UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2020March 31, 2021
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to _____ .
Commission File Number: 001-37983
TechnipFMC plc
(Exact name of registrant as specified in its charter)
| | | | | |
| United Kingdom | 98-1283037 |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
| |
| One St. Paul’s Churchyard | |
| London | |
| United Kingdom | EC4M 8AP |
| (Address of principal executive offices) | (Zip Code) |
+44 203-429-3950
(Registrant’s telephone number, including area code)
| | | | | | | | | | | | | | |
| Securities registered pursuant to Section 12(b) of the Act: | | | | |
| Title of Each Class | | Trading Symbol | Name of Each Exchange on Which Registered | |
| Ordinary shares, $1.00 par value per share | | FTI | New York Stock Exchange | |
Securities registered pursuant to Section 12(g) of the Act: None. | | | | |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| | | | | | | | | | | |
| Large accelerated filer | ☒ | Accelerated filer | ☐ |
| Non-accelerated filer | ☐ | Smaller reporting company | ☐ |
| | Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
| | | | | | | | |
| Class | | Outstanding at July 29, 2020April 30, 2021 |
| Ordinary shares, $1.00 par value per share | | 449,332,133450,668,293 |
TABLE OF CONTENTS
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q of TechnipFMC plc (the “Company,” “we,” “us,” or “our”) contains “forward-looking statements” as defined in Section 27A of the United States Securities Act of 1933, as amended, and Section 21E of the United States Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements usually relate to future events and anticipated revenues, earnings, cash flows or other aspects of our operations or operating results. Forward-looking statements are often identified by the words “believe,” “expect,” “anticipate,” “plan,” “intend,” “foresee,” “should,” “would,” “could,” “may,” “estimate,” “outlook” and similar expressions, including the negative thereof. The absence of these words, however, does not mean that the statements are not forward-looking. These forward-looking statements are based on our current expectations, beliefs and assumptions concerning future developments and business conditions and their potential effect on us. While management believes that these forward-looking statements are reasonable as and when made, there can be no assurance that future developments affecting us will be those that we anticipate.
All of our forward-looking statements involve risks and uncertainties (some of which are significant or beyond our control) and assumptions that could cause actual results to differ materially from our historical experience and our present expectations or projections. Known material factors that could cause actual results to differ materially from those contemplated in the forward-looking statements include those set forth in Part II, Item 1A, “Risk Factors” and elsewhere of this Quarterly Report on Form 10-Q, as well as the following:
•risks associated with disease outbreaks and other public health issues, including the coronavirus disease 2019 (“COVID-19”), their impact on the global economy and the business of our company, customers, suppliers and other partners, changes in, and the administration of, treaties, laws, and regulations, including in response to such issues and the potential for such issues to exacerbate other risks we face, including thoseRisks related to the factors listed or referenced below;Our Business and Industry
•risks associated withdemand for our ability to consummate our proposed separationproducts and spin-off;services, which depends on oil and gas industry activity and expenditure levels that are directly affected by trends in demand for and price of crude oil and natural gas;
•unanticipated changes relating to competitive factors in our industry;
•demand for our products and services, which is affected by changes in the price of, and demand for, crude oil and natural gas in domestic and international markets;industry, including ongoing industry consolidation;
•our ability to develop, implement, and implementprotect new technologies and services, as well as our ability to protect and maintain critical intellectual property assets;
•potential liabilities arising out of the installation or use of our products;
•cost overruns related to our fixed price contracts or capital asset construction projects that may affect revenues;
•our ability to timely deliver our backlog and its effect on our future sales, profitability, and our relationships with our customers;
•our reliance on subcontractors, suppliers and joint venture partners in the performance of our contracts;
•our ability to hire and retain key personnel;
•piracy risks for our maritime employees and assets;
•the potential impacts of seasonal and weather conditions;
•the cumulative loss of major contracts, customers, or alliances;
•U.S. and international laws and regulations, including existing or future environmental regulations, that may increase our costs, limitrisks associated with the demand for our products and services or restrict our operations;
•COVID-19 pandemic, the United Kingdom’s withdrawal from the European Union, disruptions in the political, regulatory, economic, and social conditions of the countries in which we conduct business;
•risks associated with The Depository Trust Company and Euroclear for clearance services for shares traded on the NYSENew York Stock Exchange (the “NYSE”) and the Euronext Paris Stock Exchange, respectively;
•our existing and future debt, which may limit cash flow available to invest in the United Kingdom’s withdrawalongoing needs of our business and could prevent us from fulfilling our obligations under our outstanding debt;
•a downgrade in our debt rating, which could restrict our ability to access the European Union;capital markets;
•risks related to our acquisition and divestiture activities;
Risks related to Our Operations
•risks related to our fixed price contracts, such as cost overruns;
•risks related to capital asset construction projects for vessels and manufacturing facilities, such as delays and cost overruns;
•our ability to timely deliver our backlog and its effect on our future sales, profitability, and customer relationships;
•our reliance on subcontractors, suppliers and joint venture partners in the performance of our contracts;
•failure of our information technology infrastructure, including as a result of cyber-attacks, and actual or perceived failure to comply with data security and privacy obligations;
•piracy risks for our maritime employees and assets;
Risks related to Legal Proceedings, Tax, and Regulatory Matters
•potential liabilities arising out of the installation or use of our products, which may not be covered by insurance or may be in excess of policy limits, of for which expected recoveries may not be realized;
•U.S. and international 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 change, bribery and corruption, and taxation, that may increase our costs, limit the demand for our products and services or restrict our operations;
•risks associated with being an English public limited company, including the need for “distributable profits”,to meet certain additional financial requirements before we may declare dividends or repurchase shares and shareholder approval of certain capital structure decisions, and the risk that wewhich may not be ablelimit our flexibility to pay dividends or repurchase shares in accordance withmanage our announced capital allocation plan;
•compliance with covenants under our debt instruments and conditions in the credit markets;
•downgrade in the ratings of our debt could restrict our ability to access the debt capital markets;capital;
•the outcome of uninsured claims and litigation against us;
•the risks of currency exchange rate fluctuations associated with our international operations;
•risks related to our acquisition and divestiture activities;
•failure of our information technology infrastructure or any significant breach of security, including related to cyber attacks, and actual or perceived failure to comply with data security and privacy obligations;
•risks associated with tax liabilities, changes in U.S. federal or international tax laws or interpretations to which we are subject; and
Risks related to the Spin-off and the Related Transactions
•future liabilities related to the Spin-off (as defined herein) or our inability to achieve some or all of the anticipated benefits;
•risks associated with being a significant shareholder in Technip Energies N.V. (“Technip Energies”), including potential fluctuation in the value of our investment in Technip Energies;
General Risk Factors
•our ability to hire and/or retain the services of key managers and employees;
•the potential impacts of seasonal and weather conditions;
•currency exchange rate fluctuations associated with our international operations;
•such other risk factors as set forth in our filings with the U.S. Securities and Exchange Commission and in our filings with the Autorité des marchés financiers or the U.K. Financial Conduct Authority.financiers.
We caution you not to place undue reliance on any forward-looking statements, which speak only as of the date hereof. We undertake no obligation to publicly update or revise any of our forward-looking statements after the date they are made, whether as a result of new information, future events or otherwise, except to the extent required by law.
PART I — FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TECHNIPFMC PLC AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
| | | Three Months Ended | | | Six Months Ended | | | | Three Months Ended |
| | June 30, | | | June 30, | | | | March 31, |
| (In millions, except per share data) | (In millions, except per share data) | 2020 | | 2019 | | 2020 | | 2019 | (In millions, except per share data) | | 2021 | | 2020 |
| Revenue | Revenue | | | | | | | | Revenue | | | | |
| Service revenue | Service revenue | $ | 2,315.2 | | | $ | 2,548.8 | | | $ | 4,622.9 | | | $ | 4,599.9 | | Service revenue | | $ | 826.2 | | | $ | 773.6 | |
| Product revenue | Product revenue | 818.4 | | | 832.8 | | | 1,590.0 | | | 1,632.1 | | Product revenue | | 773.0 | | | 758.0 | |
| Lease revenue | Lease revenue | 24.9 | | | 52.6 | | | 75.9 | | | 115.2 | | Lease revenue | | 32.8 | | | 51.0 | |
| Total revenue | Total revenue | 3,158.5 | | | 3,434.2 | | | 6,288.8 | | | 6,347.2 | | Total revenue | | 1,632.0 | | | 1,582.6 | |
| | Costs and expenses | Costs and expenses | | Costs and expenses | | |
| Cost of service revenue | Cost of service revenue | 1,971.5 | | | 1,949.9 | | | 3,962.9 | | | 3,594.1 | | Cost of service revenue | | 743.8 | | | 704.4 | |
| Cost of product revenue | Cost of product revenue | 645.4 | | | 771.6 | | | 1,317.7 | | | 1,493.3 | | Cost of product revenue | | 671.2 | | | 661.7 | |
| Cost of lease revenue | Cost of lease revenue | 24.1 | | | 23.7 | | | 62.1 | | | 69.7 | | Cost of lease revenue | | 26.2 | | | 38.0 | |
| Selling, general and administrative expense | Selling, general and administrative expense | 234.9 | | | 323.8 | | | 528.8 | | | 621.6 | | Selling, general and administrative expense | | 147.6 | | | 195.3 | |
| Research and development expense | Research and development expense | 38.2 | | | 29.5 | | | 73.4 | | | 69.4 | | Research and development expense | | 16.5 | | | 25.4 | |
| Impairment, restructuring and other expenses (Note 17) | 140.3 | | | 9.2 | | | 3,348.7 | | | 25.7 | | |
| Separation costs (Note 2) | — | | | — | | | 27.1 | | | — | | |
| Merger transaction and integration costs | — | | | 12.9 | | | — | | | 25.0 | | |
| Impairment, restructuring and other expenses (Note 16) | | Impairment, restructuring and other expenses (Note 16) | | 25.5 | | | 3,199.1 | |
| Total costs and expenses | Total costs and expenses | 3,054.4 | | | 3,120.6 | | | 9,320.7 | | | 5,898.8 | | Total costs and expenses | | 1,630.8 | | | 4,823.9 | |
| | Other income (expense), net | Other income (expense), net | (9.7) | | | (72.6) | | | (38.2) | | | (98.8) | | Other income (expense), net | | 35.6 | | | (7.9) | |
| Income from equity affiliates (Note 11) | Income from equity affiliates (Note 11) | 13.0 | | | 14.2 | | | 41.8 | | | 28.1 | | Income from equity affiliates (Note 11) | | 7.7 | | | 21.1 | |
| Income from investment in Technip Energies (Note 11) | | Income from investment in Technip Energies (Note 11) | | 470.1 | | | 0 | |
| Income (loss) before net interest expense and income taxes | Income (loss) before net interest expense and income taxes | 107.4 | | | 255.2 | | | (3,028.3) | | | 377.7 | | Income (loss) before net interest expense and income taxes | | 514.6 | | | (3,228.1) | |
| Net interest expense | (74.4) | | | (140.6) | | | (146.7) | | | (228.8) | | |
| Interest income | | Interest income | | 4.1 | | | 9.8 | |
| Interest expense | | Interest expense | | (38.6) | | | (32.8) | |
| Loss on early extinguishment of debt | | Loss on early extinguishment of debt | | (23.5) | | | 0 | |
| | Income (loss) before income taxes | Income (loss) before income taxes | 33.0 | | | 114.6 | | | (3,175.0) | | | 148.9 | | Income (loss) before income taxes | | 456.6 | | | (3,251.1) | |
| Provision for income taxes (Note 19) | 17.7 | | | 0.9 | | | 55.4 | | | 15.4 | | |
| Net income (loss) | 15.3 | | | 113.7 | | | (3,230.4) | | | 133.5 | | |
| Net income attributable to non-controlling interests | (3.6) | | | (16.7) | | | (14.0) | | | (15.6) | | |
| Net income (loss) attributable to TechnipFMC plc | $ | 11.7 | | | $ | 97.0 | | | $ | (3,244.4) | | | $ | 117.9 | | |
| Provision (benefit) for income taxes (Note 18) | | Provision (benefit) for income taxes (Note 18) | | 24.5 | | | (23.2) | |
| Income (loss) from continuing operations | | Income (loss) from continuing operations | | 432.1 | | | (3,227.9) | |
| Income from continuing operations attributable to non-controlling interests | | Income from continuing operations attributable to non-controlling interests | | (1.8) | | | (6.9) | |
| Income (loss) from continuing operations attributable to TechnipFMC plc | | Income (loss) from continuing operations attributable to TechnipFMC plc | | 430.3 | | | (3,234.8) | |
| Income (loss) from discontinued operations | | Income (loss) from discontinued operations | | (60.2) | | | (17.8) | |
| Income from discontinued operations attributable to non-controlling interests | | Income from discontinued operations attributable to non-controlling interests | | (1.9) | | | (3.5) | |
| Net Income (loss) attributable to TechnipFMC plc | | Net Income (loss) attributable to TechnipFMC plc | | $ | 368.2 | | | $ | (3,256.1) | |
| | Earnings (loss) per share attributable to TechnipFMC plc (Note 7) | | |
| Earnings (loss) per share from continuing operations attributable to TechnipFMC plc | | Earnings (loss) per share from continuing operations attributable to TechnipFMC plc | | |
| Basic | Basic | $ | 0.03 | | | $ | 0.22 | | | $ | (7.24) | | | $ | 0.26 | | Basic | | $ | 0.96 | | | $ | (7.23) | |
| Diluted | Diluted | $ | 0.03 | | | $ | 0.21 | | | $ | (7.24) | | | $ | 0.26 | | Diluted | | $ | 0.95 | | | $ | (7.23) | |
| | Weighted average shares outstanding (Note 7) | | |
| Earnings (loss) per share from discontinued operations attributable to TechnipFMC plc | | Earnings (loss) per share from discontinued operations attributable to TechnipFMC plc | | |
| Basic and diluted | | Basic and diluted | | $ | (0.14) | | | $ | (0.05) | |
| | Total earnings (loss) per share attributable to TechnipFMC plc | | Total earnings (loss) per share attributable to TechnipFMC plc | | |
| Basic | Basic | 448.3 | | | 447.5 | | | 447.9 | | | 447.7 | Basic | | $ | 0.82 | | | $ | (7.28) | |
| Diluted | Diluted | 449.5 | | | 451.2 | | | 447.9 | | | 451.9 | Diluted | | $ | 0.81 | | | $ | (7.28) | |
| | Weighted average shares outstanding (Note 6) | | Weighted average shares outstanding (Note 6) | | |
| Basic | | Basic | | 449.7 | | | 447.5 |
| Diluted | | Diluted | | 451.1 | | | 447.5 |
The accompanying notes are an integral part of the condensed consolidated financial statements.
TECHNIPFMC PLC AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | | | Six Months Ended | | |
| June 30, | | | | June 30, | | |
| (In millions) | 2020 | | 2019 | | 2020 | | 2019 |
| Net income (loss) | $ | 15.3 | | | $ | 113.7 | | | $ | (3,230.4) | | | $ | 133.5 | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Foreign currency translation adjustments(a) | 15.1 | | | (22.2) | | | (202.8) | | | (1.3) | |
| | | | | | | |
| Net gains (losses) on hedging instruments | | | | | | | |
| Net gains (losses) arising during the period | 35.0 | | | (10.8) | | | (54.3) | | | 5.2 | |
| Reclassification adjustment for net losses included in net income | 3.7 | | | 6.7 | | | 3.8 | | | 6.4 | |
Net gains (losses) on hedging instruments(b) | 38.7 | | | (4.1) | | | (50.5) | | | 11.6 | |
| | | | | | | |
| Net pension and other post-retirement benefits | | | | | | | |
| Net gains arising during the period | 2.9 | | | 0.5 | | | 2.2 | | | 1.0 | |
| Reclassification adjustment for amortization of prior service cost included in net income | 0.2 | | | 1.1 | | | 0.5 | | | 1.4 | |
| Reclassification adjustment for amortization of net actuarial loss included in net income | 2.2 | | | — | | | 4.4 | | | — | |
| | | | | | | |
Net pension and other postretirement benefits(c) | 5.3 | | | 1.6 | | | 7.1 | | | 2.4 | |
| Other comprehensive income (losses), net of tax | 59.1 | | | (24.7) | | | (246.2) | | | 12.7 | |
| Comprehensive income (loss) | 74.4 | | | 89.0 | | | (3,476.6) | | | 146.2 | |
| Comprehensive income attributable to non-controlling interest | (6.8) | | | (17.3) | | | (6.1) | | | (16.9) | |
| Comprehensive income (loss) attributable to TechnipFMC plc | $ | 67.6 | | | $ | 71.7 | | | $ | (3,482.7) | | | $ | 129.3 | |
| | | | | | | | | | | | | | | |
| | | Three Months Ended |
| | | March 31, |
| (In millions) | | | | | 2021 | | 2020 |
| Net income (loss) attributable to TechnipFMC plc | | | | | $ | 368.2 | | | $ | (3,256.1) | |
| Income from continuing operations attributable to non-controlling interests | | | | | (1.8) | | | (6.9) | |
| Income from discontinued operations attributable to non-controlling interests | | | | | (1.9) | | | (3.5) | |
| Net Income (loss) attributable to TechnipFMC plc, including non-controlling interest | | | | | 371.9 | | | (3,245.7) | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Foreign currency translation adjustments(a) | | | | | (28.1) | | | (217.9) | |
| | | | | | | |
| Net losses on hedging instruments | | | | | | | |
| Net losses arising during the period | | | | | (14.5) | | | (89.3) | |
| Reclassification adjustment for net (gains) losses included in net income | | | | | (2.7) | | | 0.1 | |
Net losses on hedging instruments(b) | | | | | (17.2) | | | (89.2) | |
| | | | | | | |
| | | | | | | |
| Pension and other post-retirement benefits | | | | | | | |
| Net gains (losses) arising during the period | | | | | 3.5 | | | (0.7) | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| Reclassification adjustment for amortization of prior service cost included in net loss | | | | | 0.1 | | | 0.3 | |
| Reclassification adjustment for amortization of net actuarial loss included in net loss | | | | | 4.8 | | | 2.2 | |
| | | | | | | |
Net pension and other postretirement benefits(c) | | | | | 8.4 | | | 1.8 | |
| Other comprehensive income (loss), net of tax | | | | | (36.9) | | | (305.3) | |
| Comprehensive income (loss) | | | | | 335.0 | | | (3,551.0) | |
| Comprehensive (income) loss attributable to non-controlling interest | | | | | (3.8) | | | 0.7 | |
| Comprehensive income (loss) attributable to TechnipFMC plc | | | | | $ | 331.2 | | | $ | (3,550.3) | |
(a)Net of income tax (expense) benefit of NaN and NaN for the three months ended June 30,March 31, 2021 and 2020, and 2019, respectively, and NaN and NaN for the six months ended June 30, 2020 and 2019, respectively.
(b)Net of income tax (expense) benefit of $(6.7)$4.9 million and $(0.4)$22.5 million for the three months ended June 30,March 31, 2021 and 2020, and 2019, respectively, and $15.8 million and $(0.3) million for the six months ended June 30, 2020 and 2019, respectively.
(c)Net of income tax (expense) benefitexpense of $(0.9)$(2.1) million and $0.7$(0.6) million for the three months ended June 30,March 31, 2021 and 2020, and 2019, respectively, and $(1.5) million and $0.6 million for the six months ended June 30, 2020 and 2019, respectively.
The accompanying notes are an integral part of the condensed consolidated financial statements.
TECHNIPFMC PLC AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
| | (In millions, except par value data) | (In millions, except par value data) | June 30,
2020 | | December 31,
2019 | (In millions, except par value data) | March 31,
2021 | | December 31,
2020 |
| Assets | Assets | | | | Assets | | | |
| Cash and cash equivalents | Cash and cash equivalents | $ | 4,809.5 | | | $ | 5,190.2 | | Cash and cash equivalents | $ | 752.8 | | | $ | 1,269.2 | |
| Trade receivables, net of allowances of $129.1 in 2020 and $95.4 in 2019 | 2,226.1 | | | 2,287.1 | | |
| Contract assets, net of allowances of $2.9 in 2020 and nil in 2019 | 1,414.4 | | | 1,520.0 | | |
| Trade receivables, net of allowances of $38.5 in 2021 and $40.2 in 2020 | | Trade receivables, net of allowances of $38.5 in 2021 and $40.2 in 2020 | 1,046.4 | | | 987.1 | |
| Contract assets, net of allowances of $1.1 in 2021 and $2.4 in 2020 | | Contract assets, net of allowances of $1.1 in 2021 and $2.4 in 2020 | 1,008.7 | | | 934.1 | |
| Inventories, net (Note 8) | Inventories, net (Note 8) | 1,370.2 | | | 1,416.0 | | Inventories, net (Note 8) | 1,164.8 | | | 1,252.8 | |
| Derivative financial instruments (Note 20) | 201.9 | | | 101.9 | | |
| Derivative financial instruments (Note 19) | | Derivative financial instruments (Note 19) | 203.5 | | | 268.7 | |
| Income taxes receivable | Income taxes receivable | 241.6 | | | 264.6 | | Income taxes receivable | 131.6 | | | 276.8 | |
| Advances paid to suppliers | Advances paid to suppliers | 280.0 | | | 242.9 | | Advances paid to suppliers | 80.6 | | | 96.3 | |
| | Other current assets (Note 9) | Other current assets (Note 9) | 938.0 | | | 863.7 | | Other current assets (Note 9) | 625.8 | | | 662.9 | |
| Investment in Technip Energies | | Investment in Technip Energies | 1,249.0 | | | 0 | |
| Current assets of discontinued operations | | Current assets of discontinued operations | 0 | | | 5,696.8 | |
| Total current assets | Total current assets | 11,481.7 | | | 11,886.4 | | Total current assets | 6,263.2 | | | 11,444.7 | |
| Investments in equity affiliates | Investments in equity affiliates | 335.2 | | | 300.4 | | Investments in equity affiliates | 316.9 | | | 305.5 | |
| Property, plant and equipment, net of accumulated depreciation of $2,438.5 in 2020 and $2,288.8 in 2019 | 2,850.8 | | | 3,162.0 | | |
| Property, plant and equipment, net of accumulated depreciation of $2,400.6 in 2021 and $2,154.2 in 2020 | | Property, plant and equipment, net of accumulated depreciation of $2,400.6 in 2021 and $2,154.2 in 2020 | 2,690.8 | | | 2,744.7 | |
| Operating lease right-of-use assets | Operating lease right-of-use assets | 854.7 | | | 892.6 | | Operating lease right-of-use assets | 750.5 | | | 784.9 | |
| Goodwill (Note 13) | 2,470.7 | | | 5,598.3 | | |
| Intangible assets, net of accumulated amortization of $634.9 in 2020 and $763.4 in 2019 | 1,026.9 | | | 1,086.6 | | |
| Finance lease right-of-use assets | | Finance lease right-of-use assets | 51.5 | | | 27.5 | |
| | Intangible assets, net of accumulated amortization of $422.8 in 2021 and $493.1 in 2020 | | Intangible assets, net of accumulated amortization of $422.8 in 2021 and $493.1 in 2020 | 832.7 | | | 851.3 | |
| Deferred income taxes | Deferred income taxes | 240.7 | | | 260.5 | | Deferred income taxes | 57.3 | | | 49.4 | |
| Derivative financial instruments (Note 20) | 77.2 | | | 39.5 | | |
| Derivative financial instruments (Note 19) | | Derivative financial instruments (Note 19) | 35.3 | | | 29.2 | |
| | Other assets | Other assets | 256.5 | | | 292.5 | | Other assets | 167.3 | | | 161.8 | |
| Non-current assets of discontinued operations | | Non-current assets of discontinued operations | 0 | | | 3,293.6 | |
| Total assets | Total assets | $ | 19,594.4 | | | $ | 23,518.8 | | Total assets | $ | 11,165.5 | | | $ | 19,692.6 | |
| | Liabilities and equity | Liabilities and equity | | Liabilities and equity | |
| Short-term debt and current portion of long-term debt (Note 14) | $ | 524.1 | | | $ | 495.4 | | |
| Short-term debt and current portion of long-term debt (Note 13) | | Short-term debt and current portion of long-term debt (Note 13) | $ | 96.8 | | | $ | 624.7 | |
| Operating lease liabilities | Operating lease liabilities | 236.3 | | | 275.1 | | Operating lease liabilities | 161.6 | | | 195.5 | |
| Finance lease liabilities | | Finance lease liabilities | 51.1 | | | 26.9 | |
| Accounts payable, trade | Accounts payable, trade | 2,476.1 | | | 2,659.8 | | Accounts payable, trade | 1,247.9 | | | 1,195.2 | |
| Contract liabilities | Contract liabilities | 4,685.4 | | | 4,585.1 | | Contract liabilities | 892.5 | | | 1,045.7 | |
| Accrued payroll | Accrued payroll | 353.9 | | | 411.5 | | Accrued payroll | 178.4 | | | 186.8 | |
| Derivative financial instruments (Note 20) | 308.5 | | | 141.3 | | |
| Derivative financial instruments (Note 19) | | Derivative financial instruments (Note 19) | 172.5 | | | 157.5 | |
| Income taxes payable | Income taxes payable | 76.6 | | | 75.7 | | Income taxes payable | 84.9 | | | 61.5 | |
| Other current liabilities (Note 9) | Other current liabilities (Note 9) | 1,236.7 | | | 1,494.5 | | Other current liabilities (Note 9) | 985.6 | | | 800.1 | |
| Current liabilities of discontinued operations | | Current liabilities of discontinued operations | 0 | | | 6,121.3 | |
| Total current liabilities | Total current liabilities | 9,897.6 | | | 10,138.4 | | Total current liabilities | 3,871.3 | | | 10,415.2 | |
| Long-term debt, less current portion (Note 14) | 3,982.9 | | | 3,980.0 | | |
| Operating lease liabilities | 688.0 | | | 681.7 | | |
| Long-term debt, less current portion (Note 13) | | Long-term debt, less current portion (Note 13) | 2,434.3 | | | 2,835.5 | |
| Operating lease liabilities, less current portion | | Operating lease liabilities, less current portion | 656.4 | | | 632.8 | |
| Deferred income taxes | Deferred income taxes | 77.8 | | | 138.2 | | Deferred income taxes | 60.7 | | | 79.3 | |
| Accrued pension and other post-retirement benefits, less current portion | Accrued pension and other post-retirement benefits, less current portion | 327.3 | | | 368.6 | | Accrued pension and other post-retirement benefits, less current portion | 248.9 | | | 268.4 | |
| Derivative financial instruments (Note 20) | 67.2 | | | 52.7 | | |
| Derivative financial instruments (Note 19) | | Derivative financial instruments (Note 19) | 34.2 | | | 18.8 | |
| Other liabilities | Other liabilities | 336.9 | | | 430.0 | | Other liabilities | 119.6 | | | 103.3 | |
| Non-current liabilities of discontinued operations | | Non-current liabilities of discontinued operations | 0 | | | 1,081.3 | |
| Total liabilities | Total liabilities | 15,377.7 | | | 15,789.6 | | Total liabilities | 7,425.4 | | | 15,434.6 | |
| Commitments and contingent liabilities (Note 18) | | | | |
| Commitments and contingent liabilities (Note 17) | | Commitments and contingent liabilities (Note 17) | 0 | | 0 |
| Mezzanine equity | Mezzanine equity | | Mezzanine equity | |
| Redeemable non-controlling interest | Redeemable non-controlling interest | 41.1 | | | 41.1 | | Redeemable non-controlling interest | 44.6 | | | 43.7 | |
| Stockholders’ equity (Note 15) | | | | |
| Ordinary shares, $1.00 par value; 618.3 shares and 618.3 shares authorized in 2020 and 2019, respectively; 449.3 shares and 447.1 shares issued and outstanding in 2020 and 2019, respectively; nil and 4 shares canceled in 2020 and 2019, respectively | 449.3 | | | 447.1 | | |
| Stockholders’ equity (Note 14) | | Stockholders’ equity (Note 14) | | | |
| Ordinary shares, $1.00 par value; 618.3 shares authorized in 2021 and 2020; 449.8 shares and 449.5 shares issued and outstanding in 2021 and 2020, respectively | | Ordinary shares, $1.00 par value; 618.3 shares authorized in 2021 and 2020; 449.8 shares and 449.5 shares issued and outstanding in 2021 and 2020, respectively | 449.8 | | | 449.5 | |
| Capital in excess of par value of ordinary shares | Capital in excess of par value of ordinary shares | 10,213.6 | | | 10,182.8 | | Capital in excess of par value of ordinary shares | 9,152.1 | | | 10,242.4 | |
| Accumulated deficit | Accumulated deficit | (4,876.0) | | | (1,563.1) | | Accumulated deficit | (4,547.0) | | | (4,915.2) | |
| Accumulated other comprehensive loss | Accumulated other comprehensive loss | (1,645.8) | | | (1,407.5) | | Accumulated other comprehensive loss | (1,400.8) | | | (1,622.5) | |
| Total TechnipFMC plc stockholders’ equity | Total TechnipFMC plc stockholders’ equity | 4,141.1 | | | 7,659.3 | | Total TechnipFMC plc stockholders’ equity | 3,654.1 | | | 4,154.2 | |
| Non-controlling interests | Non-controlling interests | 34.5 | | | 28.8 | | Non-controlling interests | 41.4 | | | 40.4 | |
| Non-controlling interests of discontinued operations | | Non-controlling interests of discontinued operations | 0 | | | 19.7 | |
| Total equity | Total equity | 4,175.6 | | | 7,688.1 | | Total equity | 3,695.5 | | | 4,214.3 | |
| Total liabilities and equity | Total liabilities and equity | $ | 19,594.4 | | | $ | 23,518.8 | | Total liabilities and equity | $ | 11,165.5 | | | $ | 19,692.6 | |
The accompanying notes are an integral part of the condensed consolidated financial statements.
TECHNIPFMC PLC AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
| | | | | | | | | | | |
| (In millions) | Six Months Ended | | |
| June 30, | | |
| 2020 | | 2019 |
| Cash provided (required) by operating activities | | | |
| Net income (loss) | $ | (3,230.4) | | | $ | 133.5 | |
| Adjustments to reconcile net income to cash provided (required) by operating activities | | | |
| Depreciation | 166.0 | | | 176.2 | |
| Amortization | 61.0 | | | 60.7 | |
| Impairments | 3,221.7 | | | 1.2 | |
| Employee benefit plan and share-based compensation costs | 36.2 | | | 37.6 | |
| Deferred income tax benefit, net | (42.8) | | | (127.5) | |
| Unrealized loss on derivative instruments and foreign exchange | 4.2 | | | 27.5 | |
| Income from equity affiliates, net of dividends received | (36.9) | | | (24.1) | |
| Other | 112.3 | | | 233.3 | |
| Changes in operating assets and liabilities, net of effects of acquisitions | | | |
| Trade receivables, net and contract assets | (10.4) | | | (82.8) | |
| Inventories, net | (58.7) | | | (134.9) | |
| Accounts payable, trade | (41.1) | | | (105.0) | |
| Contract liabilities | 147.5 | | | 274.2 | |
| Income taxes payable (receivable), net | 17.1 | | | (68.4) | |
| Other current assets and liabilities, net | (414.8) | | | (240.6) | |
| Other noncurrent assets and liabilities, net | 3.1 | | | 34.6 | |
| Cash provided (required) by operating activities | (66.0) | | | 195.5 | |
| | | |
| Cash provided (required) by investing activities | | | |
| Capital expenditures | (177.7) | | | (270.5) | |
| Payment to acquire debt securities | — | | | (59.7) | |
| Proceeds from sale of debt securities | — | | | 18.9 | |
| | | |
| Cash received from divestiture | 2.5 | | | — | |
| Proceeds from sale of assets | 25.4 | | | 1.3 | |
| Proceeds from repayment of advances to joint venture | 12.5 | | | 22.5 | |
| | | |
| Cash required by investing activities | (137.3) | | | (287.5) | |
| | | |
| Cash required by financing activities | | | |
| Net increase (decrease) in short-term debt | 21.6 | | | (17.9) | |
| Net decrease in commercial paper | (112.9) | | | (479.5) | |
| | | |
| Proceeds from issuance of long-term debt | 163.6 | | | 96.2 | |
| | | |
| Purchase of ordinary shares | — | | | (90.1) | |
| Dividends paid | (59.2) | | | (116.6) | |
| Payments related to taxes withheld on share-based compensation | (6.4) | | | — | |
| Settlements of mandatorily redeemable financial liability | (135.3) | | | (220.6) | |
| | | |
| Cash required by financing activities | (128.6) | | | (828.5) | |
| Effect of changes in foreign exchange rates on cash and cash equivalents | (48.8) | | | 1.8 | |
| Decrease in cash and cash equivalents | (380.7) | | | (918.7) | |
| Cash and cash equivalents, beginning of period | 5,190.2 | | | 5,540.0 | |
| Cash and cash equivalents, end of period | $ | 4,809.5 | | | $ | 4,621.3 | |
| | | | | | | | | | | |
| (In millions) | Three Months Ended March 31, |
| 2021 | | 2020 |
| Cash provided (required) by operating activities | | | |
| | | |
| | | |
| Net income (loss) from continuing operations | $ | 432.1 | | | $ | (3,227.9) | |
| Adjustments to reconcile income (loss) from continuing operations to cash provided (required) by operating activities | | | |
| Depreciation | 71.1 | | | 78.4 | |
| Amortization | 24.1 | | | 25.5 | |
| Impairments | 18.8 | | | 3,188.0 | |
| Employee benefit plan and share-based compensation costs | 4.7 | | | 16.3 | |
| Deferred income tax benefit, net | (31.9) | | | (58.7) | |
| Income from investment in Technip Energies | (470.1) | | | 0 | |
| Unrealized loss on derivative instruments and foreign exchange | (5.5) | | | 92.6 | |
| Income from equity affiliates, net of dividends received | (7.7) | | | (22.1) | |
| Loss on early extinguishment of debt | 23.5 | | | 0 | |
| Other | (0.1) | | | (5.1) | |
| Changes in operating assets and liabilities, net of effects of acquisitions | | | |
| Trade receivables, net and contract assets | (165.6) | | | 38.3 | |
| Inventories, net | 66.0 | | | (29.1) | |
| Accounts payable, trade | 84.8 | | | (56.9) | |
| Contract liabilities | (132.9) | | | 50.3 | |
| Income taxes payable (receivable), net | 165.3 | | | 43.4 | |
| Other current assets and liabilities, net | 100.7 | | | (676.7) | |
| Other noncurrent assets and liabilities, net | 4.2 | | | 103.9 | |
| Cash provided (required) by operating activities from continuing operations | 181.5 | | | (439.8) | |
| Cash provided by operating activities from discontinued operations | 66.3 | | | 467.7 | |
| Cash provided by operating activities | 247.8 | | | 27.9 | |
| | | |
| Cash provided (required) by investing activities | | | |
| Capital expenditures | (44.2) | | | (75.5) | |
| Proceeds from sale of debt securities | 24.2 | | | 0 | |
| Cash received from divestiture | 0 | | | 2.5 | |
| Proceeds from sale of assets | 4.4 | | | 7.1 | |
| Proceed from sale of investment in Technip Energies | 100.0 | | | 0 | |
| Advances from BPI | 100.0 | | | 0 | |
| Proceeds from repayment of advances to joint venture | 12.5 | | | 0 | |
| Other | 0 | | | 1.9 | |
| Cash provided (required) by investing activities from continuing operations | 196.9 | | | (64.0) | |
| Cash required by investing activities from discontinued operations | (4.5) | | | (9.5) | |
| Cash provided (required) by investing activities | 192.4 | | | (73.5) | |
| | | |
| Cash provided (required) by financing activities | | | |
| Net increase in short-term debt | 6.2 | | | 73.6 | |
| Net decrease in commercial paper | (953.1) | | | (309.2) | |
| Proceeds from revolving credit facility | 200.0 | | | 500.0 | |
| Proceeds from issuance of long-term debt | 1,000.0 | | | 0 | |
| Repayments of long-term debt | (1,065.8) | | | 0 | |
| Payments for debt issuance costs | (53.5) | | | 0 | |
| Payments related to taxes withheld on share-based compensation | 0 | | | (3.2) | |
| Cash paid for finance leases | (0.4) | | | 0 | |
| | | |
| Cash provided (required) by financing activities from continuing operations | (866.6) | | | 261.2 | |
| Cash provided (required) by financing activities from discontinued operations | (79.1) | | | (458.2) | |
| Cash required by financing activities | (945.7) | | | (197.0) | |
| Effect of changes in foreign exchange rates on cash and cash equivalents | (10.9) | | | (9.7) | |
| Decrease in cash and cash equivalents | (516.4) | | | (252.3) | |
| Cash and cash equivalents, beginning of period | 1,269.2 | | | 1,188.0 | |
| Cash and cash equivalents, end of period | $ | 752.8 | | | $ | 935.7 | |
The accompanying notes are an integral part of the condensed consolidated financial statements.
TECHNIPFMC PLC AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)
THREE MONTHS ENDED JUNE 30,MARCH 31, 2021 and 2020 and 2019
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (In millions) | Ordinary Shares | | | | Capital in Excess of Par Value of Ordinary Shares | | (Accumulated Deficit) Retained Earnings | | Accumulated Other Comprehensive Income (Loss) | | Non-controlling Interest | | Total Stockholders’ Equity |
| Balance as of March 31,2019 | $ | 448.3 | | | | | $ | 10,169.5 | | | $ | 1,047.9 | | | $ | (1,323.0) | | | $ | 30.9 | | | $ | 10,373.6 | |
| Net income | — | | | | | — | | | 97.0 | | | — | | | 16.7 | | | 113.7 | |
| Other comprehensive income (loss) | — | | | | | — | | | — | | | (25.3) | | | 0.6 | | | (24.7) | |
| Cancellation treasury shares | (1.8) | | | | | (38.2) | | | — | | | — | | | — | | | (40.0) | |
| Dividends ($0.13 per share) | — | | | | | — | | | (58.1) | | | — | | | — | | | (58.1) | |
| Share-based compensation (Note 16) | — | | | | | 21.1 | | | — | | | — | | | — | | | 21.1 | |
| Other | — | | | | | — | | | (2.8) | | | — | | | (2.4) | | | (5.2) | |
| Balance as of June 30,2019 | $ | 446.5 | | | | | $ | 10,152.4 | | | $ | 1,084.0 | | | $ | (1,348.3) | | | $ | 45.8 | | | $ | 10,380.4 | |
| | | | | | | | | | | | | |
| Balance as of March 31,2020 | $ | 448.3 | | | | | $ | 10,196.8 | | | $ | (4,887.0) | | | $ | (1,701.7) | | | $ | 28.4 | | | $ | 4,084.8 | |
| | | | | | | | | | | | | |
| Net income | — | | | | | — | | | 11.7 | | | — | | | 3.6 | | | 15.3 | |
| Other comprehensive income | — | | | | | — | | | — | | | 55.9 | | | 3.2 | | | 59.1 | |
| | | | | | | | | | | | | |
| Issuance of ordinary shares | 1.0 | | | | | — | | | — | | | — | | | — | | | 1.0 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Share-based compensation (Note 16) | — | | | | | 16.8 | | | — | | | — | | | — | | | 16.8 | |
| Other | — | | | | | — | | | (0.7) | | | — | | | (0.7) | | | (1.4) | |
| Balance as of June 30,2020 | $ | 449.3 | | | | | $ | 10,213.6 | | | $ | (4,876.0) | | | $ | (1,645.8) | | | $ | 34.5 | | | $ | 4,175.6 | |
TECHNIPFMC PLC AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)
SIX MONTHS ENDED JUNE 30, 2020 and 2019
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (In millions) | Ordinary Shares | | Ordinary Shares Held in
Treasury and
Employee
Benefit
Trust | | Capital in
Excess of Par
Value of
Ordinary Shares | | (Accumulated Deficit) Retained Earnings | | Accumulated
Other
Comprehensive
Income
(Loss) | | Non-controlling
Interest | | Total
Stockholders’
Equity |
| 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 4) | — | | | — | | | — | | | 1.8 | | | — | | | — | | | 1.8 | |
| Net income | — | | | — | | | — | | | 117.9 | | | — | | | 15.6 | | | 133.5 | |
| Other comprehensive income | — | | | — | | | — | | | — | | | 11.4 | | | 1.3 | | | 12.7 | |
| Cancellation of ordinary shares | (4.0) | | | — | | | (86.1) | | | — | | | — | | | — | | | (90.1) | |
| Net sales of ordinary shares for employee benefit trust | — | | | 2.4 | | | — | | | — | | | — | | | — | | | 2.4 | |
| Cash dividends declared ($0.26 per share) | — | | | — | | | — | | | (116.6) | | | — | | | — | | | (116.6) | |
| Share-based compensation (Note 16) | — | | | — | | | 41.5 | | | — | | | — | | | — | | | 41.5 | |
| Other | — | | | — | | | — | | | 8.7 | | | — | | | (2.4) | | | 6.3 | |
| Balance as of June 30, 2019 | $ | 446.5 | | | $ | — | | | $ | 10,152.4 | | | $ | 1,084.0 | | | $ | (1,348.3) | | | $ | 45.8 | | | $ | 10,380.4 | |
| | | | | | | | | | | | | |
| 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 (Note 4) | — | | | — | | | — | | | (7.8) | | | — | | | — | | | (7.8) | |
| Net income (loss) | — | | | — | | | — | | | (3,244.4) | | | — | | | 14.0 | | | (3,230.4) | |
| Other comprehensive loss | — | | | — | | | — | | | — | | | (238.3) | | | (7.9) | | | (246.2) | |
| | | | | | | | | | | | | |
| Issuance of ordinary shares | 2.2 | | | — | | | (7.6) | | | — | | | — | | | — | | | (5.4) | |
| | | | | | | | | | | | | |
| Cash dividends declared ($0.13 per share) | — | | | — | | | — | | | (59.2) | | | — | | | — | | | (59.2) | |
| Share-based compensation (Note 16) | — | | | — | | | 38.4 | | | — | | | — | | | — | | | 38.4 | |
| Other | — | | | — | | | — | | | (1.5) | | | — | | | (0.4) | | | (1.9) | |
| Balance as of June 30, 2020 | $ | 449.3 | | | $ | — | | | $ | 10,213.6 | | | $ | (4,876.0) | | | $ | (1,645.8) | | | $ | 34.5 | | | $ | 4,175.6 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (In millions) | Ordinary Shares | | Capital in
Excess of Par
Value of
Ordinary Shares | | 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 (Note 3) | — | | | — | | | (7.8) | | | — | | | — | | | (7.8) | |
| Net income (loss) | — | | | — | | | (3,256.1) | | | — | | | 10.4 | | | (3,245.7) | |
| Other comprehensive loss | — | | | — | | | — | | | (294.2) | | | (11.1) | | | (305.3) | |
| Issuance of ordinary shares | 1.2 | | | (7.6) | | | — | | | — | | | — | | | (6.4) | |
| Cash dividends declared ($0.13 per share) | — | | | — | | | (59.2) | | | — | | | — | | | (59.2) | |
| Share-based compensation (Note 15) | — | | | 21.6 | | | — | | | — | | | — | | | 21.6 | |
| Other | — | | | — | | | (0.8) | | | — | | | 0.3 | | | (0.5) | |
| Balance as of March 31, 2020 | 448.3 | | | 10,196.8 | | | (4,887.0) | | | (1,701.7) | | | 28.4 | | | 4,084.8 | |
| | | | | | | | | | | |
| Balance as of December 31, 2020 | 449.5 | | | 10,242.4 | | | (4,915.2) | | | (1,622.5) | | | 60.1 | | | 4,214.3 | |
| | | | | | | | | | | |
| Net income (loss) | — | | | — | | | 368.2 | | | — | | | 3.7 | | | 371.9 | |
| Other comprehensive loss | — | | | — | | | — | | | (37.0) | | | 0.1 | | | (36.9) | |
| Issuance of ordinary shares | 0.3 | | | — | | | — | | | — | | | — | | | 0.3 | |
| Share-based compensation (Note 15) | — | | | 3.4 | | | — | | | — | | | — | | | 3.4 | |
| Spin-off of Technip Energies (Note 2) | — | | | (1,093.7) | | | 0 | | | 258.7 | | | (19.9) | | | (854.9) | |
| | | | | | | | | | | |
| Other | — | | | — | | | — | | | — | | | (2.6) | | | (2.6) | |
| Balance as of March 31, 2021 | 449.8 | | | 9,152.1 | | | (4,547.0) | | | (1,400.8) | | | 41.4 | | | 3,695.5 | |
The accompanying notes are an integral part of the condensed consolidated financial statements.
TECHNIPFMC PLC AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited condensed consolidated financial statements of TechnipFMC plc and its consolidated subsidiaries (“TechnipFMC”, the “Company,” “we,” “us,” or “our”) have been prepared in accordance with United States generally accepted accounting principles (“GAAP”) and rules and regulations of the Securities and Exchange Commission (“SEC”) pertaining to interim financial information. As permitted under those rules, certain footnotes or other financial information that are normally required by GAAP have been condensed or omitted. These unaudited condensed consolidated financial statements should be read together with our audited consolidated financial statements contained in our Annual Report on Form 10-K (“Form 10-K”) for the year ended December 31, 2019.2020.
Our accounting policies are in accordance with GAAP. 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.
In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, consisting of normal recurring adjustments, as well as adjustments to our financial position pursuant to a business combination, necessary for a fair statement of our financial condition and operating results as of and for the periods presented. Revenue, expenses, assets and liabilities can vary during each quarter of the year. Therefore, the results and trends in these financial statements may not be representative of the results that may be expected for the year ending December 31, 2020.
Reclassifications – Certain prior-year amounts have been reclassified to conform to the current year’s presentation.
NOTE 2. PLANNED SEPARATION TRANSACTIONDISCONTINUED OPERATIONS
The Spin-off
On August 26, 2019,February 16, 2021, we announced thatcompleted our Board of Directors had unanimously approved a plan to separate our Onshore/Offshore segment and Loading Systems and process automation businessesseparation into antwo independent publicly traded companycompanies: TechnipFMC, a fully integrated technology and service provider, and Technip Energies, a leading engineering and technology player (“Technip Energies”). 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 percent 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 trade under the ticker symbol “TE” on the Euronext Paris Stock Exchange.
In connection with the planned transaction, we renamed our Onshore/Offshore segment toSpin-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, liabilities and obligations attributable to periods prior to, at and after the Spin-off.
Discontinued Operations
The Spin-off represented a strategic shift that will have a major impact to our operations and consolidated financial statements, accordingly Technip Energies has been presented as discontinued operations in the first quarterconsolidated statements of 2020. Due to the COVID-19 pandemic, the significant decline in commodity prices,income, consolidated balance sheets and the heightened volatility in global equity markets, on March 15, 2020, we announcedconsolidated statements of cash flows. Therefore, the postponementresults of the completion of the transaction until the markets sufficiently recover. The transaction will be subject to general market conditions, regulatory approvals, consultation of employee representatives, where applicable, and final approval from our Board of Directors. We incurred $27.1 million of separation costs associated with the planned transaction during the first quarter of 2020. We did not record any separation costs duringTechnip Energies were presented as discontinued operations for the three months ended June 30, 2020.March 31, 2021 and 2020 including the historical results of Technip Energies prior to the Distribution on February 16, 2021. Our condensed consolidated balance sheets, condensed consolidated statements of income, condensed consolidated statements of cash flows and notes to the condensed consolidated financial statements have been updated to reflect continuing operations only.
NOTE 3. BUSINESS COMBINATION TRANSACTIONS
On December 30, 2019, we completedThe following table summarizes the acquisitioncomponents of the remaining 50% interest in Technip Odebrecht PLSV CV (“TOP CV”). TOP CV was formed as a joint venture between Technip SA and Ocyan SA to provide pipeline installation ships to Petroleo Brasileiro SA (“Petrobras”) for their work in oil and gas fields offshore Brazil with results reported in our Subsea segment using the equity methodincome from discontinued operations, net of accounting. Subsequent to this transaction the investment became a fully consolidated entity. In connection with the acquisition, we acquired $391.0 million in assets, including two vessels valued at $335.2 million. In addition, we assumed $239.9 million of liabilities, including a $203.1 million term loan.
There were no significant acquisitions or other type of business combinations during the three and six months ended June 30, 2020 and 2019.tax:
| | | | | | | | | | | |
| Three Months Ended |
| March 31, |
| (In millions) | 2021 | | 2020 |
| Revenue | $ | 906.0 | | | $ | 1,547.7 | |
| Costs and expenses | 889.3 | | | 1,442.4 | |
| Other income and interest expense, net | (18.6) | | | (62.2) | |
| Income (loss) from discontinued operations before income taxes | $ | (1.9) | | | $ | 43.1 | |
| Income (loss) from discontinued operations, net of income taxes | $ | (60.2) | | | $ | (17.8) | |
Assets and liabilities of discontinued operations are summarized below:
| | | | | | | | |
| | December 31, |
| (In millions) | | 2020 |
| Assets | | |
| Cash and cash equivalents | | $ | 3,538.6 | |
| Trade receivables, net of allowances | | 1,302.7 | |
| Contract assets | | 333.5 | |
| Other current assets | | 522.0 | |
| Total current assets of discontinued operations | | 5,696.8 | |
| Property, plant and equipment, net of accumulated depreciation | | 117.1 | |
| Goodwill | | 2,512.5 | |
| Other assets | | 664.0 | |
| Total non-current assets of discontinued operations | | 3,293.6 | |
| Total assets of discontinued operations | | $ | 8,990.4 | |
| | |
| Liabilities | | |
| Accounts payable, trade | | $ | 1,545.1 | |
| Contract liabilities | | 3,690.4 | |
| Other current liabilities | | 885.8 | |
| Total current liabilities of discontinued operations | | 6,121.3 | |
| Long-term debt, less current portion | | 482.2 | |
| Operating lease liabilities | | 248.2 | |
| Other liabilities | | 350.9 | |
| Total non-current liabilities of discontinued operations | | 1,081.3 | |
| Total liabilities of discontinued operations | | $ | 7,202.6 | |
On February 16, 2021, all assets and liabilities of Technip Energies were spun-off, therefore, as of March 31, 2021, there were no assets and liabilities classified as discontinued operations.
NOTE 4.3. NEW ACCOUNTING STANDARDS
Recently Adopted Accounting Standards under GAAP
Effective January 1, 2020, we adopted ASU No. 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement.” This update modifies the disclosure requirement on fair value measurements in Topic 820. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively. The adoption of this update concerns presentation and disclosure only as it relates to our consolidated financial statements. See Note 21 for our fair value measurements disclosure.
Effective January 1, 2020, we adopted ASU No. 2018-15, “Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (a consensus of the FASB Emerging Issues Task Force).” This update requires that the implementation costs incurred in a cloud computing arrangement that is a service contract are deferred if they would be capitalized based on the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The adoption of this update did not have a material impact on our consolidated financial statements.
Effective January 1, 2020, we adopted ASU No. 2018-18, “Collaborative Arrangements (Topic 808)—Clarifying the Interaction between Topic 808 and Topic 606.” This update clarifies the interaction between the guidance for certain collaborative arrangements and the Revenue Recognition financial accounting and reporting standard. An entity should recognize the cumulative effect of initially applying the amendments as an adjustment to the opening balance of retained earnings of the later of the earliest annual period presented and the annual period that includes the date of the entity’s initial application of Topic 606. The adoption of this update concerns presentation and disclosure only with no material impact to our consolidated financial statements.
Effective January 1, 2020, we adopted ASU No. 2019-04, “Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments.” The update clarifies and improves areas of guidance related to the recently issued standards including (1) ASU No. 2016-01, “Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Liabilities”, (2) ASU No. 2016-13, “Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.”, and (3) ASU No. 2017-12, “Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities”. The adoption of this update concerns presentation and disclosure only with no material impact to our consolidated financial statements.
Adoption of ASU No. 2016-13 “Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments
Effective January 1, 2020, we adopted ASU No. 2016-13, “Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” This ASU introduces a new model for recognizing credit losses on financial instruments based on an estimate of current expected credit losses. The guidance applies to (1) loans, accounts receivable, trade receivables, and other financial assets measured at amortized cost, (2) loan commitments and other off-balance sheet credit exposures, (3) debt securities and other financial assets measured at fair value through other comprehensive income, and (4) beneficial interests in securitized financial assets.
In June 2016, the FASB issued an update of the ASU to provide a practical expedient for transition and targeted improvements.
We adopted Topic 326 using a modified retrospective transition method through a cumulative-effect adjustment to beginning retained earnings in the period of adoption. The effect of adopting Topic 326 was an increase in accumulated deficit of $7.8 million, which includes a $2.1 million increase in noncurrent deferred tax assets, with a corresponding decrease in trade receivables, loans, and debt notes receivable.
Financial assets at amortized cost include trade receivables, loans issued to third or related parties, and held to maturity debt securities. These financial assets were presented under other current assets or other assets, as applicable. Contract assets are subject to the credit losses standard per revenue recognition standard.
Trade receivables and contract assets constitute a homogeneous portfolio, and therefore, to measure the expected credit losses, trade receivables and contract assets have been grouped together. The contract assets relate to unbilled work in progress and have substantially the same risk characteristics as the trade receivables for the same types of contracts. We have therefore concluded that the expected loss rates for trade receivables are a reasonable approximation of the loss rates for the contract assets.
The following table summarizes the balances of financial assets and non-financial assets at amortized cost as of January 1, 2020:
| | | | | | | | | | | | | | | | | |
| (In millions) | As reported at December 31, 2019 | | Impact of ASC 326 | | Balance at 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 | |
We manage our receivables portfolios using published default risk as a key credit quality indicator for our loans and receivables. Our loans receivable and security deposits were related to sales of long-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 government bonds.
The table below summarizes the amortized cost basis of financial assets by years of origination and credit quality. The key credit quality indicator is updated as of June 30, 2020.
| | | | | | | | | | | |
| (In millions) | Year of origination | | Balance at June 30, 2020 |
| Loans receivables, security deposits and other | | | |
| Moody’s rating Ba2 | 2019 | | $ | 151.8 | |
| | | |
| Debt securities at amortized cost | | | |
| Moody’s rating B3 | 2019 | | 70.9 | |
| Total financial assets | | | $ | 222.7 | |
Credit Losses
For contract assets, trade receivables, loans receivable, and security deposits and other, 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 held-to-maturity debt securities at amortized cost, we evaluate whether the debt securities are considered to have low credit risk at the reporting date using available, reasonable, and supportable information.
The table below shows the roll-forward of allowance for credit losses for the six months ended June 30, 2020.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Balance at June 30, 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 | 34.5 | | | 0.4 | | | 0.1 | | | 0.4 | | | — | |
| Write-offs charged against the allowance | (1.7) | | | — | | | — | | | — | | | — | |
| Recoveries | (2.9) | | | (2.5) | | | (0.6) | | | (1.0) | | | — | |
| Ending balance in the allowance for credit losses | $ | 129.1 | | | $ | 2.9 | | | $ | 9.0 | | | $ | 1.0 | | | $ | 1.1 | |
Other than certain trade receivables due in one year or less, we do not have any financial assets that are past due or are on non-accrual status.
Recently Issued Accounting Standards under GAAP
In August 2018, the FASB issued ASU No. 2018-14, “Compensation—Retirement Benefits—Defined Benefit Plans—General (Subtopic 715-20): Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans.” This update amends ASC 715 to add, remove, and clarify disclosure requirements related to defined benefit pension and other post-retirement plans. The amendments inWe adopted this ASU are effective for usamendment as of January 1, 2021, and early adoption is permitted. The amendments in this update are required to be adopted retrospectively. We are currently evaluating thewhich did not have a material impact of this ASU on our condensed consolidated financial statements.
In December 2019, the FASB issued ASU No. 2019-12, “Income Taxes to Topic 740—Simplifying the Accounting for Income Taxes”.Taxes.” The amendments simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. This update also improves and simplifies areas of generally accepted accounting principles (GAAP) for which cost and complexity can be reduced while maintaining or improving the usefulness of the information provided to users of financial statements. This update is effective for usWe adopted this amendment as of January 1, 2021, and early adoption is permitted. We are currently evaluating thewhich did not have a material impact of this ASU on our condensed consolidated financial statements.
In January 2020, the FASB issued ASU No. 2020-01, "Investments—Equity Securities (Topic 321),", “Investments—Equity Method and Joint Ventures (Topic 323),”, and “Derivatives and Hedging (Topic 815)—Clarifying the Interactions between Topic 321, Topic 323, and Topic 815”815,”, and made targeted improvements to address certain aspects of accounting for financial instruments. This update clarifies that a company should consider observable transactions that require a company to either apply or discontinue the equity method of accounting under Topic 323, Investments—Equity Method and Joint Ventures, for the purposes of applying the measurement alternative in accordance with Topic 321 immediately before applying or upon discontinuing the equity method. The new ASU also clarifies that, when determining the accounting for certain forward contracts and purchased options, a company should not consider whether underlying securities would be accounted for under the equity method or fair value option upon settlement or exercise. TheWe adopted this amendment is effective fromas of January 1, 2021, and early adoption is permitted. We are currently evaluating thewhich did not have a material impact of this ASU on our condensed consolidated financial statements.
In October 2020, the FASB issued ASU No. 2020-10, “Codification Improvements.” The amendments in this update improve consistency by amending the accounting standards codification (the “Codification”) to include all disclosure guidance in the appropriate sections and clarify the application of various provisions in the Codification by amending and adding new headings, cross referencing to other guidance, and refining or correcting terminology. We adopted this update at January 1, 2021, which did not have a material impact on our condensed 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)” which clarifies the scope of Topic 848. The amendments in this updatethese updates apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The expedients and exceptions provided by the amendments do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for hedging relationships existing as of December 31, 2022, that an entity has elected certain optional expedients for and that are retained through the end of the hedging relationship. The amendments in this update are effective as of March 12, 2020 through December 31, 2022. We are currently evaluating the impact of this ASU on our condensed consolidated financial statements.
NOTE 5.4. REVENUE
The majority of our revenue is from long-term contracts associated with designing and manufacturing products and systems and providing services to customers involved in exploration and production of crude oil and natural gas.
Disaggregation of Revenue
Revenues are disaggregated by geographic location and contract types.
The following tables present products and services revenue by geography for each reportable segment for the three and six months ended June 30, 2020March 31, 2021 and 2019:2020:
| | | Reportable Segments | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | | Three Months Ended |
| | June 30, 2020 | | | June 30, 2019 | | | March 31, 2021 | | March 31, 2020 |
| (In millions) | (In millions) | Subsea | | Technip Energies | | Surface Technologies | | Subsea | | Technip Energies | | Surface Technologies | (In millions) | Subsea | | Surface Technologies | | Subsea | | Surface Technologies |
| Europe, Russia, Central Asia | Europe, Russia, Central Asia | $ | 426.5 | | | $ | 645.8 | | | $ | 48.3 | | | $ | 459.6 | | | $ | 651.2 | | | $ | 60.0 | | Europe, Russia, Central Asia | $ | 255.9 | | | $ | 42.1 | | | $ | 423.1 | | | $ | 50.3 | |
| Americas | Americas | 507.9 | | | 298.8 | | | 81.1 | | | 341.8 | | | 196.9 | | | 199.9 | | Americas | 561.7 | | | 75.2 | | | 436.5 | | | 149.3 | |
| Asia Pacific | Asia Pacific | 185.5 | | | 264.8 | | | 28.0 | | | 177.7 | | | 275.5 | | | 44.1 | | Asia Pacific | 241.6 | | | 24.0 | | | 137.6 | | | 34.3 | |
| Africa | Africa | 168.2 | | | 202.1 | | | 14.7 | | | 373.8 | | | 111.1 | | | 14.9 | | Africa | 292.2 | | | 8.2 | | | 214.6 | | | 13.6 | |
| Middle East | Middle East | 80.1 | | | 126.8 | | | 55.0 | | | 135.6 | | | 270.3 | | | 69.2 | | Middle East | 23.8 | | | 74.5 | | | 21.8 | | | 50.5 | |
| Total products and services revenue | Total products and services revenue | $ | 1,368.2 | | | $ | 1,538.3 | | | $ | 227.1 | | | $ | 1,488.5 | | | $ | 1,505.0 | | | $ | 388.1 | | Total products and services revenue | $ | 1,375.2 | | | $ | 224.0 | | | $ | 1,233.6 | | | $ | 298.0 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Reportable Segments | | | | | | | | | | |
| Six Months Ended | | | | | | | | | | |
| June 30, 2020 | | | | | | June 30, 2019 | | | | |
| (In millions) | Subsea | | Technip Energies | | Surface Technologies | | Subsea | | Technip Energies | | Surface Technologies |
| Europe, Russia, Central Asia | $ | 849.6 | | | $ | 1,253.1 | | | $ | 98.6 | | | $ | 859.2 | | | $ | 1,292.8 | | | $ | 115.8 | |
| Americas | 944.4 | | | 595.5 | | | 230.4 | | | 718.9 | | | 357.3 | | | 393.1 | |
| Asia Pacific | 323.1 | | | 548.6 | | | 62.3 | | | 277.4 | | | 577.4 | | | 89.1 | |
| Africa | 382.8 | | | 411.9 | | | 28.3 | | | 519.6 | | | 171.5 | | | 26.2 | |
| Middle East | 101.9 | | | 276.9 | | | 105.5 | | | 270.8 | | | 441.1 | | | 121.8 | |
| Total products and services revenue | $ | 2,601.8 | | | $ | 3,086.0 | | | $ | 525.1 | | | $ | 2,645.9 | | | $ | 2,840.1 | | | $ | 746.0 | |
The following tables representpresent revenue by contract type for each reportable segment for the three and six months ended June 30, 2020March 31, 2021 and 2019:2020:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Reportable Segments | | | | | | | | | | |
| Three Months Ended | | | | | | | | | | |
| June 30, 2020 | | | | | | June 30, 2019 | | | | |
| (In millions) | Subsea | | Technip Energies | | Surface Technologies | | Subsea | | Technip Energies | | Surface Technologies |
| Services | $ | 764.2 | | | $ | 1,520.6 | | | $ | 30.4 | | | $ | 970.2 | | | $ | 1,505.0 | | | $ | 73.6 | |
| Products | 604.0 | | | 17.7 | | | 196.7 | | | 518.3 | | | — | | | 314.5 | |
| Total products and services revenue | 1,368.2 | | | 1,538.3 | | | 227.1 | | | 1,488.5 | | | 1,505.0 | | | 388.1 | |
| Lease | 10.3 | | | — | | | 14.6 | | | 20.2 | | | — | | | 32.4 | |
| Total revenue | $ | 1,378.5 | | | $ | 1,538.3 | | | $ | 241.7 | | | $ | 1,508.7 | | | $ | 1,505.0 | | | $ | 420.5 | |
| | | Reportable Segments | | | | | | | | | | | | | | | | | | | | | |
| | Six Months Ended | | | Three Months Ended |
| | June 30, 2020 | | | June 30, 2019 | | | March 31, 2021 | | March 31, 2020 |
| (In millions) | (In millions) | Subsea | | Technip Energies | | Surface Technologies | | Subsea | | Technip Energies | | Surface Technologies | (In millions) | Subsea | | Surface Technologies | | Subsea | | Surface Technologies |
| Services | Services | $ | 1,481.7 | | | $ | 3,054.7 | | | $ | 86.5 | | | $ | 1,615.8 | | | $ | 2,840.1 | | | $ | 144.0 | | Services | $ | 793.4 | | | $ | 32.8 | | | $ | 717.5 | | | $ | 56.1 | |
| Products | Products | 1,120.1 | | | 31.3 | | | 438.6 | | | 1,030.1 | | | — | | | 602.0 | | Products | 581.8 | | | 191.2 | | | 516.1 | | | 241.9 | |
| Total products and services revenue | Total products and services revenue | 2,601.8 | | | 3,086.0 | | | 525.1 | | | 2,645.9 | | | 2,840.1 | | | 746.0 | | Total products and services revenue | 1,375.2 | | | 224.0 | | | 1,233.6 | | | 298.0 | |
| Lease | Lease | 29.8 | | | — | | | 46.1 | | | 48.1 | | | — | | | 67.1 | | Lease | 11.3 | | | 21.5 | | | 19.5 | | | 31.5 | |
| Total revenue | Total revenue | $ | 2,631.6 | | | $ | 3,086.0 | | | $ | 571.2 | | | $ | 2,694.0 | | | $ | 2,840.1 | | | $ | 813.1 | | Total revenue | $ | 1,386.5 | | | $ | 245.5 | | | $ | 1,253.1 | | | $ | 329.5 | |
Contract Balances
The timing of revenue recognition, billings and cash collections results in billed accounts receivable, costs and estimated earnings in excess of billings on uncompleted contracts (contract assets), and billings in excess of costs and estimated earnings on uncompleted contracts (contract liabilities) on the condensed consolidated balance sheets.
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 just subject to the passage of time. Amounts may not exceed their net realizable value. Costs and estimated earnings in excess of 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.
The following table provides information about net contract liabilitiesassets (liabilities) as of June 30, 2020March 31, 2021 and December 31, 2019:2020:
| | (In millions) | (In millions) | June 30,
2020 | | December 31,
2019 | | $ change | | % change | (In millions) | March 31,
2021 | | December 31,
2020 | | $ change | | % change |
| Contract assets | Contract assets | $ | 1,414.4 | | | $ | 1,520.0 | | | $ | (105.6) | | | (6.9) | | Contract assets | $ | 1,008.7 | | | $ | 934.1 | | | $ | 74.6 | | | 8.0 | |
| Contract (liabilities) | Contract (liabilities) | (4,685.4) | | | (4,585.1) | | | (100.3) | | | (2.2) | | Contract (liabilities) | (892.5) | | | (1,045.7) | | | 153.2 | | | 14.7 | |
| Net contract liabilities | $ | (3,271.0) | | | $ | (3,065.1) | | | $ | (205.9) | | | (6.7) | | |
| Net contract assets (liabilities) | | Net contract assets (liabilities) | $ | 116.2 | | | $ | (111.6) | | | $ | 227.8 | | | 204.1 | |
The decreaseincrease in our contract assets from December 31, 20192020 to June 30, 2020March 31, 2021 was primarily due to the timing of project milestones.
The increasedecrease in our contract liabilities was primarily due to additional cashcompletion of performance obligations for contracts, for which consideration was received excluding amounts recognized as revenuein advance of the work performed during the period.
In order to determine revenue recognized in the period from contract liabilities, we first allocate revenue to the individual contract liability balance outstanding at the beginning of the period until the revenue exceeds that balance. Any subsequent revenue we recognize increases contract asset balance. Revenue recognized for the three months ended June 30,March 31, 2021 that was included in the contract liabilities balance at December 31, 2020 and 2019was $128.4 million. Revenue recognized for the three months ended March 31, 2020 that was included in the contract liabilities balance at December 31, 2019 and 2018 was $457.3 million and $1,147.1 million, respectively, and $874.4 million and $2,014.3 million for the six months ended June 30, 2020 and 2019, respectively.$143.4 million.
In addition, net revenue recognized forFor the three months ended June 30,March 31, 2021 and 2020, and 2019 from our performance obligations satisfied in previous periods had favorable impacts of $101.6we recognized $(5.3) million and $325.7$(11.8) million, respectively, and $158.9 million and $493.4 million for the six months ended June 30, 2020 and 2019, respectively. This primarily relatesrelated to the unfavorable changes in the estimateestimates of the stage of completion that impactedcontract revenue.
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 material right but work has not been performed. The transaction price of the order backlog includes 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 June 30, 2020,March 31, 2021, the aggregate amount of the transaction price allocated to order backlog was $20,603.8$7,221.4 million. We expect to recognize revenue on approximately 27.8%44.7% of the order backlog through 20202021 and 72.2%55.3% thereafter.
The following table details the order backlog for each business segment as of June 30, 2020:March 31, 2021:
| | (In millions) | (In millions) | 2020 | | 2021 | | Thereafter | (In millions) | 2021 | | 2022 | | Thereafter |
| Subsea | Subsea | $ | 2,211.7 | | | $ | 2,912.0 | | | $ | 1,961.6 | | Subsea | $ | 2,954.0 | | | $ | 2,534.2 | | | $ | 1,368.9 | |
| Technip Energies | 3,291.8 | | | 5,541.9 | | | 4,298.9 | | |
| Surface Technologies | Surface Technologies | 220.2 | | | 161.0 | | | 4.7 | | Surface Technologies | 274.5 | | | 87.9 | | | 1.9 | |
| Total order backlog | Total order backlog | $ | 5,723.7 | | | $ | 8,614.9 | | | $ | 6,265.2 | | Total order backlog | $ | 3,228.5 | | | $ | 2,622.1 | | | $ | 1,370.8 | |
NOTE 6.5. BUSINESS SEGMENTS
Management’s determination of our reporting segments was made on the basis of our strategic priorities within each segment and the differences in the products and services we provide, which corresponds to the manner in which our Chairman and Chief Executive Officer, as our chief operating decision maker, reviews and evaluates operating performance to make decisions about resources to be allocated to the segment.
We report Subsequent to the results of operations in the followingSpin-off, we now operate under 2 reporting segments: Subsea and Surface Technologies:
•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 deep water exploration and production of crude oil and natural gas.
•Technip Energies - offers extensive experience, knowledge and unique project management capabilities in Onshore and Offshore hydrocarbon infrastructure businesses; it also combines its leading engineering and construction capabilities with its technological know-how, products and servicesgas, while developing renewable alternatives to developserve new solutions that will support the world’s energy transition.industries.
•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; designs, manufactures, and supplies technologically advanced high-pressure valves and fittings for oilfield service companies; and also provides flowback and well testing services.
Beginning in the first quarter of 2020, in anticipation of our separation transaction, we renamed our Onshore/Offshore segment 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 due to these businesses not being material.
Segment operating profit (loss) is defined as total segment revenue less segment operating expenses. Income (loss) from equity method investments is included in computing segment operating profit. The following items have been excluded in computing segment operating profit (loss): corporate staff expense, foreign exchange gains (losses), income from investment in Technip Energies, net interest income (expense) associated with corporate debt facilities and income taxes, and other revenue and other expense, net.taxes.
Segment revenue and segment operating profit (loss) were as follows:
| | | Three Months Ended | | | Six Months Ended | | | | Three Months Ended |
| | June 30, | | | June 30, | | | | March 31, |
| (In millions) | (In millions) | 2020 | | 2019 | | 2020 | | 2019 | (In millions) | | 2021 | | 2020 |
| Segment revenue | Segment revenue | | | | | | | | Segment revenue | | | | |
| Subsea | Subsea | $ | 1,378.5 | | | $ | 1,508.7 | | | $ | 2,631.6 | | | $ | 2,694.0 | | Subsea | | $ | 1,386.5 | | | $ | 1,253.1 | |
| Technip Energies | 1,538.3 | | | 1,505.0 | | | 3,086.0 | | | 2,840.1 | | |
| Surface Technologies | Surface Technologies | 241.7 | | | 420.5 | | | 571.2 | | | 813.1 | | Surface Technologies | | 245.5 | | | 329.5 | |
| Total revenue | Total revenue | $ | 3,158.5 | | | $ | 3,434.2 | | | $ | 6,288.8 | | | $ | 6,347.2 | | Total revenue | | $ | 1,632.0 | | | $ | 1,582.6 | |
| | Segment operating profit (loss) | Segment operating profit (loss) | | Segment operating profit (loss) | | |
| Subsea | Subsea | $ | (75.6) | | | $ | 94.6 | | | $ | (2,826.3) | | | $ | 144.5 | | Subsea | | $ | 37.0 | | | $ | (2,750.7) | |
| Technip Energies | 231.3 | | | 274.0 | | | 382.5 | | | 429.7 | | |
| Surface Technologies | Surface Technologies | (13.4) | | | 25.5 | | | (437.4) | | | 36.0 | | Surface Technologies | | 8.2 | | | (424.0) | |
| Total segment operating profit (loss) | Total segment operating profit (loss) | $ | 142.3 | | | $ | 394.1 | | | $ | (2,881.2) | | | $ | 610.2 | | Total segment operating profit (loss) | | $ | 45.2 | | | $ | (3,174.7) | |
| | Corporate items | Corporate items | | Corporate items | | |
| Impairment, restructuring and other expenses | (1.9) | | | (1.4) | | | (5.5) | | | (10.3) | | |
| Separation costs | — | | | — | | | (27.1) | | | — | | |
| Merger transaction costs | — | | | (12.9) | | | — | | | (25.0) | | |
| Legal expenses | — | | | (55.2) | | | — | | | (55.2) | | |
Other corporate expenses(a) | (27.2) | | | (51.4) | | | (65.4) | | | (112.4) | | |
| Corporate expense | (29.1) | | | (120.9) | | | (98.0) | | | (202.9) | | |
| Corporate expense(a) | | Corporate expense(a) | | (28.8) | | | (30.3) | |
| Net interest expense | Net interest expense | (74.4) | | | (140.6) | | | (146.7) | | | (228.8) | | Net interest expense | | (34.5) | | | (23.0) | |
| Foreign exchange losses | (5.8) | | | (18.0) | | | (49.1) | | | (29.6) | | |
| Loss on early extinguishment of debt | | Loss on early extinguishment of debt | | (23.5) | | | 0 | |
| Income from investment in Technip Energies | | Income from investment in Technip Energies | | 470.1 | | | 0 | |
| Foreign exchange gains (losses) | | Foreign exchange gains (losses) | | 28.1 | | | (23.1) | |
| Total corporate items | Total corporate items | (109.3) | | | (279.5) | | | (293.8) | | | (461.3) | | Total corporate items | | 411.4 | | | (76.4) | |
Income (loss) before income taxes(b) | Income (loss) before income taxes(b) | $ | 33.0 | | | $ | 114.6 | | | $ | (3,175.0) | | | $ | 148.9 | | Income (loss) before income taxes(b) | | $ | 456.6 | | | $ | (3,251.1) | |
(a)Other corporate expensesCorporate expense primarily includeincludes corporate staff expenses, stock-basedshare-based compensation expenses, impairment, restructuring and other expense, and other employee benefits.
(b)Includes amounts attributable to non-controlling interests.
Segment assets were as follows:
| | | | | | | | | | | |
| (In millions) | June 30,
2020 | | December 31, 2019 |
| Segment assets | | | |
| Subsea | $ | 7,314.9 | | | $ | 10,824.2 | |
| Technip Energies | 4,725.1 | | | 4,448.8 | |
| Surface Technologies | 1,522.4 | | | 2,246.4 | |
| | | |
| Total segment assets | 13,562.4 | | | 17,519.4 | |
Corporate (a) | 6,032.0 | | | 5,999.4 | |
| Total assets | $ | 19,594.4 | | | $ | 23,518.8 | |
(a)Corporate includes cash, deferred income tax balances, property, plant and equipment not associated with a specific segment, pension assets and the fair value of derivative financial instruments.
NOTE 7.6. EARNINGS (LOSS) PER SHARE
A reconciliation of the number of shares used for the basic and diluted earnings (loss) per share calculation was as follows:
| | | Three Months Ended | | | Six Months Ended | | | | Three Months Ended |
| | June 30, | | | June 30, | | | | March 31, |
| (In millions, except per share data) | (In millions, except per share data) | 2020 | | 2019 | | 2020 | | 2019 | (In millions, except per share data) | | 2021 | | 2020 |
| Net income (loss) attributable to TechnipFMC plc | $ | 11.7 | | | $ | 97.0 | | | $ | (3,244.4) | | | $ | 117.9 | | |
| Income (loss) from continuing operations attributable to TechnipFMC plc | | Income (loss) from continuing operations attributable to TechnipFMC plc | | $ | 430.3 | | | $ | (3,234.8) | |
| Income (loss) from discontinued operations attributable to TechnipFMC plc | | Income (loss) from discontinued operations attributable to TechnipFMC plc | | (62.1) | | | (21.3) | |
| Net Income (loss) attributable to TechnipFMC plc | | Net Income (loss) attributable to TechnipFMC plc | | $ | 368.2 | | | $ | (3,256.1) | |
| | | Weighted average number of shares outstanding | Weighted average number of shares outstanding | 448.3 | | | 447.5 | | | 447.9 | | | 447.7 | | Weighted average number of shares outstanding | | 449.7 | | | 447.5 | |
| Dilutive effect of restricted stock units | Dilutive effect of restricted stock units | 0.3 | | | 1.6 | | | — | | | 1.8 | | Dilutive effect of restricted stock units | | 1.4 | | | 0 | |
| | Dilutive effect of performance shares | 0.9 | | | 2.1 | | | — | | | 2.4 | | |
| | | Total shares and dilutive securities | Total shares and dilutive securities | 449.5 | | | 451.2 | | | 447.9 | | | 451.9 | | Total shares and dilutive securities | | 451.1 | | | 447.5 | |
| | Basic earnings (loss) per share attributable to TechnipFMC plc | $ | 0.03 | | | $ | 0.22 | | | $ | (7.24) | | | $ | 0.26 | | |
| Diluted earnings (loss) per share attributable to TechnipFMC plc | $ | 0.03 | | | $ | 0.21 | | | $ | (7.24) | | | $ | 0.26 | | |
| Basic and diluted earnings (loss) per share attributable to TechnipFMC plc: | | Basic and diluted earnings (loss) per share attributable to TechnipFMC plc: | | |
| Earnings (loss) per share from continuing operations attributable to TechnipFMC plc | | Earnings (loss) per share from continuing operations attributable to TechnipFMC plc | | |
| Basic | | Basic | | $ | 0.96 | | | $ | (7.23) | |
| Diluted | | Diluted | | $ | 0.95 | | | $ | (7.23) | |
| | Earnings (loss) per share from discontinued operations attributable to TechnipFMC plc | | Earnings (loss) per share from discontinued operations attributable to TechnipFMC plc | | |
| Basic and diluted | | Basic and diluted | | $ | (0.14) | | | $ | (0.05) | |
| | Total earnings (loss) per share attributable to TechnipFMC plc | | Total earnings (loss) per share attributable to TechnipFMC plc | | |
| Basic | | Basic | | $ | 0.82 | | | $ | (7.28) | |
| Diluted | | Diluted | | $ | 0.81 | | | $ | (7.28) | |
For the sixthree months ended June 30,March 31, 2020, we incurred a net loss;loss from continuing operations; therefore, the impact of any incremental shares from our share-based compensation awards would be anti-dilutive. For the six months ended June 30, 2020, 3.42.7 million shares were anti-dilutive due to net loss position.anti-dilutive.
Weighted average shares of the following share-based compensation awards were excluded from the calculation of 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:
| | | Three Months Ended | | | Six Months Ended | | | | Three Months Ended |
| | June 30, | | | June 30, | | | | March 31, |
| (millions of shares) | (millions of shares) | 2020 | | 2019 | | 2020 | | 2019 | (millions of shares) | | 2021 | | 2020 |
| Share option awards | Share option awards | 4.7 | | | 4.9 | | | 4.7 | | | 4.6 | | Share option awards | | 1.7 | | | 4.7 | |
| Restricted share units | Restricted share units | 6.3 | | | — | | | 1.8 | | | 0.1 | | Restricted share units | | 4.9 | | | 1.1 | |
| Performance shares | Performance shares | 4.8 | | | 0.1 | | | 2.1 | | | 0.1 | | Performance shares | | 0 | | | 2.5 | |
| Total | Total | 15.8 | | | 5.0 | | | 8.6 | | | 4.8 | | Total | | 6.6 | | | 8.3 | |
NOTE 7. RECEIVABLES
We manage our receivables portfolios using published default risk as a key credit quality indicator for our loans and receivables. Our loans receivable and security deposits were related to sales of long-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 government bonds.
The table below summarizes the amortized cost basis of financial assets by years of origination and credit quality. The key credit quality indicator is updated as of March 31, 2021.
| | | | | | | | | | | | | | | | | |
| (In millions) | Year of origination | | Balance as of March 31, 2021 | | Balance as of December 31, 2020 |
| Loans receivables, security deposits and other | | | | | |
| Moody’s rating Ba2 | 2019 | | $ | 98.5 | | | $ | 107.6 | |
| | | | | |
| Debt securities at amortized cost | | | | | |
| Moody’s rating B3 | 2019 | | 0 | | | 23.7 | |
| Total financial assets | | | $ | 98.5 | | | $ | 131.3 | |
Credit Losses
For contract assets, trade receivables, loans receivable, and security deposits and other, 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 held-to-maturity debt securities at amortized cost, we evaluate whether the debt securities are considered to have low credit risk at the reporting date using available, reasonable, and supportable information.
The table below shows the roll-forward of allowance for credit losses as of March 31, 2021 and 2020, respectively.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Balance as of March 31, 2021 |
| (In millions) | Trade receivables | | Contract assets | | Loans receivable | | Security deposit and other | | Held-to-maturity debt securities |
| Beginning balance in allowance for credit losses | $ | 40.2 | | | $ | 2.4 | | | $ | 7.5 | | | $ | 0.4 | | | $ | 0.5 | |
| Current period provision (release) for expected credit losses | 3.8 | | | (0.6) | | | (0.5) | | | 0.2 | | | (0.5) | |
| | | | | | | | | |
| Recoveries | (5.5) | | | (0.7) | | | (1.1) | | | 0 | | | 0 | |
| Ending balance in the allowance for credit losses | $ | 38.5 | | | $ | 1.1 | | | $ | 5.9 | | | $ | 0.6 | | | $ | 0 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Balance as of March 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 | $ | 59.4 | | | $ | 4.5 | | | $ | 9.5 | | | $ | 0.7 | | | $ | 1.1 | |
| Current period provision for expected credit losses | 1.6 | | | 0 | | | 0 | | | 0 | | | 0 | |
| | | | | | | | | |
| Recoveries | (2.6) | | | 0 | | | (0.5) | | | 0 | | | 0 | |
| Ending balance in the allowance for credit losses | $ | 58.4 | | | $ | 4.5 | | | $ | 9.0 | | | $ | 0.7 | | | $ | 1.1 | |
Other than certain trade receivables due in one year or less, we do not have any financial assets that are past due or are on non-accrual status.
NOTE 8. INVENTORIES
Inventories consisted of the following:
| | (In millions) | (In millions) | June 30,
2020 | | December 31,
2019 | (In millions) | March 31,
2021 | | December 31,
2020 |
| Raw materials | Raw materials | $ | 286.1 | | | $ | 347.5 | | Raw materials | $ | 222.6 | | | $ | 270.3 | |
| Work in process | Work in process | 254.5 | | | 290.2 | | Work in process | 227.5 | | | 242.7 | |
| Finished goods | Finished goods | 829.6 | | | 778.3 | | Finished goods | 714.7 | | | 739.8 | |
| | Inventories, net | Inventories, net | $ | 1,370.2 | | | $ | 1,416.0 | | Inventories, net | $ | 1,164.8 | | | $ | 1,252.8 | |
NOTE 9. OTHER CURRENT ASSETS & OTHER CURRENT LIABILITIES
Other current assets consisted of the following:
| | (In millions) | (In millions) | June 30,
2020 | | December 31,
2019 | (In millions) | March 31,
2021 | | December 31,
2020 |
| Value-added tax receivables | $ | 407.4 | | | $ | 395.2 | | |
| Value - added tax receivables | | Value - added tax receivables | $ | 260.1 | | | $ | 236.4 | |
| Prepaid expenses | | Prepaid expenses | 95.4 | | | 78.1 | |
| Other tax receivables | | Other tax receivables | 80.0 | | | 73.8 | |
| Sundry receivables | Sundry receivables | 162.7 | | | 69.6 | | Sundry receivables | 74.1 | | | 138.4 | |
| Prepaid expenses | 127.0 | | | 66.8 | | |
| Other taxes receivables | 79.0 | | | 100.7 | | |
| Assets held for sale | | Assets held for sale | 47.4 | | | 47.3 | |
| Current financial assets at amortized cost | | Current financial assets at amortized cost | 30.9 | | | 40.6 | |
| Held-to-maturity investments | Held-to-maturity investments | 49.7 | | | 49.7 | | Held-to-maturity investments | 0 | | | 24.2 | |
| Current financial assets at amortized cost | 39.0 | | | 42.0 | | |
| Asset held for sale | 1.9 | | | 25.8 | | |
| Other | Other | 71.3 | | | 113.9 | | Other | 37.9 | | | 24.1 | |
| Total other current assets | Total other current assets | $ | 938.0 | | | $ | 863.7 | | Total other current assets | $ | 625.8 | | | $ | 662.9 | |
Other current liabilities consisted of the following:
| | (In millions) | (In millions) | June 30,
2020 | | December 31,
2019 | (In millions) | March 31,
2021 | | December 31,
2020 |
| Warranty accruals and project contingencies (Note 10) | $ | 233.0 | | | $ | 310.1 | | |
| Value added tax and other taxes payable | 196.4 | | | 240.4 | | |
| Warranty accruals and project contingencies | | Warranty accruals and project contingencies | $ | 193.2 | | | $ | 168.8 | |
| Legal provisions | Legal provisions | 168.9 | | | 183.6 | | Legal provisions | 129.6 | | | 127.6 | |
| Value - added tax and other taxes payable | | Value - added tax and other taxes payable | 126.2 | | | 91.4 | |
| BPI Share Purchase Agreement payable | | BPI Share Purchase Agreement payable | 100.0 | | | 0 | |
| Social security liability | Social security liability | 123.5 | | | 116.5 | | Social security liability | 65.9 | | | 67.9 | |
| Taxes payable to Technip Energies due to separation | | Taxes payable to Technip Energies due to separation | 59.0 | | | 0 | |
| Provisions | Provisions | 98.8 | | | 86.6 | | Provisions | 36.1 | | | 53.0 | |
| Redeemable financial liability | 71.8 | | | 129.1 | | |
| Compensation accrual | Compensation accrual | 38.8 | | | 89.6 | | Compensation accrual | 18.6 | | | 54.3 | |
| Current portion of accrued pension and other post-retirement benefits | Current portion of accrued pension and other post-retirement benefits | 17.3 | | | 14.9 | | Current portion of accrued pension and other post-retirement benefits | 7.1 | | | 6.9 | |
| Liabilities held for sale | — | | | 9.3 | | |
| | Other accrued liabilities | Other accrued liabilities | 288.2 | | | 314.4 | | Other accrued liabilities | 249.9 | | | 230.2 | |
| Total other current liabilities | Total other current liabilities | $ | 1,236.7 | | | $ | 1,494.5 | | Total other current liabilities | $ | 985.6 | | | $ | 800.1 | |
NOTE 10. WARRANTY OBLIGATIONS
Warranty obligations are included within “Other current liabilities” in our consolidated balance sheets as of June 30, 2020March 31, 2021 and December 31, 2019.2020. A reconciliation of warranty obligations for the three and six months ended June 30,March 31, 2021 and 2020 and 2019 is as following:follows:
| | | Three Months Ended | | | Six Months Ended | | | | Three Months Ended |
| | June 30, | | | June 30, | | | | March 31, |
| (In millions) | (In millions) | 2020 | | 2019 | | 2020 | | 2019 | (In millions) | | 2021 | | 2020 |
| Balance at beginning of period | Balance at beginning of period | $ | 148.6 | | | $ | 181.5 | | | $ | 193.5 | | | $ | 234.4 | | Balance at beginning of period | | $ | 109.5 | | | $ | 121.7 | |
| Warranty expenses | Warranty expenses | 35.8 | | | 30.2 | | | 46.4 | | | 37.4 | | Warranty expenses | | 12.5 | | | 6.1 | |
| Adjustment to existing accruals | Adjustment to existing accruals | (4.5) | | | 11.2 | | | (56.9) | | | (44.9) | | Adjustment to existing accruals | | (12.3) | | | 23.8 | |
| Claims paid | Claims paid | (7.3) | | | (16.9) | | | (10.4) | | | (20.9) | | Claims paid | | (3.0) | | | (0.9) | |
| Balance at end of period | Balance at end of period | $ | 172.6 | | | $ | 206.0 | | | $ | 172.6 | | | $ | 206.0 | | Balance at end of period | | $ | 106.7 | | | $ | 150.7 | |
NOTE 11. EQUITY METHOD INVESTMENTS
Our income from equity affiliates during the three months ended March 31, 2021 and 2020 was $7.7 million and $21.1 million, respectively, and included within our Subsea segment.
Investment in eachTechnip Energies
As discussed in Note 2, immediately following the completion of the Spin-off, we owned 49.9% of the outstanding shares of Technip Energies. On January 7, 2021, Bpifrance Participations SA (“BPI”) entered into a share purchase agreement with us (the “Share Purchase Agreement”) pursuant to which BPI agreed to purchase a portion of our reporting segmentsretained stake in Technip Energies N.V. (the “BPI Investment”) for $200.0 million (the “Purchase Price”), subject to certain adjustments. On March 31, 2021, BPI ultimately purchased 7.5 million shares in Technip Energies from us for $100.0 million. Accordingly, on April 8, 2021, we refunded $100.0 million to BPI as a result of their revised level of investment. As of March 31, 2021, we owned 82.3 million shares, representing 45.7% of the outstanding shares of Technip Energies.
On April 27, 2021 we further reduced our ownership in Technip Energies and agreed to sell Technip Energies shares, representing approximately a total of 15% of Technip Energies’ share capital, through a private placement and the concurrent sale to Technip Energies. See Note 21 for details. We do not intend to remain a long-term shareholder of Technip Energies and will exit our ownership stake in a timely and orderly manner within a year.
At the Spin-off date, on initial recognition of the investment, we elected to account for our investment in Technip Energies at fair value with all subsequent changes in fair value for the investment reported in our consolidated statement of income.
For the three months ended March 31, 2021, we recognized $470.1 million of income related to our investment in Technip Energies. The amount recognized was comprised of a purchase price discount on sale of shares to BPI and a fair value revaluation gain of our investment. The carrying amount of the investment as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | | | Six Months Ended | | |
| June 30, | | | | June 30, | | |
| (In millions) | 2020 | | 2019 | | 2020 | | 2019 |
| Subsea | $ | 15.7 | | | $ | 11.3 | | | $ | 36.8 | | | $ | 26.2 | |
| Technip Energies | (2.7) | | | 2.9 | | | 5.0 | | | 1.9 | |
| | | | | | | |
| Income from equity affiliates | $ | 13.0 | | | $ | 14.2 | | | $ | 41.8 | | | $ | 28.1 | |
NOTE 12. RELATED PARTY TRANSACTIONS
Receivables, payables, revenues, and expenses, which are included in our condensed consolidated financial statements for all transactions with related parties, defined as entities related to our directors and main shareholders as well as the partners of our consolidated joint ventures, were as follows.
Trade receivablesAccounts receivable consisted of receivables due from the following related parties:
| | | | | | | | | | | |
| (In millions) | June 30,
2020 | | December 31, 2019 |
| TP JGC Coral France SNC | $ | 35.9 | | | $ | 40.1 | |
| TTSJV W.L.L. | 16.8 | | | 22.4 | |
| Novarctic SNC | 5.4 | | | — | |
| Others | 19.1 | | | 14.3 | |
| Total trade receivables | $ | 77.2 | | | $ | 76.8 | |
| | | | | | | | | | | |
| (In millions) | March 31,
2021 | | December 31, 2020 |
| Technip Energies | $ | 130.5 | | | $ | 0 | |
| Equinor ASA | 32.1 | | | 24.1 | |
| Dofcon Navegacao | 2.9 | | | 4.2 | |
| Techdof Brasil AS | 6.5 | | | 8.0 | |
| | | |
| Others | 2.1 | | | 1.7 | |
| Total accounts receivable | $ | 174.1 | | | $ | 38.0 | |
TP JGC Coral France SNC, TTSJV W.L.L. and Novarctic SNC areDofcon Navegacao is an equity method affiliates.affiliate. Techdof Brasil AS is a wholly owned subsidiary of Dofcon Brasil AS, our equity method affiliate. In October 2020, a prior member of our Board of Directors was an executive of Equinor ASA. One member of our Board of Directors serves on the Board of Directors for Storengy.
Trade payablesAccounts payable consisted of payables due to the following related parties:
| | | | | | | | | | | |
| (In millions) | June 30,
2020 | | December 31, 2019 |
| Chiyoda | $ | 16.6 | | | $ | 24.8 | |
| JGC Corporation | 4.2 | | | 15.1 | |
| IFP Energies nouvelles | 2.2 | | | 2.4 | |
| Dofcon Navegacao | 1.5 | | | 2.1 | |
| | | |
| Others | 2.8 | | | 6.7 | |
| Total trade payables | $ | 27.3 | | | $ | 51.1 | |
| | | | | | | | | | | |
| (In millions) | March 31,
2021 | | December 31,
2020 |
| Technip Energies | $ | 216.7 | | | $ | 0 | |
| Dofcon Navegacao | 1.9 | | | 1.5 | |
| Others | 4.0 | | | 3.1 | |
| Total accounts payable | $ | 222.6 | | | $ | 4.6 | |
Chiyoda
Additionally, we have a note receivable from Dofcon Brasil AS for $25.3 million and JGC Corporation$37.6 million as of March 31, 2021 and December 31, 2020, respectively. Dofcon Brasil AS is a variable interest entity and accounted for as an equity method investment.
Revenue consisted of amounts from the following related parties:
| | | | | | | | | | | | | | | |
| | | Three Months Ended |
| | | March 31, |
| (In millions) | | | | | 2021 | | 2020 |
| Equinor ASA | | | | | $ | 95.5 | | | $ | 0 | |
| Technip Energies | | | | | 1.5 | | | 0 | |
| Techdof Brasil AS | | | | | 3.5 | | | 1.3 | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| Others | | | | | 3.1 | | | 3.0 | |
| Total revenue | | | | | $ | 103.6 | | | $ | 4.3 | |
Expenses consisted of amounts to the following related parties:
| | | | | | | | | | | | | | | |
| | | Three Months Ended |
| | | March 31, |
| (In millions) | | | | | 2021 | | 2020 |
| Technip Energies | | | | | $ | 0.6 | | | $ | 0 | |
| Dofcon Navegacao | | | | | 6.6 | | | 8.0 | |
| Arkema S.A. | | | | | 0.7 | | | 0.4 | |
| Magma Global Limited | | | | | 1.5 | | | 0.7 | |
| IFP Energies Nouvelles | | | | | 0.9 | | | 1.1 | |
| Serimax Holdings SAS | | | | | 0 | | | 0.2 | |
| Others | | | | | 6.6 | | | 5.9 | |
| Total expenses | | | | | $ | 16.9 | | | $ | 16.3 | |
Serimax Holdings SAS and Magma Global Limited are joint venture partnersequity method investments. A former member of our Board of Directors serves on our Yamal project.the Board of Directors for Arkema S.A. A former member of our Board of Directors served as an executive officer of IFP Energies nouvelles until June 2020. Dofcon Navegacao is an equity method affiliate.
Additionally, we have a note receivables balance of $52.8 million and $65.2 million at June 30, 2020 and December 31, 2019, respectively. The note receivables balance includes $50.1 million and $62.5 million with Dofcon Brasil AS as of June 30, 2020 and December 31, 2019, respectively. Dofcon Brasil AS is a variable interest entity (“VIE”) and accounted for as an equity method affiliate. These are included in other assets in our consolidated balance sheets.
Revenue consisted of amounts from the following related parties:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | | | Six Months Ended | | |
| June 30, | | | | June 30, | | |
| (In millions) | 2020 | | 2019 | | 2020 | | 2019 |
| TTSJV W.L.L. | $ | 13.0 | | | $ | 22.7 | | | $ | 28.6 | | | $ | 75.5 | |
| TP JGC Coral France SNC | 6.6 | | | 51.0 | | | 19.2 | | | 77.7 | |
| Techdof Brasil AS | 2.4 | | | — | | | 4.4 | | | — | |
| | | | | | | |
| | | | | | | |
| Dofcon Navegacao | — | | | 1.6 | | | 0.6 | | | 5.7 | |
| Anadarko Petroleum Company | — | | | 12.1 | | | — | | | 40.8 | |
| TOP CV | — | | | 2.7 | | | — | | | 4.0 | |
| Others | 7.5 | | | 12.4 | | | 13.6 | | | 22.5 | |
| Total revenue | $ | 29.5 | | | $ | 102.5 | | | $ | 66.4 | | | $ | 226.2 | |
A member of our Board of Directors (the “Director”) served on the Board of Directors of Anadarko Petroleum Company (“Anadarko”) until August 2019. In August 2019, Anadarko was acquired by Occidental Petroleum Corporation (“Occidental”). As a result, the Director no longer serves as a member of the Board of Directors of Anadarko. The Director is not an officer or director of Occidental.
Techdof Brasil AS is a wholly owned subsidiary of Dofcon Brasil AS, our equity method affiliate.
TOP CV was previously an equity method affiliate that became a fully consolidated subsidiary on December 30, 2019. See Note 3 for further details.
Expenses consisted of amount to the following related parties:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | | | Six Months Ended | | |
| June 30, | | | | June 30, | | |
| (In millions) | 2020 | | 2019 | | 2020 | | 2019 |
| Dofcon Navegacao | $ | 3.8 | | | $ | — | | | $ | 11.8 | | | $ | 0.4 | |
| Arkema S.A. | 2.4 | | | 9.8 | | | 2.8 | | | 9.8 | |
| | | | | | | |
| | | | | | | |
| Magma Global Limited | 0.9 | | | 1.3 | | | 1.6 | | | 3.2 | |
| | | | | | | |
| IFP Energies nouvelles | 0.7 | | | — | | | 1.8 | | | 1.0 | |
| Serimax Holdings SAS | 0.3 | | | 0.2 | | | 0.5 | | | 17.7 | |
| | | | | | | |
| JGC Corporation | 0.2 | | | 4.6 | | | 0.4 | | | 18.9 | |
| Chiyoda | — | | | 3.4 | | | — | | | 17.6 | |
| | | | | | | |
| | | | | | | |
| Others | 0.9 | | | 5.8 | | | 10.8 | | | 9.2 | |
| Total expenses | $ | 9.2 | | | $ | 25.1 | | | $ | 29.7 | | | $ | 77.8 | |
Magma Global Limited and Serimax Holdings SAS are equity method affiliates. A member of our Board of Directors serves on the Board of Directors for Arkema S.A.
NOTE 13. GOODWILL AND INTANGIBLE ASSETS
During the first quarter of 2020, triggering events were identified which led to performing interim goodwill impairment testing in our Subsea and Surface Technologies reporting units as of March 31, 2020. These events included the COVID-19 pandemic breakout, commodity price declines, and a significant decrease in our market capitalization as well as those of our peers and customers.
The fair value for our reporting units 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.
The impairment assessment resulted in a conclusion that goodwill in the Subsea and Surface Technologies segments was impaired by $2,747.5 million and $335.9 million, respectively. The impairment assessment also concluded the fair value of the Technip Energies reporting unit was in excess of its carrying amount.
The carrying amount of goodwill by business segment was as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| (In millions) | Subsea | | Technip Energies | | Surface | | Total |
| December 31, 2019 | $ | 2,814.1 | | | $ | 2,423.6 | | | $ | 360.6 | | | $ | 5,598.3 | |
Transfers (a) | (21.2) | | | 46.1 | | | (24.9) | | | — | |
| Impairments | (2,747.5) | | | — | | | (335.9) | | | (3,083.4) | |
| | | | | | | |
| Translation | (45.4) | | | 1.0 | | | 0.2 | | | (44.2) | |
| June 30, 2020 | $ | — | | | $ | 2,470.7 | | | $ | — | | | $ | 2,470.7 | |
(a) Beginning in the first quarter of 2020, Technip Energies 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. See Note 6 for further details.
NOTE 14. DEBT
Overview
Long-term debt consisted of the following:
| | (In millions) | (In millions) | June 30,
2020 | | December 31,
2019 | (In millions) | March 31,
2021 | | December 31,
2020 |
| | Senior secured revolving credit facility | | Senior secured revolving credit facility | $ | 200.0 | | | $ | 0 | |
| | Commercial paper | Commercial paper | $ | 1,851.1 | | | $ | 1,967.0 | | Commercial paper | 21.2 | | | 1,043.7 | |
| Synthetic bonds due 2021 | Synthetic bonds due 2021 | 496.7 | | | 492.9 | | Synthetic bonds due 2021 | 0 | | | 551.2 | |
| 3.45% Senior Notes due 2022 | 3.45% Senior Notes due 2022 | 500.0 | | | 500.0 | | 3.45% Senior Notes due 2022 | 0 | | | 500.0 | |
| 5.00% 2010 Private placement notes due 2020 | 223.9 | | | 224.6 | | |
| 3.40% 2012 Private placement notes due 2022 | 3.40% 2012 Private placement notes due 2022 | 167.9 | | | 168.5 | | 3.40% 2012 Private placement notes due 2022 | 176.1 | | | 184.0 | |
| 3.15% 2013 Private placement notes due 2023 | 3.15% 2013 Private placement notes due 2023 | 145.5 | | | 146.0 | | 3.15% 2013 Private placement notes due 2023 | 299.3 | | | 312.9 | |
| 3.15% 2013 Private placement notes due 2023 | 139.9 | | | 140.4 | | |
| 4.50% 2020 Private placement notes due 2025 | 167.9 | | | — | | |
| 5.75% 2020 Private placement notes due 2025 | | 5.75% 2020 Private placement notes due 2025 | 234.8 | | | 245.4 | |
| 6.50% Senior notes due 2026 | | 6.50% Senior notes due 2026 | 1,000.0 | | | 0 | |
| 4.00% 2012 Private placement notes due 2027 | 4.00% 2012 Private placement notes due 2027 | 84.0 | | | 84.2 | | 4.00% 2012 Private placement notes due 2027 | 88.0 | | | 92.0 | |
| 4.00% 2012 Private placement notes due 2032 | 4.00% 2012 Private placement notes due 2032 | 111.8 | | | 112.3 | | 4.00% 2012 Private placement notes due 2032 | 117.4 | | | 122.7 | |
| 3.75% 2013 Private placement notes due 2033 | 3.75% 2013 Private placement notes due 2033 | 111.8 | | | 112.3 | | 3.75% 2013 Private placement notes due 2033 | 117.4 | | | 122.7 | |
| Bank borrowings | 477.1 | | | 513.3 | | |
| Other | 41.2 | | | 23.0 | | |
| Unamortized issuing fees | (11.8) | | | (9.1) | | |
| Bank borrowings and other | | Bank borrowings and other | 313.7 | | | 298.4 | |
| | Unamortized debt issuance costs and discounts | | Unamortized debt issuance costs and discounts | (36.8) | | | (12.8) | |
| Total debt | Total debt | 4,507.0 | | | 4,475.4 | | Total debt | 2,531.1 | | | 3,460.2 | |
Less: current borrowings (a) | Less: current borrowings (a) | 524.1 | | | 495.4 | | Less: current borrowings (a) | 96.8 | | | 624.7 | |
| Long-term debt | Long-term debt | $ | 3,982.9 | | | $ | 3,980.0 | | Long-term debt | $ | 2,434.3 | | | $ | 2,835.5 | |
|
(a) As of June 30, 2020March 31, 2021 and December 31, 2019,2020, current borrowings consisted primarily of bank borrowings and notes with current maturities of 12 months.
Debt Financing Transactions in Connection with the Spin-off
In connection with the Spin-off, we executed a series of refinancing transactions, in order to provide a capital structure with sufficient cash resources to support future operating and investment plans.
Debt Issuance
•On February 16, 2021, we entered into a credit agreement, which provides for a $1.0 billion three-year senior secured multicurrency revolving credit facility (“Revolving Credit Facility”) including a $450.0 million letter of credit subfacility; and
•On January 29, 2021, we issued $1.0 billion of 6.50% senior notes due 2026 (the “2021 Notes”).
Significant Funding and Liquidity ActivitiesRepayment of Debt
During
The proceeds from the six months ended June 30, 2020, we completeddebt issuance described above along with the following transactions in orderavailable cash on hand were used to enhance our total liquidity position:fund:
•Issued €150The repayment of all $542.4 million of the outstanding Synthetic Convertible Bonds that matured in January 2021;
•The repayment of all $500.0 million aggregate principal amount of new 4.500% notesoutstanding 3.45% Senior Notes due June 30, 2025. On July 31, 2020,2022. In connection with the repayment, we entered intorecorded a subscription agreement with respectloss on extinguishment of debt of $23.5 million related to the issuancedifference between the amount paid and sale of an additional €50 million aggregate principal amountthe net carrying value of the Euro Denominated Notes, which is expected to close on August 4, 2020debt; and is subject to the satisfaction of customary conditions precedent. In the event of the spin-off of our Technip Energies business segment followed, within three months of the effective date of the spin-off, by a downgrade by a nationally recognized rating agency of the corporate rating of TechnipFMC from an investment grade to a non-investment grade rating or a withdrawal of any such rating, the interest rate applicable to the Euro Denominated Notes will be increased to 5.75%;
•Entered into a new, six-month €500 millionThe termination of the $2.5 billion senior unsecured revolving credit facility agreement, which may be extended for two additional three-month periods (the “Euro Facility”);entered into on January 17, 2017; and
•Entered the termination of the €500.0 million Euro Facility entered into on May 19, 2020; and the Banktermination of England’s COVID Corporate Financing Facility program (the “CCFF Program”), which allows us to issue up to £600the CCFF Program entered into on May 19, 2020. In connection with the termination of these credit facilities, we repaid $830.9 million of unsecuredthe outstanding commercial paper notes.borrowings.
Credit Facilities and Debt
Revolving credit facilityCredit Facility - On January 17, 2017,February 16, 2021, we acceded toentered into a new $2.5 billion senior unsecured revolving credit facility agreement, (“Facility Agreement”) between FMC Technologies, Inc., Technip Eurocash SNC, and TechnipFMC plc (the “Borrowers”) with JPMorgan Chase Bank, National Association (“JPMorgan”), as agent and an arranger, SG Americas Securities LLC as an arranger, and the lenders party thereto.
The Facility Agreementwhich provides for the establishment of a $1.0 billion three-year senior secured multicurrency revolving credit facility, which includesRevolving Credit Facility including a $1.5 billion$450.0 million letter of credit subfacility. SubjectWe incurred $27.9 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 condensed consolidated balance sheet as of March 31, 2021. The deferred debt issuance costs are amortized to certain conditions,interest expense over the Borrowers may requestterm of the aggregate commitmentsRevolving Credit Facility.
Availability of borrowings under the facility agreement be increasedRevolving Credit Facility is reduced by an additional $500.0the outstanding letters of credit issued against the facility. As of March 31, 2021, there were 0 letters of credit outstanding and availability of borrowings under the Revolving Credit Facility was $800.0 million. On November 26, 2018, we entered into an agreement which extends the expiration date to January 2023.
Borrowings under the Revolving Credit Facility Agreement bear interest at the following rates, plus an applicable margin, depending on currency:
•U.S. dollar-denominated loans bear interest, at the Borrowers’Company’s option, at a base rate or an adjusted rate linked to the London interbank offered rate (“Adjusted LIBOR”);
•sterling-denominatedSterling denominated loans bear interest at Adjusted LIBOR; and
•euro-denominatedEuro-denominated loans bear interest aton an adjusted rate linked to the Euro interbank offered rate (“EURIBOR”).rate.
Depending on our credit rating, the
The applicable margin for revolvingborrowings under the Revolving Credit Facility ranges from 2.50% to 3.50% for eurocurrency loans varies (i) in the case of Adjusted LIBOR and EURIBOR loans, from 0.820%1.50% to 1.300% and (ii) in the case of2.50% for base rate loans, from 0.000%depending on a total leverage ratio. The Revolving Credit Facility is subject to 0.300%. The “base rate” is the highest of (a) the prime rate announced by JPMorgan, (b) the greater of the Federal Funds Rate and the Overnight Bank Funding Rate plus 0.50% or (c) one-month Adjusted LIBOR plus 1.00%. As of June 30, 2020, there were no outstanding borrowings under our revolving credit facility.
Euro Facility – On May 19, 2020, we entered into the Euro Facility with HSBC France, as agent, and the lenders party thereto, which provides for the establishment of a six-month revolving credit facility denominated in Euros with total commitments of €500 million, which may be extended by us for two additional three-month periods. Borrowings under the Euro Facility bear interest at the Euro interbank offered rate for a period equal in length to the interest period of a given loan (which may be three or six months), plus an applicable margin. As of June 30, 2020, there were no outstanding borrowings under Euro Facility.
On June 12, 2020, we entered into Amendment No. 1 to the Facility Agreement and into an Amendment and Restatement Agreement to our Euro Facility. The amendments, which are effective through the respective expirations of the Facility Agreement and Euro Facility, permit us to include the gross book value of $3.2 billion of goodwill (fully impaired in the quarter ended March 31, 2020) in the calculation of consolidated net worth, which is used in the calculation of our quarterly compliance with the total capitalization ratio under the Facility Agreement and Euro Facility.
The Facility Agreement and Euro Facility contain usual and customary covenants, representations and warranties, andcovenants, events of default, for credit facilities of this type, includingmandatory repayment provisions and financial covenants requiring that our total capitalization ratio not exceed 60% at the end of any financial quarter. The Facility Agreement and Euro Facility also contain covenants restricting our ability and our subsidiaries’ ability to incur additional liens and indebtedness, enter into asset sales, or make certain investments.
covenants. As of June 30, 2020,March 31, 2021, we were in compliance with all restrictive covenants under our credit facilities.the Revolving Credit Facility.
CCFF Program 2021 Notes- On May 19, 2020,January 29, 2021, we entered intoissued $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 dealer agreement (the “Dealer Agreement”) with Banksenior unsecured basis by substantially all of America Merrill Lynch International DAC (the “Dealer”)our wholly-owned U.S. subsidiaries and an Issuing and Paying Agency Agreement (the “Agency Agreement”, and together withnon-U.S. subsidiaries in Brazil, the Dealer Agreement, the “Agreements”) with Bank of America, National Association, London Branch, relating to the European commercial paper program established under the CCFF Program as a source of additional liquidity.
The Agreements provide the terms under which we may issue,Netherlands, Norway, Singapore and the Dealer will arrange for, the saleUnited Kingdom. We incurred $25.7 million of short-term, unsecured commercial paper notes (the “Notes”) to reduce existing debt or decrease overall borrowing costs. The Notes contain customary representations, warranties, covenants, defaults, and indemnification provisions, and will be sold at such discounts from their face amounts as shall be agreed between us and the Dealer. The Notes will be fully payable at maturity, and the maturitiesissuance costs in connection with issuance of the Notes will vary but may not exceed 364 days.2021 Notes. These debt issuance costs are deferred and are included in Long-term debt in our condensed consolidated balance sheet as of March 31, 2021. The principal amount of outstanding Notes may not exceed £600 million. The Agency Agreement provides fordeferred debt issuance costs are amortized to interest expense over the terms of issuance and paymentterm of the Notes. As of June 30, 2020, our commercial paper borrowings under2021 Notes, which approximates the CCFF Program had a weighted averageeffective interest rate of 0.43%. As of June 30, 2020, we had $392.7 million of Notes outstanding and recorded as long-term borrowings under the CCFF Program because we had the ability and intent to refinance the obligation due March 2021. Subsequent to June 30, 2020, we issued an additional $348.6 million of Notes.
Bilateral credit facility - We have access to a €100.0 million bilateral credit facility expiring in May 2021.
The bilateral credit facility contains usual and customary covenants, representations and warranties and events of default for credit facilities of this type.
As of June 30, 2020, there were no outstanding borrowings under our bilateral credit facility.
Commercial paper - Under our commercial paper program, we have the ability to access $1.5 billion and €1.0 billionAs of short-term financing through our commercial paper dealers, subject to the limit of unused capacity of our revolving facility agreement. As we have both the ability and intent to refinance these obligations on a long-term basis, our commercial paper borrowings were classified as long-term debt in the consolidated balance sheets as of June 30, 2020March 31, 2021 and December 31, 2019.2020, we had $21.2 million and $1,043.7 million of commercial paper outstanding, respectively. Commercial paper borrowings arewere issued at market interest rates. As of June 30, 2020,March 31, 2021, our commercial paper borrowings had a weighted average interest rate of 2.05% on0.48% on the U.S. dollar denominated borrowings and 0.06% on the Euro denominated borrowings. As of June 30, 2020, we had $1,459.5 million of outstanding commercial paper borrowings under this program.
Synthetic bonds - As we have both the ability and intent to refinance this obligation on a long-term basis, our synthetic bonds due January 2021 are classified as long-term debt in the consolidated balance sheets as of June 30, 2020.
dollar denominated borrowings. In accordance with the terms of the new Revolving Credit Facility, we do not have an ability to issue any new commercial paper notes going forward.
Bank borrowings - In December 2016, we entered into a £160.0 millionInclude term loan agreement to finance the Deep Explorer, a diving support vessel (“DSV”), maturing 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.
On December 30, 2019, we completed the acquisition of the remaining 50% interestissued in TOP CV. In connection with the acquisition, we assumed liabilities that included a $203.1 million term loan,financing for certain of which $174.0 million isour vessels and amounts outstanding and due September 30, 2020. The debt is fully collateralized againstunder our two vessels, Coral do Atlantico and Deep Star.
In January 2019, we executed a sale-leaseback transaction to finance the purchase of a deepwater DSV, Deep Discoverer (the “Vessel”) for the full transaction price of $116.8 million. The sale-leaseback agreement was entered into with a French joint-stock company owned by Credit Industrial et Commercial which was formed for the sole purpose to purchase and act as the lessor of the Vessel. It is a VIE, which is fully consolidated in our condensed consolidated financial statements. The transaction was funded through debt of $96.2 million which is primarily long-term, expiring on January 8, 2031.
Foreignforeign 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 15.14. STOCKHOLDERS’ EQUITY
Cash dividends paid during the six months ended June 30, 2020 and 2019 were $59.2 million and $116.6 million, respectively. We made a dividend payment of $0.13 per share in April 2020, which fulfills our annual dividend under our revised dividend policy announced on April 21, 2020.
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 dividends 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” in our statutory balance sheet. Therefore, we are not permitted to pay dividends out of share capital, which includes share premium. On November 27, 2019, we redeemed 50,000 redeemable shares of £1 each and cancelled one deferred ordinary share of £1 in the capital of the Company.
In April 2017, the Board of Directors authorized the repurchase of $500.0 million in ordinary shares under our share repurchase program. We implemented our share repurchase plan in September 2017. The Board of Directors authorized an extension of this program, adding $300.0 million in December 2018 for a total of $800.0 million in ordinary shares. There were no ordinary shares repurchased during the six months ended June 30, 2020 under our authorized share repurchase program. The $500.0 million part of the program was completed on December 20, 2018. We intend to cancel repurchased shares and not hold them in treasury. Canceled treasury shares are accounted for using the constructive retirement method.
Accumulated other comprehensive income (loss) consisted of the following:
| | (In millions) | (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 | (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, 2019 | $ | (1,230.1) | | | | $ | (5.8) | | | $ | (171.6) | | | $ | (1,407.5) | | | $ | (4.7) | | |
| December 31, 2020 | | December 31, 2020 | $ | (1,401.2) | | | | $ | 34.0 | | | $ | (255.3) | | | $ | (1,622.5) | | | $ | (4.1) | |
| Other comprehensive income (loss) before reclassifications, net of tax | Other comprehensive income (loss) before reclassifications, net of tax | (196.3) | | | | (52.9) | | | 2.2 | | | (247.0) | | | (7.9) | | Other comprehensive income (loss) before reclassifications, net of tax | (28.2) | | | | (14.5) | | | 3.5 | | | (39.2) | | | 0.1 | |
| Reclassification adjustment for net losses included in net income (loss), net of tax | Reclassification adjustment for net losses included in net income (loss), net of tax | — | | | | 3.8 | | | 4.9 | | | 8.7 | | | — | | Reclassification adjustment for net losses included in net income (loss), net of tax | 0 | | | | (2.7) | | | 4.9 | | | 2.2 | | | 0 | |
| Other comprehensive income (loss), net of tax | Other comprehensive income (loss), net of tax | (196.3) | | | | (49.1) | | | 7.1 | | | (238.3) | | | (7.9) | | Other comprehensive income (loss), net of tax | (28.2) | | | | (17.2) | | | 8.4 | | | (37.0) | | | 0.1 | |
| June 30, 2020 | $ | (1,426.4) | | | | $ | (54.9) | | | $ | (164.5) | | | $ | (1,645.8) | | | $ | (12.6) | | |
| Spin-off of Technip Energies | | Spin-off of Technip Energies | 241.2 | | | | (19.7) | | | 37.2 | | | 258.7 | | | 0 | |
| March 31, 2021 | | March 31, 2021 | $ | (1,188.2) | | | | $ | (2.9) | | | $ | (209.7) | | | $ | (1,400.8) | | | $ | (4.0) | |
Reclassifications out of accumulated other comprehensive income (loss) consisted of the following:
| | | Three Months Ended | | | Six Months Ended | | | | | Three Months Ended | |
| | June 30, | | | June 30, | | | | | March 31, | |
| (In millions) | (In millions) | 2020 | | 2019 | | 2020 | | 2019 | | (In millions) | | 2021 | | 2020 | |
| Details about Accumulated Other Comprehensive Income (loss) Components | Details about Accumulated Other Comprehensive Income (loss) Components | Amount Reclassified out of Accumulated Other
Comprehensive Loss | | | Affected Line Item in the Condensed Consolidated Statements of Income | Details about Accumulated Other Comprehensive Income (loss) Components | | Amount Reclassified out of Accumulated Other
Comprehensive Loss | | Affected Line Item in the Condensed Consolidated Statements of Income |
| Gains (losses) on hedging instruments | Gains (losses) on hedging instruments | | | | Gains (losses) on hedging instruments | | | | |
| Foreign exchange contracts | Foreign exchange contracts | $ | (11.3) | | | $ | (13.2) | | | $ | (22.4) | | | $ | (12.5) | | | Revenue | Foreign exchange contracts | | $ | (10.4) | | | $ | (11.1) | | | Revenue |
| | 10.2 | | | 2.3 | | | 20.0 | | | 4.9 | | | Cost of sales | | | 8.3 | | | 9.8 | | | Cost of sales |
| | (0.4) | | | — | | | (0.4) | | | 0.1 | | | Selling, general and administrative expense | | | 0.1 | | | 0 | | | Selling, general and administrative expense |
| | | (2.2) | | | 1.0 | | | (1.2) | | | (1.4) | | | Other income (expense), net | | | 4.0 | | | 1.0 | | | Other income (expense), net |
| | (3.7) | | | (9.9) | | | (4.0) | | | (8.9) | | | Loss before income taxes | | | 2.0 | | | (0.3) | | | Income (loss) before income taxes |
| | — | | | (3.2) | | | (0.2) | | | (2.5) | | | Provision for income taxes (Note 19) | | | (0.7) | | | (0.2) | | | Provision for income taxes |
| | $ | (3.7) | | | $ | (6.7) | | | $ | (3.8) | | | $ | (6.4) | | | Net loss | | | $ | 2.7 | | | $ | (0.1) | | | Net income (loss) |
| Pension and other post-retirement benefits | Pension and other post-retirement benefits | | | | | | | | | Pension and other post-retirement benefits | | | | | |
| | Amortization of prior service credit (cost) | Amortization of prior service credit (cost) | (0.2) | | | (1.5) | | | (0.5) | | | (1.9) | | | (a) | Amortization of prior service credit (cost) | | (0.1) | | | (0.3) | | | (a) |
| Amortization of net actuarial loss | Amortization of net actuarial loss | (3.1) | | | — | | | (5.9) | | | — | | | (a) | Amortization of net actuarial loss | | (6.9) | | | (2.8) | | | (a) |
| | | (3.3) | | | (1.5) | | | (6.4) | | | (1.9) | | | Loss before income taxes | | | (7.0) | | | (3.1) | | | Income (loss) before income taxes |
| | (0.9) | | | (0.4) | | | (1.5) | | | (0.5) | | | Provision for income taxes (Note 19) | | | (2.1) | | | (0.6) | | | Provision for income taxes |
| | $ | (2.4) | | | $ | (1.1) | | | $ | (4.9) | | | $ | (1.4) | | | Net loss | | | $ | (4.9) | | | $ | (2.5) | | | Net income (loss) |
(a)These accumulated other comprehensive income components are included in the computation of net periodic pension costcost.
.
NOTE 16.15. SHARE-BASED COMPENSATION
Under the Amended and Restated TechnipFMC plc Incentive Award Plan (the “Plan”), we may grant certain incentives and awards to our officers, employees, non-employee directors, and consultants of the Company and its subsidiaries. Awards may include share options, share appreciation rights, performance stock units, restricted stock units, restricted shares or other awards authorized under the Plan. Under the Plan, 24.1 million ordinary shares were authorized for awards.awards in 2017. On the record date of the Spin-off, 11.9 million shares remained available under the Plan, which were adjusted to reflect the Spin-off using an adjustment ratio, calculated as the ratio of the closing price of shares of TechnipFMC common stock on the NYSE on the date immediately prior to the Spin-off to the closing price of shares of TechnipFMC on the NYSE on the date immediately after the Spin-off. After this adjustment, 15.2 million ordinary shares remained authorized for awards under the Plan as of February 17, 2021.
We recognize compensation expense and the corresponding tax benefits for awards under the Plan. Share-based compensation expense for non-vested share options and time-based and performance-based restricted stock units was $16.8$3.4 million and $21.1$21.6 million for the three months ended June 30,March 31, 2021 and 2020, and 2019, respectively, and $38.4 million and $41.5 million for the six months ended June 30, 2020 and 2019, respectively.
NOTE 17.16. IMPAIRMENT, RESTRUCTURING AND OTHER EXPENSES
Impairment, restructuring and other expenses were as follows:
| | | Three Months Ended | | | Six Months Ended | | | | Three Months Ended |
| | June 30, | | | June 30, | | | | March 31, |
| (In millions) | (In millions) | 2020 | | 2019 | | 2020 | | 2019 | (In millions) | | 2021 | | 2020 |
| Subsea | Subsea | $ | 95.8 | | | $ | 4.5 | | | $ | 2,869.4 | | | $ | 6.8 | | Subsea | | $ | 19.7 | | | 2,773.6 | |
| Technip Energies | 35.9 | | | 2.1 | | | 42.7 | | | 5.9 | | |
| Surface Technologies | Surface Technologies | 6.7 | | | 1.2 | | | 431.1 | | | 2.7 | | Surface Technologies | | 2.8 | | | 424.4 | |
| Corporate and other | Corporate and other | 1.9 | | | 1.4 | | | 5.5 | | | 10.3 | | Corporate and other | | 3.0 | | | 1.1 | |
| Total impairment, restructuring and other expenses | Total impairment, restructuring and other expenses | $ | 140.3 | | | $ | 9.2 | | | $ | 3,348.7 | | | $ | 25.7 | | Total impairment, restructuring and other expenses | | $ | 25.5 | | | $ | 3,199.1 | |
Goodwill and Long-Lived Assets Impairments
Goodwill and long-lived assets impairments were as follows:
| | | | | | | | | | | | | | | |
| | | | | Three Months Ended |
| | | March 31, |
| (In millions) | | | | | 2021 | | 2020 |
| Subsea | | | | | $ | 15.7 | | | $ | 2,776.5 | |
| Surface Technologies | | | | | 0.1 | | | 411.5 | |
| Corporate and other | | | | | 3.0 | | | 0 | |
| Total impairments | | | | | $ | 18.8 | | | $ | 3,188.0 | |
During the first halfthree months ended March 31, 2021, subsequent to the spin-off, certain real estate realization decisions were made and as a result, we recorded $18.8 million of impairment charges relating to our operating lease right-of-use assets.
During the three months ended March 31, 2020, triggering events were identified whichthat led to impairments of certain long-lived assets, including goodwill.
During the three and six months ended June 30,March 31, 2020, impairment charges of $33.7 million and $3,221.7$3,188.0 million were recorded, respectively.recorded. These charges included goodwill impairment charges of $2,747.5 million and $335.9 million in our Subsea and Surface Technologies segments, respectively, recorded during the six months ended June 30, 2020. See Note 13 for further details.respectively.
For other long-lived assets, a conclusion was made that the market uncertainty was a triggering event for certain asset groups that serve short-cycle businesses in our Subsea and Surface Technologies segments. Assessing these asset groups for recoverability required the use of unobservable inputs that involvesrequire 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. As a result of this assessment, during the three and six months ended June 30, 2020, impairment charges of $29.0 million for Subsea, of $32.5 million and $61.5 million, respectively, consisting mostly of installation and service equipment, and $1.2$75.6 million and $76.8 million, respectively, for Surface
Technologies, consisting mainly of North America-based fracturing and wellhead assets were recorded.recorded during the three months ended March 31, 2020.
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 that 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
In addition, during the three and six months ended June 30, 2020, we recorded restructuring and other charges of $106.6 million and $127.0 million, respectively. Restructuring and other charges primarily consisted of severance and other employee related costs and COVID-19 related expenses across all segments. Restructuring and other expenses were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | Three Months Ended March 31, |
| | Three Months Ended June 30, 2020 | | | Six Months Ended June 30, 2020 | | | 2021 | | | 2020 |
| (In millions) | (In millions) | Restructuring and other charges | | COVID-19 expenses | | Restructuring and other charges | | COVID-19 expenses | (In millions) | Restructuring and other charges | | | Restructuring and other charges | | COVID-19 expenses |
| Subsea | Subsea | $ | 35.9 | | | $ | 27.4 | | | $ | 29.0 | | | $ | 31.4 | | Subsea | $ | 4.0 | | | | $ | (6.9) | | | $ | 4.0 | |
| Technip Energies | 11.1 | | | 24.8 | | | 14.0 | | | 28.7 | | |
| Surface Technologies | Surface Technologies | 1.3 | | | 4.2 | | | 13.1 | | | 5.3 | | Surface Technologies | 2.7 | | | | 11.8 | | | 1.1 | |
| Corporate and other | Corporate and other | 1.9 | | | — | | | 5.5 | | | — | | Corporate and other | 0 | | | | 1.1 | | | 0 | |
| Total | Total | $ | 50.2 | | | $ | 56.4 | | | $ | 61.6 | | | $ | 65.4 | | Total | $ | 6.7 | | | | $ | 6.0 | | | $ | 5.1 | |
During the three months ended March 31, 2020, we incurred $5.1 million of COVID-19 related expenses. These expenses represent 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.
Prolonged uncertainty in energy markets could lead to further future reductions in capital spending from our customer base. In turn, this may lead to changes in our strategy. 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 continue to 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 18.17. 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 majority of these financial instruments expire within five years. Management does not expect any of these financial instruments to result in losses that, if incurred, would have a material adverse effect inon our condensed consolidated financial position, results of operations, or cash flows.
Guarantees consisted of the following:
| | (In millions) | (In millions) | June 30,
2020 | | December 31,
2019 | (In millions) | March 31,
2021 | | December 31,
2020 |
Financial guarantees (a) | Financial guarantees (a) | $ | 944.4 | | | $ | 945.5 | | Financial guarantees (a) | $ | 98.4 | | | $ | 104.9 | |
Performance guarantees (b) | Performance guarantees (b) | 4,988.4 | | | 4,916.0 | | Performance guarantees (b) | 1,146.8 | | | 1,353.9 | |
| Maximum potential undiscounted payments | Maximum potential undiscounted payments | $ | 5,932.8 | | | $ | 5,861.5 | | Maximum potential undiscounted payments | $ | 1,245.2 | | | $ | 1,458.8 | |
(a)Financial guarantees represent contracts that contingently require a guarantor to make payments to a guaranteed party based on changes in an 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 inon 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 we have also raised with the DOJ certain other projects performed by Technip S.A. subsidiaries in Brazil between 2002 and 2013. The DOJ has 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 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, we 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 will not be required to have a monitor and will, instead, provide reports on our anti-corruption program to the Brazilian and U.S. authorities for two and three years, respectively.
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 will also provide the DOJ reports on our anti-corruption program during the term of the DPA.
In Brazil, 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 have committed, as part of those agreements, to make certain enhancements to their compliance programs in Brazil during a two-year self-reporting period, which aligns 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.
To date, the investigation by 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. As we continue to progress our discussions with PNF towards resolution, 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 anticorruptionanti-corruption laws and regulations that it may seek to impose in appropriate circumstances including, but not limited to, fines, penalties, 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 failure to meet specified contractual milestone dates and the applicable customer asserts a conforming claim 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 at June 30, 2020March 31, 2021 and December 31, 2019,2020, and that the ultimate resolution of such matters will not materially affect our consolidated financial position, results of operations, or cash flows.
NOTE 19.18. INCOME TAXES
Our provision for income taxes for the three months ended June 30,March 31, 2021 and 2020 and 2019 reflected effective tax rates of 53.6%5.4% and 0.8%0.7%, respectively. The year-over-year increase in the effective tax rate was primarily due to the increased impact of losses including certain impairments in jurisdictions with a full valuation allowance, offset in part byand a favorable change in the forecasted earnings mix. The increase also relates to one-time benefits, which were recorded in 2019, for the finalization of previously estimated tax liabilities based on the filing of tax returns.
Our provision for income taxes for the six months ended June 30, 2020 and 2019 reflected effective tax rates of (1.7)% and 10.3%, respectively. The year-over-year increase in the effective tax rate was primarily due to the impact of nondeductible goodwill impairments, offset in part by a favorable change in forecasted earnings mix.
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.
NOTE 20.19. DERIVATIVE FINANCIAL INSTRUMENTS
For purposes of mitigating the effect of changes in exchange rates, we hold derivative financial instruments to hedge the risks of certain identifiable and anticipated transactions and recorded assets and liabilities in our condensed 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 trading purposes where the objective is solely to generate profit.
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 condensed consolidated balance sheets. At June 30, 2020,As of March 31, 2021, we held the following material net positions:
| | | Net Notional Amount
Bought (Sold) | | | Net Notional Amount
Bought (Sold) |
| (In millions) | (In millions) | | USD Equivalent | (In millions) | | USD Equivalent |
| Euro | Euro | 1,915.9 | | | 2,144.9 | | Euro | 464.4 | | | 544.8 | |
| British pound | | British pound | 287.2 | | | 395.5 | |
| Brazilian real | Brazilian real | 7,480.0 | | | 1,365.9 | | Brazilian real | 1,320.1 | | | 231.8 | |
| British pound | 644.3 | | | 790.8 | | |
| Norwegian krone | Norwegian krone | 1,796.3 | | | 184.3 | | Norwegian krone | 1,155.3 | | | 135.7 | |
| | Singapore dollar | | Singapore dollar | 103.5 | | | 77.0 | |
| Canadian dollar | | Canadian dollar | 31.2 | | | 24.7 | |
| Indian rupee | | Indian rupee | 752.9 | | | 10.2 | |
| | Kuwaiti dinar | | Kuwaiti dinar | (3.0) | | | (10.0) | |
| Indonesian rupiah | | Indonesian rupiah | (191,631.6) | | | (13.2) | |
| Australian dollar | | Australian dollar | (157.1) | | | (119.6) | |
| Malaysian ringgit | Malaysian ringgit | 485.6 | | | 113.3 | | Malaysian ringgit | (732.2) | | | (176.6) | |
| Singapore dollar | 106.7 | | | 76.3 | | |
| Indian rupee | 2,072.5 | | | 27.4 | | |
| Japanese yen | 2,157.7 | | | 20.0 | | |
| Colombian peso | 51,238.2 | | | 13.6 | | |
| Hong Kong dollar | (94.5) | | | (12.2) | | |
| Mexican peso | (460.7) | | | (19.9) | | |
| Australian dollar | (29.7) | | | (20.3) | | |
| Canadian dollar | (89.8) | | | (65.6) | | |
| U.S. dollar | U.S. dollar | (2,337.4) | | | (2,337.4) | | U.S. dollar | (105.2) | | | (105.2) | |
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. At June 30, 2020,As of March 31, 2021, our portfolio of these instruments included the following material net positions:
| | | | | | | | | | | |
| Net Notional Amount
Bought (Sold) | | |
| (In millions) | | | USD Equivalent |
| Brazilian real | 76.5 | | | 14.0 | |
| Euro | (6.4) | | | (7.2) | |
| Norwegian krone | (103.0) | | | (10.6) | |
| U.S. dollar | 1.7 | | | 1.7 | |
| | | | | | | | | | | |
| Net Notional Amount
Bought (Sold) |
| (In millions) | | | USD Equivalent |
| Brazilian real | 64.8 | | | 11.4 | |
| Norwegian krone | (138.8) | | | (16.3) | |
| Euro | (14.4) | | | (16.9) | |
| U.S. dollar | 20.7 | | | 20.7 | |
Fair value amounts for all outstanding derivative instruments have been determined using available market information and commonly accepted valuation methodologies. See Note 2120 for further details. Accordingly, the estimates presented may not be indicative of the amounts that we would realize in a current market exchange and may not be indicative of the 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 condensed consolidated balance sheets:
| | | June 30, 2020 | | | December 31, 2019 | | | March 31, 2021 | | December 31, 2020 | |
| (In millions) | (In millions) | Assets | | Liabilities | | Assets | | Liabilities | | (In millions) | Assets | | Liabilities | | Assets | | Liabilities | |
| Derivatives designated as hedging instruments | Derivatives designated as hedging instruments | | | | | | | Derivatives designated as hedging instruments | | | | | | |
| Foreign exchange contracts | Foreign exchange contracts | | | Foreign exchange contracts | | |
| Current - Derivative financial instruments | Current - Derivative financial instruments | $ | 184.9 | | | $ | 298.3 | | | $ | 94.3 | | | $ | 125.0 | | | Current - Derivative financial instruments | $ | 199.7 | | | $ | 164.8 | | | $ | 189.5 | | | $ | 141.9 | | |
| Long-term - Derivative financial instruments | Long-term - Derivative financial instruments | 77.1 | | | 67.0 | | | 34.8 | | | 48.0 | | | Long-term - Derivative financial instruments | 35.3 | | | 33.8 | | | 28.9 | | | 18.8 | | |
| Total derivatives designated as hedging instruments | Total derivatives designated as hedging instruments | 262.0 | | | 365.3 | | | 129.1 | | | 173.0 | | | Total derivatives designated as hedging instruments | 235.0 | | | 198.6 | | | 218.4 | | | 160.7 | | |
| Derivatives not designated as hedging instruments | Derivatives not designated as hedging instruments | | | Derivatives not designated as hedging instruments | | |
| Foreign exchange contracts | Foreign exchange contracts | | | Foreign exchange contracts | | |
| Current - Derivative financial instruments | Current - Derivative financial instruments | 17.0 | | | 10.2 | | | 7.6 | | | 16.3 | | | Current - Derivative financial instruments | 3.8 | | | 7.7 | | | 79.2 | | | 15.6 | | |
| Long-term - Derivative financial instruments | Long-term - Derivative financial instruments | — | | | 0.1 | | | 0.4 | | | 0.4 | | | Long-term - Derivative financial instruments | 0 | | | 0.4 | | | 0.3 | | | — | | |
| Total derivatives not designated as hedging instruments | Total derivatives not designated as hedging instruments | 17.0 | | | 10.3 | | | 8.0 | | | 16.7 | | | Total derivatives not designated as hedging instruments | 3.8 | | | 8.1 | | | 79.5 | | | 15.6 | | |
| Long-term - Derivative financial instruments - Synthetic Bonds - Call Option Premium | 0.1 | | | — | | | 4.3 | | | — | | | |
| Long-term - Derivative financial instruments - Synthetic Bonds - Embedded Derivatives | — | | | 0.1 | | | — | | | 4.3 | | | |
| Total derivatives | Total derivatives | $ | 279.1 | | | $ | 375.7 | | | $ | 141.4 | | | $ | 194.0 | | | Total derivatives | $ | 238.8 | | | $ | 206.7 | | | $ | 297.9 | | | $ | 176.3 | | |
Cash flow hedges of forecasted transactions qualifying for hedge accounting, net of tax, resulted in accumulated other comprehensive losses of $55.8$4.4 million and $5.8$12.9 million at June 30, 2020as of March 31, 2021 and December 31, 2019,2020, respectively. We expect to transfer an approximate $33.6$36.0 million loss from accumulated OCI to earnings during the next 12 months when the anticipated transactions actually occur. All anticipated transactions currently being hedged are expected to occur by the second half of 2023.
The following table presents the gains (losses) recognized in other comprehensive income related to derivative instruments designated as cash flow hedges:
| | | | | | | | | | | | | | | | | | | | | | | |
| Gain (Loss) Recognized in OCI | | | | | | |
| Three Months Ended | | | | Six Months Ended | | |
| June 30, | | | | June 30, | | |
| (In millions) | 2020 | | 2019 | | 2020 | | 2019 |
| Foreign exchange contracts | $ | 41.7 | | | $ | (13.6) | | | $ | (70.3) | | | $ | 3.0 | |
| | | | | | | | | | | | | | | |
| | | | | Gain (Loss) Recognized in OCI |
| | | Three Months Ended |
| | | March 31, |
| (In millions) | | | | | 2021 | | 2020 |
| Foreign exchange contracts | | | | | $ | (20.2) | | | $ | (91.7) | |
The following represents the effect of cash flow hedge accounting onin the condensed consolidated statements of income for the three and six months ended June 30, 2020March 31, 2021 and 2019:2020:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (In millions) | Three Months Ended March 31, 2021 | | Three Months Ended March 31, 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 |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| Cash Flow hedge gain (loss) recognized in income | | | | | | | | | | | | | | | |
| Foreign Exchange Contracts | | | | | | | | | | | | | | | |
| Amounts reclassified from accumulated OCI to income | $ | (10.4) | | | $ | 8.3 | | | $ | 0.1 | | | $ | 4.0 | | | $ | (11.1) | | | $ | 9.8 | | | $ | 0 | | | $ | 0.5 | |
| Amounts excluded from effectiveness testing | 1.0 | | | (1.2) | | | 0.9 | | | (0.6) | | | 1.2 | | | (2.2) | | | 0 | | | (12.6) | |
| Total cash flow hedge gain (loss) recognized in income | (9.4) | | | 7.1 | | | 1.0 | | | 3.4 | | | (9.9) | | | 7.6 | | | 0 | | | (12.1) | |
| Total hedge gain (loss) recognized in income | $ | (9.4) | | | $ | 7.1 | | | $ | 1.0 | | | $ | 3.4 | | | $ | (9.9) | | | $ | 7.6 | | | $ | 0 | | | $ | (12.1) | |
| | | | | | | | | | | | | | | |
| Gain (loss) recognized in income on derivatives not designated as hedging instruments | 0.2 | | | 0.5 | | | 0 | | | (11.4) | | | 0 | | | 0 | | | 0 | | | 0 | |
| Total | $ | (9.2) | | | $ | 7.6 | | | $ | 1.0 | | | $ | (8.0) | | | $ | (9.9) | | | $ | 7.6 | | | $ | 0 | | | $ | (12.1) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (In millions) | Three Months Ended June 30, 2020 | | | | | | | | Three Months Ended June 30, 2019 | | | | | | |
| 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 |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| Cash Flow hedge gain (loss) recognized in income | | | | | | | | | | | | | | | |
| Foreign Exchange Contracts | | | | | | | | | | | | | | | |
| Amounts reclassified from accumulated OCI to income | $ | (11.3) | | | $ | 10.2 | | | $ | (0.4) | | | $ | (2.2) | | | $ | (13.2) | | | $ | 2.3 | | | $ | — | | | $ | 1.0 | |
| Amounts excluded from effectiveness testing | 0.2 | | | (0.5) | | | (0.1) | | | 19.8 | | | (0.8) | | | 1.9 | | | — | | | (12.5) | |
| Total cash flow hedge gain (loss) recognized in income | (11.1) | | | 9.7 | | | (0.5) | | | 17.6 | | | (14.0) | | | 4.2 | | | — | | | (11.5) | |
| Total hedge gain (loss) recognized in income | $ | (11.1) | | | $ | 9.7 | | | $ | (0.5) | | | $ | 17.6 | | | $ | (14.0) | | | $ | 4.2 | | | $ | — | | | $ | (11.5) | |
| | | | | | | | | | | | | | | |
| Gain (loss) recognized in income on derivatives not designated as hedging instruments | (0.5) | | | 0.2 | | | — | | | (13.4) | | | (0.1) | | | (0.1) | | | — | | | 8.3 | |
| Total | $ | (11.6) | | | $ | 9.9 | | | $ | (0.5) | | | $ | 4.2 | | | $ | (14.1) | | | $ | 4.1 | | | $ | — | | | $ | (3.2) | |
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| (In millions) | Six Months Ended June 30, 2020 | | | | | | | | Six Months Ended June 30, 2019 | | | | | | |
| 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 |
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| Cash Flow hedge gain (loss) recognized in income | | | | | | | | | | | | | | | |
| Foreign Exchange Contracts | | | | | | | | | | | | | | | |
| Amounts reclassified from accumulated OCI to income | $ | (22.4) | | | $ | 20.0 | | | $ | (0.4) | | | $ | (1.2) | | | $ | (12.5) | | | $ | 4.9 | | | $ | 0.1 | | | $ | (1.4) | |
| Amounts excluded from effectiveness testing | 1.4 | | | (2.7) | | | (0.1) | | | 8.2 | | | (1.1) | | | (2.2) | | | — | | | (22.1) | |
| Total cash flow hedge gain (loss) recognized in income | (21.0) | | | 17.3 | | | (0.5) | | | 7.0 | | | (13.6) | | | 2.7 | | | 0.1 | | | (23.5) | |
| Total hedge gain (loss) recognized in income | $ | (21.0) | | | $ | 17.3 | | | $ | (0.5) | | | $ | 7.0 | | | $ | (13.6) | | | $ | 2.7 | | | $ | 0.1 | | | $ | (23.5) | |
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| Gain (loss) recognized in income on derivatives not designated as hedging instruments | (0.6) | | | 0.8 | | | — | | | (22.1) | | | (1.1) | | | (0.1) | | | — | | | 5.0 | |
| Total | $ | (21.6) | | | $ | 18.1 | | | $ | (0.5) | | | $ | (15.1) | | | $ | (14.7) | | | $ | 2.6 | | | $ | 0.1 | | | $ | (18.5) | |
Balance Sheet Offsetting - We execute derivative contracts with counterparties that consent to a master netting agreement, which permits net settlement of the gross derivative assets against gross derivative liabilities. Each instrument is accounted for individually and assets and liabilities are not offset. As of June 30, 2020March 31, 2021 and December 31, 2019,2020, we had no collateralized derivative contracts. The following tables present both gross information and net information of recognized derivative instruments:
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| June 30, 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 | $ | 279.1 | | | $ | (187.9) | | | $ | 91.2 | | | $ | 141.4 | | | $ | (112.5) | | | $ | 28.9 | |
| Derivative liabilities | $ | 375.7 | | | $ | (187.9) | | | $ | 187.8 | | | $ | 194.0 | | | $ | (112.5) | | | $ | 81.5 | |
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| March 31, 2021 | | December 31, 2020 |
| (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 | $ | 238.8 | | | $ | (125.2) | | | $ | 113.6 | | | $ | 297.9 | | | $ | (128.7) | | | $ | 169.2 | |
| Derivative liabilities | $ | 206.7 | | | $ | (125.2) | | | $ | 81.5 | | | $ | 176.3 | | | $ | (99.3) | | | $ | 77.0 | |
NOTE 21.20. FAIR VALUE MEASUREMENTS
Assets and liabilities measured at fair value on a recurring basis were as follows:
| | | June 30, 2020 | | | December 31, 2019 | | | March 31, 2021 | | December 31, 2020 |
| (In millions) | (In millions) | Total | | Level 1 | | Level 2 | | Level 3 | | Total | | Level 1 | | Level 2 | | Level 3 | (In millions) | Total | | Level 1 | | Level 2 | | Level 3 | | Total | | Level 1 | | Level 2 | | Level 3 |
| Assets | Assets | | | | | | | | | | | | | | | | Assets | | | | | | | | | | | | | | | |
| Investments | Investments | | Investments | |
| | Investment in Technip Energies | | Investment in Technip Energies | $ | 1,249.0 | | | $ | 1,249.0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | |
Equity securities(a) | Equity securities(a) | $ | 37.6 | | | $ | 37.6 | | | $ | — | | | $ | — | | | $ | 54.8 | | | $ | 54.8 | | | $ | — | | | $ | — | | Equity securities(a) | 24.3 | | | 24.3 | | | 0 | | | 0 | | | 23.4 | | | 23.4 | | | 0 | | | 0 | |
| Money market fund | Money market fund | 1.8 | | | — | | | 1.8 | | | — | | | 1.5 | | | — | | | 1.5 | | | — | | Money market fund | 1.9 | | | 0 | | | 1.9 | | | 0 | | | 1.7 | | | 0 | | | 1.7 | | | 0 | |
Stable value fund(b) | Stable value fund(b) | 1.5 | | | — | | | — | | | — | | | 2.1 | | | — | | | — | | | — | | Stable value fund(b) | 0.8 | | | 0 | | | 0 | | | 0 | | | 0.9 | | | 0 | | | 0 | | | 0 | |
| | Held-to-maturity debt securities | Held-to-maturity debt securities | 72.0 | | | — | | | 72.0 | | | — | | | 71.9 | | | — | | | 71.9 | | | — | | Held-to-maturity debt securities | 0 | | | 0 | | | 0 | | | 0 | | | 24.2 | | | 0 | | | 24.2 | | | 0 | |
| Derivative financial instruments | Derivative financial instruments | | Derivative financial instruments | |
| Synthetic bonds - call option premium | 0.1 | | | — | | | 0.1 | | | — | | | 4.3 | | | — | | | 4.3 | | | — | | |
| Foreign exchange contracts | Foreign exchange contracts | 279.0 | | | — | | | 279.0 | | | — | | | 137.1 | | | — | | | 137.1 | | | — | | Foreign exchange contracts | 238.8 | | | 0 | | | 238.8 | | | 0 | | | 297.9 | | | 0 | | | 297.9 | | | 0 | |
| Assets held for sale | Assets held for sale | 1.9 | | | — | | | — | | | 1.9 | | | 25.8 | | | — | | | — | | | 25.8 | | Assets held for sale | 47.4 | | | 0 | | | 0 | | | 47.4 | | | 47.3 | | | 0 | | | 0 | | | 47.3 | |
| Total assets | Total assets | $ | 393.9 | | | $ | 37.6 | | | $ | 352.9 | | | $ | 1.9 | | | $ | 297.5 | | | $ | 54.8 | | | $ | 214.8 | | | $ | 25.8 | | Total assets | $ | 1,562.2 | | | $ | 1,273.3 | | | $ | 240.7 | | | $ | 47.4 | | | $ | 395.4 | | | $ | 23.4 | | | $ | 323.8 | | | $ | 47.3 | |
| Liabilities | Liabilities | | | | | | | | | | | | | | | | Liabilities | | | | | | | | | | | | | | | |
| Redeemable financial liability | $ | 219.8 | | | $ | — | | | $ | — | | | $ | 219.8 | | | $ | 268.8 | | | $ | — | | | $ | — | | | $ | 268.8 | | |
| Derivative financial instruments | Derivative financial instruments | | Derivative financial instruments | |
| Synthetic bonds - embedded derivatives | 0.1 | | | — | | | 0.1 | | | — | | | 4.3 | | | — | | | 4.3 | | | — | | |
| Foreign exchange contracts | Foreign exchange contracts | 375.6 | | | — | | | 375.6 | | | — | | | 189.7 | | | — | | | 189.7 | | | — | | Foreign exchange contracts | 206.7 | | | 0 | | | 206.7 | | | 0 | | | 176.3 | | | 0 | | | 176.3 | | | 0 | |
| Liabilities held for sale | — | | | — | | | — | | | — | | | 9.3 | | | — | | | — | | | 9.3 | | |
| | Total liabilities | Total liabilities | $ | 595.5 | | | $ | — | | | $ | 375.7 | | | $ | 219.8 | | | $ | 472.1 | | | $ | — | | | $ | 194.0 | | | $ | 278.1 | | Total liabilities | $ | 206.7 | | | $ | 0 | | | $ | 206.7 | | | $ | 0 | | | $ | 176.3 | | | $ | 0 | | | $ | 176.3 | | | $ | 0 | |
(a)Includes fixed income and other investments measured at fair value.
(b)Certain investments that are measured at fair value using net asset value per share (or its equivalent) have not been classified in the fair value hierarchy.
Investment in Technip Energies - The fair value of our investment in Technip Energies is based on quoted prices that we have the ability to access in public markets, see Note 11 for further details.
Equity securities and Available-for-sale securities - The fair value measurement of our traded securities and Available-for-sale securities is based on quoted prices that we have the ability to access in public markets.
Stable value fund and Money market fund - StableThe stable value fund and money market fund are valued at the net asset value of the shares held at the end of the quarter, which is based on the fair value of the underlying investments using information reported by our investment advisor at quarter-end.
Held-to-maturity debt securities - Held-to-maturity debt securities consist of government bonds. These investments are stated at amortized cost, which approximates fair value.
Assets and liabilities held for sale - The fair value of our assets and liabilities held for sale was determined using a market approach that took into consideration the expected sales price.
Mandatorily redeemable financial liability - As of March 31, 2021, our G1200 vessel is classified as held for sale. In March 2021, we entered into a Memorandum of Agreement to sell the fourth quarter of 2016, we obtained voting control interests in legal Technip Energies contract entities which own and account forvessel. The agreement is subject to certain conditions precedent to complete the design, engineering and construction oftransaction. We expect to complete the Yamal LNG plant. As part of this transaction, we recognized the fair value of the mandatorily redeemable financial liability using a discounted cash flow model. The key assumptions used in applying the income approach are the selected discount rates and the expected dividends to be distributedsale in the future to the non-controlling interest holders. Expected dividends to be distributed are based on the non-controlling interests’ sharefirst half of the expected profitability of the underlying contract, a 20.6% discount rate and the overall timing of completion of the project.2021.
A mandatorily redeemable financial liability of $219.8 million was recognized as of June 30, 2020 to account for the fair value of the non-controlling interests. See Note 9 for further details.
A decrease of one percentage point in the discount rate would have increased the liability by $2.2 million as of June 30, 2020. 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.
Change in the fair value of our Level 3 mandatorily redeemable financial liability is recorded as interest expense on the consolidated statements of income and is presented below:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | | | Six Months Ended | | |
| June 30, | | | | June 30, | | |
| (In millions) | 2020 | | 2019 | | 2020 | | 2019 |
| Balance at beginning of period | $ | 300.1 | | | $ | 318.3 | | | $ | 268.8 | | | $ | 408.5 | |
| Less: Expenses recognized in net interest expense | (50.8) | | | (140.2) | | | (86.3) | | | (224.9) | |
| Less: Settlements | 131.1 | | | 45.7 | | | 135.3 | | | 220.6 | |
| Balance at end of period | $ | 219.8 | | | $ | 412.8 | | | $ | 219.8 | | | $ | 412.8 | |
Redeemable non-controlling interest - In the first quarter of 2018, we acquiredWe 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 in the fair value measurement.measurements hierarchy. As of June 30, 2020March 31, 2021 and December 31, 2019,2020, the fair value of our redeemable non-controlling interest was $41.1$44.6 million and $43.7 million, respectively.
Derivative financial instruments - We use the income approach 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 by using the spread of similar companies in the same industry, of similar size and with the same credit rating.
At the present time, weWe 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 2019 for further details.
Nonrecurring Fair Value Measurements
Fair value of long-lived, non-financial assets - Long-lived non-financial assets are measured atreviewed for impairment whenever events or changes in circumstances indicate that carrying amounts of such assets may not be recoverable.
The following summarizes impairments of long-lived assets and related post-impairment fair value on a non-recurring basis for the purposes of calculating impairment, when the recoverable amountthree
months ended March 31, 2021 and 2020:
| | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, | |
| 2021 | | 2020 | |
| (In millions) | Impairment | | Fair Value (a) | | Impairment | | Fair Value (a) | |
| Long-lived assets | $ | 18.8 | | | $ | 31.6 | | | $ | 104.6 | | | $ | 269.6 | | |
(a)Measured as of the assets has been determined to be less thanimpairment date using the book value of the assets. During 2019, we recorded certain long-lived asset impairments primarily related to vesselsincome approach and machinery and equipment in our Subsea segment. Due to the intent to sell our G1201 vessel and subsequently signed Memorandum of Agreement (MOA) with a third party, we reviewed the carrying value of its sister vessel, the G1200, as of September 30, 2019. As a result of this assessment, an impairment charge was recorded on the two vessels to bring their carrying value to a combined fair value of $104.0 million as of September 30, 2019. The fair value measurements of these vessels were based on the transaction price in the MOA, which is a Level 2 observable input as per the fair value hierarchy. For the remaining long-lived assets which we impaired in 2019, we measured their fair value by estimating the amount and timing of net future cash flows, which are Level 3 unobservable inputs, and discounting them using a10.8% risk-adjusted rate of interest, of 10.8%. As of December 31, 2019, these impaired assets were recorded at theirresulting in a Level 3 fair value of $238.5 million.measurement.
During the first half of 2020 we recorded impairments primarily to installation and service equipment assets in our Subsea segment and North America-based fracturing and wellhead assets in our Surface Technologies segment. As of June 30, 2020, these impaired assets were recorded at their fair value of $314.3 million. We measured their fair value by estimating the amount and timing of net future cash flows, which are Level 3 unobservable inputs, and discounting them using a risk-adjusted rate of interest of 10.8%.
Other fair value disclosures
Fair value of debt - The respective carrying value and fair value of our Synthetic bonds and our Senior Notes and private placement notes on a combined basis as of June 30, 2020 was $2,149.4 million and $2,206.5 million, respectively. The respective carrying value and fair value of our Synthetic bonds and our Senior Notes and private placement notes on a combined basis as of December 31, 2019 were $1,981.2 million and $2,078.2 million, respectively.
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, senior notes and synthetic bonds was $2,097.3 million and $2,199.2 million as of March 31, 2021 and December 31, 2020, 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 primarily 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 21. SUBSEQUENT EVENT
On April 8, 2021, Pursuant to the “Share Purchase Agreement” with BPI, we refunded $100.0 million to BPI as a result of their revised level of investment.
On April 27, 2021 we sold 25 million Technip Energies shares, representing 14% of Technip Energies’ share capital, through a private placement by way of an accelerated bookbuild offering (the “Placement”). The sale price of the shares in the Placement was set at €11.10 per share, yielding total gross proceeds of €277.5 million or $335.2 million.
Concurrently with the Placement, Technip Energies purchased from TechnipFMC 1.8 million shares (equivalent to 1% of share capital) at €11.10 per share, corresponding to the price of the Placement (the “Concurrent Sale to Technip Energies”). The sale of shares to Technip Energies yielded total gross proceeds of €20.0 million or $24.2 million. This purchase was separate from the Placement.
Upon completion of the Placement and the Concurrent Sale to Technip Energies, TechnipFMC retains a direct stake of 55.5 million shares, representing 31% of Technip Energies’ share capital.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
BUSINESS OUTLOOK
Overall Outlook - TThe price ofhe short-term outlook for crude oil moved higher in the quarter despite the volatility experienced early in the period. However,has improved. Economic activity continues to expand, driven by strong fiscal stimulus, COVID vaccinations, and re-openings of local economies. Additionally, oil prices were still down more than 30% since the start of the year, primarilysupply has been constrained due to the excess market supply. The significant demand destruction related to the COVID-19 pandemic continued throughout the quarter. The short-term outlook improved as theindustry’s more disciplined capital spend, particularly for OPEC+ countries adoptedwhich appear to be focused on realizing a more constructive approach toward managingprice that supports both economic growth and continued energy investment. These conditions could also provide greater price stability over the oversupplied market.intermediate term.
Long-term demand for energy is still forecastforecasted to rise,increase. Our conversations with clients remains constructive, and we believe thisthe current outlook will ultimately provide our customersis providing them with the confidence to increase investments in new sources of oil and natural gas production. We continue to believe that offshore and deepwater developments will remain a significant part of our customers’ portfolios in the long-term. TechnipFMC’s strong positioning in transition fuels, such as natural gas, will also allow us to play a key role in the energy transition markets.
COVID-19 - Beginning inOn February 16, 2021, we completed the first quarter, we experienced operational impacts as a result of COVID-19. These impacts included supply chain disruptions; productivity declines; and logistics constraints. There has been a resumption of activity from some suppliers, and we expect that other supply chain impacts will subside as regional restrictions are removed, subject to any future deterioration in the global COVID-19 situation. We believe, given the long-cycle nature of our projects, that we will be able to mitigate a majorityseparation of the impacts related to supply chain disruption.
Even though many of our locations remained open, we experienced productivity declines as a result of the pandemic. The energy sector was deemed to be an essentialTechnip Energies business in most countries, which provided us the flexibility to keep offices and manufacturing centers open. We allowed all non-essential personnel to work from home but in some cases we experienced reduced productivity as employees transitionedsegment. Subsequent to the new work environment. We also experienced periodic productivity declines in our manufacturing facilities as employee groups were isolated in the event of a COVID-19 exposure.
We also experienced logistics impacts related to the movement of personnelSpin-off, we now operate under two reporting segments: Subsea and equipment due to new COVID-19 regulations. Specifically, these impacts included delays in crew changes on vessels due to quarantine periodsSurface Technologies. See Notes 2 and limitations on travel to and from points of embarkation.
In addition to these operational impacts, we incurred incremental, direct costs related to voluntary measures implemented to ensure the safety of employees, contractors, suppliers, and clients. We activated a COVID-19 Incident Management Team in order to administer a consistent response throughout our global operations and provide coordinated support to localized events. Specific actions taken by the team included the following:
–Established a thorough Business Continuity Planning process, which included the work from home initiative, when practical, to support continuity of operations;
–Adopted enhanced sanitation practices across all offices and facilities, implemented personal hygiene protocols and measures to restrict non-essential business travel, and restricted non-essential visitors from visiting our offices and facilities;
–Provided personal protective equipment and performed proactive health screening and testing of offshore personnel and required employees to self-quarantine when they may have been exposed to, or shown any symptoms of COVID-19;
–Collaborated more closely with clients to mitigate COVID-19 impacts in order to advance projects and meet customer requirements, albeit at reduced productivity in some instances; and
–Engaged with critical vendors regarding their own pandemic preparedness plans to minimize the impact to our business operations.
Senior management is continuously monitoring the situation and providing frequent communications to both employees and external clients and partners. Regulatory directives and COVID-19 case management continued to
result in the periodic full or partial operational disruption of some of our facilities, vessels, and suppliers beyond the first quarter, and we expect some level of disruption to continue in the second half of the year.
More specific impacts of COVID-19 and the commodity price decline as well as the outlook11 for the business segments are provided below.further details.
Subsea - – The impact of thevolatile, and generally low crude oil price environment hasof the last several years led many of our customers to significantly reduce their capital spending plans. TechnipFMC continuesplans and defer new deepwater projects. The trajectory and pace of further recovery and expansion in the subsea market is subject to engage with its customersmore stringent capital discipline and alliance partners as they workthe allocation of capital our clients dedicate to updatedeveloping offshore oil and gas fields among their business plans. We did not receive any cancellations forentire portfolio of projects. The risk of project sanctioning delays still exists in the current environment; however, innovative approaches to subsea projects, in backlog during the period.
We believe that deepwater will become an even more prevalent piece of the energy mix aslike our iEPCI™ solution, have improved project economics, remain attractive, particularly for brownfield developments. Sanctioning on a number of greenfield projects has shifted fromand many offshore discoveries can be developed economically at today’s crude oil prices. In the current year, impacting our previous projection for 2020 orders. We continue to evaluate approximately $11 billion of large project opportunities thatlong-term, we believe are still likelydeepwater development is expected to move forward over the next 24 months. Additional projects approaching $6 billion in value have been extended beyond this timeframe but remain active and subject to future award. Large project activity continues to demonstrate our strength in important basins such as Brazil, Guyana, and Norway.
Beyond this large project activity, our orders have been supported by subsea services, direct iEPCI™ awards and small project activity, much of which is exclusive to TechnipFMC. These opportunities have generated over $3 billion of inbound orders in each of the last three years and are enabled by our installed base, growing list of alliance partners, and unique integrated FEED capabilities. We anticipate resiliency in services activity, where we expect to benefit from the industry’s largest installed base of subsea equipment in operation today, as well as a likely shift by some clients from greenfield developments to brownfield intervention.
We continue to work closely with our customers through early engagement in iFEED™ and the use of iEPCI™ to allow more project final investment decisions through the cycle. iEPCI™ can support our clients’ initiatives to improve subsea project economics by helping to reduce cost and accelerate time to first oil. TechnipFMC’s integrated commercial model now accounts for a significant portionpart of many of our orders and revenue and will serve as our standard approach to new business going forward.customers’ portfolios.
As the subsea industry continues to evolve, we are acceleratinghave taken actions to further streamline our organization, achieve standardization, and reduce cycle times. ContinuedThe rationalization of our global footprint will also further leverage the benefits of theour integrated offering. We aim to continuously align our operations with activity levels, while preserving our core capacity in order to deliver current projects in backlog and future order activity.
Technip Energies - Given the long cycle natureWe have experienced renewed operator confidence in advancing subsea activity as a result of the business,improved economic outlook, lower market volatility and higher oil price. With crude now trending above $60 per barrel, the resilienceopportunity set of large subsea projects to be sanctioned over the next 24 months has expanded.
Front-end engineering and maturitydesign (“FEED”) activity continues to improve, with solid momentum experienced in the second half of 2020. FEED activity in the current year is expected to return to the more robust levels seen in 2019, which further supports our view of a sustainable recovery for deepwater. We expect at least 60% of the projects undergoing studies in backlog and2021 to include an iEPCI™ solution, many of which could be directly awarded to our diversified global footprint, we have been ableCompany upon reaching final investment decision.
TechnipFMC is increasingly less dependent on larger, publicly tendered projects.
•We anticipate that an increasing share of our inbound orders will result from projects that will be directly awarded to mitigate a significant portionour Company, many of COVID-19 operational impacts. The near-term effects relate more to operational efficiencies and timing issues and not the stoppage of projects.which may come from our alliance partners;
Onshore market•We anticipate higher activity continues to provide a tangible set of opportunities, albeit at lower levels than previously forecast. We expect natural gasin subsea services, with the industry’s largest installed base; and renewables to take a larger share of global energy demand as evidenced by the record level of new LNG capacity sanctioned in 2019.
Market dynamics•We expect a higher mix of EPCI™ project awards, demonstrating strong geographic diversity and new adopters of our unique, integrated approach to subsea development.
For the remainder of 2021, we believe that Subsea inbound orders will exceed the $4 billion achieved in 2020. We expect Brazil to be the most active region of the world for LNG have shifted in recent months, and this will alter the broader LNG landscapenew project orders, driven by continued investment in the near-term.pre-salt field discoveries. We anticipate additional market growth potential coming from the North Sea, Asia Pacific and Africa. The number of economically viable LNG projects is likely to decline, and many of the remaining qualified EPC contractors will be challenged in this period of subdued project sanctioning. Technip Energies has demonstrated remarkable resilience through past cycles, and we do not believe this is the start of an extended downturn for our Company.We have already been awarded two additional projects, Rovuma in Mozambique and Energia Costa Azul in Mexico, although both remain subject to final investment decision, and neither of these projects are included in our backlog today. In addition,strong front end activity we are actively tendering a majorexperiencing today should further support project in the Middle East and performing front-end work on other LNG prospects, some of which are likely to move forward due in part to their strategic importance to their host country. We continue to believe that the long-term fundamentals for natural gas – LNG in particular - remain strong given its critical role as a transition fuel.award momentum into 2022.
As an industry leader, TechnipFMC is well positioned for growth in new liquefaction and regasification capacity as well as opportunities in biofuels, green chemistry, and other energy alternatives. Active engagement in FEED studies provides a platform for early collaboration with clients and can significantly de-risk project execution while also supporting our pursuit of EPC contracts. Our direct engagement led to the signing of a major EPC contract in July for the construction of a new hydrocracking complex for the Assiut refinery in Egypt. Additionally, we continue to selectively pursue refining, petrochemical, fertilizer and renewables project opportunities in the Middle East, Africa, Asia and North America as these sectors typically prove to be more resilient through a downturn.
Offshore market activity is expected to weaken in the near-term as sanctioning on a number of greenfield projects is likely to shift from the current year. Recent discoveries of offshore fields with reserves in regions such as Australia and East Africa are expected to benefit future activity; however, the timing of increased investment in these regions could be deferred. In the long-term, new upstream investment will also be required as gas becomes a bigger portion of the global energy mix.
Surface Technologies - North American– Surface Technologies’ performance is typically driven by variations in global drilling activity, declined significantly duringcreating a dynamic environment. Operating results can be further impacted by stimulation activity and the second quarter as evidenced by the more than 60% sequential decline in rig count and fracturing crews over the period. We have taken rapid and aggressive actions to reduce our costs as we look to mitigate the steep sales decline anticipatedcompletions intensity of shale applications in the current year. The number of U.S. fracturing crews has started to recover from the recent trough reached in May, and activity more broadly is expected to remain flat during the second half of 2020.Americas.
Activity outsideThe North America shale market is expectedsensitive to remainoil price fluctuations. The rig count exited 2020 below prior year-end levels but increased in the first quarter of 2021.
In 2021, we expect our completions-related revenue to outperform the overall market, driven by increased market adoption of iComplete™ – our fully integrated, digitally enabled pressure control system. iComplete™ has already achieved significant market penetration since its introduction in the third quarter of 2020, with more resilient. We alsothan 10 customers utilizing the new integrated system.
Drilling activity in international markets is less cyclical than North America as most activity is driven 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 Middle East and Asia Pacific, both of which are being supported by strength instrong gas-related activity. The business mix outside of North America is expected to account for as much as 60%
In recent years, our international revenue has become a greater proportion of total segment revenue. We expect a gradual and steady recovery in well count in 2021 to drive modest international market growth, with spending increases led by national oil companies, particularly in the Middle East.
Our unique capabilities in the international markets, which demand higher specification equipment, global services and local content, provide a platform for us to extend our leadership positions. We remain levered to these more resilient markets where we expect to source approximately 65% of our full year Surface Technologies revenue for 2020.in 2021.
CONSOLIDATED RESULTS OF OPERATIONS OF TECHNIPFMC PLC
THREE MONTHS ENDED JUNE 30,MARCH 31, 2021 AND 2020 AND 2019
| | | Three Months Ended | | | | Three Months Ended | | |
| | June 30, | | | Change | | | March 31, | | Change |
| (In millions, except %) | (In millions, except %) | 2020 | | 2019 | | $ | | % | (In millions, except %) | 2021 | | 2020 | | $ | | % |
| Revenue | Revenue | $ | 3,158.5 | | | $ | 3,434.2 | | | (275.7) | | | (8.0) | | Revenue | $ | 1,632.0 | | | $ | 1,582.6 | | | 49.4 | | | 3.1 | |
| | Costs and expenses | Costs and expenses | | Costs and expenses | |
| Cost of sales | Cost of sales | 2,641.0 | | | 2,745.2 | | | (104.2) | | | (3.8) | | Cost of sales | 1,441.2 | | | 1,404.1 | | | 37.1 | | | 2.6 | |
| Selling, general and administrative expense | Selling, general and administrative expense | 234.9 | | | 323.8 | | | (88.9) | | | (27.5) | | Selling, general and administrative expense | 147.6 | | | 195.3 | | | (47.7) | | | (24.4) | |
| Research and development expense | Research and development expense | 38.2 | | | 29.5 | | | 8.7 | | | 29.5 | | Research and development expense | 16.5 | | | 25.4 | | | (8.9) | | | (35.0) | |
| Impairment, restructuring and other expenses (Note 17) | 140.3 | | | 9.2 | | | 131.1 | | | 1,425.0 | | |
| Impairment, restructuring and other expenses (Note 16) | | Impairment, restructuring and other expenses (Note 16) | 25.5 | | | 3,199.1 | | | (3,173.6) | | | (99.2) | |
| | Merger transaction and integration costs | — | | | 12.9 | | | (12.9) | | | (100.0) | | |
| | Total costs and expenses | Total costs and expenses | 3,054.4 | | | 3,120.6 | | | (66.2) | | | (2.1) | | Total costs and expenses | 1,630.8 | | | 4,823.9 | | | (3,193.1) | | | (66.2) | |
| | Other income (expense), net | Other income (expense), net | (9.7) | | | (72.6) | | | 62.9 | | | 86.6 | | Other income (expense), net | 35.6 | | | (7.9) | | | 43.5 | | | 550.6 | |
| Income from equity affiliates (Note 12) | 13.0 | | | 14.2 | | | (1.2) | | | (8.5) | | |
| Income from equity affiliates (Note 11) | | Income from equity affiliates (Note 11) | 7.7 | | | 21.1 | | | (13.4) | | | (63.5) | |
| Income from investment in Technip Energies (Note 11) | | Income from investment in Technip Energies (Note 11) | 470.1 | | | — | | | n/a | | n/a |
| Loss on early extinguishment of debt | | Loss on early extinguishment of debt | (23.5) | | | — | | | n/a | | n/a |
| Net interest expense | Net interest expense | (74.4) | | | (140.6) | | | 66.2 | | | 47.1 | | Net interest expense | (34.5) | | | (23.0) | | | (11.5) | | | (50.0) | |
| Income (loss) before income taxes | Income (loss) before income taxes | 33.0 | | | 114.6 | | | (81.6) | | | (71.2) | | Income (loss) before income taxes | 456.6 | | | (3,251.1) | | | 3,707.7 | | | 114.0 | |
| Provision for income taxes (Note 19) | 17.7 | | | 0.9 | | | 16.8 | | | 1,866.7 | | |
| Net income (loss) | 15.3 | | | 113.7 | | | (98.4) | | | (86.5) | | |
| Net income attributable to non-controlling interests | (3.6) | | | (16.7) | | | 13.1 | | | 78.4 | | |
| Net income (loss) attributable to TechnipFMC plc | $ | 11.7 | | | $ | 97.0 | | | (85.3) | | | (87.9) | | |
| Provision (benefit) for income taxes (Note 18) | | Provision (benefit) for income taxes (Note 18) | 24.5 | | | (23.2) | | | 47.7 | | | 205.6 | |
| Income (loss) from continuing operations | | Income (loss) from continuing operations | 432.1 | | | (3,227.9) | | | 3,660.0 | | | 113.4 | |
| Income from continuing operations attributable to non-controlling interests | | Income from continuing operations attributable to non-controlling interests | (1.8) | | | (6.9) | | | 5.1 | | | 73.9 | |
| Income (loss) from continuing operations attributable to TechnipFMC plc | | Income (loss) from continuing operations attributable to TechnipFMC plc | 430.3 | | | (3,234.8) | | | 3,654.9 | | | 113.0 | |
| Income (loss) from discontinued operations | | Income (loss) from discontinued operations | (60.2) | | | (17.8) | | | (42.4) | | | (238.2) | |
| Income from discontinued operations attributable to non-controlling interests | | Income from discontinued operations attributable to non-controlling interests | (1.9) | | | (3.5) | | | 1.6 | | | 45.7 | |
| Net Income (loss) attributable to TechnipFMC plc | | Net Income (loss) attributable to TechnipFMC plc | 368.2 | | | (3,256.1) | | | 3,624.3 | | | 111.3 | |
Revenue
Revenue decreased $275.7increased $49.4 million or 8.0% induring the second quarter of 2020three months ended March 31, 2021, compared to the second quarter of 2019.same period in 2020. Subsea revenue decreasedincreased year-over-year primarily, due to negative impacts from foreign exchange translation due toincreased project and services activity. This increase was offset by a stronger U.S. dollar. Excluding foreign exchange impacts, revenue was flat compared to the prior year quarter, despite operational challenges associated with COVID-19 related disruptions, driven by solid backlog execution. Increaseddecrease in revenue in Technip Energies was primarily driven by higher activity in Europe and North America. The continued ramp-up of Arctic LNG 2 was partially offset by the decline in revenue from Yamal LNG, which continues to progress through the warranty phase. Technip Energies revenue was negatively impacted by COVID-19 related disruptions, which were offset by the increase in revenue as a result of a litigation settlement.our Surface Technologies revenue decreased versus the prior-year period,segment, primarily as a result of the significant decline in operator activity in North American activity and the impact of COVID-19 related disruptions.America.
Gross Profit
Gross profit (revenue less cost of sales) as a percentage of sales decreasedincreased to 16.4% in11.7% during the second quarter of 2020, from 20.1%three months ended March 31, 2021, compared to 11.3% in the prior-year period. Subsea gross profit primarily decreasedas a percentage of sales increased due to a more competitively priced backlogstronger operational performance and the negative operational impacts related to COVID-19.from lower operating costs. Gross profit declined in Technip Energies due in large part to a reduced contribution from Yamal LNG as the project reached physical completion last year and is progressing through the warranty phase. Surface Technologies gross profit was negatively impacted primarily by theas a percentage of sales increased year-over-year decline in North American drillingdespite lower sales volume due to improved execution and completions activity.benefits from prior year cost reduction.
Selling, General and Administrative Expense
Selling, general and administrative expense decreased $88.9$47.7 million year-over-year, primarily as a result of decreased corporate expenses associated with our support functions. During the first half of 2020, in response to a deteriorated market environment driven in part by the accelerated paceCOVID-19 pandemic, we implemented a series of cost reduction actions.initiatives that resulted in significant savings and extended to all business segments and support functions.
Impairment, Restructuring and Other ExpensesExpense
We incurred $140.3$25.5 million of restructuring, impairment and other charges during the second quarter of 2020. These charges primarily included $56.4three months ended March 31, 2021 compared to $3,199.1 million of COVID-19 related expensesrestructuring, impairment and $50.2 million restructuring and severance expenses. COVID-19 related expenses represent unplanned, one-off, incremental and non-recoverable costsother charges incurred solely as a result of 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. COVID-19 related expenses exclude costs associated with project and/or operational inefficiencies, time delays in performance delivery, indirect costs increases and potentially reimbursable or recoverable expenses.during the three months ended March 31, 2020. See Note 1716 for further details.
Merger Transaction and Integration Costs
We incurred integration costs of $12.9 million during the second quarter of 2019, before the announcement of the planned separation transaction due to the continuation of the integration activities pertaining to combining the two legacy companies.
Other Income (expense), Net
Other income (expense), net, primarily reflects foreign currency gains and losses, including gains and losses associated with the remeasurement of net cash positions. Inpositions and other non-operating gains and losses. During the second quarter of 2020,three months ended March 31, 2021, we recognized $5.8$35.6 million of other income, which primarily included $28.1 million of net foreign exchange losses, compared to $18.0gains. During the three months ended March 31, 2020, we recognized $7.9 million of other expenses, which primarily included $23.1 million of net foreign exchange losses in the second quarter of 2019.losses. The decreasechange in foreign exchange gains and losses during the second quarter resulted from decreased hedging costs and a reduction inis primarily due to foreign exchange lossesgains from unhedged currencies primarily Angola. Otherand the effects of a stronger U.S. dollar on naturally hedged projects.
Income from Investment in Technip Energies
During the three months ended March 31, 2021, we recorded $470.1 million as income (expense), netfrom our investment in Technip Energies. The amount recognized was comprised of purchase price discount on sale of shares to BPI and a fair value revaluation gain of our investment. See Note 11 for the second quarter of 2019 also included a legal provision, net of settlements, of $55.2 million.further details.
Net Interest Expense
During
Net interest expense of $34.5 million increased $11.5 million in the three months ended June 30, 2020, net interest expense decreased $66.2 millionMarch 31, 2021, compared to the same period in 2019,2020, primarily due to higher interest expense associated with the change in the fair value of the redeemable financial liability. We revalued the mandatorily redeemable financial liability to reflect current expectations about the obligation and recognized a charge of $50.8 million$1.0 billion senior notes issued during the three months ended June 30, 2020 as compared to $140.2 million recognized during the same period in 2019. See Note 21 for further details. Net interest expense, excluding the fair value measurement of the mandatorily redeemable financial liability, also includes the impact of interest income and expenses, which were lower on a net basis compared to three months ended June 30, 2019.March 31, 2021.
Provision for Income Taxes
Our provision for income taxes for the three months ended June 30,March 31, 2021 and 2020 and 2019 reflected effective tax rates of 53.6%5.4% and 0.8% for the three months ended June 30, 2020 and 2019,0.7%, respectively. The year-over-year increasechange in the effective tax rate was primarily due to the impact of nondeductible goodwill impairments, offset in part by the reduced impact of losses in jurisdictions with a full valuation allowance offset in part byand a favorable change in the forecasted earnings mix. The increase also relates to one-time benefits, which were recorded in 2019, for the finalization of previously estimated tax liabilities based on the filing of tax returns.
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.
CONSOLIDATED RESULTS OF OPERATIONS OF TECHNIPFMC PLC
SIX MONTHS ENDED JUNE 30, 2020 AND 2019
| | | | | | | | | | | | | | | | | | | | | | | |
| Six Months Ended | | | | | | |
| June 30, | | | | Change | | |
| (In millions, except %) | 2020 | | 2019 | | $ | | % |
| Revenue | $ | 6,288.8 | | | $ | 6,347.2 | | | (58.4) | | | (0.9) | |
| | | | | | | |
| Costs and expenses | | | | | | | |
| Cost of sales | 5,342.7 | | | 5,157.1 | | | 185.6 | | | 3.6 | |
| Selling, general and administrative expense | 528.8 | | | 621.6 | | | (92.8) | | | (14.9) | |
| Research and development expense | 73.4 | | | 69.4 | | | 4.0 | | | 5.8 | |
| Impairment, restructuring and other expenses (Note 17) | 3,348.7 | | | 25.7 | | | 3,323.0 | | | 12,930.0 | |
| Separation costs (Note 2) | 27.1 | | | — | | | 27.1 | | | n/a |
| Merger transaction and integration costs | — | | | 25.0 | | | (25.0) | | | n/a |
| Total costs and expenses | 9,320.7 | | | 5,898.8 | | | 3,421.9 | | | 58.0 | |
| | | | | | | |
| Other income (expense), net | (38.2) | | | (98.8) | | | 60.6 | | | 61.3 | |
| Income from equity affiliates (Note 11) | 41.8 | | | 28.1 | | | 13.7 | | | 48.8 | |
| Net interest expense | (146.7) | | | (228.8) | | | 82.1 | | | 35.9 | |
| Income (loss) before income taxes | (3,175.0) | | | 148.9 | | | (3,323.9) | | | (2,232.3) | |
| Provision for income taxes (Note 19) | 55.4 | | | 15.4 | | | 40.0 | | | 259.7 | |
| Net income (loss) | (3,230.4) | | | 133.5 | | | (3,363.9) | | | (2,519.8) | |
| Net income attributable to non-controlling interests | (14.0) | | | (15.6) | | | 1.6 | | | 10.3 | |
| Net income (loss) attributable to TechnipFMC plc | $ | (3,244.4) | | | $ | 117.9 | | | (3,362.3) | | | (2,851.8) | |
Revenue
Revenue decreased $58.4 million in the first six months of 2020, compared to the prior-year period. Subsea revenue decreased year-over-year primarily due to negative impacts from foreign exchange translation due to a stronger U.S. dollar. Excluding foreign exchange impacts, project revenue grew primarily due to increased project activity in the Gulf of Mexico and Norway. Increased revenue in Technip Energies was primarily driven by the continued ramp-up of Arctic LNG 2, increased activity on downstream projects and Process Technology business, more than offset the decline in revenue from Yamal LNG, which continues to progress through the warranty phase. Technip Energies revenue was negatively impacted by COVID-19 related disruptions, which were offset by the increase in revenue as a result of a litigation settlement. Surface Technologies revenue decreased versus the prior-year period, primarily as a result of the significant decline in North American activity, the inbound delay in International market areas, and the impact of COVID-19 related disruptions.Discontinued Operations
Gross Profit
Gross profit (revenue less costIncome (loss) from discontinued operations, net of sales) income taxes was a percentage of sales decreased to 15.0% in$(60.2) million and $17.8 million for the first sixthree months ofended March 31, 2021 and 2020, compared to 18.8% in the prior-year period. Subsea gross profit primarily decreased due to a more competitively priced backlog and the negative operational impacts related to COVID-19.Gross profit declined inrespectively. Income (loss) from discontinued operations included results for Technip Energies, due in large part to a reduced contribution from Yamal LNG as the project reached physical completion last year and is progressing through the warranty phase. Surface Technologies gross profitwhich was negatively impacted primarily by the year-over-year decline in North American drilling and completions activity.
Selling, General and Administrative Expense
Selling, general and administrative expense decreased $92.8 million year-over-year, primarily as a result of decreased corporate expenses, driven by the accelerated pace of cost reduction actions.
Impairment, Restructuring and Other Expense
We incurred $3,348.7 million of restructuring, impairment and other charges during the first six months of 2020. These charges primarily included $3,083.4 million of goodwill impairment, $138.3 million of long-lived assets impairment, $65.4 million of COVID-19 related expenses, and $61.6 million for restructuring and severance expenses. COVID-19 related expenses represent unplanned, one-off, incremental and non-recoverable costs incurred solely as a result of 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. COVID-19 related expenses exclude costs associated with project and/or operational inefficiencies, time delays in performance delivery, indirect costs increases and potentially reimbursable or recoverable expenses.spun-off on February 16, 2021. See Note 17 for further details.
Merger Transaction and Integration Costs
We incurred merger transaction and integration costs of $25.0 million during the first six months of 2019, before the announcement of the planned separation transaction due to the continuation of the integration activities pertaining to combining the two legacy companies.
Separation Costs
We incurred $27.1 million of separation costs associated with the preparation of the separation transaction during the first six months of 2020. Due to the COVID-19 pandemic, the significant decline in commodity prices, and the heightened volatility in global equity markets, we have postponed the completion of the transaction until the markets sufficiently recover. See to Note 2 for further details.
Other Income (expense), Net
Other income (expense), net, primarily reflects foreign currency gains and losses, including gains and losses associated with the remeasurement of net cash positions. In the first six months of 2020, we recognized $49.1 million of net foreign exchange losses, compared with $29.6 million of net foreign exchange losses in the prior year period. The increase in foreign exchange losses during the first six months of 2020 resulted from the effects of the strengthening U.S. dollar on naturally hedged projects and increased hedging costs due to high volatility in the currency and interest rate markets. Other income (expense), net for the first half of 2019 also included a legal provision, net of settlements, of $55.2 million.
Net Interest Expense
Net interest expense decreased $82.1 million in the first six months of 2020, compared to 2019, primarily due to the change in the fair value of the redeemable financial liability. We revalued the mandatorily redeemable financial liability to reflect current expectations about the obligation and recognized a charge of $86.3 million during the first half of 2020 as compared to $224.9 million recognized during the same period in 2019. See Note 21 for further details. Net interest expense, excluding the fair value measurement of the mandatorily redeemable financial liability, also includes the impact of interest income and expenses, which were lower on a net basis compared to the first half of 2019.
Provision for Income Taxes
Our provision for income taxes for the first six months of 2020 and 2019 reflected effective tax rates of (1.7)% and 10.3%, respectively.The year-over-year increase in the effective tax rate was primarily due to the impact of nondeductible goodwill impairments, offset in part by a favorable change in forecasted earnings mix.
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.
SEGMENT RESULTS OF OPERATIONS OF TECHNIPFMC PLC
THREE MONTHS ENDED JUNE 30,MARCH 31, 2021 AND 2020 AND 2019
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 65 for further details.
Subsea
| | | Three Months Ended | | | | | | Three Months Ended | | |
| | June 30, | | | Favorable/(Unfavorable) | | | March 31, | | Favorable/(Unfavorable) |
| (In millions, except % and pts.) | 2020 | | 2019 | | $ | | % | |
| (In millions, except %) | | (In millions, except %) | 2021 | | 2020 | | $ | | % |
| Revenue | Revenue | $ | 1,378.5 | | | $ | 1,508.7 | | | (130.2) | | | (8.6) | | Revenue | $ | 1,386.5 | | | $ | 1,253.1 | | | 133.4 | | | 10.6 | |
| Operating profit (loss) | Operating profit (loss) | $ | (75.6) | | | $ | 94.6 | | | (170.2) | | | (179.9) | | Operating profit (loss) | $ | 37.0 | | | $ | (2,750.7) | | | 2,787.7 | | | 101.3 | |
| | Operating profit as a percentage of revenue | (5.5) | % | | 6.3 | % | | (11.8) pts. | |
| Operating profit (loss) as a percentage of revenue | | Operating profit (loss) as a percentage of revenue | 2.7 | % | | (219.5) | % | | 222.2 pts. |
Subsea revenue decreased $130.2increased $133.4 million, or 8.6%10.6%, year-over-year, primarily due to negative impacts from foreign exchange translation of $129.0 million due to a stronger U.S. dollar. Excluding foreign exchange impacts, revenue was flat, withhigher project revenue lower in Africa and Australia, partially offset by increased revenue from the Gulf of Mexico and Norway. Despite operational challenges associated with COVID-19 related disruptions, we continued to demonstrate strong execution of backlog.services activity.
Subsea operating profit decreased from the prior-year quarter primarily due to non-recurring charges, including $95.8 million of asset impairment, restructuring and other charges, compared to $4.5 million in 2019. Operating profit was also negatively affected by a more competitively priced backlog and the negative operational impacts related to COVID-19. Non-recurring charges incurred related to COVID-19 disruptions during the period were $27.4 million. See to Note 17 for further details.
Refer to “Non-GAAP Measures” for further information regarding our segment operating results.
Technip Energies(a)
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | | | | | |
| June 30, | | | | Favorable/(Unfavorable) | | |
| (In millions, except % and pts.) | 2020 | | 2019 | | $ | | % |
| Revenue | $ | 1,538.3 | | | $ | 1,505.0 | | | 33.3 | | | 2.2 | |
| Operating profit | $ | 231.3 | | | $ | 274.0 | | | (42.7) | | | (15.6) | |
| | | | | | | |
| Operating profit as a percentage of revenue | 15.0 | % | | 18.2 | % | | | | (3.2) pts. |
(a) In connection with the planned separation transaction, in the first quarter of 2020, we renamed our Onshore/Offshore segment Technip Energies. See Note 2 for further details.
Technip Energies revenue increased $33.3 million or 2.2% year-over-year. Revenue benefited from higher activity in LNG, downstream and by our Process Technology business. The continued ramp-up of Arctic LNG 2 more than offset the decline in revenue from Yamal LNG which continues to progress through the warranty phase. COVID-19 related operational efficiencies and business disruption also impeded revenue growth in the quarter. Revenues during the quarter benefited from the $113.2 million litigation settlement.
Operating profit decreased versus the prior-year quarter, primarily due to a reduced contribution from Yamal LNG and lower margin realization on early stage projects, including Arctic LNG 2. Project execution remained strong across the portfolio. Non-recurring charges incurred related to COVID-19 disruptions during the period were $24.8 million. See to Note 17 for further details.
Refer to ‘Non-GAAP Measures’ for further information regarding our segment operating results.
Surface Technologies
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | | | | | |
| June 30, | | | | Favorable/(Unfavorable) | | |
| (In millions, except % and pts.) | 2020 | | 2019 | | $ | | % |
| Revenue | $ | 241.7 | | | $ | 420.5 | | | (178.8) | | | (42.5) | |
| Operating profit | $ | (13.4) | | | $ | 25.5 | | | (38.9) | | | (152.5) | |
| | | | | | | |
| Operating profit as a percentage of revenue | (5.5) | % | | 6.1 | % | | | | (11.6) pts. |
Surface Technologies revenue decreased $178.8 million, or 42.5%, year-over-year, primarily driven by the significant decline in North American activity. COVID-19 related disruptions and reduced activity levels led to a more modest revenue decline outside of North America, where over 60% of total segment revenue was generated during the period.
Surface Technologies operating profit decreased versus the prior-year quarter primarily due to lower activity in North America driven by the significant decline in rig count and completions-related activity. Operating profit was also negatively impacted by non-recurring charges related to COVID-19 disruptions, which were $4.2 million for the three months ended June 30, 2020. See to Note 17 for further details.
Refer to “Non-GAAP Measures” for further information regarding our segment operating results.
Corporate Expenses
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | | | | | |
| June 30, | | | | Favorable/(Unfavorable) | | |
| (In millions, except %) | 2020 | | 2019 | | $ | | % |
| Corporate expenses | $ | (29.1) | | | $ | (120.9) | | | 91.8 | | | 75.9 | |
Corporate expenses decreased by $91.8 millionMarch 31, 2021 improved versus the prior year, primarily due to lower activity and cost cutting measures implemented during the second quarter of 2020. Corporate expense incurred during the second quarter of 2019 included a legal provision, net of settlements of, $55.2 million and $12.9 million of integration expenses.
Refer to “Non-GAAP Measures” for further information regarding our segment operating results.
SEGMENT RESULTS OF OPERATIONS OF TECHNIPFMC PLC
SIX MONTHS ENDED JUNE 30, 2020 AND 2019
Segment operating profit is defined as total segment revenue less segment operating expenses. Certain items have been excludedsignificant reduction in computing segment operating profit and are included in corporate items. See Note 6 for further details.
Subsea
| | | | | | | | | | | | | | | | | | | | | | | |
| Six Months Ended | | | | | | |
| June 30, | | | | Favorable/(Unfavorable) | | |
| (In millions, except %) | 2020 | | 2019 | | $ | | % |
| Revenue | $ | 2,631.6 | | | $ | 2,694.0 | | | (62.4) | | | (2.3) | |
| Operating profit (loss) | $ | (2,826.3) | | | $ | 144.5 | | | (2,970.8) | | | n/a |
| | | | | | | |
| Operating profit (loss) as a percentage of revenue | (107.4) | % | | 5.4 | % | | | | (112.8) pts. |
Subsea revenue decreased $62.4 million, or 2.3%, year-over-year, primarily due to negative impacts from foreign exchange translation of $198.0 million due to a stronger U.S. dollar. Excluding foreign exchange impacts, project revenue grew primarily due to increased project activity in the Gulf of Mexico and Norway. Despite operational challenges associated with COVID-19 related disruptions, we continued to demonstrate strong execution of backlog.
Subsea operating loss is due primarily to significantnon-cash impairment charges as well as benefits from prior year cost reduction activities and other non-recurring charges. The operating loss included $2,869.4 million of goodwill and long-lived assets impairments, restructuring and other charges and COVID-19 related expenses compared to $6.8 million in 2019. Non-recurring charges incurred related to COVID-19 disruptions during the period were $31.4 million. See Note 17 for further details.increased installation activity.
Refer to ‘Non-GAAP Measures’ below for more information regarding our segment operating results.
Technip Energies(a)
| | | | | | | | | | | | | | | | | | | | | | | |
| Six Months Ended | | | | | | |
| June 30, | | | | Favorable/(Unfavorable) | | |
| (In millions, except %) | 2020 | | 2019 | | $ | | % |
| Revenue | $ | 3,086.0 | | | $ | 2,840.1 | | | 245.9 | | | 8.7 | |
| Operating profit | $ | 382.5 | | | $ | 429.7 | | | (47.2) | | | (11.0) | |
| | | | | | | |
| Operating profit as a percentage of revenue | 12.4 | % | | 15.1 | % | | | | (2.7) pts. |
(a) In connection with the planned separation transaction, in the first quarter of 2020, we renamed our Onshore/Offshore segment Technip Energies. See Note 2 for further details.
Technip Energies revenue increased $245.9 million, or 8.7% year-over-year. Revenue benefited from higher activity in LNG, downstream and by our Process Technology business. The continued ramp-up of Arctic LNG 2 more than offset the decline in revenue from Yamal LNG which continues to progress through the warranty phase. COVID-19 related operational efficiencies and business disruption also impeded revenue growth during the six months ended June 30, 2020. Revenue during the period benefited from a $113.2 million litigation settlement.
Operating profit decreased year-over-year, primarily due to a reduced contribution from Yamal LNG and lower margin realization on early stage projects, including Arctic LNG 2. Project execution remained strong across the portfolio. Non-recurring charges incurred related to COVID-19 disruptions during the period were $28.7 million. See Note 17 for further details.
Refer to “Non-GAAP Measures” below for more information regarding our segment operating results.
Surface Technologies
| | | Six Months Ended | | | | | | Three Months Ended | | |
| | June 30, | | | Favorable/(Unfavorable) | | | March 31, | | Favorable/(Unfavorable) |
| (In millions, except %) | (In millions, except %) | 2020 | | 2019 | | $ | | % | (In millions, except %) | 2021 | | 2020 | | $ | | % |
| Revenue | Revenue | $ | 571.2 | | | $ | 813.1 | | | (241.9) | | | (29.8) | | Revenue | $ | 245.5 | | | $ | 329.5 | | | (84.0) | | | (25.5) | |
| Operating profit (loss) | Operating profit (loss) | $ | (437.4) | | | $ | 36.0 | | | (473.4) | | | n/a | Operating profit (loss) | $ | 8.2 | | | $ | (424.0) | | | 432.2 | | | 101.9 | |
| | Operating profit (loss) as a percentage of revenue | Operating profit (loss) as a percentage of revenue | (76.6) | % | | 4.4 | % | | (81.0) pts. | Operating profit (loss) as a percentage of revenue | 3.3 | % | | (128.7) | % | | 132.0 pts. |
Surface Technologies revenue decreased $241.9$84.0 million, or 29.8%25.5%, year-over-year, primarily driven by the significant declinereduction in operator activity in North American activity. COVID-19 related disruptions and reduced activity levels led to a more modest revenue declineAmerica. Revenue outside of North America where over 50%displayed resilience. Nearly 70% of total segment revenue was generated duringoutside of North America in the period.
Surface Technologies operating loss wasprofit improved versus the prior year, primarily due to impairment and restructuring charges. Operating loss was also negatively impacted by the reduced demand in North America driven by the significant declinereduction in rig countnon-cash impairment charges as well as improvements in execution, benefits from prior year cost reduction initiatives and completions-related activity. Non-recurring charges incurred related to COVID-19 disruptions during the period were $5.3 million. See Note 17 for further details.
Refer to ‘Non-GAAP Measures’ below for more information regarding our segment operating results.
Corporate Expenses
| | | Six Months Ended | | | | | | Three Months Ended | | |
| | June 30, | | | Favorable/(Unfavorable) | | | March 31, | | Favorable/(Unfavorable) |
| (In millions, except %) | (In millions, except %) | 2020 | | 2019 | | $ | | % | (In millions, except %) | 2021 | | 2020 | | $ | | % |
| Corporate expenses | Corporate expenses | $ | (98.0) | | | $ | (202.9) | | | 104.9 | | | 51.7 | | Corporate expenses | $ | (28.8) | | | $ | (30.3) | | | 1.5 | | | 5.0 | |
Corporate expenses decreased by $104.9 million primarily due to lower activity and cost cutting measures implemented during the first six months of 2020 and included $27.1 million of separation costs incurred during the first quarter of 2020. Corporate expense incurred during the first six months of 2019 included a legal provision, net of settlements, of $55.2 million and $25.0 million of integration expenses.remained flat year-over-year.
Refer to ‘Non-GAAP Measures’ for further information regarding our segment operating results.
NON-GAAP MEASURES
In addition to financial results determined in accordance with U.S. generally accepted accounting principles (“GAAP”), we provide non-GAAP financial measures (as defined in Item 10 of Regulation S-K of the Securities Exchange Act of 1934, as amended) below.below:
–Net income,Income from continuing operations, excluding charges and credits, as well as measures derived from it (excluding charges and credits;
–Income before net interest expense and taxes, excluding charges and credits ("Adjusted Operating profit");
–Depreciation and amortization, excluding charges and credits (“Adjusted Depreciation and amortization”);
–Earnings before net interest expense, income taxes, depreciation and amortization, excluding charges and credits ("Adjusted EBITDA");
–Corporate expenses excluding charges and credits and foreign exchange impacts; and
–Net (debt) cash
are non-GAAP financial measures.
Management believes that the exclusion of charges and credits from these financial measures enables investors and management to more effectively evaluate our operations and consolidated results of operations period-over-period, and to identify operating trends that could otherwise be masked or misleading to both investors and management by the excluded items. These measures are also used by management as performance measures in determining certain incentive compensation. The foregoing non-GAAP financial measures should be considered in addition to, not as a substitute for or superior to, other measures of financial performance prepared in accordance with GAAP.
The following is a reconciliation of the most comparable financial measures under GAAP to the non-GAAP financial measures.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended |
| March 31, 2021 |
| Income (loss) from continuing operations attributable to TechnipFMC plc | | Income attributable to non-controlling interest from continuing operations | | Provision (benefit) for income taxes | | Net interest expense and loss on early extinguishment of debt | | 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 | $ | 430.3 | | | $ | 1.8 | | | $ | 24.5 | | | $ | 58.0 | | | $ | 514.6 | | | $ | 95.2 | | | $ | 609.8 | |
| | | | | | | | | | | | | |
| Charges and (credits): | | | | | | | | | | | | | |
| Impairment and other charges | 18.8 | | | — | | | — | | | — | | | 18.8 | | | — | | | 18.8 | |
| Restructuring and other charges | 6.5 | | | — | | | 0.2 | | | — | | | 6.7 | | | — | | | 6.7 | |
| (Income) loss from investment in Technip Energies | (470.1) | | | — | | | — | | | — | | | (470.1) | | | — | | | (470.1) | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Adjusted financial measures | $ | (14.5) | | | $ | 1.8 | | | $ | 24.7 | | | $ | 58.0 | | | $ | 70.0 | | | $ | 95.2 | | | $ | 165.2 | |
| | | | | | | | | | | | | |
| Diluted earnings (loss) per share from continuing operations attributable to TechnipFMC plc, as reported | $ | 0.95 | | | | | | | | | | | | | |
| Adjusted diluted earnings per share from continuing operations attributable to TechnipFMC plc | $ | (0.03) | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended |
| March 31, 2020 |
| Income (loss) from continuing operations attributable to TechnipFMC plc | | Income attributable to non-controlling interest from continuing operations | | Provision (benefit) 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 | $ | (3,234.8) | | | $ | 6.9 | | | $ | (23.2) | | | $ | 23.0 | | | $ | (3,228.1) | | | $ | 108.7 | | | $ | (3,119.4) | |
| | | | | | | | | | | | | |
| Charges and (credits): | | | | | | | | | | | | | |
| Impairment and other charges | 3,159.9 | | | — | | | 28.1 | | | — | | | 3,188.0 | | | — | | | 3,188.0 | |
| Restructuring and other charges | 4.5 | | | — | | | 1.5 | | | — | | | 6.0 | | | — | | | 6.0 | |
| Direct COVID-19 expenses | 3.9 | | | — | | | 1.2 | | | — | | | 5.1 | | | — | | | 5.1 | |
| Purchase price accounting adjustment | 6.5 | | | — | | | 2.0 | | | — | | | 8.5 | | | (8.5) | | | — | |
| | | | | | | | | | | | | |
| Adjusted financial measures | $ | (60.0) | | | $ | 6.9 | | | $ | 9.6 | | | $ | 23.0 | | | $ | (20.5) | | | $ | 100.2 | | | $ | 79.7 | |
| | | | | | | | | | | | | |
| Diluted earnings (loss) per share from continuing operations attributable to TechnipFMC plc, as reported | $ | (7.23) | | | | | | | | | | | | | |
| Adjusted diluted earnings per share from continuing operations attributable to TechnipFMC plc | $ | (0.13) | | | | | | | | | | | | | |
CONSOLIDATED RESULTS OF OPERATIONS OF TECHNIPFMC PLC
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended |
| March 31, 2021 |
| Subsea | | Surface Technologies | | Corporate Expense | | Foreign Exchange, net and Other | | Total |
| Revenue | $ | 1,386.5 | | | $ | 245.5 | | | $ | — | | | $ | — | | | $ | 1,632.0 | |
| | | | | | | | | |
| Operating profit (loss), as reported (pre-tax) | $ | 37.0 | | | $ | 8.2 | | | $ | (28.8) | | | $ | 498.2 | | | $ | 514.6 | |
| | | | | | | | | |
| Charges and (credits): | | | | | | | | | |
| Impairment and other charges | 15.7 | | | 0.1 | | | 3.0 | | | — | | | 18.8 | |
| Restructuring and other charges | 4.0 | | | 2.7 | | | — | | | — | | | 6.7 | |
| (Income) loss from investment in Technip Energies | — | | | — | | | — | | | (470.1) | | | (470.1) | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| Subtotal | 19.7 | | | 2.8 | | | 3.0 | | | (470.1) | | | (444.6) | |
| | | | | | | | | |
| Adjusted Operating profit (loss) | 56.7 | | | 11.0 | | | (25.8) | | | 28.1 | | | 70.0 | |
| | | | | | | | | |
| Depreciation and amortization | 78.4 | | | 15.9 | | | 0.9 | | | — | | | 95.2 | |
| | | | | | | | | |
| Adjusted EBITDA | $ | 135.1 | | | $ | 26.9 | | | $ | (24.9) | | | $ | 28.1 | | | $ | 165.2 | |
| | | | | | | | | |
| Operating profit margin, as reported | 2.7 | % | | 3.3 | % | | | | | | 31.5 | % |
| | | | | | | | | |
| Adjusted Operating profit margin | 4.1 | % | | 4.5 | % | | | | | | 4.3 | % |
| | | | | | | | | |
| Adjusted EBITDA margin | 9.7 | % | | 11.0 | % | | | | | | 10.1 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | | | | | | | | | | | |
| June 30, 2020 | | | | | | | | | | | | |
| Net income (loss) attributable to TechnipFMC plc | | Net income (loss) attributable to non-controlling interests | | Provision (benefit) 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 | $ | 11.7 | | | $ | 3.6 | | | $ | 17.7 | | | $ | 74.4 | | | $ | 107.4 | | | $ | 106.6 | | | $ | 214.0 | |
| | | | | | | | | | | | | |
| Charges and (credits): | | | | | | | | | | | | | |
| Impairment and other charges | 53.5 | | | — | | | (19.8) | | | — | | | 33.7 | | | — | | | 33.7 | |
| Restructuring and other charges | 47.6 | | | — | | | 2.6 | | | — | | | 50.2 | | | — | | | 50.2 | |
| Direct COVID-19 expenses | 47.8 | | | — | | | 8.6 | | | — | | | 56.4 | | | — | | | 56.4 | |
| Litigation settlement | (113.2) | | | — | | | — | | | — | | | (113.2) | | | — | | | (113.2) | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Valuation allowance | (5.2) | | | — | | | 5.2 | | | — | | | — | | | — | | | — | |
| Adjusted financial measures | $ | 42.2 | | | $ | 3.6 | | | $ | 14.3 | | | $ | 74.4 | | | $ | 134.5 | | | $ | 106.6 | | | $ | 241.1 | |
| | | | | | | | | | | | | |
| Diluted earnings (loss) per share attributable to TechnipFMC plc, as reported | $ | 0.03 | | | | | | | | | | | | | |
| Adjusted diluted earnings per share attributable to TechnipFMC plc | $ | 0.09 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | | | | | | | | | | | |
| June 30, 2019 | | | | | | | | | | | | |
| Net income (loss) attributable to TechnipFMC plc | | Net income (loss) attributable to non-controlling interests | | Provision (benefit) 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 | $ | 97.0 | | | $ | 16.7 | | | $ | 0.9 | | | $ | 140.6 | | | $ | 255.2 | | | $ | 117.5 | | | $ | 372.7 | |
| | | | | | | | | | | | | |
| Charges and (credits): | | | | | | | | | | | | | |
| Impairment and other charges | 0.4 | | | — | | | 0.1 | | | — | | | 0.5 | | | — | | | 0.5 | |
| Restructuring and other severance charges | 6.7 | | | — | | | 2.0 | | | — | | | 8.7 | | | — | | | 8.7 | |
| Business combinations transaction and integration costs | 9.8 | | | — | | | 3.1 | | | — | | | 12.9 | | | — | | | 12.9 | |
| Legal provision, net | 55.2 | | | — | | | — | | | — | | | 55.2 | | | — | | | 55.2 | |
| Purchase price accounting adjustment | 6.5 | | | — | | | 2.0 | | | — | | | 8.5 | | | (8.5) | | | — | |
| Adjusted financial measures | $ | 175.6 | | | $ | 16.7 | | | $ | 8.1 | | | $ | 140.6 | | | $ | 341.0 | | | $ | 109.0 | | | $ | 450.0 | |
| | | | | | | | | | | | | |
| Diluted earnings (loss) per share attributable to TechnipFMC plc, as reported | $ | 0.21 | | | | | | | | | | | | | |
| Adjusted diluted earnings per share attributable to TechnipFMC plc | $ | 0.39 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended |
| March 31, 2020 |
| Subsea | | Surface Technologies | | Corporate Expense | | Foreign Exchange, net | | Total |
| Revenue | $ | 1,253.1 | | | $ | 329.5 | | | $ | — | | | $ | — | | | $ | 1,582.6 | |
| | | | | | | | | |
| Operating profit (loss), as reported (pre-tax) | $ | (2,750.7) | | | $ | (424.0) | | | $ | (30.3) | | | $ | (23.1) | | | $ | (3,228.1) | |
| | | | | | | | | |
| Charges and (credits): | | | | | | | | | |
| Impairment and other charges | 2,776.5 | | | 411.5 | | | — | | | — | | | 3,188.0 | |
| Restructuring and other charges* | (6.9) | | | 11.8 | | | 1.1 | | | — | | | 6.0 | |
| Direct COVID-19 expenses | 4.0 | | | 1.1 | | | — | | | — | | | 5.1 | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| Purchase price accounting adjustments | 8.5 | | | — | | | — | | | — | | | 8.5 | |
| Subtotal | 2,782.1 | | | 424.4 | | | 1.1 | | | — | | | 3,207.6 | |
| | | | | | | | | |
| Adjusted Operating profit (loss) | 31.4 | | | 0.4 | | | (29.2) | | | (23.1) | | | (20.5) | |
| | | | | | | | | |
| Adjusted Depreciation and amortization | 73.4 | | | 24.1 | | | 2.7 | | | — | | | 100.2 | |
| | | | | | | | | |
| Adjusted EBITDA | $ | 104.8 | | | $ | 24.5 | | | $ | (26.5) | | | $ | (23.1) | | | $ | 79.7 | |
| | | | | | | | | |
| Operating profit margin, as reported | -219.5 | % | | -128.7 | % | | | | | | -204.0 | % |
| | | | | | | | | |
| Adjusted Operating profit margin | 2.5 | % | | 0.1 | % | | | | | | -1.3 | % |
| | | | | | | | | |
| Adjusted EBITDA margin | 8.4 | % | | 7.4 | % | | | | | | 5.0 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Six Months Ended | | | | | | | | | | | | |
| June 30, 2020 | | | | | | | | | | | | |
| Net income (loss) attributable to TechnipFMC plc | | Net income (loss) attributable to non-controlling interests | | Provision (benefit) 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 | $ | (3,244.4) | | | $ | 14.0 | | | $ | 55.4 | | | $ | 146.7 | | | $ | (3,028.3) | | | $ | 227.0 | | | $ | (2,801.3) | |
| | | | | | | | | | | | | |
| Charges and (credits): | | | | | | | | | | | | | |
| Impairment and other charges | 3,213.4 | | | — | | | 8.3 | | | — | | | 3,221.7 | | | — | | | 3,221.7 | |
| Restructuring and other charges | 56.2 | | | — | | | 5.4 | | | — | | | 61.6 | | | — | | | 61.6 | |
| Direct COVID-19 expenses | 54.6 | | | — | | | 10.8 | | | — | | | 65.4 | | | — | | | 65.4 | |
| Litigation settlement | (113.2) | | | — | | | — | | | — | | | (113.2) | | | — | | | (113.2) | |
| Separation costs | 20.2 | | | — | | | 6.9 | | | — | | | 27.1 | | | — | | | 27.1 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Purchase price accounting adjustment | 6.5 | | | — | | | 2.0 | | | — | | | 8.5 | | | (8.5) | | | — | |
| Valuation allowance | (0.2) | | | — | | | 0.2 | | | — | | | — | | | — | | | — | |
| Adjusted financial measures | $ | (6.9) | | | $ | 14.0 | | | $ | 89.0 | | | $ | 146.7 | | | $ | 242.8 | | | $ | 218.5 | | | $ | 461.3 | |
| | | | | | | | | | | | | |
| Diluted earnings (loss) per share attributable to TechnipFMC plc, as reported | $ | (7.24) | | | | | | | | | | | | | |
| Adjusted diluted earnings per share attributable to TechnipFMC plc | $ | (0.02) | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Six Months Ended | | | | | | | | | | | | |
| June 30, 2019 | | | | | | | | | | | | |
| Net income (loss) attributable to TechnipFMC plc | | Net income (loss) attributable to non-controlling interests | | Provision (benefit) 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 | $ | 117.9 | | | $ | 15.6 | | | $ | 15.4 | | | $ | 228.8 | | | $ | 377.7 | | | $ | 236.9 | | | $ | 614.6 | |
| | | | | | | | | | | | | |
| Charges and (credits): | | | | | | | | | | | | | |
| Impairment and other charges | 0.9 | | | — | | | 0.3 | | | — | | | 1.2 | | | — | | | 1.2 | |
| Restructuring and other severance charges | 18.3 | | | — | | | 6.2 | | | — | | | 24.5 | | | — | | | 24.5 | |
| Business combinations transaction and integration costs | 18.7 | | | — | | | 6.3 | | | — | | | 25.0 | | | — | | | 25.0 | |
| Reorganization | 19.2 | | | — | | | 6.1 | | | — | | | 25.3 | | | — | | | 25.3 | |
| Legal provision, net | 55.2 | | | — | | | — | | | — | | | 55.2 | | | — | | | 55.2 | |
| Purchase price accounting adjustment | 13.0 | | | — | | | 4.0 | | | — | | | 17.0 | | | (17.0) | | | — | |
| Valuation allowance | (40.3) | | | — | | | 40.3 | | | — | | | — | | | — | | | — | |
| Adjusted financial measures | $ | 202.9 | | | $ | 15.6 | | | $ | 78.6 | | | $ | 228.8 | | | $ | 525.9 | | | $ | 219.9 | | | $ | 745.8 | |
| | | | | | | | | | | | | |
| Diluted earnings (loss) per share attributable to TechnipFMC plc, as reported | $ | 0.26 | | | | | | | | | | | | | |
| Adjusted diluted earnings per share attributable to TechnipFMC plc | $ | 0.45 | | | | | | | | | | | | | |
CONSOLIDATED RESULTS OF OPERATIONS OF TECHNIPFMC PLC
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | | | | | | | | | |
| June 30, 2020 | | | | | | | | | | |
| Subsea | | Technip Energies | | Surface Technologies | | Corporate Expense | | Foreign Exchange, net | | Total |
| Revenue | $ | 1,378.5 | | | $ | 1,538.3 | | | $ | 241.7 | | | $ | — | | | $ | — | | | $ | 3,158.5 | |
| | | | | | | | | | | |
| Operating profit (loss), as reported (pre-tax) | $ | (75.6) | | | $ | 231.3 | | | $ | (13.4) | | | $ | (29.1) | | | $ | (5.8) | | | $ | 107.4 | |
| | | | | | | | | | | |
| Charges and (credits): | | | | | | | | | | | |
| Impairment and other charges | 32.5 | | | — | | | 1.2 | | | — | | | — | | | 33.7 | |
| Restructuring and other charges | 35.9 | | | 11.1 | | | 1.3 | | | 1.9 | | | — | | | 50.2 | |
| Direct COVID-19 expenses | 27.4 | | | 24.8 | | | 4.2 | | | — | | | — | | | 56.4 | |
| Litigation settlement | — | | | (113.2) | | | — | | | — | | | — | | | (113.2) | |
| | | | | | | | | | | |
| Subtotal | 95.8 | | | (77.3) | | | 6.7 | | | 1.9 | | | — | | | 27.1 | |
| | | | | | | | | | | |
| Adjusted Operating profit (loss) | 20.2 | | | 154.0 | | | (6.7) | | | (27.2) | | | (5.8) | | | 134.5 | |
| | | | | | | | | | | |
| Adjusted Depreciation and amortization | 79.4 | | | 8.6 | | | 15.0 | | | 3.6 | | | — | | | 106.6 | |
| | | | | | | | | | | |
| Adjusted EBITDA | $ | 99.6 | | | $ | 162.6 | | | $ | 8.3 | | | $ | (23.6) | | | $ | (5.8) | | | $ | 241.1 | |
| | | | | | | | | | | |
| Operating profit margin, as reported | (5.5) | % | | 15.0 | % | | (5.5) | % | | | | | | 3.4 | % |
| | | | | | | | | | | |
| Adjusted Operating profit margin | 1.5 | % | | 10.0 | % | | -2.8 | % | | | | | | 4.3 | % |
| | | | | | | | | | | |
| Adjusted EBITDA margin | 7.2 | % | | 10.6 | % | | 3.4 | % | | | | | | 7.6 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | | | | | | | | | |
| June 30, 2019 | | | | | | | | | | |
| Subsea | | Technip Energies | | Surface Technologies | | Corporate Expense | | Foreign Exchange, net | | Total |
| Revenue | $ | 1,508.7 | | | $ | 1,505.0 | | | $ | 420.5 | | | $ | — | | | $ | — | | | $ | 3,434.2 | |
| | | | | | | | | | | |
| Operating profit (loss), as reported (pre-tax) | $ | 94.6 | | | $ | 274.0 | | | $ | 25.5 | | | $ | (120.9) | | | $ | (18.0) | | | $ | 255.2 | |
| | | | | | | | | | | |
| Charges and (credits): | | | | | | | | | | | |
| Impairment and other charges | (0.1) | | | — | | | 0.6 | | | — | | | — | | | 0.5 | |
| Restructuring and other severance charges | 4.6 | | | 2.1 | | | 0.6 | | | 1.4 | | | — | | | 8.7 | |
| Business combination transaction and integration costs | — | | | — | | | — | | | 12.9 | | | — | | | 12.9 | |
| Legal provision, net | — | | | — | | | — | | | 55.2 | | | — | | | 55.2 | |
| Purchase price accounting adjustments - amortization related | 8.5 | | | — | | | — | | | — | | | — | | | 8.5 | |
| Subtotal | 13.0 | | | 2.1 | | | 1.2 | | | 69.5 | | | — | | | 85.8 | |
| | | | | | | | | | | |
| Adjusted Operating profit (loss) | 107.6 | | | 276.1 | | | 26.7 | | | (51.4) | | | (18.0) | | | 341.0 | |
| | | | | | | | | | | |
| Adjusted Depreciation and amortization | 78.6 | | | 5.8 | | | 20.0 | | | 4.6 | | | — | | | 109.0 | |
| | | | | | | | | | | |
| Adjusted EBITDA | $ | 186.2 | | | $ | 281.9 | | | $ | 46.7 | | | $ | (46.8) | | | $ | (18.0) | | | $ | 450.0 | |
| | | | | | | | | | | |
| Operating profit margin, as reported | 6.3 | % | | 18.2 | % | | 6.1 | % | | | | | | 7.4 | % |
| | | | | | | | | | | |
| Adjusted Operating profit margin | 7.1 | % | | 18.3 | % | | 6.3 | % | | | | | | 9.9 | % |
| | | | | | | | | | | |
| Adjusted EBITDA margin | 12.3 | % | | 18.7 | % | | 11.1 | % | | | | | | 13.1 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Six Months Ended | | | | | | | | | | |
| June 30, 2020 | | | | | | | | | | |
| Subsea | | Technip Energies | | Surface Technologies | | Corporate Expense | | Foreign Exchange, net | | Total |
| Revenue | $ | 2,631.6 | | | $ | 3,086.0 | | | $ | 571.2 | | | $ | — | | | $ | — | | | $ | 6,288.8 | |
| | | | | | | | | | | |
| Operating profit (loss), as reported (pre-tax) | $ | (2,826.3) | | | $ | 382.5 | | | $ | (437.4) | | | $ | (98.0) | | | $ | (49.1) | | | $ | (3,028.3) | |
| | | | | | | | | | | |
| Charges and (credits): | | | | | | | | | | | |
| Impairment and other charges | 2,809.0 | | | — | | | 412.7 | | | — | | | — | | | 3,221.7 | |
| Restructuring and other charges* | 29.0 | | | 14.0 | | | 13.1 | | | 5.5 | | | — | | | 61.6 | |
| Direct COVID-19 expenses | 31.4 | | | 28.7 | | | 5.3 | | | — | | | — | | | 65.4 | |
| Litigation settlement | — | | | (113.2) | | | — | | | — | | | — | | | (113.2) | |
| Separation costs | — | | | — | | | — | | | 27.1 | | | — | | | 27.1 | |
| Purchase price accounting adjustments | 8.5 | | | — | | | — | | | — | | | — | | | 8.5 | |
| Subtotal | 2,877.9 | | | (70.5) | | | 431.1 | | | 32.6 | | | — | | | 3,271.1 | |
| | | | | | | | | | | |
| Adjusted Operating profit (loss) | 51.6 | | | 312.0 | | | (6.3) | | | (65.4) | | | (49.1) | | | 242.8 | |
| | | | | | | | | | | |
| Adjusted Depreciation and amortization | 152.8 | | | 17.7 | | | 39.1 | | | 8.9 | | | — | | | 218.5 | |
| | | | | | | | | | | |
| Adjusted EBITDA | $ | 204.4 | | | $ | 329.7 | | | $ | 32.8 | | | $ | (56.5) | | | $ | (49.1) | | | $ | 461.3 | |
| | | | | | | | | | | |
| Operating profit margin, as reported | (107.4) | % | | 12.4 | % | | (76.6) | % | | | | | | (48.2) | % |
| | | | | | | | | | | |
| Adjusted Operating profit margin | 2.0 | % | | 10.1 | % | | -1.1 | % | | | | | | 3.9 | % |
| | | | | | | | | | | |
| Adjusted EBITDA margin | 7.8 | % | | 10.7 | % | | 5.7 | % | | | | | | 7.3 | % |
*On December 30, 2019, we completed the acquisition of the remaining 50% of Technip Odebrecht PLSV CV. A $7.3 million gain recorded within restructuring and other charges in the Subsea segment during the six months ended June 30, 2020.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Six Months Ended | | | | | | | | | | |
| June 30, 2019 | | | | | | | | | | |
| Subsea | | Technip Energies | | Surface Technologies | | Corporate Expense | | Foreign Exchange, net | | Total |
| Revenue | $ | 2,694.0 | | | $ | 2,840.1 | | | $ | 813.1 | | | $ | — | | | $ | — | | | $ | 6,347.2 | |
| | | | | | | | | | | |
| Operating profit (loss), as reported (pre-tax) | $ | 144.5 | | | $ | 429.7 | | | $ | 36.0 | | | $ | (202.9) | | | $ | (29.6) | | | $ | 377.7 | |
| | | | | | | | | | | |
| Charges and (credits): | | | | | | | | | | | |
| Impairment and other charges | 0.6 | | | — | | | 0.6 | | | — | | | — | | | 1.2 | |
| Restructuring and other severance charges | 6.2 | | | 5.9 | | | 2.1 | | | 10.3 | | | — | | | 24.5 | |
| Business combination transaction and integration costs | — | | | — | | | — | | | 25.0 | | | — | | | 25.0 | |
| Reorganization | — | | | 25.3 | | | — | | | — | | | — | | | 25.3 | |
| Legal provision, net | — | | | — | | | — | | | 55.2 | | | — | | | 55.2 | |
| Purchase price accounting adjustments - amortization related | 17.0 | | | — | | | — | | | — | | | — | | | 17.0 | |
| Subtotal | 23.8 | | | 31.2 | | | 2.7 | | | 90.5 | | | — | | | 148.2 | |
| | | | | | | | | | | |
| Adjusted Operating profit (loss) | 168.3 | | | 460.9 | | | 38.7 | | | (112.4) | | | (29.6) | | | 525.9 | |
| | | | | | | | | | | |
| Adjusted Depreciation and amortization | 157.6 | | | 15.8 | | | 38.1 | | | 8.4 | | | — | | | 219.9 | |
| | | | | | | | | | | |
| Adjusted EBITDA | $ | 325.9 | | | $ | 476.7 | | | $ | 76.8 | | | $ | (104.0) | | | $ | (29.6) | | | $ | 745.8 | |
| | | | | | | | | | | |
| Operating profit margin, as reported | 5.4 | % | | 15.1 | % | | 4.4 | % | | | | | | 6.0 | % |
| | | | | | | | | | | |
| Adjusted Operating profit margin | 6.2 | % | | 16.2 | % | | 4.8 | % | | | | | | 8.3 | % |
| | | | | | | | | | | |
| Adjusted EBITDA margin | 12.1 | % | | 16.8 | % | | 9.4 | % | | | | | | 11.8 | % |
INBOUND ORDERS AND ORDER BACKLOG
Inbound orders - Inbound orders represent the estimated sales value of confirmed customer orders received during the reporting period.COVID-19 has had a minimal impact on our ability to finalize sales contracts required to recognize new inbound orders in the quarter. However, the significant decline in commodity prices, due in part to the lower demand resulting from COVID-19, is expected to negatively impact the near-term outlook for inbound orders.
| | | Inbound Orders | | | | Inbound Orders |
| | Three Months Ended | | | Six Months Ended | | | | Three Months Ended |
| | June 30, | | | June 30, | | | | March 31, |
| (In millions) | (In millions) | 2020 | | 2019 | | 2020 | | 2019 | (In millions) | | 2021 | | 2020 |
| Subsea | Subsea | $ | 511.7 | | | $ | 2,632.7 | | | $ | 1,683.8 | | | $ | 5,310.4 | | Subsea | | $ | 1,518.8 | | | $ | 1,172.1 | |
| Technip Energies | 835.8 | | | 8,131.2 | | | 1,396.4 | | | 11,270.0 | | |
| Surface Technologies | Surface Technologies | 187.1 | | | 415.7 | | | 553.4 | | | 783.6 | | Surface Technologies | | 203.3 | | | 366.3 | |
| Total inbound orders | Total inbound orders | $ | 1,534.6 | | | $ | 11,179.6 | | | $ | 3,633.6 | | | $ | 17,364.0 | | Total inbound orders | | $ | 1,722.1 | | | $ | 1,538.4 | |
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. The scheduling of some future work included in our order backlog has been impacted by COVID-19 related disruptions and remains subject to future adjustment. See Note 5 for further details.
| | | Order Backlog | | | Order Backlog |
| (In millions) | (In millions) | June 30,
2020 | | December 31,
2019 | (In millions) | March 31,
2021 | | December 31,
2020 |
| Subsea | Subsea | $ | 7,085.3 | | | $ | 8,479.8 | | Subsea | $ | 6,857.1 | | | $ | 6,876.0 | |
| Technip Energies | 13,132.6 | | | 15,298.1 | | |
| Surface Technologies | Surface Technologies | 385.9 | | | 473.2 | | Surface Technologies | 364.3 | | | 413.5 | |
| Total order backlog | Total order backlog | $ | 20,603.8 | | | $ | 24,251.1 | | Total order backlog | $ | 7,221.4 | | | $ | 7,289.5 | |
Subsea - Order backlog for Subsea at June 30, 2020 decreased by $1.4 billion compared to December 31, 2019. Subsea backlog of $7.1$6.9 billion at June 30, 2020as of March 31, 2021 was composed of various subsea projects, including Total Golfinho;Mozambique LNG; Eni Coral and Merakes; Petrobras Mero I;I and Mero II; Energean Karish;Karish North, El Amriya and Idku; ExxonMobil Liza Phase 2; Neptune Duva & Gjøa P1;Payara; Petronas Limbayong; Reliance MJ1;MJ-1; Equinor Johan Sverdrup Phase 2;Breidablikk; Husky West White Rose; BP Platina; Chevron Gorgon Stage 2; andSantos Barossa Phase I; Woodside Pyxis and Lambert Deep.
Technip Energies - Technip Energies order backlog at June 30, 2020 decreased by $2.2 billion compared to December 31, 2019. Technip Energies backlog of $13.1 billion at June 30, 2020 was composed of various projects, including Arctic LNG 2, Yamal LNG; Midor refinery expansion; BP Tortue FPSO; Long Son Petrochemicals; ExxonMobil Beaumont refinery expansion; HURL fertilizer plants; Petronas Kasawari; Energean Karish; Neste bio-diesel expansion; and Motor Oil Hellas New Naphtha Complex.
Surface Technologies - Order backlog for Surface Technologies at June 30, 2020as of March 31, 2021 decreased by $87.3$49.2 million compared to December 31, 2019.2020. Given the short-cycle nature of the business, most orders are quickly converted into sales revenue; longer contracts are typically converted within 12 months.
Non-consolidated backlog - As of March 31, 2021, we had $611.6 million of non-consolidated order backlog in our Subsea segment. Non-consolidated order backlog reflects the proportional share of backlog related to joint ventures that is not consolidated due to our minority ownership position.
| | | | | |
| Non-consolidated order backlog |
(In millions) | June 30,
2020 |
Subsea | $ | 702.8 | |
Technip Energies | 2,095.4 | |
Total order backlog | $ | 2,798.2 | |
LIQUIDITY AND CAPITAL RESOURCES
Most of our cash is managed centrally and flowedflows through centralized bank accounts controlled and maintained by TechnipFMC globally and in many operating jurisdictions to best meet the liquidity needs of our global operations.
We expect to meet the continuing funding requirements of our global operations with cash generated by such operations and our existing revolving credit facility.Revolving Credit Facility.
Net (Debt) Cash - Net (debt) cash, 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, or net cash, is a meaningful financial measure that may assist investors in understanding our financial condition and recognizing underlying trends in our capital structure. Net (debt) cash 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 cash,debt, utilizing details of classifications from our condensed consolidated balance sheets:
| | (In millions) | (In millions) | June 30,
2020 | | December 31,
2019 | (In millions) | March 31,
2021 | | December 31,
2020 |
| Cash and cash equivalents | Cash and cash equivalents | $ | 4,809.5 | | | $ | 5,190.2 | | Cash and cash equivalents | $ | 752.8 | | | $ | 1,269.2 | |
| Short-term debt and current portion of long-term debt | Short-term debt and current portion of long-term debt | (524.1) | | | (495.4) | | Short-term debt and current portion of long-term debt | (96.8) | | | (624.7) | |
| Long-term debt, less current portion | Long-term debt, less current portion | (3,982.9) | | | (3,980.0) | | Long-term debt, less current portion | (2,434.3) | | | (2,835.5) | |
| Net cash | $ | 302.5 | | | $ | 714.8 | | |
| Net debt | | Net debt | $ | (1,778.3) | | | $ | (2,191.0) | |
Cash Flows
Operating cash flows from continuing operations - During the sixthree months ended June 30,March 31, 2021 and 2020, we consumed $66.0generated $181.5 million and used $439.8 million, respectively, in operating cash flows from continuing operations. The increase of $621.3 million in cash flows fromgenerated by operating activities as compared to $195.5 million generated during in the six months ended June 30, 2019, resulting in a $261.5 million decrease compared to the prior-year period. The decreasefrom continuing operations was primarily due primarily to timing differences on project milestones and vendor payments. In addition, operating cash flows for the six months ended June 30, 2020, decreased due to the negative working capital impact of the litigation settlement receivable recorded in the second quarter of 2020 and expected to be cash collected in early 2021, and by the $48.5 million scheduled payment for a previously recorded litigation settlement.
Investing cash flows from continuing operations - Investing activities provided $196.9 million during the three months ended March 31, 2021 and used $137.3 million and $287.5$64.0 million of cash during the sixthree months ended June 30, 2020 and 2019, respectively.March 31, 2020. The decreaseincrease of $150.2$260.9 million in cash usedprovided by investing activities was primarily due primarily to decreasedthe proceeds received from BPI and a reduction of capital expenditures and decreased payments to acquire debt securities during the sixthree months ended June 30, 2020.March 31, 2021.
Financing cash flows from continuing operations - Financing activities used $128.6$866.6 million and $828.5provided $261.2 million of cash during the sixthree months ended June 30,March 31, 2021 and 2020, and 2019, respectively. The decrease of $699.9 millionincrease in cash used by financing activities was primarily due primarily to our efforts and commitment to preserve cashthe increased debt pay down activity during the sixthree months ended June 30, 2020,March 31, 2021.
Debt and Liquidity
Debt Financing Transactions in Connection with the Spin-off
In connection with the Spin-off, we executed a series of refinancing transactions, in order to provide a capital structure with sufficient cash resources to support future operating and investment plans.
Debt Issuance
•On February 16, 2021, we entered into a credit agreement, which included reductionprovides for a $1.0 billion three-year senior secured multicurrency revolving credit facility (“Revolving Credit Facility”) including a $450.0 million letter of credit subfacility; and
•On January 29, 2021, we issued $1.0 billion of 6.50% senior notes due 2026 (the “2021 Notes”).
Repayment of Debt
The proceeds from the debt issuance described above along with the available cash on hand were used to fund:
•The repayment of all $542.4 million of the outstanding Synthetic Convertible Bonds that matured in cash dividendsJanuary 2021;
•The repayment of all $500.0 million aggregate principal amount of outstanding 3.45% Senior Notes due 2022. In connection with the repayment, we recorded a loss on extinguishment of debt of $23.5 million related to the difference between the amount paid and share repurchases.the net carrying value of the debt; and
•The termination of the $2.5 billion senior unsecured revolving credit facility we entered into on January 17, 2017; and the termination of the €500.0 million Euro Facility entered into on May 19, 2020; and the termination of the CCFF Program entered into on May 19, 2020. In connection with the termination of these credit facilities, we repaid $830.9 million of the outstanding commercial paper borrowings.
Debt and Liquidity
Significant Funding and Liquidity Activities - DuringAvailability of borrowings under the six months ended June 30, 2020, we completed the following transactions in order to enhance our total liquidity position:
•Issued €150 million aggregate principal amount of new 4.500% notes due June 30, 2025. On July 31, 2020, we entered into a subscription agreement with respect to the issuance and sale of an additional €50 million aggregate principal amount of the Euro Denominated Notes, which is expected to close on August 4, 2020 and is subject to the satisfaction of customary conditions precedent. In the event of the spin-off of our Technip Energies business segment followed, within three months of the effective date of the spin-off, by a downgrade by a nationally recognized rating agency of the corporate rating of TechnipFMC from an investment grade to a non-investment grade rating or a withdrawal of any such rating, the interest rate applicable to the Euro Denominated Notes will be increased to 5.75%;
•Entered into a new, six-month €500 million senior unsecured revolving credit facility agreement which may be extended for two additional three-month periods; and
•Entered into the CCFF Program, which allows us to issue up to £600 million of unsecured commercial paper notes.
Revolving Credit Facilities - The following is a summary of our revolving credit facilities at June 30, 2020:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(In millions) Description | Amount | | Debt
Outstanding | | Commercial Paper Outstanding(a) | | Letters
of
Credit | | Unused
Capacity | | Maturity |
| Revolving credit facility | $ | 2,500.0 | | | $ | — | | | $ | 1,459.5 | | | $ | — | | | $ | 1,040.5 | | | January 2023 |
| CCFF Program | £ | 600.0 | | | £ | — | | | £ | 320.0 | | | £ | — | | | £ | 280.0 | | | March 2021 |
| Euro Facility | € | 500.0 | | | € | — | | | € | — | | | € | — | | | € | 500.0 | | | November 2020 |
| Bilateral credit facility | € | 100.0 | | | € | — | | | € | — | | | € | — | | | € | 100.0 | | | May 2021 |
(a)Under our commercial paper program, we have the ability to access up to $1.5 billion and €1.0 billion of financing through our commercial paper dealers. Our available capacity under our revolving credit facilityFacility is reduced by anythe outstanding commercial paper.
Committedletters of credit available under our revolving credit facility providesissued against the ability to issue our commercial paper obligations on a long-term basis. We had $1,459.5 millionfacility. As of commercial paper issued under our facility at June 30, 2020. As we had both the ability and intent to refinance these obligations on a long-term basis, these commercial paper borrowings were classified as long-term debt in the accompanying condensed consolidated balance sheets at June 30, 2020.
On June 12, 2020, we entered into Amendment No. 1 to the Facility Agreement and into an Amendment and Restatement Agreement to our Euro Facility. The amendments, which are effective through the respective expirations of the Facility Agreement and Euro Facility, permit us to include the gross book value of $3.2 billion of goodwill (fully impaired in the quarter ended March 31, 2020) in the calculation2021, there were no letters of consolidated net worth, which is used in the calculationcredit outstanding and availability of our quarterly compliance with the total capitalization ratioborrowings under the Revolving Credit Facility Agreement and Euro Facility.was $800.0 million.
As of June 30, 2020,March 31, 2021, we were in compliance with all restrictive covenants under our credit facilities.the Revolving Credit Facility. See Note 1413 for further details.
Credit Ratings - Our credit ratings with Standard and Poor’s (S&P) are BBB+BB+ for our long-term unsecured debt and A-2B for our short-term debt and commercial paper program. Our credit ratings with Moody’s are Baa2Ba1 for our long-term unsecured debt and P-2NP for our commercial paper program.
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 Note 2120 for further details.
The significant declines in the equity markets and in the valuation of other assets precipitated by the COVID-19 pandemic negatively affected the values of our pension plan assets during the first quarter ended March 31, 2020. While the equity markets and the valuation of other assets have recovered moderately during the quarter ended June 30, 2020, the fair values of our pension plan assets remain lower than pre-pandemic levels. If pension plan asset values do not continue to recover to pre-pandemic levels or deteriorate again as a result of uncertainty regarding the timing and pace of economic recovery from the COVID-19 pandemic, we may incur increased pension expense in future periods.
Financial Position Outlook
InWe are committed to a strong balance sheet and ample liquidity that that will enable us to avoid distress in cyclical troughs and access capital markets throughout the current, uncertain market environment duecycle. We believe our liquidity has and continues to exceed the COVID-19 pandemiclevel required to achieve this goal.
Our objective in financing our business is to maintain sufficient liquidity, adequate financial resources and financial flexibility in order to fund the oil price decline, we are strategically focused on cash and liquidity preservation.
We reducedrequirements of our expectations forbusiness. Our capital expenditures in thecan be adjusted and managed to match market demand and activity levels. Based on current year by more than 30%market conditions and our future expectations, our capital expenditures for 2021 are estimated to be approximately $300.0$250.0 million. Projected capital expenditures for 2020 do not include any contingent capital that may be needed to respond to a contract award.
We announced a series of cost reduction initiatives that will result in annualized savings of more than $350.0 million that extendSubsequent to all business segments and support functions. We anticipate achieving the targeted savings run-rate by the endcompletion of the year.
Additionally,Spin-off and sale of shares to BPI, we announced revisions to compensation through the endown 45.7% of the year which includeoutstanding shares of Technip Energies as of March 31, 2021.
On April 27, 2021 we sold 25 million Technip Energies shares through a 30% reductionprivate placement by way of an accelerated bookbuild offering (the “Placement”). Concurrently with the Placement, Technip Energies purchased from TechnipFMC 1.8 million shares. This purchase was separate from the Placement. Upon completion of the Placement and the Concurrent Sale to the Chairman and Chief Executive Officer’s salary;Technip Energies, TechnipFMC retains a 30% reduction in the Boarddirect stake of Directors’ retainer; and a 20% reduction to the Executive Leadership team’s salaries.55.5 million shares, representing 31% of Technip Energies’ share capital.
In April 2020, our Board of Directors announced its decision to lower the annual dividend by 75% to $0.13 per share. TechnipFMC paid a dividend of $0.13 per share earlier this year, and this fulfills the annual dividend distribution for 2020. The revised dividend policy will reduce the annual cash outflow by $175 million when compared to the previous year’s distribution. We intend to payconduct an orderly sale of our remaining stake in Technip Energies over time and will use the 2021 dividendproceeds (net of broker fees and discounts) from future sales to further reduce our net leverage. We do not intend to remain a long-term shareholder of Technip Energies and will exit our ownership stake in quarterly installments beginning in April 2021.
Historically, TechnipFMC has generated liquiditya timely and capital resources primarily through operations and, when needed, through its credit facility. We have $1,040.5 million of capacity available under our revolving credit facility that we expect to utilize if working capital needs temporarily increase. The volatility in credit, equity and commodity markets creates some uncertainty for its businesses.
While client conversations remain ongoing, the Company’s increased visibility gives us confidence in our full-year guidance for all business segments. We expect free cash flow to be between cash flow neutral and $150.0 million. We define free cash flow as cash flow from operating activities less capital expenditures.
CRITICAL ACCOUNTING ESTIMATES
Refer to our Annual Report on Form 10-K for the year ended December 31, 20192020 for a discussion of our critical accounting estimates. During the sixthree months ended June 30, 2020,March 31, 2021, there were no changes to our identified critical accounting estimates, other than those indicated below.
Revenue Recognition
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 material resources, productivity, and weather, all of which can affect the accuracy of our cost estimates, and ultimately, our future profitability.
Our operating loss for the three and six months ended June 30, 2020 was positively impacted by approximately $96.7 million and $174.9 million, as a result of changes in contract estimates related to projects that were in progress at June 30, 2020. During the three and six months endedJune 30, 2020, we recognized changes in our estimates that had an impact on our margin in the amounts of $104.7 million, $(7.1) million, and $(0.9) million for the three months ended and $174.6 million, $4.5 million, and $(4.2) million for the six months ended in our Technip Energies, Subsea, and Surface Technologies segments, respectively. The changes in contract estimates are attributed to better-than-expected performance in the execution of our projects.
Our operating profit was positively impacted by approximately $275.1 million and $432.3 million for the three and six months ended June 30, 2019, comprising $147.0 million and $128.1 million for the three months ended and $256.9 million and $175.4 million for the six months ended June 30, 2019 in our Technip Energies and Subsea segments, respectively. The changes in contract estimates were attributed to better than expected performance in the execution of our projects.estimates.
OTHER MATTERS
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 FCPA.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 we have also raised with DOJ certain other projects performed by Technip S.A. subsidiaries in Brazil between 2002 and 2013. The DOJ has 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 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”)) about these existing matters.
On June 25, 2019, we 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 will not be required to have a monitor and will, instead, provide reports on our anti-corruption program to the Brazilian and U.S. authorities for two and three years, respectively.
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 will also provide the DOJ reports on our anti-corruption program during the term of the DPA.
In Brazil, 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 have committed, as part of those agreements, to make certain enhancements to their compliance programs in Brazil during a two-year self-reporting period, which aligns 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.
To date, the investigation by 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. As we continue to progress our discussions with PNF towards resolution, 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 anticorruptionanti-corruption laws and regulations that it may seek to impose in appropriate circumstances including, but not limited to, fines, penalties, 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.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
For quantitative and qualitative disclosures about market risk affecting the Company, see Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk,” in our Annual Report on Form 10-K for the year ended December 31, 2019.2020. Our exposure to market risk has not changed materially since December 31, 2019.2020.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
As of June 30, 2020,March 31, 2021, under the direction of our Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of our disclosure controls and procedures, as defined in Rule 13a-15(e) under the Exchange Act. Based upon this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of June 30, 2020.March 31, 2021.
Changes in Internal Controls over Financial Reporting
There were no changes in our internal control over financial reporting during the three months ended June 30, 2020March 31, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II — OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
A purported shareholder class action filed in 2017 and amended in January 2018 and captioned Prause v. TechnipFMC, et al., No. 4:17-cv-02368 (S.D. Texas) is pending in the U.S. District Court for the Southern District of Texas (“District Court”) against the Company and certain current and former officers and employees of the Company. The suit alleged violations of the federal securities laws in connection with the Company's restatement of our first quarter 2017 financial results and a material weakness in our internal control over financial reporting announced on July 24, 2017. On January 18, 2019, 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”). A remainingThe shareholder also asserted a claim for alleged violation of Section 11 of the Securities Act in connection with the reporting of certain financial results in the Company’s Registration Statement on Form S-4 Registration Statement filed in 2016 is pending2016. On December 13, 2020, the parties filed a Stipulation and seeks unspecified damages.Agreement of Settlement to settle all claims asserted in the suit with prejudice. The Company is vigorously contestingDefendants entered into the Stipulation solely to eliminate the burden, expense, uncertainty and risk of further litigation, and cannot predict its duration or outcome.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. On March 22, 2021, after a hearing, the Court entered a final judgment approving the settlement.
In addition to the above-referenced matter, we are involved in various other pending or potential legal actions or disputes in the ordinary course of our business. These actions and disputes can involve our agents, suppliers, clients, and join venture partners and can include claims related to payment of fees, service quality, and ownership arrangements including certain put or call options. Management is unable to predict the ultimate outcome of these actions because of their inherent uncertainty. However, management believes 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.
ITEM 1A. RISK FACTORS
In additionAs of the date of this filing, there have been no material changes or updates to our risk factors that were previously disclosed in Part I, Item 1A of our Annual Report on Form 10-K for the year ended the December 31, 2019, the following risk factor was identified:2020.
The COVID-19 pandemic has significantly reduced demand for our products and services, and has 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 oil and natural gas markets. Measures taken to address and limit the spread of the disease-such as stay-at-home orders, social distancing guidelines, and travel restrictions-have adversely affected the economies and financial markets of many countries. The resulting disruption to our operations, communications, travel, 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.
While the full impact of the COVID-19 pandemic is not yet known, we are closely monitoring the effects of the pandemic on commodity demands and on our customers, as well as on our operations and employees. These effects include adverse revenue and net income effects; disruptions to our operations; potential project delays or cancellations; employee impacts from illness, school closures, and other community response measures; and temporary closures of our facilities or the facilities of our customers and suppliers.
COVID-19, and the volatile regional and global economic conditions stemming from the pandemic, could also aggravate the other risk factors that we identified in Part I, Item 1A, “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2019, including but not limited to risks related to the demand for oil and gas, which may not recover immediately. The full extent to which the COVID-19 pandemic will impact our results is unknown and evolving and will depend on various factors and consequences beyond our control, such as the severity, duration, and spread of COVID-19; the success of actions taken by governments and health organizations to combat the disease and treat its effects; decisions by our alliance partners and customers regarding their business plans and capital expenditures; and the extent to which, and the timing of, general economic and operating conditions recover.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
We had no unregistered sales of equity securities during the three months ended June 30, 2020.
The following table summarizes repurchases of our ordinary shares during the three months ended June 30, 2020.March 31, 2021.
Issuer Purchases of Equity Securities
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Period | | Total Number
of Shares Purchased | | 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 (a)
|
April 1, 2020 – April 30, 2020 | | — | | | $ | — | | | — | | | 14,286,427 | |
May 1, 2020 – May 31, 2020 | | — | | | $ | — | | | — | | | 14,286,427 | |
June 1, 2020 – June 30, 2020 | | — | | | $ | — | | | — | | | 14,286,427 | |
Total | | — | | | | | — | | | 14,286,427 | |
We did not have any purchases of equity securities during the three months ended March 31, 2021.(a)In December 2018, our Board of Directors authorized an extension of our share repurchase program for $300 million for the purchase of ordinary shares.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
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| Exhibit Number | | Exhibit Description |
| | |
| | |
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| | |
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| | |
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| | |
| | |
| 4.1 | | |
| 4.1.a | | |
| 10.1 | | DealerSeparation and Distribution Agreement, dated as of May 19, 2020January 7, 2021, by and between TechnipFMC plc, as Issuer; FMC Technologies, Inc., as Guarantor;the Company and Bank of America Merrill Lynch International DAC, as Arranger and DealerTechnip Energies B.V. (incorporated by reference from Exhibit 10.1 to the Current Report on Form 8-K filed on May 21, 2020)January 12, 2021) (File No. 001-37983). |
| 10.2 | | Issuing and Paying AgencyShare Purchase Agreement, dated as of May 19, 2020January 7, 2021, by and between TechnipFMC plc, as Issuer; FMC Technologies, Inc., as Guarantor;the Company and Bank of America, National Association, London Branch, an Issue and Paying Agent and Calculation AgentBpifrance Participations SA (incorporated by reference from Exhibit 10.2 to the Current Report on Form 8-K filed on May 21, 2020)January 12, 2021) (File No. 001-37983). |
| 10.3 | | €500,000,000 FacilityRelationship Agreement, dated as of May 19, 2020 between TechnipFMC plcJanuary 7, 2021, by and among the Company, Technip Eurocash SNC, as borrowers; HSBC France, as Agent;Energies B.V. and the lenders party theretoBpifrance Participations SA (incorporated by reference from Exhibit 10.3 to the Current Report on Form 8-K filed on May 21, 2020)January 12, 2021) (File No. 001-37983). |
| 10.4 | | |
| 10.5 | | Tax Matters Agreement, dated as of June 12, 2020,February 16, 2021 by and amongbetween TechnipFMC plc FMC Technologies, Inc. and Technip Eurocash SNC, as borrowers; JPMorgan Chase Bank, N.A., as agent and an arranger; SG Americas Securities LLC as an arranger; and the other lenders party theretoEnergies B.V. (incorporated by reference from Exhibit 10.1 to the Current Report on Form 8-K filed on June 15, 2020)February 16, 2021) (File No. 001-37983). |
10.510.6 | | Amendment and Restatement Agreement to €500,000,000 FacilityEmployee Matters Agreement, dated as of June 12, 2020February 15, 2021, by and between TechnipFMC plc and Technip Eurocash SNC, as borrowers; HSBC France, as Agent; and the lenders party theretoEnergies B.V. (incorporated by reference from Exhibit 10.2 to the Current Report on Form 8-K filed on June 15, 2020)February 16, 2021) (File No. 001-37983). |
| 10.7 | | |
| 10.8 | | |
| 10.9 | | |
| 10.10 | | Credit Agreement, dated February 16, 2021, by and among TechnipFMC plc, JPMorgan Chase Bank, N.A., Citigroup Global Markets Inc. or an affiliate, DNB Capital, LLC or an affiliate, Société Générale, Sumitomo Mitsui Banking Corporation, Wells Fargo Securities, LLC and BofA Securities, Inc., collectively, as lead arrangers, JPMorgan Chase Bank, N.A., as administrative agent, Standard Chartered Bank, as documentation agent, and the lenders party thereto (incorporated by reference from Exhibit 10.6 to the Current Report on Form 8-K filed on February 16, 2021) (File No. 001-37983) |
| 10.11* | | |
| 10.12* | | |
| 10.13* | | |
| 31.1 | | |
| 31.2 | | |
| 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.
** Furnished with this Quarterly Report on Form 10-Q.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
TechnipFMC plc
(Registrant)
| | | | | |
| |
| /s/ Krisztina Doroghazi | |
| Krisztina Doroghazi | |
Senior Vice President, Controller and Chief Accounting Officer
(Principal Accounting Officer and a Duly Authorized Officer) | |
Date: July 31, 2020May 3, 2021