UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 20212022
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to _____ .
Commission File Number: 001-37983
TechnipFMC plc
(Exact name of registrant as specified in its charter)
| | | | | |
| United Kingdom | 98-1283037 |
(State or other jurisdiction of incorporation or organization)
| (I.R.S. Employer Identification No.) |
Hadrian House,
Wincomblee Road | |
| Newcastle Upon Tyne | |
| United Kingdom | NE6 3PL |
| (Address of principal executive offices) | (Zip Code) |
+44 191-295-0303
(Registrant’s telephone number, including area code)
One St. Paul’s Churchyard
London
United Kingdom
EC4M 8AP
(Address of principal executive offices)
(Former name, former address and former fiscal year, if changed since last report)
| | | | | | | | | | | | | | |
| Securities registered pursuant to Section 12(b) of the Act: |
Title of Each Classeach class | Trading Symbol | Name of Each Exchangeeach exchange on Which Registeredwhich registered |
| Ordinary shares, $1.00 par value per share | FTI | New 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. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| | | | | | | | | | | |
| Large accelerated filer | ☒ | Accelerated filer | ☐ |
| Non-accelerated filer | ☐ | Smaller reporting company | ☐ |
| | Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
| | | | | | | | |
| Class | | Outstanding at October 26, 202124, 2022 |
| Ordinary shares, $1.00 par value per share | | 450,700,480446,440,061 |
TABLE OF CONTENTS
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q of TechnipFMC plc (the “Company,” “we,” “us,” or “our”) contains “forward‑looking“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, 20202021 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 its impact on the demand for our products and services;services and global shipping and logistics challenges caused by it; our inability to develop, implement and protect new technologies and services;services, including new technologies and services for our new energy ventures; the cumulative loss of major contracts, customers or alliances;alliances and unfavorable credit and commercial terms of certain contracts; the refusal of DTC to act as depository agency for our shares; disruptions in the political, regulatory, economic and social conditions of the countries in which we conduct business; the refusal of DTC and Euroclear to act as depository and clearing agencies for our shares; the United Kingdom’s withdrawal from the European Union; 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; our inability to address increasing attention to ESG matters; uncertainties related to our investments in new energy industries; the risks caused by fixed-price contracts; any delays and cost overruns of new capital asset construction projects for vessels and manufacturing facilities; our failure to 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; the risks of pirates endangering our maritime employees and assets; potential liabilities inherent in the industries in which we operate or have operated; our failure to comply with numerous 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, including intellectual property litigation; tax laws, treaties and regulations and any unfavorable findings by relevant tax authorities; the uncertainties related to the anticipated benefits or our future liabilities in connection with the spin-off of Technip Energies (the “Spin-off”); any negative changes in Technip Energies’s results of operations, cash flows and financial position, which impact the value of our remaining investment therein; potential departure of our key managers and employees; adverse seasonal and weather conditions and unfavorable currency exchange raterates; and risk in connection with our defined benefit pension plan commitments.
We caution you not to place undue reliance on any forward-looking statements, which speak only as of the date hereof. We undertake no obligation to publicly update or revise any of our forward-looking statements after the date they are made, whether as a result of new information, future events or otherwise, except to the extent required by law.
PART I — FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TECHNIPFMC PLC AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
| | | Three Months Ended | | Nine Months Ended | | Three Months Ended | | Nine Months Ended |
| | September 30, | | September 30, | | September 30, | | September 30, |
| (In millions, except per share data) | (In millions, except per share data) | 2021 | | 2020 | | 2021 | | 2020 | (In millions, except per share data) | 2022 | | 2021 | | 2022 | | 2021 |
| Revenue | Revenue | | | | | | | | Revenue | | | | | | | |
| Service revenue | Service revenue | $ | 901.0 | | | $ | 892.1 | | | $ | 2,640.6 | | | $ | 2,459.6 | | Service revenue | $ | 902.0 | | | $ | 901.0 | | | $ | 2,773.6 | | | $ | 2,640.6 | |
| Product revenue | Product revenue | 640.0 | | | 805.6 | | | 2,121.8 | | | 2,365.0 | | Product revenue | 778.6 | | | 640.0 | | | 2,074.9 | | | 2,121.8 | |
| Lease revenue | Lease revenue | 38.4 | | | 29.8 | | | 117.8 | | | 105.7 | | Lease revenue | 52.4 | | | 38.4 | | | 157.5 | | | 117.8 | |
| Total revenue | Total revenue | 1,579.4 | | | 1,727.5 | | | 4,880.2 | | | 4,930.3 | | Total revenue | 1,733.0 | | | 1,579.4 | | | 5,006.0 | | | 4,880.2 | |
| | Costs and expenses | Costs and expenses | | Costs and expenses | |
| Cost of service revenue | Cost of service revenue | 761.4 | | | 854.0 | | | 2,338.5 | | | 2,353.3 | | Cost of service revenue | 684.1 | | | 761.4 | | | 2,288.5 | | | 2,338.5 | |
| Cost of product revenue | Cost of product revenue | 571.4 | | | 636.6 | | | 1,815.0 | | | 1,930.0 | | Cost of product revenue | 753.5 | | | 571.4 | | | 1,914.5 | | | 1,815.0 | |
| Cost of lease revenue | Cost of lease revenue | 31.2 | | | 28.2 | | | 94.2 | | | 90.3 | | Cost of lease revenue | 36.8 | | | 31.2 | | | 120.0 | | | 94.2 | |
| Selling, general and administrative expense | Selling, general and administrative expense | 153.4 | | | 181.8 | | | 473.6 | | | 534.9 | | Selling, general and administrative expense | 151.9 | | | 153.4 | | | 454.6 | | | 473.6 | |
| Research and development expense | Research and development expense | 18.7 | | | 20.8 | | | 54.4 | | | 71.3 | | Research and development expense | 19.0 | | | 18.7 | | | 45.1 | | | 54.4 | |
| Impairment, restructuring and other expenses (Note 16) | 7.3 | | | 53.5 | | | 34.8 | | | 3,356.2 | | |
| Impairment, restructuring and other expenses (Note 15) | | Impairment, restructuring and other expenses (Note 15) | 6.9 | | | 7.3 | | | 15.1 | | | 34.8 | |
| Total costs and expenses | Total costs and expenses | 1,543.4 | | | 1,774.9 | | | 4,810.5 | | | 8,336.0 | | Total costs and expenses | 1,652.2 | | | 1,543.4 | | | 4,837.8 | | | 4,810.5 | |
| | Other income (expense), net | Other income (expense), net | (5.9) | | | 7.9 | | | 28.7 | | | (20.3) | | Other income (expense), net | (10.3) | | | (5.9) | | | 33.5 | | | 28.7 | |
| Income (loss) from equity affiliates (Note 11) | (30.0) | | | 12.9 | | | (9.5) | | | 49.7 | | |
| Income from investment in Technip Energies (Note 11) | 28.5 | | | — | | | 351.8 | | | — | | |
| Income (loss) before net interest expense and income taxes | 28.6 | | | (26.6) | | | 440.7 | | | (3,376.3) | | |
| Income (loss) from equity affiliates (Note 10) | | Income (loss) from equity affiliates (Note 10) | 13.8 | | | (30.0) | | | 23.5 | | | (9.5) | |
| Income (loss) from investment in Technip Energies (Note 10) | | Income (loss) from investment in Technip Energies (Note 10) | — | | | 28.5 | | | (27.7) | | | 351.8 | |
| Income before net interest expense and income taxes | | Income before net interest expense and income taxes | 84.3 | | | 28.6 | | | 197.5 | | | 440.7 | |
| Interest income | Interest income | 2.1 | | | 7.7 | | | 8.9 | | | 36.4 | | Interest income | 4.2 | | | 2.1 | | | 12.2 | | | 8.9 | |
| Interest expense | Interest expense | (41.4) | | | (30.8) | | | (117.9) | | | (109.1) | | Interest expense | (35.1) | | | (41.4) | | | (104.7) | | | (117.9) | |
| Loss on early extinguishment of debt | Loss on early extinguishment of debt | (16.0) | | | — | | | (39.5) | | | — | | Loss on early extinguishment of debt | — | | | (16.0) | | | (29.8) | | | (39.5) | |
| Income (loss) before income taxes | Income (loss) before income taxes | (26.7) | | | (49.7) | | | 292.2 | | | (3,449.0) | | Income (loss) before income taxes | 53.4 | | | (26.7) | | | 75.2 | | | 292.2 | |
| Provision for income taxes (Note 18) | 12.3 | | | 9.1 | | | 71.7 | | | 13.5 | | |
| Provision for income taxes (Note 17) | | Provision for income taxes (Note 17) | 42.7 | | | 12.3 | | | 91.0 | | | 71.7 | |
| Income (loss) from continuing operations | Income (loss) from continuing operations | (39.0) | | | (58.8) | | | 220.5 | | | (3,462.5) | | Income (loss) from continuing operations | 10.7 | | | (39.0) | | | (15.8) | | | 220.5 | |
| Net income from continuing operations attributable to non-controlling interests | (1.6) | | | (5.9) | | | (5.5) | | | (14.6) | | |
| Net (income) from continuing operations attributable to non-controlling interests | | Net (income) from continuing operations attributable to non-controlling interests | (5.7) | | | (1.6) | | | (19.4) | | | (5.5) | |
| Income (loss) from continuing operations attributable to TechnipFMC plc | Income (loss) from continuing operations attributable to TechnipFMC plc | (40.6) | | | (64.7) | | | 215.0 | | | (3,477.1) | | Income (loss) from continuing operations attributable to TechnipFMC plc | 5.0 | | | (40.6) | | | (35.2) | | | 215.0 | |
| Income (loss) from discontinued operations | Income (loss) from discontinued operations | 8.4 | | | 65.2 | | | (44.1) | | | 238.5 | | Income (loss) from discontinued operations | (15.3) | | | 8.4 | | | (34.7) | | | (44.1) | |
| Income from discontinued operations attributable to non-controlling interests | Income from discontinued operations attributable to non-controlling interests | — | | | (4.4) | | | (1.9) | | | (9.7) | | Income from discontinued operations attributable to non-controlling interests | — | | | — | | | — | | | (1.9) | |
| Net income (loss) attributable to TechnipFMC plc | Net income (loss) attributable to TechnipFMC plc | $ | (32.2) | | | $ | (3.9) | | | $ | 169.0 | | | $ | (3,248.3) | | Net income (loss) attributable to TechnipFMC plc | $ | (10.3) | | | $ | (32.2) | | | $ | (69.9) | | | $ | 169.0 | |
| | Earnings (loss) per share from continuing operations attributable to TechnipFMC plc | Earnings (loss) per share from continuing operations attributable to TechnipFMC plc | | Earnings (loss) per share from continuing operations attributable to TechnipFMC plc | |
| Basic | Basic | $ | (0.09) | | | $ | (0.14) | | | $ | 0.48 | | | $ | (7.75) | | Basic | $ | 0.01 | | | $ | (0.09) | | | $ | (0.08) | | | $ | 0.48 | |
| Diluted | Diluted | $ | (0.09) | | | $ | (0.14) | | | $ | 0.47 | | | $ | (7.75) | | Diluted | $ | 0.01 | | | $ | (0.09) | | | $ | (0.08) | | | $ | 0.47 | |
| | Earnings (loss) per share from discontinued operations attributable to TechnipFMC plc | Earnings (loss) per share from discontinued operations attributable to TechnipFMC plc | | Earnings (loss) per share from discontinued operations attributable to TechnipFMC plc | |
| Basic and diluted | Basic and diluted | $ | 0.02 | | | $ | 0.14 | | | $ | (0.10) | | | $ | 0.51 | | Basic and diluted | $ | (0.03) | | | $ | 0.02 | | | $ | (0.08) | | | $ | (0.10) | |
| | Total earnings (loss) per share attributable to TechnipFMC plc | Total earnings (loss) per share attributable to TechnipFMC plc | | Total earnings (loss) per share attributable to TechnipFMC plc | |
| Basic | Basic | $ | (0.07) | | | $ | (0.01) | | | $ | 0.38 | | | $ | (7.24) | | Basic | $ | (0.02) | | | $ | (0.07) | | | $ | (0.16) | | | $ | 0.38 | |
| Diluted | Diluted | $ | (0.07) | | | $ | (0.01) | | | $ | 0.37 | | | $ | (7.24) | | Diluted | $ | (0.02) | | | $ | (0.07) | | | $ | (0.16) | | | $ | 0.37 | |
| | Weighted average shares outstanding (Note 6) | Weighted average shares outstanding (Note 6) | | Weighted average shares outstanding (Note 6) | |
| Basic | Basic | 450.7 | | | 449.4 | | | 450.4 | | | 448.4 | Basic | 450.1 | | | 450.7 | | | 451.1 | | | 450.4 |
| Diluted | Diluted | 450.7 | | | 449.4 | | | 454.7 | | | 448.4 | Diluted | 458.1 | | | 450.7 | | | 451.1 | | | 454.7 |
The accompanying notes are an integral part of the condensed consolidated financial statements.
TECHNIPFMC PLC AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended |
| September 30, | | September 30, |
| (In millions) | 2021 | | 2020 | | 2021 | | 2020 |
| Net income (loss) attributable to TechnipFMC plc | $ | (32.2) | | | $ | (3.9) | | | $ | 169.0 | | | $ | (3,248.3) | |
| Income from continuing operations attributable to non-controlling interests | (1.6) | | | (5.9) | | | (5.5) | | | (14.6) | |
| Income from discontinued operations attributable to non-controlling interests | — | | | (4.4) | | | (1.9) | | | (9.7) | |
| Net Income (loss) attributable to TechnipFMC plc, including non-controlling interest | (30.6) | | | 6.4 | | | 176.4 | | | (3,224.0) | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Foreign currency translation adjustments(a) | (57.2) | | | (10.4) | | | (1.8) | | | (213.2) | |
| | | | | | | |
| Net gains (losses) on hedging instruments | | | | | | | |
| Net gains (losses) arising during the period | (16.8) | | | 44.7 | | | (28.8) | | | (10.6) | |
| Reclassification adjustment for net losses included in net income (loss) | 1.3 | | | 3.9 | | | 3.3 | | | 8.7 | |
Net gains (losses) on hedging instruments(b) | (15.5) | | | 48.6 | | | (25.5) | | | (1.9) | |
| | | | | | | |
| | | | | | | |
| Pension and other post-retirement benefits | | | | | | | |
| Net gains (losses) arising during the period | 3.2 | | | (2.6) | | | 4.4 | | | (0.4) | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| Reclassification adjustment for amortization of prior service cost included in net income (loss) | 0.1 | | | 0.3 | | | 0.4 | | | 0.8 | |
| Reclassification adjustment for amortization of net actuarial loss included in net income (loss) | 4.7 | | | 2.3 | | | 14.3 | | | 6.7 | |
| | | | | | | |
Net pension and other postretirement benefits(c) | 8.0 | | | — | | | 19.1 | | | 7.1 | |
| Other comprehensive income (loss), net of tax | (64.7) | | | 38.2 | | | (8.2) | | | (208.0) | |
| Comprehensive income (loss) | (95.3) | | | 44.6 | | | 168.2 | | | (3,432.0) | |
| Comprehensive income attributable to non-controlling interest | (0.2) | | | (11.8) | | | (5.9) | | | (17.9) | |
| Comprehensive income (loss) attributable to TechnipFMC plc | $ | (95.5) | | | $ | 32.8 | | | $ | 162.3 | | | $ | (3,449.9) | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended |
| September 30, | | September 30, |
| (In millions) | 2022 | | 2021 | | 2022 | | 2021 |
| Net income (loss) attributable to TechnipFMC plc | $ | (10.3) | | | $ | (32.2) | | | $ | (69.9) | | | $ | 169.0 | |
| Net (income) from continuing operations attributable to non-controlling interests | (5.7) | | | (1.6) | | | (19.4) | | | (5.5) | |
| Income from discontinued operations attributable to non-controlling interests | — | | | — | | | — | | | (1.9) | |
| Net income (loss) attributable to TechnipFMC plc, including non-controlling interests | (4.6) | | | (30.6) | | | (50.5) | | | 176.4 | |
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Foreign currency translation adjustments(a) | (100.0) | | | (57.2) | | | (104.3) | | | (1.8) | |
| | | | | | | |
| Net gains (losses) on hedging instruments | | | | | | | |
| Net losses arising during the period | (33.4) | | | (16.8) | | | (92.0) | | | (28.8) | |
| Reclassification adjustment for net (gains) losses included in net income (loss) | 6.7 | | | 1.3 | | | 18.5 | | | 3.3 | |
Net losses on hedging instruments(b) | (26.7) | | | (15.5) | | | (73.5) | | | (25.5) | |
| | | | | | | |
| | | | | | | |
| Pension and other post-retirement benefits | | | | | | | |
| Net gains (losses) arising during the period | (1.5) | | | 3.2 | | | (3.0) | | | 4.4 | |
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| | | | | | | |
| | | | | | | |
| Reclassification adjustment for amortization of prior service cost included in net income (loss) | 0.1 | | | 0.1 | | | 0.3 | | | 0.4 | |
| Reclassification adjustment for amortization of net actuarial loss included in net income (loss) | 2.9 | | | 4.7 | | | 8.9 | | | 14.3 | |
| | | | | | | |
Net pension and other post-retirement benefits(c) | 1.5 | | | 8.0 | | | 6.2 | | | 19.1 | |
| Other comprehensive loss, net of tax | (125.2) | | | (64.7) | | | (171.6) | | | (8.2) | |
| Comprehensive income (loss) | (129.8) | | | (95.3) | | | (222.1) | | | 168.2 | |
| Comprehensive income attributable to non-controlling interest | (2.9) | | | (0.2) | | | (12.2) | | | (5.9) | |
| Comprehensive income (loss) attributable to TechnipFMC plc | $ | (132.7) | | | $ | (95.5) | | | $ | (234.3) | | | $ | 162.3 | |
(a)Net of income tax benefit of nil for the three and nine months ended September 30, 20212022 and 2020.2021.
(b)Net of income tax (expense) benefit of $3.6$8.1 million and $(13.1)$3.6 million for the three months ended September 30, 20212022 and 2020,2021, respectively, and $6.6$8.2 million and $2.7$6.6 million for the nine months ended September 30, 20212022 and 2020,2021, respectively.
(c)Net of income tax (expense) benefitexpense of $(2.1)$(2.9) million and $1.7$(2.1) million for the three months ended September 30, 20212022 and 2020,2021, respectively, and $(5.5)$(6.0) million and $0.2$(5.5) million for the nine months ended September 30, 20212022 and 2020,2021, respectively.
The accompanying notes are an integral part of the condensed consolidated financial statements.
TECHNIPFMC PLC AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
| | (In millions, except par value data) | (In millions, except par value data) | September 30,
2021 | | December 31,
2020 | (In millions, except par value data) | September 30,
2022 | | December 31,
2021 |
| Assets | Assets | | | | Assets | | | |
| Cash and cash equivalents | Cash and cash equivalents | $ | 1,034.0 | | | $ | 1,269.2 | | Cash and cash equivalents | $ | 711.5 | | | $ | 1,327.4 | |
| Trade receivables, net of allowances of $38.3 in 2021 and $40.2 in 2020 | 1,128.9 | | | 987.7 | | |
| Contract assets, net of allowances of $1.2 in 2021 and $2.4 in 2020 | 1,027.0 | | | 886.8 | | |
| Trade receivables, net of allowances of $35.9 in 2022 and $38.1 in 2021 | | Trade receivables, net of allowances of $35.9 in 2022 and $38.1 in 2021 | 1,048.8 | | | 911.9 | |
| Contract assets, net of allowances of $1.2 in 2022 and $1.1 in 2021 | | Contract assets, net of allowances of $1.2 in 2022 and $1.1 in 2021 | 1,023.9 | | | 966.0 | |
| Inventories, net (Note 8) | Inventories, net (Note 8) | 1,069.8 | | | 1,252.8 | | Inventories, net (Note 8) | 1,031.6 | | | 1,031.9 | |
| Derivative financial instruments (Note 19) | 160.3 | | | 268.7 | | |
| Derivative financial instruments (Note 18) | | Derivative financial instruments (Note 18) | 306.1 | | | 110.3 | |
| Income taxes receivable | Income taxes receivable | 95.4 | | | 274.7 | | Income taxes receivable | 79.3 | | | 85.0 | |
| Advances paid to suppliers | Advances paid to suppliers | 62.6 | | | 96.3 | | Advances paid to suppliers | 51.9 | | | 79.4 | |
| | Other current assets (Note 9) | Other current assets (Note 9) | 533.9 | | | 683.4 | | Other current assets (Note 9) | 505.9 | | | 512.3 | |
| Investment in Technip Energies (Note 11) | 485.3 | | | — | | |
| Current assets of discontinued operations | — | | | 5,725.1 | | |
| Investment in Technip Energies (Note 10) | | Investment in Technip Energies (Note 10) | — | | | 317.3 | |
| Total current assets | Total current assets | 5,597.2 | | | 11,444.7 | | Total current assets | 4,759.0 | | | 5,341.5 | |
| Investments in equity affiliates (Note 11) | 295.6 | | | 305.5 | | |
| Property, plant and equipment, net of accumulated depreciation of $2,386.3 in 2021 and $2,154.2 in 2020 | 2,619.0 | | | 2,756.2 | | |
| Investments in equity affiliates (Note 10) | | Investments in equity affiliates (Note 10) | 315.3 | | | 292.4 | |
| Property, plant and equipment, net of accumulated depreciation of $2,270.1 in 2022 and $2,204.0 in 2021 | | Property, plant and equipment, net of accumulated depreciation of $2,270.1 in 2022 and $2,204.0 in 2021 | 2,258.2 | | | 2,597.2 | |
| Operating lease right-of-use assets | Operating lease right-of-use assets | 694.3 | | | 784.9 | | Operating lease right-of-use assets | 734.3 | | | 707.9 | |
| Finance lease right-of-use assets | Finance lease right-of-use assets | 52.6 | | | 27.5 | | Finance lease right-of-use assets | 51.6 | | | 52.2 | |
| | Intangible assets, net of accumulated amortization of $468.9 in 2021 and $493.1 in 2020 | 786.4 | | | 851.3 | | |
| Intangible assets, net of accumulated amortization of $642.7 in 2022 and $575.5 in 2021 | | Intangible assets, net of accumulated amortization of $642.7 in 2022 and $575.5 in 2021 | 734.2 | | | 813.7 | |
| Deferred income taxes | Deferred income taxes | 47.6 | | | 34.2 | | Deferred income taxes | 72.0 | | | 74.3 | |
| Derivative financial instruments (Note 19) | 6.4 | | | 29.2 | | |
| | Derivative financial instruments (Note 18) | | Derivative financial instruments (Note 18) | 13.9 | | | 10.5 | |
| Other assets | Other assets | 154.5 | | | 175.6 | | Other assets | 120.4 | | | 130.4 | |
| Non-current assets of discontinued operations | — | | | 3,283.5 | | |
| Total assets | Total assets | $ | 10,253.6 | | | $ | 19,692.6 | | Total assets | $ | 9,058.9 | | | $ | 10,020.1 | |
| | Liabilities and equity | Liabilities and equity | | Liabilities and equity | |
| Short-term debt and current portion of long-term debt (Note 13) | $ | 282.2 | | | $ | 624.7 | | |
| Short-term debt and current portion of long-term debt (Note 12) | | Short-term debt and current portion of long-term debt (Note 12) | $ | 231.9 | | | $ | 277.6 | |
| Operating lease liabilities | Operating lease liabilities | 126.2 | | | 195.5 | | Operating lease liabilities | 133.0 | | | 126.2 | |
| Finance lease liabilities | Finance lease liabilities | 0.7 | | | 26.9 | | Finance lease liabilities | 52.1 | | | 0.7 | |
| Accounts payable, trade | Accounts payable, trade | 1,238.0 | | | 1,201.0 | | Accounts payable, trade | 1,299.4 | | | 1,294.3 | |
| Contract liabilities | Contract liabilities | 914.6 | | | 1,046.8 | | Contract liabilities | 711.1 | | | 1,012.9 | |
| Accrued payroll | Accrued payroll | 182.6 | | | 186.8 | | Accrued payroll | 163.0 | | | 194.1 | |
| Derivative financial instruments (Note 19) | 154.6 | | | 157.5 | | |
| Derivative financial instruments (Note 18) | | Derivative financial instruments (Note 18) | 523.9 | | | 161.0 | |
| Income taxes payable | Income taxes payable | 62.5 | | | 61.2 | | Income taxes payable | 90.5 | | | 124.6 | |
| Other current liabilities (Note 9) | Other current liabilities (Note 9) | 729.5 | | | 818.3 | | Other current liabilities (Note 9) | 534.1 | | | 660.4 | |
| Current liabilities of discontinued operations | — | | | 6,096.5 | | |
| Total current liabilities | Total current liabilities | 3,690.9 | | | 10,415.2 | | Total current liabilities | 3,739.0 | | | 3,851.8 | |
| Long-term debt, less current portion (Note 13) | 1,973.6 | | | 2,835.5 | | |
| Long-term debt, less current portion (Note 12) | | Long-term debt, less current portion (Note 12) | 1,134.9 | | | 1,727.3 | |
| Operating lease liabilities, less current portion | Operating lease liabilities, less current portion | 627.1 | | | 632.8 | | Operating lease liabilities, less current portion | 685.1 | | | 646.8 | |
| Financing lease liabilities, less current portion | Financing lease liabilities, less current portion | 51.3 | | | — | | Financing lease liabilities, less current portion | 1.1 | | | 51.1 | |
| Deferred income taxes | Deferred income taxes | 62.1 | | | 79.3 | | Deferred income taxes | 42.1 | | | 47.5 | |
| Accrued pension and other post-retirement benefits, less current portion | Accrued pension and other post-retirement benefits, less current portion | 205.0 | | | 268.4 | | Accrued pension and other post-retirement benefits, less current portion | 91.2 | | | 113.4 | |
| Derivative financial instruments (Note 19) | 7.9 | | | 18.8 | | |
| Derivative financial instruments (Note 18) | | Derivative financial instruments (Note 18) | 45.9 | | | 15.5 | |
| Other liabilities | Other liabilities | 116.3 | | | 103.3 | | Other liabilities | 145.3 | | | 148.3 | |
| Non-current liabilities of discontinued operations | — | | | 1,081.3 | | |
| Total liabilities | Total liabilities | 6,734.2 | | | 15,434.6 | | Total liabilities | 5,884.6 | | | 6,601.7 | |
| Commitments and contingent liabilities (Note 17) | 0 | | 0 | |
| Mezzanine equity | | |
| Redeemable non-controlling interest | — | | | 43.7 | | |
| Stockholders’ equity (Note 14) | | | | |
| Ordinary shares, $1.00 par value; 618.3 shares authorized in 2021 and 2020; 450.6 shares and 449.5 shares issued and outstanding in 2021 and 2020, respectively | 450.6 | | | 449.5 | | |
| Commitments and contingent liabilities (Note 16) | | Commitments and contingent liabilities (Note 16) | | | |
| | Stockholders’ equity (Note 13) | | Stockholders’ equity (Note 13) | |
| Ordinary shares, $1.00 par value; 618.3 shares authorized in 2022 and 2021; 446.4 shares and 450.7 shares issued and outstanding in 2022 and 2021, respectively | | Ordinary shares, $1.00 par value; 618.3 shares authorized in 2022 and 2021; 446.4 shares and 450.7 shares issued and outstanding in 2022 and 2021, respectively | 446.4 | | | 450.7 | |
| Capital in excess of par value of ordinary shares | Capital in excess of par value of ordinary shares | 9,152.4 | | | 10,242.4 | | Capital in excess of par value of ordinary shares | 9,143.8 | | | 9,160.8 | |
| Accumulated deficit | Accumulated deficit | (4,747.7) | | | (4,915.2) | | Accumulated deficit | (4,973.9) | | | (4,903.8) | |
| Accumulated other comprehensive loss | Accumulated other comprehensive loss | (1,358.2) | | | (1,622.5) | | Accumulated other comprehensive loss | (1,469.4) | | | (1,305.0) | |
| Total TechnipFMC plc stockholders’ equity | Total TechnipFMC plc stockholders’ equity | 3,497.1 | | | 4,154.2 | | Total TechnipFMC plc stockholders’ equity | 3,146.9 | | | 3,402.7 | |
| Non-controlling interests | Non-controlling interests | 22.3 | | | 40.4 | | Non-controlling interests | 27.4 | | | 15.7 | |
| Non-controlling interests of discontinued operations | — | | | 19.7 | | |
| Total equity | Total equity | 3,519.4 | | | 4,214.3 | | Total equity | 3,174.3 | | | 3,418.4 | |
| Total liabilities and equity | Total liabilities and equity | $ | 10,253.6 | | | $ | 19,692.6 | | Total liabilities and equity | $ | 9,058.9 | | | $ | 10,020.1 | |
The accompanying notes are an integral part of the condensed consolidated financial statements.
TECHNIPFMC PLC AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
| | (In millions) | (In millions) | Nine Months Ended September 30, | (In millions) | Nine Months Ended September 30, |
| 2021 | | 2020 | 2022 | | 2021 |
| Cash provided (required) by operating activities | Cash provided (required) by operating activities | | | | Cash provided (required) by operating activities | | | |
| | Net income (loss) from continuing operations | $ | 220.5 | | | $ | (3,462.5) | | |
| Net income (loss) | | Net income (loss) | $ | (50.5) | | | $ | 176.4 | |
| Net loss from discontinued operations | | Net loss from discontinued operations | 34.7 | | | 44.1 | |
| Adjustments to reconcile income (loss) from continuing operations to cash provided (required) by operating activities | Adjustments to reconcile income (loss) from continuing operations to cash provided (required) by operating activities | | Adjustments to reconcile income (loss) from continuing operations to cash provided (required) by operating activities | |
| Depreciation | 219.0 | | | 222.3 | | |
| Amortization | 70.7 | | | 76.0 | | |
| Depreciation and amortization | | Depreciation and amortization | 284.4 | | | 289.7 | |
| Impairments | Impairments | 20.9 | | | 3,244.7 | | Impairments | 4.7 | | | 20.9 | |
| Employee benefit plan and share-based compensation costs | Employee benefit plan and share-based compensation costs | 22.5 | | | 36.3 | | Employee benefit plan and share-based compensation costs | 27.0 | | | 22.5 | |
| Deferred income tax benefit, net | (39.0) | | | (5.8) | | |
| Income from investment in Technip Energies | (351.8) | | | — | | |
| Unrealized gains on derivative instruments and foreign exchange | (19.3) | | | (26.9) | | |
| Deferred income tax benefit | | Deferred income tax benefit | (21.1) | | | (39.0) | |
| (Income) loss from investment in Technip Energies | | (Income) loss from investment in Technip Energies | 27.7 | | | (351.8) | |
| Unrealized (gain) loss on derivative instruments and foreign exchange | | Unrealized (gain) loss on derivative instruments and foreign exchange | 66.4 | | | (19.3) | |
| (Income) loss from equity affiliates, net of dividends received | (Income) loss from equity affiliates, net of dividends received | 9.4 | | | (46.5) | | (Income) loss from equity affiliates, net of dividends received | (23.1) | | | 9.4 | |
| Loss on early extinguishment of debt | Loss on early extinguishment of debt | 39.5 | | | — | | Loss on early extinguishment of debt | 29.8 | | | 39.5 | |
| Other | Other | (19.0) | | | (1.9) | | Other | 2.9 | | | (19.0) | |
| Changes in operating assets and liabilities, net of effects of acquisitions | Changes in operating assets and liabilities, net of effects of acquisitions | | Changes in operating assets and liabilities, net of effects of acquisitions | |
| Trade receivables, net and contract assets | Trade receivables, net and contract assets | (320.0) | | | (45.3) | | Trade receivables, net and contract assets | (375.1) | | | (320.0) | |
| Inventories, net | Inventories, net | 165.9 | | | (20.7) | | Inventories, net | (27.4) | | | 165.9 | |
| Accounts payable, trade | 78.0 | | | (236.0) | | |
| Contract liabilities | (104.8) | | | (33.3) | | |
| Income taxes payable (receivable), net | 178.9 | | | (34.4) | | |
| Trade payables and contract liabilities | | Trade payables and contract liabilities | (108.0) | | | (26.8) | |
| Income taxes payable, net | | Income taxes payable, net | (19.0) | | | 178.9 | |
| Other current assets and liabilities, net | Other current assets and liabilities, net | 57.4 | | | 644.9 | | Other current assets and liabilities, net | (93.5) | | | 57.4 | |
| Other non-current assets and liabilities, net | Other non-current assets and liabilities, net | 2.7 | | | (21.2) | | Other non-current assets and liabilities, net | 25.8 | | | 2.7 | |
| Cash provided by operating activities from continuing operations | 231.5 | | | 289.7 | | |
| Cash provided (required) by operating activities from discontinued operations | 66.3 | | | (187.6) | | |
| Cash provided by operating activities | 297.8 | | | 102.1 | | |
| Cash provided (required) by operating activities from continuing operations | | Cash provided (required) by operating activities from continuing operations | (214.3) | | | 231.5 | |
| Cash provided by operating activities from discontinued operations | | Cash provided by operating activities from discontinued operations | — | | | 66.3 | |
| Cash provided (required) by operating activities | | Cash provided (required) by operating activities | (214.3) | | | 297.8 | |
| | Cash provided (required) by investing activities | Cash provided (required) by investing activities | | Cash provided (required) by investing activities | |
| Capital expenditures | Capital expenditures | (131.2) | | | (227.3) | | Capital expenditures | (94.3) | | | (131.2) | |
| Proceeds from redemption of debt securities | 27.4 | | | 3.9 | | |
| Payment to acquire debt securities | (29.1) | | | (3.9) | | |
| Proceeds from sales of assets | Proceeds from sales of assets | 95.7 | | | 23.0 | | Proceeds from sales of assets | 13.4 | | | 95.7 | |
| Cash received from divestiture | — | | | 2.5 | | |
| Proceeds from sale of investment in Technip Energies | Proceeds from sale of investment in Technip Energies | 784.5 | | | — | | Proceeds from sale of investment in Technip Energies | 288.5 | | | 784.5 | |
| Proceeds from repayment of advances to joint venture | Proceeds from repayment of advances to joint venture | 12.5 | | | 12.5 | | Proceeds from repayment of advances to joint venture | 12.5 | | | 12.5 | |
| Other | Other | — | | | (1.0) | | Other | (6.8) | | | (1.7) | |
| Cash provided (required) by investing activities from continuing operations | 759.8 | | | (190.3) | | |
| Cash provided by investing activities from continuing operations | | Cash provided by investing activities from continuing operations | 213.3 | | | 759.8 | |
| Cash required by investing activities from discontinued operations | Cash required by investing activities from discontinued operations | (4.5) | | | (22.1) | | Cash required by investing activities from discontinued operations | — | | | (4.5) | |
| Cash provided (required) by investing activities | 755.3 | | | (212.4) | | |
| Cash provided by investing activities | | Cash provided by investing activities | 213.3 | | | 755.3 | |
| | Cash provided (required) by financing activities | | |
| Cash required by financing activities | | Cash required by financing activities | |
| Net decrease in short-term debt | Net decrease in short-term debt | (31.3) | | | (2.0) | | Net decrease in short-term debt | (204.7) | | | (31.3) | |
| Net decrease in commercial paper | Net decrease in commercial paper | (974.3) | | | (251.3) | | Net decrease in commercial paper | — | | | (974.3) | |
| | Net increase in revolving credit facility | | Net increase in revolving credit facility | 150.0 | | | — | |
| Proceeds from issuance of long-term debt | Proceeds from issuance of long-term debt | 1,164.4 | | | 223.2 | | Proceeds from issuance of long-term debt | — | | | 1,164.4 | |
| Repayments of long-term debt | Repayments of long-term debt | (1,242.2) | | | (423.9) | | Repayments of long-term debt | (451.7) | | | (1,242.2) | |
| Share repurchases | | Share repurchases | (50.1) | | | — | |
| Payments for debt issuance costs | Payments for debt issuance costs | (53.5) | | | — | | Payments for debt issuance costs | — | | | (53.5) | |
| Dividends paid | — | | | (59.2) | | |
| | Acquisition of non-controlling interest | Acquisition of non-controlling interest | (48.6) | | | — | | Acquisition of non-controlling interest | — | | | (48.6) | |
| Payments related to taxes withheld on share-based compensation | (2.4) | | | (6.4) | | |
| | Other | Other | (1.4) | | | — | | Other | (70.3) | | | (3.8) | |
| Cash required by financing activities from continuing operations | Cash required by financing activities from continuing operations | (1,189.3) | | | (519.6) | | Cash required by financing activities from continuing operations | (626.8) | | | (1,189.3) | |
| Cash required by financing activities from discontinued operations | Cash required by financing activities from discontinued operations | (3,617.7) | | | (392.2) | | Cash required by financing activities from discontinued operations | — | | | (3,617.7) | |
| Cash required by financing activities | Cash required by financing activities | (4,807.0) | | | (911.8) | | Cash required by financing activities | (626.8) | | | (4,807.0) | |
| Effect of changes in foreign exchange rates on cash and cash equivalents | Effect of changes in foreign exchange rates on cash and cash equivalents | (19.9) | | | 75.9 | | Effect of changes in foreign exchange rates on cash and cash equivalents | 11.9 | | | (19.9) | |
| Change in cash and cash equivalents | Change in cash and cash equivalents | (3,773.8) | | | (946.2) | | Change in cash and cash equivalents | (615.9) | | | (3,773.8) | |
| Cash and cash equivalents, beginning of period | Cash and cash equivalents, beginning of period | 4,807.8 | | | 5,190.2 | | Cash and cash equivalents, beginning of period | 1,327.4 | | | 4,807.8 | |
| Cash and cash equivalents, end of period | Cash and cash equivalents, end of period | $ | 1,034.0 | | | $ | 4,244.0 | | Cash and cash equivalents, end of period | $ | 711.5 | | | $ | 1,034.0 | |
The following table provides a reconciliation of cash, cash equivalents reported in the condensed consolidated balance sheets to the total of the amounts in the condensed consolidated statements of cash flows:CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2022 and 2021
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (In millions) | Ordinary Shares | | Capital in Excess of Par Value of Ordinary Shares | | Accumulated Deficit | | Accumulated Other Comprehensive Income (Loss) | | Non-controlling Interest | | Total Stockholders’ Equity |
| Balance as of June 30, 2021 | $ | 450.6 | | | $ | 9,144.7 | | | $ | (4,714.0) | | | $ | (1,294.9) | | | $ | 42.9 | | | $ | 3,629.3 | |
| Net income (loss) | — | | | — | | | (32.2) | | | — | | | 1.6 | | | (30.6) | |
| Other comprehensive loss | — | | | — | | | — | | | (63.3) | | | (1.4) | | | (64.7) | |
| | | | | | | | | | | |
| Share-based compensation (Note 14) | — | | | 7.7 | | | — | | | — | | | — | | | 7.7 | |
| | | | | | | | | | | |
| Accrued distributions to non-controlling interest | — | | | — | | | — | | | — | | | (15.0) | | | (15.0) | |
| Other | — | | | — | | | (1.5) | | | — | | | (5.8) | | | (7.3) | |
| Balance as of September 30, 2021 | $ | 450.6 | | | $ | 9,152.4 | | | $ | (4,747.7) | | | $ | (1,358.2) | | | $ | 22.3 | | | $ | 3,519.4 | |
| | | | | | | | | | | |
| Balance as of June 30, 2022 | $ | 452.2 | | | $ | 9,178.2 | | | $ | (4,964.0) | | | $ | (1,347.0) | | | $ | 25.0 | | | $ | 3,344.4 | |
| | | | | | | | | | | |
| Net income (loss) | — | | | — | | | (10.3) | | | — | | | 5.7 | | | (4.6) | |
| Other comprehensive loss | — | | | — | | | — | | | (122.4) | | | (2.8) | | | (125.2) | |
| | | | | | | | | | | |
| Share-based compensation (Note 14) | — | | | 9.9 | | | — | | | — | | | — | | | 9.9 | |
| Shares repurchased and cancelled | (5.8) | | | (44.3) | | | — | | | — | | | — | | | (50.1) | |
| Other | — | | | — | | | 0.4 | | | — | | | (0.5) | | | (0.1) | |
| Balance as of September 30, 2022 | $ | 446.4 | | | $ | 9,143.8 | | | $ | (4,973.9) | | | $ | (1,469.4) | | | $ | 27.4 | | | $ | 3,174.3 | |
| | | | | | | | | | | |
|
Nine Months Ended September 30, |
| (In millions) | 2021 | | 2020 |
| Cash and cash equivalents | $ | 1,034.0 | | | $ | 968.4 | |
| Cash and cash equivalents attributable to discontinued operations | — | | | 3,275.6 | |
| Total cash and cash equivalents in the statement of cash flows | $ | 1,034.0 | | | $ | 4,244.0 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (In millions) | Ordinary Shares | | Capital in
Excess of Par
Value of
Ordinary Shares | | Accumulated Deficit | | Accumulated Other Comprehensive Income (Loss) | | Non-controlling
Interest | | Total
Stockholders’
Equity |
| Balance as of December 31, 2020 | $ | 449.5 | | | $ | 10,242.4 | | | $ | (4,915.2) | | | $ | (1,622.5) | | | $ | 60.1 | | | $ | 4,214.3 | |
| | | | | | | | | | | |
| Net income | — | | | — | | | 169.0 | | | — | | | 7.4 | | | 176.4 | |
| Other comprehensive loss | — | | | — | | | — | | | (6.7) | | | (1.5) | | | (8.2) | |
| Issuance of ordinary shares | 1.1 | | | — | | | — | | | — | | | — | | | 1.1 | |
| Share-based compensation (Note 14) | — | | | 18.4 | | | — | | | — | | | — | | | 18.4 | |
| Spin-off of Technip Energies (Note 2) | — | | | (1,108.4) | | | — | | | 271.0 | | | (19.9) | | | (857.3) | |
| Accrued distributions to non-controlling interest | — | | | — | | | — | | | — | | | (15.0) | | | (15.0) | |
| Other | — | | | — | | | (1.5) | | | — | | | (8.8) | | | (10.3) | |
| Balance as of September 30, 2021 | $ | 450.6 | | | $ | 9,152.4 | | | $ | (4,747.7) | | | $ | (1,358.2) | | | $ | 22.3 | | | $ | 3,519.4 | |
| | | | | | | | | | | |
| Balance as of December 31, 2021 | $ | 450.7 | | | $ | 9,160.8 | | | $ | (4,903.8) | | | $ | (1,305.0) | | | $ | 15.7 | | | $ | 3,418.4 | |
| | | | | | | | | | | |
| Net income (loss) | — | | | — | | | (69.9) | | | — | | | 19.4 | | | (50.5) | |
| Other comprehensive loss | — | | | — | | | — | | | (164.4) | | | (7.2) | | | (171.6) | |
| Issuance of ordinary shares | 1.5 | | | (1.6) | | | — | | | — | | | — | | | (0.1) | |
| Share-based compensation (Note 14) | — | | | 28.9 | | | — | | | — | | | — | | | 28.9 | |
| Shares repurchased and cancelled | (5.8) | | | (44.3) | | | — | | | — | | | — | | | (50.1) | |
| Other | — | | | — | | | (0.2) | | | — | | | (0.5) | | | (0.7) | |
| Balance as of September 30, 2022 | $ | 446.4 | | | $ | 9,143.8 | | | $ | (4,973.9) | | | $ | (1,469.4) | | | $ | 27.4 | | | $ | 3,174.3 | |
The accompanying notes are an integral part of the condensed consolidated financial statements.
TECHNIPFMC PLC AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)
THREE MONTHS ENDED SEPTEMBER 30, 2021 and 2020
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (In millions) | Ordinary Shares | | | | Capital in Excess of Par Value of Ordinary Shares | | Accumulated Deficit | | Accumulated Other Comprehensive Income (Loss) | | Non-controlling Interest | | Total Stockholders’ Equity |
| Balance as of June 30, 2020 | $ | 449.3 | | | | | $ | 10,213.6 | | | $ | (4,876.0) | | | $ | (1,645.8) | | | $ | 34.5 | | | $ | 4,175.6 | |
| Net income (loss) | — | | | | | — | | | (3.9) | | | — | | | 10.3 | | | 6.4 | |
| Other comprehensive income | — | | | | | — | | | — | | | 36.7 | | | 1.5 | | | 38.2 | |
| Issuance of ordinary shares | 0.1 | | | | | — | | | — | | | — | | | — | | | 0.1 | |
| Share-based compensation (Note 15) | — | | | | | 14.2 | | | — | | | — | | | — | | | 14.2 | |
| Other | — | | | | | — | | | 0.9 | | | — | | | (1.7) | | | (0.8) | |
| Balance as of September 30, 2020 | $ | 449.4 | | | | | $ | 10,227.8 | | | $ | (4,879.0) | | | $ | (1,609.1) | | | $ | 44.6 | | | $ | 4,233.7 | |
| | | | | | | | | | | | | |
| Balance as of June 30, 2021 | $ | 450.6 | | | | | $ | 9,144.7 | | | $ | (4,714.0) | | | $ | (1,294.9) | | | $ | 42.9 | | | $ | 3,629.3 | |
| | | | | | | | | | | | | |
| Net income (loss) | — | | | | | — | | | (32.2) | | | — | | | 1.6 | | | (30.6) | |
| Other comprehensive loss | — | | | | | — | | | — | | | (63.3) | | | (1.4) | | | (64.7) | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Share-based compensation (Note 15) | — | | | | | 7.7 | | | — | | | — | | | — | | | 7.7 | |
| Accrued distributions to non-controlling interest | — | | | | | — | | | — | | | — | | | (15.0) | | | (15.0) | |
| Other | — | | | | | — | | | (1.5) | | | — | | | (5.8) | | | (7.3) | |
| Balance as of September 30, 2021 | $ | 450.6 | | | | | $ | 9,152.4 | | | $ | (4,747.7) | | | $ | (1,358.2) | | | $ | 22.3 | | | $ | 3,519.4 | |
The accompanying notes are an integral part of the condensed consolidated financial statements.
TECHNIPFMC PLC AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30, 2021 and 2020
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (In millions) | Ordinary Shares | | Capital in
Excess of Par
Value of
Ordinary Shares | | Accumulated Deficit | | Accumulated
Other
Comprehensive
Income
(Loss) | | Non-controlling
Interest | | Total
Stockholders’
Equity |
| Balance as of December 31, 2019 | 447.1 | | | 10,182.8 | | | (1,563.1) | | | (1,407.5) | | | 28.8 | | | 7,688.1 | |
| Adoption of accounting standards (Note 3) | — | | | — | | | (7.8) | | | — | | | — | | | (7.8) | |
| Net income (loss) | — | | | — | | | (3,248.3) | | | — | | | 24.3 | | | (3,224.0) | |
| Other comprehensive loss | — | | | — | | | — | | | (201.6) | | | (6.4) | | | (208.0) | |
| Issuance of ordinary shares | 2.3 | | | (7.6) | | | — | | | — | | | — | | | (5.3) | |
| Cash dividends declared ($0.13 per share) | — | | | — | | | (59.2) | | | — | | | — | | | (59.2) | |
| Share-based compensation (Note 15) | — | | | 52.6 | | | — | | | — | | | — | | | 52.6 | |
| Other | — | | | — | | | (0.6) | | | — | | | (2.1) | | | (2.7) | |
| Balance as of September 30, 2020 | 449.4 | | | 10,227.8 | | | (4,879.0) | | | (1,609.1) | | | 44.6 | | | 4,233.7 | |
| | | | | | | | | | | |
| Balance as of December 31, 2020 | 449.5 | | | 10,242.4 | | | (4,915.2) | | | (1,622.5) | | | 60.1 | | | 4,214.3 | |
| | | | | | | | | | | |
| Net income | — | | | — | | | 169.0 | | | — | | | 7.4 | | | 176.4 | |
| Other comprehensive loss | — | | | — | | | — | | | (6.7) | | | (1.5) | | | (8.2) | |
| Issuance of ordinary shares | 1.1 | | | — | | | — | | | — | | | — | | | 1.1 | |
| Share-based compensation (Note 15) | — | | | 18.4 | | | — | | | — | | | — | | | 18.4 | |
| Spin-off of Technip Energies (Note 2) | — | | | (1,108.4) | | | — | | | 271.0 | | | (19.9) | | | (857.3) | |
| Accrued distributions to non-controlling interest | — | | | — | | | — | | | — | | | (15.0) | | | (15.0) | |
| Other | — | | | — | | | (1.5) | | | — | | | (8.8) | | | (10.3) | |
| Balance as of September 30, 2021 | 450.6 | | | 9,152.4 | | | (4,747.7) | | | (1,358.2) | | | 22.3 | | | 3,519.4 | |
The accompanying notes are an integral part of the condensed consolidated financial statements.
TECHNIPFMC PLC AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited condensed consolidated financial statements of TechnipFMC plc and its consolidated subsidiaries (“TechnipFMC,” the “Company,” “we,” “us,” or “our”) have been prepared in accordance with United States generally accepted accounting principles (“GAAP”) and 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, 2020.2021.
Our accounting policies are in accordance with GAAP. The preparation of financial statements in conformity with these accounting principles requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Ultimate results could differ from our estimates.
In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, consisting of normal recurring adjustments as well as adjustments to our financial position pursuant to a business combination, necessary for a fair statement of our financial condition and operating results as of and for the periods presented. Revenue, expenses, assets and liabilities can vary during each quarter of the year. Therefore, the results and trends in these financial statements may not be representative of the results that may be expected for the year ending December 31, 2021.2022. Certain prior-year amounts have been reclassified to conform to the current year’s presentation.
NOTE 2. DISCONTINUED OPERATIONS
The Spin-off
On February 16, 2021, we completed our separation into 2 independent publicly traded companies: TechnipFMC, a fully integrated technology and service provider, andof the Technip Energies a leading engineering and technology player (“Technip Energies”).business segment. The transaction was structured as a spin-off (the “Spin-off”), which occurred by way of a pro rata dividend (the “Distribution”) to our shareholders of 50.1% of the outstanding shares in Technip Energies N.V. Each of our shareholders received one ordinary share of Technip Energies N.V. for every five ordinary shares of TechnipFMC held at 5:00 p.m., Eastern Standard Time, on the record date, February 17, 2021. Technip Energies N.V. is now an independent public company and its shares trade under the ticker symbol “TE” on the Euronext Paris Stock Exchange.
In connection with the Spin-off, TechnipFMC and Technip Energies entered into a separation and distribution agreement, as well as various other agreements, including, among others, a tax matters agreement, an employee matters agreement, and a transition services agreement and certain agreements relating to intellectual property. These agreements provide for the allocation between TechnipFMC and Technip Energies of assets, employees, taxes, liabilities and obligations attributable to periods prior to, at and after the Spin-off.
Discontinued Operations
The Spin-off represented a strategic shift that will havehad a major impact to our operations and consolidated financial statements. Accordingly, historical results of Technip Energies prior to the Distribution on February 16, 2021 have been presented as discontinued operations in our condensed consolidated statements of income condensed consolidated balance sheets and condensed consolidated statements of cash flows for the three and nine months ended September 30, 2021 and 2020.2021. Our condensed consolidated statements of income condensed consolidated balance sheets and condensed consolidated statements of cash flows and notes to the condensed consolidated financial statements have been updated to reflect continuing operations only.
The following table summarizes the components of income (loss) from discontinued operations, net of tax:income taxes:
| | | Three Months Ended September 30, | | Nine Months Ended September 30, | | Three Months Ended September 30, | | Nine Months Ended September 30, |
| (In millions) | (In millions) | 2021 | | 2020 | | 2021 | | 2020 | (In millions) | 2022 | | 2021 | | 2022 | | 2021 |
| Revenue | Revenue | $ | — | | | $ | 1,608.2 | | | $ | 906.0 | | | $ | 4,694.2 | | Revenue | $ | — | | | $ | — | | | $ | — | | | $ | 906.0 | |
| Costs and expenses | Costs and expenses | — | | | (1,480.1) | | | (889.3) | | | (4,239.7) | | Costs and expenses | (15.8) | | | — | | | (15.8) | | | (889.3) | |
| Other, net | — | | | (49.5) | | | (18.6) | | | (151.6) | | |
| Income (loss) from discontinued operations before income taxes | $ | — | | | $ | 78.6 | | | $ | (1.9) | | | $ | 302.9 | | |
| Other expense, net | | Other expense, net | — | | | — | | | — | | | (18.6) | |
| Loss from discontinued operations before income taxes | | Loss from discontinued operations before income taxes | $ | (15.8) | | | $ | — | | | $ | (15.8) | | | $ | (1.9) | |
| Income tax expense (benefit) | | Income tax expense (benefit) | (0.5) | | | (8.4) | | | 18.9 | | | 42.2 | |
| Income (loss) from discontinued operations, net of income taxes | Income (loss) from discontinued operations, net of income taxes | $ | 8.4 | | | $ | 65.2 | | | $ | (44.1) | | | $ | 238.5 | | Income (loss) from discontinued operations, net of income taxes | $ | (15.3) | | | $ | 8.4 | | | $ | (34.7) | | | $ | (44.1) | |
AssetsFor both the three and liabilities ofnine months ended September 30, 2022, we recorded $15.8 million in expense from discontinued operations are summarized below:
| | | | | | | | |
| | December 31, |
(In millions) | | 2020 |
Assets | | |
Cash and cash equivalents | | $ | 3,538.6 | |
Trade receivables, net of allowances | | 1,302.1 | |
Contract assets | | 380.8 | |
Other current assets | | 503.6 | |
Total current assets of discontinued operations | | 5,725.1 | |
Property, plant and equipment, net of accumulated depreciation | | 105.6 | |
Goodwill | | 2,512.5 | |
Other assets | | 665.4 | |
Total non-current assets of discontinued operations | | 3,283.5 | |
Total assets of discontinued operations | | $ | 9,008.6 | |
| | |
Liabilities | | |
Accounts payable, trade | | $ | 1,539.5 | |
Contract liabilities | | 3,689.3 | |
Other current liabilities | | 867.7 | |
Total current liabilities of discontinued operations | | 6,096.5 | |
Long-term debt, less current portion | | 482.2 | |
Operating lease liabilities | | 248.2 | |
Other liabilities | | 350.9 | |
Total non-current liabilities of discontinued operations | | 1,081.3 | |
Total liabilities of discontinued operations | | $ | 7,177.8 | |
On February 16, 2021, all assetsdue to a change in estimate of liabilities recognized in connection with the Spin-off. Also, for the three and liabilities of Technip Energies were spun-off; therefore, as ofnine months ended September 30, 2021, there were no assets and liabilities classified as discontinued operations. As of September 30, 2021,2022, we had $65.1recorded $(0.5) million and $44.8$18.9 million, of accounts receivable and accounts payable, respectively, outstanding with Technip Energies.
in income tax (benefit) expense from discontinued operations related to a change in estimate in our French tax group.
NOTE 3. NEW ACCOUNTING STANDARDS
Recently Adopted Accounting Standards under GAAP
In August 2018,2020, the FASB issued ASU No. 2018-14, 2020-06, ““Compensation—Retirement Benefits—Defined Benefit Plans—GeneralDebt – Debt with Conversion and Other Options (Subtopic 715-20): Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans.470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815 – 40).” This update amends ASC 715simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts in an entity’s own equity. The amendments to add, remove,this update are effective for fiscal years beginning after December 15, 2021, and clarify disclosure requirements related to defined benefit pension and other post-retirement plans.interim periods within those fiscal years, with early adoption permitted no earlier than fiscal years beginning after December 15, 2020. We adopted this amendment as of January 1, 2021, which did not have a material impact on our condensed consolidated financial statements.
In December 2019, the FASB issued ASU No. 2019-12, “Income Taxes to Topic 740—Simplifying the Accounting for Income Taxes.” The amendments simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. This update also improves and simplifies areas of GAAP for which cost and complexity can be reduced while maintaining or improving the usefulness of the information provided to users of financial statements. We adopted this amendment as of January 1, 2021, which did not have a material impact on our condensed consolidated financial statements.
In January 2020, the FASB issued ASU No. 2020-01, “Investments—Equity Securities (Topic 321),”“Investments—Equity Method and Joint Ventures (Topic 323),” and “Derivatives and Hedging (Topic 815)—Clarifying the Interactions between Topic 321, Topic 323, and Topic 815,” and made targeted improvements to address certain aspects of accounting for financial instruments. This update clarifies that a company should consider observable transactions that require a company to either apply or discontinue the equity method of accounting under Topic 323, Investments—Equity Method and Joint Ventures, for the purposes of applying the measurement alternative in accordance with Topic 321 immediately before applying or upon discontinuing the equity method. The new ASU also clarifies that, when determining the accounting for certain forward contracts and purchased options, a company should not consider whether underlying securities would be accounted for under the equity method or fair value option upon settlement or exercise. We adopted this amendment as of January 1, 2021, which did not have a material impact on our condensed consolidated financial statements.
In October 2020, the FASB issued ASU No. 2020-10, “Codification Improvements.” The amendments in this update improve consistency by amending the accounting standards codification (the “Codification”) to include all disclosure guidance in the appropriate sections and clarify the application of various provisions in the Codification by amending and adding new headings, cross-referencing to other guidance, and refining or correcting terminology. We adopted this update at January 1, 2021,2022, which did not have a material impact on our condensed consolidated financial statements.
Recently Issued Accounting Standards under GAAP
In March 2020, the FASB issued ASU No. 2020-04, “Facilitation of the Effects of Reference Rate Reform on Financial Reporting (Topic 848).” In addition, in January 2021, FASB issued ASU No. 2021-01, “Reference Rate Reform (Topic 848)” which clarifies the scope of Topic 848. The amendments in these updates apply only to contracts, hedging relationships, and other transactions that reference the London interbank offered rate (“LIBOR”) or another reference rate expected to be discontinued because of reference rate reform. The expedients and exceptions provided by the amendments do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for hedging relationships existing as of December 31, 2022, that an entity has elected certain optional expedients for and that are retained through the end of the hedging relationship. The amendments in this update were issued as of March 12, 2020, effective through December 31, 2022. We are currently evaluating the impact of this ASU on our condensed consolidated financial statements.
In August 2020,We consider the FASB issued ASU No. 2020-06, “Debt – Debt with Conversionapplicability and Other Options (Subtopic 470-20)impact of all ASUs. We assessed ASUs not listed above and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815 – 40).” This update simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts in an entity’s own equity. The amendments to this update are effective for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years, with early adoption permitted no earlier than fiscal years beginning after December 15, 2020. We dodetermined that they either were not anticipate the adoption of this updateapplicable or were not expected to have a material impact on our condensed consolidated financial statements.
NOTE 4. REVENUE
The majority of our revenue is from long-term contracts associated with designing and manufacturing products and systems and providing services to customers involved in exploration and production of crude oil and natural gas.
Disaggregation of Revenue
Revenues are disaggregated by geographic location and contract types.
The following tables present total revenue by geography for each reportable segment for the three and nine months ended September 30, 20212022 and 2020:2021:
| | | Reportable Segments | | Reportable Segments |
| | Three Months Ended | | Three Months Ended |
| | September 30, 2021 | | September 30, 2020 | | September 30, 2022 | | September 30, 2021 |
| (In millions) | (In millions) | Subsea | | Surface Technologies | | Subsea | | Surface Technologies | (In millions) | Subsea | | Surface Technologies | | Subsea | | Surface Technologies |
| Europe, Russia, Central Asia | $ | 423.2 | | | $ | 46.3 | | | $ | 476.5 | | | $ | 43.0 | | |
| Latin America | | Latin America | $ | 411.7 | | | $ | 30.1 | | | $ | 211.5 | | | $ | 22.7 | |
| Europe and Central Asia | | Europe and Central Asia | 395.0 | | | 42.1 | | | 423.2 | | | 46.3 | |
| Africa | | Africa | 216.5 | | | 7.6 | | | 257.8 | | | 8.5 | |
| North America | North America | 174.7 | | | 99.3 | | | 240.5 | | | 63.5 | | North America | 205.1 | | | 146.2 | | | 174.7 | | | 99.3 | |
| Latin America | 211.5 | | | 22.7 | | | 239.3 | | | 15.1 | | |
| Asia Pacific | Asia Pacific | 244.9 | | | 20.9 | | | 230.4 | | | 28.0 | | Asia Pacific | 162.7 | | | 26.4 | | | 244.9 | | | 20.9 | |
| Africa | 257.8 | | | 8.5 | | | 263.3 | | | 11.0 | | |
| Middle East | Middle East | — | | | 69.6 | | | 51.8 | | | 65.1 | | Middle East | 24.0 | | | 65.6 | | | — | | | 69.6 | |
| Total revenue | Total revenue | $ | 1,312.1 | | | $ | 267.3 | | | $ | 1,501.8 | | | $ | 225.7 | | Total revenue | $ | 1,415.0 | | | $ | 318.0 | | | $ | 1,312.1 | | | $ | 267.3 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended |
| September 30, 2021 | | September 30, 2020 |
| (In millions) | Subsea | | Surface Technologies | | Subsea | | Surface Technologies |
| Europe, Russia, Central Asia | $ | 1,102.9 | | | $ | 145.2 | | | $ | 1,329.8 | | | $ | 145.4 | |
| North America | 594.4 | | | 266.6 | | | 660.3 | | | 292.4 | |
| Latin America | 809.7 | | | 57.8 | | | 785.1 | | | 54.9 | |
| Asia Pacific | 736.8 | | | 72.2 | | | 556.8 | | | 93.1 | |
| Africa | 822.6 | | | 31.2 | | | 646.9 | | | 39.6 | |
| Middle East | 26.5 | | | 214.3 | | | 154.5 | | | 171.5 | |
| Total revenue | $ | 4,092.9 | | | $ | 787.3 | | | $ | 4,133.4 | | | $ | 796.9 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended |
| September 30, 2022 | | September 30, 2021 |
| (In millions) | Subsea | | Surface Technologies | | Subsea | | Surface Technologies |
| Europe and Central Asia | $ | 1,154.6 | | | $ | 121.6 | | | $ | 1,102.9 | | | $ | 145.2 | |
| Latin America | 1,069.0 | | | 78.9 | | | 809.7 | | | 57.8 | |
| Africa | 653.3 | | | 25.7 | | | 822.6 | | | 31.2 | |
| Asia Pacific | 586.3 | | | 70.6 | | | 736.8 | | | 72.2 | |
| North America | 582.3 | | | 406.9 | | | 594.4 | | | 266.6 | |
| Middle East | 73.2 | | | 183.6 | | | 26.5 | | | 214.3 | |
| Total revenue | $ | 4,118.7 | | | $ | 887.3 | | | $ | 4,092.9 | | | $ | 787.3 | |
The following tables present total revenue by contract type for each reportable segment for the three and nine months ended September 30, 20212022 and 2020:2021:
| | | Reportable Segments | | Reportable Segments |
| | Three Months Ended | | Three Months Ended |
| | September 30, 2021 | | September 30, 2020 | | September 30, 2022 | | September 30, 2021 |
| (In millions) | (In millions) | Subsea | | Surface Technologies | | Subsea | | Surface Technologies | (In millions) | Subsea | | Surface Technologies | | Subsea | | Surface Technologies |
| Services | Services | $ | 861.7 | | | $ | 39.3 | | | $ | 865.2 | | | $ | 26.9 | | Services | $ | 845.0 | | | $ | 57.0 | | | $ | 861.7 | | | $ | 39.3 | |
| Products | Products | 441.6 | | | 198.4 | | | 623.6 | | | 182.0 | | Products | 556.0 | | | 222.6 | | | 441.6 | | | 198.4 | |
| Lease | Lease | 8.8 | | | 29.6 | | | 13.0 | | | 16.8 | | Lease | 14.0 | | | 38.4 | | | 8.8 | | | 29.6 | |
| Total revenue | Total revenue | $ | 1,312.1 | | | $ | 267.3 | | | $ | 1,501.8 | | | $ | 225.7 | | Total revenue | $ | 1,415.0 | | | $ | 318.0 | | | $ | 1,312.1 | | | $ | 267.3 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended |
| September 30, 2021 | | September 30, 2020 |
| (In millions) | Subsea | | Surface Technologies | | Subsea | | Surface Technologies |
| Services | $ | 2,530.2 | | | $ | 110.4 | | | $ | 2,346.9 | | | $ | 112.7 | |
| Products | 1,526.5 | | | 595.3 | | | 1,743.7 | | | 621.3 | |
| Lease | 36.2 | | | 81.6 | | | 42.8 | | | 62.9 | |
| Total revenue | $ | 4,092.9 | | | $ | 787.3 | | | $ | 4,133.4 | | | $ | 796.9 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended |
| September 30, 2022 | | September 30, 2021 |
| (In millions) | Subsea | | Surface Technologies | | Subsea | | Surface Technologies |
| Services | $ | 2,611.0 | | | $ | 162.6 | | | $ | 2,530.2 | | | $ | 110.4 | |
| Products | 1,463.4 | | | 611.5 | | | 1,526.5 | | | 595.3 | |
| Lease | 44.3 | | | 113.2 | | | 36.2 | | | 81.6 | |
| Total revenue | $ | 4,118.7 | | | $ | 887.3 | | | $ | 4,092.9 | | | $ | 787.3 | |
Contract Balances
The timing of revenue recognition, billings and cash collections results in billed accounts receivable, costs and estimated earnings in excess of billings on uncompleted contracts (contract assets), and billings in excess of costs and estimated earnings on uncompleted contracts (contract liabilities) on the condensed consolidated balance sheets. Any expected contract losses are recorded in the period in which they become probable.
Contract Assets - Contract assets include unbilled amounts typically resulting from sales under long-term contracts when revenue is recognized over time and revenue recognized exceeds the amount billed to the customer, and right to payment is not just subject to the passage of time. Amounts may not exceed their net realizable value. Costs and estimated earnings in excess of billings on uncompleted contracts are generally classified as current.
Contract Liabilities - We sometimes receive advances or deposits from our customers, before revenue is recognized, resulting in contract liabilities.
The following table provides information about net contract assets (liabilities) as of September 30, 20212022 and December 31, 2020:2021:
| | (In millions) | (In millions) | September 30,
2021 | | December 31,
2020 | | $ change | | % change | (In millions) | September 30,
2022 | | December 31,
2021 | | $ change | | % change |
| Contract assets | Contract assets | $ | 1,027.0 | | | $ | 886.8 | | | $ | 140.2 | | | 15.8 | | Contract assets | $ | 1,023.9 | | | $ | 966.0 | | | $ | 57.9 | | | 6.0 | |
| Contract (liabilities) | (914.6) | | | (1,046.8) | | | 132.2 | | | 12.6 | | |
| Contract liabilities | | Contract liabilities | (711.1) | | | (1,012.9) | | | 301.8 | | | 29.8 | |
| Net contract assets (liabilities) | Net contract assets (liabilities) | $ | 112.4 | | | $ | (160.0) | | | $ | 272.4 | | | 170.3 | | Net contract assets (liabilities) | $ | 312.8 | | | $ | (46.9) | | | $ | 359.7 | | | 767.0 | |
The increase in our contract assets from December 31, 20202021 to September 30, 20212022 was primarily due to the timing of project milestones.
The decrease in our contract liabilities was primarily due to progress relative to performance obligations and completion of performance obligations for contracts, for which consideration was received in advance of the work performed during the period.
In order to determine revenue recognized in the period from contract liabilities, we first allocate revenue to the individual contract liability balance outstanding at the beginning of the period until the revenue exceeds that balance. Any subsequent revenue we recognize increases the contract asset balance. Revenue recognized for the three months ended September 30, 20212022 and 20202021 that was included in the contract liabilities balance atas of December 31, 2021 and 2020 and 2019 was $53.4was $256.0 million and $69.7$53.4 million, respectively, and $250.5$471.7 million and $424.1$250.5 million for the nine months ended September 30, 20212022 and 2020,2021, respectively.
ForIn addition, net revenue recognized from our performance obligations satisfied in prior periods had favorable impacts of $97.2 million and $4.3 million for the three months ended September 30, 2022 and 2021, respectively, and 2020, we recognized $4.3$119.2 million and $(2.3)$6.9 million, respectively, and for thenine months ended September 30, 2021 and 2020, we recognized $6.9 million2022 and $(17.2) million,2021, respectively, related to the favorable (unfavorable) from changes in estimatesthe estimate of contractthe stage of completion that impacted revenue.
Transaction Price Allocated to the Remaining Unsatisfied Performance Obligations
Remaining unsatisfied performance obligations (“RUPO” or “order backlog”) representrepresents the transaction price for products and services for which we have a material right but work has not been performed. The transactionTransaction price of the order backlog includes the base transaction price, variable consideration and changes in transaction price. The order backlog table does not include contracts for which we recognize revenue at the amount to which we have the right to invoice for services performed. The transaction price of order backlog related to unfilled, confirmed customer orders is estimated at each reporting date. As of September 30, 2021,2022, the aggregate amount of the transaction price allocated to order backlog was $7,002.4 million. We expect$8,841.0 million. TechnipFMC expects to recognize revenue on approximately 15.4%14.2% of the order backlog through 20212022 and 84.6%85.8% thereafter.
The following table details the order backlog for each business segment as of September 30, 2021:2022:
| | (In millions) | (In millions) | 2021 | | 2022 | | Thereafter | (In millions) | 2022 | | 2023 | | Thereafter |
| Subsea | Subsea | $ | 930.8 | | | $ | 3,241.8 | | | $ | 2,488.8 | | Subsea | $ | 996.1 | | | $ | 3,747.3 | | | $ | 2,859.8 | |
| Surface Technologies | Surface Technologies | 150.5 | | | 177.4 | | | 13.1 | | Surface Technologies | 256.2 | | | 286.1 | | | 695.5 | |
| Total order backlog | Total order backlog | $ | 1,081.3 | | | $ | 3,419.2 | | | $ | 2,501.9 | | Total order backlog | $ | 1,252.3 | | | $ | 4,033.4 | | | $ | 3,555.3 | |
NOTE 5. BUSINESS SEGMENTS
Management’s determination of our reporting segments was made on the basis of our strategic priorities within each segment and the differences in the products and services we provide, which corresponds to the manner in which our ChairmanChair 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. Subsequent to the Spin-off, we nowWe operate under 2two reporting segments:segments, Subsea and Surface Technologies:
•Subsea - designs and manufactures products and systems, performs engineering, procurement and project management, and provides services used by oil and gas companies involved in offshore deep water exploration and production of crude oil and natural gas, while developing renewable alternatives to serve new energy industries.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 (loss) is defined as total segment revenue less segment operating expenses. Income (loss) from equity method investments is included in computing segment operating profit. The following items have been excluded in computing segment operating profit (loss):profit: corporate staff expense, foreign exchange gains (losses), income (loss) from investment in Technip Energies, net interest income (expense) associated with corporate debt facilities and income taxes.
Segment revenue and segment operating profit (loss) were as follows:
| | | Three Months Ended | | Nine Months Ended | | Three Months Ended | | Nine Months Ended |
| | September 30, | | September 30, | | September 30, | | September 30, |
| (In millions) | (In millions) | 2021 | | 2020 | | 2021 | | 2020 | (In millions) | 2022 | | 2021 | | 2022 | | 2021 |
| Segment revenue | Segment revenue | | | | | | | | Segment revenue | | | | | | | |
| Subsea | Subsea | $ | 1,312.1 | | | $ | 1,501.8 | | | $ | 4,092.9 | | | $ | 4,133.4 | | Subsea | $ | 1,415.0 | | | $ | 1,312.1 | | | $ | 4,118.7 | | | $ | 4,092.9 | |
| Surface Technologies | Surface Technologies | $ | 267.3 | | | $ | 225.7 | | | 787.3 | | | 796.9 | | Surface Technologies | 318.0 | | | 267.3 | | | 887.3 | | | 787.3 | |
| Total revenue | $ | 1,579.4 | | | $ | 1,727.5 | | | $ | 4,880.2 | | | $ | 4,930.3 | | |
| Total segment revenue | | Total segment revenue | $ | 1,733.0 | | | $ | 1,579.4 | | | $ | 5,006.0 | | | $ | 4,880.2 | |
| | Segment operating profit (loss) | | |
| Segment operating profit | | Segment operating profit | |
| Subsea | Subsea | $ | 23.5 | | | $ | 20.3 | | | $ | 132.9 | | | $ | (2,806.0) | | Subsea | $ | 105.0 | | | $ | 23.5 | | | $ | 256.1 | | | $ | 132.9 | |
| Surface Technologies | Surface Technologies | 12.1 | | | (7.0) | | | 33.2 | | | (444.4) | | Surface Technologies | 19.0 | | | 12.1 | | | 32.7 | | | 33.2 | |
| Total segment operating profit (loss) | $ | 35.6 | | | $ | 13.3 | | | $ | 166.1 | | | $ | (3,250.4) | | |
| Total segment operating profit | | Total segment operating profit | $ | 124.0 | | | $ | 35.6 | | | $ | 288.8 | | | $ | 166.1 | |
| | Corporate items | Corporate items | | Corporate items | |
Corporate expense(a) | Corporate expense(a) | (29.3) | | | (25.3) | | | (88.4) | | | (72.1) | | Corporate expense(a) | (25.2) | | | (29.3) | | | (76.7) | | | (88.4) | |
| Net interest expense | Net interest expense | (39.3) | | | (23.1) | | | (109.0) | | | (72.7) | | Net interest expense | (30.9) | | | (39.3) | | | (92.5) | | | (109.0) | |
| Loss on early extinguishment of debt | Loss on early extinguishment of debt | (16.0) | | | — | | | (39.5) | | | — | | Loss on early extinguishment of debt | — | | | (16.0) | | | (29.8) | | | (39.5) | |
| Income (loss) from investment in Technip Energies | Income (loss) from investment in Technip Energies | 28.5 | | | — | | | 351.8 | | | — | | Income (loss) from investment in Technip Energies | — | | | 28.5 | | | (27.7) | | | 351.8 | |
| Foreign exchange gains (losses) | Foreign exchange gains (losses) | (6.2) | | | (14.6) | | | 11.2 | | | (53.8) | | Foreign exchange gains (losses) | (14.5) | | | (6.2) | | | 13.1 | | | 11.2 | |
| Total corporate items | Total corporate items | (62.3) | | | (63.0) | | | 126.1 | | | (198.6) | | Total corporate items | (70.6) | | | (62.3) | | | (213.6) | | | 126.1 | |
Income (loss) before income taxes(b) | Income (loss) before income taxes(b) | $ | (26.7) | | | $ | (49.7) | | | $ | 292.2 | | | $ | (3,449.0) | | Income (loss) before income taxes(b) | $ | 53.4 | | | $ | (26.7) | | | $ | 75.2 | | | $ | 292.2 | |
(a)Corporate expense primarily includes corporate staff expenses, share-based compensation expenses, long-lived assets impairment, restructuring and other expenses, and other employee benefits.
(b)Includes amounts attributable to non-controlling interests.
NOTE 6. EARNINGS (LOSS) PER SHARE
A reconciliation of the number of shares used for the basic and diluted earnings (loss) per share calculation was as follows:
| | | Three Months Ended | | Nine Months Ended | | Three Months Ended | | Nine Months Ended |
| | September 30, | | September 30, | | September 30, | | September 30, |
| (In millions, except per share data) | (In millions, except per share data) | 2021 | | 2020 | | 2021 | | 2020 | (In millions, except per share data) | 2022 | | 2021 | | 2022 | | 2021 |
| Income (loss) from continuing operations attributable to TechnipFMC plc | Income (loss) from continuing operations attributable to TechnipFMC plc | $ | (40.6) | | | $ | (64.7) | | | $ | 215.0 | | | $ | (3,477.1) | | Income (loss) from continuing operations attributable to TechnipFMC plc | $ | 5.0 | | | $ | (40.6) | | | $ | (35.2) | | | $ | 215.0 | |
| Income (loss) from discontinued operations attributable to TechnipFMC plc | Income (loss) from discontinued operations attributable to TechnipFMC plc | 8.4 | | | 60.8 | | | (46.0) | | | 228.8 | | Income (loss) from discontinued operations attributable to TechnipFMC plc | (15.3) | | | 8.4 | | | (34.7) | | | (46.0) | |
| Net income (loss) attributable to TechnipFMC plc | Net income (loss) attributable to TechnipFMC plc | $ | (32.2) | | | $ | (3.9) | | | $ | 169.0 | | | $ | (3,248.3) | | Net income (loss) attributable to TechnipFMC plc | $ | (10.3) | | | $ | (32.2) | | | $ | (69.9) | | | $ | 169.0 | |
| | | Weighted average number of shares outstanding | Weighted average number of shares outstanding | 450.7 | | | 449.4 | | | 450.4 | | | 448.4 | | Weighted average number of shares outstanding | 450.1 | | | 450.7 | | | 451.1 | | | 450.4 | |
| Dilutive effect of restricted stock units | Dilutive effect of restricted stock units | — | | | — | | | 3.9 | | | — | | Dilutive effect of restricted stock units | 5.4 | | | — | | | — | | | 3.9 | |
| | Dilutive effect of performance shares | Dilutive effect of performance shares | — | | | — | | | 0.4 | | | — | | Dilutive effect of performance shares | 2.6 | | | — | | | — | | | 0.4 | |
| | Total shares and dilutive securities | Total shares and dilutive securities | 450.7 | | | 449.4 | | | 454.7 | | | 448.4 | | Total shares and dilutive securities | 458.1 | | | 450.7 | | | 451.1 | | | 454.7 | |
| | Basic and diluted earnings (loss) per share attributable to TechnipFMC plc: | Basic and diluted earnings (loss) per share attributable to TechnipFMC plc: | | Basic and diluted earnings (loss) per share attributable to TechnipFMC plc: | |
| Earnings (loss) per share from continuing operations attributable to TechnipFMC plc | Earnings (loss) per share from continuing operations attributable to TechnipFMC plc | | Earnings (loss) per share from continuing operations attributable to TechnipFMC plc | |
| Basic | Basic | $ | (0.09) | | | $ | (0.14) | | | $ | 0.48 | | | $ | (7.75) | | Basic | $ | 0.01 | | | $ | (0.09) | | | $ | (0.08) | | | $ | 0.48 | |
| Diluted | Diluted | $ | (0.09) | | | $ | (0.14) | | | $ | 0.47 | | | $ | (7.75) | | Diluted | $ | 0.01 | | | $ | (0.09) | | | $ | (0.08) | | | $ | 0.47 | |
| | Earnings (loss) per share from discontinued operations attributable to TechnipFMC plc | Earnings (loss) per share from discontinued operations attributable to TechnipFMC plc | | Earnings (loss) per share from discontinued operations attributable to TechnipFMC plc | |
| Basic and diluted | Basic and diluted | $ | 0.02 | | | $ | 0.14 | | | $ | (0.10) | | | $ | 0.51 | | Basic and diluted | $ | (0.03) | | | $ | 0.02 | | | $ | (0.08) | | | $ | (0.10) | |
| | Total earnings (loss) per share attributable to TechnipFMC plc | Total earnings (loss) per share attributable to TechnipFMC plc | | Total earnings (loss) per share attributable to TechnipFMC plc | |
| Basic | Basic | $ | (0.07) | | | $ | (0.01) | | | $ | 0.38 | | | $ | (7.24) | | Basic | $ | (0.02) | | | $ | (0.07) | | | $ | (0.16) | | | $ | 0.38 | |
| Diluted | Diluted | $ | (0.07) | | | $ | (0.01) | | | $ | 0.37 | | | $ | (7.24) | | Diluted | $ | (0.02) | | | $ | (0.07) | | | $ | (0.16) | | | $ | 0.37 | |
For the three months ended September 30, 2021, and September 30, 2020, we incurred a loss from continuing operations; therefore, the impact of 4.3 million and 0.6 million shares werewas anti-dilutive. For the nine months ended September 30, 2020,2022, we incurred a loss from continuing operations; therefore, the impact of 3.66.6 million shares werewas anti-dilutive.
Weighted average shares of the following share-based compensation awards were excluded from the calculation of diluted weighted average number of shares, where the assumed proceeds exceed the average market price from the calculation of diluted weighted average number of shares, because their effect would be anti-dilutive:
| | | Three Months Ended | | Nine Months Ended | | Three Months Ended | | Nine Months Ended |
| | September 30, | | September 30, | | September 30, | | September 30, |
| (millions of shares) | (millions of shares) | 2021 | | 2020 | | 2021 | | 2020 | (millions of shares) | 2022 | | 2021 | | 2022 | | 2021 |
| Share option awards | Share option awards | 1.7 | | | 4.7 | | | 1.6 | | | 4.7 | | Share option awards | 1.6 | | | 1.7 | | | 1.6 | | | 1.6 | |
| Restricted share units | Restricted share units | 0.1 | | | 4.5 | | | 0.3 | | | 1.8 | | Restricted share units | — | | | 0.1 | | | — | | | 0.3 | |
| Performance shares | — | | | 4.5 | | | — | | | 2.0 | | |
| | Total | Total | 1.8 | | | 13.7 | | | 1.9 | | | 8.5 | | Total | 1.6 | | | 1.8 | | | 1.6 | | | 1.9 | |
NOTE 7. RECEIVABLES
We manage our trade and loans receivables portfolios using published default risk as a key credit quality indicator for our loans and receivables.indicator. Our loans receivable and security deposits were related to sales of long-lived assets or businesses, loans to related parties for capital expenditure purposes, or security deposits for lease arrangements.
We manage our held-to-maturity debt securities using published credit ratings as a key credit quality indicator as our held-to-maturity debt securities consist of government bonds.
The table below summarizes the amortized cost basis of financial assets by years of origination and credit quality. The key credit quality indicator is updated as of September 30, 2021.
| | | | | | | | | | | | | | | | | | September 30, 2022 | | December 31, 2021 |
| (In millions) | (In millions) | Year of origination | | Balance as of September 30, 2021 | | Balance as of December 31, 2020 | (In millions) | Credit rating | | Year of origination | | Balance | | Credit rating | | Year of origination | | Balance |
| Loans receivables, security deposits and other | | | | | | |
| Moody’s rating Ba2 | 2019 | | $ | 76.1 | | | $ | 107.6 | | |
| | Loans receivables and other | | Loans receivables and other | Moody’s rating A3 - Ba2 | | 2020-2022 | | $ | 53.9 | | | Moody’s rating Ba2 | | 2019-2020 | | $ | 50.9 | |
| Debt securities at amortized cost | Debt securities at amortized cost | | Debt securities at amortized cost | Moody’s rating Caa1 | | 2021 | | 16.1 | | | Moody’s rating B3 | | 2019-2021 | | 24.0 | |
| Moody’s rating B3 | 2019 | | 25.9 | | | 23.7 | | |
| Total financial assets | Total financial assets | | $ | 102.0 | | | $ | 131.3 | | Total financial assets | | $ | 70.0 | | | $ | 74.9 | |
Credit Losses
For contract assets, trade receivables, loans receivable, and security depositsreceivables, and other, we have elected to calculate an expected credit loss based on loss rates from historical data. We develop loss-rate statistics on the basis of the amount written-off over the life of the financial assets and contract assets and adjust these historical credit loss trends for forward-looking factors specific to the debtors and the economic environment to determine lifetime expected losses.
For held-to-maturity debt securities at amortized cost, we evaluate whether the debt securities are considered to have low credit risk at the reporting date using available reasonable and supportable information.
The table below shows the roll-forward of allowance for credit losses as of September 30, 20212022 and 2020,2021, respectively.
| | | Balance as of September 30, 2021 | | Balance as of September 30, 2022 |
| (In millions) | (In millions) | Trade receivables | | Contract assets | | Loans receivable | | Security deposit and other | | Held-to-maturity debt securities | (In millions) | Trade receivables | | Contract assets | | Loans receivable and other | | | Held-to-maturity debt securities |
| Allowance for credit losses at December 31, 2020 | $ | 40.2 | | | $ | 2.4 | | | $ | 7.5 | | | $ | 0.4 | | | $ | 0.5 | | |
| Allowance for credit losses at December 31, 2021 | | Allowance for credit losses at December 31, 2021 | $ | 38.1 | | | $ | 1.1 | | | $ | 0.6 | | | | $ | 2.7 | |
| Current period provision (release) for expected credit losses | Current period provision (release) for expected credit losses | (0.7) | | | (0.5) | | | (0.1) | | | (0.1) | | | 2.2 | | Current period provision (release) for expected credit losses | — | | | 0.1 | | | (0.1) | | | | (1.5) | |
| | Recoveries | Recoveries | (1.2) | | | (0.7) | | | — | | | — | | | — | | Recoveries | (2.2) | | | — | | | — | | | | — | |
| Allowance for credit losses at September 30, 2021 | $ | 38.3 | | | $ | 1.2 | | | $ | 7.4 | | | $ | 0.3 | | | $ | 2.7 | | |
| Allowance for credit losses at September 30, 2022 | | Allowance for credit losses at September 30, 2022 | $ | 35.9 | | | $ | 1.2 | | | $ | 0.5 | | | | $ | 1.2 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Balance as of September 30, 2020 |
| (In millions) | Trade receivables | | Contract assets | | Loans receivable | | Security deposit and other | | Held-to-maturity debt securities |
| Allowance for credit losses at December 31, 2019 | $ | 59.4 | | | $ | 4.5 | | | $ | 9.5 | | | $ | 0.7 | | | $ | 1.1 | |
| Current period provision for expected credit losses | 35.7 | | | 0.1 | | | 0.1 | | | — | | | — | |
| | | | | | | | | |
| Recoveries | (6.2) | | | (2.8) | | | (0.6) | | | — | | | — | |
| Allowance for credit losses at September 30, 2020 | $ | 88.9 | | | $ | 1.8 | | | $ | 9.0 | | | $ | 0.7 | | | $ | 1.1 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Balance as of September 30, 2021 |
| (In millions) | Trade receivables | | Contract assets | | Loans receivable and other | | | | Held-to-maturity debt securities |
| Allowance for credit losses at December 31, 2020 | $ | 40.2 | | | $ | 2.4 | | | $ | 7.9 | | | | | $ | 0.5 | |
| Current period provision (release) for expected credit losses | (0.7) | | | (0.5) | | | (0.2) | | | | | 2.2 | |
| | | | | | | | | |
| Recoveries | (1.2) | | | (0.7) | | | — | | | | | — | |
| Allowance for credit losses at September 30, 2021 | $ | 38.3 | | | $ | 1.2 | | | $ | 7.7 | | | | | $ | 2.7 | |
Certain trade receivables are due in one year or less. We do not have any financial assets that are past due or are on non-accrual status.
NOTE 8. INVENTORIES
Inventories consisted of the following:
| | (In millions) | (In millions) | September 30,
2021 | | December 31,
2020 | (In millions) | September 30,
2022 | | December 31,
2021 |
| Raw materials | Raw materials | $ | 239.5 | | | $ | 270.3 | | Raw materials | $ | 299.8 | | | $ | 250.1 | |
| Work in process | Work in process | 203.4 | | | 242.7 | | Work in process | 158.2 | | | 178.7 | |
| Finished goods | Finished goods | 626.9 | | | 739.8 | | Finished goods | 573.6 | | | 603.1 | |
| | Inventories, net | Inventories, net | $ | 1,069.8 | | | $ | 1,252.8 | | Inventories, net | $ | 1,031.6 | | | $ | 1,031.9 | |
NOTE 9. OTHER CURRENT ASSETS & OTHER CURRENT LIABILITIES
Other current assets consisted of the following:
| | (In millions) | (In millions) | September 30,
2021 | | December 31,
2020 | (In millions) | September 30,
2022 | | December 31,
2021 |
| Value - added tax receivables | $ | 246.9 | | | $ | 256.9 | | |
| Value-added tax receivables | | Value-added tax receivables | $ | 212.5 | | | $ | 222.4 | |
| Withholding tax and other receivables | | Withholding tax and other receivables | 137.8 | | | 176.7 | |
| Prepaid expenses | Prepaid expenses | 77.2 | | | 78.1 | | Prepaid expenses | 80.8 | | | 50.7 | |
| Sundry receivables | 67.9 | | | 138.4 | | |
| Other tax receivables | 61.3 | | | 73.8 | | |
| | Assets held for sale | | Assets held for sale | 18.3 | | | 5.0 | |
| Held-to-maturity investments | | Held-to-maturity investments | 13.8 | | | 8.8 | |
| Current financial assets at amortized cost | Current financial assets at amortized cost | 36.4 | | | 40.6 | | Current financial assets at amortized cost | 12.9 | | | 21.9 | |
| Held-to-maturity investments | 6.9 | | | 24.2 | | |
| Assets held for sale | 4.0 | | | 47.3 | | |
| Other | Other | 33.3 | | | 24.1 | | Other | 29.8 | | | 26.8 | |
| Total other current assets | Total other current assets | $ | 533.9 | | | $ | 683.4 | | Total other current assets | $ | 505.9 | | | $ | 512.3 | |
Other current liabilities consisted of the following:
| | (In millions) | (In millions) | September 30,
2021 | | December 31,
2020 | (In millions) | September 30,
2022 | | December 31,
2021 |
| Legal provisions | | Legal provisions | $ | 106.8 | | | $ | 121.7 | |
| Warranty accruals and project contingencies | Warranty accruals and project contingencies | $ | 123.4 | | | $ | 168.8 | | Warranty accruals and project contingencies | 103.4 | | | 119.5 | |
| Legal provisions | 122.5 | | | 127.6 | | |
| Value - added tax and other taxes payable | 90.5 | | | 109.6 | | |
| Value-added tax and other taxes payable | | Value-added tax and other taxes payable | 63.6 | | | 71.0 | |
| Social security liability | | Social security liability | 50.8 | | | 70.4 | |
| Compensation accrual | Compensation accrual | 62.8 | | | 54.3 | | Compensation accrual | 47.1 | | | 85.7 | |
| Social security liability | 59.9 | | | 67.9 | | |
| Provisions | Provisions | 25.9 | | | 53.0 | | Provisions | 11.3 | | | 23.6 | |
| Derivative liability | 22.4 | | | — | | |
| Accrued distributions to non-controlling interests | 15.0 | | | — | | |
| Current portion of accrued pension and other post-retirement benefits | Current portion of accrued pension and other post-retirement benefits | 6.1 | | | 6.9 | | Current portion of accrued pension and other post-retirement benefits | 3.3 | | | 5.2 | |
| Other accrued liabilities | Other accrued liabilities | 201.0 | | | 230.2 | | Other accrued liabilities | 147.8 | | | 163.3 | |
| Total other current liabilities | Total other current liabilities | $ | 729.5 | | | $ | 818.3 | | Total other current liabilities | $ | 534.1 | | | $ | 660.4 | |
NOTE 10. WARRANTY OBLIGATIONS
Warranty obligations are included within Other current liabilities in our consolidated balance sheets as of September 30, 2021 and December 31, 2020. A reconciliation of warranty obligations for the three and nine months ended September 30, 2021 and 2020 is as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended |
| September 30, | | September 30, |
| (In millions) | 2021 | | 2020 | | 2021 | | 2020 |
| Balance at beginning of period | $ | 104.0 | | | $ | 112.0 | | | $ | 109.5 | | | $ | 121.7 | |
| Warranty expenses | 12.0 | | | 10.5 | | | 34.0 | | | 50.8 | |
| Adjustment to existing accruals | (21.0) | | | 7.2 | | | (40.9) | | | (35.5) | |
| Claims paid | (3.5) | | | (7.2) | | | (11.1) | | | (14.5) | |
| Balance at end of period | $ | 91.5 | | | $ | 122.5 | | | $ | 91.5 | | | $ | 122.5 | |
NOTE 11. EQUITY METHOD INVESTMENTS
Our income (loss) from equity affiliates is included in our Subsea segment. During the three and nine months ended September 30, 2021,2022, our lossincome from equity affiliates was $30.0$13.8 million and $9.5$23.5 million, respectively. Our incomeloss from equity affiliates during the three and nine months ended September 30, 20202021 was $12.9$30.0 million and $49.7$9.5 million, respectively.
In 2018,During the first quarter of 2022, we entered into Magnora Offshore Wind AS, a collaboration agreementpartnership with Magma Global Ltd. (“Magma Global”)Magnora ASA, in order to develop a new generationfloating offshore wind projects. As of hybrid flexible pipe for use inSeptember 30, 2022, the traditionalequity method investment balance was $2.7 million and new energy industries. As part of the collaboration, we purchased a minority ownership interest in Magma Global.represented approximately 20% ownership.
In October 2021, we purchased the remaining ownership interest in Magma Global for $64.0 million. The cash consideration will be paid to the shareholders of Magma Global in 3 annual installments. The first payment of $23.9 million was paid on October 12, 2021. Magma technology enables the manufacture of Thermoplastic Composite Pipe (TCP) using Polyether Ether Ketone (PEEK) polymer, which is highly resistant to corrosive compounds, such as CO2.
With the step acquisition of the remaining outstanding shares of Magma Global and our resulting control of the company, we recorded a $36.7 million impairment during the third quarter of 2021 to adjust our equity method investment to its estimated fair value. The impairment charge is included in income/loss from equity affiliates line in our condensed consolidated statement of income.
Investment in Technip Energies
As discussed in Note 2, immediately following the completion of the Spin-off, we owned 49.9% of the outstanding shares of Technip Energies. On January 7, 2021, Bpifrance Participations SA (“BPI”) entered into the Share Purchase Agreement with us pursuant to which BPI agreed to purchase a portion of our retained stake in Technip Energies N.V. (the “BPI Investment”) for $200.0 million (the “Purchase Price”), subject to certain adjustments. On March 31, 2021, BPI ultimately purchased 7.5 million shares in Technip Energies from us for $100.0 million. Accordingly, on April 8, 2021, we refunded $100.0 million to BPI as a result of their revised level of investment.
On April 27, 2021 we sold 25.0 million Technip Energies shares, representing 14% of Technip Energies’ share capital, through a private placement by way of an accelerated bookbuild offering (the “April Placement”). The sale price of the shares in the April Placement was set at €11.10 per share, yielding total gross proceeds of €277.5 million, or $335.2 million.
Concurrently with the April Placement, Technip Energies purchased from us 1.8 million shares of Technip Energies (equivalent to 1% of share capital) at €11.10 per share, corresponding to the price of the April Placement (the “Concurrent Sale to Technip Energies”). The sale of shares to Technip Energies yielded total gross proceeds of €20.0 million or $24.2 million. This purchase was separate from the April Placement.
On July 29, 2021Investment in Technip Energies
There was no gain or loss recognized for the three months ended September 30, 2022 as we announced the launch and pricing of the sale of 16.0 million Technip Energies shares, representing approximately 9% of Technip Energies’ issued and outstanding share capital, through a private placement by way of an accelerated bookbuild offering (the “July Placement”). The sale price of the shares in the July Placement was set at €11.20 per share, yielding total gross proceeds of €179.2 million, or $213.1 million. We agreed to a 60-day lock-up forfully divested our remaining sharesownership in Technip Energies subjectprior to waiver fromJune 30, 2022. For the Joint Global Coordinators and certain other customary exceptions.
On September 2, 2021 we announced the sale of 17.6 million Technip Energies shares, representing approximately 10% of Technip Energies’ issued and outstanding share capital, through a private sale transaction with HAL Investments, the Dutch investment subsidiary of HAL Holding, N.V. (the “September Sale”). The sale price of the shares in the September Sale was set at €11.15 per share, yielding total gross proceeds of €196.2 million, or $231.5 million. The Joint Global Coordinators from the July Placement granted a waiver of the 60-day lock-up solely for the purpose of the September Sale. The original 60-day lock-up applicable to the July Placement remained in effect in all other respects until October 2, 2021.
The September Sale was completed in 2 tranches. The first tranche of 8.6 million shares was sold and settled in September for gross proceeds of €96.3 million, or $114.4 million. The second tranche of 9.0 million shares was settled on October 22, 2021 for gross proceeds of €99.9 million, or $116.4 million. As of nine months ended September 30, 2021,2022, we retained 17.1% ownership interest in Technip Energies’ issued and outstanding share capital. Asrecognized a result of the reduced ownership interest in Technip Energies and$27.7 million loss related loss of significant influence, we discontinued the use of equity method of accounting for our interest in Technip Energies. Following the September sale, we account for our remaining ownership interest in Technip Energies as equity security at fair value.
As of October 26, 2021, we retain a direct stake of 21.9 million shares, representing 12.3% of Technip Energies’ issued and outstanding share capital. There is no lock-up associated with our remaining stake in Technip Energies.
At the Spin-off date, on initial recognition of the investment, we elected to account for our investment in Technip Energies atEnergies. The amount recognized includes purchase price discounts on the sales of shares and fair value with all subsequent changes in fair value for the investment reported inrevaluation gains (losses) of our consolidated statement of income.investment.
For the three and nine months ended September 30, 2021, we recognized $28.5 million and $351.8 million of income, respectively, related to our investment in Technip Energies, respectively.Energies. The amounts recognized include purchase price discounts on the sales of shares and a fair value revaluation gains (losses) of our investment.
Income for the three months ended September 30, 2021 also included a $22.4 million loss on the forward sale contract associated with the September sale of the second tranche of Technip Energies shares. The loss represents the difference between the agreed upon sales price for the September sale and the market price used to determine the carrying amount of the investment in the condensed consolidated financial statements. As of September 30, 2021, the $22.4 million loss was recorded as the derivative liability associated with the forward sale and was included in other current liabilities in our condensed consolidated balance sheet. The carrying amount of our investment in Technip Energies as of September 30, 2021 was $485.3 million.
NOTE 12.11. RELATED PARTY TRANSACTIONS
Receivables, payables, revenues and expenses, which are included in our condensed consolidated financial statements for all transactions with related parties, defined as entities related to our directors and main shareholders as well as the partners of our consolidated joint ventures, were as follows.
Accounts receivable consisted of receivables due from the following related parties:
| | (In millions) | (In millions) | September 30,
2021 | | December 31, 2020 | (In millions) | September 30,
2022 | | December 31, 2021 |
| Equinor ASA | $ | — | | | $ | 24.1 | | |
| Dofcon Navegacao | Dofcon Navegacao | 23.4 | | | 4.2 | | Dofcon Navegacao | $ | 10.4 | | | $ | 22.7 | |
| Techdof Brasil AS | Techdof Brasil AS | 9.2 | | | 8.0 | | Techdof Brasil AS | 5.3 | | | 4.5 | |
| | Others | Others | 2.5 | | | 1.7 | | Others | 0.7 | | | 2.5 | |
| Total accounts receivable | Total accounts receivable | $ | 35.1 | | | $ | 38.0 | | Total accounts receivable | $ | 16.4 | | | $ | 29.7 | |
Dofcon Navegacao is an equity method investment.and Techdof Brasil AS is a wholly owned subsidiary of Dofcon Brasil AS,are our equity method affiliate. In October 2020, we added a new member to our Board of Directors who was an executive of Equinor ASA.
Accounts payable consisted of payables due to the following related parties:
| | | | | | | | | | | |
| (In millions) | September 30,
2021 | | December 31,
2020 |
| Dofcon Navegacao | $ | 4.4 | | | $ | 1.5 | |
| Others | 2.5 | | | 3.1 | |
| Total accounts payable | $ | 6.9 | | | $ | 4.6 | |
investments. Additionally, we have a note receivable fromof $0 and $12.6 million with Dofcon Brasil AS for $25.2 million and $37.6 million as of September 30, 20212022 and December 31, 2020,2021, respectively. Dofcon Brasil AS is a variable interest entityThese are included in other assets in our condensed consolidated balance sheets.
As of September 30, 2022 and accounted for as an equity method investment.December 31, 2021, we did not have significant accounts payable outstanding with our related parties.
Revenue includedconsisted of amounts from the following related parties:
| | | Three Months Ended | | Nine Months Ended | | Three Months Ended | | Nine Months Ended |
| | September 30, | | September 30, | | September 30, | | September 30, |
| (In millions) | (In millions) | 2021 | | 2020 | | 2021 | | 2020 | (In millions) | 2022 | | 2021 | | 2022 | | 2021 |
| | Dofcon Navegacao | Dofcon Navegacao | 0.1 | | | 0.8 | | | 1.3 | | | 1.4 | | Dofcon Navegacao | $ | 1.6 | | | $ | 0.1 | | | $ | 7.0 | | | $ | 1.3 | |
| | | Techdof Brasil AS | Techdof Brasil AS | 3.6 | | | 2.0 | | | 12.5 | | | 6.4 | | Techdof Brasil AS | 1.8 | | | 3.6 | | | 1.8 | | | 12.5 | |
| | Others | Others | 3.4 | | | 11.6 | | | 7.8 | | | 18.3 | | Others | 1.8 | | | 3.5 | | | 4.8 | | | 7.8 | |
| Total revenue | Total revenue | $ | 7.1 | | | $ | 14.4 | | | $ | 21.6 | | | $ | 26.1 | | Total revenue | $ | 5.2 | | | $ | 7.2 | | | $ | 13.6 | | | $ | 21.6 | |
Expenses includedconsisted of amounts to the following related parties:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended |
| September 30, | | September 30, |
| (In millions) | 2021 | | 2020 | | 2021 | | 2020 |
| | | | | | | |
| Dofcon Navegacao | $ | 8.3 | | | $ | 5.2 | | | $ | 21.3 | | | $ | 17.0 | |
| | | | | | | |
| Magma Global Limited | 5.1 | | | 1.0 | | | 9.2 | | | 2.6 | |
| | | | | | | |
| Altus Intervention | 2.2 | | | 1.5 | | | 5.0 | | | 2.6 | |
| Others | 16.9 | | | 0.9 | | | 25.1 | | | 14.2 | |
| Total expenses | $ | 32.5 | | | $ | 8.6 | | | $ | 60.6 | | | $ | 36.4 | |
Magma Global Limited was an equity method investment. In October 2021, we purchased | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended |
| September 30, | | September 30, |
| (In millions) | 2022 | | 2021 | | 2022 | | 2021 |
| Dofcon Navegacao | $ | 6.3 | | | $ | 8.3 | | | $ | 12.4 | | | $ | 21.3 | |
| Jumbo Shipping | 3.5 | | | — | | | 11.8 | | | — | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| Others | 4.4 | | | 24.2 | | | 14.2 | | | 39.3 | |
| Total expenses | $ | 14.2 | | | $ | 32.5 | | | $ | 38.4 | | | $ | 60.6 | |
A member of our Board of Directors serves on the remaining ownership interest in Magma Global, see Note 11Board of Directors for further details.Jumbo Shipping.
NOTE 13.12. DEBT
Overview
Long-term debt consisted of the following:
| | | | | | | | | | | |
| (In millions) | September 30,
2021 | | December 31,
2020 |
| | | |
| | | |
| Commercial paper | $ | — | | | $ | 1,043.7 | |
| Synthetic bonds due 2021 | — | | | 551.2 | |
| 3.45% Senior Notes due 2022 | — | | | 500.0 | |
| 3.40% 2012 Private placement notes due 2022 | 173.6 | | | 184.0 | |
| 3.15% 2013 Private placement notes due 2023 | 295.2 | | | 312.9 | |
| 5.75% 2020 Private placement notes due 2025 | 231.5 | | | 245.4 | |
| 6.50% Senior notes due 2026 | 835.9 | | | — | |
| 4.00% 2012 Private placement notes due 2027 | 86.8 | | | 92.0 | |
| 4.00% 2012 Private placement notes due 2032 | 115.8 | | | 122.7 | |
| 3.75% 2013 Private placement notes due 2033 | 115.8 | | | 122.7 | |
| Bank borrowings and other | 429.5 | | | 298.4 | |
| | | |
| Unamortized debt issuance costs and discounts | (28.3) | | | (12.8) | |
| Total debt | 2,255.8 | | | 3,460.2 | |
Less: current borrowings (a) | 282.2 | | | 624.7 | |
| Long-term debt | $ | 1,973.6 | | | $ | 2,835.5 | |
(a) As of September 30, 2021 and December 31, 2020, current borrowings consisted primarily of bank borrowings and notes with current maturities of 12 months.
Debt Financing Transactions in Connection with the Spin-off
In connection with the Spin-off, we executed a series of refinancing transactions, in order to provide a capital structure with sufficient cash resources to support future operating and investment plans.
Debt Issuance
•On February 16, 2021, we entered into a credit agreement, which provides for a $1.0 billion three-year senior secured multicurrency revolving credit facility (“Revolving Credit Facility”) including a $450.0 million letter of credit subfacility; and
•On January 29, 2021, we issued $1.0 billion of 6.50% senior notes due 2026 (the “2021 Notes”).
Repayment of Debt
The proceeds from the debt issuance described above along with the available cash on hand, were used to fund:
•the repayment of all $542.4 million of the outstanding Synthetic Convertible Bonds that matured in January 2021;
•the repayment of all $500.0 million aggregate principal amount of outstanding 3.45% Senior Notes due 2022. In connection with the repayment, we recorded a loss on extinguishment of debt of $23.5 million related to the difference between the amount paid and the net carrying value of the debt; and
•the termination of the $2.5 billion senior unsecured revolving credit facility entered into on January 17, 2017; the termination of the €500.0 million Euro Facility entered into on May 19, 2020, and the termination of the CCFF Program entered into on May 19, 2020. In connection with the termination of these credit facilities, we repaid $830.9 million of the outstanding commercial paper borrowings.
| | | | | | | | | | | |
| (In millions) | September 30,
2022 | | December 31,
2021 |
| Revolving credit facility | $ | 150.0 | | | $ | — | |
| 3.40% 2012 Private placement notes due 2022 | — | | | 169.9 | |
| 3.15% 2013 Private placement notes due 2023 | 248.5 | | | 288.8 | |
| 5.75% 2020 Private placement notes due 2025 | 194.9 | | | 226.5 | |
| 6.50% Senior notes due 2026 | 202.9 | | | 633.1 | |
| 4.00% 2012 Private placement notes due 2027 | 73.1 | | | 84.9 | |
| 4.00% 2012 Private placement notes due 2032 | 97.5 | | | 113.3 | |
| 3.75% 2013 Private placement notes due 2033 | 97.5 | | | 113.3 | |
| Bank borrowings and other | 312.8 | | | 397.4 | |
| | | |
| Unamortized debt issuance costs and discounts | (10.4) | | | (22.3) | |
| Total debt | 1,366.8 | | | 2,004.9 | |
| Less: current borrowings | 231.9 | | | 277.6 | |
| Long-term debt | $ | 1,134.9 | | | $ | 1,727.3 | |
Credit Facilities and Debt
Revolving Credit Facility - On February 16, 2021, we entered into a credit agreement, which provides for a $1.0 billion three-year senior secured multicurrencymulti-currency Revolving Credit Facility, including a $450.0 million letter of credit subfacility.sub-facility. We incurred $27.9$34.8 million of debt issuance costs in connection with the Revolving Credit Facility. These debt issuance costs are deferred and are included in Other Assetsother assets in our condensed consolidated balance sheet as of September 30, 2021.sheets. The deferred debt issuance costs are amortized to interest expense over the term of the Revolving Credit Facility.
Availability of borrowings under the Revolving Credit Facility is reduced by the outstanding letters of credit issued against the facility. As of September 30, 2021,2022, there were $150.0 million of borrowings and were $72.9$45.4 million of letters of credit outstanding, and our availability of borrowings under the Revolving Credit Facility was $927.1$804.6 million.
Borrowings under the Revolving Credit Facility bear interest at the following rates, plus an applicable margin, depending on currency:
•U.S. dollar-denominated loans bear interest, at the Company’s option, at a base rate or an adjusted rate linked to the London interbank offered rate (“Adjusted LIBOR”);
•Sterling denominated loans bear interest at Adjusted LIBOR;rate; and
•Euro-denominated loans bear interest on an adjusted rate linked to the Euro interbank offered rate.
The applicable margin for borrowings under the Revolving Credit Facility ranges from 2.50% to 3.50% for Eurocurrency loans and 1.50% to 2.50% for base rate loans, depending on a total leverage ratio. The Revolving Credit Facility is subject to customary representations and warranties, covenants, events of default, mandatory repayment provisions and financial covenants.
2021 Notes - On January 29, 2021, we issued $1.0 billion of 6.50% senior notes due 2026.2026 (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-ownedwholly owned U.S. subsidiaries and non-U.S. subsidiaries in Brazil, the Netherlands, Norway, Singapore and the United Kingdom. We incurred $25.7 million of debt issuance costs in connection with issuance of the 2021 Notes. These debt issuance costs are deferred and are included in long-term debt in our condensed consolidated balance sheet as of September 30, 2021.sheets. The deferred debt issuance costs are amortized to interest expense over the term of the 2021 Notes, which approximates the effective interest method. In
During the nine months ended September 2021,30, 2022, we completed a tender offer and purchased for cash $164.1$430.2 million of the outstanding 2021 Notes. We paid a cash premium of $12.3$21.5 million to the tendering note holders who tendered and wrote-off $3.7$8.3 million of bonddebt issuance costs. In October 2021, we purchased an additional $2.8 million of the outstanding 2021 Notes. Subsequent to September 30, 2021 we amended the Credit Agreement to amend covenants forConcurrent with the tender offer, the Company obtained consents of holders with respect to the 2021 Notes to certain proposed amendments (“Proposed Amendments”) to the indenture governing these notes. The Proposed Amendments, among other things, eliminated substantially all of the restrictive covenants and early debt repurchasescertain event of these 2021 Notes. We aredefault triggers in the indenture.
As of September 30, 2022, we were in compliance with the restrictive covenants of the Credit Agreement.
Commercial paper - As of December 31, 2020, we had $1,043.7 million of commercial paper outstanding. Commercial paper borrowings were issued at market interest rates. In accordance with the terms of the new Revolving Credit Facility, we do not have an ability to issue any new commercial paper notes going forward.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 14.13. STOCKHOLDERS’ EQUITY
In July 2022, the Board of Directors authorized the repurchase of up to $400.0 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, 2022. Based upon the remaining repurchase authority of $349.9 million and the closing stock price as of September 30, 2022, approximately 41.4 million ordinary shares could be subject to repurchase. All share repurchases were immediately cancelled.
Accumulated other comprehensive income (loss) 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 |
| December 31, 2020 | $ | (1,401.2) | | | | | $ | 34.0 | | | $ | (255.3) | | | $ | (1,622.5) | | | $ | (4.1) | |
| Other comprehensive income (loss) before reclassifications, net of tax | (0.3) | | | | | (28.8) | | | 4.4 | | | (24.7) | | | (1.5) | |
| Reclassification adjustment for net losses included in net income (loss), net of tax | — | | | | | 3.3 | | | 14.7 | | | 18.0 | | | — | |
| Other comprehensive income (loss), net of tax | (0.3) | | | | | (25.5) | | | 19.1 | | | (6.7) | | | (1.5) | |
| Spin-off of Technip Energies | 253.5 | | | | | (19.7) | | | 37.2 | | | 271.0 | | | — | |
| | | | | | | | | | | |
| September 30, 2021 | $ | (1,148.0) | | | | | $ | (11.2) | | | $ | (199.0) | | | $ | (1,358.2) | | | $ | (5.6) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (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 |
| June 30, 2022 | $ | (1,158.3) | | | $ | (64.1) | | | $ | (124.6) | | | $ | (1,347.0) | | | $ | (10.1) | |
| Other comprehensive income (loss) before reclassifications, net of tax | (97.2) | | | (33.4) | | | (1.5) | | | (132.1) | | | (2.8) | |
| Reclassification adjustment for net losses included in net income, net of tax | — | | | 6.7 | | | 3.0 | | | 9.7 | | | — | |
| Other comprehensive income (loss), net of tax | (97.2) | | | (26.7) | | | 1.5 | | | (122.4) | | | (2.8) | |
| September 30, 2022 | $ | (1,255.5) | | | $ | (90.8) | | | $ | (123.1) | | | $ | (1,469.4) | | | $ | (12.9) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (In millions) | Foreign Currency
Translation | | Hedging | | Defined Pension
and Other
Post-Retirement
Benefits | | Accumulated Other
Comprehensive
Loss Attributable to
TechnipFMC plc | | Accumulated Other
Comprehensive
Loss Attributable
to Non-Controlling Interest |
| December 31, 2021 | $ | (1,158.4) | | | $ | (17.3) | | | $ | (129.3) | | | $ | (1,305.0) | | | $ | (5.7) | |
| Other comprehensive loss before reclassifications, net of tax | (97.1) | | | (92.0) | | | (3.0) | | | (192.1) | | | (7.2) | |
| Reclassification adjustment for net losses included in net income (loss), net of tax | — | | | 18.5 | | | 9.2 | | | 27.7 | | | — | |
| Other comprehensive income (loss), net of tax | (97.1) | | | (73.5) | | | 6.2 | | | (164.4) | | | (7.2) | |
| September 30, 2022 | $ | (1,255.5) | | | $ | (90.8) | | | $ | (123.1) | | | $ | (1,469.4) | | | $ | (12.9) | |
Reclassifications out of accumulated other comprehensive income (loss) consisted of the following:
| | | Three Months Ended | | Nine Months Ended | | | Three Months Ended | | Nine Months Ended | |
| | September 30, | | September 30, | | | September 30, | | September 30, | |
| (In millions) | (In millions) | 2021 | | 2020 | | 2021 | | 2020 | | (In millions) | 2022 | | 2021 | | 2022 | | 2021 | |
| Details about Accumulated Other Comprehensive Income (loss) Components | Details about Accumulated Other Comprehensive Income (loss) Components | Amount Reclassified out of Accumulated Other
Comprehensive Loss | | Affected Line Item in the Condensed Consolidated Statements of Income | Details about Accumulated Other Comprehensive Income (loss) Components | Amount Reclassified out of Accumulated Other
Comprehensive Loss | | Affected Line Item in the Condensed Consolidated Statements of Income |
| Gains (losses) on hedging instruments | Gains (losses) on hedging instruments | | | | Gains (losses) on hedging instruments | | | |
| Foreign exchange contracts | Foreign exchange contracts | $ | (1.6) | | | $ | (23.8) | | | $ | (27.6) | | | $ | (57.3) | | | Revenue | Foreign exchange contracts | $ | (1.4) | | | $ | (1.6) | | | $ | (1.9) | | | $ | (27.6) | | | Revenue |
| | 0.7 | | | 18.3 | | | 12.2 | | | 48.0 | | | Cost of sales | | (5.6) | | | 0.7 | | | (12.6) | | | 12.2 | | | Cost of sales |
| | (0.1) | | | — | | | 0.1 | | | (0.4) | | | Selling, general and administrative expense | | — | | | (0.1) | | | (0.3) | | | 0.1 | | | Selling, general and administrative expense |
| | (0.7) | | | (2.0) | | | 6.2 | | | (3.2) | | | Other income (expense), net | | (2.2) | | | (0.7) | | | (11.1) | | | 6.2 | | | Other income (expense), net |
| | (1.7) | | | (7.5) | | | (9.1) | | | (12.9) | | | Income (loss) before income taxes | | (9.2) | | | (1.7) | | | (25.9) | | | (9.1) | | | Income (loss) before income taxes |
| | (0.4) | | | (3.6) | | | (5.8) | | | (4.2) | | | Provision for income taxes | | (2.5) | | | (0.4) | | | (7.4) | | | (5.8) | | | Provision for income taxes |
| | $ | (1.3) | | | $ | (3.9) | | | $ | (3.3) | | | $ | (8.7) | | | Net income (loss) | | $ | (6.7) | | | $ | (1.3) | | | $ | (18.5) | | | $ | (3.3) | | | Net income (loss) |
| Pension and other post-retirement benefits | Pension and other post-retirement benefits | | | | | | | | | Pension and other post-retirement benefits | | | | | | | | |
| Amortization of prior service credit (cost) | Amortization of prior service credit (cost) | $ | (0.1) | | | $ | (0.3) | | | $ | (0.4) | | | $ | (0.8) | | | (a) | Amortization of prior service credit (cost) | $ | (0.1) | | | $ | (0.1) | | | $ | (0.3) | | | $ | (0.4) | | | Other income (expense), net (a) |
| Amortization of net actuarial loss | Amortization of net actuarial loss | (6.8) | | | (0.6) | | | (19.8) | | | (6.5) | | | (a) | Amortization of net actuarial loss | (5.8) | | | (6.8) | | | (14.9) | | | (19.8) | | | Other income (expense), net (a) |
| | (6.9) | | | (0.9) | | | (20.2) | | | (7.3) | | | Income (loss) before income taxes | | (5.9) | | | (6.9) | | | (15.2) | | | (20.2) | | | Income (loss) before income taxes |
| | (2.1) | | | 1.7 | | | (5.5) | | | 0.2 | | | Provision for income taxes | | (2.9) | | | (2.1) | | | (6.0) | | | (5.5) | | | Provision for income taxes |
| | $ | (4.8) | | | $ | (2.6) | | | $ | (14.7) | | | $ | (7.5) | | | Net income (loss) | | $ | (3.0) | | | $ | (4.8) | | | $ | (9.2) | | | $ | (14.7) | | | Net income (loss) |
(a)These accumulated other comprehensive income components are included in the computation of net periodic pension cost.
NOTE 15.14. SHARE-BASED COMPENSATION
Under the Amended and Restated TechnipFMC plc Incentive Award Plan (the “Plan”“2017 Plan”), we maywere able to grant certain incentives and awards to our officers, employees, non-employee directors and consultants of the Company and its subsidiaries. Awards may includeincluded share options, share appreciation rights, performance stock units, restricted stock units, restricted shares or other awards authorized under the 2017 Plan. On April 28, 2022, we adopted the TechnipFMC plc 2022 Incentive Award Plan (the “Plan”), which replaces the 2017 Plan. Under the Plan, 24.18.9 million ordinary shares were authorized for awards, in 2017. Onand the record date ofremaining available shares from the Spin-off, 11.9 million shares remained available2017 Plan were added to the authorized amount under the Plan, which were adjusted to reflect the Spin-off using an adjustment ratio, calculated as the ratio of the closing price of shares of TechnipFMC common stock on the NYSE on the date immediately prior to the Spin-off to the closing price of shares of TechnipFMC on the NYSE on the date immediately after the Spin-off. After this adjustment, 15.2 million ordinary shares remained authorized for awards under the Plan as of February 17, 2021.Plan.
We recognize compensation expense and the corresponding tax benefits for awards under the Plan.incentive award plans. Share-based compensation expense for non-vested share options, performance-based shares and time-based and performance-based restricted stock units was $7.7$9.9 million and $14.2$7.7 million for the three months ended September 30, 20212022 and 2020,2021, respectively, and $18.4$28.9 million and $52.6$18.4 million for the nine months ended September 30, 20212022 and 2020,2021, respectively.
NOTE 16.15. IMPAIRMENT, RESTRUCTURING AND OTHER EXPENSES
Impairment, restructuring and other expenses were as follows:
| | | Three Months Ended | | Nine Months Ended | | Three Months Ended | | Nine Months Ended |
| | September 30, | | September 30, | | September 30, | | September 30, |
| (In millions) | (In millions) | 2021 | | 2020 | | 2021 | | 2020 | (In millions) | 2022 | | 2021 | | 2022 | | 2021 |
| Subsea | Subsea | $ | 6.9 | | | $ | 43.4 | | | $ | 27.6 | | | 2,912.8 | | Subsea | $ | 3.3 | | | $ | 6.9 | | | $ | 2.5 | | | 27.6 | |
| Surface Technologies | Surface Technologies | — | | | 8.7 | | | 3.8 | | | 439.8 | | Surface Technologies | 3.6 | | | — | | | 9.6 | | | 3.8 | |
| Corporate and other | Corporate and other | 0.4 | | | 1.4 | | | 3.4 | | | 3.6 | | Corporate and other | — | | | 0.4 | | | 3.0 | | | 3.4 | |
| Total impairment, restructuring and other expenses | Total impairment, restructuring and other expenses | $ | 7.3 | | | $ | 53.5 | | | $ | 34.8 | | | $ | 3,356.2 | | Total impairment, restructuring and other expenses | $ | 6.9 | | | $ | 7.3 | | | $ | 15.1 | | | $ | 34.8 | |
Goodwill and Long-Lived Assets Impairments
Goodwill and long-lived assets impairments were as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended |
| September 30, | | September 30, |
| (In millions) | 2021 | | 2020 | | 2021 | | 2020 |
| Subsea | $ | 1.3 | | | $ | 17.6 | | | $ | 17.6 | | | $ | 2,826.6 | |
| Surface Technologies | — | | | 5.4 | | | 0.3 | | | 418.1 | |
| Corporate and other | — | | | — | | | 3.0 | | | — | |
| Total impairments | $ | 1.3 | | | $ | 23.0 | | | $ | 20.9 | | | $ | 3,244.7 | |
During the nine months ended September 30, 2021, subsequent to the Spin-off, certain real estate realization actions were taken, and as a result,2022, we recorded $19.6$15.1 million of impairment charges relatingand restructuring expenses, primarily related to exiting our operating lease right-of-use assets.
operations in Russia and Canada. During the three and nine months ended September 30, 2020, triggering events were identified that led to impairments of certain long-lived assets, including goodwill. During the three and nine months ended September 30, 2020, impairment charges of $23.0 million and $3,244.7 million, respectively, were recorded. These charges included goodwill impairment charges of $2,747.5 million and $335.9 million in our Subsea and Surface Technologies segments, respectively.
For other long-lived assets, a conclusion was made that the market uncertainty was a triggering event for certain asset groups that serve short-cycle businesses in our Subsea and Surface Technologies segments. Assessing these asset groups for recoverability required the use of unobservable inputs that require significant judgment. Such judgments include expected future asset utilization while taking into account reduced future capital spending by certain customers in response to market conditions. As a result of this assessment, for the three and nine months ended September 30, 2020, we recorded impairment charges of $17.6 million and $79.1 million, respectively, in our Subsea segment, consisting primarily of installation and service equipment. For the three and nine months ended September 30, 2020, we recorded impairment charges of $5.4 million and $82.2 million, respectively, in our Surface Technologies segment, consisting primarily of North America-based fracturing and wellhead assets.
Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that carrying amounts of such assets may not be recoverable. Assessing the recoverability of assets to be held and used requires the use of unobservable inputs, which involves significant judgment. Such judgments include expected future asset utilization while taking into account reduced future capital spending by certain customers in response to market conditions.
In addition, during the three and nine months ended September 30, 2021, we recorded $19.6 million of impairment expenses, primarily relating to our operating lease right-of-use assets as a $36.7 million impairment to adjust our equity method investment in Magma Global to its estimated fair market value. The impairment charge is included in income/loss from equity affiliates line in our condensed consolidated statementresult of income. See Note 11 for further information.certain real estate rationalization actions.
Restructuring and Other Expenses
Restructuring and other charges primarily consisted of severance, facilities restructuring and other employee related costs across both segments. Restructuringall segments and other expenses were as follows:
| | | Three Months Ended September 30, | | Nine Months Ended September 30, | | Three Months Ended | | Nine Months Ended |
| | 2021 | 2020 | | 2021 | 2020 | | September 30, | | September 30, |
| (In millions) | (In millions) | Restructuring and other charges | | Restructuring and other charges | | COVID-19 expenses | | Restructuring and other charges | | Restructuring and other charges | | COVID-19 expenses | (In millions) | 2022 | | 2021 | | 2022 | | 2021 |
| Subsea | Subsea | $ | 5.6 | | | 7.1 | | $ | 18.7 | | | $ | 10.0 | | | $ | 36.1 | | | $ | 50.1 | | Subsea | $ | 1.4 | | | $ | 5.6 | | | $ | 0.6 | | | 10.0 | |
| Surface Technologies | Surface Technologies | — | | | 0.9 | | 2.4 | | | 3.5 | | | 14.0 | | | 7.7 | | Surface Technologies | 1.9 | | | — | | | 6.8 | | | 3.5 | |
| Corporate and other | Corporate and other | 0.4 | | | 1.4 | | — | | | 0.4 | | | 3.6 | | | — | | Corporate and other | — | | | 0.4 | | | 3.0 | | | 0.4 | |
| Total | $ | 6.0 | | | $ | 9.4 | | | $ | 21.1 | | | $ | 13.9 | | | $ | 53.7 | | | $ | 57.8 | | |
| Total restructuring and other expenses | | Total restructuring and other expenses | $ | 3.3 | | | $ | 6.0 | | | $ | 10.4 | | | $ | 13.9 | |
During the three and nine months ended September 30, 2020, we incurred $21.1 million and $57.8 million, respectively, of COVID-19 related expenses. These expenses represent unplanned, one-off, incremental and non-recoverable costs incurred solely as a result of the COVID-19 pandemic situation, which would not have been incurred otherwise.
Prolonged uncertainty in energy markets could lead to further reductions in capital spending from our customer base. In turn, this may lead to changes in our strategy. We will continue to take actions to mitigate the adverse effects of the changing market environment and expect to continue to adjust our cost structure to market conditions. If market conditions deteriorate, we may record additional restructuring charges and additional impairments of our long-lived assets, operating lease right-of-use assets and equity method investments.
NOTE 17.16. COMMITMENTS AND CONTINGENT LIABILITIES
Contingent liabilities associated with guarantees - In the ordinary course of business, we enter into standby letters of credit, performance bonds, surety bonds and other guarantees with financial institutions for the benefit of our customers, vendors and other parties. The majority of these financial instruments expire within five years. Management does not expect any of these financial instruments to result in losses that, if incurred, would have a material adverse effect on our condensed consolidated financial position, results of operations or cash flows.
Guarantees consisted of the following:
| | (In millions) | (In millions) | September 30,
2021 | | December 31,
2020 | (In millions) | September 30,
2022 | | December 31,
2021 |
Financial guarantees (a) | Financial guarantees (a) | $ | 177.5 | | | $ | 104.9 | | Financial guarantees (a) | $ | 203.4 | | | $ | 177.4 | |
Performance guarantees (b) | Performance guarantees (b) | 1,112.2 | | | 1,353.9 | | Performance guarantees (b) | 1,423.1 | | | 1,069.0 | |
| Maximum potential undiscounted payments | Maximum potential undiscounted payments | $ | 1,289.7 | | | $ | 1,458.8 | | Maximum potential undiscounted payments | $ | 1,626.5 | | | $ | 1,246.4 | |
(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 nonfinancialnon-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 our consolidated financial position, results of operations, or cash flows.
Contingent liabilities associated with legal and tax matters - We are involved in various pending or potential legal and tax actions or disputes in the ordinary course of our business. These actions and disputes can involve our agents, suppliers, clients and venture partners, and can include claims related to payment of fees, service quality and ownership arrangements. 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 we have also raised with the DOJ certain other projects performed by Technip S.A. subsidiaries in Brazil between 2002 and 2013. The DOJ has also inquired about projects in Ghana and Equatorial Guinea that were awarded to Technip S.A. subsidiaries in 2008 and 2009, respectively. We cooperated with the DOJ in its investigation into potential violations of the FCPA in connection with these projects. We contacted and cooperated with the Brazilian authorities (Federal Prosecution Service (“MPF”), the Comptroller General of Brazil (“CGU”) and the Attorney General of Brazil (“AGU”)) with their investigation concerning the projects in Brazil and have also contacted and are cooperating with French authorities (the Parquet National Financier (“PNF”)) with their investigation about these existing matters.
On June 25, 2019, we announced a global resolution to pay a total of $301.3 million to the DOJ, the SEC, the MPF and the CGU/AGU to resolve these anti-corruption investigations. We will not be required to have a monitor and will, instead, provide reports on our anti-corruption program to the Brazilian and U.S. authorities for two and three years, respectively.
As part of this resolution, we entered into a three-year Deferred Prosecution Agreement (“DPA”) with the DOJ related to charges of conspiracy to violate the FCPA related to conduct in Brazil and with Unaoil. In addition, Technip USA, Inc., a U.S. subsidiary, pled guilty to one count of conspiracy to violate the FCPA related to conduct in Brazil. We will also provide the DOJ reports on our anti-corruption program during the term of the DPA.
In Brazil, our subsidiaries, Technip Brasil - Engenharia, Instalações E Apoio Marítimo Ltda. and Flexibrás Tubos Flexíveis Ltda., entered into leniency agreements with both the MPF and the CGU/AGU. We have committed, as part of those agreements, to make certain enhancements to their compliance programs in Brazil during a two-year self-reporting period, which aligns with our commitment to cooperation and transparency with the compliance community in Brazil and globally.
In September 2019, the SEC approved our previously disclosed agreement in principle with the SEC Staff and issued an Administrative Order, pursuant to which we paid the SEC $5.1 million, which was included in the global resolution of $301.3 million.
To date, the investigation by PNF related to historical projects in Equatorial Guinea and Ghana has not reached a resolution. We remain committed to finding a resolution with the PNF and will maintain a $70.0 million provision related to this investigation. Additionally, the PNF recently informed us that it is reviewing historical projects in Angola. We are not aware of any evidence that would support a finding of liability with respect to these projects, or whether the PNF would seek any additional penalty. As we continue our discussions with PNF towards a potential resolution of all of these matters, the amount of a settlement could exceed this provision.
There is no certainty that a settlement with PNF will be reached or that the settlement will not exceed current accruals. The PNF has a broad range of potential sanctions under anti-corruption laws and regulations that it may seek to impose in appropriate circumstances including, but not limited to, fines, penalties, confiscations and modifications to business practices and compliance programs. Any of these measures, if applicable to us, as well as potential customer reaction to such measures, could have a material adverse impact on our business, results of operations and financial condition. If we cannot reach a resolution with the PNF, we could be subject to criminal proceedings in France, the outcome of which cannot be predicted.
Contingent liabilities associated with liquidated damages - Some of our contracts contain provisions that require us to pay liquidated damages if we are responsible for the 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, 20212022 and December 31, 2020,2021, and that the ultimate resolution of such matters will not materially affect our consolidated financial position, results of operations or cash flows.
NOTE 18.17. INCOME TAXES
Our provision for income taxes for the three months ended September 30, 20212022 and 20202021 reflected effective tax rates of 80.0% and (46.1)% and (18.3)%, respectively. The year-over-year decreaseincrease in the effective tax rate was primarily due to the increased impact of 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, 20212022 and 20202021 reflected effective tax rates of 24.5%121.0% and (0.4)%24.5%, respectively. The year-over-year increase in the effective tax rate was primarily due to the increased impact of losses in jurisdictions with a full valuation allowance, a change in geographical profit mix year over year and the impact of nondeductible goodwill impairments.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 1189.. DERIVATIVE FINANCIAL INSTRUMENTS
For purposes of mitigating the effect of changes in exchange rates, we hold derivative financial instruments to hedge the risks of certain identifiable and anticipated transactions and recorded assets and liabilities in our condensed consolidated balance sheets. The types of risks hedged are those relating to the variability of future earnings and cash flows caused by movements in foreign currency exchange rates. Our policy is to hold derivatives only for the purpose of hedging risks associated with anticipated foreign currency purchases and sales created in the normal course of business, and not for trading purposes where the objective is solely to generate profit.speculative purposes.
Generally, we enter into hedging relationships such that changes in the fair values or cash flows of the transactions being hedged are expected to be offset by corresponding changes in the fair value of the derivatives. For derivative instruments that qualify as a cash flow hedge, the effective portion of the gain or loss of the derivative, which does not include the time value component of a forward currency rate, is reported as a component of other comprehensive income (“OCI”) and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. For derivative instruments not designated as hedging instruments, any change in the fair value of those instruments is reflected in earnings in the period such change occurs.
We hold the following types of derivative instruments:
Foreign exchange rate forward contracts - The purpose of these instruments is to hedge the risk of changes in future cash flows of anticipated purchase or sale commitments denominated in foreign currencies and recorded assets and liabilities in our condensed consolidated balance sheets. As of September 30, 2021,2022, we held the following material net positions:
| | | Net Notional Amount
Bought (Sold) | | Net Notional Amount
Bought (Sold) |
| (In millions) | (In millions) | | USD Equivalent | (In millions) | | USD Equivalent |
| Euro | Euro | 874.2 | | | 1,012.0 | | Euro | 1,128.0 | | | 1,099.3 | |
| Norwegian krone | | Norwegian krone | 3,239.9 | | | 299.3 | |
| Australian dollar | | Australian dollar | 284.1 | | | 183.7 | |
| Singapore dollar | | Singapore dollar | 80.3 | | | 55.9 | |
| Indonesian rupiah | | Indonesian rupiah | 711,216.8 | | | 46.7 | |
| Canadian dollar | | Canadian dollar | 25.9 | | | 18.8 | |
| Indian rupee | | Indian rupee | 1,312.9 | | | 16.1 | |
| British pound | | British pound | (187.8) | | | (207.4) | |
| Kuwaiti dinar | | Kuwaiti dinar | (4.1) | | | (13.1) | |
| Malaysian ringgit | | Malaysian ringgit | (452.6) | | | (97.6) | |
| Brazilian real | Brazilian real | 1,108.6 | | | 203.8 | | Brazilian real | (773.9) | | | (143.2) | |
| Australian dollar | 205.6 | | | 147.9 | | |
| British pound | 100.9 | | | 135.8 | | |
| Singapore dollar | 167.7 | | | 123.2 | | |
| Indian rupee | 1,000.7 | | | 13.5 | | |
| Norwegian krone | 113.9 | | | 13.0 | | |
| Russian ruble | 839.0 | | | 11.5 | | |
| Canadian dollar | 11.9 | | | 9.3 | | |
| U.S. dollar | | U.S. dollar | (1,522.5) | | | (1,522.5) | |
| | Mexican peso | (123.6) | | | (6.0) | | |
| Kuwaiti dinar | (3.4) | | | (11.1) | | |
| Indonesian rupiah | (256,884.1) | | | (18.0) | | |
| Malaysian ringgit | (642.9) | | | (153.5) | | |
| U.S. dollar | (329.7) | | | (329.7) | | |
|
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, 2021,2022, our portfolio of these instruments included the following material net positions:
| | | Net Notional Amount
Bought (Sold) | | Net Notional Amount
Bought (Sold) |
| (In millions) | (In millions) | | USD Equivalent | (In millions) | | USD Equivalent |
| Brazilian real | Brazilian real | 62.9 | | | 11.6 | | Brazilian real | 115.0 | | | 21.3 | |
| Norwegian krone | Norwegian krone | (26.7) | | | (3.0) | | Norwegian krone | (11.4) | | | (1.1) | |
| Euro | Euro | (10.2) | | | (11.8) | | Euro | (2.6) | | | (2.5) | |
| U.S. dollar | U.S. dollar | 4.3 | | | 4.3 | | U.S. dollar | (16.5) | | | (16.5) | |
Fair value amounts for all outstanding derivative instruments have been determined using available market information and commonly accepted valuation methodologies. See Note 2019 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.
The following table presents the location and fair value amounts of derivative instruments reported in the condensed consolidated balance sheets:
| | | September 30, 2021 | | December 31, 2020 | | September 30, 2022 | | December 31, 2021 |
| (In millions) | (In millions) | Assets | | Liabilities | | Assets | | Liabilities | (In millions) | Assets | | Liabilities | | Assets | | Liabilities |
| Derivatives designated as hedging instruments | Derivatives designated as hedging instruments | | | | | | Derivatives designated as hedging instruments | | | | | |
| Foreign exchange contracts | Foreign exchange contracts | | Foreign exchange contracts | |
| Current - Derivative financial instruments | Current - Derivative financial instruments | $ | 139.7 | | | $ | 128.2 | | | $ | 189.5 | | | $ | 141.9 | | Current - Derivative financial instruments | $ | 289.2 | | | $ | 436.4 | | | $ | 106.4 | | | $ | 139.5 | |
| Long-term - Derivative financial instruments | Long-term - Derivative financial instruments | 6.2 | | | 7.9 | | | 28.9 | | | 18.8 | | Long-term - Derivative financial instruments | 13.9 | | | 39.5 | | | 10.5 | | | 15.5 | |
| Total derivatives designated as hedging instruments | Total derivatives designated as hedging instruments | 145.9 | | | 136.1 | | | 218.4 | | | 160.7 | | Total derivatives designated as hedging instruments | 303.1 | | | 475.9 | | | 116.9 | | | 155.0 | |
| Derivatives not designated as hedging instruments | Derivatives not designated as hedging instruments | | Derivatives not designated as hedging instruments | |
| Foreign exchange contracts | Foreign exchange contracts | | Foreign exchange contracts | |
| Current - Derivative financial instruments | Current - Derivative financial instruments | 20.6 | | | 26.4 | | | 79.2 | | | 15.6 | | Current - Derivative financial instruments | 16.9 | | | 87.5 | | | 3.9 | | | 21.5 | |
| Long-term - Derivative financial instruments | Long-term - Derivative financial instruments | 0.2 | | | — | | | 0.3 | | | — | | Long-term - Derivative financial instruments | — | | | 6.4 | | | — | | | — | |
| Total derivatives not designated as hedging instruments | Total derivatives not designated as hedging instruments | 20.8 | | | 26.4 | | | 79.5 | | | 15.6 | | Total derivatives not designated as hedging instruments | 16.9 | | | 93.9 | | | 3.9 | | | 21.5 | |
| Total derivatives | Total derivatives | $ | 166.7 | | | $ | 162.5 | | | $ | 297.9 | | | $ | 176.3 | | Total derivatives | $ | 320.0 | | | $ | 569.8 | | | $ | 120.8 | | | $ | 176.5 | |
Cash flow hedges of forecasted transactions, qualifyingnet of tax, which qualify for hedge accounting, net of tax, resulted in accumulated other comprehensive (losses) gainslosses of $(12.6)$92.2 million and $12.9$18.7 million as of September 30, 20212022 and December 31, 2020,2021, respectively. We expect to transfer an approximate $32.0$59.5 million gainloss 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 secondfirst half of 2024.2025.
The following table presents the gains (losses) recognized in other comprehensive income related to derivative instruments designated as cash flow hedges:
| | | Gain (Loss) Recognized in OCI | | Gain (Loss) Recognized in OCI | | Gain (Loss) Recognized in OCI |
| | Three Months Ended | | Nine Months Ended | | Three Months Ended | | Nine Months Ended |
| | September 30, | | September 30, | | September 30, | | September 30, |
| (In millions) | (In millions) | 2021 | | 2020 | | 2021 | | 2020 | (In millions) | 2022 | | 2021 | | 2022 | | 2021 |
| Foreign exchange contracts | Foreign exchange contracts | $ | (20.8) | | | $ | 56.7 | | | $ | (41.2) | | | $ | (14.9) | | Foreign exchange contracts | $ | (43.9) | | | $ | (20.8) | | | $ | (107.6) | | | $ | (41.2) | |
The following tables represent the effect of cash flow hedge accounting in the condensed consolidated statements of income for the three and nine months ended September 30, 20212022 and 2020:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (In millions) | Three Months Ended September 30, 2021 | | Three Months Ended September 30, 2020 |
| Total amount of income (expense) presented in the consolidated statements of income associated with hedges and derivatives | Revenue | | Cost of sales | | Selling,
general
and
administrative
expense | | Other income (expense), net | | Revenue | | Cost of sales | | Selling,
general
and
administrative
expense | | Other income (expense), net |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| Amounts reclassified from accumulated OCI to income | $ | (1.6) | | | $ | 0.7 | | | $ | (0.1) | | | $ | (0.7) | | | $ | (23.8) | | | $ | 18.3 | | | $ | — | | | $ | (0.6) | |
| Amounts excluded from effectiveness testing | (1.0) | | | (0.3) | | | — | | | (1.2) | | | 3.5 | | | (3.2) | | | 0.1 | | | (0.4) | |
| Total cash flow hedge gain (loss) recognized in income | (2.6) | | | 0.4 | | | (0.1) | | | (1.9) | | | (20.3) | | | 15.1 | | | 0.1 | | | (1.0) | |
| Total hedge gain (loss) recognized in income | $ | (2.6) | | | $ | 0.4 | | | $ | (0.1) | | | $ | (1.9) | | | $ | (20.3) | | | $ | 15.1 | | | $ | 0.1 | | | $ | (1.0) | |
| | | | | | | | | | | | | | | |
| Gain (loss) recognized in income on derivatives not designated as hedging instruments | — | | | (0.1) | | | — | | | (25.2) | | | (0.1) | | | 1.4 | | | — | | | 10.6 | |
| Total | $ | (2.6) | | | $ | 0.3 | | | $ | (0.1) | | | $ | (27.1) | | | $ | (20.4) | | | $ | 16.5 | | | $ | 0.1 | | | $ | 9.6 | |
| | (In millions) | (In millions) | Nine Months Ended September 30, 2021 | | Nine Months Ended September 30, 2020 | (In millions) | Three Months Ended September 30, 2022 | | Three Months Ended September 30, 2021 |
| Total amount of income (expense) presented in the consolidated statements of income associated with hedges and derivatives | 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 | 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 | Amounts reclassified from accumulated OCI to income | $ | (27.6) | | | $ | 12.2 | | | $ | 0.1 | | | $ | 6.2 | | | $ | (57.3) | | | $ | 48.0 | | | $ | (0.4) | | | $ | (0.6) | | Amounts reclassified from accumulated OCI to income | $ | (1.4) | | | $ | (5.6) | | | $ | — | | | $ | (2.2) | | | $ | (1.6) | | | $ | 0.7 | | | $ | (0.1) | | | $ | (0.7) | |
| Amounts excluded from effectiveness testing | Amounts excluded from effectiveness testing | (0.8) | | | (3.0) | | | — | | | (3.2) | | | 6.0 | | | (8.0) | | | — | | | 2.0 | | Amounts excluded from effectiveness testing | 5.2 | | | (4.8) | | | (0.1) | | | (11.7) | | | (1.0) | | | (0.3) | | | — | | | (1.2) | |
| Total cash flow hedge gain (loss) recognized in income | Total cash flow hedge gain (loss) recognized in income | (28.4) | | | 9.2 | | | 0.1 | | | 3.0 | | | (51.3) | | | 40.0 | | | (0.4) | | | 1.4 | | Total cash flow hedge gain (loss) recognized in income | 3.8 | | | (10.4) | | | (0.1) | | | (13.9) | | | (2.6) | | | 0.4 | | | (0.1) | | | (1.9) | |
| Total hedge gain (loss) recognized in income | Total hedge gain (loss) recognized in income | (28.4) | | | 9.2 | | | 0.1 | | | 3.0 | | | (51.3) | | | 40.0 | | | (0.4) | | | 1.4 | | Total hedge gain (loss) recognized in income | $ | 3.8 | | | $ | (10.4) | | | $ | (0.1) | | | $ | (13.9) | | | $ | (2.6) | | | $ | 0.4 | | | $ | (0.1) | | | $ | (1.9) | |
| | Gain (loss) recognized in income on derivatives not designated as hedging instruments | Gain (loss) recognized in income on derivatives not designated as hedging instruments | 1.4 | | | 0.5 | | | — | | | 8.2 | | | (0.8) | | | 2.7 | | | — | | | (12.6) | | Gain (loss) recognized in income on derivatives not designated as hedging instruments | 0.1 | | | 0.6 | | | — | | | (22.0) | | | — | | | (0.1) | | | — | | | (25.2) | |
| Total | Total | $ | (27.0) | | | $ | 9.7 | | | $ | 0.1 | | | $ | 11.2 | | | $ | (52.1) | | | $ | 42.7 | | | $ | (0.4) | | | $ | (11.2) | | Total | $ | 3.9 | | | $ | (9.8) | | | $ | (0.1) | | | $ | (35.9) | | | $ | (2.6) | | | $ | 0.3 | | | $ | (0.1) | | | $ | (27.1) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (In millions) | Nine Months Ended September 30, 2022 | | Nine Months Ended September 30, 2021 |
| 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) | $ | (1.9) | | | $ | (12.6) | | | $ | (0.3) | | | $ | (11.1) | | | $ | (27.6) | | | $ | 12.2 | | | $ | 0.1 | | | $ | 6.2 | |
| Amounts excluded from effectiveness testing | 8.2 | | | (8.6) | | | 0.4 | | | (31.3) | | | (0.8) | | | (3.0) | | | — | | | (3.2) | |
| Total cash flow hedge gain (loss) recognized in income | 6.3 | | | (21.2) | | | 0.1 | | | (42.4) | | | (28.4) | | | 9.2 | | | 0.1 | | | 3.0 | |
| Total hedge gain (loss) recognized in income | 6.3 | | | (21.2) | | | 0.1 | | | (42.4) | | | (28.4) | | | 9.2 | | | 0.1 | | | 3.0 | |
| | | | | | | | | | | | | | | |
| Gain (loss) recognized in income on derivatives not designated as hedging instruments | — | | | (0.8) | | | — | | | (8.0) | | | 1.4 | | | 0.5 | | | — | | | 8.2 | |
| Total | $ | 6.3 | | | $ | (22.0) | | | $ | 0.1 | | | $ | (50.4) | | | $ | (27.0) | | | $ | 9.7 | | | $ | 0.1 | | | $ | 11.2 | |
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, 20212022 and December 31, 2020,2021, we had no collateralized derivative contracts. The following tables present both gross information and net information of recognized derivative instruments:
| | | September 30, 2021 | | December 31, 2020 | | September 30, 2022 | | December 31, 2021 |
| (In millions) | (In millions) | Gross Amount Recognized | | Gross Amounts Not Offset, Permitted Under Master Netting Agreements | | Net Amount | | Gross Amount Recognized | | Gross Amounts Not Offset, Permitted Under Master Netting Agreements | | Net Amount | (In millions) | Gross Amount Recognized | | Gross Amounts Not Offset, Permitted Under Master Netting Agreements | | Net Amount | | Gross Amount Recognized | | Gross Amounts Not Offset, Permitted Under Master Netting Agreements | | Net Amount |
| Derivative assets | Derivative assets | $ | 166.7 | | | $ | (101.9) | | | $ | 64.8 | | | $ | 297.9 | | | $ | (128.7) | | | $ | 169.2 | | Derivative assets | $ | 320.0 | | | $ | (200.2) | | | $ | 119.8 | | | $ | 120.8 | | | $ | (78.6) | | | $ | 42.2 | |
| Derivative liabilities | Derivative liabilities | $ | 162.5 | | | $ | (101.9) | | | $ | 60.6 | | | $ | 176.3 | | | $ | (128.7) | | | $ | 47.6 | | Derivative liabilities | $ | 569.8 | | | $ | (200.2) | | | $ | 369.6 | | | $ | 176.5 | | | $ | (78.6) | | | $ | 97.9 | |
NOTE 20.19. FAIR VALUE MEASUREMENTS
Assets and liabilities measured at fair value on a recurring basis were as follows:
| | | September 30, 2021 | | December 31, 2020 | | September 30, 2022 | | December 31, 2021 |
| (In millions) | (In millions) | Total | | Level 1 | | Level 2 | | Level 3 | | Total | | Level 1 | | Level 2 | | Level 3 | (In millions) | Total | | Level 1 | | Level 2 | | Level 3 | | Total | | Level 1 | | Level 2 | | Level 3 |
| Assets | Assets | | | | | | | | | | | | | | | | Assets | | | | | | | | | | | | | | | |
| Investments | Investments | | Investments | |
| | Investment in Technip Energies | Investment in Technip Energies | $ | 485.3 | | | $ | 485.3 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | Investment in Technip Energies | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 317.3 | | | $ | 317.3 | | | $ | — | | | $ | — | |
Equity securities(a) | Equity securities(a) | 23.9 | | | 23.9 | | | — | | | — | | | 23.4 | | | 23.4 | | | — | | | — | | Equity securities(a) | 18.7 | | | 18.7 | | | — | | | — | | | 25.0 | | | 25.0 | | | — | | | — | |
| Money market fund | 2.6 | | | — | | | 2.6 | | | — | | | 1.7 | | | — | | | 1.7 | | | — | | |
Stable value fund(b) | 0.6 | | | — | | | — | | | — | | | 0.9 | | | — | | | — | | | — | | |
| Money market and stable value funds | | Money market and stable value funds | 1.7 | | | — | | | 1.5 | | | — | | | 2.7 | | | — | | | 2.4 | | | — | |
| | | Held-to-maturity debt securities | Held-to-maturity debt securities | 24.0 | | | — | | | 24.0 | | | — | | | 24.2 | | | — | | | 24.2 | | | — | | Held-to-maturity debt securities | 15.0 | | | — | | | 15.0 | | | — | | | 24.0 | | | — | | | 24.0 | | | — | |
| Derivative financial instruments | Derivative financial instruments | | Derivative financial instruments | |
| Foreign exchange contracts | Foreign exchange contracts | 166.7 | | | — | | | 166.7 | | | — | | | 297.9 | | | — | | | 297.9 | | | — | | Foreign exchange contracts | 320.0 | | | — | | | 320.0 | | | — | | | 120.8 | | | — | | | 120.8 | | | — | |
| Assets held for sale | 4.0 | | | — | | | — | | | 4.0 | | | 47.3 | | | — | | | — | | | 47.3 | | |
| | Total assets | Total assets | $ | 707.1 | | | $ | 509.2 | | | $ | 193.3 | | | $ | 4.0 | | | $ | 395.4 | | | $ | 23.4 | | | $ | 323.8 | | | $ | 47.3 | | Total assets | $ | 355.4 | | | $ | 18.7 | | | $ | 336.5 | | | $ | — | | | $ | 489.8 | | | $ | 342.3 | | | $ | 147.2 | | | $ | — | |
| Liabilities | Liabilities | | | | | | | | | | | | | | | | Liabilities | | | | | | | | | | | | | | | |
| Derivative financial instruments | Derivative financial instruments | | Derivative financial instruments | |
| Foreign exchange contracts | Foreign exchange contracts | 162.5 | | | — | | | 162.5 | | | — | | | 176.3 | | | — | | | 176.3 | | | — | | Foreign exchange contracts | 569.8 | | | — | | | 569.8 | | | — | | | 176.5 | | | — | | | 176.5 | | | — | |
| Other current liabilities | 22.4 | | | 22.4 | | | — | | | — | | | — | | | — | | | — | | | — | | |
| | Total liabilities | Total liabilities | $ | 184.9 | | | $ | 22.4 | | | $ | 162.5 | | | $ | — | | | $ | 176.3 | | | $ | — | | | $ | 176.3 | | | $ | — | | Total liabilities | $ | 569.8 | | | $ | — | | | $ | 569.8 | | | $ | — | | | $ | 176.5 | | | $ | — | | | $ | 176.5 | | | $ | — | |
(a)Includes fixed income and other investments measured at fair value.
(b)Certain investments that are measured at fair value using net asset value per share (or its equivalent) have not been classified in the fair value hierarchy.
Investment in Technip Energies - The fair value of our investment in Technip Energies iswas based on quoted prices that we havehad the ability to access in public markets, see markets. As of September 30, 2022, we fully divested our remaining ownership in Technip Energies. See Note 1110 for further details. 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.
Stable value fund and Money market fundand stable value funds - The stable value fund and money market fundThese 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.
Assets held for sale - The fair value of our assets held for sale was determined using a market approach that took into consideration the expected sales price. As of December 31, 2020, our G1200 vessel is classified as held for sale. In March 2021, we entered into a Memorandum of Agreement to sell the vessel. We completed the sale and received $48.0 million in cash proceeds during the second quarter of 2021.
Redeemable non-controlling interest - In accordance with the Share Purchase Agreement between Technip-Coflexip UK Holdings Limited (“TUK”) and Island Offshore Management AS (“Island Offshore”) that was executed on March 12, 2018, whereby TUK initially purchased 51% of the shares of TIOS AS, a joint venture between TUK and Island Offshore (“TIOS”), TUK acquired the remaining 49% interest in TIOS at a total price of $48.6 million during the third quarter of 2021. As of December 31, 2020, we owned a 51% share in TIOS and the redeemable non-controlling interest was recorded as mezzanine equity at fair value of $43.7 million.
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 1918 for further details. Other current liabilities - Includes mark-to-market on the forward sale contract associated with the September Sale of the second tranche of Technip Energies shares, see Note 11 for further details. The liability was valued using the end of the quarter market share price for Technip Energies and therefore is presented in Level 1 of the fair value hierarchy.
Nonrecurring Fair Value Measurements
Fair value of long-lived, non-financial assets - Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that carrying amounts of such assets may not be recoverable.
The following summarizes impairments of equity investment andour long-lived assets and related post-impairment fair value for the nine months ended September 30, 2021 and 2020::
| | | Nine Months Ended September 30, | | | | | | | | | | | | | | |
| | 2021 | | 2020 | | | | Nine Months Ended September 30, 2021 |
| (In millions) | (In millions) | Impairment | | Fair Value | | Impairment | | Fair Value | (In millions) | | | Impairment | | Fair Value |
Long-lived assets(a) | Long-lived assets(a) | $ | 20.9 | | | $ | 31.6 | | | $ | 161.3 | | | $ | 353.3 | | Long-lived assets(a) | | | $ | 20.9 | | | $ | 31.6 | |
Equity method investment impairment (b) | $ | 36.7 | | | $ | 85.4 | | | $ | — | | | $ | — | | |
(a)Measured asMeasuring these asset groups for recoverability required the use of the impairment date using the income approach and a 10.8% risk-adjusted rate of interest, resultingunobservable inputs that require significant judgment. Such judgments include expected future asset utilization in a Level 3 fair value measurement.
(b)Measured as of the impairment date using the estimated fair value of the consideration transferred, resulting in a Level 3 fair value measurement.response to market conditions.
Other fair value disclosures
The carrying amounts of cash and cash equivalents, trade receivables, accounts payable, short-term debt, commercial paper, debt associated with our bank borrowings, credit facilities, as well as amounts included in other current assets and other current liabilities that meet the definition of financial instruments, approximate fair value.
Fair value of debt - We use a market approach to determine the fair value of our fixed-rate debt using observable market data, which results in a Level 2 fair value measurement. The estimated fair value of our private placement notes, revolving credit facility and senior notes and synthetic bonds was $1,954.2$1,019.8 million and $2,199.2$1,706.1 million as of September 30, 20212022 and December 31, 2020,2021, respectively.
Credit risk - By their nature, financial instruments involve risk, including credit risk, for non-performance by counterparties. Financial instruments that potentially subject us to credit risk 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.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
BUSINESS OUTLOOK
Overall Outlook - – The short-term outlook for crude oilgrowth in global energy demand has improved. Economic activity continues to expand,been driven by strong fiscal stimulus, COVID vaccinations and the re-opening of local economies.increased economic activity. Oil prices have been further supported by the industry’s more disciplined capital spend, particularly for OPEC+ countries which appear to be focused on realizing a price that supports both economic growth and continued energy investment. These conditions could also provide greater price stability over the intermediate term.
Long-termThe shift from the pandemic-led contraction to economic growth has resulted in high inflation and logistical bottlenecks. The energy transition and the Russian invasion of Ukraine have further exacerbated these trends, with the invasion disrupting access to several key commodities and supply routes. With long-term demand for energy is forecast to increase. Our conversations with clients remain constructive, and we see continued improvement inincrease, the broader market outlook asconflict has highlighted the need for greater energy security for countries across the globe.
We have entered a multi-year upcycle for energy demand. We believe that investments in new sources of oil and natural gas production will increase over the intermediate-term.intermediate-term, resulting in strong inbound orders for our Company through at least 2025. We are confident that these conventional resources will remain an important part of the energy mix for an extended period of time.
Looking beyondWe are also committed to the strength of these traditional markets,energy transition, where we believe that offshore will also play a meaningful role in the the transition to renewable energy resources and reduction of carbon emissions.
We are making real progress through our three main pillars of greenhouse gas removal, offshore floating renewables and hydrogen.
We have been successful in building on our focuspartnerships and alliances to further position ourselves as the leading offshore energy architect.
•During the first quarter, we signed the Option to Lease Agreement for the ScotWind N3 area through our partnership in offshore renewables, Magnora Offshore Wind. The proposed development project will install 33 floating wind turbines with total capacity of approximately 500 megawatts – which could power more than 600,000 homes in the United Kingdom. We also signed an agreement with Shell to explore synergies with a shared goal of enabling offshore renewable energy generation and reducing total CO2 emissions – another example of how our long-standing partnerships extend to all areas of wind, wave, hydrogenour business.
•In July, Orbital Marine Power, which is collaborating with TechnipFMC to accelerate the global commercialization of its tidal stream turbine, was awarded two contracts for difference in the UK Allocation Round 4 multi-turbine projects in Eday, Orkney. Capable of delivering 7.2MW of predictable clean energy to the grid once completed, these Orbital tidal stream energy projects will support the UK’s security of supply, energy transition and carbon transportation and storage. We recently announced the acquisition of the remaining shares of Magma Global,a leader in advanced composite technologies, as well as the formation of our strategic alliance with Talos Energy to develop and deliver technical and commercial solutions to Carbon Capture and Storage projects. These strategic actions will expand our capabilities and provide us with new opportunities to address carbon emissions.broader climate change objectives.
Subsea – The strength of our inbound orders in the first nine months of the year has been indicative of the continued offshore market recovery and expansion. Innovative approaches to subsea projects, like our iEPCI™iEPCI solution, have improved project economics, and many offshore discoveries can be developed economically atwell below today’s crude oil prices. We believe deepwater development is likely to remain a significant part of many of our customers’ portfolios.
As the subsea industry continues to evolve, we have taken actions to further streamline our organization, achieve standardization and reduce cycle times. The rationalization of our global footprint will also further leverage the benefits of our integrated offering. We aim to continuously align our operations with activity levels, while preserving our core capacity in order to deliver current projects in backlog and future order activity.
We have experienced renewed operator confidence in advancing subsea activity as a result of the improvedrobust economic outlook, lower market volatilityimproved project economics and higher oil price.more recent concerns regarding the security of energy supply. With crude above $70$90 per barrel, the opportunity set of large subsea projects to be sanctioned over the next 24 months has expanded.expanded, driven in part by new greenfield opportunities in Brazil and Guyana. 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.
Front-end engineering and design (“FEED”) activity continues to improve. FEED activity inFor the current year, is expected to return to the more robust levels seen in 2019, which further supportsour early engagement and client partnerships support our view ofthat subsea tree awards for the total industry are likely to exceed 350 – a sustainable recovery for deepwater.level not seen since 2013. We expect at least 60% of the projectsexperienced continued strength in the current year that are undergoing studies with TechnipFMC to include an iEPCI™ solution, many of which could be directly awarded to our Company upon reaching final investment decision.
TechnipFMC is increasingly less dependent on larger, publicly tendered projects.
•We anticipate that an increasing share of our inbound orders will result from projects that will be directly awarded to us, many of which may come from our alliance partners;
•We anticipate higher activity in subsea services, with the industry’s largest installed base; and
•We expect a higher mix of iEPCI™ project awards, demonstrating strong geographic diversity and new adopters of our unique, integrated approach to subsea development.
We are confident that Subsea inbound orders in 2021 will exceed the $4 billion achieved in the prior year, with $3.9 billion of orders already inbound in the first nine months of the year. Overyear, with orders growing to $5.2 billion, a book-to-bill of 1.3. Our Subsea Opportunities list remains at a record level. This strong project pipeline and the active dialogue with our large and expanded customer base gives us continued confidence that our full-year Subsea inbound will be up as much as 40 percent versus the prior year, with orders approaching $7.0 billion in 2022. Extending the outlook into 2023, we believe orders over the next five quarters we anticipate Subsea inbound orders could approach $7will be at least $9.0 billion. We expect Brazil to be the most active region of the world for new
As the subsea industry continues to evolve, we are driving simplification, standardization, and industrialization to reduce cycle times. The industrialization of our project orders, driven by continued investmentbusiness through the introduction of configure-to-order (CTO) is another way in which we are driving real change in our industry that further improves the economics of our customer’s projects while driving greater efficiencies for TechnipFMC.
With CTO, we have designed an environment, process, culture and tools which are scalable and, more importantly, are transformational to the future of our company. Our customers require a product platform that provides them with choices which meet their unique and evolving needs, but also provides them with the significant speed, cost and efficiency benefits that come with product and process standardization. CTO has allowed us to redefine our sourcing strategy and transform our manufacturing flow, resulting in up to 25 percent lower product cost and a shortened 12 month delivery time for subsea production equipment – savings that are both real and sustainable. This has paved the way for other products to adopt a similar operating model, enabling an enterprise-wide way of working.
Since 2015, 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 pre-salt field discoveries.cycle and more in parallel with the short cycle U.S. land market. We anticipate additional market growth potential coming from the North Sea, Asia Pacificbelieve these changes are fundamental and Africa. The strong front end activity we are experiencing today should further support project award momentum into 2022.sustainable as a result of new business models and technology pioneered by our company.
Surface Technologies – Our performance is typically driven by variations in global drilling activity, creating a dynamic environment. Operating results can be further impacted by stimulation activity and the completions intensity of shale applications in North America.
In 2021, ourActivity in North America is expected to increase in 2022, driven by higher drilling and completion activity and an improved pricing environment. Our completions-related revenue has recovered, driven by the North America market activity increase andcontinues to benefit from the successful adoption of iComplete™iComplete – our fully integrated, digitally enabled pressure control system. iComplete™ has already achieved significant market penetration since its introduction inWe also recently introduced our E-Mission solution for onshore production facilities. This digital offering uses proprietary process automation to provide the third quarter of 2020, with more than 10 different customers utilizing the new integrated system.industry’s only real-time monitoring and control system that both reduces methane flaring by up to 50 percent and maximizes oil production.
Drilling activity in internationalInternational markets is less cyclical than North America as most activity is driven by national oil companies, which tend to maintain a longer term view that exhibits less variability in capital spend. Additionally, wewill continue to benefit from our exposure to the Middle East, the North Sea and Asia Pacific.
In recent years, our international revenue has becomerepresent a greater proportionsignificant portion of total segment revenue. We expect a gradual and steady recoveryrevenue in well count in 2021 to drive international market growth. Increased spending will be led by national oil companies, particularly in the Middle East, where we expect a significant increase in order activity in the fourth quarter, driven by several multi-year awards.
2022. Our unique capabilities in the internationalthese markets, which demand higher specification equipment, global services and local content, provide a platform for us to extend our leadership positions. We remain levered to these more resilient markets where we expect to source approximately 65% of our full year Surface Technologies revenue in 2021.
CONSOLIDATED RESULTS OF OPERATIONS OF TECHNIPFMC PLC
THREE MONTHS ENDED SEPTEMBER 30, 20212022 AND 20202021
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | | | |
| September 30, | | Change |
| (In millions, except %) | 2021 | | 2020 | | $ | | % |
| Revenue | $ | 1,579.4 | | | $ | 1,727.5 | | | (148.1) | | | (8.6) | |
| | | | | | | |
| Costs and expenses | | | | | | | |
| Cost of sales | 1,364.0 | | | 1,518.8 | | | (154.8) | | | (10.2) | |
| Selling, general and administrative expense | 153.4 | | | 181.8 | | | (28.4) | | | (15.6) | |
| Research and development expense | 18.7 | | | 20.8 | | | (2.1) | | | (10.1) | |
| Impairment, restructuring and other expenses (Note 16) | 7.3 | | | 53.5 | | | (46.2) | | | (86.4) | |
| Total costs and expenses | 1,543.4 | | | 1,774.9 | | | (231.5) | | | (13.0) | |
| | | | | | | |
| Other income (expense), net | (5.9) | | | 7.9 | | | (13.8) | | | (174.7) | |
| Income (loss) from equity affiliates (Note 11) | (30.0) | | | 12.9 | | | (42.9) | | | (332.6) | |
| Income from investment in Technip Energies (Note 11) | 28.5 | | | — | | | 28.5 | | | |
| Loss on early extinguishment of debt | (16.0) | | | — | | | (16.0) | | | |
| Net interest expense | (39.3) | | | (23.1) | | | (16.2) | | | (70.1) | |
| Loss before income taxes | (26.7) | | | (49.7) | | | 23.0 | | | 46.3 | |
| Provision for income taxes (Note 18) | 12.3 | | | 9.1 | | | 3.2 | | | 35.2 | |
| Loss from continuing operations | (39.0) | | | (58.8) | | | 19.8 | | | 33.7 | |
| Net income from continuing operations attributable to non-controlling interests | (1.6) | | | (5.9) | | | 4.3 | | | 72.9 | |
| Loss from continuing operations attributable to TechnipFMC plc | (40.6) | | | (64.7) | | | 24.1 | | | 37.2 | |
| Income from discontinued operations | 8.4 | | | 65.2 | | | (56.8) | | | (87.1) | |
| Income from discontinued operations attributable to non-controlling interests | — | | | (4.4) | | | 4.4 | | | 100.0 | |
| Net Income (loss) attributable to TechnipFMC plc | (32.2) | | | (3.9) | | | (28.3) | | | (725.6) | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | | | |
| September 30, | | Change |
| (In millions, except %) | 2022 | | 2021 | | $ | | % |
| Revenue | $ | 1,733.0 | | | $ | 1,579.4 | | | $ | 153.6 | | | 9.7 | |
| | | | | | | |
| Costs and expenses | | | | | | | |
| Cost of sales | 1,474.4 | | | 1,364.0 | | | 110.4 | | | 8.1 | |
| Selling, general and administrative expense | 151.9 | | | 153.4 | | | (1.5) | | | (1.0) | |
| Research and development expense | 19.0 | | | 18.7 | | | 0.3 | | | 1.6 | |
| Impairment, restructuring and other expenses (Note 15) | 6.9 | | | 7.3 | | | (0.4) | | | (5.5) | |
| Total costs and expenses | 1,652.2 | | | 1,543.4 | | | 108.8 | | | 7.0 | |
| | | | | | | |
| Other expense, net | (10.3) | | | (5.9) | | | (4.4) | | | (74.6) | |
| Income (loss) from equity affiliates (Note 10) | 13.8 | | | (30.0) | | | 43.8 | | | 146.0 | |
| Income from investment in Technip Energies (Note 10) | — | | | 28.5 | | | (28.5) | | | (100.0) | |
| Loss on early extinguishment of debt | — | | | (16.0) | | | 16.0 | | | (100.0) | |
| Net interest expense | (30.9) | | | (39.3) | | | 8.4 | | | 21.4 | |
| Income (loss) before income taxes | 53.4 | | | (26.7) | | | 80.1 | | | 300.0 | |
| Provision for income taxes (Note 17) | 42.7 | | | 12.3 | | | 30.4 | | | 247.2 | |
| Income (loss) from continuing operations | 10.7 | | | (39.0) | | | 49.7 | | | 127.4 | |
| Net (income) from continuing operations attributable to non-controlling interests | (5.7) | | | (1.6) | | | (4.1) | | | (256.3) | |
| Income (loss) from continuing operations attributable to TechnipFMC plc | 5.0 | | | (40.6) | | | 45.6 | | | 112.3 | |
| Income (loss) from discontinued operations | (15.3) | | | 8.4 | | | (23.7) | | | (282.1) | |
| | | | | | | |
| Net Income (loss) attributable to TechnipFMC plc | $ | (10.3) | | | $ | (32.2) | | | $ | 21.9 | | | 68.0 | |
Revenue
Revenue decreased $148.1increased $153.6 million during the three months ended September 30, 2021,2022, compared to the same period in 2020.2021. Subsea revenue decreased year-over-year, primarily due to lower activity in the Gulf of Mexico and North Sea. Surface Technologies revenue increased year-over-year, primarily driven by an increase in installation and services activity. Surface Technologies revenue increased, primarily as a result of the increase in operator activity in North America and the success of our iComplete™ ecosystem.America.
Gross Profit
Gross profit (revenue less cost of sales), as a percentage of sales, increased to 13.6%14.9% during the three months ended September 30, 2021,2022, compared to 12.1%13.6% in the prior-year period. Subsea gross profit as a percentage of sales, increased year over year due to stronger operational performanceimproved margins in backlog and from lower operating costs.an increase in installation and services activity. Surface Technologies gross profit as a percentage of sales, increased year-over-year, driven by higher sales volume, favorable product mix and lower operating costs.primarily due to an increase in operator activity in North America.
Selling, General and Administrative Expense
Selling, general and administrative expense decreased $28.4$1.5 million year-over-year. The decrease isyear-over-year, primarily driven by thea decrease in costs associated with digital development activities and legal expenses.our support functions.
Impairment, Restructuring and Other Expenses
We incurred $7.3$6.9 million of impairment, restructuring impairment and other chargesexpenses during the three months ended September 30, 20212022, primarily related to exiting our operations in Canada compared, to $53.5$7.3 million of restructuring, impairment and other charges incurred during the three months ended September 30, 2020. Three Months Ended September 30, impairment, restructuring and other expenses were impacted by unplanned, non-recoverable COVID-19 related expenses.2021. See Note 1615 for further details.
Other Income (Expense), Net
Other expense,income (expense), net, primarily reflects foreign currency gains and losses, including gains and losses associated with the remeasurement of net cash positions, and gains and losses on sales of property, plant and equipment. Inequipment and non-operating gains and losses. For the third quarterthree months ended September 30, 2022, we recognized $10.3 million of other expense, net, which primarily included $14.5 million of net foreign exchange losses. For the three months ended September 30, 2021, we recognized $5.9 million of other expenses,expense, net, which primarily included $6.2 million of net foreign exchange losses. In the third quarter of 2020, we recognized $7.9 million of other income, which primarily included $14.6 million of net foreign exchange losses. These losses were partially offset by $5.4 million of gains on sales of property, plant and equipment. The change in foreign exchange gains and losses is primarily due to foreign exchange gains and losses from unhedged currencies and the effect of these foreign currencies’ exchange rate to a U.S. dollar on naturally hedged projects.that we cannot hedge.
Income (Loss) from Equity Affiliates
For the three months ended September 30, 20212022 and 2020,2021, we recorded an income of $13.8 million and a loss of $30.0 million and an income of $12.9 million, respectively, from equity method affiliates. During the three months ended September 30, 2021, we recorded a $36.7 million impairment of our Magma Global equity method investment. See Note 11 for further details.
Income from Investment in Technip Energies
During the three months ended September 30, 2021, we recorded a $28.5 million of income as a result of our investment in Technip Energies. The amountamounts recognized primarily reflects areflect fair value revaluation gaingains (losses) of our investment and purchase price discounts on the sales of shares.investment. See Note 1110 for further details.
Loss on Early Extinguishment of Debt
For the three months ended September 30, 2021, we recognized a $16.0 million of loss on early extinguishment of debt, which related to premium paid and write-off of bonddebt issuance costs within connection with the repurchase of the 2021 Notes. See Note 13 for further details.
Net Interest Expense
Net interest expense of $39.3$30.9 million increased $16.2decreased by $8.4 million in the three months ended September 30, 2021,2022, compared to the same period in 2020,2021, primarily due to higher interest expense associated with the $1.0 billion senior notes issued during the three months ended March 31, 2021.reduction in outstanding debt.
Provision for Income Taxes
Our provision for income taxes for the three months ended September 30, 20212022 and 20202021 reflected effective tax rates of(46.1)% 80.0% and (18.3)(46.1)%, respectively. The year-over-year decreaseincrease in the effective tax rate was primarily due to the increased impact of 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.
Discontinued Operations
Income (loss) from discontinued operations, net of income taxes, was $8.4a loss of $15.3 million and income of $65.28.4 millionfor the three months ended September 30, 20212022 and 20202021, respectively.respectively.
CONSOLIDATED RESULTS OF OPERATIONS OF TECHNIPFMC PLC
NINE MONTHS ENDED SEPTEMBER 30, 20212022 AND 20202021
| | | Nine Months Ended | | | | Nine Months Ended | | |
| | September 30, | | Change | | September 30, | | Change |
| (In millions, except %) | (In millions, except %) | 2021 | | 2020 | | $ | | % | (In millions, except %) | 2022 | | 2021 | | $ | | % |
| Revenue | Revenue | $ | 4,880.2 | | | $ | 4,930.3 | | | (50.1) | | | (1.0) | | Revenue | $ | 5,006.0 | | | $ | 4,880.2 | | | $ | 125.8 | | | 2.6 | |
| | Costs and expenses | Costs and expenses | | Costs and expenses | |
| Cost of sales | Cost of sales | 4,247.7 | | | 4,373.6 | | | (125.9) | | | (2.9) | | Cost of sales | 4,323.0 | | | 4,247.7 | | | 75.3 | | | 1.8 | |
| Selling, general and administrative expense | Selling, general and administrative expense | 473.6 | | | 534.9 | | | (61.3) | | | (11.5) | | Selling, general and administrative expense | 454.6 | | | 473.6 | | | (19.0) | | | (4.0) | |
| Research and development expense | Research and development expense | 54.4 | | | 71.3 | | | (16.9) | | | (23.7) | | Research and development expense | 45.1 | | | 54.4 | | | (9.3) | | | (17.1) | |
| Impairment, restructuring and other expenses (Note 16) | 34.8 | | | 3,356.2 | | | (3,321.4) | | | (99.0) | | |
| Impairment, restructuring and other expenses (Note 15) | | Impairment, restructuring and other expenses (Note 15) | 15.1 | | | 34.8 | | | (19.7) | | | (56.6) | |
| | Total costs and expenses | Total costs and expenses | 4,810.5 | | | 8,336.0 | | | (3,525.5) | | | (42.3) | | Total costs and expenses | 4,837.8 | | | 4,810.5 | | | 27.3 | | | 0.6 | |
| | Other income (expense), net | 28.7 | | | (20.3) | | | 49.0 | | | 241.4 | | |
| Income (loss) from equity affiliates (Note 11) | (9.5) | | | 49.7 | | | (59.2) | | | (119.1) | | |
| Income from investment in Technip Energies (Note 11) | 351.8 | | | — | | | 351.8 | | | |
| Other income, net | | Other income, net | 33.5 | | | 28.7 | | | 4.8 | | | 16.7 | |
| Income (loss) from equity affiliates (Note 10) | | Income (loss) from equity affiliates (Note 10) | 23.5 | | | (9.5) | | | 33.0 | | | 347.4 | |
| Income (loss) from investment in Technip Energies (Note 10) | | Income (loss) from investment in Technip Energies (Note 10) | (27.7) | | | 351.8 | | | (379.5) | | | (107.9) | |
| Loss on early extinguishment of debt | Loss on early extinguishment of debt | (39.5) | | | — | | | (39.5) | | | Loss on early extinguishment of debt | (29.8) | | | (39.5) | | | 9.7 | | | 24.6 | |
| Net interest expense | Net interest expense | (109.0) | | | (72.7) | | | (36.3) | | | (49.9) | | Net interest expense | (92.5) | | | (109.0) | | | 16.5 | | | 15.1 | |
| Income (loss) before income taxes | 292.2 | | | (3,449.0) | | | 3,741.2 | | | 108.5 | | |
| Provision for income taxes (Note 18) | 71.7 | | | 13.5 | | | 58.2 | | | 431.1 | | |
| Income before income taxes | | Income before income taxes | 75.2 | | | 292.2 | | | (217.0) | | | (74.3) | |
| Provision for income taxes (Note 17) | | Provision for income taxes (Note 17) | 91.0 | | | 71.7 | | | 19.3 | | | 26.9 | |
| Income (loss) from continuing operations | Income (loss) from continuing operations | 220.5 | | | (3,462.5) | | | 3,683.0 | | | 106.4 | | Income (loss) from continuing operations | (15.8) | | | 220.5 | | | (236.3) | | | (107.2) | |
| Net income from continuing operations attributable to non-controlling interests | (5.5) | | | (14.6) | | | 9.1 | | | 62.3 | | |
| Net (income) from continuing operations attributable to non-controlling interests | | Net (income) from continuing operations attributable to non-controlling interests | (19.4) | | | (5.5) | | | (13.9) | | | (252.7) | |
| Income (loss) from continuing operations attributable to TechnipFMC plc | Income (loss) from continuing operations attributable to TechnipFMC plc | 215.0 | | | (3,477.1) | | | 3,692.1 | | | 106.2 | | Income (loss) from continuing operations attributable to TechnipFMC plc | (35.2) | | | 215.0 | | | (250.2) | | | (116.4) | |
| Income (loss) from discontinued operations | (44.1) | | | 238.5 | | | (282.6) | | | (118.5) | | |
| Loss from discontinued operations | | Loss from discontinued operations | (34.7) | | | (44.1) | | | 9.4 | | | 21.3 | |
| Income from discontinued operations attributable to non-controlling interests | Income from discontinued operations attributable to non-controlling interests | (1.9) | | | (9.7) | | | 7.8 | | | 80.4 | | Income from discontinued operations attributable to non-controlling interests | — | | | (1.9) | | | 1.9 | | | 100.0 | |
| Net income (loss) attributable to TechnipFMC plc | Net income (loss) attributable to TechnipFMC plc | 169.0 | | | (3,248.3) | | | 3,417.3 | | | 105.2 | | Net income (loss) attributable to TechnipFMC plc | $ | (69.9) | | | $ | 169.0 | | | $ | (238.9) | | | (141.4) | |
Revenue
Revenue decreased $50.1increased by $125.8 million during the nine months ended September 30, 2021,2022, compared to the same period in 2020.2021. Subsea revenue decreased year-over-year, primarily due to decreased subsea production system sales in the Gulf of Mexico and North Sea. Revenue in our Surface Technologies segment also decreasedincreased year-over-year, primarily as a result of higher project and services activity. Surface Technologies revenue increased, primarily as a result of the reductionincrease in operator activity in North America.
Gross Profit
Gross profit (revenue less cost of sales), as a percentage of sales, increased to 13.0%13.6% during the nine months ended September 30, 2021,2022, compared to 11.3%13.0% in the prior-year period. Subsea gross profit increased year-over-year, as a percentageresult of sales, increased due to stronger operational performanceimproved margins in backlog and from lower operating costs.an increase in installation and services activity. Surface Technologies gross profit as a percentage of sales, increaseddecreased year-over-year, despite lower sales volumeprimarily due to favorable product mix, improved execution and lower operating costs.the increase in operator activity in North America.
Selling, General and Administrative Expense
Selling, general and administrative expense decreased $61.3by $19.0 million year-over-year. During the first half of 2020, in responseyear-over-year, primarily due to a deteriorated market environment drivendecrease in part by the COVID-19 pandemic, we implemented a series of cost reduction initiatives that resulted in significant reduction in year-over-year selling, general and administrative expense.costs associated with our support functions.
Impairment, Restructuring and Other ExpenseExpenses
We incurred $34.8$15.1 million of impairment, restructuring impairment and other chargesexpenses during the nine months ended September 30, 2021,2022, primarily related to exiting our operations in Russia and Canada, compared to $3,356.2$34.8 million of restructuring, impairment and other charges incurred during the nine
months ended September 30, 2020. Impairment, restructuring and other charges incurred during the nine months ended September 30,
2021, primarily included $19.6 million of impairment charges primarily of our operating lease right-of-use assets. Impairment, restructuring and other charges incurred during the nine months ended September 30, 2020, primarily included $3,083.4 million of goodwill impairment, $161.3 million of long-lived assets impairment, $57.8 million of COVID-19 related expenses, and $53.7 million for restructuring and severance expenses.2021. See
Note 1615 for further details.
Other Income, (expense), Net
Other income, (expense), net, primarily reflects foreign currency gains and losses, including gains and losses associated with the remeasurement of net cash positions, gains and otherlosses on sales of property, plant and equipment and non-operating gains and losses. DuringThe foreign currency impact was a net gain of $13.1 million and $11.2 million for the nine months ended September 30, 2022 and 2021, we recognized $28.7 million of other income, which primarily included $11.2 million of net foreign exchange gains. During the nine months ended September 30, 2020, we recognized $20.3 million of other expenses, which primarily included $53.8 million of net foreign exchange losses. The change in foreign exchange gains and losses is primarily due to foreign exchange gains from unhedged currencies and the effects of a stronger U.S. dollar on naturally hedged projects.respectively.
Income (Loss) from Equity Affiliates
For the nine months ended September 30, 20212022 and 2020,2021, we recorded an income of $23.5 million and a loss of $9.5 million and an income of $49.7 million, respectively, from equity method affiliates. During the nine months ended September 30, 2021, we recorded a $36.7 million impairment of our Magma Global equity method investment. See Note 11 for further details.
Income (Loss) from Investment in Technip Energies
During the nine months ended September 30, 2022 and 2021, we recorded a $27.7 million loss and $351.8 million asof income, respectively, as a result of our investment in Technip Energies. The amountamounts recognized represents aprimarily represent fair value revaluation gaingains (losses) of our investment and purchase price discounts on the sales of shares.investment. See Note 1110 for further details.
Loss on Early Extinguishment of Debt
For the nine months ended September 30, 2022 and 2021, we recognized losses of $29.8 million and $39.5 million of loss on early extinguishment of debt, whichrespectively. Loss on early extinguishment of debt recognized during the nine months ended September 30, 2022 related to premium paid and write-off of bonddebt issuance costs within connection with the repurchase of the 2021 Notes andNotes. Loss on early extinguishment of debt recognized during the nine months ended September 30, 2021 related to premium paid in connection with the repayment of our 3.45% Senior Notes due 2022.2022 and premium paid and write-off of debt issuance costs in connection with repurchase of the 2021 Notes. See Note 1312 for further details.
Net Interest Expense
Net interest expense of $109.0$92.5 million increased $36.3decreased by $16.5 million in the nine months ended September 30, 2021,2022, compared to the same period in 2020,2021, primarily due to higher interest expense associated with the $1.0 billion senior notes issued during the three months ended March 31, 2021.reduction in outstanding debt.
Provision for Income Taxes
Our provision for income taxes for the nine months ended September 30, 20212022 and 20202021 reflected effective tax rates of 24.5%121.0% and (0.4)%24.5%, respectively. The year-over-year increase in the effective tax rate was primarily due to the increased impact of losses in jurisdictions with a full valuation allowance, a change in geographical profit mix year over year and the impact of nondeductible goodwill impairments.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 ofin the United Kingdom.
Discontinued Operations
Income (loss)
Loss from discontinued operations, net of income taxes, was $44.1$34.7 million loss and $238.5$44.1 million income for the nine months ended September 30, 20212022 and 20202021, respectively. Income (loss) from discontinued operations included resultsSee Note 2 for Technip Energies, which was spun-off on February 16, 2021. See Note 2 for furtherfurther details.
SEGMENT RESULTS OF OPERATIONS OF TECHNIPFMC PLC
THREE MONTHS ENDED SEPTEMBER 30, 20212022 AND 20202021
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 5 for further details. Subsea
| | | Three Months Ended | | | | Three Months Ended | | |
| | September 30, | | Favorable/(Unfavorable) | | September 30, | | Favorable/(Unfavorable) |
| (In millions, except % and pts.) | (In millions, except % and pts.) | 2021 | | 2020 | | $ | | % | (In millions, except % and pts.) | 2022 | | 2021 | | $ | | % |
| Revenue | Revenue | $ | 1,312.1 | | | $ | 1,501.8 | | | (189.7) | | | (12.6) | | Revenue | $ | 1,415.0 | | | $ | 1,312.1 | | | 102.9 | | | 7.8 | |
| Operating profit (loss) | $ | 23.5 | | | $ | 20.3 | | | 3.2 | | | 15.8 | | |
| Operating profit | | Operating profit | $ | 105.0 | | | $ | 23.5 | | | 81.5 | | | 346.8 | |
| | Operating profit as a percentage of revenue | Operating profit as a percentage of revenue | 1.8 | % | | 1.4 | % | | 0.4 pts. | Operating profit as a percentage of revenue | 7.4 | % | | 1.8 | % | | 5.6 pts. |
Subsea revenue decreased $189.7increased $102.9 million or 12.6%7.8% year-over-year, primarily due to lowerhigher activity in the Gulf of Mexico and North Sea.Brazil.
Subsea operating profit for the three months ended September 30, 20212022 improved versus the prior year, primarily due to benefits from prior year cost reduction activitiesimproved margins in backlog and increased installation and services activity.
Refer to “Non-GAAP Measures” for further information regarding our segment operating results.
Surface Technologies
| | | Three Months Ended | | | | Three Months Ended | | |
| | September 30, | | Favorable/(Unfavorable) | | September 30, | | Favorable/(Unfavorable) |
| (In millions, except % and pts.) | (In millions, except % and pts.) | 2021 | | 2020 | | $ | | % | (In millions, except % and pts.) | 2022 | | 2021 | | $ | | % |
| Revenue | Revenue | $ | 267.3 | | | $ | 225.7 | | | 41.6 | | | 18.4 | | Revenue | $ | 318.0 | | | $ | 267.3 | | | 50.7 | | | 19.0 | |
| Operating profit (loss) | $ | 12.1 | | | $ | (7.0) | | | 19.1 | | | 272.9 | | |
| Operating profit | | Operating profit | $ | 19.0 | | | $ | 12.1 | | | 6.9 | | | 57.0 | |
| | Operating profit as a percentage of revenue | Operating profit as a percentage of revenue | 4.5 | % | | (3.1) | % | | 7.6 pts. | Operating profit as a percentage of revenue | 6.0 | % | | 4.5 | % | | 1.5 pts. |
Surface Technologies revenue increased $41.6$50.7 million, or 18.4%19.0%, year-over-year, primarily driven by an increase in operator activity in North America and the success of our iComplete™ ecosystem.America. Revenue outside of North America represented approximately 63%54.0% of total segment revenue during the three months ended September 30, 2021.2022.
Surface Technologies operating profit improvedincreased versus the prior year, primarily due to increasedan increase in operator activity favorable product mix, prior year cost reduction initiatives and the reduction in non-cash impairment charges.North America.
Refer to “Non-GAAP Measures” for further information regarding our segment operating results.
Corporate ExpensesExpense
| | | Three Months Ended | | | | Three Months Ended | | |
| | September 30, | | Favorable/(Unfavorable) | | September 30, | | Favorable/(Unfavorable) |
| (In millions, except %) | (In millions, except %) | 2021 | | 2020 | | $ | | % | (In millions, except %) | 2022 | | 2021 | | $ | | % |
| Corporate expenses | $ | (29.3) | | | $ | (25.3) | | | (4.0) | | | (15.8) | | |
| Corporate expense | | Corporate expense | $ | (25.2) | | | $ | (29.3) | | | 4.1 | | | 14.0 | |
Corporate expenses increasedexpense decreased by $4.0$4.1 million, or 15.8%14.0%, year-over-year, primarily due to increaseddecreased costs associated with IT and legalour support functions.
Refer to “Non-GAAP Measures” for further information regarding our segment operating results.
SEGMENT RESULTS OF OPERATIONS OF TECHNIPFMC PLC
NINE MONTHS ENDED SEPTEMBER 30, 20212022 AND 20202021
Subsea
| | | Nine Months Ended | | | | Nine Months Ended | | |
| | September 30, | | Favorable/(Unfavorable) | | September 30, | | Favorable/(Unfavorable) |
| (In millions, except %) | (In millions, except %) | 2021 | | 2020 | | $ | | % | (In millions, except %) | 2022 | | 2021 | | $ | | % |
| Revenue | Revenue | $ | 4,092.9 | | | $ | 4,133.4 | | | (40.5) | | | (1.0) | | Revenue | $ | 4,118.7 | | | $ | 4,092.9 | | | 25.8 | | | 0.6 | |
| Operating profit (loss) | $ | 132.9 | | | $ | (2,806.0) | | | 2,938.9 | | | 104.7 | | |
| Operating profit | | Operating profit | $ | 256.1 | | | $ | 132.9 | | | 123.2 | | | 92.7 | |
| | Operating profit (loss) as a percentage of revenue | 3.2 | % | | (67.9) | % | | 71.1 pts. | |
| Operating profit as a percentage of revenue | | Operating profit as a percentage of revenue | 6.2 | % | | 3.2 | % | | 3.0 pts. |
Subsea revenue decreased $40.5increased by $25.8 million, or 1.0%0.6%, year-over-year, primarily due to reducedhigher project installation activity in Brazil and the GulfUnited Kingdom, which was partially offset by the negative impact of Mexico and North Sea.foreign exchange.
Subsea operating profit for the nine months ended September 30, 2021 improved2022, increased versus the prior year, primarily due to the significant reductionimproved margins in non-cash impairment charges as well as prior year cost reduction activitiesbacklog and an increased mix of installation activity.and services activities.
Refer to “Non-GAAP Measures” below for more information regarding our segment operating results.
Surface Technologies
| | | Nine Months Ended | | | | Nine Months Ended | | |
| | September 30, | | Favorable/(Unfavorable) | | September 30, | | Favorable/(Unfavorable) |
| (In millions, except %) | (In millions, except %) | 2021 | | 2020 | | $ | | % | (In millions, except %) | 2022 | | 2021 | | $ | | % |
| Revenue | Revenue | $ | 787.3 | | | $ | 796.9 | | | (9.6) | | | (1.2) | | Revenue | $ | 887.3 | | | $ | 787.3 | | | 100.0 | | | 12.7 | |
| Operating profit (loss) | $ | 33.2 | | | $ | (444.4) | | | 477.6 | | | 107.5 | | |
| Operating profit | | Operating profit | $ | 32.7 | | | $ | 33.2 | | | (0.5) | | | (1.5) | |
| | Operating profit (loss) as a percentage of revenue | 4.2 | % | | (55.8) | % | | 60.0 pts. | |
| Operating profit as a percentage of revenue | | Operating profit as a percentage of revenue | 3.7 | % | | 4.2 | % | | (0.5) pts. |
Surface Technologies revenue decreased $9.6increased by $100.0 million, or 1.2%12.7%, year-over-year, primarily driven by the reduction in operator activityan increase in North America. Revenue outside of North America increased primarily driven by higher services activity in Northern Europe, Asia Pacific and Middle East.activity. Approximately 66%54.1% of total segment revenue was generated outside of North America during the nine months ended September 30, 2021.2022.
Surface Technologies operating profit improved significantly versus the prior year,decreased year-over-year, primarily due to the significant reductionincrease in non-cash impairment charges as well as favorable product mix and benefits from prior year cost reduction initiatives.operator activity in North America.
Refer to “Non-GAAP Measures” below for more information regarding our segment operating results.
Corporate ExpensesExpense
| | | Nine Months Ended | | | | Nine Months Ended | | |
| | September 30, | | Favorable/(Unfavorable) | | September 30, | | Favorable/(Unfavorable) |
| (In millions, except %) | (In millions, except %) | 2021 | | 2020 | | $ | | % | (In millions, except %) | 2022 | | 2021 | | $ | | % |
| Corporate expenses | $ | (88.4) | | | $ | (72.1) | | | (16.3) | | | (22.6) | | |
| Corporate expense | | Corporate expense | $ | (76.7) | | | $ | (88.4) | | | 11.7 | | | 13.2 | |
Corporate expenses increasedexpense decreased by $16.3$11.7 million, or 22.6%13.2%, year-over-year, primarily due to increaseddecreased costs associated with IT and legalour support functions.
Refer to “Non-GAAP Measures” for further information regarding our segment operating results.
NON-GAAP MEASURES
In addition to financial results determined in accordance with U.S. generally accepted accounting principles (“GAAP”), we provide non-GAAP financial measures (as defined in Item 10 of Regulation S-K of the Securities Exchange Act of 1934, as amended)Act) below:
–Income (loss) from continuing operations attributable to TechnipFMC plc, excluding charges and credits, as well as measures derived from it;
–Income (loss) before net interest expense and taxes, excluding charges and credits (“Adjusted Operatingoperating profit”) and Adjusted Operatingoperating profit margin;
–Adjusted diluted lossearnings (loss) per share from continuing operations;operations attributable to TechnipFMC plc;
–Depreciation and amortization, excluding charges and credits (“Adjusted Depreciationdepreciation and Amortization”amortization”);
–Earnings before net interest expense, income taxes, depreciation and amortization, excluding charges and credits (“Adjusted EBITDA”) and Adjusted EBITDA margin;
–Corporate expenses excluding charges and credits and foreign exchange impacts;credits; and
–Net (debt) cash.cash;
Management believes that the exclusion of charges and credits from these financial measures enables investors and management to more effectively evaluate our operations and consolidated results of operations period-over-period, and to identify operating trends that could otherwise be masked or misleading to both investors and management by the excluded items. These measures are also used by management as performance measures in determining certain incentive compensation. The foregoing non-GAAP financial measures should be considered in addition to, not as a substitute for or superior to, other measures of financial performance prepared in accordance with GAAP.
The following is a reconciliation of the most comparable financial measures under GAAP to the non-GAAP financial measures.
CONSOLIDATED RESULTS OF OPERATIONS OF TECHNIPFMC PLC
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended |
| September 30, 2021 |
| Loss from continuing operations attributable to TechnipFMC plc | | Income attributable to non-controlling interests from continuing operations | | Provision for income taxes | | Net interest expense and loss on early extinguishment of debt | | Income before net interest expense and income taxes (Operating profit) | | Depreciation and amortization | | Earnings before net interest expense, income taxes, depreciation and amortization (EBITDA) |
| TechnipFMC plc, as reported | $ | (40.6) | | | $ | 1.6 | | | $ | 12.3 | | | $ | 55.3 | | | $ | 28.6 | | | $ | 96.5 | | | $ | 125.1 | |
| | | | | | | | | | | | | |
| Charges and (credits): | | | | | | | | | | | | | |
| Impairment and other charges* | 38.0 | | | — | | | — | | | — | | | 38.0 | | | — | | | 38.0 | |
| Restructuring and other charges | 6.1 | | | — | | | (0.1) | | | — | | | 6.0 | | | — | | | 6.0 | |
| Income from investment in Technip Energies | (28.5) | | | — | | | — | | | — | | | (28.5) | | | — | | | (28.5) | |
| Adjusted financial measures | $ | (25.0) | | | $ | 1.6 | | | $ | 12.2 | | | $ | 55.3 | | | $ | 44.1 | | | $ | 96.5 | | | $ | 140.6 | |
| | | | | | | | | | | | | |
| Diluted loss per share from continuing operations attributable to TechnipFMC plc, as reported | $ | (0.09) | | | | | | | | | | | | | |
| Adjusted diluted loss per share from continuing operations attributable to TechnipFMC plc | $ | (0.06) | | | | | | | | | | | | | |
*Includes $36.7 million impairment relating to our equity method investment.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended |
| September 30, 2020 |
| Loss from continuing operations attributable to TechnipFMC plc | | Income attributable to non-controlling interests from continuing operations | | Provision for income taxes | | Net interest expense | | Income (loss) before net interest expense and income taxes (Operating profit) | | Depreciation and amortization | | Earnings before net interest expense, income taxes, depreciation and amortization (EBITDA) |
| TechnipFMC plc, as reported | $ | (64.7) | | | $ | 5.9 | | | $ | 9.1 | | | $ | 23.1 | | | $ | (26.6) | | | $ | 94.2 | | | $ | 67.6 | |
| | | | | | | | | | | | | |
| Charges and (credits): | | | | | | | | | | | | | |
| Impairment and other charges | 19.3 | | | — | | | 3.7 | | | — | | | 23.0 | | | — | | | 23.0 | |
| Restructuring and other charges | 8.4 | | | — | | | 1.0 | | | — | | | 9.4 | | | — | | | 9.4�� | |
| Direct COVID-19 expenses | 17.3 | | | — | | | 3.8 | | | — | | | 21.1 | | | — | | | 21.1 | |
| Valuation allowance | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| Adjusted financial measures | $ | (19.7) | | | $ | 5.9 | | | $ | 17.6 | | | $ | 23.1 | | | $ | 26.9 | | | $ | 94.2 | | | $ | 121.1 | |
| | | | | | | | | | | | | |
| Diluted loss per share from continuing operations attributable to TechnipFMC plc, as reported | $ | (0.14) | | | | | | | | | | | | | |
| Adjusted diluted loss per share from continuing operations attributable to TechnipFMC plc | $ | (0.04) | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended |
| September 30, 2021 |
| Income (loss) from continuing operations attributable to TechnipFMC plc | | Income attributable to non-controlling interests from continuing operations | | Provision for income taxes | | Net interest expense and loss on early extinguishment of debt | | Income before net interest expense and income taxes (Operating profit) | | Depreciation and amortization | | Earnings before net interest expense, income taxes, depreciation and amortization (EBITDA) |
| TechnipFMC plc, as reported | $ | 215.0 | | | $ | 5.5 | | | $ | 71.7 | | | $ | 148.5 | | | $ | 440.7 | | | $ | 289.7 | | | $ | 730.4 | |
| | | | | | | | | | | | | |
| Charges and (credits): | | | | | | | | | | | | | |
| Impairment and other charges* | 57.6 | | | — | | | — | | | — | | | 57.6 | | | — | | | 57.6 | |
| Restructuring and other charges | 13.7 | | | — | | | 0.2 | | | — | | | 13.9 | | | — | | | 13.9 | |
| Income from investment in Technip Energies | (351.8) | | | — | | | — | | | — | | | (351.8) | | | — | | | (351.8) | |
| Adjusted financial measures | $ | (65.5) | | | $ | 5.5 | | | $ | 71.9 | | | $ | 148.5 | | | $ | 160.4 | | | $ | 289.7 | | | $ | 450.1 | |
| | | | | | | | | | | | | |
| Diluted earnings per share from continuing operations attributable to TechnipFMC plc, as reported | $ | 0.47 | | | | | | | | | | | | | |
| Adjusted diluted loss per share from continuing operations attributable to TechnipFMC plc | $ | (0.14) | | | | | | | | | | | | | |
*Includes $36.7 million impairment relating to our equity method investment.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended |
| September 30, 2020 |
| Loss from continuing operations attributable to TechnipFMC plc | | Income attributable to non-controlling interests from continuing operations | | Provision for income taxes | | Net interest expense | | Loss before net interest expense and income taxes (Operating profit) | | Depreciation and amortization | | Earnings before net interest expense, income taxes, depreciation and amortization (EBITDA) |
| TechnipFMC plc, as reported | $ | (3,477.1) | | | $ | 14.6 | | | $ | 13.5 | | | $ | 72.7 | | | $ | (3,376.3) | | | $ | 298.3 | | | $ | (3,078.0) | |
| | | | | | | | | | | | | |
| Charges and (credits): | | | | | | | | | | | | | |
| Impairment and other charges | 3,232.7 | | | — | | | 12.0 | | | — | | | 3,244.7 | | | — | | | 3,244.7 | |
| Restructuring and other charges | 48.9 | | | — | | | 4.8 | | | — | | | 53.7 | | | — | | | 53.7 | |
| Direct COVID-19 expenses | 50.9 | | | — | | | 6.9 | | | — | | | 57.8 | | | — | | | 57.8 | |
| Purchase price accounting adjustment | 6.5 | | | — | | | 2.0 | | | — | | | 8.5 | | | (8.5) | | | — | |
| Valuation allowance | (3.1) | | | — | | | 3.1 | | | — | | | — | | | — | | | — | |
| Adjusted financial measures | $ | (141.2) | | | $ | 14.6 | | | $ | 42.3 | | | $ | 72.7 | | | $ | (11.6) | | | $ | 289.8 | | | $ | 278.2 | |
| | | | | | | | | | | | | |
| Diluted loss per share from continuing operations attributable to TechnipFMC plc, as reported | $ | (7.75) | | | | | | | | | | | | | |
| Adjusted diluted loss per share from continuing operations attributable to TechnipFMC plc | $ | (0.31) | | | | | | | | | | | | | |
CONSOLIDATED RESULTS OF OPERATIONS OF TECHNIPFMC PLC
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended |
| September 30, 2021 |
| Subsea | | Surface Technologies | | Corporate Expense | | Foreign Exchange, net and Other | | Total |
| Revenue | $ | 1,312.1 | | | $ | 267.3 | | | $ | — | | | $ | — | | | $ | 1,579.4 | |
| | | | | | | | | |
| Operating profit (loss), as reported (pre-tax) | $ | 23.5 | | | $ | 12.1 | | | $ | (29.3) | | | $ | 22.3 | | | $ | 28.6 | |
| | | | | | | | | |
| Charges and (credits): | | | | | | | | | |
| Impairment and other charges* | 38.0 | | | — | | | — | | | — | | | 38.0 | |
| Restructuring and other charges | 5.6 | | | — | | | 0.4 | | | — | | | 6.0 | |
| Income from investment in Technip Energies | — | | | — | | | — | | | (28.5) | | | (28.5) | |
| Subtotal | 43.6 | | | — | | | 0.4 | | | (28.5) | | | 15.5 | |
| | | | | | | | | |
| Adjusted Operating profit (loss) | 67.1 | | | 12.1 | | | (28.9) | | | (6.2) | | | 44.1 | |
| | | | | | | | | |
| Depreciation and amortization | 79.4 | | | 16.3 | | | 0.8 | | | — | | | 96.5 | |
| | | | | | | | | |
| Adjusted EBITDA | $ | 146.5 | | | $ | 28.4 | | | $ | (28.1) | | | $ | (6.2) | | | $ | 140.6 | |
| | | | | | | | | |
| Operating profit margin, as reported | 1.8 | % | | 4.5 | % | | | | | | 1.8 | % |
| | | | | | | | | |
| Adjusted Operating profit margin | 5.1 | % | | 4.5 | % | | | | | | 2.8 | % |
| | | | | | | | | |
| Adjusted EBITDA margin | 11.2 | % | | 10.6 | % | | | | | | 8.9 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended |
| September 30, 2022 |
| Income from continuing operations attributable to TechnipFMC plc | | Income attributable to non-controlling interests from continuing operations | | Provision for income taxes | | Net interest expense and loss on early extinguishment of debt | | Income before net interest expense and income taxes (Operating profit) | | Depreciation and amortization | | Earnings before net interest expense, income taxes, depreciation and amortization (EBITDA) |
| TechnipFMC plc, as reported | $ | 5.0 | | | $ | 5.7 | | | $ | 42.7 | | | $ | 30.9 | | | $ | 84.3 | | | $ | 94.5 | | | $ | 178.8 | |
| | | | | | | | | | | | | |
| Charges and (credits): | | | | | | | | | | | | | |
| Impairment and other charges | 3.6 | | | — | | | — | | | — | | | 3.6 | | | — | | | 3.6 | |
| Restructuring and other charges | 4.1 | | | — | | | (0.9) | | | — | | | 3.2 | | | — | | | 3.2 | |
| | | | | | | | | | | | | |
| Adjusted financial measures | $ | 12.7 | | | $ | 5.7 | | | $ | 41.8 | | | $ | 30.9 | | | $ | 91.1 | | | $ | 94.5 | | | $ | 185.6 | |
| | | | | | | | | | | | | |
| Diluted earnings per share from continuing operations attributable to TechnipFMC plc, as reported | $ | 0.01 | | | | | | | | | | | | | |
| Adjusted diluted earnings per share from continuing operations attributable to TechnipFMC plc | $ | 0.03 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended |
| September 30, 2021 |
| Loss from continuing operations attributable to TechnipFMC plc | | Income attributable to non-controlling interests from continuing operations | | Provision for income taxes | | Net interest expense and loss on early extinguishment of debt | | Income (loss) before net interest expense and income taxes (Operating profit) | | Depreciation and amortization | | Earnings before net interest expense, income taxes, depreciation and amortization (EBITDA) |
| TechnipFMC plc, as reported | $ | (40.6) | | | $ | 1.6 | | | $ | 12.3 | | | $ | 55.3 | | | $ | 28.6 | | | $ | 96.5 | | | $ | 125.1 | |
| | | | | | | | | | | | | |
| Charges and (credits): | | | | | | | | | | | | | |
| Impairment and other charges* | 38.0 | | | — | | | — | | | — | | | 38.0 | | | — | | | 38.0 | |
| Restructuring and other charges | 6.1 | | | — | | | (0.1) | | | — | | | 6.0 | | | — | | | 6.0 | |
| Income from investment in Technip Energies | (28.5) | | | — | | | — | | | — | | | (28.5) | | | — | | | (28.5) | |
| Adjusted financial measures | $ | (25.0) | | | $ | 1.6 | | | $ | 12.2 | | | $ | 55.3 | | | $ | 44.1 | | | $ | 96.5 | | | $ | 140.6 | |
| | | | | | | | | | | | | |
| Diluted loss per share from continuing operations attributable to TechnipFMC plc, as reported | $ | (0.09) | | | | | | | | | | | | | |
| Adjusted diluted loss per share from continuing operations attributable to TechnipFMC plc | $ | (0.06) | | | | | | | | | | | | | |
*Includes $36.7 million impairment relating to our equity method investment.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended |
| September 30, 2022 |
| Income (loss) from continuing operations attributable to TechnipFMC plc | | Income attributable to non-controlling interests from continuing operations | | Provision for income taxes | | Net interest expense and loss on early extinguishment of debt | | Income before net interest expense and income taxes (Operating profit) | | Depreciation and amortization | | Earnings before net interest expense, income taxes, depreciation and amortization (EBITDA) |
| TechnipFMC plc, as reported | $ | (35.2) | | | $ | 19.4 | | | $ | 91.0 | | | $ | 122.3 | | | $ | 197.5 | | | $ | 284.4 | | | $ | 481.9 | |
| | | | | | | | | | | | | |
| Charges and (credits): | | | | | | | | | | | | | |
| Impairment and other charges | 4.7 | | | — | | | — | | | — | | | 4.7 | | | — | | | 4.7 | |
| Restructuring and other charges* | 10.9 | | | — | | | 0.4 | | | — | | | 11.3 | | | — | | | 11.3 | |
| Loss from investment in Technip Energies | 27.7 | | | — | | | — | | | — | | | 27.7 | | | — | | | 27.7 | |
| Adjusted financial measures | $ | 8.1 | | | $ | 19.4 | | | $ | 91.4 | | | $ | 122.3 | | | $ | 241.2 | | | $ | 284.4 | | | $ | 525.6 | |
| | | | | | | | | | | | | |
| Diluted loss per share from continuing operations attributable to TechnipFMC plc, as reported | $ | (0.08) | | | | | | | | | | | | | |
| Adjusted diluted earnings per share from continuing operations attributable to TechnipFMC plc | $ | 0.02 | | | | | | | | | | | | | |
*Includes inventory write-off of approximately $0.9 million.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended |
| September 30, 2021 |
| Income (loss) from continuing operations attributable to TechnipFMC plc | | Income attributable to non-controlling interests from continuing operations | | Provision for income taxes | | Net interest expense and loss on early extinguishment of debt | | Income before net interest expense and income taxes (Operating profit) | | Depreciation and amortization | | Earnings before net interest expense, income taxes, depreciation and amortization (EBITDA) |
| TechnipFMC plc, as reported | $ | 215.0 | | | $ | 5.5 | | | $ | 71.7 | | | $ | 148.5 | | | $ | 440.7 | | | $ | 289.7 | | | $ | 730.4 | |
| | | | | | | | | | | | | |
| Charges and (credits): | | | | | | | | | | | | | |
| Impairment and other charges* | 57.6 | | | — | | | — | | | — | | | 57.6 | | | — | | | 57.6 | |
| Restructuring and other charges | 13.7 | | | — | | | 0.2 | | | — | | | 13.9 | | | — | | | 13.9 | |
| Income from Investment in Technip Energies | (351.8) | | | — | | | — | | | — | | | (351.8) | | | — | | | (351.8) | |
| Adjusted financial measures | $ | (65.5) | | | $ | 5.5 | | | $ | 71.9 | | | $ | 148.5 | | | $ | 160.4 | | | $ | 289.7 | | | $ | 450.1 | |
| | | | | | | | | | | | | |
| Diluted earnings per share from continuing operations attributable to TechnipFMC plc, as reported | $ | 0.47 | | | | | | | | | | | | | |
| Adjusted diluted loss per share from continuing operations attributable to TechnipFMC plc | $ | (0.14) | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended |
| September 30, 2020 |
| Subsea | | Surface Technologies | | Corporate Expense | | Foreign Exchange, net | | Total |
| Revenue | $ | 1,501.8 | | | $ | 225.7 | | | $ | — | | | $ | — | | | $ | 1,727.5 | |
| | | | | | | | | |
| Operating profit (loss), as reported (pre-tax) | $ | 20.3 | | | $ | (7.0) | | | $ | (25.3) | | | $ | (14.6) | | | $ | (26.6) | |
| | | | | | | | | |
| Charges and (credits): | | | | | | | | | |
| Impairment and other charges | 17.6 | | | 5.4 | | | — | | | — | | | 23.0 | |
| Restructuring and other charges | 7.1 | | | 0.9 | | | 1.4 | | | — | | | 9.4 | |
| Direct COVID-19 expenses | 18.7 | | | 2.4 | | | — | | | — | | | 21.1 | |
| Subtotal | 43.4 | | | 8.7 | | | 1.4 | | | — | | | 53.5 | |
| | | | | | | | | |
| Adjusted Operating profit (loss) | 63.7 | | | 1.7 | | | (23.9) | | | (14.6) | | | 26.9 | |
| | | | | | | | | |
| Depreciation and amortization | 82.3 | | | 15.6 | | | (3.7) | | | — | | | 94.2 | |
| | | | | | | | | |
| Adjusted EBITDA | $ | 146.0 | | | $ | 17.3 | | | $ | (27.6) | | | $ | (14.6) | | | $ | 121.1 | |
| | | | | | | | | |
| Operating profit margin, as reported | 1.4 | % | | (3.1) | % | | | | | | (1.5) | % |
| | | | | | | | | |
| Adjusted Operating profit margin | 4.2 | % | | 0.8 | % | | | | | | 1.6 | % |
| | | | | | | | | |
| Adjusted EBITDA margin | 9.7 | % | | 7.7 | % | | | | | | 7.0 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended |
| September 30, 2021 |
| Subsea | | Surface Technologies | | Corporate Expense | | Foreign Exchange, net and Other | | Total |
| Revenue | $ | 4,092.9 | | | $ | 787.3 | | | $ | — | | | $ | — | | | $ | 4,880.2 | |
| | | | | | | | | |
| Operating profit (loss), as reported (pre-tax) | $ | 132.9 | | | $ | 33.2 | | | $ | (88.4) | | | $ | 363.0 | | | $ | 440.7 | |
| | | | | | | | | |
| Charges and (credits): | | | | | | | | | |
| Impairment and other charges* | 54.3 | | | 0.3 | | | 3.0 | | | — | | | 57.6 | |
| Restructuring and other charges | 10.0 | | | 3.5 | | | 0.4 | | | — | | | 13.9 | |
| Income from investment in Technip Energies | — | | | — | | | — | | | (351.8) | | | (351.8) | |
| Subtotal | 64.3 | | | 3.8 | | | 3.4 | | | (351.8) | | | (280.3) | |
| | | | | | | | | |
| Adjusted Operating profit (loss) | 197.2 | | | 37.0 | | | (85.0) | | | 11.2 | | | 160.4 | |
| | | | | | | | | |
| Depreciation and amortization | 238.5 | | | 48.5 | | | 2.7 | | | — | | | 289.7 | |
| | | | | | | | | |
| Adjusted EBITDA | $ | 435.7 | | | $ | 85.5 | | | $ | (82.3) | | | $ | 11.2 | | | $ | 450.1 | |
| | | | | | | | | |
| Operating profit margin, as reported | 3.2 | % | | 4.2 | % | | | | | | 9.0 | % |
| | | | | | | | | |
| Adjusted Operating profit margin | 4.8 | % | | 4.7 | % | | | | | | 3.3 | % |
| | | | | | | | | |
| Adjusted EBITDA margin | 10.6 | % | | 10.9 | % | | | | | | 9.2 | % |
*Includes $36.7 million impairment relating to our equity method investment.
CONSOLIDATED RESULTS OF OPERATIONS OF TECHNIPFMC PLC
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended |
| September 30, 2022 |
| Subsea | | Surface Technologies | | Corporate Expense | | Foreign Exchange, net and Other | | Total |
| Revenue | $ | 1,415.0 | | | $ | 318.0 | | | $ | — | | | $ | — | | | $ | 1,733.0 | |
| | | | | | | | | |
| Operating profit (loss), as reported (pre-tax) | $ | 105.0 | | | $ | 19.0 | | | $ | (25.2) | | | $ | (14.5) | | | $ | 84.3 | |
| | | | | | | | | |
| Charges and (credits): | | | | | | | | | |
| Impairment and other charges | 1.9 | | | 1.7 | | | — | | | — | | | 3.6 | |
| Restructuring and other charges | 1.4 | | | 1.8 | | | — | | | — | | | 3.2 | |
| | | | | | | | | |
| Subtotal | 3.3 | | | 3.5 | | | — | | | — | | | 6.8 | |
| | | | | | | | | |
| Adjusted Operating profit (loss) | 108.3 | | | 22.5 | | | (25.2) | | | (14.5) | | | 91.1 | |
| | | | | | | | | |
| Depreciation and amortization | 75.5 | | | 18.3 | | | 0.7 | | | — | | | 94.5 | |
| | | | | | | | | |
| Adjusted EBITDA | $ | 183.8 | | | $ | 40.8 | | | $ | (24.5) | | | $ | (14.5) | | | $ | 185.6 | |
| | | | | | | | | |
| Operating profit margin, as reported | 7.4 | % | | 6.0 | % | | | | | | 4.9 | % |
| | | | | | | | | |
| Adjusted Operating profit margin | 7.7 | % | | 7.1 | % | | | | | | 5.3 | % |
| | | | | | | | | |
| Adjusted EBITDA margin | 13.0 | % | | 12.8 | % | | | | | | 10.7 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended |
| September 30, 2021 |
| Subsea | | Surface Technologies | | Corporate Expense | | Foreign Exchange, net | | Total |
| Revenue | $ | 1,312.1 | | | $ | 267.3 | | | $ | — | | | $ | — | | | $ | 1,579.4 | |
| | | | | | | | | |
| Operating profit (loss), as reported (pre-tax) | $ | 23.5 | | | $ | 12.1 | | | $ | (29.3) | | | $ | 22.3 | | | $ | 28.6 | |
| | | | | | | | | |
| Charges and (credits): | | | | | | | | | |
| Impairment and other charges* | 38.0 | | | — | | | — | | | — | | | 38.0 | |
| Restructuring and other charges | 5.6 | | | — | | | 0.4 | | | — | | | 6.0 | |
| Income from investment in Technip Energies | — | | | — | | | — | | | (28.5) | | | (28.5) | |
| Subtotal | 43.6 | | | — | | | 0.4 | | | (28.5) | | | 15.5 | |
| | | | | | | | | |
| Adjusted Operating profit (loss) | 67.1 | | | 12.1 | | | (28.9) | | | (6.2) | | | 44.1 | |
| | | | | | | | | |
| Depreciation and amortization | 79.4 | | | 16.3 | | | 0.8 | | | — | | | 96.5 | |
| | | | | | | | | |
| Adjusted EBITDA | $ | 146.5 | | | $ | 28.4 | | | $ | (28.1) | | | $ | (6.2) | | | $ | 140.6 | |
| | | | | | | | | |
| Operating profit margin, as reported | 1.8 | % | | 4.5 | % | | | | | | 1.8 | % |
| | | | | | | | | |
| Adjusted Operating profit margin | 5.1 | % | | 4.5 | % | | | | | | 2.8 | % |
| | | | | | | | | |
| Adjusted EBITDA margin | 11.2 | % | | 10.6 | % | | | | | | 8.9 | % |
*Includes $36.7 million impairment relating to our equity method investment.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended |
| September 30, 2022 |
| Subsea | | Surface Technologies | | Corporate Expense | | Foreign Exchange, net and Other | | Total |
| Revenue | $ | 4,118.7 | | | $ | 887.3 | | | $ | — | | | $ | — | | | $ | 5,006.0 | |
| | | | | | | | | |
| Operating profit (loss), as reported (pre-tax) | $ | 256.1 | | | $ | 32.7 | | | $ | (76.7) | | | $ | (14.6) | | | $ | 197.5 | |
| | | | | | | | | |
| Charges and (credits): | | | | | | | | | |
| Impairment and other charges | 1.9 | | | 2.8 | | | — | | | — | | | 4.7 | |
| Restructuring and other charges* | 0.6 | | | 7.7 | | | 3.0 | | | — | | | 11.3 | |
| Loss from investment in Technip Energies | — | | | — | | | — | | | 27.7 | | | 27.7 | |
| Subtotal | 2.5 | | | 10.5 | | | 3.0 | | | 27.7 | | | 43.7 | |
| | | | | | | | | |
| Adjusted Operating profit (loss) | 258.6 | | | 43.2 | | | (73.7) | | | 13.1 | | | 241.2 | |
| | | | | | | | | |
| Depreciation and amortization | 230.2 | | | 52.0 | | | 2.2 | | | — | | | 284.4 | |
| | | | | | | | | |
| Adjusted EBITDA | $ | 488.8 | | | $ | 95.2 | | | $ | (71.5) | | | $ | 13.1 | | | $ | 525.6 | |
| | | | | | | | | |
| Operating profit margin, as reported | 6.2 | % | | 3.7 | % | | | | | | 3.9 | % |
| | | | | | | | | |
| Adjusted Operating profit margin | 6.3 | % | | 4.9 | % | | | | | | 4.8 | % |
| | | | | | | | | |
| Adjusted EBITDA margin | 11.9 | % | | 10.7 | % | | | | | | 10.5 | % |
*Includes inventory write-off of approximately $0.9 million.
| | | Nine Months Ended | | Nine Months Ended |
| | September 30, 2020 | | September 30, 2021 |
| | Subsea | | Surface Technologies | | Corporate Expense | | Foreign Exchange, net | | Total | | Subsea | | Surface Technologies | | Corporate Expense | | Foreign Exchange, net | | Total |
| Revenue | Revenue | $ | 4,133.4 | | | $ | 796.9 | | | $ | — | | | $ | — | | | $ | 4,930.3 | | Revenue | $ | 4,092.9 | | | $ | 787.3 | | | $ | — | | | $ | — | | | $ | 4,880.2 | |
| | Operating loss, as reported (pre-tax) | Operating loss, as reported (pre-tax) | $ | (2,806.0) | | | $ | (444.4) | | | $ | (72.1) | | | $ | (53.8) | | | $ | (3,376.3) | | Operating loss, as reported (pre-tax) | $ | 132.9 | | | $ | 33.2 | | | $ | (88.4) | | | $ | 363.0 | | | $ | 440.7 | |
| | Charges and (credits): | Charges and (credits): | | Charges and (credits): | |
| Impairment and other charges | 2,826.6 | | | 418.1 | | | — | | | — | | | 3,244.7 | | |
| Impairment and other charges* | | Impairment and other charges* | 54.3 | | | 0.3 | | | 3.0 | | | — | | | 57.6 | |
| Restructuring and other charges | Restructuring and other charges | 36.1 | | | 14.0 | | | 3.6 | | | — | | | 53.7 | | Restructuring and other charges | 10.0 | | | 3.5 | | | 0.4 | | | — | | | 13.9 | |
| Direct COVID-19 expenses | 50.1 | | | 7.7 | | | — | | | — | | | 57.8 | | |
| Purchase price accounting adjustment | 8.5 | | | — | | | — | | | — | | | 8.5 | | |
| Income from investment in Technip Energies | | Income from investment in Technip Energies | — | | | — | | | — | | | (351.8) | | | (351.8) | |
| Subtotal | Subtotal | 2,921.3 | | | 439.8 | | | 3.6 | | | — | | | 3,364.7 | | Subtotal | 64.3 | | | 3.8 | | | 3.4 | | | (351.8) | | | (280.3) | |
| | Adjusted Operating profit (loss) | Adjusted Operating profit (loss) | 115.3 | | | (4.6) | | | (68.5) | | | (53.8) | | | (11.6) | | Adjusted Operating profit (loss) | 197.2 | | | 37.0 | | | (85.0) | | | 11.2 | | | 160.4 | |
| | Adjusted Depreciation and amortization | 235.1 | | | 54.7 | | | — | | | — | | | 289.8 | | |
| Depreciation and amortization | | Depreciation and amortization | 238.5 | | | 48.5 | | | 2.7 | | | — | | | 289.7 | |
| | Adjusted EBITDA | Adjusted EBITDA | $ | 350.4 | | | $ | 50.1 | | | $ | (68.5) | | | $ | (53.8) | | | $ | 278.2 | | Adjusted EBITDA | $ | 435.7 | | | $ | 85.5 | | | $ | (82.3) | | | $ | 11.2 | | | $ | 450.1 | |
| | Operating profit margin, as reported | Operating profit margin, as reported | -67.9 | % | | -55.8 | % | | -68.5 | % | Operating profit margin, as reported | 3.2 | % | | 4.2 | % | | 9.0 | % |
| | Adjusted Operating profit margin | Adjusted Operating profit margin | 2.8 | % | | -0.6 | % | | -0.2 | % | Adjusted Operating profit margin | 4.8 | % | | 4.7 | % | | 3.3 | % |
| | Adjusted EBITDA margin | Adjusted EBITDA margin | 8.5 | % | | 6.3 | % | | 5.6 | % | Adjusted EBITDA margin | 10.6 | % | | 10.9 | % | | 9.2 | % |
*Includes $36.7 million impairment relating to our equity method investment.
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 | | Inbound Orders |
| | Three Months Ended | | Nine Months Ended | | Three Months Ended | | Nine Months Ended |
| | September 30, | | September 30, | | September 30, | | September 30, |
| (In millions) | (In millions) | 2021 | | 2020 | | 2021 | | 2020 | (In millions) | 2022 | | 2021 | | 2022 | | 2021 |
| Subsea | Subsea | $ | 1,116.0 | | | $ | 1,607.1 | | | $ | 3,926.1 | | | $ | 3,290.9 | | Subsea | $ | 1,400.8 | | | $ | 1,116.0 | | | $ | 5,222.4 | | | $ | 3,926.1 | |
| Surface Technologies | Surface Technologies | 249.9 | | | 207.5 | | | 721.4 | | | 760.9 | | Surface Technologies | 449.2 | | | 249.9 | | | 1,014.2 | | | 721.4 | |
| Total inbound orders | Total inbound orders | $ | 1,365.9 | | | $ | 1,814.6 | | | $ | 4,647.5 | | | $ | 4,051.8 | | Total inbound orders | $ | 1,850.0 | | | $ | 1,365.9 | | | $ | 6,236.6 | | | $ | 4,647.5 | |
Order backlog - Order backlog is calculated as the estimated sales value of unfilled, confirmed customer orders at the reporting date. Backlog reflects the current expectations for the timing of project execution. See Note 54 for further details. | | | Order Backlog | | Order Backlog |
| (In millions) | (In millions) | September 30,
2021 | | December 31,
2020 | (In millions) | September 30,
2022 | | December 31,
2021 |
| Subsea | Subsea | $ | 6,661.4 | | | $ | 6,876.0 | | Subsea | $ | 7,603.2 | | | $ | 6,533.0 | |
| Surface Technologies | Surface Technologies | 341.0 | | | 413.5 | | Surface Technologies | 1,237.8 | | | 1,124.7 | |
| Total order backlog | Total order backlog | $ | 7,002.4 | | | $ | 7,289.5 | | Total order backlog | $ | 8,841.0 | | | $ | 7,657.7 | |
Subsea - Subsea backlog of $6.7 billion$7,603.2 million as of September 30, 20212022 increased by $1,070.2 million compared to December 31, 2021. Subsea backlog was composed of various subsea projects, including Total Mozambique LNG; Eni Coral; Petrobras Buzios 6, Mero I, Mero II and Marlim Manifolds;Marlim; Total Energies Mozambique LNG, Lapa NE and Clov 3; ExxonMobil Yellowtail and Payara; Petronas Limbayong; Reliance MJ-1; Equinor Breidablikk;Shell Jackdaw and Gumusut; Husky West White Rose; Chevron Gorgon Stage 2; Santos Barossa Phase I andEquinor Halten East; Tullow Jubilee South East.East; Wintershall Maria; and Harbour Talbot.
Surface Technologies - Order backlog for Surface Technologies as of September 30, 2021 decreased2022 increased by $72.5$113.1 million compared to December 31, 2020. Given the short-cycle nature of the business, most orders are quickly converted into sales revenue; longer contracts are typically converted within 12 months.2021.
Non-consolidated backlog - As of September 30, 20212022, we had $621.7$508.9 million of non-consolidated order backlog in our Subsea segment. Non-consolidated order backlog reflects the proportional share of backlog related to joint ventures that is not consolidated due to our minority ownership position.
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.
We expect to meet the continuing funding requirements of our global operations with cash generated by such operations and our existing Revolving Credit Facility.
Net (Debt) CashDebt - Net (debt) cash,debt, is a non-GAAP financial measure reflecting total debt, net of cash and cash equivalents, net of debt.equivalents. Management uses this non-GAAP financial measure to evaluate our capital structure and financial leverage. We believe net debt or net cash, is a meaningful financial measure that may assist investors in understanding our financial condition and recognizing underlying trends in our capital structure. Net (debt) cashdebt should not be considered an alternative to, or more meaningful than, cash and cash equivalentsour total debt as determined in accordance with GAAP or as an indicator of our operating performance or liquidity.
The following table provides a reconciliation of our cash and cash equivalentstotal debt to net debt, utilizing details of classifications from our condensed consolidated balance sheets:
| | (In millions) | (In millions) | September 30,
2021 | | December 31,
2020 | (In millions) | September 30,
2022 | | December 31,
2021 |
| Cash and cash equivalents | Cash and cash equivalents | $ | 1,034.0 | | | $ | 1,269.2 | | Cash and cash equivalents | $ | 711.5 | | | $ | 1,327.4 | |
| Short-term debt and current portion of long-term debt | Short-term debt and current portion of long-term debt | (282.2) | | | (624.7) | | Short-term debt and current portion of long-term debt | (231.9) | | | (277.6) | |
| Long-term debt, less current portion | Long-term debt, less current portion | (1,973.6) | | | (2,835.5) | | Long-term debt, less current portion | (1,134.9) | | | (1,727.3) | |
| Net debt | Net debt | $ | (1,221.8) | | | $ | (2,191.0) | | Net debt | $ | (655.3) | | | $ | (677.5) | |
Cash Flows
Operating cash flows from continuing operations - DuringWe used $214.3 million of cash in operating activities from continuing operations during the nine months ended September 30, 2021 and 2020, we generated2022, as compared to $231.5 million and $289.7 million, respectively, inof cash generated by operating cash flows from continuing operations.operations during the same period in 2021. The decrease of $58.2$445.8 million in cash generated by operating activities from continuing operations was primarily due to timing differences on project milestones, vendor payments for inventory, fluctuations in derivative assets and improved working capital management actions.liabilities and timing of income tax refund.
Investing cash flows from continuing operations - Investing activities from continuing operations provided $759.8$213.3 million during the nine months ended September 30, 2021 and used $190.3$759.8 million of cash during the nine months ended September 30, 2020.2022 and 2021, respectively. The increasedecrease of $950.1$546.5 million in cash provided by investing activities was primarily due to thea $496.0 million decrease in proceeds received from the salesales of our investment in Technip Energies theand a decrease in proceeds from sales of assets, and decreasedpartially offset by a decrease in capital expenditures during the nine months ended September 30, 2021.2022.
Financing cash flows from continuing operations - Financing activities from continuing operations used $1,189.3$626.8 million and $519.6$1,189.3 million of cash during the nine months ended September 30, 20212022 and 2020,2021, respectively. The increasedecrease in cash used by financing activities was primarily due to the increaseddecreased debt pay down activity, partially offset by share repurchases during the nine months ended September 30, 2021.2022.
Debt and Liquidity
Debt Financing Transactions
During the nine months ended September 30, 2021, we executed a series of refinancing transactions, in order to provide a capital structure with sufficient cash resources to support future operating and investment plans.
Debt Issuance
•On February 16, 2021, we entered into a credit agreement, which provides for a $1.0 billion three-year senior secured multicurrency revolving credit facility (“Revolving Credit Facility”), including a $450.0 million letter of credit subfacility; and
•On January 29, 2021, we issued $1.0 billion of 6.50% senior notes due 2026 (the “2021 Notes”).
Repayment of Debt
The proceeds from the debt issuance described above along with the available cash on hand were used to fund:
•the repayment of all $542.4 million of the outstanding Synthetic Convertible Bonds that matured in January 2021;
•the repayment of all $500.0 million aggregate principal amount of outstanding 3.45% Senior Notes due 2022. In connection with the repayment, we recorded a loss on extinguishment of debt of $23.5 million related to the difference between the amount paid and the net carrying value of the debt; and
•the termination of the $2.5 billion senior unsecured revolving credit facility we entered into on January 17, 2017; the termination of the €500.0 million Euro Facility entered into on May 19, 2020, and the termination of the CCFF Program entered into on May 19, 2020. In connection with the termination of these credit facilities, we repaid $830.9 million of the outstanding commercial paper borrowings.
Availability of borrowings under the Revolving Credit Facility is reduced by the outstanding letters of credit issued against the facility. As of September 30, 2021,2022, there were $150.0 million of borrowings and $72.945.4 million letters of credit outstanding, and our availability of borrowings under the Revolving Credit Facility was $927.1$804.6 million.
In September 2021, we completed a tender offer and purchased for cash $164.1 million of the outstanding 2021 Notes. We paid a cash premium of $12.3 million to the note holders who tendered and wrote-off $3.7 million of bond issuance costs. In October 2021, we purchased an additional $2.8 million of the outstanding 2021 Notes. Subsequent to September 30, 2021 we amended the Credit Agreement to amend covenants for the tender offer and early debt repurchases of these 2021 Notes. We are in compliance with the restrictive covenants of the Credit Agreement. See Note 13 for further details.
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 12 for further details regarding our debt. Credit Risk Analysis
For the purposes of mitigating the effect of the changes in exchange rates, we hold derivative financial instruments. Valuations of derivative assets and liabilities reflect the fair value of the instruments, including the values associated with counterparty risk. These values must also take into account our credit standing, thus including the valuation of the derivative instrument and the value of the net credit differential between the counterparties to the derivative contract. Adjustments to our derivative assets and liabilities related to credit risk were not material for any period presented.
The income approach was used as the valuation technique to measure the fair value of foreign currency derivative instruments on a recurring basis. This approach calculates the present value of the future cash flow by measuring the change from the derivative contract rate and the published market indicative currency rate, multiplied by the contract notional values. Credit risk is then incorporated by reducing the derivative’s fair value in asset positions by the result of multiplying the present value of the portfolio by the counterparty’s published credit spread. Portfolios in a liability position are adjusted by the same calculation; however, a spread representing our credit spread is used.
Our credit spread, and the credit spread of other counterparties not publicly available, are approximated using the spread of similar companies in the same industry, of similar size, and with the same credit rating. See Note 2018 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 and ample liquidity that will enable us to access capital markets throughout the cycle. We believe our liquidity has and continues to exceed the level required to achieve this goal.meet our requirements and plans for cash for the next 12 months.
Our objective in financing our business is to maintain sufficient liquidity, adequate financial resources and financial flexibility in order to fund the requirements of our business. Our capital expenditures can be adjusted and managed to match market demand and activity levels. Based on current market conditions andWe have reduced our future expectations ourfor capital expenditures for 2021 are estimated2022 by $50.0 million to be approximately $250.0 million.$180.0 million, primarily due to the timing of vessel recertifications. Projected capital expenditures do not include any contingent capital that may be needed to respond to contract awards.
In addition, we intend to conduct an orderly sale of our remaining stake in Technip Energies over time and will use the proceeds from future sales to further reduce our net leverage. We do not intend to remain a long-term shareholder of Technip Energies and anticipate that we will exit our ownership stake in an orderly manner within a year. The carrying amount of the investment as of September 30, 2021 was $485.3 million.
CRITICAL ACCOUNTING ESTIMATES
Refer to our Annual Report on Form 10-K for the year ended December 31, 20202021 for a discussion of our critical accounting estimates. During the nine months ended September 30, 2021,2022, 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 we have also raised with the DOJ certain other projects performed by Technip S.A. subsidiaries in Brazil between 2002 and 2013. The DOJ has also inquired about projects in Ghana and Equatorial Guinea that were awarded to Technip S.A. subsidiaries in 2008 and 2009, respectively. We cooperated with the DOJ in its investigation into potential violations of the FCPA in connection with these projects. We contacted and cooperated with the Brazilian authorities (Federal Prosecution Service (“MPF”), the Comptroller General of Brazil (“CGU”) and the Attorney General of Brazil (“AGU”)) with their investigation concerning the projects in Brazil and have also contacted and are cooperating with French authorities (the Parquet National Financier (“PNF”)) about these existing matters.
On June 25, 2019, we announced a global resolution to pay a total of $301.3 million to the DOJ, the SEC, the MPF, and the CGU/AGU to resolve these anti-corruption investigations. We will not be required to have a monitor and will, instead, provide reports on our anti-corruption program to the Brazilian and U.S. authorities for two and three years, respectively.
As part of this resolution, we entered into a three-year Deferred Prosecution Agreement (“DPA”) with the DOJ related to charges of conspiracy to violate the FCPA related to conduct in Brazil and with Unaoil. In addition, Technip USA, Inc., a U.S. subsidiary, pled guilty to one count of conspiracy to violate the FCPA related to conduct in Brazil. We will also provide the DOJ reports on our anti-corruption program during the term of the DPA.
In Brazil, our subsidiaries, Technip Brasil - Engenharia, Instalações E Apoio Marítimo Ltda. and Flexibrás Tubos Flexíveis Ltda., entered into leniency agreements with both the MPF and the CGU/AGU. We have committed, as part of those agreements, to make certain enhancements to their compliance programs in Brazil during a two-year self-reporting period, which aligns with our commitment to cooperation and transparency with our compliance community in Brazil and globally.
In September 2019, the SEC approved our previously disclosed agreement in principle with the SEC Staff and issued an Administrative Order, pursuant to which we paid the SEC $5.1 million, which was included in the global resolution of $301.3 million.
To date, the investigation by PNF related to historical projects in Equatorial Guinea and Ghana has not reached a resolution. We remain committed to finding a resolution with the PNF and will maintain a $70.0 million provision related to this investigation. Additionally, the PNF recently informed us that it is reviewing historical projects in Angola. We are not aware of any evidence that would support a finding of liability with respect to these projects, or whether the PNF would seek any additional penalty. As we continue our discussions with PNF towards a potential resolution of all of these matters, the amount of a settlement could exceed this provision.
There is no certainty that a settlement with PNF will be reached or that the settlement will not exceed current accruals. The PNF has a broad range of potential sanctions under anti-corruption laws and regulations that it may seek to impose in appropriate circumstances including, but not limited to, fines, penalties, confiscations and modifications to business practices and compliance programs. Any of these measures, if applicable to us, as well as potential customer reaction to such measures, could have a material adverse impact on our business, results of operations, and financial condition. If we cannot reach a resolution with the PNF, we could be subject to criminal proceedings in France, the outcome of which cannot be predicted.
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, 2020.2021. Our exposure to market risk has not changed materially since December 31, 2020.2021.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
As of September 30, 2021,2022, 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, 2021.2022.
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, 20212022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II — OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
A purported shareholder class action filed in 2017 and amended in January 2018 and captioned Prause v. TechnipFMC, et al., No. 4:17-cv-02368 (S.D. Texas) is pending in the U.S. District Court for the Southern District of Texas (“District Court”) against the Company and certain current and former officers and employees of the Company. The suit alleged violations of the federal securities laws in connection with the Company's restatement of our first quarter 2017 financial results and a material weakness in our internal control over financial reporting announced on July 24, 2017. On January 18, 2019, the District Court dismissed claims under Section 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, and Section 15 of the Securities Act of 1933, as amended (“Securities Act”). The shareholder also asserted a claim for alleged violation of Section 11 of the Securities Act in connection with the reporting of certain financial results in the Company’s Registration Statement on Form S-4 filed in 2016. On December 13, 2020, the parties filed a Stipulation and Agreement of Settlement to settle all claims asserted in the suit with prejudice. The Defendants entered into the Stipulation solely to eliminate the burden, expense, uncertainty and risk of further litigation, and denied, and continue to deny, each and all of the claims and contentions alleged by the shareholder plaintiff in this action. On December 16, 2020, the District Court entered an order preliminarily approving the settlement and ordering notice to the settlement class. On March 22, 2021, after a hearing, the Court entered a final judgment approving the settlement.
In addition to the above-referenced matter, weWe are involved in various other pending or potential legal actions or disputes in the ordinary course of our business. These actions and disputes can involve our agents, suppliers, clients and 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, 2020.2021.
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, 2021.2022.
Issuer PurchasesThe following table summarizes repurchases of Equity Securities
We did not have any purchases of equity securitiesour ordinary shares during the three months ended September 30, 2021.2022:
ISSUER PURCHASES OF EQUITY SECURITIES
| | | | | | | | | | | | | | | | | | | | | | | |
| Period | Total Number of Shares Purchased (a) | | Average Price
Paid per
Share | | Total Number of
Shares Purchased as
Part of Publicly
Announced Plans or
Programs | | Maximum Number
of Shares That May
Yet Be Purchased
Under the Plans or
Programs |
| July 1, 2022—July 31, 2022 | — | | | $ | — | | | — | | | — | |
| August 1, 2022—August 31, 2022 | 3,690,444 | | | $ | 8.43 | | | 3,690,444 | | | 45,089,163 | |
| September 1, 2022—September 30, 2022 | 2,143,007 | | | $ | 8.82 | | | 2,143,007 | | | 41,357,370 | |
| Total | 5,833,451 | | | $ | 8.57 | | | 5,833,451 | | | 41,357,370 | |
____________________
(a)In July 2022, we announced a repurchase plan approved by our Board of Directors authorizing up to $400.0 million to repurchase shares of our issued and outstanding ordinary shares through open market purchases. For the three months ended September 30, 2022, we repurchased 5,833,451 shares for a total cost of $50.1 million at an average price of $8.57 per share.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
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10.1 | | Second Amendment, dated October 6, 2021, to the Credit Agreement, dated February 16, 2021, by and among TechnipFMC plc, JPMorgan Chase Bank, N.A., Citigroup Global Markets Inc. or an affiliate, DNB Capital, LLC or an affiliate, Société Générale, Sumitomo Mitsui Banking Corporation, Wells Fargo Securities, LLC and BofA Securities, Inc., collectively, as lead arrangers, JPMorgan Chase Bank, N.A., as administrative agent, Standard Chartered Bank, as documentation agent, and the lenders party thereto. |
| 31.1 | | |
| 31.2 | | |
| 32.1* | | |
| 32.2* | | |
| 101.INS | | XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
| 101.SCH | | Inline XBRL Taxonomy Extension Schema Document. |
| 101.CAL | | Inline XBRL Taxonomy Extension Calculation Linkbase Document. |
| 101.DEF | | Inline XBRL Taxonomy Extension Definition Linkbase Document. |
| 101.LAB | | Inline XBRL Taxonomy Extension Label Linkbase Document. |
| 101.PRE | | Inline XBRL Taxonomy Extension Presentation Linkbase Document. |
| 104 | | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
* Furnished with this Quarterly Report on Form 10-Q.Indicates a management contract or compensatory plan or arrangement.
SIGNATURESIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
TechnipFMC plc
(Registrant)
| | | | | |
| |
| /s/ Krisztina Doroghazi | |
| Krisztina Doroghazi | |
Senior Vice President, Controller and Chief Accounting Officer
(Chief Accounting Officer and a Duly Authorized Officer) | |
Date: October 27, 202128, 2022