Document/ExhibitDescriptionPagesSize 1: 10-Q Quarterly Report HTML 1.70M
2: EX-31.1 Certification -- §302 - SOA'02 HTML 27K
3: EX-31.2 Certification -- §302 - SOA'02 HTML 27K
4: EX-32.1 Certification -- §906 - SOA'02 HTML 24K
5: EX-32.2 Certification -- §906 - SOA'02 HTML 25K
11: R1 Cover HTML 79K
12: R2 Condensed Consolidated Statements of Income HTML 161K
(Unaudited)
13: R3 Condensed Consolidated Statements of Comprehensive HTML 101K
Income (Unaudited)
14: R4 Condensed Consolidated Statements of Comprehensive HTML 32K
Income (Unaudited) (Parenthetical)
15: R5 Condensed Consolidated Balance Sheets (Unaudited) HTML 173K
16: R6 Condensed Consolidated Balance Sheets (Unaudited) HTML 44K
(Parenthetical)
17: R7 Condensed Consolidated Statements of Cash Flows HTML 115K
(Unaudited)
18: R8 Condensed Consloidated Statements of Changes in HTML 84K
Stockholders' Equity (Unaudited)
19: R9 Basis of Presentation and Summary of Significant HTML 28K
Accounting Policies
20: R10 New Accounting Standards HTML 37K
21: R11 Revenue HTML 112K
22: R12 Business Segments HTML 67K
23: R13 Earnings (Loss) Per Share HTML 70K
24: R14 Receivables HTML 63K
25: R15 Inventories HTML 31K
26: R16 Other Current Assets & Other Current Liabilities HTML 48K
27: R17 Investments HTML 32K
28: R18 Related Party Transactions HTML 57K
29: R19 Debt HTML 49K
30: R20 Stockholders? Equity HTML 124K
31: R21 Commitments and Contingent Liabilities HTML 43K
32: R22 Income Taxes HTML 29K
33: R23 Derivative Financial Instruments HTML 155K
34: R24 Fair Value Measurements HTML 71K
35: R25 Discontinued Operations HTML 27K
36: R26 Subsequent Event HTML 26K
37: R27 Basis of Presentation and Summary of Significant HTML 27K
Accounting Policies (Policy)
38: R28 Revenue (Tables) HTML 107K
39: R29 Business Segments (Tables) HTML 60K
40: R30 Earnings (Loss) Per Share (Tables) HTML 72K
41: R31 Receivables (Tables) HTML 64K
42: R32 Inventories (Tables) HTML 32K
43: R33 Other Current Assets & Other Current Liabilities HTML 49K
(Tables)
44: R34 Related Party Transactions (Tables) HTML 55K
45: R35 Debt (Tables) HTML 41K
46: R36 Stockholders? Equity (Tables) HTML 119K
47: R37 Commitments and Contingent Liabilities (Tables) HTML 33K
48: R38 Derivative Financial Instruments (Tables) HTML 172K
49: R39 Fair Value Measurements (Tables) HTML 64K
50: R40 New Accounting Standards - (Details) HTML 52K
51: R41 REVENUE - Schedule of Disaggregation of Revenue HTML 81K
(Details)
52: R42 REVENUE - Schedule of Contract Balances (Details) HTML 47K
53: R43 REVENUE - Schedule of Remaining Revenue HTML 52K
Performance Obligations (Details)
54: R44 BUSINESS SEGMENTS - Schedule of Segment Revenue HTML 67K
and Segment Operating Profit (Details)
55: R45 Earnings (LOSS) PER SHARE - Reconciliation of HTML 96K
Number of Shares Used for Basic and Diluted
Earnings Per Share ("EPS") Calculation (Details)
56: R46 RECEIVABLES - Schedule of Financing Receivable HTML 35K
Credit Quality Indicators (Details)
57: R47 RECEIVABLES - Schedule of Financing Receivable, HTML 62K
Allowance for Credit Loss (Details)
58: R48 Inventories (Details) HTML 33K
59: R49 OTHER CURRENT ASSETS & OTHER CURRENT LIABILITIES - HTML 41K
Schedule of Other Current Assets (Details)
60: R50 OTHER CURRENT ASSETS & OTHER CURRENT LIABILITIES - HTML 46K
Schedule of Other Current Liabilities (Details)
61: R51 Investments (Details) HTML 47K
62: R52 RELATED PARTY TRANSACTIONS - Trade Receivables HTML 32K
(Details)
63: R53 RELATED PARTY TRANSACTIONS - Revenue (Details) HTML 39K
64: R54 RELATED PARTY TRANSACTIONS - Expenses (Details) HTML 33K
65: R55 DEBT - Schedule of Long-Term Debt (Details) HTML 64K
66: R56 DEBT - Credit Facilities and Debt (Details) HTML 69K
67: R57 STOCKHOLDERS? EQUITY - Narrative (Details) HTML 40K
68: R58 STOCKHOLDERS? EQUITY -Schedule of Accumulated HTML 73K
Other Comprehensive Loss (Details)
69: R59 STOCKHOLDERS? EQUITY - Schedule of HTML 84K
Reclassifications Out of Accumulated Other
Comprehensive Loss (Details)
70: R60 COMMITMENTS AND CONTINGENT LIABILITIES - HTML 68K
Narratives (Details)
71: R61 COMMITMENTS AND CONTINGENT LIABILITIES - Schedule HTML 31K
of Guarantor Obligations (Details)
72: R62 Income Taxes (Details) HTML 25K
73: R63 DERIVATIVE FINANCIAL INSTRUMENTS - Schedule of HTML 78K
Notional Amounts of Outstanding Derivative
Positions (Details)
74: R64 DERIVATIVE FINANCIAL INSTRUMENTS - Schedule of HTML 53K
Fair Value of Derivative Instruments (Details)
75: R65 DERIVATIVE FINANCIAL INSTRUMENTS - Narrative HTML 35K
(Details)
76: R66 DERIVATIVE FINANCIAL INSTRUMENTS - Schedule of HTML 85K
Gain (Loss) Recognized in Income Related to Hedges
and Derivatives (Details)
77: R67 DERIVATIVE FINANCIAL INSTRUMENTS - Offsetting HTML 54K
Assets (Details)
78: R68 FAIR VALUE MEASUREMENTS - Schedule of Assets and HTML 80K
Liabilities Measured at Fair Value on a Recurring
Basis (Details)
79: R69 FAIR VALUE MEASUREMENTS - Narrative (Details) HTML 26K
80: R70 Discontinued Operations (Details) HTML 40K
81: R71 Subsequent Event (Details) HTML 28K
84: XML IDEA XML File -- Filing Summary XML 154K
82: XML XBRL Instance -- fti-20230930_htm XML 2.69M
83: EXCEL IDEA Workbook of Financial Report Info XLSX 157K
7: EX-101.CAL XBRL Calculations -- fti-20230930_cal XML 244K
8: EX-101.DEF XBRL Definitions -- fti-20230930_def XML 641K
9: EX-101.LAB XBRL Labels -- fti-20230930_lab XML 1.72M
10: EX-101.PRE XBRL Presentations -- fti-20230930_pre XML 1.02M
6: EX-101.SCH XBRL Schema -- fti-20230930 XSD 160K
85: JSON XBRL Instance as JSON Data -- MetaLinks 557± 833K
86: ZIP XBRL Zipped Folder -- 0001681459-23-000097-xbrl Zip 361K
Securities
registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol
Name of each exchange on which registered
iOrdinary shares, $1.00 par value per share
iFTI
iNew
York Stock Exchange
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. iYes☒ 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). iYes☒ 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.
iLarge accelerated
filer
☒
Accelerated filer
☐
Non-accelerated filer
☐
Smaller reporting company
i☐
Emerging growth company
i☐
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 i☒
Indicate
the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
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, market growth and recovery, growth of our new energies business 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 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 I, Item 1A, “Risk Factors”
of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 and Part II, Item 1A, “Risk Factors” and elsewhere of this Quarterly Report on Form 10-Q, including unpredictable trends in the demand for and price of crude oil and natural gas; competition and unanticipated changes relating to competitive factors in our industry, including ongoing industry consolidation; the COVID-19 pandemic and any resurgence thereof; our inability to develop, implement and protect new technologies and services and intellectual property related thereto, including new technologies and services for our New Energy business; the cumulative loss of major contracts, customers or alliances and unfavorable credit and commercial terms of certain contracts;
disruptions in the political, regulatory, economic and social conditions of the countries in which we conduct business; the refusal of DTC to act as depository agency for our shares; the impact of our existing and future indebtedness and the restrictions on our operations by terms of the agreements governing our existing indebtedness; the risks caused by our acquisition and divestiture activities; additional costs or risks from increasing scrutiny and expectations regarding ESG matters; uncertainties related to our investments in New Energy business; the risks caused by fixed-price contracts; our failure to timely deliver our backlog; our reliance on subcontractors, suppliers and our joint venture partners; a failure or breach of our IT infrastructure or that of our subcontractors,
suppliers or joint venture partners, including as a result of cyber-attacks; risks of pirates endangering our maritime employees and assets; any delays and cost overruns of new capital asset construction projects for vessels and manufacturing facilities; potential liabilities inherent in the industries in which we operate or have operated; our failure to comply with existing and future laws and regulations, including those related to environmental protection, climate change, health and safety, labor and employment, import/export controls, currency exchange, bribery and corruption, taxation, privacy, data protection and data security; the additional restrictions on dividend payouts or share repurchases as an English public limited company; uninsured claims and litigation against us; tax laws, treaties and regulations and any unfavorable findings by relevant tax authorities; potential departure of our key managers and employees; adverse seasonal and weather conditions
and unfavorable currency exchange rates; risk in connection with our defined benefit pension plan commitments; and our inability to obtain sufficient bonding capacity for certain contracts. 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.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
Three
Months Ended
Nine Months Ended
September 30,
September 30,
(In millions)
2023
2022
2023
2022
Net income (loss) attributable to TechnipFMC plc
$
i90.0
$
(i10.3)
$
i3.2
$
(i69.9)
(Income)
from continuing operations attributable to non-controlling interests
(i3.7)
(i5.7)
(i2.0)
(i19.4)
Net
income (loss) attributable to TechnipFMC plc, including non-controlling interests
i93.7
(i4.6)
i5.2
(i50.5)
Foreign
currency translation adjustments(a)
(i50.5)
(i100.0)
(i0.6)
(i104.3)
Net
gains (losses) on hedging instruments
Net gains (losses) arising during the period
i5.6
(i33.4)
(i19.3)
(i92.0)
Reclassification
adjustment for net (gains) losses included in net income (loss)
(i12.4)
i6.7
(i3.8)
i18.5
Net
losses on hedging instruments(b)
(i6.8)
(i26.7)
(i23.1)
(i73.5)
Pension
and other post-retirement benefits
Net gains (losses) arising during the period
i0.5
(i1.5)
i0.7
(i3.0)
Reclassification
adjustment for amortization of prior service cost included in net income (loss)
i0.1
i0.1
i0.2
i0.3
Reclassification
adjustment for amortization of net actuarial loss included in net income (loss)
i2.2
i2.9
i6.6
i8.9
Net
pension and other post-retirement benefits(c)
i2.8
i1.5
i7.5
i6.2
Other
comprehensive loss, net of tax
(i54.5)
(i125.2)
(i16.2)
(i171.6)
Comprehensive
income (loss)
i39.2
(i129.8)
(i11.0)
(i222.1)
Comprehensive
(income) attributable to non-controlling interest
(i10.7)
(i2.9)
(i5.8)
(i12.2)
Comprehensive
income (loss) attributable to TechnipFMC plc
$
i28.5
$
(i132.7)
$
(i16.8)
$
(i234.3)
(a)Net
of income tax of iiiinil///
for the three and nine months ended September 30, 2023 and 2022.
(b)Net of income tax benefit of $i11.4 million and $i8.1
million for the three months ended September 30, 2023 and 2022, respectively, and $i0.4 million and $i8.2
million for the nine months ended September 30, 2023 and 2022, respectively.
(c)Net of income tax (expense) benefit of $(i0.5) million and $(i2.9)
million for the three months ended September 30, 2023 and 2022, respectively, and $i1.5 million and $(i6.0)
million for the nine months ended September 30, 2023 and 2022, respectively.
The accompanying notes are an integral part of the condensed consolidated financial statements.
Accrued
pension and other post-retirement benefits, less current portion
i54.4
i59.7
Derivative
financial instruments (Note 15)
i25.6
i3.6
Other liabilities
i147.8
i138.1
Total
liabilities
i6,414.3
i6,167.6
Commitments and contingent liabilities (Note 13)
i
i
Stockholders’
equity (Note 12)
Ordinary shares, $ii1.00/
par value; ii618.3/ shares authorized in 2023 and 2022; ii435.5/
shares and ii442.2/ shares issued and outstanding in 2023 and 2022, respectively
i435.5
i442.2
Capital
in excess of par value of ordinary shares
i8,979.9
i9,109.7
Accumulated
deficit
(i5,025.5)
(i5,010.0)
Accumulated
other comprehensive loss
(i1,321.7)
(i1,301.7)
Total
TechnipFMC plc stockholders’ equity
i3,068.2
i3,240.2
Non-controlling
interests
i41.8
i36.5
Total
equity
i3,110.0
i3,276.7
Total
liabilities and equity
$
i9,524.3
$
i9,444.3
The
accompanying notes are an integral part of the condensed consolidated financial statements.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1. iBASIS
OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
i
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 the 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, 2022.
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 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 condensed consolidated financial statements may not be representative of the results that may be expected for the year ending December 31, 2023.
Certain prior-year amounts have been reclassified to conform to the current year’s presentation.
NOTE 2. iNEW
ACCOUNTING STANDARDS
Recently Adopted Accounting Standards under GAAP
In September 2022, the Financial Accounting Standards Board (the “FASB”) issued ASU No. 2022-04, "Disclosure of Supplier Finance Program Obligations," which is intended to enhance the transparency surrounding the use of supplier finance programs. Supplier finance programs may also be referred to as reverse factoring, payables finance, or structured payables arrangements. The amendments require a buyer that uses supplier finance programs to make annual disclosures about the program’s key terms, the balance sheet presentation of related amounts, the confirmed amount outstanding at the end of the period and associated roll forward information.
We adopted the standard as of January 1, 2023. We
facilitate a supply chain finance program (“SCF”) that is administered by a third-party financial institution which allows qualifying suppliers to sell their receivables from the Company to the SCF bank. These participating suppliers negotiate their outstanding receivable directly with the SCF bank. We are not a party to those agreements and the terms of our payment obligations are not impacted by a supplier’s participation in the SCF. We agree to pay the SCF bank based on the original invoice amounts and maturity dates as consistent with our other Accounts payables.
All outstanding amounts related to suppliers participating in the SCF are recorded within Accounts payable, trade in our condensed consolidated balance sheets, and the associated payments are included in operating activities within our condensed consolidated
statements of cash flows. As of September 30, 2023 and December 31, 2022, the amounts due to suppliers participating in the SCF and included in Accounts payable were approximately $i135.9 million and $i101.8 million,
respectively.
We consider the applicability and impact of all ASUs. We assessed ASUs not listed above and determined that they either were not applicable or were not expected to have a material impact on ourfinancial statements.
NOTE 3. iREVENUE
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 the exploration and production of crude oil and natural gas.
10
Disaggregation of Revenue
Revenues are disaggregated by geographic location and contract types.
i
The
following tables present total revenue by geography for each reportable segment for the three and nine months ended September 30, 2023 and 2022:
The
following tables present total revenue by contract type for each reportable segment for the three and nine months ended September 30, 2023 and 2022:
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. Any expected contract losses are recorded in the period in which they become probable.
Contract
Assets -Contract assetsinclude 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
increase in our contract assets from December 31, 2022 to September 30, 2023 was due to the timing of project milestones. The increase in our contract liabilities was driven from an overall portfolio and client mix enabling an acceleration of cash payments in advance.
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 the contract asset balance. Revenue recognized for the three months ended September 30, 2023 and 2022 that was included in the contract liabilities balance as of December 31, 2022 and 2021 was $i90.3
million and $i256.0 million, respectively, and $i592.9 million and $i471.7
million for the nine months ended September 30, 2023 and 2022, respectively.
12
Net revenue recognized from our performance obligations satisfied in prior periods had unfavorable impact of $i8.8
million and favorable impact of $i97.2 million for the three months ended September 30, 2023 and 2022, respectively, from changes in the estimate of the stage of completion that impacted revenue. For the nine months ended September 30, 2023
and 2022, we had unfavorable impact of $i12.5 million and favorable impact of $i119.2
million, respectively, from changes in the estimate of the stage of completion that impacted 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. Transaction price of the order backlog includes the base transaction price, variable consideration and changes in transaction price. The transaction price of order backlog related to unfilled, confirmed customer orders is estimated at each reporting date. As of September 30, 2023, the aggregate amount of the transaction price allocated to order backlog was $i13.2
billion. TechnipFMC expects to recognize revenue on approximately i11.2% of the order backlog through 2023 and i88.8% thereafter.
i
The
following table details the order backlog for each business segment as of September 30, 2023:
(In millions)
2023
2024
Thereafter
Subsea
$
i1,146.0
$
i4,475.0
$
i6,452.6
Surface
Technologies
i340.4
i261.1
i555.6
Total
order backlog
$
i1,486.4
$
i4,736.1
$
i7,008.2
/
NOTE
4. iBUSINESS 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 Chair 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 operate under itwo
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 exploration and production of crude oil and natural gas.
•Surface Technologies - designs and manufactures products and systems and provides services used by oil and gas companies involved in land and shallow water exploration and production of 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.
Segment operating profit 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: non-recurring legal settlement charges, corporate staff expense, foreign exchange gains (losses), loss from investment in Technip Energies, net interest income (expense) associated with corporate debt facilities and income taxes.
13
i
Segment
revenue and segment operating profit were as follows:
Three Months Ended
Nine Months Ended
September 30,
September 30,
(In
millions)
2023
2022
2023
2022
Segment revenue
Subsea
$
i1,708.3
$
i1,415.0
$
i4,714.3
$
i4,118.7
Surface
Technologies
i348.6
i318.0
i1,032.2
i887.3
Total
segment revenue
$
i2,056.9
$
i1,733.0
$
i5,746.5
$
i5,006.0
Segment
operating profit
Subsea
$
i177.7
$
i105.0
$
i397.9
$
i256.1
Surface
Technologies
i33.3
i19.0
i81.4
i32.7
Total
segment operating profit
$
i211.0
$
i124.0
$
i479.3
$
i288.8
Corporate
items
Corporate expense(a)
(i24.7)
(i25.2)
(i205.6)
(i76.7)
Net
interest expense
(i26.7)
(i30.9)
(i75.7)
(i92.5)
Loss
on early extinguishment of debt
ii—/
ii—/
i—
(ii29.8/)
Loss
from investment in Technip Energies
i—
i—
i—
(i27.7)
Foreign
exchange gains (losses)
(i46.4)
(i14.5)
(i92.6)
i13.1
Total
corporate items
(i97.8)
(i70.6)
(i373.9)
(i213.6)
Income
(loss) before income taxes(b)
$
i113.2
$
i53.4
$
i105.4
$
i75.2
(a)Corporate
expense includes a non-recurring legal settlement charge for the nine months ended September 30, 2023, corporate staff expenses, share-based compensation expenses, and other employee benefits.
(b)Includes amounts attributable to non-controlling interests.
/
14
NOTE 5. iEARNINGS
(LOSS) PER SHARE
i
A reconciliation of the number of shares used for the basic and diluted earnings (loss) per share calculation was as follows:
Three
Months Ended
Nine Months Ended
September 30,
September 30,
(In millions, except per share data)
2023
2022
2023
2022
Income (loss) from continuing operations attributable to TechnipFMC plc
$
i90.0
$
i5.0
$
i3.2
$
(i35.2)
Loss
from discontinued operations attributable to TechnipFMC plc
i—
(i15.3)
i—
(i34.7)
Net
income (loss) attributable to TechnipFMC plc
$
i90.0
$
(i10.3)
$
i3.2
$
(i69.9)
Weighted
average number of shares outstanding
i436.9
i450.1
i439.7
i451.1
Dilutive
effect of restricted stock units
i5.3
i5.4
i5.6
i—
Dilutive
effect of performance shares
i8.1
i2.6
i7.6
i—
Total
shares and dilutive securities
i450.3
i458.1
i452.9
i451.1
Basic
and diluted earnings (loss) per share attributable to TechnipFMC plc:
Earnings (loss) per share from continuing operations attributable to TechnipFMC plc
Basic
$
i0.21
$
i0.01
$
i0.01
$
(i0.08)
Diluted
$
i0.20
$
i0.01
$
i0.01
$
(i0.08)
Loss
per share from discontinued operations attributable to TechnipFMC plc
Basic and diluted
$
ii0.00/
$
(ii0.03/)
$
ii0.00/
$
(ii0.08/)
Total
earnings (loss) per share attributable to TechnipFMC plc
Basic
$
i0.21
$
(i0.02)
$
i0.01
$
(i0.16)
Diluted
$
i0.20
$
(i0.02)
$
i0.01
$
(i0.16)
/
For
the nine months ended September 30, 2022, we incurred a loss from continuing operations; therefore, the impact of i6.6 million shares was anti-dilutive.
i
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
Nine
Months Ended
September 30,
September 30,
(millions of shares)
2023
2022
2023
2022
Share option awards
i0.8
i1.6
i1.4
i1.6
Total
i0.8
i1.6
i1.4
i1.6
/
NOTE
6. iRECEIVABLES
We manage our receivables portfolios using published default risk as a key credit quality indicator for our loans and receivables. Our loans receivables and other are related to dividends receivable, 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.
15
i
The table below summarizes the amortized cost basis of financial assets by years of origination and credit quality.
To calculate an expected credit loss for contract assets and trade receivables, we develop loss-rate statistics on the basis of the amount written-off over the life of the financial assets and contract assets and adjust these historical credit loss trends for forward-looking factors specific to the debtors and the economic environment to determine lifetime expected losses.
For loans receivable and held-to-maturity debt securities at amortized cost, we evaluate whether these securities are considered to have low credit risk at the reporting date using available, reasonable and supportable information.
i
The
table below shows the roll forward of allowance for credit losses as of September 30, 2023 and 2022, respectively.
Our income from equity affiliates is included in our Subsea segment. During the three and nine months ended September 30, 2023, our income from equity affiliates was $i20.6
million and $i35.9 million, respectively. Our income from equity affiliates during the three and nine months ended September 30, 2022 was $i13.8
million and $i23.5 million, respectively.
Our major equity method investments are as follows:
Dofcon Brasil AS is an affiliated company in the form of a joint venture between TechnipFMC and DOF Subsea and was founded in 2006. Dofcon Brasil AS is a holding company, which owns and controls TechDof Brasil AS and Dofcon Navegacao Ltda, collectively referred to as “Dofcon.” Dofcon provides Pipe-Laying Support Vessels (PLSVs) for work in oil and gas fields
offshore Brazil. Dofcon is considered a VIE because it does not have sufficient equity to finance its activities without additional subordinated financial support from other parties. We are not the primary beneficiary of the VIE. As such, we have accounted for our i50% investment using the equity method of accounting with results reported in our Subsea segment. In June 2023, Dofcon Brasil declared a $i170.0 million
dividend. TechnipFMC’s i50% share of this dividend is included in other current assets as of September 30, 2023.
17
Dofcon and Techdof, itwoi50%-i50% legal entities owned in partnership with DOF Group have debts related to loans on its vessels. During 2022, DOF ASA, the parent company of DOF Subsea, underwent a bankruptcy process that triggered cross default provisions in the credit facilities of certain
joint ventures associated with the parent company guarantees provided by itself and its wholly owned subsidiary DOF Subsea. During March 2023, DOF ASA completed the process of restructuring (unrelated and outside of the joint venture), and DOF Services AS is the new holding company of DOF Group. The lenders made no claims under the guarantees, and the acceleration clauses within the debt instruments were not enforceable as Dofcon and Techdof obtained waivers or consents from the lenders. Dofcon and Techdof continue to service the credit facilities as per the terms of the agreements. As a result of the restructure within DOF Group, the cross default provisions ceased to exist and therefore waivers and consents are no longer required. Accordingly, TechnipFMC has not recognized a liability related to its guarantees. TechnipFMC and DOF provide guarantees for the debts and our share of the guarantees was $i397.3 million
as of September 30, 2023.
TechDof Brasil AS owns and operates the Skandi Buzios vessel. During June 2023, a fire occurred onboard the vessel alongside Porto do Açu in Brazil. The fire was brought under control after efforts by the crew and local authorities, and no serious injuries were sustained. TechDof Brasil AS and TechnipFMC have cooperated in the investigation of the fire and its cause, and in the process to get the vessel back in operations. Repairs on the vessel are expected to start during the fourth quarter of 2023. The time of the repairs is dependent on various factors and the vessel will not be on-hire before 2024. As a result of the incident, the Company did not note any impairment indicators, which were other than temporary, and thus
ino impairment has been recorded on the carrying value of our investment.
Investment in Technip Energies
During 2022, we fully divested our remaining ownership in Technip Energies.
For the nine months ended September 30, 2022, we recognized a $i27.7
million loss related to our investment in Technip Energies. The amounts recognized include purchase price discounts on the sales of shares and fair value revaluation gains (losses) of our investment.
NOTE 10. iRELATED 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.
i
Accounts receivable due from related parties consisted of the following:
Revolving Credit Facility - On February 16, 2021, we entered into a credit agreement, which provided for a $i1.0 billion ithree-year senior secured multi-currency Revolving Credit
Facility, including a $i450.0 million letter of credit sub-facility. We incurred $i34.8 million of debt issuance costs in connection with the Revolving Credit Facility. These debt issuance costs are deferred and are
included in other assets in our condensed consolidated balance sheets. The deferred debt issuance costs are amortized to interest expense over the term of the Revolving Credit Facility.
On April 24, 2023, we entered into a fifth amendment (the “Amendment No. 5”) to the Revolving Credit Facility (as amended, the “Credit Agreement”), dated February 16, 2021, which increases the commitments available to the Company to $i1.25
billion and extends the term to ifive years from the date of the Amendment No. 5. The Credit Agreement also provides for a $i250.0 million letter of credit sub-facility.
Availability of borrowings under the Credit Agreement is reduced by the
outstanding letters of credit issued against the facility. As of September 30, 2023, there were $i54.2 million letters of credit outstanding, and our availability under the Credit Agreement was $i1,195.8 million.
Borrowings
under the Credit Agreement bear interest at the following rates, plus an applicable margin, depending on currency:
•U.S. dollar-denominated loans bear interest, at the Company’s option, at a base rate or an adjusted rate linked to the Secured Overnight Financing Rate (“Adjusted Term SOFR”); and
•Euro-denominated loans bear interest on an adjusted rate linked to the Euro interbank offered rate.
19
The applicable margin for borrowings under the Credit Agreement ranges from i2.50%
to i3.50% for Term Benchmark (as defined in the Credit Agreement) loans and i1.50% to i2.50%
for base rate loans, depending on a total leverage ratio. The Credit Agreement is subject to customary representations and warranties, covenants, events of default, mandatory repayment provisions and financial covenants.
Letter of Credit Facility - On April 24, 2023, the Company entered into a new $i500 million ifive-year
senior secured performance letters of credit facility (the “Performance LC Credit Agreement”). The commitments under the Performance LC Credit Agreement may be increased to $i1.0 billion, subject to the satisfaction of certain customary conditions precedent. The Performance LC Credit Agreement permits the Company and its subsidiaries to have access to performance letters of credit
denominated in a variety of currencies to support the contracting activities with counterparties that require or request a performance or similar guarantee. It contains substantially the same customary representations and warranties, covenants, events of default, mandatory repayment provisions and financial covenants as the Credit Agreement and benefits from the same guarantees and security as the Credit Agreement on a pari passu basis.
Upon the occurrence of an Investment Grade Debt Rating by any itwo
of three Rating Agencies and the satisfaction of certain other conditions precedent, the collateral securing the Credit Agreement and the Performance LC Credit Agreement and the guarantees provided by certain subsidiaries of the Company shall be automatically released (“fall-away”) and certain negative covenants will no longer apply to the Company.
2021 Notes - On January 29, 2021, we issued $i1.0 billion
of ii6.50/% senior notes due 2026 (the “2021 Notes”). The interest on the 2021 Notes
is paid semi-annually on February 1 and August 1 of each year, beginning on August 1, 2021. The 2021 Notes are senior unsecured obligations and are guaranteed on a senior unsecured basis by substantially all of our wholly owned U.S. subsidiaries and non-U.S. subsidiaries in Brazil, the Netherlands, Norway, Singapore and the United Kingdom.
As of September 30, 2023, we were in compliance with all debt covenants.
Bank borrowings - Include term loans issued in connection with financing for certain of our vessels and amounts outstanding under our foreign committed credit lines.
Foreign
committed credit - We have committed credit lines at many of our international subsidiaries for immaterial amounts. We utilize these facilities for asset financing and to provide a more efficient daily source of liquidity. The effective interest rates depend upon the local national market.
NOTE 12. iSTOCKHOLDERS’ EQUITY
On July
26, 2023, the Company announced that its Board of Directors authorized and declared a quarterly cash dividend of $ii0.05/
per share. The cash dividend of $i0.05 per share was paid on September 6, 2023, to shareholders of record as of the close of business on the New York Stock Exchange on August 22, 2023.The Company intends to pay dividends on a quarterly basis, and this dividend represents $i0.20
per share on an annualized basis. Cash dividends paid during the three and nine months ended September 30, 2023 was $ii21.8/ million.
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” on our statutory balance sheet. Therefore, we are not permitted to pay dividends out of share capital, which includes share premium.
On July 26, 2023, the Board of Directors authorized additional share repurchase of up to $i400.0 million.
Together with the existing program, the Company’s total share repurchase authorization was increased to $i800.0 million of our outstanding ordinary shares under our share repurchase program. Pursuant to this share repurchase program, we repurchased $i50.1 million
of ordinary shares during the three months ended September 30, 2023. Since the initial share repurchase authorization in July 2022, we have purchased an aggregate amount of $i250.3 million of ordinary shares through September 30, 2023. Based upon the remaining repurchase authority of $i549.7 million
and the closing stock price as of September 30, 2023, approximately i27.0 million ordinary shares could be subject to repurchase. All repurchased shares were immediately cancelled.
20
i
Accumulated
other comprehensive income (loss) for three and nine months ended September 30, 2023 and 2022 consisted of the following:
(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
(a)These accumulated other comprehensive income components are included in the computation of net periodic pension cost.
/
NOTE 13. iCOMMITMENTS 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 ifive years. Management does not expect any of these financial instruments to result in losses that would have a material adverse effect on our condensed consolidated financial position, results of operations or cash flows.
i
Guarantees
made by our consolidated subsidiaries consisted of the following:
(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 non-financial 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 ourconsolidated financial position, results of operations, or cash flows.
22
Contingent liabilities associated with legal and tax matters - We are involved in various pending or potential legal and tax actions or disputes in the ordinary course of our business. These actions and disputes can involve our agents, suppliers, clients and venture partners, and can include claims related to payment of fees, service quality and ownership arrangements, including certain put or call options. We are unable to predict the ultimate outcome of these actions because of their inherent
uncertainty. However, we believe that the most probable, ultimate resolution of these matters will not have a material adverse effect on our consolidated financial position, results of operations or cash flows.
On March 28, 2016, FMC Technologies received an inquiry from the U.S. Department of Justice (“DOJ”) related to the DOJ's investigation of whether certain services Unaoil S.A.M. provided to its clients, including FMC Technologies, violated the U.S. Foreign Corrupt Practices Act (“FCPA”). On March 29, 2016, Technip S.A. also received an inquiry from the DOJ related to Unaoil. We cooperated with the DOJ's investigations and, with regard to FMC Technologies, a related investigation by the SEC.
In late 2016, Technip S.A. was contacted
by the DOJ regarding its investigation of offshore platform projects awarded between 2003 and 2007, performed in Brazil by a joint venture company in which Technip S.A. was a minority participant, and also raised with the DOJ certain other projects performed by Technip S.A. subsidiaries in Brazil between 2002 and 2013. The DOJ also inquired about projects in Ghana and Equatorial Guinea that were awarded to Technip S.A. subsidiaries in 2008 and 2009, respectively. We cooperated with the DOJ in its investigation into potential violations of the 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 also contacted and cooperated with French authorities (the Parquet National Financier (“PNF”)) with their investigation about these matters.
On June 25, 2019, we announced a global resolution to pay a total of $i301.3 million to the DOJ, the SEC, the MPF and the CGU/AGU to resolve these anti-corruption investigations. We were not required to have a monitor and, instead, provided reports on our
anti-corruption program to the Brazilian and U.S. authorities for two and ithree years, respectively.
As part of this resolution, we entered into a ithree-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 i1 count of conspiracy to violate the FCPA related to conduct in Brazil. We also provided the DOJ reports on our anti-corruption program during the term of the DPA.
In Brazil, on June 25, 2019, our subsidiaries Technip Brasil - Engenharia, Instalações E Apoio Marítimo Ltda.
and Flexibrás Tubos Flexíveis Ltda. entered into leniency agreements with both the MPF and the CGU/AGU. We made, as part of those agreements, certain enhancements to the compliance programs in Brazil during the itwo-year self-reporting period, which aligned with our commitment to cooperation and transparency with the compliance community in Brazil and globally.
In September 2019, the SEC approved our previously disclosed agreement in principle with the SEC Staff and issued an Administrative Order, pursuant to which we paid the SEC $i5.1
million, which was included in the global resolution of $i301.3 million.
On December 8, 2022, the Company received notice of the official release from all obligations and charges by CGU, having successfully completed all of the self-reporting requirements in the leniency agreements and the case was closed. On December 27, 2022,
the DOJ filed a Motion to Dismiss the charges against TechnipFMC related to conspiracy to violate the FCPA, noting to the Court that the Company had fully met and completed all of its obligations under the DPA. The Dismissal Order was signed by the Court on January 4, 2023, thereby closing the case. All obligations to regulatory authorities related to the enforcement matters in the United States and Brazil have been completed and the Company has been unconditionally released by both jurisdictions.
On June 22, 2023, the Company, through its subsidiary
Technip UK Limited, along with Technip Energies SAS, a subsidiary of Technip Energies NV, reached a resolution with the PNF of all outstanding matters, including its investigations into historical projects in Equatorial Guinea, Ghana, and Angola. The resolution took the form of a convention judiciaire d'interet public, (“CJIP”), which does not involve any admission of liability or guilt.
23
Under the terms of the CJIP, Technip UK and Technip Energies France will pay a public interest fine of €i154.8 million
and €i54.1 million, respectively, for a total of €i208.9 million. Under the companies’ separation agreements, TechnipFMC is responsible for €i179.45 million
to be paid in installments through July 2024, and Technip Energies is responsible for the remaining €i29.45 million. During the three-months ended June 30, 2023, we recorded a $i126.5 million
liability incremental to our existing provision. After making a scheduled installment payment of €i24.7 million on July 13, 2023, we have an outstanding balance, after foreign exchange impact, of $i164.0 million
in other current liabilities in our condensed consolidated balance sheet as of September 30, 2023.
TechnipFMC fully cooperated with the PNF and was not required to retain a monitor. The CJIP received final approval by the President of the Tribunal Judiciaire of Paris at a hearing on June 28, 2023.
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 September 30, 2023 and December 31, 2022, and that the ultimate resolution of such matters will not materially affect our consolidated financial position, results of operations or cash flows.
NOTE 14. iINCOME
TAXES
Our provision for income taxes for the three months ended September 30, 2023 and 2022 reflected effective tax rates of i17.2% and i80.0%,
respectively. The year-over-year change in the effective tax rate was primarily related to losses in jurisdictions with a full valuation allowance and a change in geographical profit mix year over year.
Our provision for income taxes for the nine months ended September 30, 2023 and 2022 reflected effective tax rates of i95.1% and i121.0%,
respectively. The year-over-year change in the effective tax rate was primarily related to losses in jurisdictions with a full valuation allowance, a change in other discrete adjustments and in geographical profit mix year over year.
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 15. iDERIVATIVE
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 speculative purposes.
Generally, we enter into hedging relationships such that changes in the fair values or cash flows of the transactions being hedged are expected to be offset by corresponding changes in the fair value of the derivatives. For derivative
instruments that qualify as a cash flow hedge, the effective portion of the gain or loss of the derivative, which does not include the time value component of a forward currency rate, is reported as a component of other comprehensive income (“OCI”) and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. For derivative instruments not designated as hedging instruments, any change in the fair value of those instruments is reflected in earnings in the period such change occurs. Cash flows related to derivatives designated as cash flow and fair value hedges are classified consistently with the cash flows of the associated hedged item.
24
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. iAs of September 30, 2023, we held the following
material net positions:
Net Notional Amount Bought (Sold)
(In millions)
USD Equivalent
Euro
i1,472.6
i1,560.2
Norwegian
krone
i4,250.1
i400.0
Australian dollar
i349.0
i226.2
Brazilian
real
i1,061.8
i212.1
Indonesian rupiah
i2,006,373.6
i129.6
Singapore
dollar
i84.1
i61.6
Canadian dollar
i66.3
i49.3
Czech
koruna
i372.1
i16.2
Malaysian ringgit
i64.7
i13.8
Indian
rupee
i1,111.5
i13.4
Swedish krona
i114.1
i10.5
British
pound
(i48.0)
(i58.8)
U.S. dollar
(i2,711.1)
(i2,711.1)
Foreign
exchange rate instruments embedded in purchase and sale contracts - The purpose of these instruments is to match offsetting currency payments and receipts for particular projects or comply with government restrictions on the currency used to purchase goods in certain countries. As of September 30, 2023, our portfolio of these instruments included the following material net positions:
Net Notional Amount Bought (Sold)
(In
millions)
USD Equivalent
Brazilian real
i28.4
i5.7
Norwegian
krone
i3.3
i0.3
Euro
(i16.9)
(i17.9)
U.S.
dollar
i12.9
i12.9
Fair value amounts for all outstanding derivative instruments have been determined using
available market information and commonly accepted valuation methodologies. See Note 16 for further details. Accordingly, the estimates presented may not be indicative of the amounts 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.
25
i
The
following table presents the location and fair value amounts of derivative instruments reported in the condensed consolidated balance sheets:
Total
derivatives not designated as hedging instruments
i16.9
i23.7
i27.9
i14.1
Total
derivatives
$
i152.6
$
i213.8
$
i289.9
$
i350.2
/
Cash
flow hedges of forecasted transactions, net of tax, which qualify for hedge accounting, resulted in accumulated other comprehensive loss of $i41.6 million and accumulated other comprehensive income of $i18.5 million as of September 30,
2023 and December 31, 2022, respectively. We expect to transfer an approximate $i2.3 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 i2026.
i
The
following table presents the gains (losses) recognized in other comprehensive income related to derivative instruments designated as cash flow hedges:
The
following table represents the effect of cash flow hedge accounting in the condensed consolidated statements of income for the three and nine months ended September 30, 2023 and 2022:
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
Amounts
reclassified from accumulated OCI to income (loss)
$
(i9.0)
$
i22.4
$
(i0.2)
$
(i6.0)
$
(i1.9)
$
(i12.6)
$
(i0.3)
$
(i11.1)
Amounts
excluded from effectiveness testing
i15.1
(i27.4)
(i1.0)
i69.8
i8.2
(i8.6)
i0.4
(i31.3)
Total
cash flow hedge gain (loss) recognized in income
i6.1
(i5.0)
(i1.2)
i63.8
i6.3
(i21.2)
i0.1
(i42.4)
Total
hedge gain (loss) recognized in income
i6.1
(i5.0)
(i1.2)
i63.8
i6.3
(i21.2)
i0.1
(i42.4)
Gain
(loss) recognized in income on derivatives not designated as hedging instruments
(i0.1)
(i0.8)
i—
(i33.1)
i—
(i0.8)
i—
(i8.0)
Total
$
i6.0
$
(i5.8)
$
(i1.2)
$
i30.7
$
i6.3
$
(i22.0)
$
i0.1
$
(i50.4)
/
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 September 30, 2023 and December 31, 2022, we had no collateralized derivative contracts. iiThe
following tables present both gross information and net information of recognized derivative instruments:/
Equity
securities - The fair value measurement of our traded securities is based on quoted prices that we have the ability to access in public markets.
Money market and stable value funds - These funds 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. These funds include fixed income and other investments measured at fair value. Certain investments that are measured at fair value using net asset value per share (or its equivalent) have not been classified in the fair value hierarchy.
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.
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.
We currently have no credit-risk-related contingent features in our agreements with the financial institutions that would require us to post collateral for derivative positions in a liability position. See Note 15 for further details.
Other fair value disclosures
The carrying amounts of cash and cash equivalents, trade receivables, accounts payable, short-term debt, debt associated with our bank borrowings, credit facilities, as well as amounts included in other current assets and other current liabilities that meet the definition of financial instruments, approximate fair value.
Fair
value of debt - We use a market approach to determine the fair value of our fixed-rate debt using observable market data, which results in a Level 2 fair value measurement. The estimated fair value of our private placement notes and senior notes was $i912.8 million and $i916.3
million as of September 30, 2023 and December 31, 2022, respectively.
28
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 17. iDISCONTINUED
OPERATIONS
On February 16, 2021, we completed our separation of the Technip Energies business segment. The transaction was structured as a spin-off (the “Spin-off”), which occurred by way of a pro rata dividend (the “Distribution”) to our shareholders of i50.1% of the outstanding shares in Technip Energies N.V. Each of our shareholders received one ordinary share of Technip Energies N.V. for every five ordinary shares of TechnipFMC held at 5:00 p.m., Eastern Standard Time, on the record date, February
17, 2021.
In connection with the Spin-off, TechnipFMC and Technip Energies entered into a separation and distribution agreement, as well as various other agreements, including, among others, a tax matters agreement, an employee matters agreement, a transition services agreement and certain agreements relating to intellectual property. These agreements provide for the allocation between TechnipFMC and Technip Energies of assets, employees, taxes, liabilities and obligations attributable to periods prior to, at and after the Spin-off.
For both the three and nine months ended September 30, 2022, we recorded $ii15.8/
million in expense from discontinued operations due to a change in estimate of liabilities recognized in connection with the Spin-off. Also for the three and nine months ended September 30, 2022, we recorded $(i0.5) million and $i18.9
million, respectively, in income tax (benefit) expense from discontinued operations related to a change in estimate in the French tax group.
NOTE 18. iSUBSEQUENT EVENTS
On October 24, 2023, the Company announced that its Board of Directors authorized and declared a quarterly cash dividend of $i0.05
per share, payable on December 6, 2023 to shareholders on record as of the close of business on the New York Stock Exchange on November 21, 2023. The ex-dividend date is November 20, 2023.
29
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
BUSINESS
OUTLOOK
Overall Outlook – The global economy is forecast to grow in 2023. Increased lending rates by central banks aimed at slowing inflation and reduced availability of credit related to regional banking concerns have increased the risk of a mild recession in some economies. Still, higher global gross domestic product (GDP) in aggregate is anticipated to support growth in energy demand this year.
Oil prices continue to be supported by regional geopolitical tensions and the industry’s more disciplined capital spend. This is evident for OPEC+ countries who are focused on realizing a price that supports both economic growth and energy investment, as seen by production cuts that are expected to remain in place through the end of 2024. An extended period of underinvestment has contributed to a current supply deficit that has resulted in increased upstream
spending, lending support to a constructive view on the longer-term outlook for oil prices.
With long-term energy demand forecast to increase, the conflict in Ukraine has highlighted the need for greater energy security across the globe. As a result, the energy industry has accelerated its efforts to address the essential need for hydrocarbons today to ensure the continuity of affordable energy while also playing an essential role in the energy transition.
We are in the midst of a multi-year growth cycle for energy demand. We believe that investment in new sources of oil and natural gas production will increase over the intermediate-term, fueled by an expansion of activity in international markets – largely offshore and the Middle East. Investment in the Middle East occurs in both offshore and surface environments, with capital spending expected
to accelerate in support of longer-term production targets. TechnipFMC has leading positions in many of these international markets and is uniquely positioned to take full advantage of this growth opportunity. We are confident that conventional resources will remain an important part of the energy mix for an extended period.
We are also committed to the energy transition, where we believe that offshore will play a meaningful role in the transition to renewable energy resources and reduction of carbon emissions. We are making real progress through our three main pillars of greenhouse gas removal, offshore floating renewables and hydrogen. We have also been successful in building on our partnerships and alliances to further position ourselves as the leading architect for offshore energy.
Subsea – Innovative approaches to
subsea projects, like our iEPCI solution, have improved project economics, and many offshore discoveries can be developed economically well below today’s crude oil prices. We believe deepwater development is likely to remain a significant part of many of our customers’ portfolios.
Offshore economics have materially improved, and subsea cycle-times have become significantly shorter. This has resulted in new subsea investments coming much earlier in the cycle and more in parallel with U.S. land markets. We believe these changes are fundamental and sustainable as a result of new business models and technology pioneered by our Company.
As the subsea industry continues to evolve, we are driving simplification, standardization, and industrialization to reduce cycle
times. The industrialization of our project business through the introduction of configure-to-order (“CTO”) is another way we are driving real change in our industry that further improves the economics of our customers’ projects while driving greater efficiencies for TechnipFMC.
With CTO, we have designed an environment, a process, a culture and tools that are scalable and, more importantly, are transformational to the future of our Company. Our customers require a product platform that provides them with choices that meet their unique and evolving needs, but also provides them with the significant speed, cost and efficiency benefits that come with product and process standardization. CTO has allowed us to redefine our sourcing strategy and transform our manufacturing flow, resulting in up to 25% lower product cost
and a shortened 12-month delivery time for subsea production equipment – savings that are both real and sustainable. This has paved the way for other products to adopt a similar operating model, enabling an enterprise-wide way of working.
30
We continue to drive further adoption of our Subsea 2.0TM configurable product platform, with Equinor and ExxonMobil both utilizing Subsea 2.0TM for the first time in the second quarter. In the same period, we also signed a 20-year frame agreement with Chevron to provide Subsea 2.0TM production systems for gas field developments
offshore Australia. As evidenced by the addition of these three new adopters, more clients are recognizing the benefits of our CTO product portfolio.
We continue to experience increased operator confidence in advancing subsea activity in response to both improved project economics and concerns regarding the security of energy supply. Crude is currently priced above $80 per barrel and is projected to stay at or above this level in the intermediate term, supported in part by the extension of OPEC+ production cuts through the end of next year.
The pipeline of front-end engineering and design studies continues to expand. More projects in advanced stages are moving towards final investment decision, resulting in a robust set of large subsea projects that we anticipate could be sanctioned over the next 24 months. The average project size has also risen
due to an increased number of large, greenfield opportunities in Brazil, Guyana and Africa. We also expect increased tie-back activity, with growth from these smaller projects to come primarily from the North Sea, Gulf of Mexico and West Africa – all regions in which we have a strong presence and are well-positioned due to our extensive installed base.
There is also exploration activity occurring in new offshore frontiers. Recent oil and gas discoveries have been announced by operators in basins near countries such as Suriname, Namibia and Colombia, and we believe additional countries will become producers of deepwater resources during this decade. These examples demonstrate the strength of the current investment cycle and support our view that investment in conventional energy resources will continue.
The
Company’s order momentum continued in the third quarter, with year-to-date Subsea inbound of $8.5 billion exceeding our total orders in all of 2022. We now believe that Subsea orders will exceed $9 billion for the full year, an increase of at least 34% year-over-year. Growth in the current year is expected to be driven by a significant increase in iEPCI awards, which represented approximately 50% of Subsea inbound orders year-to-date. We also anticipate growth in Subsea Services revenue to $1.3 billion, supported by the continued expansion in our installed base. When taken together, we expect direct awards, iEPCI and Subsea Services to represent more than 70% of inbound orders in 2023.
Surface Technologies – Our performance typically is driven by variations in global drilling activity, creating a dynamic environment. Operating results
can be further impacted by stimulation activity and the completions intensity of shale applications in North America.
In the third quarter, operating profit in North America benefited from strategic actions taken in prior quarters that helped offset lower revenue in the period. We continue to progress well on our E-Mission solution for onshore production facilities. The digital offering uses proprietary process automation to provide the industry’s only real-time monitoring and control system that both reduces methane flaring by up to 50% and maximizes oil production.
International markets represented approximately 61% of total segment revenue in the third quarter. Our backlog provides us with visibility for international growth in 2023. TechnipFMC’s unique capabilities in these markets, which demand higher specification equipment, global services
and local content, provide a platform for us to extend our leadership positions.
Drilling activity in international markets is less cyclical than in North America as most activities are undertaken by national oil companies which tend to maintain a longer-term view that exhibits less variability in capital spend. We continue to benefit from our exposure to the Middle East, the North Sea and Asia Pacific.
We continue to execute on our multi-year framework agreement with Abu Dhabi National Oil Company to provide wellheads, trees and associated services. We have also added new manufacturing capabilities in Saudi Arabia, where the country is expected to increase its sustainable oil capacity and significantly expand its natural gas production over the next decade. Our new facility also supports our commitment to develop a diverse and capable workforce
as part of Aramco’s In-Kingdom Total Value Add Program and Saudi Vision 2030. The Middle East remains one of our largest market opportunities in the current decade.
31
CONSOLIDATED RESULTS OF OPERATIONS OF TECHNIPFMC PLC
(Income) from continuing operations attributable to non-controlling interests
(3.7)
(5.7)
2.0
35.1
Income
(loss) from continuing operations attributable to TechnipFMC plc
90.0
5.0
85.0
1,700.0
Loss from discontinued operations
—
(15.3)
15.3
100.0
Net
Income (loss) attributable to TechnipFMC plc
$
90.0
$
(10.3)
$
100.3
973.8
Revenue
Revenue increased $323.9 million during the three months ended September 30, 2023, compared to the same period in 2022. Subsea revenue increased by $293.3 million, primarily driven by a
24.5% higher backlog as of December 31, 2021, than December 31, 2022, converting into an increase in project revenues over the period. Surface Technologies revenue increased by $30.6 million, out of which $22.2 million is due to increased activity in the Middle East.
Gross Profit
Gross profit (revenue less cost of sales) increased to $366.9 million during the three months ended September 30, 2023, compared to $256.0 million in the prior-year period. Subsea gross profit increased year over year by $94.7 million, of which $42.0 million is due to volume increase and $52.7 million in favorable activity mix. Surface Technologies gross profit increased year-over-year by $13.1 million,
of which $9.4 million due to North America’s improved operational performance and $6.4 million due to higher Middle East activity.
Selling, General and Administrative Expense
Selling, general and administrative expense increased $31.9 million year-over-year, in support of increased business activities in both segments.
Impairment, Restructuring and Other Expenses
We incurred $4.3 million of impairment, restructuring and other expenses during the three months ended September 30, 2023, of which $1.9 million was impairment of equipment and right-of-use assets and $1.8 million restructuring costs from the closure of a site in Mexico. During the three months ended September
30, 2022, we incurred $3.6 million impairment and $3.3 million restructuring expenses mainly associated with impairment of assets and exiting our operations in Canada and Russia.
32
Other Income (Expense), Net
Other income (expense), net, includes gains and losses associated with the remeasurement of net cash positions, gains and losses on sales of property, plant and equipment and non-operating gains and losses. The $31.2 million year-over-year increase in net expense is driven by the impact of net foreign exchange losses in the quarter.
Income (Loss) from Equity
Affiliates
For the three months ended September 30, 2023 and 2022, we recorded income from equity method affiliates of $20.6 million and $13.8 million, respectively, resulting from an increase in operational activity of our joint ventures.
Net Interest Expense
Net interest expense of $26.7 million decreased by $4.2 million in the three months ended September 30, 2023, compared to the same period in 2022, due to movement in outstanding debt and fluctuation in interest rates.
Provision for Income Taxes
Our provision for income taxes for the three
months ended September 30, 2023 and 2022reflected effective tax rates of 17.2% and 80.0%, respectively. The year-over-year change in the effective tax rate was primarily related to losses in jurisdictions with a full valuation allowance and a change in geographical profit mix year over year.
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 those of the United Kingdom.
33
CONSOLIDATED
RESULTS OF OPERATIONS OF TECHNIPFMC PLC
(Income) from continuing operations attributable to non-controlling interests
(2.0)
(19.4)
17.4
89.7
Income
(loss) from continuing operations attributable to TechnipFMC plc
3.2
(35.2)
38.4
109.1
Loss from discontinued operations
—
(34.7)
34.7
100.0
Net
income (loss) attributable to TechnipFMC plc
$
3.2
$
(69.9)
$
73.1
104.6
Revenue
Revenue increased by $740.5 million during the nine months ended September 30, 2023, compared to the same period in 2022. Subsea revenue increase was driven by 24.5% higher backlog
as of December 31, 2021, than December 31, 2022, converting into an increase of $530.2 million in project revenues. Surface Technologies revenue increased by $144.9 million, year-over-year, of which $79.5 million and $26.9 million are due to increase in operator activity in the Middle East and North America, respectively.
Gross Profit
Gross profit (revenue less cost of sales) increased to $920.5 million during the nine months ended September 30, 2023, compared to $674.0 million in the prior-year period. Subsea gross profit increased year-over-year by $199.9 million, of which
$75.4 million is due to volume increase and $124.5 million due to favorable activity mix. Surface Technologies gross profit increased year-over-year by $43.9 million, of which $23.4 million is driven by North America’s improved operational performance and $21.3 million due to higher activity in the Middle East.
Selling, General and Administrative Expense
Selling, general and administrative expense increased by $33.1 million year-over-year, in support of increased activities in both segments.
34
Impairment, Restructuring and Other Expenses
We incurred $10.0 million of impairment,
restructuring and other expenses during the nine months ended September 30, 2023, compared, to $15.1 million during the nine months ended September 30, 2022. During the nine months ended September 30, 2023, we incurred $6.6 million of restructuring and severance expenses, primarily associated with exiting operations in Canada and costs from the closure of a site in Mexico. Additionally, we incurred $1.8 million of asset impairment in the U.K. During the nine months ended September 30, 2022, we incurred impairment, restructuring and other expenses, primarily associated with exiting our operations in Russia and Canada.
Other
Income (Expense), Net
Other income (expense), net, includes gains and losses associated with the remeasurement of net cash positions, gains and losses on sales of property, plant and equipment and non-operating gains and losses. For the nine months ended September 30, 2023, we recognized a $126.5 million non-recurring legal settlement charge and the remaining increase is mainly the year-over-year impact of net foreign exchange gains and losses. Excluding the non-recurring legal settlement charge, Other income (expense) net increase by $65.1 million year-over-year, which is the result of $79.6 million increase in net foreign exchange losses compensated by higher gains on sales of property, plant and equipment.
Income from Equity Affiliates
For
the nine months ended September 30, 2023 and 2022, we recorded income from equity method affiliates of $35.9 million and $23.5 million, respectively, resulting from an increase in operational activity of our joint ventures.
Loss from Investment in Technip Energies
During the nine months ended September 30, 2022, we recorded a loss of $27.7 million as a result of our investment in Technip Energies. The amounts recognized represent fair value revaluation gains (losses) of our investment and the result of the sale of the investment. See Note 9 for further details.
Loss
on Early Extinguishment of Debt
For the nine months ended September 30, 2022, we recognized a loss of $29.8 million on early extinguishment of debt which related to premium paid and write-off of bond issuance costs in connection with the repurchase of the 2021 Notes. See Note 11 for further details.
Net Interest Expense
Net interest expense of $75.7 million decreased by $16.8 million in the nine months ended September 30, 2023, compared to the same period in 2022, due to the reduction in outstanding debt.
Provision for
Income Taxes
Our provision for income taxes for the nine months ended September 30, 2023 and 2022 reflected effective tax rates of 95.1% and 121.0%, respectively. The year-over-year change in the effective tax rate was primarily related to losses in jurisdictions with a full valuation allowance, a change in other discrete adjustments and in geographical profit mix year over year.
Our effective tax rate can fluctuate depending on our country mix of earnings, since our foreign earnings are generally subject to higher tax rates than in the United Kingdom.
Discontinued Operations
Loss from discontinued operations, net of income taxes, was $34.7 million for
the nine months ended September 30, 2022. See Note 17 for further details.
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 4 for further details.
Subsea
Three Months Ended
September 30,
Change
(In millions, except % and pts.)
2023
2022
$
%
Revenue
$
1,708.3
$
1,415.0
293.3
20.7
Operating
profit
$
177.7
$
105.0
72.7
69.2
Operating profit as a percentage of revenue
10.4
%
7.4
%
3.0
pts.
Subsea revenue increased $293.3 million, as a continued positive impact of the backlog increase in 2022, compared to prior year. $143.6 million increase comes from Brazil, $116.9 million from Norway and $54.1million from the United States, offset by net $20.9 million decrease from the rest of the world.
Subsea operating profit for the three months ended September 30, 2023, increased by $72.7 million. $42.0 million comes from volume, combined with $52.7 million in favorable activity mix, partially offset by a $22.0 million increase in operating expense.
Surface Technologies
Three
Months Ended
September 30,
Change
(In millions, except % and pts.)
2023
2022
$
%
Revenue
$
348.6
$
318.0
30.6
9.6
Operating
profit
$
33.3
$
19.0
14.3
75.3
Operating profit as a percentage of revenue
9.6
%
6.0
%
3.6
pts.
Surface Technologies revenue increased by $30.6 million, $22.2 million of which is attributable to increased activity in the Middle East. During the three months ended September 30, 2023 and 2022, 60.6% and 54.0% of total segment revenue, respectively, was generated outside of North America, of which the Middle East represented 25.2% and 20.6%, respectively.
Surface Technologies operating profit increased versus the prior year by $14.3 million, of which $7.2 million is due to North America’s improved operational performance and $5.3 million due to higher Middle East activity.
Corporate Expense
Three
Months Ended
September 30,
Change
(In millions, except %)
2023
2022
$
%
Corporate expense
$
(24.7)
$
(25.2)
0.5
2.0
Corporate
expense of $24.7 million for the three months ended September 30, 2023 is related to costs associated with our support functions, such as corporate staff expenses, share-based compensation expense and other employee benefits.
Subsea revenue increased by $595.6 million, driven by increased backlog during 2022. $410.2 million increase comes from Brazil, $168.5 million from Norway, $172.9 million from the United States and $100.1 million from Guyana, offset by $321.8 million decline in Asia Pacific as projects reached completion in the region.
Subsea operating profit for the nine months ended September 30, 2023, increased by $141.8 million, $75.4 million from volume, combined with $124.5 million in favorable activity mix, partially offset by a $58.1 million increase in operating expense.
Surface Technologies
Nine
Months Ended
September 30,
Change
(In millions, except %)
2023
2022
$
%
Revenue
$
1,032.2
$
887.3
144.9
16.3
Operating
profit
$
81.4
$
32.7
48.7
148.9
Operating profit as a percentage of revenue
7.9
%
3.7
%
4.2
pts.
Surface Technologies revenue increased by $144.9 million, $79.5 million of which is the result of increased activity in the Middle East and $26.9 million is due to increased operator activity in North America. During the nine months ended September 30, 2023 and 2022, 58% and 54% of total segment revenue, respectively, was generated outside of North America.
Surface Technologies operating profit increased year-over-year by $48.7 million. $21.3 million is due to North America’s improved operational performance and $27.4 million is the result of higher activity in international markets.
Corporate Expense
Nine
Months Ended
September 30,
Change
(In millions, except %)
2023
2022
$
%
Corporate expense
$
(205.6)
$
(76.7)
(128.9)
(168.1)
Corporate
expense increased by $128.9 million, or 168.1%, year-over-year, mostly due to the non-recurring legal settlement costs of $126.5 million incurred during the nine months ended September 30, 2023.
37
INBOUND ORDERS AND ORDER BACKLOG
Inbound orders - Inbound orders represent the estimated sales value of confirmed customer orders received during the reporting period.
Inbound
Orders
Three Months Ended
Nine Months Ended September 30,
(In millions)
2023
2022
2023
2022
Subsea
$
1,828.0
$
1,400.8
$
8,479.0
$
5,222.4
Surface
Technologies
317.1
449.2
972.3
1,014.2
Total inbound orders
$
2,145.1
$
1,850.0
$
9,451.3
$
6,236.6
Order
backlog - Order backlog is calculated as the estimated sales value of unfilled, confirmed customer orders at the reporting date. Backlog reflects the transaction price for products and services for which we have a material right, but work has not been performed. See Note 3 for further details.
Subsea
- Subsea backlog of $12.1 billion as of September 30, 2023 increased by $3.9 billion compared to December 31, 2022. Subsea backlog was composed of various subsea projects, including Petrobras Buzios 6, Mero I, Mero II and Marlim; Total Energies Mozambique LNG, Lapa North East and Clov 3; ExxonMobil Yellowtail and Uaru; AkerBP Utsira; Azule Energy Agogo; Shell Jackdaw and Dover; Husky West White Rose; Equinor BM-C33, Rosebank and Irpa, Verdande; Tullow Jubilee South East; Wintershall Maria and Dvalin; and Harbour Talbot.
Surface Technologies - Order backlog for Surface Technologies as of September 30, 2023 decreased by $64.4 million compared to December 31,
2022.
LIQUIDITY AND CAPITAL RESOURCES
Most of our cash is managed centrally and flows 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.
Net Debt - Net debt, is a non-GAAP financial measure reflecting total debt, net of cash and cash equivalents. Management uses this non-GAAP financial measure to evaluate our capital structure and financial leverage. We believe net debt is a meaningful financial measure that may assist investors in understanding our financial condition and recognizing underlying trends in our capital structure. Net debt
should not be considered an alternative to, or more meaningful than, our total debt as determined in accordance with GAAP or as an indicator of our operating performance or liquidity.
38
The following table provides a reconciliation of our total debt to net debt, utilizing details of classifications from our condensed consolidated balance sheets:
Short-term debt and current portion of long-term debt
(407.3)
(367.3)
Long-term debt, less current portion
(933.5)
(999.3)
Net
debt
$
(649.9)
$
(309.5)
Cash Flows
Operating cash flows from continuing operations -We used $8.1 million and $214.3 million of cash in operating activities from continuing operations during the nine months ended September 30, 2023 and 2022. The decrease of $206.2 million in cash used by operating activities from continuing operations was primarily due to timing differences on project milestones, vendor payments for inventory,
and fluctuations in derivative assets and liabilities.
Investing cash flows from continuing operations - We used $63.5 million of cash in investing activities from continuing operations during the nine months ended September 30, 2023 as compared to $213.3 million cash generated in investing cash flows from continuing operations during the same period in 2022. The decrease of $276.8 million in cash from investing activities was primarily due to $288.5 million proceeds received from sales of our investment in Technip Energies during 2022 and an increase in cash required of $59.4 million for capital expenditures. This cash need was offset by $61.9 million cash from sale of assets, of which $54.4 million was related to the sale of Apache II pipelay vessel.
Financing cash flows
from continuing operations - Financing activities from continuing operations used $276.7 million and $626.8 million of cash during the nine months ended September 30, 2023 and 2022, respectively. The decrease of $350.1 million in cash used by financing activities was driven by long-term debt pay down activity of $451.7 million during the nine months ended September 30, 2022, partially offset by an increase of $100.0 million in share repurchases during the nine months ended September 30, 2023.
39
Debt
and Liquidity
On April 24, 2023, we entered into a fifth amendment (the “Amendment No. 5”) to the Revolving Credit Facility (as amended, the “Credit Agreement”), dated February 16, 2021, which increases the commitments available to the Company under the Credit Agreement to $1.25 billion and extends the term to five years from the date of the Amendment No. 5. The Credit Agreement also provides for a $250.0 million letter of credit sub-facility.
On April 24, 2023, the Company also entered into a new $500
million five-year senior secured performance letters of credit facility (the “Performance LC Credit Agreement”). The commitments under the Performance LC Credit Agreement may be increased to $1.0 billion, subject to the satisfaction of certain customary conditions precedent. The Performance LC Credit Agreement permits the Company and its subsidiaries to have access to performance letters of credit denominated in a variety of currencies to support the contracting activities with counterparties that require or request a performance or similar guarantee. It contains substantially the same customary representations and warranties, covenants, events of default, mandatory repayment provisions and financial covenants as the Credit Agreement and benefits from the same guarantees and security
as the Credit Agreement on a pari passu basis.
Availability of borrowings under the Revolving Credit Facility is reduced by the outstanding letters of credit issued against the facility. As of September 30, 2023, there were $54.2 million letters of credit outstanding, and our availability under the Revolving Credit Facility was $1,195.8 million.
Credit Ratings - Our credit ratings with Standard and Poor’s (“S&P”) are BB+ for our long-term unsecured, guaranteed debt (2021 Notes) and BB for our long-term unsecured debt (the Private Placement notes). Our credit ratings with Moody’s are Ba1 for our long-term unsecured, guaranteed debt. See Note 11 for further details regarding our debt.
On
July 26, 2023, our Board of Directors authorized and declared a quarterly cash dividend of $0.05 per share. The cash dividend of $0.05 per share was paid on September 6, 2023, to shareholders of record as of the close of business on the New York Stock Exchange on August 22, 2023.Cash dividends paid during the three and nine months ended September 30, 2023 was $21.8 million. We intend to pay dividends on a quarterly basis, and this dividend represents $0.20 per share on an annualized basis.
On July 26, 2023, our Board of Directors authorized additional share repurchase of up to $400.0 million. Together with the
existing program, our total share repurchase authorization was increased to $800.0 million of our outstanding ordinary shares under our share repurchase program. Pursuant to this share repurchase program, we repurchased $50.1 million of ordinary shares during the three months ended September 30, 2023, Since the initial share repurchase authorization in July 2022, we have purchased an aggregate amount of $250.3 million of ordinary shares through September 30, 2023. Based upon the remaining repurchase authority of $549.7 million and the closing stock price as of September 30, 2023, approximately 27.0 million ordinary shares could be subject to repurchase.
We expect to repurchase shares from time to time through open market purchases, privately negotiated transactions,
Rule 10b5-1 plans, and any other means in accordance with applicable securities laws. The share repurchase program does not obligate us to repurchase shares and may be suspended or discontinued at any time at our discretion.
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.
40
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 15 for further details.
At this time, we have no credit-risk-related contingent features in our agreements with the financial institutions that would require us to post collateral for derivative positions in a liability position.
Financial
Position Outlook
We are committed to a strong balance sheet. We continue to maintain sufficient liquidity to support the needs of the business through growth, cyclicality and unforeseen events. We continue to maintain and drive sustainable leverage to preserve access to capital throughout the cycle. Our capital expenditures can be adjusted and managed to match market demand and activity levels. Based on current market conditions and our future expectations, our capital expenditures for 2023 are estimated to be approximately $250 million. Projected capital expenditures do not include any contingent capital that may be needed to respond to contract awards. In maintaining our commitment to sustainable leverage and liquidity, we expect to be able to continue to generate free cash flow available for investment in growth and distribution to shareholders
through the business cycle.
CRITICAL ACCOUNTING ESTIMATES
Refer to our Annual Report on Form 10-K for the year ended December 31, 2022 for a discussion of our critical accounting estimates. During the nine months ended September 30, 2023, there were no changes to our identified critical accounting 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 U.S. Foreign Corrupt Practices Act (“FCPA”). On March 29, 2016, Technip S.A. also received an inquiry from the DOJ related to Unaoil. We cooperated with the DOJ's investigations and, with regard to FMC Technologies, a related investigation by the SEC.
In late 2016, Technip S.A. was contacted by the DOJ regarding its investigation of offshore platform projects awarded between 2003 and 2007, performed in Brazil by a joint venture company in which Technip S.A. was a minority participant, and also raised with the DOJ certain other projects performed by Technip S.A. subsidiaries in Brazil between 2002 and 2013. The DOJ also
inquired about projects in Ghana and Equatorial Guinea that were awarded to Technip S.A. subsidiaries in 2008 and 2009, respectively. We cooperated with the DOJ in its investigation into potential violations of the 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 also contacted and cooperated with French authorities (the Parquet National Financier (“PNF”)) with their investigation about these 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 were not required to have a monitor and, instead, provided reports on our anti-corruption program to the Brazilian and U.S. authorities for two and three years, respectively.
41
As part of this resolution, we entered into a three-year Deferred Prosecution Agreement (“DPA”) with the DOJ related to charges of conspiracy to violate the FCPA related to conduct in Brazil and with Unaoil. In addition, Technip USA, Inc., a U.S. subsidiary, pled guilty to one count of conspiracy to violate the FCPA related to conduct in Brazil. We also provided the DOJ reports on our anti-corruption program during the term of the DPA.
In
Brazil, on June 25, 2019, our subsidiaries Technip Brasil - Engenharia, Instalações E Apoio Marítimo Ltda. and Flexibrás Tubos Flexíveis Ltda. entered into leniency agreements with both the MPF and the CGU/AGU. We made, as part of those agreements, certain enhancements to the compliance programs in Brazil during the two-year self-reporting period, which aligned with our commitment to cooperation and transparency with the compliance community in Brazil and globally.
In September 2019, the SEC approved our previously disclosed agreement in principle with the SEC Staff and issued an Administrative Order, pursuant to which we paid the SEC $5.1 million, which was included in the global resolution of $301.3 million.
On
December 8, 2022, the Company received notice of the official release from all obligations and charges by CGU, having successfully completed all of the self-reporting requirements in the leniency agreements and the case was closed. On December 27, 2022, the DOJ filed a Motion to Dismiss the charges against TechnipFMC related to conspiracy to violate the FCPA, noting to the Court that the Company had fully met and completed all of its obligations under the DPA. The Dismissal Order was signed by the Court on January 4, 2023, thereby closing the case. All obligations to regulatory authorities related to the enforcement matters in the United States and
Brazil have been completed and the Company has been unconditionally released by both jurisdictions.
On June 22, 2023, the Company, through its subsidiary Technip UK Limited, along with Technip Energies SAS, a subsidiary of Technip Energies NV, reached a resolution with the PNF of all outstanding matters, including its investigations into historical projects in Equatorial Guinea, Ghana, and Angola. The resolution took the form of a convention judiciaire d'interet public, (“CJIP”), which does not involve any admission of liability or guilt. Under the terms of the CJIP, Technip UK and Technip Energies France will pay a public interest fine of €154.8 million and €54.1 million, respectively,
for a total of €208.9 million. Under the companies’ separation agreements, TechnipFMC is responsible for €179.45 million to be paid in installments through July 2024, and Technip Energies is responsible for the remaining €29.45 million. During the three months ended June 30, 2023, we recorded a $126.5 million liability incremental to our existing provision. After making a scheduled installment payment of €24.7 million on July 13, 2023, we have an outstanding balance, after foreign exchange impact, of $164.0 million in other current liabilities in our condensed consolidated balance sheet as of September 30, 2023.
TechnipFMC fully cooperated with the PNF and was not required to retain a monitor. The CJIP received final approval by the President of the Tribunal
Judiciaire of Paris at a hearing on June 28, 2023.
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, 2022. Our exposure to market risk has not changed materially since December 31, 2022.
ITEM 4.
CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
As of September 30, 2023, 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) and 15d-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 September 30, 2023.
Changes in Internal Controls over Financial Reporting
There were no changes in our internal control over financial reporting during the three months ended September
30, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
42
PART II — OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We are involved in various 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 joint 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
As 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 December 31, 2022.
ITEM 2.
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
We had no unregistered sales of equity securities during the three months ended September 30, 2023.
The following table summarizes repurchases of our ordinary shares during the three months ended September 30, 2023:
ISSUER PURCHASES OF EQUITY SECURITIES
Period
Total
Number of
Shares
Purchased (a)
Average Price Paid per Share
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
(a)In
July 2023, the Board of Directors authorized additional share repurchase of up to $400.0 million. Together with the existing program, the Company’s total share repurchase authorization was increased to $800.0 million. For the three months ended September 30, 2023, we repurchased 2,673,621 shares for a total cost of $50.1 million at an average price of $18.70 per share.
(b)Based upon the remaining repurchase authority and the closing stock price as of the last trading date of the respective period.
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.
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).
*Furnished herewith.
+Certain schedules or exhibits to this exhibit have been omitted pursuant to Item 601(a)(5) of Regulation S-K and will be provided to the
Securities and Exchange Commission upon request.
44
SIGNATURES
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.
