Restatement of Financial Statement | NOTE 2. RESTATEMENT OF FINANCIAL STATEMENTS In the Original Filing, we recognized significant net foreign exchange gains. In July 2017, incremental reviews were performed on the gains and losses from foreign currency denominated transactions which operate as natural hedges on its projects. For each project, a currency rate is established at the time the project is awarded, and this “project rate” is used to measure foreign currency gains and losses throughout the life of the project for project performance purposes. Periodic remeasurement of foreign exchange gains and losses is required for financial statement reporting. During our review, management found that there were errors in the rates used for remeasurement and related foreign exchange adjustments. In late July 2017, management concluded that this deviation led to the misstatement of foreign exchange gains and losses in certain of our engineering and construction projects and the fair value measurement of certain related ownership interests for the periods presented in the Original Filing. On July 24, 2017, the Audit Committee of the Board of Directors of the Company, after consideration of relevant facts and circumstances and after consultation with management and PricewaterhouseCoopers LLP, our independent registered public accounting firm, concluded that our unaudited interim condensed consolidated U.S. GAAP financial statements as of March 31, 2017 and for the three months ended March 31, 2017 and prior year periods included for comparison purposes in our Quarterly Report on Form 10-Q These errors resulted in the restatement of the Company’s financial statements for the periods presented in the Original Filing. Restatement adjustments were recorded for other income (expense), income from equity affiliates, net interest expense, provision for income taxes and billings in excess of costs as a result of the correction of foreign currency exchange rates used to initially measure these amounts. Restatement adjustments were also recorded for intangible assets, other assets and stockholders’ equity to reflect corrections of exchange rates used in the calculation of the fair value of certain acquired assets. Certain assets acquired were adjusted to reflect the impact of using the correct foreign exchange rates. Adjustments were recorded to cost and expenses to reflect decreased amortization of intangible assets for the period due to the revalued intangible assets. The Condensed Consolidated Statements of Income, the Condensed Consolidated Statements of Comprehensive Income, the Condensed Consolidated Balance Sheets, the Condensed Consolidated Statements of Cash Flows and the Condensed Consolidated States of Changes in Stockholders’ Equity, and Notes 1, 2, 3, 5, 9, 12, 14, 15, 19 and 20 in these financial statements were updated to reflect the restatement. See “Part I—Item 4. Controls and Procedures As restated” herein. The following tables summarize the impact of these adjustments on our previously reported results filed on our Condensed Consolidated Financial Statement line items in our Original Filing: The effects of the restatement on our Condensed Consolidated Statements of Operations for the three months ended March 31, 2017 and 2016 are as follows: Three Months Ended (In millions, except per share data) March 31, 2017 As Previously Restatement As Restated Costs and expenses: Cost of service revenue $ 2,380.5 $ (2.9 ) $ 2,377.6 Costs and expenses 3,345.1 (2.9 ) 3,342.2 Other income (expense), net 327.4 (263.9 ) 63.5 Income before net interest expense and income taxes 379.7 (261.0 ) 118.7 Net interest expense (81.7 ) (0.4 ) (82.1 ) Income before income taxes 298.0 (261.4 ) 36.6 Provision for income taxes 103.7 (51.9 ) 51.8 Net income (loss) 194.3 (209.5 ) (15.2 ) Net income (loss) attributable to TechnipFMC plc $ 190.8 $ (209.5 ) $ (18.7 ) Earnings (loss) per share attributable to TechnipFMC plc: Basic $ 0.41 $ (0.45 ) $ (0.04 ) Diluted $ 0.41 $ (0.45 ) $ (0.04 ) Weighted average shares outstanding: Diluted 468.9 466.6 Three Months Ended (In millions, except per share data) March 31, 2016 As Previously Restatement As Restated Other income (expense), net $ (33.9 ) $ (8.2 ) $ (42.1 ) Income from equity affiliates (Note 9) 45.6 (20.1 ) 25.5 Income before net interest expense and income taxes 208.1 (28.3 ) 179.8 Income before income taxes 194.8 (28.3 ) 166.5 Provision for income taxes (Note 15) 47.5 (1.6 ) 45.9 Net income 147.3 (26.7 ) 120.6 Net income attributable to TechnipFMC plc $ 147.4 $ (26.7 ) $ 120.7 Earnings per share attributable to TechnipFMC plc (Note 5): Basic $ 1.25 $ (0.23 ) $ 1.02 Diluted $ 1.21 $ (0.24 ) $ 0.97 The effects of the restatement on our Condensed Consolidated Statements of Comprehensive Income for the three months ended March 31, 2017 and 2016 are as follows: Three Months Ended March 31, 2017 (In millions) As Previously Restatement As Restated Net income (loss) $ 194.3 $ (209.5 ) $ (15.2 ) Comprehensive income 261.3 (209.5 ) 51.8 Comprehensive income attributable to TechnipFMC plc $ 257.6 $ (209.5 ) $ 48.1 Three Months Ended March 31, 2016 (In millions) As Previously Restatement As Restated Net income $ 147.3 $ (26.7 ) $ 120.6 Comprehensive income 118.6 (26.7 ) 91.9 Comprehensive income attributable to TechnipFMC plc $ 119.5 $ (26.7 ) $ 92.8 The effects of the restatement on our Condensed Consolidated Balance Sheets as of March 31, 2017 and December 31, 2016 are as follows: March 31, 2017 (In millions) As Previously Restatement As Restated Intangible assets, net $ 1,580.0 $ (78.8 ) $ 1,501.2 Deferred income taxes 519.4 124.2 643.6 Total assets 29,570.5 45.4 29,615.9 Billings in excess of costs 3,478.7 222.4 3,701.1 Total current liabilities 11,497.0 222.4 11,719.4 Accrued pension and other post-retirement benefits, less current portion 351.2 0.8 352.0 Other liabilities 390.7 (0.8 ) 389.9 Retained earnings 2,992.2 405.2 3,397.4 Accumulated other comprehensive loss (408.2 ) (582.2 ) (990.4 ) Total TechnipFMC plc stockholders’ equity 13,552.8 (177.0 ) 13,375.8 Total liabilities and equity $ 29,570.5 $ 45.4 $ 29,615.9 December 31, 2016 (In millions) As Previously Restatement As Restated Intangible assets, net $ 255.4 $ (81.7 ) $ 173.7 Deferred income taxes 549.3 72.3 621.6 Total assets 18,699.1 (9.4 ) 18,689.7 Billings in excess of costs 3,364.5 (41.5 ) 3,323.0 Total current liabilities 10,930.4 (41.5 ) 10,888.9 Accrued pension and other post-retirement benefits, less current portion 160.0 0.8 160.8 Other liabilities 301.8 (1.2 ) 300.6 Retained earnings 2,801.4 614.7 3,416.1 Accumulated other comprehensive loss (475.2 ) (582.2 ) (1,057.4 ) Total TechnipFMC plc stockholders’ equity 5,091.1 32.5 5,123.6 Total liabilities and equity $ 18,699.1 $ (9.4 ) $ 18,689.7 The effects of the restatement on our Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2017 and 2016 are as follows: (In millions) Three Months Ended March 31, 2017 As Previously Restatement As Restated Cash provided (required) by operating activities: Net income (loss) $ 194.3 $ (209.5 ) $ (15.2 ) Amortization 70.9 (2.9 ) 68.0 Deferred income tax provision (benefit) 55.9 (51.9 ) 4.0 Other 53.6 0.4 54.0 Advance payments and billings in excess of costs (220.6 ) 263.9 43.3 (In millions) Three Months Ended March 31, 2016 As Previously Restatement As Restated Cash provided (required) by operating activities: Net income $ 147.3 $ (26.7 ) $ 120.6 Deferred income tax provision (benefit) (18.2 ) (1.6 ) (19.8 ) Other (22.2 ) 20.1 (2.1 ) Advance payments and billings in excess of costs (91.6 ) 8.2 (83.4 ) The effects of the restatement on our Condensed Consolidated Statements of Changes in Stockholders’ Equity as of March 31, 2017 and December 31, 2016 are as follows: (In millions) Ordinary Ordinary Treasury and Employee Benefit Trust Capital in Excess of Par Value of Ordinary Retained Earnings Accumulated Other Comprehensive Income (Loss) Non- controlling Interest Total Stockholders’ Equity Balance as of December 31, 2016 as previously reported $ 114.7 $ (44.5 ) $ 2,694.7 $ 2,801.4 $ (475.2 ) $ (11.7 ) $ 5,079.4 Restatement Adjustments — — — 614.7 (582.2 ) — 32.5 Balance as of December 31, 2016 as restated $ 114.7 $ (44.5 ) $ 2,694.7 $ 3,416.1 $ (1,057.4 ) $ (11.7 ) $ 5,111.9 Balance as of March 31, 2017 as previously reported $ 466.6 $ (5.4 ) $ 10,507.6 $ 2,992.2 $ (408.2 ) $ 6.4 $ 13,559.2 Restatement Adjustments — — — 405.2 (582.2 ) — (177.0 ) Balance as March 31, 2017 as restated $ 466.6 $ (5.4 ) $ 10,507.6 $ 3,397.4 $ (990.4 ) $ 6.4 $ 13,382.2 The effects of the restatement on our reportable segments for the three months ended March 31, 2017 and 2016 are as follows: Three Months Ended March 31, 2017 (In millions) As Previously Restatement As Restated Income before income taxes: Segment operating profit (loss): Onshore/Offshore $ 139.9 $ 2.9 $ 142.8 Total segment operating profit 175.5 2.9 178.4 Corporate items: Corporate income (expense) 204.2 (263.9 ) (59.7 ) Net interest expense (81.7 ) (0.4 ) (82.1 ) Total corporate items 122.5 (264.3 ) (141.8 ) Income before income taxes $ 298.0 $ (261.4 ) $ 36.6 Three Months Ended March 31, 2016 (In millions) As Previously Restatement As Restated Income before income taxes: Segment operating profit (loss): Onshore/Offshore $ 58.5 $ (20.1 ) $ 38.4 Total segment operating profit 254.9 (20.1 ) 234.8 Corporate items: Corporate income (expense) (46.8 ) (8.2 ) (55.0 ) Total corporate items (60.1 ) (8.2 ) (68.3 ) Income before income taxes $ 194.8 $ (28.3 ) $ 166.5 |