| Total impairment, restructuring and other expenses | $ | 15.2 | $ | 66.7 | $ | 3,402.0 | |||||||||||
Goodwill and Long-Lived Assets Impairments
Goodwill and long-lived assets impairments were as follows:
| Year Ended December 31, | |||||||||||||||||
| (In millions) | 2022 | 2021 | 2020 | ||||||||||||||
| Subsea | $ | 1.9 | $ | 44.2 | $ | 2,854.5 | |||||||||||
| Surface Technologies | 2.8 | 1.9 | 419.3 | ||||||||||||||
| Corporate and other | — | 3.0 | — | ||||||||||||||
| Total impairments | $ | 4.7 | $ | 49.1 | $ | 3,273.8 | |||||||||||
2022
During the year ended December 31, 2022, we recorded $4.7 million of impairment charges for property, plant and equipment and right-of-use operating lease assets, related to exiting our operations in Russia and Canada.
91
| Pensions | Other Post-retirement Benefits | ||||||||||||||||||||||||||||||||||
| 2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||||||||||||||
| (In millions) | U.S. | Int’l | U.S. | Int’l | |||||||||||||||||||||||||||||||
| Accumulated benefit obligation | $ | 684.7 | $ | 873.0 | $ | 669.6 | $ | 773.3 | |||||||||||||||||||||||||||
| Projected benefit obligation at January 1 | $ | 669.7 | $ | 881.0 | $ | 598.1 | $ | 753.4 | $ | 10.6 | $ | 9.5 | |||||||||||||||||||||||
| Service cost | — | 19.1 | — | 16.3 | — | — | |||||||||||||||||||||||||||||
| Interest cost | 22.2 | 14.1 | 25.6 | 18.3 | 0.4 | 0.5 | |||||||||||||||||||||||||||||
| Actuarial (gain) loss | 53.9 | 35.5 | 80.7 | 102.8 | (0.2) | 1.4 | |||||||||||||||||||||||||||||
| Amendments | — | 0.1 | — | 0.9 | — | — | |||||||||||||||||||||||||||||
| Curtailments | — | (0.2) | — | — | — | — | |||||||||||||||||||||||||||||
| Settlements | (25.6) | (3.5) | — | (0.6) | — | — | |||||||||||||||||||||||||||||
| Foreign currency exchange rate changes | — | 48.0 | — | 11.1 | (0.5) | (0.1) | |||||||||||||||||||||||||||||
| Plan participants’ contributions | — | 1.1 | — | 1.1 | — | — | |||||||||||||||||||||||||||||
| Benefits paid | (35.5) | (27.2) | (34.7) | (25.7) | (0.5) | (0.5) | |||||||||||||||||||||||||||||
| Other | — | 2.1 | — | 3.4 | — | (0.2) | |||||||||||||||||||||||||||||
| Projected benefit obligation as of December 31 | 684.7 | 970.1 | 669.7 | 881.0 | 9.8 | 10.6 | |||||||||||||||||||||||||||||
| Fair value of plan assets at January 1 | 520.0 | 657.8 | 477.4 | 570.6 | — | — | |||||||||||||||||||||||||||||
| Actual return on plan assets | 14.3 | 45.9 | 72.0 | 89.1 | — | — | |||||||||||||||||||||||||||||
| Company contributions | — | 28.7 | — | 6.9 | — | — | |||||||||||||||||||||||||||||
| Foreign currency exchange rate changes | — | 33.4 | — | 13.5 | — | — | |||||||||||||||||||||||||||||
| Settlements | (19.6) | (1.9) | — | — | — | — | |||||||||||||||||||||||||||||
| Plan participants’ contributions | — | 1.1 | — | 1.1 | — | — | |||||||||||||||||||||||||||||
| Benefits paid | (31.0) | (20.8) | (29.4) | (19.6) | — | — | |||||||||||||||||||||||||||||
| Other | — | 2.0 | — | (3.8) | — | — | |||||||||||||||||||||||||||||
| Fair value of plan assets as of December 31 | 483.7 | 746.2 | 520.0 | 657.8 | — | — | |||||||||||||||||||||||||||||
| Funded status of the plans (liability) as of December 31 | $ | (201.0) | $ | (223.9) | $ | (149.7) | $ | (223.2) | $ | (9.8) | $ | (10.6) | |||||||||||||||||||||||
| Pensions | Other Post-retirement Benefits | ||||||||||||||||||||||||||||||||||
| 2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||||||||||||||
| (In millions) | U.S. | Int’l | U.S. | Int’l | |||||||||||||||||||||||||||||||
| Current portion of accrued pension and other post-retirement benefits | (4.6) | (8.6) | (5.5) | (8.8) | (0.7) | (0.6) | |||||||||||||||||||||||||||||
| Accrued pension and other post-retirement benefits, net of current portion | (196.4) | (215.3) | (144.2) | (214.4) | (9.1) | (10.0) | |||||||||||||||||||||||||||||
| Funded status as of December 31 | $ | (201.0) | $ | (223.9) | $ | (149.7) | $ | (223.2) | $ | (9.8) | $ | (10.6) | |||||||||||||||||||||||
2020
During the year ended December 31, 2020, we recorded $3,083.4 million and $190.4 million related to goodwill and long-lived assets impairments, respectively. As of December 31, 2020, goodwill balance was fully written-off. Due to the substantial decline in global demand for oil caused by the COVID-19 pandemic in 2020, we reviewed the future utilization of our vessels and service potential of our subsea service and surface equipment and determined that the carrying amount of our goodwill and some of our long-lived assets exceeded their respective fair values. As a result, we recorded $2,747.5 million and $335.9 million of goodwill impairment charges in our Subsea and Surface Technologies segments, respectively. The $190.4 million of long-lived asset impairments consisted of $88.4 million attributable to plant, equipment and various machinery infrastructure in our Subsea segment; $82.0 million mainly related to building and surface equipment in our Surface Technologies segment; and $20.0 million of operating lease right-of-use assets impairments.
Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that carrying amounts of such assets may not be recoverable. Assessing the recoverability of assets to be held and used requires the use of unobservable inputs, which involves significant judgment. Such judgments include expected future asset utilization while taking into account reduced future capital spending by certain customers in response to market conditions.
Restructuring and Other Expenses
Restructuring and other expenses were as follows:
| Year Ended December 31, | |||||||||||||||||||||||
| 2022 | 2021 | 2020 | |||||||||||||||||||||
| (In millions) | Restructuring and other charges | Restructuring and other charges | Restructuring and other charges | COVID-19 expenses | |||||||||||||||||||
| Subsea | $ | (0.8) | $ | 9.3 | $ | 52.9 | $ | 50.1 | |||||||||||||||
| Surface Technologies | 7.6 | 5.7 | 13.2 | 7.7 | |||||||||||||||||||
| Corporate and other | 3.7 | 2.6 | 4.3 | — | |||||||||||||||||||
| Total | $ | 10.5 | $ | 17.6 | $ | 70.4 | $ | 57.8 | |||||||||||||||
2022
During the year ended December 31, 2022, we recorded $10.5 million of restructuring and other charges, mostly related to exiting our operations in Russia and Canada and consisted of severance and other employee related costs.
2021
During the year ended December 31, 2021, we recorded $17.6 million of restructuring and other charges, which consisted of severance and other employee related costs.
2020
During the year ended December 31, 2020, we recorded $70.4 million of restructuring and other charges and $57.8 million of COVID-19 expenses. COVID-19 related expenses represented unplanned, one-off, incremental and non-recoverable costs incurred solely as a result of the COVID-19 pandemic situation, which would not have been incurred otherwise. COVID-19 related expenses primarily included (a) employee payroll and travel, operational disruptions associated with quarantining, personnel travel restrictions to job sites, and shutdown of manufacturing plants and sites; (b) supply chain and related expediting costs of accelerated shipments for previously ordered and undelivered products; (c) costs associated with implementing additional information technology to support remote working environments; and (d) facilities-related expenses to ensure safe working environments.
We will continue to take actions designed to mitigate the adverse effects of the rapidly changing market environment and expect to continue to adjust our cost structure to market conditions. If market conditions deteriorate, we may record additional restructuring charges and additional impairments of our long-lived assets, operating lease right-of-use assets and equity method investments.
NOTE 20. COMMITMENTS AND CONTINGENT LIABILITIES
Contingent liabilities associated with guarantees - In the ordinary course of business, we enter into standby letters of credit, performance bonds, surety bonds, and other guarantees with financial institutions for the benefit of our customers, vendors, and other parties. The following table summarizesmajority of these financial instruments expire within five years. Management does not expect any of these financial instruments to result in losses that would have a material adverse effect on our consolidated financial position, results of operations, or cash flows.
Guarantees made by our consolidated subsidiaries consisted of the pre-tax amountsfollowing:
| (In millions) | December 31, 2022 | ||||
Financial guarantees (a) | $ | 170.2 | |||
Performance guarantees (b) | 1,458.2 | ||||
| Maximum potential undiscounted payments | $ | 1,628.4 | |||
(a)Financial guarantees represent contracts that contingently require a guarantor to make payments to a guaranteed party based on changes in accumulatedan underlying agreement that is related to an asset, a liability or an equity security of the guaranteed party. These tend to be drawn down only if there is a failure to fulfill our financial obligations.
(b)Performance guarantees represent contracts that contingently require a guarantor to make payments to a guaranteed party based on another entity's failure to perform under a nonfinancial obligating agreement. Events that trigger payment are performance-related, such as failure to ship a product or provide a service.
We believe the ultimate resolution of our known contingencies will not materially adversely affect our consolidated financial position, results of operations, or cash flows.
Contingent liabilities associated with legal and tax matters - We are involved in various pending or potential legal and tax actions or disputes in the ordinary course of our business. These actions and disputes can involve our agents, suppliers, clients, and venture partners, and can include claims related to payment of fees, service quality, and ownership arrangements, including certain put or call options. We are unable to predict the ultimate outcome of these actions because of their inherent uncertainty. However, we believe that the most probable, ultimate resolution of these matters will not have a material adverse effect on our consolidated financial position, results of operations or cash flows.
On March 28, 2016, FMC Technologies received an inquiry from the U.S. Department of Justice (“DOJ”) related to the DOJ's investigation of whether certain services Unaoil S.A.M. provided to its clients, including FMC Technologies, violated the U.S. Foreign Corrupt Practices Act (“FCPA”). On March 29, 2016, Technip S.A. also received an inquiry from the DOJ related to Unaoil. We cooperated with the DOJ's investigations and, with regard to FMC Technologies, a related investigation by the SEC.
In late 2016, Technip S.A. was contacted by the DOJ regarding its investigation of offshore platform projects awarded between 2003 and 2007, performed in Brazil by a joint venture company in which Technip S.A. was a minority participant, and also raised with the DOJ certain other comprehensive (income) loss asprojects performed by Technip S.A. subsidiaries in Brazil between 2002 and 2013. The DOJ also inquired about projects in Ghana and Equatorial Guinea that were awarded to Technip S.A. subsidiaries in 2008 and 2009, respectively. We cooperated with the DOJ in its investigation into potential violations of December 31, 2020the FCPA in connection with these projects. We contacted and cooperated with the Brazilian authorities (Federal Prosecution Service (“MPF”), the Comptroller General of Brazil (“CGU”) and the Attorney General of Brazil (“AGU”)) with their investigation concerning the projects in Brazil and have also contacted and are cooperating with French authorities (the Parquet National Financier (“PNF”)) with their investigation about these existing matters.
On June 25, 2019, thatwe announced a global resolution to pay a total of $301.3 million to the DOJ, the SEC, the MPF, and the CGU/AGU to resolve these anti-corruption investigations. We were not required to have not been recognized as components of net periodic benefit cost:
| Pensions | Other Post-retirement Benefits | ||||||||||||||||||||||||||||||||||
| 2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||||||||||||||
| (In millions) | U.S. | Int’l | U.S. | Int’l | |||||||||||||||||||||||||||||||
| Pre-tax amounts recognized in accumulated other comprehensive (income) loss | |||||||||||||||||||||||||||||||||||
| Unrecognized actuarial loss | $ | 198.4 | $ | 122.3 | $ | 121.6 | $ | 90.7 | $ | 1.3 | $ | 1.9 | |||||||||||||||||||||||
| Unrecognized prior service cost | — | 6.2 | — | 7.0 | — | — | |||||||||||||||||||||||||||||
| Accumulated other comprehensive (income) loss as of December 31 | $ | 198.4 | $ | 128.5 | $ | 121.6 | $ | 97.7 | $ | 1.3 | $ | 1.9 | |||||||||||||||||||||||
| Pensions | Other Post-retirement Benefits | ||||||||||||||||||||||||||||||||||
| 2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||||||||||||||
| (In millions) | U.S. | Int’l | U.S. | Int’l | |||||||||||||||||||||||||||||||
| Plans with underfunded or non-funded projected benefit obligation | |||||||||||||||||||||||||||||||||||
| Aggregate projected benefit obligation | $ | 684.7 | $ | 818.7 | $ | 668.4 | $ | 741.2 | $ | 9.8 | $ | 10.7 | |||||||||||||||||||||||
| Aggregate fair value of plan assets | $ | 483.7 | $ | 596.7 | $ | 518.8 | $ | 522.8 | $ | — | $ | — | |||||||||||||||||||||||
| Pensions | Other Post-retirement Benefits | ||||||||||||||||||||||||||||||||||
| 2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||||||||||||||
| (In millions) | U.S. | Int’l | U.S. | Int’l | |||||||||||||||||||||||||||||||
| Plans with underfunded or non-funded accumulated benefit obligation | |||||||||||||||||||||||||||||||||||
| Aggregate accumulated benefit obligation | $ | 684.7 | $ | 325.7 | $ | 668.4 | $ | 292.1 | $ | — | $ | — | |||||||||||||||||||||||
| Aggregate fair value of plan assets | $ | 483.7 | $ | 154.0 | $ | 518.8 | $ | 140.3 | $ | — | $ | — | |||||||||||||||||||||||
As part of this resolution, we entered into a three-year Deferred Prosecution Agreement (“DPA”) with the DOJ related to charges of conspiracy to violate the FCPA related to conduct in Brazil and with Unaoil. In addition, Technip USA, Inc., a U.S. subsidiary, pled guilty to one count of conspiracy to violate the FCPA related to conduct in Brazil. We also provided the DOJ reports on our anti-corruption program during the term of the DPA.
In Brazil, on June 25, 2019 our subsidiaries Technip Brasil - Engenharia, Instalações E Apoio Marítimo Ltda. and Flexibrás Tubos Flexíveis Ltda. entered into leniency agreements with both the MPF and the CGU/AGU. We made, as part of those agreements, certain enhancements to the compliance programs in Brazil during the two-year self-reporting period, which aligned with our commitment to cooperation and transparency with the compliance community in Brazil and globally.
In September 2019, the SEC approved our previously disclosed agreement in principle with the SEC Staff and issued an Administrative Order, pursuant to which we paid the SEC $5.1 million, which was included in the global resolution of $301.3 million.
On December 8, 2022, the Company received notice of the official release from all obligations and charges by CGU, having successfully completed all of the self-reporting requirements in the leniency agreements and the case was closed. On December 27, 2022, the DOJ filed a Motion to Dismiss the charges against TechnipFMC related to conspiracy to violate the FCPA, noting to the Court that the Company had fully met and completed all of its obligations under the DPA. The following table summarizesDismissal Order was signed by the componentsCourt on January 4, 2023, thereby closing the case. All obligations to regulatory authorities related to the enforcement matters in the United States and Brazil have been completed and the Company has been unconditionally released by both jurisdictions.
To date, the investigation by the PNF related to historical projects in Equatorial Guinea and Ghana has not reached resolution. We remain committed to finding a resolution with the PNF and will maintain a $70.0 million provision related to this investigation. Additionally, the PNF informed us that it is reviewing other historical projects in Angola. We are not aware of net periodic benefit cost (income)any evidence that would support a finding of liability with respect to these projects, or whether the PNF would seek to impose any additional penalty. As we continue our discussions with PNF towards a potential resolution of all of these matters, the amount of a settlement could exceed this provision.
There is no certainty that a settlement with PNF will be reached or that the settlement will not exceed current accruals. The PNF has a broad range of potential sanctions under anti-corruption laws and regulations that it may seek to impose in appropriate circumstances including, but not limited to, fines, penalties, confiscations and modifications to business practices and compliance programs. Any of these measures, if applicable to us, as well as potential customer reaction to such measures, could have a material adverse impact on our business, results of operations, and financial condition. If we cannot reach a resolution with the PNF, we could be subject to criminal proceedings in France, the outcome of which cannot be predicted.
Contingent liabilities associated with liquidated damages - Some of our contracts contain provisions that require us to pay liquidated damages if we are responsible for the years ended December 31, 2020, 2019failure to meet specified contractual milestone dates and 2018:
| Pensions | Other Post-retirement Benefits | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2020 | 2019 | 2018 | 2020 | 2019 | 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||
| (In millions) | U.S. | Int’l | U.S. | Int’l | U.S. | Int’l | |||||||||||||||||||||||||||||||||||||||||||||||
| Components of net periodic benefit cost (income) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Service cost | $ | — | $ | 19.1 | $ | — | $ | 16.3 | $ | 0.2 | $ | 21.2 | $ | — | $ | — | $ | — | |||||||||||||||||||||||||||||||||||
| Interest cost | 22.2 | 14.1 | 25.6 | 18.3 | 23.8 | 20.9 | 0.4 | 0.5 | 0.4 | ||||||||||||||||||||||||||||||||||||||||||||
| Expected return on plan assets | (45.4) | (37.9) | (41.6) | (33.5) | (50.1) | (41.2) | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Settlement cost | 1.4 | 0.8 | — | 0.3 | 0.4 | 0.4 | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Curtailment benefit | — | — | — | — | — | (3.8) | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Amortization of net actuarial loss (gain) | 6.9 | 2.1 | 1.8 | 0.7 | — | 0.6 | 0.1 | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Amortization of prior service cost (credit) | — | 1.2 | — | 1.0 | — | 1.3 | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Net periodic benefit cost (income) | $ | (14.9) | $ | (0.6) | $ | (14.2) | $ | 3.1 | $ | (25.7) | $ | (0.6) | $ | 0.5 | $ | 0.5 | $ | 0.4 | |||||||||||||||||||||||||||||||||||
| Pensions | Other Post-retirement Benefits | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2020 | 2019 | 2018 | 2020 | 2019 | 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||
| (In millions) | U.S. | Int’l | U.S. | Int’l | U.S. | Int’l | |||||||||||||||||||||||||||||||||||||||||||||||
| Changes in plan assets and benefit obligations recognized in other comprehensive income (loss) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net actuarial gain (loss) arising during period | $ | (85.1) | $ | (27.2) | $ | (50.2) | $ | (47.3) | $ | (73.5) | $ | (15.3) | $ | — | $ | — | $ | — | |||||||||||||||||||||||||||||||||||
| Prior service (cost) credit arising during period | — | (0.1) | — | (0.9) | 0.2 | (2.7) | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Settlements and curtailments | 1.4 | 0.8 | — | 0.3 | 0.4 | (3.4) | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Amortization of net actuarial loss (gain) | 6.9 | 2.1 | 1.8 | 0.7 | — | 0.6 | (0.1) | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Amortization of prior service cost (credit) | — | 1.2 | — | 1.0 | — | 1.3 | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Other | — | (7.5) | — | (0.8) | — | 1.4 | (0.6) | (0.1) | (0.1) | ||||||||||||||||||||||||||||||||||||||||||||
| Total recognized in other comprehensive income (loss) | $ | (76.8) | $ | (30.7) | $ | (48.4) | $ | (47.0) | $ | (72.9) | $ | (18.1) | $ | (0.7) | $ | (0.1) | $ | (0.1) | |||||||||||||||||||||||||||||||||||
NOTE 21. INCOME TAXES
Components of accumulated other comprehensive income (loss) as a componentfrom continuing operations before income taxes - U.S. and outside U.S. components of net period benefit cost (income), during the next fiscal year areincome (loss) from continuing operations before income taxes were as follows:
| Pensions | Other Post-retirement Benefits | ||||||||||||||||
| (In millions) | U.S. | Int’l | |||||||||||||||
| Net actuarial losses | $ | 16.8 | $ | 4.0 | $ | — | |||||||||||
| Prior service cost | $ | — | $ | 1.2 | $ | — | |||||||||||
| Year Ended December 31, | |||||||||||||||||
| (In millions) | 2022 | 2021 | 2020 | ||||||||||||||
| United States | $ | (148.8) | $ | (288.2) | $ | (2,169.3) | |||||||||||
| Outside United States | 217.7 | 486.3 | (1,329.4) | ||||||||||||||
| Income (loss) from continuing operations before income taxes | $ | 68.9 | $ | 198.1 | $ | (3,498.7) | |||||||||||
| Pensions | Other Post-retirement Benefits | ||||||||||||||||||||||||||||||||||
| 2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||||||||||||||
| U.S. | Int’l | U.S. | Int’l | ||||||||||||||||||||||||||||||||
| Discount rate | 2.70 | % | 1.23 | % | 3.40 | % | 1.70 | % | 3.47 | % | 4.31 | % | |||||||||||||||||||||||
| Rate of compensation increase | N/A | 1.92 | % | N/A | 2.39 | % | 4.00 | % | 4.00 | % | |||||||||||||||||||||||||
| Year Ended December 31, | |||||||||||||||||
| (In millions) | 2022 | 2021 | 2020 | ||||||||||||||
| Current | |||||||||||||||||
| United States | $ | (0.5) | $ | 0.2 | $ | (18.3) | |||||||||||
| Outside United States | 118.9 | 206.0 | 69.5 | ||||||||||||||
| Total current income taxes | 118.4 | 206.2 | 51.2 | ||||||||||||||
| Deferred | |||||||||||||||||
| United States | — | — | (2.8) | ||||||||||||||
| Outside United States | (13.0) | (95.1) | (29.0) | ||||||||||||||
| Total deferred income taxes | (13.0) | (95.1) | (31.8) | ||||||||||||||
| Provision for income taxes | $ | 105.4 | $ | 111.1 | $ | 19.4 | |||||||||||
| Pensions | Other Post-retirement Benefits | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2020 | 2019 | 2018 | 2020 | 2019 | 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||
| U.S. | Int’l | U.S. | Int’l | U.S. | Int’l | ||||||||||||||||||||||||||||||||||||||||||||||||
| Discount rate | 3.40 | % | 1.65 | % | 4.40 | % | 2.56 | % | 3.70 | % | 2.39 | % | 4.31 | % | 5.04 | % | 4.33 | % | |||||||||||||||||||||||||||||||||||
| Rate of compensation increase | N/A | 2.33 | % | N/A | 2.34 | % | N/A | 2.39 | % | 4.00 | % | 4.00 | % | 4.00 | % | ||||||||||||||||||||||||||||||||||||||
| Expected rate of return on plan assets | 7.75 | % | 4.84 | % | 8.65 | % | 5.04 | % | 8.57 | % | 4.90 | % | N/A | N/A | N/A | ||||||||||||||||||||||||||||||||||||||
| December 31, | |||||||||||
| (In millions) | 2022 | 2021 | |||||||||
| Deferred tax assets attributable to | |||||||||||
| Accrued expenses | $ | 166.8 | $ | 173.0 | |||||||
| Capital loss | 21.1 | 21.1 | |||||||||
| Non-deductible interest | 87.7 | 95.4 | |||||||||
| Foreign tax credit carryforwards | 136.5 | 136.5 | |||||||||
| Other tax credits | 159.2 | 146.0 | |||||||||
| Net operating loss carryforwards | 487.5 | 455.5 | |||||||||
| Research and development credit | 13.7 | 3.8 | |||||||||
| Foreign exchange | 21.7 | 17.2 | |||||||||
| Provisions for pensions and other long-term employee benefits | 23.5 | 31.9 | |||||||||
| Contingencies | 45.3 | 38.3 | |||||||||
| Leases | 208.9 | 183.4 | |||||||||
| Other | 6.4 | 24.6 | |||||||||
| Deferred tax assets | 1,378.3 | 1,326.7 | |||||||||
| Valuation allowance | (999.1) | (935.5) | |||||||||
| Deferred tax assets, net of valuation allowance | 379.2 | 391.2 | |||||||||
| Deferred tax liabilities attributable to | |||||||||||
| Contract liabilities | 23.1 | 32.2 | |||||||||
| Tax on undistributed earnings not indefinitely reinvested | 13.4 | — | |||||||||
| Property, plant and equipment, intangibles and other assets | 117.2 | 162.8 | |||||||||
| Leases | 203.5 | 169.4 | |||||||||
| Other | 5.0 | — | |||||||||
| Deferred tax liabilities | 362.2 | 364.4 | |||||||||
| Net deferred tax assets | $ | 17.0 | $ | 26.8 | |||||||
At December 31, 2022 and 2021, the durationcarrying amount of net deferred tax assets and the expected yieldrelated valuation allowance included the impact of the investments are matching the expected cash outflows arising from the pension obligations. We have not changed the processes used to manage its risks from previous periods. Investments are well diversified, such that the failure of any single investment would not have a material impact on the overall level of assets. Our pension investment strategy emphasizes maximizing returns consistent with balancing risk. Excluding our international plans with insurance-based investments, 86% of our total pension plan assets represent the U.S. qualified plan and the U.K. plan. These plans are primarily invested in equity securities to maximize the long-term returns of the plans. The investment managers of these assets, including the hedge funds and limited partnerships, use Graham and Dodd fundamental investment analysis to select securities that have a margin of safety between the price of the security and the estimated value of the security. This value-oriented approach tends to mitigate the risk of a large equity allocation.
Foreign tax credit carryforwards. At December 31, 2022, deferred tax assets included U.S. foreign tax credit carryforwards of $136.5 million, which, if not utilized, will begin to expire in 2023. Realization of these deferred tax assets is dependent on the generation of sufficient U.S. taxable income prior to the above date. Based on long-term forecasts of operating results, management believes that it is more likely than not that our U.S. earnings over the forecast period will not result in sufficient U.S. taxable income to fully realize these deferred tax assets; therefore, we have established a valuation allowance against the related deferred tax assets. In its analysis, management has considered the effect of deemed dividends and other investments primarily consistexpected adjustments to U.S. earnings that are required in determining U.S. taxable income. Non-U.S. earnings subject to U.S. tax, including deemed dividends for U.S. tax purposes, were $0.3 million in 2022, $19.5 million in 2021 and $0.1 million in 2020.
Net operating loss carryforwards. At December 31, 2022, we had $487.5 million of real estate investment truststax-effected net operating loss carryforwards, with approximately $21.5 million estimated to be utilized against our unrecognized tax benefits. The ultimate realization of these deferred tax assets depends on our ability to generate sufficient taxable income in the appropriate taxing jurisdiction. Our deferred tax assets from net operating losses will expire as follows:
| (In millions) | Net Operating Loss | ||||
| 2023 – 2026 | $ | 61.1 | |||
| 2027 – 2031 | 58.7 | ||||
| 2032 – 2042 | 74.4 | ||||
| Non-Expiring | 293.3 | ||||
| $ | 487.5 | ||||
Unrecognized tax benefits - The following table presents a summary of changes in our unrecognized tax benefits:
| (In millions) | Federal,State and Foreign Tax | ||||||||||||||||
| Balance at December 31, 2020 | $ | 46.2 | |||||||||||||||
| Reductions for tax positions related to prior years | (15.2) | ||||||||||||||||
| Additions for tax positions related to current year | 39.9 | ||||||||||||||||
| Reductions for tax positions due to settlements | (2.1) | ||||||||||||||||
| Balance at December 31, 2021 | 68.8 | ||||||||||||||||
| Reductions for tax positions related to prior years | (22.8) | ||||||||||||||||
| Additions for tax positions related to current year | 16.8 | ||||||||||||||||
| Additions for tax positions due to settlements | 0.8 | ||||||||||||||||
| Balance at December 31, 2022 | $ | 63.6 | |||||||||||||||
The amounts reported above for uncertain tax positions excludes interest and other investments. These investments are measured at quoted market prices, which representpenalties of $1.1 million, $0.2 million, and $0.6 million for the NAVyears ended December 31, 2022, 2021, and 2020, respectively. Interest and penalties relating to these uncertain tax positions were included in income tax expense in our consolidated statements of income. It is reasonably possible that within twelve months, $8.9 million of assets for unrecognized tax benefits will be settled. This amount is reflected in income taxes payable, the remaining balance of the securities heldunrecognized tax benefit is recorded in such funds at year end.
| (In millions) | U.S. | International | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| December 31, 2020 | Total | Level 1 | Level 2 | Level 3 | Net Asset Value (a) | Total | Level 1 | Level 2 | Level 3 | Net Asset Value (a) | |||||||||||||||||||||||||||||||||||||||||||||||||
| Cash and cash equivalents | $ | 38.1 | $ | 38.1 | $ | — | $ | — | $ | — | $ | 66.3 | $ | 66.3 | $ | — | $ | — | $ | — | |||||||||||||||||||||||||||||||||||||||
| Equity securities | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| U.S. companies | 83.3 | 83.3 | — | — | — | 96.3 | 96.3 | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||
| International companies | 1.1 | 1.1 | — | — | — | 209.1 | 209.1 | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||
| Registered investment companies | 38.4 | — | — | — | 38.4 | 68.2 | — | — | — | 68.2 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Insurance contracts | — | — | — | — | — | 154.0 | — | 154.0 | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||
| Hedge funds | 160.9 | — | — | — | 160.9 | 98.3 | — | — | — | 98.3 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Limited partnerships | 160.9 | — | — | — | 160.9 | 14.5 | — | — | — | 14.5 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Real estate and other investments | 1.0 | 1.0 | — | — | — | 39.5 | 39.5 | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||
| Total assets | $ | 483.7 | $ | 123.5 | $ | — | $ | — | $ | 360.2 | $ | 746.2 | $ | 411.2 | $ | 154.0 | $ | — | $ | 181.0 | |||||||||||||||||||||||||||||||||||||||
| December 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Cash and cash equivalents | $ | 50.5 | $ | 50.5 | $ | — | $ | — | $ | — | $ | 10.0 | $ | 10.0 | $ | — | $ | — | $ | — | |||||||||||||||||||||||||||||||||||||||
| Equity securities | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| U.S. companies | 110.3 | 110.3 | — | — | — | 70.4 | 70.4 | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||
| International companies | 5.4 | 5.4 | — | — | — | 251.5 | 251.5 | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||
| Registered investment companies | 36.3 | — | — | — | 36.3 | 63.4 | — | — | — | 63.4 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Common/collective trusts | 12.5 | — | — | — | 12.5 | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||
| Insurance contracts | — | — | — | — | — | 138.5 | — | 138.5 | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||
| Hedge funds | 164.3 | — | — | — | 164.3 | 82.0 | — | — | — | 82.0 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Limited partnerships | 139.4 | — | — | — | 139.4 | 7.9 | — | — | — | 7.9 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Real estate and other investments | 1.3 | 1.3 | — | — | — | 36.0 | 36.0 | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||
| Total assets | $ | 520.0 | $ | 167.5 | $ | 0 | $ | 0 | $ | 352.5 | $ | 659.7 | $ | 367.9 | $ | 138.5 | $ | 0 | $ | 153.3 | |||||||||||||||||||||||||||||||||||||||
TechnipFMC plc is a public limited company incorporated under the laws of England and Wales. Therefore, our earnings are subject to the U.K. statutory rate which is 19.0% for 2022, 2021, and 2020.
| Pensions | Other Post-retirement Benefits | ||||||||||||||||
| (In millions) | U.S. | International | |||||||||||||||
| 2021 | $ | 47.6 | $ | 36.6 | $ | 0.6 | |||||||||||
| 2022 | 32.4 | 30.6 | 0.6 | ||||||||||||||
| 2023 | 31.0 | 32.8 | 0.6 | ||||||||||||||
| 2024 | 31.7 | 34.8 | 0.6 | ||||||||||||||
| 2025 | 31.9 | 34.8 | 0.6 | ||||||||||||||
| 2025-2029 | $ | 164.3 | $ | 198.3 | $ | 2.6 | |||||||||||
| Year Ended December 31, | |||||||||||||||||
| 2022 | 2021 | 2020 | |||||||||||||||
| Statutory income tax rate | 19.0 | % | 19.0 | % | 19.0 | % | |||||||||||
| Net difference resulting from | |||||||||||||||||
| Foreign earnings subject to different tax rates | 114.0 | % | 24.4 | % | 1.3 | % | |||||||||||
| Adjustments to prior year taxes | (56.5) | % | (52.4) | % | (1.2) | % | |||||||||||
| Net change in unrecognized tax benefits | 7.4 | % | 12.3 | % | — | % | |||||||||||
| Changes in valuation allowance | 100.1 | % | 65.4 | % | (0.9) | % | |||||||||||
| Deferred tax asset/liability revaluation for tax rate change | (29.0) | % | (12.2) | % | 0.3 | % | |||||||||||
| Impairments | — | % | — | % | (19.5) | % | |||||||||||
| Other | (1.9) | % | (0.4) | % | 0.4 | % | |||||||||||
| Effective income tax rate | 153.1 | % | 56.1 | % | (0.6) | % | |||||||||||
| Net Notional Amount Bought (Sold) | |||||||||||
| (In millions) | USD Equivalent | ||||||||||
| Euro | 1,794.5 | 2,201.8 | |||||||||
| British pound | 771.7 | 1,054.3 | |||||||||
| Malaysian ringgit | 891.0 | 221.5 | |||||||||
| Norwegian krone | 1,721.6 | 201.7 | |||||||||
| Brazilian real | 681.4 | 131.1 | |||||||||
| Singapore dollar | 171.2 | 129.4 | |||||||||
| Mexican peso | 1,288.0 | 64.7 | |||||||||
| Australian dollar | 78.2 | 60.3 | |||||||||
| Indian rupee | 3,172.0 | 43.4 | |||||||||
| Japanese yen | 1,124.4 | 10.9 | |||||||||
| Columbian peso | 37,142.2 | 10.8 | |||||||||
| Hong Kong dollar | (97.6) | (12.6) | |||||||||
| Indonesian rupiah | (201,679.7) | (14.3) | |||||||||
| U.S. dollar | (2,922.1) | (2,922.1) | |||||||||
| Net Notional Amount Bought (Sold) | |||||||||||
| (In millions) | USD Equivalent | ||||||||||
| Brazilian real | 77.9 | 15.0 | |||||||||
| Hong Kong dollar | 48.3 | 6.2 | |||||||||
| Euro | (8.7) | (10.7) | |||||||||
| Norwegian krone | (142.8) | (16.7) | |||||||||
| U.S. dollar | 5.2 | 5.2 | |||||||||
| December 31, 2020 | December 31, 2019 | ||||||||||||||||||||||
| (In millions) | Assets | Liabilities | Assets | Liabilities | |||||||||||||||||||
| Derivatives designated as hedging instruments | |||||||||||||||||||||||
| Foreign exchange contracts | |||||||||||||||||||||||
| Current - Derivative financial instruments | $ | 215.8 | $ | 151.6 | $ | 94.3 | $ | 125.0 | |||||||||||||||
| Long-term - Derivative financial instruments | 35.6 | 23.3 | 34.8 | 48.0 | |||||||||||||||||||
| Total derivatives designated as hedging instruments | 251.4 | 174.9 | 129.1 | 173.0 | |||||||||||||||||||
| Derivatives not designated as hedging instruments | |||||||||||||||||||||||
| Foreign exchange contracts | |||||||||||||||||||||||
| Current - Derivative financial instruments | 85.6 | 15.6 | 7.6 | 16.3 | |||||||||||||||||||
| Long-term - Derivative financial instruments | 0.3 | 0 | 0.4 | 0.4 | |||||||||||||||||||
| Total derivatives not designated as hedging instruments | 85.9 | 15.6 | 8.0 | 16.7 | |||||||||||||||||||
| Long-term - Derivative financial instruments - Synthetic Bonds - Call Option Premium | 0 | — | 4.3 | — | |||||||||||||||||||
| Long-term - Derivative financial instruments - Synthetic Bonds - Embedded Derivatives | — | 0 | — | 4.3 | |||||||||||||||||||
| Total derivatives | $ | 337.3 | $ | 190.5 | $ | 141.4 | $ | 194.0 | |||||||||||||||
| Gain (Loss) Recognized in OCI | |||||||||||||||||
| Year Ended December 31, | |||||||||||||||||
| (In millions) | 2020 | 2019 | 2018 | ||||||||||||||
| Foreign exchange contracts | $ | 28.0 | $ | 10.3 | $ | (75.4) | |||||||||||
| Year Ended December 31, | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (In millions) | 2020 | 2019 | 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total amount of income (expense) presented in the consolidated statements of income associated with hedges and derivatives | Revenue | Cost of sales | Selling, general and administrative expense | Other income (expense), net | Revenue | Cost of sales | Selling, general and administrative expense | Other income (expense), net | Revenue | Cost of sales | Selling, general and administrative expense | Other income (expense), net | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Cash Flow hedge gain (loss) recognized in income | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Foreign Exchange Contracts | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Amounts reclassified from accumulated OCI to income (loss) | $ | (83.7) | $ | 68.5 | $ | (0.4) | $ | (4.4) | $ | (26.6) | $ | 12.0 | $ | — | $ | (9.1) | $ | (2.4) | $ | 3.4 | $ | (0.1) | $ | 1.0 | |||||||||||||||||||||||||||||||||||||||||||||||
| Amounts excluded from effectiveness testing | 7.7 | (9.8) | (0.2) | 34.2 | 0.6 | (7.6) | 0 | (34.9) | (2.2) | (4.8) | 0 | (12.3) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total cash flow hedge gain (loss) recognized in income | (76.0) | 58.7 | (0.6) | 29.8 | (26.0) | 4.4 | — | (44.0) | (4.6) | (1.4) | (0.1) | (11.3) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Gain (loss) recognized in income on derivatives not designated as hedging instruments | (0.8) | 3.4 | 0 | 22.7 | (1.6) | 0.2 | 0 | (10.2) | (1.7) | 0.2 | 0 | (11.4) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total | $ | (76.8) | $ | 62.1 | $ | (0.6) | $ | 52.5 | $ | (27.6) | $ | 4.6 | $ | — | $ | (54.2) | $ | (6.3) | $ | (1.2) | $ | (0.1) | $ | (22.7) | |||||||||||||||||||||||||||||||||||||||||||||||
| December 31, 2020 | December 31, 2019 | ||||||||||||||||||||||||||||||||||
| (In millions) | Gross Amount Recognized | Gross Amounts Not Offset Permitted Under Master Netting Agreements | Net Amount | Gross Amount Recognized | Gross Amounts Not Offset Permitted Under Master Netting Agreements | Net Amount | |||||||||||||||||||||||||||||
| Derivative assets | $ | 337.3 | $ | (134.0) | $ | 203.3 | $ | 141.4 | $ | (112.5) | $ | 28.9 | |||||||||||||||||||||||
| Derivative liabilities | $ | 190.5 | $ | (134.0) | $ | 56.5 | $ | 194.0 | $ | (112.5) | $ | 81.5 | |||||||||||||||||||||||
NOTE 24. FAIR VALUE MEASUREMENTS22. PENSION AND OTHER POST-RETIREMENT BENEFIT PLANS
On December 31, 2017, we amended the U.S. retirement plans (the “Plans”) to freeze benefit accruals for all participants of the Plans as of December 31, 2017. After that date, participants in the Plans will no longer accrue any further benefits and participants’ benefits under the Plans will be determined based on credited service and eligible earnings as of December 31, 2017.
Foreign-based employees are eligible to participate in TechnipFMC-sponsored or government-sponsored benefit plans to which we contribute. Several of the foreign defined benefit pension plans sponsored by us provide for employee contributions; the remaining plans are noncontributory. The most significant of these plans are in the Netherlands, France, and the United Kingdom.
We have other post-retirement benefit plans covering substantially all of our U.S. unionized employees. The post-retirement health care plans are contributory; the post-retirement life insurance plans are noncontributory.
We are required to recognize the funded status of defined benefit post-retirement plans as an asset or liability in the consolidated balance sheet and recognize changes in that funded status in comprehensive income (loss) in the year in which the changes occur. Further, we are required to measure the plan’s assets and its obligations that determine its funded status as of the date of the consolidated balance sheet. We have applied this guidance to our domestic pension and other post-retirement benefit plans as well as for many of our non-U.S. plans, including those in the United Kingdom, Germany, France and Canada. Pension expense measured in compliance with GAAP for the other non-U.S. pension plans is not materially different from the locally reported pension expense.
The funded status of our U.S. Pension Plans, certain foreign pension plans and U.S. post-retirement health care and life insurance benefit plans, together with the associated balances recognized in our consolidated balance sheets as of December 31, 2022 and 2021, were as follows:
97
| Pensions | Other Post-retirement Benefits | ||||||||||||||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||||||||||||||
| (In millions) | U.S. | Int’l | U.S. | Int’l | |||||||||||||||||||||||||||||||
| Accumulated benefit obligation | $ | 465.1 | $ | 330.0 | $ | 653.6 | $ | 589.1 | |||||||||||||||||||||||||||
| Projected benefit obligation at January 1 | $ | 653.6 | $ | 601.6 | $ | 684.7 | $ | 656.4 | $ | 8.4 | $ | 9.4 | |||||||||||||||||||||||
| Service cost | — | 4.1 | — | 10.0 | — | — | |||||||||||||||||||||||||||||
| Interest cost | 18.5 | 10.4 | 18.0 | 9.8 | 0.3 | 0.3 | |||||||||||||||||||||||||||||
| Actuarial (gain) loss | (173.3) | (197.8) | 7.1 | (32.5) | (1.5) | (0.7) | |||||||||||||||||||||||||||||
| Settlements | (1.5) | (1.0) | (22.6) | — | — | — | |||||||||||||||||||||||||||||
| Foreign currency exchange rate changes | — | (55.5) | — | (11.9) | (0.1) | (0.2) | |||||||||||||||||||||||||||||
| Plan participants’ contributions | — | — | — | 0.9 | — | — | |||||||||||||||||||||||||||||
| Benefits paid | (32.2) | (21.6) | (33.6) | (22.0) | (0.4) | (0.4) | |||||||||||||||||||||||||||||
| Other | — | (0.5) | — | (9.1) | — | — | |||||||||||||||||||||||||||||
| Projected benefit obligation as of December 31 | 465.1 | 339.7 | 653.6 | 601.6 | 6.7 | 8.4 | |||||||||||||||||||||||||||||
| Fair value of plan assets at January 1 | 517.5 | 627.5 | 483.7 | 591.5 | — | — | |||||||||||||||||||||||||||||
| Actual return on plan assets | (110.6) | (186.5) | 61.1 | 46.4 | — | — | |||||||||||||||||||||||||||||
| Company contributions | 4.1 | 14.3 | 28.9 | 19.6 | — | — | |||||||||||||||||||||||||||||
| Foreign currency exchange rate changes | — | (61.6) | — | (8.9) | — | — | |||||||||||||||||||||||||||||
| Settlements | (1.5) | (1.1) | (22.6) | — | — | — | |||||||||||||||||||||||||||||
| Plan participants’ contributions | — | — | — | 0.9 | — | — | |||||||||||||||||||||||||||||
| Benefits paid | (32.2) | (21.6) | (33.6) | (22.0) | — | — | |||||||||||||||||||||||||||||
| Other | — | 1.0 | — | — | — | — | |||||||||||||||||||||||||||||
| Fair value of plan assets as of December 31 | 377.3 | 372.0 | 517.5 | 627.5 | — | — | |||||||||||||||||||||||||||||
| Funded status of the plans (liability) as of December 31 | $ | (87.8) | $ | 32.3 | $ | (136.1) | $ | 25.9 | $ | (6.7) | $ | (8.4) | |||||||||||||||||||||||
| Pensions | Other Post-retirement Benefits | ||||||||||||||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||||||||||||||
| (In millions) | U.S. | Int’l | U.S. | Int’l | |||||||||||||||||||||||||||||||
| Current portion of accrued pension and other post-retirement benefits | $ | (0.5) | $ | (1.4) | $ | (2.9) | $ | (1.7) | $ | (0.6) | $ | (0.6) | |||||||||||||||||||||||
| Accrued pension and other post-retirement benefits, net of current portion | (87.3) | 33.7 | (133.2) | 27.6 | (6.1) | (7.8) | |||||||||||||||||||||||||||||
| Funded status as of December 31 | $ | (87.8) | $ | 32.3 | $ | (136.1) | $ | 25.9 | $ | (6.7) | $ | (8.4) | |||||||||||||||||||||||
98
The following table summarizes the pre-tax amounts in accumulated other comprehensive (income) loss as of December 31, 2022 and liabilities2021 that have not been recognized as components of net periodic benefit cost:
| Pensions | Other Post-retirement Benefits | ||||||||||||||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||||||||||||||
| (In millions) | U.S. | Int’l | U.S. | Int’l | |||||||||||||||||||||||||||||||
| Pre-tax amounts recognized in accumulated other comprehensive (income) loss | |||||||||||||||||||||||||||||||||||
| Unrecognized actuarial loss | $ | 116.3 | $ | 26.5 | $ | 156.6 | $ | 15.9 | $ | (1.1) | $ | 0.4 | |||||||||||||||||||||||
| Unrecognized prior service cost | — | 3.0 | — | 3.4 | — | — | |||||||||||||||||||||||||||||
| Accumulated other comprehensive (income) loss as of December 31 | $ | 116.3 | $ | 29.5 | $ | 156.6 | $ | 19.3 | $ | (1.1) | $ | 0.4 | |||||||||||||||||||||||
The following tables summarize the projected and accumulated benefit obligations and fair values of plan assets where the projected or accumulated benefit obligation exceeds the fair value of plan assets as of December 31, 2022 and 2021:
| Pensions | Other Post-retirement Benefits | ||||||||||||||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||||||||||||||
| (In millions) | U.S. | Int’l | U.S. | Int’l | |||||||||||||||||||||||||||||||
| Plans with underfunded or non-funded projected benefit obligation | |||||||||||||||||||||||||||||||||||
| Aggregate projected benefit obligation | $ | 464.3 | $ | 42.0 | $ | 652.2 | $ | 57.9 | $ | 6.7 | $ | 8.4 | |||||||||||||||||||||||
| Aggregate fair value of plan assets | $ | 376.1 | $ | — | $ | 516.0 | $ | — | $ | — | $ | — | |||||||||||||||||||||||
| Pensions | Other Post-retirement Benefits | ||||||||||||||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||||||||||||||
| (In millions) | U.S. | Int’l | U.S. | Int’l | |||||||||||||||||||||||||||||||
| Plans with underfunded or non-funded accumulated benefit obligation | |||||||||||||||||||||||||||||||||||
| Aggregate accumulated benefit obligation | $ | 464.3 | $ | 33.9 | $ | 652.2 | $ | 46.7 | $ | — | $ | — | |||||||||||||||||||||||
| Aggregate fair value of plan assets | $ | 376.1 | $ | — | $ | 516.0 | $ | — | $ | — | $ | — | |||||||||||||||||||||||
99
The following table summarizes the components of net periodic benefit cost (income) for the years ended December 31, 2022, 2021 and 2020:
| Pensions | Other Post-retirement Benefits | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2022 | 2021 | 2020 | 2022 | 2021 | 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||
| (In millions) | U.S. | Int’l | U.S. | Int’l | U.S. | Int’l | |||||||||||||||||||||||||||||||||||||||||||||||
| Components of net periodic benefit cost (income) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Service cost | $ | — | $ | 4.1 | $ | — | $ | 10.0 | $ | — | $ | 10.4 | $ | — | $ | — | $ | — | |||||||||||||||||||||||||||||||||||
| Interest cost | 18.5 | 10.4 | 18.0 | 9.8 | 22.2 | 11.3 | 0.3 | 0.3 | 0.4 | ||||||||||||||||||||||||||||||||||||||||||||
| Expected return on plan assets | (35.2) | (24.3) | (31.9) | (25.0) | (45.4) | (36.5) | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Settlement cost | 0.8 | — | 2.8 | — | 1.4 | 0.5 | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Curtailment benefit | — | — | — | 0.4 | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Amortization of net actuarial loss (gain) | 12.0 | (0.2) | 16.8 | 1.4 | 6.9 | 0.6 | — | 0.1 | 0.1 | ||||||||||||||||||||||||||||||||||||||||||||
| Amortization of prior service cost | — | 0.3 | — | 0.5 | — | 0.6 | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Net periodic benefit cost (income) | $ | (3.9) | $ | (9.7) | $ | 5.7 | $ | (2.9) | $ | (14.9) | $ | (13.1) | $ | 0.3 | $ | 0.4 | $ | 0.5 | |||||||||||||||||||||||||||||||||||
The following table summarizes changes in plan assets and benefit obligations recognized in other comprehensive income (loss) for the years ended December 31, 2022, 2021 and 2020:
| Pensions | Other Post-retirement Benefits | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2022 | 2021 | 2020 | 2022 | 2021 | 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||
| (In millions) | U.S. | Int’l | U.S. | Int’l | U.S. | Int’l | |||||||||||||||||||||||||||||||||||||||||||||||
| Changes in plan assets and benefit obligations recognized in other comprehensive income (loss) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net actuarial gain (loss) arising during period | $ | (27.5) | $ | 12.9 | $ | (22.1) | $ | (58.4) | $ | (85.1) | $ | (26.8) | $ | — | $ | — | $ | — | |||||||||||||||||||||||||||||||||||
| Prior service (cost) credit arising during period | — | 0.1 | — | 0.6 | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Settlements and curtailments | (0.8) | — | (2.8) | (0.4) | 1.4 | 0.4 | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Amortization of net actuarial loss (gain) | (12.0) | 0.2 | (16.8) | (1.4) | 6.9 | 0.6 | — | — | (0.1) | ||||||||||||||||||||||||||||||||||||||||||||
| Amortization of prior service cost (credit) | — | (0.3) | — | (0.5) | — | 0.6 | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Other | — | — | — | — | — | (7.5) | (1.5) | (0.9) | (0.6) | ||||||||||||||||||||||||||||||||||||||||||||
| Total recognized in other comprehensive income (loss) | $ | (40.3) | $ | 12.9 | $ | (41.7) | $ | (60.1) | $ | (76.8) | $ | (32.7) | $ | (1.5) | $ | (0.9) | $ | (0.7) | |||||||||||||||||||||||||||||||||||
Included in accumulated other comprehensive income (loss) as of December 31, 2022, are noncash, pre-tax charges which have not yet been recognized in net periodic benefit cost (income). The estimated amounts expected to be amortized from the portion of each component of accumulated other comprehensive income (loss) as a component of net period benefit cost (income), during the next fiscal year are as follows:
| Pensions | Other Post-retirement Benefits | ||||||||||||||||
| (In millions) | U.S. | Int’l | |||||||||||||||
| Net actuarial losses | $ | 9.2 | $ | — | $ | (0.1) | |||||||||||
| Prior service cost | $ | — | $ | 0.4 | $ | — | |||||||||||
100
Key assumptions - The following weighted-average assumptions were used to determine the benefit obligations:
| Pensions | Other Post-retirement Benefits | ||||||||||||||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||||||||||||||
| U.S. | Int’l | U.S. | Int’l | ||||||||||||||||||||||||||||||||
| Discount rate | 5.60 | % | 9.97 | % | 2.90 | % | 1.99 | % | 7.32 | % | 5.26 | % | |||||||||||||||||||||||
| Rate of compensation increase | N/A | 5.75 | % | N/A | 3.15 | % | 4.00 | % | 4.00 | % | |||||||||||||||||||||||||
The following weighted-average assumptions were used to determine net periodic benefit cost:
| Pensions | Other Post-retirement Benefits | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2022 | 2021 | 2020 | 2022 | 2021 | 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||
| U.S. | Int’l | U.S. | Int’l | U.S. | Int’l | ||||||||||||||||||||||||||||||||||||||||||||||||
| Discount rate | 2.90 | % | 4.39 | % | 2.70 | % | 3.09 | % | 3.40 | % | 2.01 | % | 5.26 | % | 4.46 | % | 4.48 | % | |||||||||||||||||||||||||||||||||||
| Rate of compensation increase | N/A | 4.67 | % | N/A | 3.15 | % | N/A | 3.84 | % | 4.00 | % | 4.00 | % | 4.00 | % | ||||||||||||||||||||||||||||||||||||||
| Expected rate of return on plan assets | 6.75 | % | 3.65 | % | 6.75 | % | 2.22 | % | 7.75 | % | 7.27 | % | N/A | N/A | N/A | ||||||||||||||||||||||||||||||||||||||
Our estimate of expected rate of return on plan assets is based on the historical performance of plan assets, current market conditions, our asset allocation and long-term growth expectations.
Plan assets - We actively monitor how the duration and the expected yield of the investments are matching the expected cash outflows arising from the pension obligations. We have not changed the processes used to manage its risks from previous periods. Investments are well diversified, such that the failure of any single investment would not have a material impact on the overall level of assets. Our pension investment strategy emphasizes maximizing returns consistent with balancing risk. Excluding our international plans with insurance-based investments, 98.6% of our total pension plan assets represent the U.S. qualified plan and the U.K. plan. These plans are primarily invested in equity securities to maximize the long-term returns of the plans. The investment managers of these assets, including the hedge funds and limited partnerships, use Graham and Dodd fundamental investment analysis to select securities that have a margin of safety between the price of the security and the estimated value of the security. This value-oriented approach tends to mitigate the risk of a large equity allocation.
The following is a description of the valuation methodologies used for the pension plan assets. There have been no changes in the methodologies used as of December 31, 2022 and 2021.
•Cash is valued at cost, which approximates fair value.
•Equity securities are comprised of common stock and preferred stock. The fair values of equity securities are valued at the closing price reported on the active market on which the securities are traded.
•Fair values of registered investment companies and common/collective trusts are valued based on quoted market prices, which represent the net asset value (“NAV”) of shares held. Registered investment companies include investments in emerging market bonds. Common/collective trusts primarily includes money market instruments with short maturities.
•Insurance contracts are valued at book value, which approximates fair value, and is calculated using the prior-year balance plus or minus investment returns and changes in cash flows.
•The fair values of hedge funds are valued using the NAV as determined by the administrator or custodian of the fund. The funds primarily invest in U.S. and international equities, debt securities and other hedge funds.
•The fair values of limited partnerships are valued using the NAV as determined by the administrator or custodian of the fund. The partnerships primarily invest in U.S. and international equities and debt securities.
101
•Real estate and other investments consist of real estate investment trusts and other investments. These investments are measured at fairquoted market prices, which represent the NAV of the securities held in such funds at year end.
Our pension plan assets measured at fair value on a recurring basis wereare as follows:follows as of December 31, 2022 and 2021. Refer to “Fair value measurements” in Note 1 to these consolidated financial statements for a description of the levels.
| December 31, 2020 | December 31, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||
| (In millions) | Total | Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | |||||||||||||||||||||||||||||||||||||||
| Assets | |||||||||||||||||||||||||||||||||||||||||||||||
| Investments | |||||||||||||||||||||||||||||||||||||||||||||||
Equity securities(a) | $ | 65.6 | $ | 65.6 | $ | — | $ | — | $ | 54.8 | $ | 54.8 | $ | 0 | $ | — | |||||||||||||||||||||||||||||||
| Money market fund | 1.7 | — | 1.7 | — | 1.5 | — | 1.5 | — | |||||||||||||||||||||||||||||||||||||||
Stable value fund(b) | 0.9 | — | — | — | 2.1 | — | — | — | |||||||||||||||||||||||||||||||||||||||
| Held-to-maturity debt securities | 24.2 | — | 24.2 | — | 71.9 | 0 | 71.9 | 0 | |||||||||||||||||||||||||||||||||||||||
| Derivative financial instruments | |||||||||||||||||||||||||||||||||||||||||||||||
| Synthetic bonds - call option premium | — | — | — | — | 4.3 | — | 4.3 | — | |||||||||||||||||||||||||||||||||||||||
| Foreign exchange contracts | 337.3 | — | 337.3 | — | 137.1 | — | 137.1 | — | |||||||||||||||||||||||||||||||||||||||
| Assets held for sale | 47.3 | — | — | 47.3 | 25.8 | — | — | 25.8 | |||||||||||||||||||||||||||||||||||||||
| Total assets | $ | 477.0 | $ | 65.6 | $ | 363.2 | $ | 47.3 | $ | 297.5 | $ | 54.8 | $ | 214.8 | $ | 25.8 | |||||||||||||||||||||||||||||||
| Liabilities | |||||||||||||||||||||||||||||||||||||||||||||||
| Redeemable financial liability | $ | 246.6 | $ | — | $ | — | $ | 246.6 | $ | 268.8 | $ | — | $ | — | $ | 268.8 | |||||||||||||||||||||||||||||||
| Derivative financial instruments | |||||||||||||||||||||||||||||||||||||||||||||||
| Synthetic bonds - embedded derivatives | — | 0 | — | — | 4.3 | — | 4.3 | — | |||||||||||||||||||||||||||||||||||||||
| Foreign exchange contracts | 190.5 | — | 190.5 | — | 189.7 | — | 189.7 | — | |||||||||||||||||||||||||||||||||||||||
| Liabilities held for sale | — | — | — | — | 9.3 | — | — | 9.3 | |||||||||||||||||||||||||||||||||||||||
| Total liabilities | $ | 437.1 | $ | — | $ | 190.5 | $ | 246.6 | $ | 472.1 | $ | — | $ | 194.0 | $ | 278.1 | |||||||||||||||||||||||||||||||
| (In millions) | U.S. | International | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| December 31, 2022 | Total | Level 1 | Level 2 | Level 3 | Net Asset Value (a) | Total | Level 1 | Level 2 | Level 3 | Net Asset Value (a) | |||||||||||||||||||||||||||||||||||||||||||||||||
| Cash and cash equivalents | $ | 36.9 | $ | 36.9 | $ | — | $ | — | $ | — | $ | 49.4 | $ | 49.4 | $ | — | $ | — | $ | — | |||||||||||||||||||||||||||||||||||||||
| Equity securities | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| U.S. companies | 67.0 | 67.0 | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||
| International companies | — | — | — | — | — | 9.1 | 9.1 | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||
| Registered investment companies | 28.4 | — | — | — | 28.4 | 42.7 | — | — | — | 42.7 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Hedge funds | 108.8 | — | — | — | 108.8 | 221.1 | — | — | — | 221.1 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Limited partnerships | 136.2 | — | — | — | 136.2 | 2.3 | — | — | — | 2.3 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Real estate and other investments | — | — | — | — | ��� | 48.1 | 48.1 | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||
| Total assets | $ | 377.3 | $ | 103.9 | $ | — | $ | — | $ | 273.4 | $ | 372.7 | $ | 106.6 | $ | — | $ | — | $ | 266.1 | |||||||||||||||||||||||||||||||||||||||
| December 31, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Cash and cash equivalents | $ | 43.4 | $ | 43.4 | $ | — | $ | — | $ | — | $ | 40.5 | $ | 40.5 | $ | — | $ | — | $ | — | |||||||||||||||||||||||||||||||||||||||
| Equity securities | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| U.S. companies | 102.1 | 102.1 | — | — | — | 45.5 | 45.5 | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||
| International companies | 2.1 | 2.1 | — | — | — | 143.4 | 143.4 | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||
| Registered investment companies | 37.9 | — | — | — | 37.9 | 36.0 | — | — | — | 36.0 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Hedge funds | 138.8 | — | — | — | 138.8 | 291.0 | — | — | — | 291.0 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Limited partnerships | 192.5 | — | — | — | 192.5 | 3.6 | — | — | — | 3.6 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Real estate and other investments | 0.6 | 0.6 | — | — | — | 69.7 | 69.7 | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||
| Total assets | $ | 517.4 | $ | 148.2 | $ | — | $ | — | $ | 369.2 | $ | 629.7 | $ | 299.1 | $ | — | $ | — | $ | 330.6 | |||||||||||||||||||||||||||||||||||||||
(a)Includes fixed income and other investments measured at fair value.
| Pensions | Other Post-retirement Benefits | ||||||||||||||||
| (In millions) | U.S. | International | |||||||||||||||
| 2023 | $ | 31.3 | $ | 20.0 | $ | 0.6 | |||||||||||
| 2024 | 31.6 | 20.0 | 0.6 | ||||||||||||||
| 2025 | 32.0 | 21.3 | 0.6 | ||||||||||||||
| 2026 | 32.4 | 22.0 | 0.5 | ||||||||||||||
| 2027 | 32.7 | 23.5 | 0.5 | ||||||||||||||
| 2028-2032 | 165.9 | 135.9 | 2.2 | ||||||||||||||
Savings plans - The TechnipFMC Retirement Savings Plan (“Qualified Plan”), a qualified salary reduction plan under Section 401(k) of the Internal Revenue Code, is a defined contribution plan. Additionally, we have a non-qualified deferred compensation plan, the Non-Qualified Plan, which allows certain highly compensated employees the option to defer the receipt of a portion of their salary. We match a portion of the participants’ deferrals to both plans. Both plans relate to FMC Technologies, Inc.
Participants in the Non-Qualified Plan earn a return based on hypothetical investments in the same options as our 401(k) plan. Changes in the market value of our assets and liabilities held for sale was determined using a market approach that took into consideration the expected sales price.
During the years ended December 31, 2020, 20192022, and 2018,2021 we revaluedrecognized expense of $19.8 million and $21.5 million, respectively for matching contributions to these plans in 2022 and 2021, respectively. Additionally, during the liabilityyears ended December 31, 2022 and 2021, we recognized expense of $8.7 million and $9.0 million, respectively, for non-elective contributions.
NOTE 23. DERIVATIVE FINANCIAL INSTRUMENTS
For purposes of mitigating the effect of changes in exchange rates, we hold derivative financial instruments to reflecthedge the risks of certain identifiable and anticipated transactions and recorded assets and liabilities in our consolidated balance sheets. The types of risks hedged are those relating to the variability of future earnings and cash flows caused by movements in foreign currency exchange rates. Our policy is to hold derivatives only for the purpose of hedging risks associated with anticipated foreign currency purchases and sales created in the normal course of business, and not for speculative purposes.
Generally, we enter into hedging relationships such that changes in the fair values or cash flows of the transactions being hedged are expected to be offset by corresponding changes in the fair value of the derivatives. For derivative instruments that qualify as a cash flow hedge, the effective portion of the gain or loss of the derivative, which does not include the time value component of a forward currency rate, is reported as a component of other comprehensive income (“OCI”) and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. For derivative instruments not designated as hedging instruments, any change in the fair value of those instruments is reflected in earnings in the period such change occurs.
We hold the following types of derivative instruments:
Foreign exchange rate forward contracts – The purpose of these instruments is to hedge the risk of changes in future cash flows of anticipated purchase or sale commitments denominated in foreign currencies and recorded assets and liabilities in our consolidated balance sheets. As of December 31, 2022, we held the following material net positions:
103
| Net Notional Amount Bought (Sold) | |||||||||||
| (In millions) | USD Equivalent | ||||||||||
| Euro | 1,119.0 | 1,195.0 | |||||||||
| Norwegian krone | 3,615.0 | 367.0 | |||||||||
| Australian dollar | 279.0 | 189.0 | |||||||||
| Singapore dollar | 174.0 | 130.0 | |||||||||
| Indonesian rupiah | 1,312,560.0 | 84.0 | |||||||||
| Canadian dollar | 40.0 | 30.0 | |||||||||
| Indian rupee | 1,074.0 | 13.0 | |||||||||
| Mexican peso | 70.0 | 4.0 | |||||||||
| Kuwaiti Dinar | (4.0) | (14.0) | |||||||||
| Czech Koruna | 200.0 | 9.0 | |||||||||
| Malaysian ringgit | (365.0) | (83.0) | |||||||||
| Brazilian real | (784.0) | (150.0) | |||||||||
| British pound | (233.0) | (280.0) | |||||||||
| U.S. dollar | (1,558.0) | (1,558.0) | |||||||||
Foreign exchange rate instruments embedded in purchase and sale contracts – The purpose of these instruments is to match offsetting currency payments and receipts for particular projects, or comply with government restrictions on the currency used to purchase goods in certain countries. As of December 31, 2022, our portfolio of these instruments included the following material net positions:
| Net Notional Amount Bought (Sold) | |||||||||||
| (In millions) | USD Equivalent | ||||||||||
| Brazilian real | 97.3 | 18.7 | |||||||||
| Euro | (1.9) | (2.0) | |||||||||
| Norwegian krone | (24.6) | (2.5) | |||||||||
| U.S. dollar | (12.5) | (12.5) | |||||||||
Fair value amounts for all outstanding derivative instruments have been determined using available market information and commonly accepted valuation methodologies. See Note 24 for further details. Accordingly, the estimates presented may not be indicative of the amounts that we would realize in a current expectations aboutmarket exchange and may not be indicative of the obligation,gains or losses we may ultimately incur when these contracts are settled.
The following table presents the location and fair value amounts of derivative instruments reported in the consolidated balance sheets:
| December 31, 2022 | December 31, 2021 | ||||||||||||||||||||||
| (In millions) | Assets | Liabilities | Assets | Liabilities | |||||||||||||||||||
| Derivatives designated as hedging instruments | |||||||||||||||||||||||
| Foreign exchange contracts | |||||||||||||||||||||||
| Current - Derivative financial instruments | $ | 254.8 | $ | 332.5 | $ | 106.4 | $ | 139.5 | |||||||||||||||
| Long-term - Derivative financial instruments | 7.2 | 3.6 | 10.5 | 15.5 | |||||||||||||||||||
| Total derivatives designated as hedging instruments | 262.0 | 336.1 | 116.9 | 155.0 | |||||||||||||||||||
| Derivatives not designated as hedging instruments | |||||||||||||||||||||||
| Foreign exchange contracts | |||||||||||||||||||||||
| Current - Derivative financial instruments | 27.9 | 14.1 | 3.9 | 21.5 | |||||||||||||||||||
| Long-term - Derivative financial instruments | — | — | — | — | |||||||||||||||||||
| Total derivatives not designated as hedging instruments | 27.9 | 14.1 | 3.9 | 21.5 | |||||||||||||||||||
| Total derivatives | $ | 289.9 | $ | 350.2 | $ | 120.8 | $ | 176.5 | |||||||||||||||
104
Cash flow hedges of forecasted transactions, net of tax, which qualify for hedge accounting, resulted in the recognitionaccumulated other comprehensive losses of a loss of $202.0 million, $423.1$18.5 million and $322.3 million, respectively.
The fair value measurement is based upon significant unobservable inputs not observablefollowing tables present the location of gains (losses) in the market and is consequently classifiedconsolidated statements of income related to derivative instruments designated as a Level 3 fair value measurement.cash flow hedges.
| Gain (Loss) Recognized in OCI | |||||||||||||||||
| Year Ended December 31, | |||||||||||||||||
| (In millions) | 2022 | 2021 | 2020 | ||||||||||||||
| Foreign exchange contracts | $ | (55.7) | $ | (26.3) | $ | 3.8 | |||||||||||
The following represents the fair valueeffect of our Level 3 mandatorily redeemable financial liability is recorded as interest expensecash flow hedge accounting on the consolidated statements of income for the year ended December 31, 2022, 2021 and was as follows:2020:
| Year Ended December 31, | ||||||||||||||||||||
| (In millions) | 2020 | 2019 | 2018 | |||||||||||||||||
| Balance at beginning of period | $ | 268.8 | $ | 408.5 | $ | 312.0 | ||||||||||||||
| Less: Expenses recognized in net interest expense | (202.0) | (423.1) | (322.3) | |||||||||||||||||
| Less: Settlements | 224.2 | 562.8 | 225.8 | |||||||||||||||||
| Balance at end of period | $ | 246.6 | $ | 268.8 | $ | 408.5 | ||||||||||||||
| Year Ended December 31, | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (In millions) | 2022 | 2021 | 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total amount of income (expense) presented in the consolidated statements of income associated with hedges and derivatives | Revenue | Cost of sales | Selling, general and administrative expense | Other income (expense), net | Revenue | Cost of sales | Selling, general and administrative expense | Other income (expense), net | Revenue | Cost of sales | Other income (expense), net | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Amounts reclassified from accumulated OCI to income (loss) | $ | (7.4) | $ | (14.5) | $ | (0.3) | $ | (13.1) | $ | (29.7) | $ | 10.7 | $ | 0.2 | $ | 32.9 | $ | (83.7) | $ | 68.5 | $ | (0.2) | |||||||||||||||||||||||||||||||||||||||||||||||||
| Amounts excluded from effectiveness testing | 13.7 | (15.1) | 0.5 | (82.0) | (1.8) | (3.3) | — | 3.8 | 7.7 | (9.8) | 0.3 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total cash flow hedge gain (loss) recognized in income | 6.3 | (29.6) | 0.2 | (95.1) | (31.5) | 7.4 | 0.2 | 36.7 | (76.0) | 58.7 | 0.1 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Gain (loss) recognized in income on derivatives not designated as hedging instruments | (0.3) | (0.7) | — | 78.1 | 1.3 | 0.3 | — | (13.3) | (0.8) | 3.4 | 35.9 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total | $ | 6.0 | $ | (30.3) | $ | 0.2 | $ | (17.0) | $ | (30.2) | $ | 7.7 | $ | 0.2 | $ | 23.4 | $ | (76.8) | $ | 62.1 | $ | 36.0 | |||||||||||||||||||||||||||||||||||||||||||||||||
Balance Sheet Offsetting - We own a 51% share in Island Offshore Subsea AS that was subsequently renamed to TIOS AS. The non-controlling interest is recorded as mezzanine equity at fair value.The fair value measurement is based upon significant unobservable inputs not observable in the market and is consequently classified as a Level 3 fair value measurement. As of December 31, 2020 and 2019, the fair value of our redeemable non-controlling interest was $43.7 million and $41.1 million, respectively. See Note 2 for further details.
| Year Ended December 31, | |||||||||||||||||||||||||||||||||||
| 2020 | 2019 | ||||||||||||||||||||||||||||||||||
| (In millions) | Impairment | Fair Value (a) | Impairment | Fair Value (a) | |||||||||||||||||||||||||||||||
| Long-lived assets | $ | 204.0 | $ | 464.7 | $ | 495.4 | $ | 342.5 | (b) | ||||||||||||||||||||||||||
| December 31, 2020 | December 31, 2019 | ||||||||||||||||||||||
| (In millions) | Carrying Amount (a) | Fair Value (b) | Carrying Amount (a) | Fair Value (b) | |||||||||||||||||||
| Synthetic bonds due 2021 | $ | 551.2 | $ | 552.0 | $ | 492.9 | $ | 513.1 | |||||||||||||||
| 3.45% Senior Notes due 2022 | 500.0 | 513.2 | 500.0 | 499.2 | |||||||||||||||||||
| 5.00% Notes due 2020 | 0 | 0 | 224.6 | 230.0 | |||||||||||||||||||
| 3.40% Notes due 2022 | 184.0 | 188.8 | 168.5 | 180.6 | |||||||||||||||||||
| 3.15% Notes due 2023 | 159.5 | 163.7 | 146.0 | 156.8 | |||||||||||||||||||
| 3.15% Notes due 2023 | 153.4 | 161.8 | 140.4 | 150.5 | |||||||||||||||||||
| 4.50% Notes due 2025 | 245.4 | 256.8 | 0 | 0 | |||||||||||||||||||
| 4.00% Notes due 2027 | 92.0 | 99.7 | 84.2 | 96.4 | |||||||||||||||||||
| 4.00% Notes due 2032 | 122.7 | 136.8 | 112.3 | 127.8 | |||||||||||||||||||
| 3.75% Notes due 2033 | 122.7 | 126.4 | 112.3 | 123.8 | |||||||||||||||||||
| December 31, 2022 | December 31, 2021 | ||||||||||||||||||||||||||||||||||
| (In millions) | Gross Amount Recognized | Gross Amounts Not Offset Permitted Under Master Netting Agreements | Net Amount | Gross Amount Recognized | Gross Amounts Not Offset Permitted Under Master Netting Agreements | Net Amount | |||||||||||||||||||||||||||||
| Derivative assets | $ | 289.9 | $ | (142.5) | $ | 147.4 | $ | 120.8 | $ | (78.6) | $ | 42.2 | |||||||||||||||||||||||
| Derivative liabilities | $ | 350.2 | $ | (142.5) | $ | 207.7 | $ | 176.5 | $ | (78.6) | $ | 97.9 | |||||||||||||||||||||||
| 2020 | 2019 | ||||||||||||||||||||||||||||||||||||||||||||||
| (In millions, except per share data) | 4th Qtr. | 3rd Qtr. | 2nd Qtr. | 1st Qtr. | 4th Qtr. | 3rd Qtr. | 2nd Qtr. | 1st Qtr. | |||||||||||||||||||||||||||||||||||||||
| Revenue | $ | 3,426.1 | $ | 3,335.7 | $ | 3,158.5 | $ | 3,130.3 | $ | 3,726.8 | $ | 3,335.1 | $ | 3,434.2 | $ | 2,913.0 | |||||||||||||||||||||||||||||||
| Cost of sales | 2,973.8 | 2,882.3 | 2,647.0 | 2,706.3 | 3,067.2 | 2,726.4 | 2,745.2 | 2,411.9 | |||||||||||||||||||||||||||||||||||||||
| Net income (loss) | (13.9) | 6.4 | 15.3 | (3,245.7) | (2,430.3) | (115.3) | 113.7 | 19.8 | |||||||||||||||||||||||||||||||||||||||
| Net income (loss) attributable to TechnipFMC plc | $ | (39.3) | $ | (3.9) | $ | 11.7 | $ | (3,256.1) | $ | (2,414.0) | $ | (119.1) | $ | 97.0 | $ | 20.9 | |||||||||||||||||||||||||||||||
Basic earnings (loss) per share (1) | $ | (0.09) | $ | (0.01) | $ | 0.03 | $ | (7.28) | $ | (5.40) | $ | (0.27) | $ | 0.22 | $ | 0.05 | |||||||||||||||||||||||||||||||
Diluted earnings (loss) per share (1) | $ | (0.09) | $ | (0.01) | $ | 0.03 | $ | (7.28) | $ | (5.40) | $ | (0.27) | $ | 0.21 | $ | 0.05 | |||||||||||||||||||||||||||||||
Assets and Proceduresliabilities measured at fair value on a recurring basis were as follows:
| December 31, 2022 | December 31, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||
| (In millions) | Total | Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | |||||||||||||||||||||||||||||||||||||||
| Assets | |||||||||||||||||||||||||||||||||||||||||||||||
| Investments | |||||||||||||||||||||||||||||||||||||||||||||||
| Investment in Technip Energies | $ | — | $ | — | $ | — | $ | — | $ | 317.3 | $ | 317.3 | $ | — | $ | — | |||||||||||||||||||||||||||||||
| Equity securities | 19.8 | 19.8 | — | — | 25.0 | 25.0 | — | — | |||||||||||||||||||||||||||||||||||||||
| Money market and stable value funds | 1.9 | — | 1.5 | — | 2.7 | — | 2.4 | — | |||||||||||||||||||||||||||||||||||||||
| Held-to-maturity debt securities | 16.0 | — | 16.0 | — | 24.0 | — | 24.0 | — | |||||||||||||||||||||||||||||||||||||||
| Derivative financial instruments | |||||||||||||||||||||||||||||||||||||||||||||||
| Foreign exchange contracts | 289.9 | — | 289.9 | — | 120.8 | — | 120.8 | — | |||||||||||||||||||||||||||||||||||||||
| Total assets | $ | 327.6 | $ | 19.8 | $ | 307.4 | $ | — | $ | 489.8 | $ | 342.3 | $ | 147.2 | $ | — | |||||||||||||||||||||||||||||||
| Liabilities | |||||||||||||||||||||||||||||||||||||||||||||||
| Derivative financial instruments | |||||||||||||||||||||||||||||||||||||||||||||||
| Foreign exchange contracts | 350.2 | — | 350.2 | — | 176.5 | — | 176.5 | — | |||||||||||||||||||||||||||||||||||||||
| Total liabilities | $ | 350.2 | $ | — | $ | 350.2 | $ | — | $ | 176.5 | $ | — | $ | 176.5 | $ | — | |||||||||||||||||||||||||||||||
Investment in Technip Energies - The fair value of our investment in Technip Energies was based on quoted prices that we had the ability to access in public markets. As of December 31, 2020,2022, we have fully divested our remaining ownership in Technip Energies. See Note 12 for further details.
Equity securities and under the directionAvailable-for-sale Securities - The fair value measurement of our Chief Executive Officertraded securities is based on quoted prices that we have the ability to access in public markets.
Stable value and Chief Financial Officer, we evaluatedMoney market funds - These funds are valued at the effectivenessnet asset value of the shares held at the end of the year, which is based on the fair value of the underlying investments using information reported by our disclosure controlsinvestment advisor at quarter-end. These funds include fixed income and procedures, as definedother investments measured at fair value. Certain investments that are measured at fair value using net asset value per share (or its equivalent) have not been classified in Rule 13a-15(e) under the Exchange Act. Based upon this evaluation, our Chief Executive Officer and Chief Financial Officer concluded as of December 31, 2020, that our disclosure controls and procedures were effective.fair value hierarchy.
We currently have no credit-risk-related contingent features in our agreements with the financial institutions that would require us to post collateral for derivative positions in a liability position. See Note 23 for further details.
Nonrecurring Fair Value Measurements
Fair value of long-lived, non-financial assets - Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that carrying amounts of such assets may not be recoverable.
| Year Ended December 31, | |||||||||||||||||||||||
| 2021 | 2020 | ||||||||||||||||||||||
| (In millions) | Impairment | Fair Value | Impairment | Fair Value | |||||||||||||||||||
Long-lived assets(a) | $ | 49.1 | $ | 25.5 | $ | 190.4 | $ | 452.5 | |||||||||||||||
(a)Measuring these asset groups for recoverability required the use of unobservable inputs that require significant judgment. Such judgments include expected future asset utilization while taking into account reduced future capital spending by certain customers in response to market conditions.
Other fair value disclosures
The carrying amounts of cash and cash equivalents, trade receivables, accounts payable, short-term debt, commercial paper, debt associated with our bank borrowings, credit facilities, as well as amounts included in other current assets and other current liabilities that meet the definition of financial instruments, approximate fair value.
Fair value of debt - We use a market approach to determine the fair value of our fixed-rate debt using observable market data, which results in a Level 2 fair value measurement. The estimated fair value of our private placement notes and senior notes was $916.3 million and $1,706.1 million as of December 31, 2022 and December 31, 2021, respectively.
Credit risk - By their nature, financial instruments involve risk, including credit risk, for non-performance by counterparties. Financial instruments that potentially subject us to credit risk consist of trade receivables and derivative contracts. We manage the credit risk on financial instruments by transacting only with what management believes are financially secure counterparties, requiring credit approvals and credit limits and monitoring counterparties’ financial condition. Our maximum exposure to credit loss in the event of non-performance by the counterparty is limited to the amount drawn and outstanding on the financial instrument. Allowances for losses on trade receivables are established based on collectability assessments. We mitigate credit risk on derivative contracts by executing contracts only with counterparties that consent to a master netting agreement, which permits the net settlement of gross derivative assets against gross derivative liabilities.
NOTE 25. DISCONTINUED OPERATIONS
The Spin-off
On February 16, 2021, we completed our separation of the Technip Energies business segment. The transaction was structured as a spin-off (the “Spin-off”), which occurred by way of a pro rata dividend (the “Distribution”) to our shareholders of 50.1% of the outstanding shares in Technip Energies N.V. Each of our shareholders received one ordinary share of Technip Energies N.V. for every five ordinary shares of TechnipFMC held at 5:00 p.m., Eastern Standard Time, on the record date, February 17, 2021. Technip Energies N.V. is now an independent public company and its shares are traded under the ticker symbol “TE” on the Euronext Paris Stock Exchange.
In connection with the Spin-off, TechnipFMC and Technip Energies entered into a separation and distribution agreement, as well as various other agreements, including, among others, a tax matters agreement, an employee matters agreement and a transition services agreement and certain agreements relating to intellectual property. These agreements provide for the allocation between TechnipFMC and Technip Energies of assets, employees, taxes, liabilities and obligations attributable to periods prior to, at and after the Spin-off.
107
Discontinued Operations
The Spin-off represented a strategic shift that had a major impact on our operations and consolidated financial statements. Historical results of Technip Energies prior to the Distribution on February 16, 2021 have materially affected, or are reasonably likelybeen presented as discontinued operations in our consolidated statements of income and consolidated statements of cash flows for the years ended December 31, 2021 and 2020. Our consolidated statements of income and consolidated statements of cash flows and notes to materially affect, our internal control overthe consolidated financial reporting.statements have been updated to reflect continuing operations only.
The following table summarizes the components of income (loss) from discontinued operations:
| Year Ended | ||||||||||||||||||||
| (In millions) | 2022 | 2021 | 2020 | |||||||||||||||||
| Revenue | $ | — | $ | 906.0 | $ | 6,520 | ||||||||||||||
| Costs and expenses | (26.4) | (932.0) | (5,899) | |||||||||||||||||
| Other income and (expense), net | — | (18.6) | (206.8) | |||||||||||||||||
| Income (loss) from discontinued operations before income taxes | $ | (26.4) | $ | (44.6) | $ | 414.2 | ||||||||||||||
| Income tax expense | 18.9 | 28.0 | 134.0 | |||||||||||||||||
| Income (loss) from discontinued operations, net of income taxes | $ | (45.3) | $ | (72.6) | $ | 280.2 | ||||||||||||||
For the year ended December 31, 2022, we recorded $26.4 million in expense from discontinued operations due to a change in estimate of liabilities recognized in connection with the Spin-off. Also, for the year ended December 31, 2022, we recorded $18.9 million in income tax expense from discontinued operations related to a change in estimate in the French tax group.
ITEM 9B. OTHER INFORMATION9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 3. LEGAL PROCEEDINGS9A. CONTROLS AND PROCEDURES
As of December 31, 2022, and under the direction of our Chief Executive Officer and Chief Financial Officer, we evaluated the effectiveness of our disclosure controls and procedures, as defined in 2017Rule 13a-15(e) or 15d-15(e)under the Exchange Act. Based upon this evaluation, our Chief Executive Officer and amendedChief Financial Officer concluded as of December 31, 2022, that our disclosure controls and procedures were effective.
Management’s Annual Report on Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in January 2018 and captioned Prause v. TechnipFMC, et al., No. 4:17-cv-02368 (S.D. Texas) is pendingRule 13a-15(f) under the Exchange Act.
Management evaluated the effectiveness of our internal control over financial reporting as of December 31, 2022 based on the framework in Internal Control-Integrated Framework (2013) issued by the U.S. District Court for the Southern DistrictCommittee of Texas (“District Court”) against TechnipFMC and certain current and former officers and employees of TechnipFMC. The suit alleged violationsSponsoring Organizations of the federal securities laws in connection with the restatementTreadway Commission (COSO). As a result of this evaluation, management concluded that our internal control over financial reporting was effective as of December 31, 2022.
The effectiveness of our first quarter 2017internal control over financial results and a material weaknessreporting as of December 31, 2022, has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report included herein.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting announced on July 24, 2017. On January 18, 2019,during the District Court dismissed claims under Section 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, and Section 15 of the Securities Act of 1933, as amended (“Securities Act”). The shareholder also asserted a claim for alleged violation of Section 11 of the Securities Act in connection with the reporting of certainthree months ended December 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial results in our Form S-4 Registration Statement filed in 2016. On December 13, 2020, the parties filed a Stipulation and Agreement of Settlement to settle all claims asserted in the suit with prejudice. The defendants entered into the Stipulation solely to eliminate the burden, expense, uncertainty and risk of further litigation, and denied, and continue to deny, each and all of the claims and contentions alleged by the shareholder plaintiff in this action. On December 16, 2020, the District Court entered an order preliminarily approving the settlement and ordering notice to the settlement class. A settlement hearing is scheduled in the first quarter 2021.
ITEM 9B. OTHER INFORMATION
None.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
See Part I, Item 1 “Executive Officers of the Registrant” of this Annual Report on Form 10-K for information regarding our executive officers. The information set forth under the sections “Corporate Governance,” “Proposals 1(a) - 1(n)“Proposal 1 - Election of Directors”, and if applicable, “Delinquent Section 16(a) Reports” in our 2021the Proxy Statement for the 2023 Annual General Meeting of Shareholders is incorporated herein by reference.
We have adopted a Code of Business Conduct, which is applicable to our directors, officers, and employees, including our principal executive officer, financial and accounting officers, and persons performing similar functions. Our Code of Business Conduct may be found on our website at www.technipfmc.com under “About us-Governance”us-Ethics and Compliance” and is available in print to shareholders without charge by submitting a request to 11740 Katy Freeway, Energy Tower 3,13460 Lockwood Rd., Houston, Texas 77079,77044, Attention: Corporate Secretary. We intend to satisfy the disclosure requirements under the Securities and Exchange Act of 1934, as amended, regarding an amendment to or waiver from a provision of our Code of Business Conduct by posting such information on our website.
The table below sets forth our directors and their current principal occupations as of February 24, 2023.
| Name | Principal Occupation | ||||||||||
| Douglas J. Pferdehirt | |||||||||||
| Eleazar de Carvalho Filho | Founding Partner of Virtus BR Partners Assessoria Corporativa Ltda. and Founding Partner of Sinfonia Consultoria Financeira e Participações Ltda., financial advisory and consulting | ||||||||||
| Claire S. Farley | Former Vice Chairman in the Energy | ||||||||||
| Robert G. Gwin | Former President of Anadarko Petroleum Corporation, an oil and natural gas exploration and production company. | ||||||||||
| Peter Mellbye | Former Executive Vice President, Development & Production, International, of Statoil ASA, an international oil and gas | ||||||||||
| John O’Leary | Chief Executive Officer of Strand Energy, a Dubai-based company specializing in business development in the oil and gas | ||||||||||
| Margareth Øvrum | Former Executive Vice President of Development and Production Brazil of Equinor ASA, an international oil and gas | ||||||||||
| Kay G. Priestly | Former Chief Executive Officer of Turquoise Hill Resources Ltd., an international mining | ||||||||||
| John Yearwood | Former Chief Executive Officer, President, and Chief Operating Officer of Smith International, Inc., a supplier of services and manufactured products to oil and gas exploration and production | ||||||||||
| Sophie Zurquiyah | Chief Executive Officer of CGG S.A., a global geoscience technology leader. | ||||||||||
ITEM 11. EXECUTIVE COMPENSATION
Information required by this item is incorporated herein by reference from the sections entitled “Director Compensation,” “Corporate Governance - Compensation Committee Interlocks and Insider Participation, in Compensation Decisions” and” “Executive Compensation Discussion and Analysis” and “Compensation and Talent Committee Report” of our Proxy Statement for the 20212023 Annual General Meeting of Shareholders.
109
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS
Information required by this item is incorporated herein by reference from the section entitled “Security Ownership of Our ManagementCertain Beneficial Owners and Holders of More Than 5% of our Outstanding Ordinary Shares”Management” of our Proxy Statement for the 20212023 Annual General Meeting of Shareholders.
As of December 31, 2020,2022, our securities authorized for issuance under equity compensation plans were as follows:
| (shares in thousands) | Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights | Weighted Average Exercise Price of Outstanding Options, Warrants and Rights | Number of Securities Remaining Available for Future Issuance under Equity Compensation Plans | ||||||||||||||
| Equity compensation plans approved by security holders | 4,598.4 | $ | 29.77 | 14,250.2 | |||||||||||||
| Equity compensation plans not approved by security holders | — | — | — | ||||||||||||||
| Total | 4,598.4 | $ | 29.77 | 14,250.2 | |||||||||||||
| (shares in thousands) | Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights | Weighted Average Exercise Price of Outstanding Options, Warrants and Rights | Number of Securities Remaining Available for Future Issuance under Equity Compensation Plans | ||||||||||||||
| Equity compensation plans approved by security holders | 1,441.2 | $ | 20.31 | — | |||||||||||||
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Information required by this item is incorporated herein by reference from the sections entitled “Transactions with Related Persons” and “Corporate Governance - Director Independence” of our Proxy Statement for the 20212023 Annual General Meeting of Shareholders.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Information required by this item is incorporated herein by reference from the sections entitled “Proposal 5 — Ratification of U.S. Auditor” of our Proxy Statement for the 20212023 Annual General Meeting of Shareholders.
PART IV
ITEM 15. EXHIBITSEXHIBIT AND FINANCIAL STATEMENT SCHEDULES
(a)The following documents are filed as part of this Annual Report on Form 10-K:
1.The following consolidated financial statements of TechnipFMC plc and subsidiaries are filed as part of this Annual Report on Form 10-K under Part II, Item 8:
Reports of Independent Registered Public Accounting Firm on Consolidated Financial Statements (PCAOB ID: 238)
Consolidated Statements of Income for the Years Ended December 31, 2020, 20192022, 2021 and 20182020
Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2020, 2019,2022, 2021, and 20182020
Consolidated Balance Sheets as of December 31, 20202022 and 20192021
Consolidated Statements of Cash Flows for the Years Ended December 31, 2020, 20192022, 2021 and 20182020
Consolidated Statements of Changes in Stockholders’ Equity for the Years Ended December 31, 2020, 20192022, 2021 and 20182020
Notes to Consolidated Financial Statements
2.Financial Statement Schedule:
See “Schedule II - Valuation and Qualifying Accounts” included herein. All other schedules are omitted because of the absence of conditions under which they are required or because information called for is shown in the consolidated financial statements and notes thereto in Part II, Item 8 of this Annual Report on Form 10-K.
3.Exhibits:
See “Index of Exhibits” filed as part of this Annual Report on Form 10-K.
Part IV
Item 15 (a) (2), Financial Statement Schedule
Schedule II—Valuation and Qualifying Accounts
| (In millions) | (In millions) | Additions | (In millions) | Additions | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Description | Description | Balance at Beginning of Period | Charged to Costs and Expenses | Charged to Other Accounts (a) | Deductions and Adjustments (b) | Balance at End of Period | Description | Balance at Beginning of Period | Charged to Costs and Expenses | Charged to Other Accounts (a) | Deductions and Adjustments (b) | Balance at End of Period | ||||||||||||||||||||||||||||||||||||||||||||||
| Year Ended December 31, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Trade receivables allowance for doubtful accounts | $ | 117.4 | $ | 54.7 | $ | 0.3 | $ | (52.8) | $ | 119.6 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Year Ended December 31, 2020 | Year Ended December 31, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Trade receivables allowance for credit losses(c) | Trade receivables allowance for credit losses(c) | $ | 57.4 | $ | 38.0 | $ | 1.3 | $ | (56.5) | $ | 40.2 | |||||||||||||||||||||||||||||||||||||||||||||||
| Valuation allowance for deferred tax assets | Valuation allowance for deferred tax assets | $ | 430.0 | $ | 213.8 | $ | (21.3) | $ | 60.9 | $ | 683.4 | Valuation allowance for deferred tax assets | $ | 729.1 | $ | 104.4 | $ | (11.3) | $ | (7.1) | $ | 815.1 | ||||||||||||||||||||||||||||||||||||
| Year Ended December 31, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Trade receivables allowance for doubtful accounts | $ | 119.6 | $ | 22.0 | $ | (2.9) | $ | (43.3) | $ | 95.4 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Year Ended December 31, 2021 | Year Ended December 31, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Trade receivables allowance for credit losses | Trade receivables allowance for credit losses | $ | 40.2 | $ | 17.0 | $ | (10.8) | $ | (8.3) | $ | 38.1 | |||||||||||||||||||||||||||||||||||||||||||||||
| Valuation allowance for deferred tax assets | Valuation allowance for deferred tax assets | $ | 683.4 | $ | 187.0 | $ | (2.1) | $ | 48.6 | $ | 916.9 | Valuation allowance for deferred tax assets | $ | 815.1 | $ | 129.7 | $ | (12.0) | $ | 2.7 | $ | 935.5 | ||||||||||||||||||||||||||||||||||||
| Year Ended December 31, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Trade receivables allowance for doubtful accounts (c) | $ | 95.4 | $ | 66.8 | $ | 11.9 | $ | (65.2) | $ | 108.9 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Year Ended December 31, 2022 | Year Ended December 31, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Trade receivables allowance for credit losses | Trade receivables allowance for credit losses | $ | 38.1 | $ | 1.3 | $ | 9.1 | $ | (14.4) | $ | 34.1 | |||||||||||||||||||||||||||||||||||||||||||||||
| Valuation allowance for deferred tax assets | Valuation allowance for deferred tax assets | $ | 916.9 | $ | 94.7 | $ | (7.3) | $ | (69.0) | $ | 935.3 | Valuation allowance for deferred tax assets | $ | 935.5 | $ | 79.4 | $ | (15.8) | $ | — | $ | 999.1 | ||||||||||||||||||||||||||||||||||||
(a)"Additions charged to other accounts” includes translation adjustments.
(b)“Deductions and adjustments” includes write-offs, net of recoveries, increases in allowances offset by increases to deferred tax assets, and reductions in the allowances credited to expense.
(c)On January 1, 2020, we adopted ASU 2016-13, resulting in a $3.8$2.0 million increase to our trade receivables allowance for doubtful accounts. See Note 4 for further details.credit losses.
See accompanying Report of Independent Registered Public Accounting Firm.
ITEM 16. SUMMARY
None.
INDEX OF EXHIBITS
Exhibit Number | Exhibit Description | |||||||
| 2.1 | ||||||||
| 2.1.a | ||||||||
| 3.1 | ||||||||
| 4.1 | ||||||||
| 4.2 | ||||||||
| 4.2.a | ||||||||
| 4.3 | ||||||||
| 4.4 | ||||||||
| 10.1* | ||||||||
| 10.2* | ||||||||
| 10.3* | ||||||||
| 10.3a* | ||||||||
| 10.3b* | ||||||||
| 10.4* | ||||||||
| 10.5* | ||||||||
| 10.5a* | ||||||||
| 10.5b* | ||||||||
| 10.6* | ||||||||
| 10.29 | ||||||||
| 10.30 | ||||||||
| 10.41b | ||||||||
| 10.42 | ||||||||
| 10.43 | ||||||||
| 10.44* | ||||||||
| 10.45* | ||||||||
| 10.46* | ||||||||
| 10.47* | ||||||||
| 10.48* | ||||||||
| 10.49* | ||||||||
| 21.1** | ||||||||
| 32.1** | ||||||||
| 32.2** | ||||||||
| 101.INS | XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. | |||||||
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document. | |||||||
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document. | |||||||
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document. | |||||||
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document. | |||||||
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document. | |||||||
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). | |||||||
* Indicates a management contract or compensatory plan or arrangement.
** FurnishedFiled with this Form 10-K.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrantregistrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| TechnipFMC plc (Registrant) | ||||||||
| By: | /S/ KRISZTINA DOROGHAZI | |||||||
| Krisztina Doroghazi Senior Vice President, Controller and Chief Accounting Officer (Principal Accounting Officer and a Duly Authorized Officer) | ||||||||
Date: March 5, 2021February 24, 2023
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| Title | ||||||||||||||||||||
Chairman (Principal Executive Officer) | February 24, 2023 | |||||||||||||||||||
| Douglas J. Pferdehirt | ||||||||||||||||||||
(Principal Financial Officer) | February 24, 2023 | |||||||||||||||||||
| Alf Melin | ||||||||||||||||||||
| Eleazar de Carvalho Filho Director | ||||||||||||||||||||
| February 24, 2023 | ||||||||||||||||||||
| Claire S. Farley Director | ||||||||||||||||||||
Director | ||||||||||||||||||||
Director | ||||||||||||||||||||
Director | ||||||||||||||||||||
Director | ||||||||||||||||||||
Director | ||||||||||||||||||||
| Director | February 24, 2023 | |||||||||||||||||||
| Sophie Zurquiyah | ||||||||||||||||||||