The accompanying notes are an integral part of the condensed consolidated financial statements.
The accompanying notes are an integral part of the condensed consolidated financial statements.
The accompanying notes are an integral part of the condensed consolidated financial statements.
The accompanying notes are an integral part of the condensed consolidated financial statements.
The accompanying notes are an integral part of the condensed consolidated financial statements.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited condensed consolidated financial statements of TechnipFMC plc and its consolidated subsidiaries (TechnipFMC) have been
prepared in accordance with United States generally accepted accounting principles (GAAP) and rules and regulations of the Securities and Exchange Commission (SEC) pertaining to interim financial information. As permitted
under those rules, certain footnotes or other financial information that are normally required by GAAP have been condensed or omitted.
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, 2017.
In this Quarterly
Report on Form
10-Q/A,
we are reporting the results of our operations for the three months ended March 31, 2017, which consist of the combined results of operations of Technip S.A. (Technip)
and FMC Technologies, Inc. (FMC Technologies). Due to the Merger of FMC Technologies and Technip, FMC Technologies results of operations have been included in our financial statements for periods subsequent to the consummation of
the Merger on January 16, 2017.
Since TechnipFMC is the successor company to Technip, we are presenting the results of Technips operations for
the three months ended March 31, 2016 and as of December 31, 2016. Refer to Note 3 for further information related to the merger of FMC Technologies and Technip.
Principles of consolidation
These consolidated financial statements include the accounts of TechnipFMC and its majority-owned subsidiaries and
affiliates. Intercompany accounts and transactions are eliminated in consolidation.
Use of estimates
The preparation of financial statements
in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported
amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Such estimates include, but are not limited to, estimates of total contract profit or loss on long-term construction-type contracts;
estimated realizable value on excess and obsolete inventory; estimates related to pension accounting; estimates related to fair value for purposes of assessing goodwill, long-lived assets and intangible assets for impairment; estimates related to
income taxes; and estimates related to contingencies, including liquidated damages.
Investments in the common stock of unconsolidated
affiliates
The equity method of accounting is used to account for investments in unconsolidated affiliates where we have the ability to exert significant influence over the affiliates operating and financial policies. The cost method
of accounting is used where significant influence over the affiliate is not present.
Investments in unconsolidated affiliates are assessed for impairment
whenever events or changes in facts and circumstances indicate the carrying value of the investments may not be fully recoverable. When such a condition is subjectively determined to be other than temporary, the carrying value of the investment is
written down to fair value. Managements assessment as to whether any decline in value is other than temporary is based on our ability and intent to hold the investment and whether evidence indicating the carrying value of the investment is
recoverable within a reasonable period of time outweighs evidence to the contrary. Management generally considers our investments in equity method investees to be strategic, long-term investments and completes its assessments for impairment with a
long-term viewpoint.
11
Investments in which ownership is less than 20% or that do not represent significant investments are reported in
other assets on the consolidated balance sheets. Where no active market exists and where no other valuation method can be used, these financial assets are maintained at historical cost, less any accumulated impairment losses.
Business combinations
Business combinations are accounted for using the acquisition method of accounting. Under the acquisition method,
assets acquired and liabilities assumed are recorded at their respective fair values as of the acquisition date. Determining the fair value of assets and liabilities involves significant judgment regarding methods and assumptions used to calculate
estimated fair values. The purchase price is allocated to the assets, assumed liabilities and identifiable intangible assets based on their estimated fair values. Any excess of the purchase price over the estimated fair values of the net assets
acquired is recorded as goodwill. Transaction related costs are expensed as incurred.
Revenue recognition
Revenue is generally recognized
once the following four criteria are met: i) persuasive evidence of an arrangement exists, ii) delivery of the equipment has occurred (which is upon shipment or when customer-specific acceptance requirements are met) or services have been rendered,
iii) the price of the equipment or service is fixed and determinable, and iv) collectability is reasonably assured. We record our sales net of any value added, sales or use tax.
For certain construction-type manufacturing and assembly projects that involve significant design and engineering efforts to satisfy detailed customer
specifications, revenue is recognized using the percentage of completion method of accounting. Under the percentage of completion method, revenue is recognized as work progresses on each contract. We apply the ratio of costs incurred to date to
total estimated contract costs at completion or on physical progress defined for the main deliverables under the contracts. If it is not possible to form a reliable estimate of progress toward completion, no revenue or costs are recognized until the
project is complete or substantially complete. Any expected losses on construction-type contracts in progress are charged to earnings, in total, in the period the losses are identified.
Modifications to construction-type contracts, referred to as change orders, effectively change the provisions of the original contract, and may,
for example, alter the specifications or design, method or manner of performance, equipment, materials, sites and/or period for completion of the work. If a change order represents a firm price commitment from a customer, we account for the revised
estimate as if it had been included in the original estimate, effectively recognizing the pro rata impact of the new estimate on our calculation of progress toward completion in the period in which the firm commitment is received. If a change order
is unpriced: (1) we include the costs of contract performance in our calculation of progress toward completion in the period in which the costs are incurred or become probable; and (2) when it is determined that the revenue is probable of
recovery, we include the change order revenue, limited to the costs incurred to date related to the change order, in our calculation of progress toward completion. Unpriced change orders included in revenue were immaterial to our consolidated
revenue for all periods presented. Margin is not recorded on unpriced change orders unless realization is assured beyond a reasonable doubt. The assessment of realization may be based upon our previous experience with the customer or based upon our
receipt of a firm price commitment from the customer.
Progress billings are generally issued upon completion of certain phases of the work as stipulated
in the contract. Revenue in excess of progress billings are reported in costs and estimated earnings in excess of billings on uncompleted contracts in our condensed consolidated balance sheets. Progress billings and cash collections in excess of
revenue recognized on a contract are classified as billings in excess of costs and estimated earnings on uncompleted contracts and advance payments, respectively, in our condensed consolidated balance sheets. Revenue generated from the installation
portion of construction-type contracts is included in service and product revenue in our condensed consolidated statements of income.
Cash
equivalents
Cash equivalents are highly-liquid, short-term instruments with original maturities of three months or less from their date of purchase.
Trade receivables, net of allowances
An allowance for doubtful accounts is provided on receivables equal to the estimated uncollectible amounts.
This estimate is based on historical collection experience and a specific review of each customers receivables balance.
12
Inventories
Inventories are stated at the lower of cost or net realizable value. Inventory costs
include those costs directly attributable to products, including all manufacturing overhead, but excluding costs to distribute. Cost is determined on the
last-in,
first-out
(LIFO) basis for a significant portion of U.S. domiciled inventories. The
first-in,
first-out
(FIFO) or weighted average methods are used to determine the cost for most other inventories. Write-down on inventories are recorded when the net realizable value of inventories is lower than their net book value.
Impairment of property, plant and equipment
Property, plant and equipment are reviewed for impairment whenever events or changes in circumstances
indicate the carrying value of the long-lived asset may not be recoverable. The carrying value of a long-lived asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of
the asset. If it is determined that an impairment loss has occurred, the impairment loss is measured as the amount by which the carrying value of the long-lived asset exceeds its fair value.
Long-lived assets classified as held for sale are reported at the lower of carrying value or fair value less cost to sell.
Goodwill
Goodwill is not subject to amortization but is tested for impairment on an annual basis (or more frequently if impairment indicators
arise). We have established October 31 as the date of our annual test for impairment of goodwill. Reporting units with goodwill are tested for impairment by first assessing qualitative factors to determine whether the existence of events or
circumstances leads to a determination that it is more likely than not that the fair value of the reporting unit is less than its carrying amount. If after assessing the totality of events or circumstances, or based on managements judgment, we
determine it is more likely than not that the fair value of a reporting unit is less than its carrying amount, a
two-step
impairment test is performed. The first step compares the fair value of the reporting
unit (measured as the present value of expected future cash flows) to its carrying amount. If the fair value of the reporting unit is less than its carrying amount, a second step is performed. In this step, the fair value of the reporting unit is
allocated to its assets and liabilities to determine the implied fair value of goodwill, which is used to measure the impairment loss.
Debt
instruments
Debt instruments include convertible and synthetic bonds, senior and private placement notes and other borrowings. Issuance fees and redemption premium on all debt instruments are included in the cost of debt in the condensed
consolidated balance sheets, as an adjustment to the nominal amount of the debt.
Fair value measurements
Fair value is defined as the price
that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date. The fair value framework requires the categorization of assets and liabilities
measured at fair value into three levels based upon the assumptions (inputs) used to price the assets or liabilities, with the exception of certain assets and liabilities measured using the net asset value practical expedient, which are not required
to be leveled. Level 1 provides the most reliable measure of fair value, whereas Level 3 generally requires significant management judgment. The three levels are defined as follows:
|
|
|
Level
1
: Unadjusted quoted prices in active markets for identical assets and liabilities.
|
|
|
|
Level
2
: Observable inputs other than quoted prices included in Level 1. For example, quoted prices for similar assets or liabilities in active markets or quoted prices for identical
assets or liabilities in inactive markets.
|
|
|
|
Level
3
: Unobservable inputs reflecting managements own assumptions about the assumptions market participants would use in pricing the asset or liability.
|
Income taxes
Current income taxes are provided on income reported for financial statement purposes, adjusted for transactions that do not enter
into the computation of income taxes payable in the same year. Deferred tax assets and liabilities are measured using enacted tax rates for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases
of assets and liabilities. A valuation allowance is established whenever management believes that it is more likely than not that deferred tax assets may not be realizable.
U.S. income taxes are not provided on our equity in undistributed earnings of foreign subsidiaries or affiliates to the extent we have determined that the
earnings are indefinitely reinvested. U.S. income taxes are provided on such earnings in the period in which we can no longer support that such earnings are indefinitely reinvested.
13
Tax benefits related to uncertain tax positions are recognized when it is more likely than not, based on the
technical merits, that the position will be sustained upon examination.
We classify interest expense and penalties recognized on underpayments of income
taxes as income tax expense.
Stock-based employee compensation
We measure stock-based compensation expense on restricted stock awards based
on the market price at the grant date and the number of shares awarded. We use the Cox Ross Rubinstein binomial model to measure the fair value of stock options granted prior to December 31, 2016 and Black-Scholes options pricing model to
measure the fair value of stock options granted since January 1, 2017. The stock-based compensation expense for each award is recognized ratably over the applicable service period, after taking into account estimated forfeitures, or the period
beginning at the start of the service period and ending when an employee becomes eligible for retirement.
Ordinary shares held in employee benefit
trust
Our ordinary shares are purchased by the plan administrator of the FMC Technologies, Inc.
Non-Qualified
Savings and Investment Plan and placed in a trust owned by us. Purchased shares are
recorded at cost and classified as a reduction of stockholders equity on the condensed consolidated balance sheets.
Treasury
shares
Treasury shares are recorded as a reduction to stockholders equity using the cost method. Any gain or loss related to the sale of treasury shares is included in stockholders equity.
Earnings per ordinary share (EPS)
Basic EPS is computed using the weighted-average number of ordinary shares outstanding during the
year. We use the treasury stock method to compute diluted EPS which gives effect to the potential dilution of earnings that could have occurred if additional shares were issued for awards granted under our incentive compensation and stock plan. The
treasury stock method assumes proceeds that would be obtained upon exercise of awards granted under our incentive compensation and stock plan are used to purchase outstanding ordinary shares at the average market price during the period.
Convertible bonds that could be converted into or be exchangeable for new or existing shares would additionally result in a dilution of earnings per share.
The common shares assumed to be converted as of the issuance date are included to compute diluted EPS under the
if-converted
method. Additionally the net profit of the period would be adjusted for the
after-tax
interest expense related to these dilutive shares.
Foreign currency
Financial statements of
operations for which the U.S. dollar is not the functional currency, and are located in
non-highly
inflationary countries, are translated into U.S. dollars prior to consolidation. Assets and liabilities are
translated at the exchange rate in effect at the balance sheet date, while income statement accounts are translated at the average exchange rate for each period. For these operations, translation gains and losses are recorded as a component of
accumulated other comprehensive income (loss) in stockholders equity until the foreign entity is sold or liquidated. For operations in highly inflationary countries and where the local currency is not the functional currency, inventories,
property, plant and equipment, and other
non-current
assets are converted to U.S. dollars at historical exchange rates, and all gains or losses from conversion are included in net income. Foreign currency
effects on cash, cash equivalents and debt in hyperinflationary economies are included in interest income or expense.
For certain committed and
anticipated future cash flows and recognized assets and liabilities which are denominated in a foreign currency, we may choose to manage our risk against changes in the exchange rates, when compared against the functional currency, through the
economic netting of exposures instead of derivative instruments. Cash outflows or liabilities in a foreign currency are matched against cash inflows or assets in the same currency, such that movements in exchanges rates will result in offsetting
gains or losses. Due to the inherent unpredictability of the timing of cash flows, gains and losses in the current period may be economically offset by gains and losses in a future period. All gains and losses are recorded in our consolidated
statements of income in the period in which they are incurred. Gains and losses from the remeasurement of assets and liabilities are recognized in other income (expense), net.
Derivative instruments
Derivatives are recognized on the condensed consolidated balance sheets at fair value, with classification as current or
non-current
based upon the maturity of the derivative instrument. Changes in the fair value of derivative instruments are recorded in current earnings or deferred in accumulated other comprehensive income (loss),
depending on the type of hedging transaction and whether a derivative is designated as, and is effective as, a hedge. Each instrument is accounted for individually and assets and liabilities are not offset.
14
Hedge accounting is only applied when the derivative is deemed to be highly effective at offsetting changes in
anticipated cash flows of the hedged item or transaction. Changes in fair value of derivatives that are designated as cash flow hedges are deferred in accumulated other comprehensive income (loss) until the underlying transactions are recognized in
earnings. At such time, related deferred hedging gains or losses are recorded in earnings on the same line as the hedged item. Effectiveness is assessed at the inception of the hedge and on a quarterly basis. Effectiveness of forward contract cash
flow hedges are assessed based solely on changes in fair value attributable to the change in the spot rate. The change in the fair value of the contract related to the change in forward rates is excluded from the assessment of hedge effectiveness.
Changes in this excluded component of the derivative instrument, along with any ineffectiveness identified, are recorded in earnings as incurred. We document our risk management strategy and hedge effectiveness at the inception of, and during the
term of, each hedge.
We also use forward contracts to hedge foreign currency assets and liabilities, for which we do not apply hedge accounting. The
changes in fair value of these contracts are recognized in other income (expense), net on our condensed consolidated statements of income, as they occur and offset gains or losses on the remeasurement of the related asset or liability.
NOTE 2. RESTATEMENT OF FINANCIAL STATEMENTS
In the
Original Filing, we recognized significant net foreign exchange gains. In July 2017, incremental reviews were performed on the gains and losses from foreign currency denominated transactions which operate as natural hedges on its projects. For each
project, a currency rate is established at the time the project is awarded, and this project rate is used to measure foreign currency gains and losses throughout the life of the project for project performance purposes. Periodic
remeasurement of foreign exchange gains and losses is required for financial statement reporting. During our review, management found that there were errors in the rates used for remeasurement and related foreign exchange adjustments. In late July
2017, management concluded that this deviation led to the misstatement of foreign exchange gains and losses in certain of our engineering and construction projects and the fair value measurement of certain related ownership interests for the periods
presented in the Original Filing.
On July 24, 2017, the Audit Committee of the Board of Directors of the Company, after consideration of relevant
facts and circumstances and after consultation with management and PricewaterhouseCoopers LLP, our independent registered public accounting firm, concluded that our unaudited interim condensed consolidated U.S. GAAP financial statements as of
March 31, 2017 and for the three months ended March 31, 2017 and prior year periods included for comparison purposes in our Quarterly Report on
Form 10-Q
as previously filed with the SEC on
May 4, 2017, should be restated, and that such financial statements previously filed with the SEC should no longer be relied upon because of errors in such financial statements.
These errors resulted in the restatement of the Companys financial statements for the periods presented in the Original Filing. Restatement adjustments
were recorded for other income (expense), income from equity affiliates, net interest expense, provision for income taxes and billings in excess of costs as a result of the correction of foreign currency exchange rates used to initially measure
these amounts. Restatement adjustments were also recorded for intangible assets, other assets and stockholders equity to reflect corrections of exchange rates used in the calculation of the fair value of certain acquired assets. Certain assets
acquired were adjusted to reflect the impact of using the correct foreign exchange rates. Adjustments were recorded to cost and expenses to reflect decreased amortization of intangible assets for the period due to the revalued intangible assets.
15
The Condensed Consolidated Statements of Income, the Condensed Consolidated Statements of Comprehensive Income,
the Condensed Consolidated Balance Sheets, the Condensed Consolidated Statements of Cash Flows and the Condensed Consolidated States of Changes in Stockholders Equity, and Notes 1, 2, 3, 5, 9, 12, 14, 15, 19 and 20 in these financial
statements were updated to reflect the restatement. See Part IItem 4. Controls and Procedures As restated herein.
The following tables
summarize the impact of these adjustments on our previously reported results filed on our Condensed Consolidated Financial Statement line items in our Original Filing:
The effects of the restatement on our Condensed Consolidated Statements of Operations for the three months ended March 31, 2017 and 2016 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
(In millions, except per share data)
|
|
March 31, 2017
|
|
|
As Previously
Reported
|
|
|
Restatement
Adjustments
|
|
|
As Restated
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of service revenue
|
|
$
|
2,380.5
|
|
|
$
|
(2.9
|
)
|
|
$
|
2,377.6
|
|
Costs and expenses
|
|
|
3,345.1
|
|
|
|
(2.9
|
)
|
|
|
3,342.2
|
|
Other income (expense), net
|
|
|
327.4
|
|
|
|
(263.9
|
)
|
|
|
63.5
|
|
Income before net interest expense and income taxes
|
|
|
379.7
|
|
|
|
(261.0
|
)
|
|
|
118.7
|
|
Net interest expense
|
|
|
(81.7
|
)
|
|
|
(0.4
|
)
|
|
|
(82.1
|
)
|
Income before income taxes
|
|
|
298.0
|
|
|
|
(261.4
|
)
|
|
|
36.6
|
|
Provision for income taxes
|
|
|
103.7
|
|
|
|
(51.9
|
)
|
|
|
51.8
|
|
Net income (loss)
|
|
|
194.3
|
|
|
|
(209.5
|
)
|
|
|
(15.2
|
)
|
Net income (loss) attributable to TechnipFMC plc
|
|
$
|
190.8
|
|
|
$
|
(209.5
|
)
|
|
$
|
(18.7
|
)
|
Earnings (loss) per share attributable to TechnipFMC plc:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.41
|
|
|
$
|
(0.45
|
)
|
|
$
|
(0.04
|
)
|
Diluted
|
|
$
|
0.41
|
|
|
$
|
(0.45
|
)
|
|
$
|
(0.04
|
)
|
Weighted average shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
468.9
|
|
|
|
|
|
|
|
466.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
(In millions, except per share data)
|
|
March 31, 2016
|
|
|
As Previously
Reported
|
|
|
Restatement
Adjustments
|
|
|
As Restated
|
|
Other income (expense), net
|
|
$
|
(33.9
|
)
|
|
$
|
(8.2
|
)
|
|
$
|
(42.1
|
)
|
Income from equity affiliates (Note 9)
|
|
|
45.6
|
|
|
|
(20.1
|
)
|
|
|
25.5
|
|
Income before net interest expense and income taxes
|
|
|
208.1
|
|
|
|
(28.3
|
)
|
|
|
179.8
|
|
Income before income taxes
|
|
|
194.8
|
|
|
|
(28.3
|
)
|
|
|
166.5
|
|
Provision for income taxes (Note 15)
|
|
|
47.5
|
|
|
|
(1.6
|
)
|
|
|
45.9
|
|
Net income
|
|
|
147.3
|
|
|
|
(26.7
|
)
|
|
|
120.6
|
|
Net income attributable to TechnipFMC plc
|
|
$
|
147.4
|
|
|
$
|
(26.7
|
)
|
|
$
|
120.7
|
|
Earnings per share attributable to TechnipFMC plc (Note 5):
|
|
|
|
|
Basic
|
|
$
|
1.25
|
|
|
$
|
(0.23
|
)
|
|
$
|
1.02
|
|
Diluted
|
|
$
|
1.21
|
|
|
$
|
(0.24
|
)
|
|
$
|
0.97
|
|
16
The effects of the restatement on our Condensed Consolidated Statements of Comprehensive Income for the three
months ended March 31, 2017 and 2016 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
March 31, 2017
|
|
(In millions)
|
|
As Previously
Reported
|
|
|
Restatement
Adjustments
|
|
|
As Restated
|
|
Net income (loss)
|
|
$
|
194.3
|
|
|
$
|
(209.5
|
)
|
|
$
|
(15.2
|
)
|
Comprehensive income
|
|
|
261.3
|
|
|
|
(209.5
|
)
|
|
|
51.8
|
|
Comprehensive income attributable to TechnipFMC plc
|
|
$
|
257.6
|
|
|
$
|
(209.5
|
)
|
|
$
|
48.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
March 31, 2016
|
|
(In millions)
|
|
As Previously
Reported
|
|
|
Restatement
Adjustments
|
|
|
As Restated
|
|
Net income
|
|
$
|
147.3
|
|
|
$
|
(26.7
|
)
|
|
$
|
120.6
|
|
Comprehensive income
|
|
|
118.6
|
|
|
|
(26.7
|
)
|
|
|
91.9
|
|
Comprehensive income attributable to TechnipFMC plc
|
|
$
|
119.5
|
|
|
$
|
(26.7
|
)
|
|
$
|
92.8
|
|
The effects of the restatement on our Condensed Consolidated Balance Sheets as of March 31, 2017 and December 31,
2016 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2017
|
|
(In millions)
|
|
As Previously
Reported
|
|
|
Restatement
Adjustments
|
|
|
As Restated
|
|
Intangible assets, net
|
|
$
|
1,580.0
|
|
|
$
|
(78.8
|
)
|
|
$
|
1,501.2
|
|
Deferred income taxes
|
|
|
519.4
|
|
|
|
124.2
|
|
|
|
643.6
|
|
Total assets
|
|
|
29,570.5
|
|
|
|
45.4
|
|
|
|
29,615.9
|
|
Billings in excess of costs
|
|
|
3,478.7
|
|
|
|
222.4
|
|
|
|
3,701.1
|
|
Total current liabilities
|
|
|
11,497.0
|
|
|
|
222.4
|
|
|
|
11,719.4
|
|
Accrued pension and other post-retirement benefits, less current portion
|
|
|
351.2
|
|
|
|
0.8
|
|
|
|
352.0
|
|
Other liabilities
|
|
|
390.7
|
|
|
|
(0.8
|
)
|
|
|
389.9
|
|
Retained earnings
|
|
|
2,992.2
|
|
|
|
405.2
|
|
|
|
3,397.4
|
|
Accumulated other comprehensive loss
|
|
|
(408.2
|
)
|
|
|
(582.2
|
)
|
|
|
(990.4
|
)
|
Total TechnipFMC plc stockholders equity
|
|
|
13,552.8
|
|
|
|
(177.0
|
)
|
|
|
13,375.8
|
|
Total liabilities and equity
|
|
$
|
29,570.5
|
|
|
$
|
45.4
|
|
|
$
|
29,615.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
(In millions)
|
|
As Previously
Reported
|
|
|
Restatement
Adjustments
|
|
|
As Restated
|
|
Intangible assets, net
|
|
$
|
255.4
|
|
|
$
|
(81.7
|
)
|
|
$
|
173.7
|
|
Deferred income taxes
|
|
|
549.3
|
|
|
|
72.3
|
|
|
|
621.6
|
|
Total assets
|
|
|
18,699.1
|
|
|
|
(9.4
|
)
|
|
|
18,689.7
|
|
Billings in excess of costs
|
|
|
3,364.5
|
|
|
|
(41.5
|
)
|
|
|
3,323.0
|
|
Total current liabilities
|
|
|
10,930.4
|
|
|
|
(41.5
|
)
|
|
|
10,888.9
|
|
Accrued pension and other post-retirement benefits, less current portion
|
|
|
160.0
|
|
|
|
0.8
|
|
|
|
160.8
|
|
Other liabilities
|
|
|
301.8
|
|
|
|
(1.2
|
)
|
|
|
300.6
|
|
Retained earnings
|
|
|
2,801.4
|
|
|
|
614.7
|
|
|
|
3,416.1
|
|
Accumulated other comprehensive loss
|
|
|
(475.2
|
)
|
|
|
(582.2
|
)
|
|
|
(1,057.4
|
)
|
Total TechnipFMC plc stockholders equity
|
|
|
5,091.1
|
|
|
|
32.5
|
|
|
|
5,123.6
|
|
Total liabilities and equity
|
|
$
|
18,699.1
|
|
|
$
|
(9.4
|
)
|
|
$
|
18,689.7
|
|
17
The effects of the restatement on our Condensed Consolidated Statements of Cash Flows for the three months ended
March 31, 2017 and 2016 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions)
|
|
Three Months Ended
|
|
|
March 31, 2017
|
|
|
As Previously
Reported
|
|
|
Restatement
Adjustments
|
|
|
As Restated
|
|
Cash provided (required) by operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
194.3
|
|
|
$
|
(209.5
|
)
|
|
$
|
(15.2
|
)
|
Amortization
|
|
|
70.9
|
|
|
|
(2.9
|
)
|
|
|
68.0
|
|
Deferred income tax provision (benefit)
|
|
|
55.9
|
|
|
|
(51.9
|
)
|
|
|
4.0
|
|
Other
|
|
|
53.6
|
|
|
|
0.4
|
|
|
|
54.0
|
|
Advance payments and billings in excess of costs
|
|
|
(220.6
|
)
|
|
|
263.9
|
|
|
|
43.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions)
|
|
Three Months Ended
|
|
|
March 31, 2016
|
|
|
As Previously
Reported
|
|
|
Restatement
Adjustments
|
|
|
As Restated
|
|
Cash provided (required) by operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
147.3
|
|
|
$
|
(26.7
|
)
|
|
$
|
120.6
|
|
Deferred income tax provision (benefit)
|
|
|
(18.2
|
)
|
|
|
(1.6
|
)
|
|
|
(19.8
|
)
|
Other
|
|
|
(22.2
|
)
|
|
|
20.1
|
|
|
|
(2.1
|
)
|
Advance payments and billings in excess of costs
|
|
|
(91.6
|
)
|
|
|
8.2
|
|
|
|
(83.4
|
)
|
The effects of the restatement on our Condensed Consolidated Statements of Changes in Stockholders Equity as of
March 31, 2017 and December 31, 2016 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions)
|
|
Ordinary
Shares
|
|
|
Ordinary
Shares Held in
Treasury and
Employee
Benefit
Trust
|
|
|
Capital in
Excess of Par
Value of
Ordinary
Shares
|
|
|
Retained
Earnings
|
|
|
Accumulated
Other
Comprehensive
Income
(Loss)
|
|
|
Non-
controlling
Interest
|
|
|
Total
Stockholders
Equity
|
|
Balance as of December 31, 2016 as previously reported
|
|
$
|
114.7
|
|
|
$
|
(44.5
|
)
|
|
$
|
2,694.7
|
|
|
$
|
2,801.4
|
|
|
$
|
(475.2
|
)
|
|
$
|
(11.7
|
)
|
|
$
|
5,079.4
|
|
Restatement Adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
614.7
|
|
|
|
(582.2
|
)
|
|
|
|
|
|
|
32.5
|
|
Balance as of December 31, 2016 as restated
|
|
$
|
114.7
|
|
|
$
|
(44.5
|
)
|
|
$
|
2,694.7
|
|
|
$
|
3,416.1
|
|
|
$
|
(1,057.4
|
)
|
|
$
|
(11.7
|
)
|
|
$
|
5,111.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of March 31, 2017 as previously reported
|
|
$
|
466.6
|
|
|
$
|
(5.4
|
)
|
|
$
|
10,507.6
|
|
|
$
|
2,992.2
|
|
|
$
|
(408.2
|
)
|
|
$
|
6.4
|
|
|
$
|
13,559.2
|
|
Restatement Adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
405.2
|
|
|
|
(582.2
|
)
|
|
|
|
|
|
|
(177.0
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as March 31, 2017 as restated
|
|
$
|
466.6
|
|
|
$
|
(5.4
|
)
|
|
$
|
10,507.6
|
|
|
$
|
3,397.4
|
|
|
$
|
(990.4
|
)
|
|
$
|
6.4
|
|
|
$
|
13,382.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18
The effects of the restatement on our reportable segments for the three months ended March 31, 2017 and 2016
are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31, 2017
|
|
(In millions)
|
|
As Previously
Reported
|
|
|
Restatement
Adjustments
|
|
|
As Restated
|
|
Income before income taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment operating profit (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
Onshore/Offshore
|
|
$
|
139.9
|
|
|
$
|
2.9
|
|
|
$
|
142.8
|
|
Total segment operating profit
|
|
|
175.5
|
|
|
|
2.9
|
|
|
|
178.4
|
|
Corporate items:
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate income (expense)
|
|
|
204.2
|
|
|
|
(263.9
|
)
|
|
|
(59.7
|
)
|
Net interest expense
|
|
|
(81.7
|
)
|
|
|
(0.4
|
)
|
|
|
(82.1
|
)
|
Total corporate items
|
|
|
122.5
|
|
|
|
(264.3
|
)
|
|
|
(141.8
|
)
|
Income before income taxes
|
|
$
|
298.0
|
|
|
$
|
(261.4
|
)
|
|
$
|
36.6
|
|
|
|
|
|
Three Months Ended
March 31, 2016
|
|
(In millions)
|
|
As Previously
Reported
|
|
|
Restatement
Adjustments
|
|
|
As Restated
|
|
Income before income taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment operating profit (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
Onshore/Offshore
|
|
$
|
58.5
|
|
|
$
|
(20.1
|
)
|
|
$
|
38.4
|
|
Total segment operating profit
|
|
|
254.9
|
|
|
|
(20.1
|
)
|
|
|
234.8
|
|
Corporate items:
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate income (expense)
|
|
|
(46.8
|
)
|
|
|
(8.2
|
)
|
|
|
(55.0
|
)
|
Total corporate items
|
|
|
(60.1
|
)
|
|
|
(8.2
|
)
|
|
|
(68.3
|
)
|
Income before income taxes
|
|
$
|
194.8
|
|
|
$
|
(28.3
|
)
|
|
$
|
166.5
|
|
NOTE 3. MERGER OF FMC TECHNOLOGIES AND TECHNIP
Description of the Merger
On June 14, 2016, FMC
Technologies and Technip entered into a definitive business combination agreement providing for the business combination among FMC Technologies, FMC Technologies SIS Limited, a private limited company incorporated under the laws of England and Wales
and a wholly-owned subsidiary of FMC Technologies, and Technip. On August 4, 2016, the legal name of FMC Technologies SIS Limited was changed to TechnipFMC Limited, and on January 11, 2017, was subsequently
re-registered
as TechnipFMC plc, a public limited company incorporated under the laws of England and Wales.
On
January 16, 2017, the business combination was completed. Pursuant to the terms of the definitive business combination agreement, Technip merged with and into TechnipFMC, with TechnipFMC continuing as the surviving company (the Technip
Merger), and each ordinary share of Technip (the Technip Shares), other than Technip Shares owned by Technip or its wholly-owned subsidiaries, were exchanged for 2.0 ordinary shares of TechnipFMC, subject to the terms of the
definitive business combination agreement. Immediately following the Technip Merger, a wholly-owned indirect subsidiary of TechnipFMC (Merger Sub) merged with and into FMC Technologies, with FMC Technologies continuing as the surviving
company and as a wholly-owned indirect subsidiary of TechnipFMC (the FMCTI Merger), and each share of common stock of FMC Technologies (the FMCTI Shares), other than FMCTI Shares owned by FMC Technologies, TechnipFMC, Merger
Sub or their wholly-owned subsidiaries, were exchanged for 1.0 ordinary share of TechnipFMC, subject to the terms of the definitive business combination agreement.
19
Under the acquisition method of accounting, Technip was identified as the accounting acquirer and acquired a 100%
interest in FMC Technologies.
The Merger of FMC Technologies and Technip (the Merger) is expected to create a larger and more diversified
company that is better equipped to respond to economic and industry developments and better positioned to develop and build on its offerings in the subsea, surface, and onshore/offshore markets as compared to the former companies on a standalone
basis. More importantly, the Merger will bring about the ability of the combined company to (i) standardize its product and service offerings to customers, (ii) reduce costs to customers, and (iii) provide integrated product offerings
to the oil and gas industry with the aim of innovating the markets in which the combined company operates.
We incurred $54.7 million in merger
transaction and integration costs for the three months ended March 31, 2017. No similar costs were incurred for the comparable prior year quarter.
Description of FMC Technologies as Accounting Acquiree
FMC Technologies is a global provider of technology solutions for the energy industry. FMC Technologies designs, manufactures and services technologically
sophisticated systems and products, including subsea production and processing systems, surface wellhead production systems, high pressure fluid control equipment, measurement solutions and marine loading systems for the energy industry. Subsea
systems produced by FMC Technologies are used in the offshore production of crude oil and natural gas and are placed on the seafloor to control the flow of crude oil and natural gas from the reservoir to a host processing facility. Additionally, FMC
Technologies provides a full range of drilling, completion and production wellhead systems for both standard and custom-engineered applications. Surface wellhead production systems, or trees, are used to control and regulate the flow of crude oil
and natural gas from the well and are used in both onshore and offshore applications.
Consideration Transferred
The acquisition-date fair value of the consideration transferred consisted of the following:
|
|
|
|
|
(In millions, except per share data)
|
|
|
|
Total FMC Technologies, Inc. shares subject to exchange as of January 16, 2017
|
|
|
228.9
|
|
FMC Technologies, Inc. exchange ratio
(1)
|
|
|
0.5
|
|
|
|
|
|
|
Shares of TechnipFMC issued
|
|
|
114.4
|
|
Value per share of Technip as of January 16, 2017
(2)
|
|
$
|
71.40
|
|
|
|
|
|
|
Total purchase consideration
|
|
$
|
8,170.7
|
|
(1)
|
As the calculation is deemed to reflect a share capital increase of the accounting acquirer, the FMC Technologies, Inc. exchange ratio (1 share of TechnipFMC for 1 share of FMC Technologies, Inc. as provided in the
business combination agreement) is adjusted by dividing the FMC Technologies exchange ratio by the Technip exchange ratio (2 shares of TechnipFMC for 1 share of Technip as provided in the business combination agreement), i.e., 1 / 2 = 0.5 in order
to reflect the number of shares of Technip that FMC Technologies stockholders would have received if Technip was to have issued its own shares.
|
(2)
|
Closing price of Technips ordinary shares on Euronext Paris on January 16, 2017 in Euro converted at the Euro to U.S. dollar exchange rate of $1.0594 on January 16, 2017.
|
20
Assets Acquired and Liabilities Assumed
The following table summarizes the preliminary fair values of the assets acquired and liabilities assumed at the acquisition date. The Companys purchase
price allocation is subject to revision as additional information about fair value of assets and liabilities becomes available. Additional information that existed as of the acquisition date but at that time was unknown to the Company may become
known to the Company during the remainder of the measurement period. The final purchase price allocation will be based on final appraisals and other analysis of fair values of acquired assets and liabilities.
|
|
|
|
|
(In millions)
|
|
|
|
Assets:
|
|
|
|
|
Cash
|
|
$
|
1,479.2
|
|
Accounts receivable
|
|
|
1,247.4
|
|
Inventory
|
|
|
764.8
|
|
Income taxes receivable
|
|
|
139.2
|
|
Other current assets
|
|
|
282.2
|
|
Property, plant and equipment
|
|
|
1,351.3
|
|
Intangible assets
|
|
|
1,390.3
|
|
Deferred income taxes
|
|
|
67.0
|
|
Other long-term assets
|
|
|
167.3
|
|
|
|
|
|
|
Total identifiable assets acquired
|
|
|
6,888.7
|
|
Liabilities:
|
|
|
|
|
Short-term and current portion of long-term debt
|
|
|
327.1
|
|
Accounts payable, trade
|
|
|
386.0
|
|
Advance payments
|
|
|
467.0
|
|
Income taxes payable
|
|
|
92.1
|
|
Other current liabilities
|
|
|
518.6
|
|
Long-term debt, less current portion
|
|
|
1,466.6
|
|
Accrued pension and other post-retirement benefits, less current portion
|
|
|
195.5
|
|
Deferred income taxes
|
|
|
433.5
|
|
Other long-term liabilities
|
|
|
123.6
|
|
|
|
|
|
|
Total liabilities assumed
|
|
|
4,010.0
|
|
|
|
|
|
|
Net identifiable assets acquired
|
|
|
2,878.7
|
|
Goodwill
|
|
|
5,292.0
|
|
|
|
|
|
|
Net assets acquired
|
|
$
|
8,170.7
|
|
|
|
|
|
|
Segment Allocation of Goodwill
Goodwill is preliminary due to the draft status of the purchase valuation. The allocation to the reporting segments based on the draft valuation is as follows:
|
|
|
|
|
(In millions)
|
|
Allocated
Goodwill
|
|
Subsea
|
|
$
|
3,078.7
|
|
Onshore/Offshore
|
|
|
1,677.0
|
|
Surface Technologies
|
|
|
536.3
|
|
|
|
|
|
|
Total
|
|
$
|
5,292.0
|
|
|
|
|
|
|
21
Goodwill is calculated as the excess of the consideration transferred over the net assets recognized and
represents the expected revenue and cost synergies of the combined company, which are further described above. Goodwill recognized as a result of the acquisition is not deductible for tax purposes.
Acquired Identifiable Intangible Assets
The identifiable
intangible assets acquired include the following:
|
|
|
|
|
|
|
|
|
(In millions, except estimated useful lives)
|
|
Fair Value
|
|
|
Estimated
Useful Lives
|
|
Acquired technology
|
|
$
|
240.0
|
|
|
|
10
|
|
Backlog
|
|
|
175.0
|
|
|
|
2
|
|
Customer relationships
|
|
|
285.0
|
|
|
|
10
|
|
Tradenames
|
|
|
635.0
|
|
|
|
20
|
|
Software
|
|
|
55.3
|
|
|
|
Various
|
|
|
|
|
|
|
|
|
|
|
Total identifiable intangible assets acquired
|
|
$
|
1,390.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FMC Technologies results of operations have been included in our financial statements for periods subsequent to the
consummation of the Merger on January 16, 2017. FMC Technologies contributed revenues and an operating loss of $739.4 million and $80.9 million, respectively, for the period from January 17, 2017 through March 31, 2017.
Pro Forma Impact of the Merger (unaudited)
The following
unaudited supplemental pro forma results present consolidated information as if the Merger had been completed as of January 1, 2016. The pro forma results do not include any potential synergies, cost savings or other expected benefits of the
Merger. Accordingly, the pro forma results should not be considered indicative of the results that would have occurred if the Merger had been consummated as of January 1, 2016, nor are they indicative of future results. For comparative
purposes, the weighted average shares outstanding used for the diluted earnings per share calculation for the three months ended March 31, 2017 was also used to calculate the diluted earnings per share for the three months ended March 31,
2016.
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
(In millions, except per share data)
|
|
2017
Pro Forma
|
|
|
2016
Pro Forma
|
|
|
|
As Restated
|
|
|
As Restated
|
|
Revenue
|
|
$
|
3,500.9
|
|
|
$
|
3,611.2
|
|
Net income (loss) attributable to TechnipFMC adjusted for dilutive effects
|
|
$
|
(103.5
|
)
|
|
$
|
46.4
|
|
Diluted earnings (loss) per share
|
|
|
(0.22
|
)
|
|
|
0.10
|
|
22
NOTE 4. NEW ACCOUNTING STANDARDS
Recently Adopted Accounting Standards
Effective
January 1, 2017, we adopted Accounting Standards Update (ASU)
No. 2016-09,
Improvements to Employee Share-Based Payment Accounting.
Among other amendments, this update
requires that excess tax benefits or deficiencies be recognized as income tax expense or benefit in the income statement and eliminates the requirement to reclassify excess tax benefits and deficiencies from operating activities to financing
activities in the statement of cash flows. This updated guidance also gives an entity the election to either (i) estimate the forfeiture rate of employee stock-based awards or (ii) account for forfeitures as they occur. We elected to
retrospectively classify excess tax benefits and deficiencies as operating activity and these amounts, which were immaterial for all periods presented, are reflected in the income taxes payable, net line item in the accompanying condensed
consolidated statement of cash flows. In addition, we elected to continue to estimate forfeitures on the grant date to account for the estimated number of awards for which the requisite service period will not be rendered. The adoption of this
update did not have a material impact on our consolidated financial statements.
Effective January 1, 2017, we adopted ASU
No. 2015-11,
Simplifying the Measurement of Inventory
. This update requires in scope inventory to be measured at the lower of cost or net realizable value rather than at the lower of cost or
market under existing guidance. We adopted the updated guidance prospectively. The adoption of this update did not have a material impact on our consolidated financial statements.
Effective January 1, 2017, we adopted ASU
No. 2014-15,
Disclosure of Uncertainties About an
Entitys Ability to Continue as a Going Concern.
This update states that substantial doubt exists if it is probable that an entity will be unable to meet its current and future obligations. Disclosures are required if conditions give
rise to substantial doubt. However, management will need to assess if its plans will alleviate substantial doubt to determine the specific disclosures. We adopted this guidance prospectively. The adoption of this update concerns disclosure only as
it relates to our consolidated financial statements.
Recently Issued Accounting Standards
In May 2014, the Financial Accounting Standards Board (FASB) issued ASU
No. 2014-09,
Revenue
from Contracts with Customers.
This update requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in
exchange for those goods or services. The ASU will supersede most existing GAAP related to revenue recognition and will supersede some cost guidance in existing GAAP related to construction-type and production-type contract accounting. Additionally,
the ASU will significantly increase disclosures related to revenue recognition. In August 2015, the FASB issued ASU
No. 2015-14
which deferred the effective date of ASU
No. 2014-09
by one year, and as a result, is now effective for us on January 1, 2018. In March 2016, the FASB issued ASU
No. 2016-08,
Principal
versus Agent Considerations (Reporting Revenue Gross versus Net) which clarifies the implementation guidance on principal versus agent considerations. Early application is permitted to the original effective date of January 1, 2017.
Entities are permitted to apply the amendments either retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying the ASU recognized at the date of initial application. The impacts
that adoption of the ASU is expected to have on our consolidated financial statements and related disclosures are being evaluated. Additionally, we have not determined the effect of the ASU on our internal control over financial reporting or other
changes in business practices and processes and have not yet determined which transition method we will utilize upon adoption on the effective date.
In
January 2016, the FASB issued ASU
No. 2016-01,
Recognition and Measurement of Financial Assets and Financial Liabilities.
This update addresses certain aspects of recognition,
measurement, presentation and disclosure of financial instruments. Among other amendments, this update requires equity investments not accounted for under the equity method of accounting to be measured at fair value with changes in fair value
recognized in net income. An entity may choose to measure equity investments that do not have readily determinable fair values at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions
for the identical or a similar investment of the same issuer. This updated guidance also simplifies the impairment assessment of equity investments without readily determinable fair values and
23
eliminates the requirement to disclose significant assumptions and methods used to estimate the fair value of financial instruments measured at amortized cost. The updated guidance further
requires the use of exit price notion when measuring the fair value of financial instruments for disclosure purposes. The amendments in this ASU are effective for us on January 1, 2018. All amendments are required to be adopted on a modified
retrospective basis, with two exceptions. The amendments related to equity investments without readily determinable fair values and the requirement to use exit price notion are required to be adopted prospectively. Early adoption is not permitted.
We are currently evaluating the impact of this ASU on our consolidated financial statements.
In February 2016, the FASB issued ASU
No. 2016-02,
Leases.
This update requires that a lessee recognize in the statement of financial position a liability to make lease payments and a
right-of-use
asset representing its right to use the underlying asset for the lease term. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of
underlying asset not to recognize lease assets and lease liabilities. Similar to current guidance, the update continues to differentiate between finance leases and operating leases, however this distinction now primarily relates to differences in
the manner of expense recognition over time and in the classification of lease payments in the statement of cash flows. The updated guidance leaves the accounting for leases by lessors largely unchanged from existing GAAP. Early application is
permitted. Entities are required to use a modified retrospective adoption, with certain relief provisions, for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements when adopted. The
guidance will become effective for us on January 1, 2019. The impacts that adoption of the ASU is expected to have on our consolidated financial statements and related disclosures are being evaluated. Additionally, we have not determined the
effect of the ASU on our internal control over financial reporting or other changes in business practices and processes.
In June 2016, the FASB issued
ASU
2016-13,
Financial Instruments
Credit Losses.
This update introduces a new model for recognizing credit losses on financial instruments based on an estimate of current
expected credit losses. The updated guidance applies to (i) loans, accounts receivable, trade receivables, and other financial assets measured at amortized cost, (ii) loan commitments and other
off-balance
sheet credit exposures, (iii) debt securities and other financial assets measured at fair value through other comprehensive income, and (iv) beneficial interests in securitized financial
assets. The amendments in this ASU are effective for us on January 1, 2020 and are required to be adopted on a modified retrospective basis. Early adoption is permitted. We are currently evaluating the impact of this ASU on our consolidated
financial statements.
In August 2016, the FASB issued ASU
No. 2016-15
, Classification of Certain
Cash Receipts and Cash Payments.
This update amends the existing guidance for the statement of cash flows and provides guidance on eight classification issues related to the statement of cash flows. The amendments in this ASU are effective
for us on January 1, 2018 and are required to be adopted retrospectively. For issues that are impracticable to adopt retrospectively, the amendments may be adopted prospectively as of the earliest date practicable. Early adoption is permitted.
We are currently evaluating the impact of this ASU on our consolidated statements of cash flows.
In October 2016, the FASB issued ASU
No. 2016-16,
Intra-Entity Transfers of Assets Other Than Inventory.
This update requires that income tax consequences are recognized on an intra-entity transfer of an asset other than
inventory when the transfer occurs. The amendments in this ASU are effective for us on January 1, 2018 and are required to be adopted on a modified retrospective basis. Early adoption is permitted. We are currently evaluating the impact of this
ASU on our consolidated financial statements.
In January 2017, the FASB issued ASU
No. 2017-01,
Clarifying the Definition of a Business.
This update clarifies the definition of a business and provides a screen to determine when a set of assets and activities is not a business. The screen requires that when substantially all
of the fair value of the gross assets acquired or disposed of is concentrated in a single identifiable asset or a group of similar identifiable assets, such set of assets is not a business. The amendments in this ASU are effective for us on
January 1, 2018 and are required to be adopted prospectively. Early adoption is permitted. We are currently evaluating the impact of this ASU on our consolidated financial statements.
In January 2017, the FASB issued ASU
No. 2017-04,
Simplifying the Test for Goodwill Impairment.
This update eliminates Step 2 from the goodwill impairment test. An annual or interim goodwill test should be performed by comparing the fair value
24
of a reporting unit with its carrying amount. Income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit should also be considered when measuring any
applicable goodwill impairment loss. This updated guidance also eliminates the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and if it fails that qualitative assessment, to perform
Step 2 of the goodwill impairment test. Any goodwill amount allocated to a reporting unit with a zero or negative carrying amount net of assets is required to be disclosed. The amendments in this ASU are effective for us January 1, 2020 and are
required to be adopted prospectively. Early adoption is permitted. We are currently evaluating the impact of this ASU on our consolidated financial statements.
In February 2017, the FASB
issued ASU 2017-05,
Clarifying the Scope of Asset Derecognition Guidance
and Accounting for Partial Sales of Nonfinancial Assets.
It defines an
in-substance
nonfinancial asset, unifies guidance related to partial sales of nonfinancial assets, eliminates rules
specifically addressing the sale of real estate, removes exceptions to the financial asset derecognition model, and clarifies the accounting for contributions of nonfinancial assets to joint ventures. The amendments in this ASU are effective
for us January 1, 2018 and are required to be adopted with either a full retrospective approach or a modified retrospective approach. We are currently evaluating the impact of this ASU on our consolidated financial statements.
In March 2017, the FASB issued ASU
No. 2017-07,
Improving the Presentation of Net Periodic Pension Cost
and Net Periodic Postretirement Benefit Cost.
The update requires employers to disaggregate the service cost component from the other components of net benefit cost and disclose the amount of net benefit cost that is included in the income
statement or capitalized in assets, by line item. The updated guidance requires employers to report the service cost component in the same line item(s) as other compensation costs and to report other pension-related costs (which include interest
costs, amortization of pension-related costs from prior periods, and the gains or losses on plan assets) separately and exclude them from the subtotal of operating income. The updated guidance also allows only the service cost component to be
eligible for capitalization when applicable. The amendments in this ASU are effective for us on January 1, 2018. Early adoption is permitted. The guidance requires adoption on a retrospective basis for the presentation of the service cost
component and the other components of net periodic pension cost and net periodic post-retirement benefit cost in the income statement and on a prospective basis for the capitalization of the service cost component of net periodic pension cost and
net periodic post-retirement benefit in assets. We are currently evaluating the impact of this ASU on our consolidated financial statements.
NOTE 5.
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
|
|
|
|
March 31,
|
|
(In millions, except per share data)
|
|
2017
|
|
|
2016
|
|
|
|
As Restated
|
|
|
As Restated
|
|
Net income (loss) attributable to TechnipFMC plc
|
|
$
|
(18.7
|
)
|
|
$
|
120.7
|
|
After-tax
interest expense related to dilutive
shares
|
|
|
|
|
|
|
0.4
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to TechnipFMC plc adjusted for dilutive effects
|
|
|
(18.7
|
)
|
|
|
121.1
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares outstanding
|
|
|
466.6
|
|
|
|
118.2
|
|
Dilutive effect of stock options
|
|
|
|
|
|
|
|
|
Dilutive effect of performance shares
|
|
|
|
|
|
|
1.0
|
|
Dilutive effect of convertible bonds
|
|
|
|
|
|
|
5.2
|
|
|
|
|
|
|
|
|
|
|
Total shares and dilutive securities
|
|
|
466.6
|
|
|
|
124.4
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per share attributable to TechnipFMC plc
|
|
$
|
(0.04
|
)
|
|
$
|
1.02
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings (loss) per share attributable to TechnipFMC plc
|
|
$
|
(0.04
|
)
|
|
$
|
0.97
|
|
|
|
|
|
|
|
|
|
|
25
NOTE 6. RESTRUCTURING AND IMPAIRMENT EXPENSE
Restructuring and impairment expense was as follows:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
(In millions)
|
|
2017
|
|
|
2016
|
|
Subsea
|
|
$
|
6.7
|
|
|
$
|
0.3
|
|
Onshore/Offshore
|
|
|
(0.3
|
)
|
|
|
35.4
|
|
Surface Technologies
|
|
|
1.4
|
|
|
|
|
|
Corporate and other
|
|
|
1.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total restructuring and impairment expense
|
|
$
|
9.7
|
|
|
$
|
35.7
|
|
|
|
|
|
|
|
|
|
|
Restructuring
As a result of the decline in crude oil prices and its effect on the demand for products and
services in the oilfield services industry worldwide, we initiated a company-wide reduction in workforce and facility consolidation intended to reduce costs and better align our workforce with current and anticipated activity levels, which resulted
in the continued recognition of severance costs relating to termination benefits and other restructuring charges.
Asset impairments
We
conduct impairment tests on long-lived assets whenever events or changes in circumstances indicate the carrying value may not be recoverable. The carrying value of a long-lived asset is not recoverable if it exceeds the sum of the undiscounted cash
flows expected to result from the use and eventual disposition over the assets remaining useful life. Our review of recoverability of the carrying value of our assets considers several assumptions including the intended use and service
potential of the asset.
NOTE 7. INVENTORIES
Inventories consisted of the following:
|
|
|
|
|
|
|
|
|
(In millions)
|
|
March 31,
2017
|
|
|
December 31,
2016
|
|
Raw materials
|
|
$
|
278.4
|
|
|
$
|
272.9
|
|
Work in process
|
|
|
216.6
|
|
|
|
36.1
|
|
Finished goods
|
|
|
540.2
|
|
|
|
64.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,035.2
|
|
|
|
373.6
|
|
Valuation adjustments
|
|
|
(51.7
|
)
|
|
|
(38.9
|
)
|
|
|
|
|
|
|
|
|
|
Inventories, net
|
|
$
|
983.5
|
|
|
$
|
334.7
|
|
|
|
|
|
|
|
|
|
|
NOTE 8. OTHER CURRENT ASSETS
Other current assets consisted of the following:
|
|
|
|
|
|
|
|
|
(In millions)
|
|
March 31,
2017
|
|
|
December 31,
2016
|
|
Value added tax receivables
|
|
$
|
432.3
|
|
|
$
|
319.4
|
|
Other tax receivables
|
|
|
183.8
|
|
|
|
124.9
|
|
Prepaid expenses
|
|
|
161.3
|
|
|
|
106.4
|
|
Other
|
|
|
313.0
|
|
|
|
248.5
|
|
|
|
|
|
|
|
|
|
|
Other current assets
|
|
$
|
1,090.4
|
|
|
$
|
799.2
|
|
|
|
|
|
|
|
|
|
|
26
NOTE 9. EQUITY METHOD INVESTMENTS
Our income from equity affiliates included in each of our reporting segments was as follows:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
(In millions)
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
As Restated
(1)
|
|
Subsea
|
|
$
|
9.4
|
|
|
$
|
1.9
|
|
Onshore/Offshore
|
|
|
|
|
|
|
23.6
|
|
Surface Technologies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from equity affiliates
|
|
$
|
9.4
|
|
|
$
|
25.5
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Restated balances related to adjustments to equity interests due to the use of incorrect foreign exchange rates.
|
27
NOTE 10. OTHER CURRENT LIABILITIES
Other current liabilities consisted of the following:
|
|
|
|
|
|
|
|
|
(In millions)
|
|
March 31,
2017
|
|
|
December 31,
2016
|
|
Accruals on completed contracts
|
|
$
|
304.8
|
|
|
$
|
271.9
|
|
Deferred income on contracts
|
|
|
364.6
|
|
|
|
407.6
|
|
Contingencies related to contracts
|
|
|
390.9
|
|
|
|
370.1
|
|
Other taxes payable
|
|
|
236.2
|
|
|
|
143.5
|
|
Redeemable financial liability
|
|
|
88.2
|
|
|
|
33.7
|
|
Other
|
|
|
805.6
|
|
|
|
598.5
|
|
|
|
|
|
|
|
|
|
|
Total other current liabilities
|
|
$
|
2,190.3
|
|
|
$
|
1,825.3
|
|
|
|
|
|
|
|
|
|
|
NOTE 11. DEBT
Long-term
debt consisted of the following:
|
|
|
|
|
|
|
|
|
(In millions)
|
|
March 31,
2017
|
|
|
December 31,
2016
|
|
Revolving credit facility
|
|
$
|
|
|
|
$
|
|
|
Bilateral credit facilities
|
|
|
|
|
|
|
|
|
Commercial paper
|
|
|
870.3
|
|
|
|
210.8
|
|
Synthetic bonds due 2021
|
|
|
441.5
|
|
|
|
428.0
|
|
Convertible bonds due 2017
|
|
|
|
|
|
|
524.5
|
|
2.00% Senior Notes due 2017
|
|
|
300.0
|
|
|
|
|
|
3.45% Senior Notes due 2022
|
|
|
500.0
|
|
|
|
|
|
5.00% Notes due 2020
|
|
|
215.0
|
|
|
|
209.7
|
|
3.40% Notes due 2022
|
|
|
161.9
|
|
|
|
158.0
|
|
3.15% Notes due 2023
|
|
|
139.5
|
|
|
|
136.1
|
|
3.15% Notes due 2023
|
|
|
134.8
|
|
|
|
131.4
|
|
4.00% Notes due 2027
|
|
|
81.0
|
|
|
|
79.0
|
|
4.00% Notes due 2032
|
|
|
103.8
|
|
|
|
101.2
|
|
3.75% Notes due 2033
|
|
|
104.4
|
|
|
|
101.8
|
|
Bank borrowings
|
|
|
454.3
|
|
|
|
452.1
|
|
Capital leases
|
|
|
28.3
|
|
|
|
|
|
Other
|
|
|
47.0
|
|
|
|
20.3
|
|
|
|
|
|
|
|
|
|
|
Total long-term debt
|
|
|
3,581.8
|
|
|
|
2,552.9
|
|
Less: current portion
|
|
|
(499.0
|
)
|
|
|
(683.6
|
)
|
|
|
|
|
|
|
|
|
|
Long-term debt, less current portion
|
|
$
|
3,082.8
|
|
|
$
|
1,869.3
|
|
|
|
|
|
|
|
|
|
|
Revolving credit facility
On January 17, 2017, we acceded to a new $2.5 billion senior unsecured
revolving credit facility agreement (facility agreement) between FMC Technologies, Inc. and Technip Eurocash SNC (the Borrowers) with JPMorgan Chase Bank, National Association, as agent and an arranger, SG Americas Securities
LLC as an arranger, and the lenders party thereto.
28
The facility agreement provides for the establishment of a multicurrency, revolving credit facility, which
includes a $1.5 billion letter of credit subfacility. Subject to certain conditions, the Borrowers may request the aggregate commitments under the facility agreement be increased by an additional $500.0 million. The facility expires in
January 2022.
Borrowings under the facility agreement bear interest at the following rates, plus an applicable margin, depending on currency:
|
|
|
U.S. dollar-denominated loans bear interest, at the Borrowers 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; and
|
|
|
|
euro-denominated loans bear interest at the Euro interbank offered rate (EURIBOR).
|
Depending on
the credit rating of TechnipFMC, the applicable margin for revolving loans varies (i) in the case of Adjusted LIBOR and EURIBOR loans, from 0.820% to 1.300% and (ii) in the case of base rate loans, from 0.000% to 0.300%. The base
rate is the highest of (a) the prime rate announced by JPMorgan, (b) the greater of the Federal Funds Rate and the Overnight Bank Funding Rate plus 0.5% or
(c) one-month
Adjusted LIBOR
plus 1.0%.
The facility agreement contains usual and customary covenants, representations and warranties and events of default for credit facilities of
this type, including financial covenants.
Bilateral credit facilities
We have access to four bilateral credit facilities in the aggregate of
340.0 million. The bilateral credit facilities consist of:
|
|
|
two credit facilities of 80.0 million each expiring in May 2019;
|
|
|
|
a credit facility of 80.0 million expiring in June 2019; and
|
|
|
|
a credit facility of 100.0 million expiring in May 2021.
|
Each bilateral credit facility contains
usual and customary covenants, representations and warranties and events of default for credit facilities of this type.
Commercial
paper
Under our commercial paper program, we have the ability to access $1.0 billion and 1.0 billion of short-term financing through our commercial paper dealers, subject to the limit of unused capacity of our facility
agreement. As we have both the ability and intent to refinance these obligations on a long-term basis, our commercial paper borrowings were classified as long-term in the condensed consolidated balance sheets as of March 31, 2017 and
December 31, 2016. Commercial paper borrowings are issued at market interest rates. As of March 31, 2017, our commercial paper borrowings had a weighted average interest rate of 1.30% on the U.S. dollar denominated borrowings and (0.22)%
on the euro denominated borrowings.
Synthetic bonds
On January 25, 2016, we issued 375.0 million principal amount of 0.875%
convertible bonds with a maturity date of January 25, 2021 and a redemption at par of the bonds which have not been converted. On March 3, 2016, we issued additional convertible bonds for a principal amount of 75.0 million
issued on the same terms, fully fungible with and assimilated to the bonds issued on January 25, 2016. The issuance of these
non-dilutive
cash-settled convertible bonds (Synthetic Bonds),
which are linked to our ordinary shares were backed simultaneously by the purchase of cash-settled equity call options in order to hedge our economic exposure to the potential exercise of the conversion rights embedded in the Synthetic Bonds. As the
Synthetic Bonds will only be cash settled, they will not result in the issuance of new ordinary shares or the delivery of existing ordinary shares upon conversion. Interest on the Synthetic Bonds is payable semi-annually in arrears on
January 25 and July 25 of each year, beginning July 26, 2016. Net proceeds from the Synthetic Bonds were used for general corporate purposes and to finance the purchase of the call options. The Synthetic Bonds are our unsecured
obligations. The Synthetic Bonds will rank equally in right of payment with all of our existing and future unsubordinated debt.
The Synthetic Bonds
issued on January 25, 2016 were issued at par. The Synthetic Bonds issued on March 3, 2016 were issued at a premium of 112.43802% resulting from an adjustment over the
3-day
trading period following
the issuance resulting in a share reference price of 48.8355.
29
A 40.0% conversion premium was applied to the share reference price of 40.7940. The share reference price
was computed using the average of the daily volume weighted average price of our ordinary shares on the Euronext Paris market over the 10 consecutive trading days from January 21 to February 3, 2016. The initial conversion price of the
bonds was then fixed at 57.1116.
The Synthetic Bonds each have a nominal value of 100.0 thousand with a conversion ratio of 3,558.2757
and a conversion price of 28.1035. Any bondholder may, at its sole option, request the conversion in cash of all or part of the bonds it owns, beginning November 15, 2020 to the 38th business day before the maturity date.
Convertible bonds
On December 15, 2011, we issued 5,178,455 bonds convertible (the 2011-2017 Convertible Bonds) into and/or
exchangeable for new or existing shares (OCEANE) for approximately 497.6 million with a maturity date of January 1, 2017. Net proceeds from the issuance was used to partially restore our cash balance position following
the acquisition of Global Industries, Ltd. in December 2011 for a cash consideration of $936.4 million.
At maturity, all outstanding amounts under
the 2011-2017 Convertible Bonds were repaid.
Senior Notes
On February 28, 2017, we commenced offers to exchange any and all outstanding
notes issued by FMC Technologies for up to $800.0 million aggregate principal amount of new notes issued by TechnipFMC and cash. In conjunction with the offers to exchange, FMC Technologies solicited consents to adopt certain proposed
amendments to each of the indentures governing the previously issued notes to eliminate certain covenants, restrictive provisions and events of defaults from such indentures.
On March 29, 2017, we settled the offers to exchange and consent solicitations (the Exchange Offers) for (i) any and all 2.00% senior
notes due October 1, 2017 (the 2017 FMC Notes) issued by FMC Technologies for up to an aggregate principal amount of $300.0 million of new 2.00% senior notes due October 1, 2017 (the 2017 Senior Notes) issued
by TechnipFMC and cash, and (ii) any and all 3.45% senior notes due October 1, 2022 (the 2022 FMC Notes) issued by FMC Technologies for up to an aggregate principal amount of $500.0 million in new 3.45% senior notes due
October 1, 2022 (the 2022 Senior Notes) issued by TechnipFMC with registration rights and cash. Pursuant to the Exchange Offers, we issued approximately $215.4 million in aggregate principal amount of 2017 Senior Notes and
$459.8 million in aggregate principal amount of 2022 Senior Notes (collectively the Senior Notes). Interest on the 2017 Senior Notes is payable on October 1, 2017. Interest on the 2022 Senior Notes is payable semi-annually in
arrears on April 1 and October 1 of each year, beginning October 1, 2017.
The terms of the Senior Notes are governed by the indenture,
dated as of March 29, 2017 between TechnipFMC and U.S. Bank National Association, as trustee (the Trustee), as amended and supplemented by the First Supplemental Indenture between TechnipFMC and the Trustee (the First
Supplemental Indenture) relating to the issuance of the 2017 Notes and the Second Supplemental Indenture between TechnipFMC and the Trustee (the Second Supplemental Indenture) relating to the issuance of the 2022 Notes.
At any time prior to their maturity in the case of the 2017 Notes, and at any time prior to July 1, 2022, in the case of the 2022 Notes, we may redeem
some or all of the Senior Notes at the redemption prices specified in the First Supplemental Indenture and Second Supplemental Indenture, respectively. At any time on or after July 1, 2022, we may redeem the 2022 Notes at the redemption price
equal to 100% of the principal amount of the 2022 Notes redeemed. The Senior Notes are our senior unsecured obligations. The Senior Notes will rank equally in right of payment with all of our existing and future unsubordinated debt, and will rank
senior in right of payment to all of our future subordinated debt.
Private Placement Notes
On July 27, 2010, we completed the private
placement of 200.0 million aggregate principal amount of 5.0% notes due July 2020 (the 2020 Notes). Interest on the 2020 Notes is payable annually in arrears on July 27 of each year, beginning July 27, 2011. Net
proceeds of the 2020 Notes were used to partially finance the 2004-2011 bond issue, which was repaid at its maturity date on May 26, 2011. The 2020 Notes contain contains usual and customary covenants and events of default for notes of this
type. In the event of a change of control resulting in a downgrade in the rating of the notes below
BBB-,
the 2020 Notes may be redeemed early by any bondholder, at its sole discretion. The 2020 Notes are our
unsecured obligations. The 2020 Notes will rank equally in right of payment with all of our existing and future unsubordinated debt.
30
In June 2012, we completed the private placement of 325.0 million aggregate principal amount of notes.
The notes were issued in three tranches with 150.0 million bearing interest at 3.40% and due June 2022 (the Tranche A 2022 Notes), 75.0 million bearing interest of 4.0% and due June 2027 (the Tranche B 2027
Notes) and 100.0 million bearing interest of 4.0% and due June 2032 (the Tranche C 2032 Notes and, collectively with the Tranche A 2022 Notes and the Tranche B 2027 Notes, the 2012 Private
Placement Notes). Interest on the Tranche A 2022 Notes and the Tranche C 2032 Notes is payable annually in arrears on June 14 of each year beginning June 14, 2013. Interest on the Tranche B 2027 Notes is payable annually in arrears
on June 15 of each year, beginning June 15, 2013. Net proceeds of the 2012 Private Placement Notes were used for general corporate purposes. The 2012 Private Placement Notes contain usual and customary covenants and events of default for
notes of this type. In the event of a change of control resulting in a downgrade in the rating of the notes below
BBB-,
the 2012 Private Placement Notes may be redeemed early by any bondholder, at its sole
discretion. The 2012 Private Placement Notes are our unsecured obligations. The 2012 Private Placement Notes will rank equally in right of payment with all of our existing and future unsubordinated debt.
In October 2013, we completed the private placement of 355.0 million aggregate principal amount of senior notes. The notes were issued in three
tranches with 100.0 million bearing interest at 3.75% and due October 2033 (the Tranche A 2033 Notes), 130.0 million bearing interest of 3.15% and due October 2023 (the Tranche B 2023 Notes) and
125.0 million bearing interest of 3.15% and due October 2023 (the Tranche C 2023 Notes and, collectively with the Tranche A 2033 Notes and the Tranche B 2023 Notes, the 2013 Private Placement
Notes). Interest on the Tranche A 2033 Notes is payable annually in arrears on October 7 each year, beginning October 7, 2014. Interest on the Tranche B 2023 Notes is payable annually in arrears on October 16 of each year
beginning October 16, 2014. Interest on the Tranche C 2023 Notes is payable annually in arrears on October 18 of each year, beginning October 18, 2014. Net proceeds of the 2013 Private Placement Notes were used for general corporate
purposes. The 2013 Private Placement Notes contain contains usual and customary covenants and events of default for notes of this type. In the event of a change of control resulting in a downgrade in the rating of the notes below
BBB-,
the 2013 Private Placement Notes may be redeemed early by any bondholder, at its sole discretion. The 2013 Private Placement Notes are our unsecured obligations. The 2013 Private Placement Notes will rank
equally in right of payment with all of our existing and future unsubordinated debt.
Term loan
In December 2016, we entered into a
£160.0 million term loan agreement to finance the Deep Explorer, a diving support vessel (DSV), maturing December 2028. Under the loan agreement, interest accrues at an annual rate of 2.813%. This loan agreement contains
usual and customary covenants and events of default for loans of this type.
Foreign committed credit
We have committed credit lines at many
of our international subsidiaries for immaterial amounts. We utilize these facilities for asset financing and to provide a more efficient daily source of liquidity. The effective interest rates depend upon the local national market.
NOTE 12. OTHER LIABILITIES
During the three months ended
December 31, 2016, we obtained voting control interests in legal onshore/offshore contract entities which own and account for the design, engineering and construction of the Yamal LNG plant. Prior to the amendments of the contractual terms that
provided us with voting interest control, we accounted for these entities under the equity method of accounting based on our previously held interests in each of these entities. Since nearly all substantive processes to perform and execute the
obligations of the underlying contract are conducted by TechnipFMC and the noncontrolling interest holders, we accounted for these entities as an asset acquisition upon our obtaining control. In the condensed consolidated financial statements
included in the Original Filing we recognized a net gain of $72.6 million during 2016. However, in connection with the restatement, it was determined that because the fair value of the voting control interests was computed using incorrect
foreign currency rates, it was overstated by $64.9 million. As a result, we now recognize a net gain of $7.7 million during 2016. As of December 31, 2016, total assets, liabilities and equity related to these entities were
consolidated onto our balance sheet and our results of operations for the three months ended March 31, 2017 reflect the consolidated results of operations related to these entities.
31
In addition to the recognition of an intangible asset related to the acquired asset in the underlying entities, a
mandatorily redeemable financial liability of $174.8 million (as restated) was recognized as of December 31, 2016 to account for the fair value of the
non-controlling
interests, for which
$33.7 million was recorded as other current liabilities. Refer to Note 10 for further information regarding our other current liabilities. Changes in the fair value of the financial liability are recorded as interest expense on the condensed
consolidated statements of income. Refer to Note 19 for further information regarding the fair value measurement assumptions of the mandatorily redeemable financial liability and related changes in its fair value.
NOTE 13. 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 four 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 consolidated financial position, results of operations or cash flows.
Guarantees consisted of the following:
|
|
|
|
|
(In millions)
|
|
March 31, 2017
|
|
Financial guarantees
(1)
|
|
$
|
827.7
|
|
Performance guarantees
(2)
|
|
|
3,952.1
|
|
|
|
|
|
|
Maximum potential undiscounted payments
|
|
$
|
4,779.8
|
|
|
|
|
|
|
(1)
|
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 the Company fails to fulfill its financial obligations.
|
(2)
|
Performance guarantees represent contracts that contingently require a guarantor to make payments to a guaranteed party based on another entitys failure to
perform under a nonfinancial obligating agreement. Events that trigger payment are performance related, such as failure to ship a product or provide a service.
|
Contingent liabilities associated with legal matters
On March 29, 2016, Dong Energy (Dong) terminated, on the grounds of an
alleged material breach, a contract signed on February 27, 2012 with a consortium of Technip France and Daewoo Shipping & Marine Engineering Co., Ltd. This contract covered engineering, procurement, fabrication,
hook-up
and commissioning assistance for a fixed wellhead and process platform and associated facilities for the Hejre field offshore Denmark. Dong announced that it will not complete and does not intend to take
possession of the platform. The parties are currently in arbitration to resolve contract disputes related to the performance and cessation of work under the contract.
We are involved in various pending or potential legal actions or disputes in the ordinary course of our business. 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.
32
NOTE 14. STOCKHOLDERS EQUITY
There were no cash dividends declared during the three months ended March 31, 2017 and 2016.
The following is a summary of our capital stock activity for the three months ended March 31, 2017 and 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
(Number of shares in millions)
|
|
Ordinary
Shares Issued
|
|
|
Ordinary Shares
Held in
Employee
Benefit Trust
|
|
|
Treasury Stock
|
|
Balance as of December 31, 2015
|
|
|
119.0
|
|
|
|
|
|
|
|
0.8
|
|
Net stock purchased for (sold from) pursuant to liquidity contract
|
|
|
|
|
|
|
|
|
|
|
(0.1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of March 31, 2016
|
|
|
119.0
|
|
|
|
|
|
|
|
0.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2016
|
|
|
119.2
|
|
|
|
|
|
|
|
0.3
|
|
Net capital increases due to the Merger of FMC Technologies and Technip
|
|
|
347.4
|
|
|
|
|
|
|
|
|
|
Treasury stock cancellation due to the Merger of FMC Technologies and Technip
|
|
|
|
|
|
|
|
|
|
|
(0.3
|
)
|
Net stock purchased for (sold from) employee benefit trust
|
|
|
|
|
|
|
0.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of March 31, 2017
|
|
|
466.6
|
|
|
|
0.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated other comprehensive loss consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions)
|
|
Foreign Currency
Translation
|
|
|
Available-For-
Sale Securities
|
|
|
Hedging
|
|
|
Defined Pension
and Other
Post-retirement
Benefits
|
|
|
Accumulated
Other
Comprehensive
Loss
|
|
|
|
As Restated
|
|
|
|
|
|
|
|
|
As Restated
|
|
|
As Restated
|
|
December 31, 2016
|
|
$
|
(849.8
|
)
|
|
$
|
|
|
|
$
|
(126.9
|
)
|
|
$
|
(80.7
|
)
|
|
$
|
(1,057.4
|
)
|
Other comprehensive income (loss) before reclassifications, net of tax
|
|
|
6.6
|
|
|
|
0.8
|
|
|
|
24.7
|
|
|
|
|
|
|
|
32.1
|
|
Reclassification adjustment for net losses (gains) included in net income, net of tax
|
|
|
|
|
|
|
|
|
|
|
34.4
|
|
|
|
0.5
|
|
|
|
34.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss), net of tax
|
|
|
6.6
|
|
|
|
0.8
|
|
|
|
59.1
|
|
|
|
0.5
|
|
|
|
67.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2017
|
|
$
|
(843.2
|
)
|
|
$
|
0.8
|
|
|
$
|
(67.8
|
)
|
|
$
|
(80.2
|
)
|
|
$
|
(990.4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33
Reclassifications out of accumulated other comprehensive loss consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
(In millions)
|
|
March 31,
2017
|
|
|
March 31,
2016
|
|
|
|
Details about Accumulated Other Comprehensive
Loss
Components
|
|
|
|
|
|
|
|
Affected Line Item in the Condensed Consolidated
Statements of Income
|
Gains (losses) on
available-for-sale
securities
|
|
|
|
|
|
|
|
|
|
Other expense, net
|
Gains (losses) on hedging instruments
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange contracts:
|
|
$
|
(14.6
|
)
|
|
$
|
|
|
|
Revenue
|
|
|
|
(0.1
|
)
|
|
|
|
|
|
Cost of sales
|
|
|
|
(0.1
|
)
|
|
|
|
|
|
Research and development expense
|
|
|
|
(28.4
|
)
|
|
|
(63.5
|
)
|
|
Other (expense), net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(43.2
|
)
|
|
|
(63.5
|
)
|
|
Income before income taxes
|
|
|
|
(8.8
|
)
|
|
|
(20.7
|
)
|
|
Provision (benefit) for income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(34.4
|
)
|
|
$
|
(42.8
|
)
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
Defined pension and other post-retirement
benefits
|
|
|
|
|
|
|
|
|
|
|
Amortization of actuarial gain (loss)
|
|
$
|
(0.5
|
)
|
|
$
|
(0.1
|
)
|
|
(a)
|
Amortization of prior service credit (cost)
|
|
|
(0.2
|
)
|
|
|
(0.1
|
)
|
|
(a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.7
|
)
|
|
|
(0.2
|
)
|
|
Income before income taxes
|
|
|
|
(0.2
|
)
|
|
|
(0.1
|
)
|
|
Provision (benefit) for income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(0.5
|
)
|
|
$
|
(0.1
|
)
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
These accumulated other comprehensive income components are included in the computation of net periodic pension cost (see Note 16 for additional details).
|
NOTE 15. INCOME TAXES
As a result of the Merger
described in Note 3, TechnipFMC plc is a public limited company incorporated under the laws of England and Wales. Therefore, our earnings are subject to the United Kingdom statutory rate of 19.3% beginning on the effective date of the Merger.
Previously these earnings were subject to the French statutory rate of 34.4%. Our consolidated effective income tax rate information has been presented accordingly. The Merger transaction was generally a
non-taxable
event for the significant jurisdictions in which we operate.
Our income tax provision (benefit) for
the three months ended March 31, 2017 and 2016, reflected effective tax rates of 141.5% (as restated) and 27.6% (as restated), respectively. The year-over-year increase in the effective tax rate was primarily due to a change in the forecasted
country mix of earnings and valuation allowances due to additional losses generated for which no tax benefit is expected to be realized. In addition, individual tax items, combined with lower profitability in the current period, had a greater impact
on the effective rate in the three months ended March 31, 2017 as a result of lower earnings as compared to the same period in 2016.
34
The effective income tax rate was different from the statutory income tax rate due to the following:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
(In millions)
|
|
2017
|
|
|
2016
|
|
|
|
As Restated
|
|
|
As Restated
|
|
Statutory income tax rate
|
|
|
19.3
|
%
|
|
|
34.4
|
%
|
Net difference resulting from:
|
|
|
|
|
|
|
|
|
Foreign earnings subject to different tax rates
|
|
|
14.8
|
%
|
|
|
(11.7)
|
%
|
Branch profits tax
|
|
|
8.5
|
%
|
|
|
|
%
|
Deemed dividends
|
|
|
9.6
|
%
|
|
|
|
%
|
State, local and provincial taxes
|
|
|
23.2
|
%
|
|
|
2.6
|
%
|
Return to provision
|
|
|
10.4
|
%
|
|
|
(4.9)
|
%
|
Valuation allowance
|
|
|
51.4
|
%
|
|
|
12.0
|
%
|
Other
|
|
|
4.5
|
%
|
|
|
(4.8)
|
%
|
|
|
|
|
|
|
|
|
|
Effective tax rate
|
|
|
141.5
|
%
|
|
|
27.6
|
%
|
|
|
|
|
|
|
|
|
|
NOTE 16. PENSION AND OTHER POST-RETIREMENT BENEFITS
The components of net periodic benefit cost were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits
|
|
|
|
Three Months Ended March 31,
|
|
|
|
2017
|
|
|
2016
|
|
(In millions)
|
|
U.S.
|
|
|
Intl
|
|
|
U.S.
|
|
|
Intl
|
|
Service cost
|
|
$
|
2.2
|
|
|
$
|
4.6
|
|
|
|
|
|
|
$
|
2.8
|
|
Interest cost
|
|
|
5.8
|
|
|
|
4.3
|
|
|
|
|
|
|
|
2.6
|
|
Expected return on plan assets
|
|
|
(10.5
|
)
|
|
|
(7.7
|
)
|
|
|
|
|
|
|
(2.0
|
)
|
Amortization of prior service cost (credit)
|
|
|
|
|
|
|
0.2
|
|
|
|
|
|
|
|
0.1
|
|
Amortization of actuarial loss (gain), net
|
|
|
|
|
|
|
0.5
|
|
|
|
|
|
|
|
0.1
|
|
Settlement cost
|
|
|
|
|
|
|
0.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit cost
|
|
$
|
(2.5
|
)
|
|
$
|
2.1
|
|
|
|
|
|
|
$
|
3.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During the three months ended March 31, 2017, we contributed $0.6 million to our U.S. pension benefit plans and
$12.6 million to our international pension benefit plans.
NOTE 17. STOCK-BASED COMPENSATION
On January 11, 2017, we adopted the TechnipFMC plc Incentive Award Plan (the Plan). The Plan provides certain incentives and awards to
officers, employees,
non-employee
directors and consultants of TechnipFMC and its subsidiaries. The Plan allows our Board of Directors to make various types of awards to
non-employee
directors and the Compensation Committee (the Committee) of the Board of Directors to make various types of awards to other eligible individuals. Awards may include stock options,
stock appreciation rights, performance units, restricted stock units, restricted stock or other awards authorized under the Plan. All awards are subject to the Plans provisions, including all stock-based grants previously issued by FMC
Technologies and Technip prior to consummation of the Merger. Under the Plan, 24.1 million ordinary shares were authorized for awards.
We recognize
compensation expense and the corresponding tax benefits for awards under the Plan. Stock-based compensation expense for nonvested stock units was $11.4 million and $6.0 million for the three months ended March 31, 2017 and 2016,
respectively.
35
NOTE 18. 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 consolidated balance sheets. The types of risks hedged are those relating to the variability of future earnings and cash flows caused by movements in foreign currency exchange
rates. Our policy is to hold derivatives only for the purpose of hedging risks associated with anticipated foreign currency purchases and sales created in the normal course of business and not for trading purposes where the objective is solely to
generate profit.
Generally, we enter into hedging relationships such that changes in the fair values or cash flows of the transactions being hedged are
expected to be offset by corresponding changes in the fair value of the derivatives. For derivative instruments that qualify as a cash flow hedge, the effective portion of the gain or loss of the derivative, which does not include the time value
component of a forward currency rate, is reported as a component of other comprehensive income (OCI) and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. For derivative
instruments not designated as hedging instruments, any change in the fair value of those instruments are reflected in earnings in the period such change occurs.
We hold the following types of derivative instruments:
Foreign exchange rate forward contracts
The purpose of these instruments is to hedge the risk of changes in future cash flows of anticipated
purchase or sale commitments denominated in foreign currencies and recorded assets and liabilities in our consolidated balance sheets. At March 31, 2017, we held the following material net positions:
|
|
|
|
|
|
|
|
|
|
|
Net Notional Amount
Bought (Sold)
|
|
(In millions)
|
|
|
|
|
USD Equivalent
|
|
Australian dollar
|
|
|
236.6
|
|
|
|
180.3
|
|
Brazilian real
|
|
|
571.9
|
|
|
|
179.8
|
|
British pound
|
|
|
219.4
|
|
|
|
273.7
|
|
Canadian dollar
|
|
|
(172.7
|
)
|
|
|
(129.8
|
)
|
Euro
|
|
|
895.0
|
|
|
|
966.2
|
|
Malaysian ringgit
|
|
|
233.2
|
|
|
|
52.7
|
|
Nigerian naira
|
|
|
(5,341.3
|
)
|
|
|
(17.2
|
)
|
Norwegian krone
|
|
|
919.9
|
|
|
|
107.7
|
|
Singapore dollar
|
|
|
129.0
|
|
|
|
92.3
|
|
U.S. dollar
|
|
|
(1,741.0
|
)
|
|
|
(1,741.0
|
)
|
Foreign exchange rate instruments embedded in purchase and sale contracts
The purpose of these instruments is to
match offsetting currency payments and receipts for particular projects, or comply with government restrictions on the currency used to purchase goods in certain countries. At March 31, 2017, our portfolio of these instruments included the
following material net positions:
|
|
|
|
|
|
|
|
|
|
|
Net Notional Amount
Bought (Sold)
|
|
(In millions)
|
|
|
|
|
USD Equivalent
|
|
Brazilian real
|
|
|
(54.4
|
)
|
|
|
(17.1
|
)
|
Euro
|
|
|
(23.7
|
)
|
|
|
(25.4
|
)
|
Norwegian krone
|
|
|
(240.2
|
)
|
|
|
(27.9
|
)
|
U.S. dollar
|
|
|
68.7
|
|
|
|
68.7
|
|
Fair value amounts for all outstanding derivative instruments have been determined using available market information and
commonly accepted valuation methodologies. Refer to Note 19 to these consolidated financial statements for further disclosures related to the fair value measurement process. Accordingly, the estimates presented may not be indicative of the amounts
that we would realize in a current market exchange and may not be indicative of the gains or losses we may ultimately incur when these contracts are settled.
36
The following table presents the location and fair value amounts of derivative instruments reported in the
consolidated balance sheets.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2017
|
|
|
December 31, 2016
|
|
(In millions)
|
|
Assets
|
|
|
Liabilities
|
|
|
Assets
|
|
|
Liabilities
|
|
Derivatives designated as hedging instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange contracts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Derivative financial instruments
|
|
$
|
67.4
|
|
|
$
|
154.6
|
|
|
$
|
47.2
|
|
|
$
|
183.0
|
|
Long-term Derivative financial instruments
|
|
|
17.3
|
|
|
|
38.6
|
|
|
|
10.7
|
|
|
|
47.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total derivatives designated as hedging instruments
|
|
|
84.7
|
|
|
|
193.2
|
|
|
|
57.9
|
|
|
|
230.6
|
|
Derivatives not designated as hedging instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange contracts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Derivative financial instruments
|
|
|
17.2
|
|
|
|
25.9
|
|
|
|
|
|
|
|
|
|
Long-term Derivative financial instruments
|
|
|
3.0
|
|
|
|
11.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total derivatives not designated as hedging instruments
|
|
|
20.2
|
|
|
|
37.6
|
|
|
|
|
|
|
|
|
|
Long-term Derivative financial instruments
Synthetic Bonds Call Option Premium
|
|
|
108.4
|
|
|
|
|
|
|
|
180.1
|
|
|
|
|
|
Long-term Derivative financial instruments
Synthetic Bonds Embedded Derivatives
|
|
|
|
|
|
|
108.4
|
|
|
|
|
|
|
|
180.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total derivatives
|
|
$
|
213.3
|
|
|
$
|
339.2
|
|
|
$
|
238.0
|
|
|
$
|
410.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We recognized a loss of $2.7 million and a gain of $10.6 million for the three months ended March 31, 2017 and
2016, respectively, due to hedge ineffectiveness as it was probable that the original forecasted transaction would not occur. Cash flow derivative hedges of forecasted transactions, net of tax, which qualify for hedge accounting, resulted in an
accumulated other comprehensive loss of $67.8 million and $126.9 million at March 31, 2017, and December 31, 2016, respectively. We expect to transfer an approximate $65.4 million loss from accumulated OCI to earnings during
the next 12 months when the anticipated transactions actually occur. All anticipated transactions currently being hedged are expected to occur by the first half of 2020.
37
The following table presents the location of gains (losses) on the consolidated statements of income related to
derivative instruments designated as fair value hedges.
|
|
|
|
|
|
|
|
|
Location of Fair Value Hedge Gain (Loss) Recognized in Income
|
|
Gain (Loss) Recognized in
Income
|
|
|
|
Three Months Ended March 31,
|
|
(In millions)
|
|
2017
|
|
|
2016
|
|
Other income (expense), net
|
|
$
|
20.8
|
|
|
$
|
(16.2
|
)
|
The following tables present the location of gains (losses) on the consolidated statements of other comprehensive income
and/or the consolidated statements of income related to derivative instruments designated as cash flow hedges.
|
|
|
|
|
|
|
|
|
|
|
Gain (Loss) Recognized in
OCI (Effective Portion)
|
|
|
|
Three Months Ended March 31,
|
|
(In millions)
|
|
2017
|
|
|
2016
|
|
Foreign exchange contracts
|
|
$
|
34.5
|
|
|
$
|
(45.5
|
)
|
|
|
Location of Cash Flow Hedge Gain (Loss) Reclassified from
Accumulated OCI into Income
|
|
Gain (Loss) Reclassified from Accumulated
OCI into Income (Effective Portion)
|
|
|
|
Three Months Ended March 31,
|
|
(In millions)
|
|
2017
|
|
|
2016
|
|
Foreign exchange contracts:
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
(14.6
|
)
|
|
$
|
|
|
Cost of sales
|
|
|
(0.1
|
)
|
|
|
|
|
Research and development expense
|
|
|
(0.1
|
)
|
|
|
|
|
Other (expense), net
|
|
|
(28.4
|
)
|
|
|
(63.5
|
)
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
(43.2
|
)
|
|
$
|
(63.5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Location of Cash Flow Hedge Gain (Loss) Recognized in Income
|
|
Gain (Loss) Recognized in Income
(Ineffective Portion
and Amount Excluded from Effectiveness
Testing)
|
|
|
|
Three Months Ended March 31,
|
|
(In millions)
|
|
2017
|
|
|
2016
|
|
Foreign exchange contracts:
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
1.8
|
|
|
$
|
|
|
Cost of sales
|
|
|
(1.2
|
)
|
|
|
|
|
Other income (expense), net
|
|
|
(3.1
|
)
|
|
|
9.8
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
(2.5
|
)
|
|
$
|
9.8
|
|
|
|
|
|
|
|
|
|
|
The following table presents the location of gains (losses) on the consolidated statements of income related to derivative
instruments not designated as hedging instruments.
38
|
|
|
|
|
|
|
|
|
Location of Gain (Loss) Recognized in Income
|
|
Gain (Loss) Recognized in Income on
Derivatives
(Instruments Not Designated as Hedging
Instruments)
|
|
|
|
Three Months Ended March 31,
|
|
(In millions)
|
|
2017
|
|
|
2016
|
|
Foreign exchange contracts:
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
0.3
|
|
|
$
|
|
|
Cost of sales
|
|
|
(0.5
|
)
|
|
|
|
|
Other income, net
|
|
|
28.0
|
|
|
|
1.6
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
27.8
|
|
|
$
|
1.6
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet Offsetting
We execute derivative contracts only 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 March 31, 2017 and December 31,
2016, we had no collateralized derivative contracts. The following tables present both gross information and net information of recognized derivative instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2017
|
|
|
December 31, 2016
|
|
(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
|
|
$
|
213.3
|
|
|
$
|
(81.5
|
)
|
|
$
|
131.8
|
|
|
$
|
238.0
|
|
|
$
|
(57.9
|
)
|
|
$
|
180.1
|
|
|
|
|
|
|
March 31, 2017
|
|
|
December 31, 2016
|
|
(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 liabilities
|
|
$
|
339.2
|
|
|
$
|
(81.5
|
)
|
|
$
|
257.7
|
|
|
$
|
410.7
|
|
|
$
|
(57.9
|
)
|
|
$
|
352.8
|
|
NOTE 19. FAIR VALUE MEASUREMENTS
Assets and liabilities measured at fair value on a recurring basis were as follows:
39
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2017
|
|
|
December 31, 2016
|
|
(In millions)
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
|
As
Restated
|
|
|
|
|
|
|
|
|
As
Restated
|
|
|
As
Restated
|
|
|
|
|
|
|
|
|
As
Restated
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonqualified Plan:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Traded securities
(1)
|
|
$
|
26.2
|
|
|
$
|
26.2
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Money market fund
|
|
|
1.7
|
|
|
|
|
|
|
|
1.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stable value fund
(2)
|
|
|
0.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale
securities
|
|
|
29.5
|
|
|
|
29.5
|
|
|
|
|
|
|
|
|
|
|
|
27.9
|
|
|
|
27.9
|
|
|
|
|
|
|
|
|
|
Derivative financial instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Synthetic bonds - call option premium
|
|
|
108.4
|
|
|
|
|
|
|
|
108.4
|
|
|
|
|
|
|
|
180.1
|
|
|
|
|
|
|
|
180.1
|
|
|
|
|
|
Foreign exchange contracts
|
|
|
104.9
|
|
|
|
|
|
|
|
104.9
|
|
|
|
|
|
|
|
57.9
|
|
|
|
|
|
|
|
57.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
271.5
|
|
|
$
|
55.7
|
|
|
$
|
215.0
|
|
|
$
|
|
|
|
$
|
265.9
|
|
|
$
|
27.9
|
|
|
$
|
238.0
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Redeemable financial liability
|
|
$
|
242.9
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
242.9
|
|
|
$
|
174.8
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
174.8
|
|
Derivative financial instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Synthetic bonds - embedded derivatives
|
|
|
108.4
|
|
|
|
|
|
|
|
108.4
|
|
|
|
|
|
|
|
180.1
|
|
|
|
|
|
|
|
180.1
|
|
|
|
|
|
Foreign exchange contracts
|
|
|
230.8
|
|
|
|
|
|
|
|
230.8
|
|
|
|
|
|
|
|
230.6
|
|
|
|
|
|
|
|
230.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
$
|
582.1
|
|
|
$
|
|
|
|
$
|
339.2
|
|
|
$
|
242.9
|
|
|
$
|
585.5
|
|
|
$
|
|
|
|
$
|
410.7
|
|
|
$
|
174.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Includes equity securities, fixed income and other investments measured at fair value.
|
(2)
|
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.
|
40
Non-qualified
plan
The fair value measurement of our traded
securities is based on quoted prices that we have the ability to access in public markets. Our stable value fund and money market fund are valued at the net asset value of the shares held at the end of the quarter, which is based on the fair value
of the underlying investments using information reported by our investment advisor at
quarter-end.
Available-for-sale
investments
The fair value measurement of our
available-for-sale
investments is based on quoted prices that we have the ability to access in public markets.
Mandatorily redeemable financial liability
We
determined the fair value of the mandatorily redeemable financial liability using a discounted cash flow model. Refer to Note 12 for further information related to this liability. The key assumption used in applying the income approach is the
expected dividends to be distributed in the future to the noncontrolling interest holders. Expected dividends to be distributed is based on the noncontrolling interests share of the expected profitability of the underlying contract, the
selected discount rate, and the overall timing of completion of the project. A decrease of one percentage point in the discount rate would have increased the liability by $4.0 million (as restated) as of March 31, 2017. The fair value
measurement is based upon significant unobservable inputs not observable in the market and is consequently classified as a Level 3 fair value measurement.
Changes in the fair value of our Level 3 mandatorily redeemable financial liability is presented below. Since the liability was created during the three
months ended December 31, 2016, no changes in fair value are presented for the prior period.
|
|
|
|
|
(In millions)
|
|
Three Months Ended
March 31, 2017
|
|
|
|
As Restated
|
|
Balance at beginning of period
|
|
$
|
174.8
|
|
Remeasurement adjustment included in earnings
|
|
|
68.1
|
|
Settlements
|
|
|
|
|
|
|
|
|
|
Balance at end of period
|
|
$
|
242.9
|
|
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 derivatives fair value in asset positions by the result of multiplying the present value of the portfolio by the counterpartys published credit
spread. Portfolios in a liability position are adjusted by the same calculation; however, a spread representing our credit spread is used. Our credit spread, and the credit spread of other counterparties not publicly available are approximated by
using the spread of similar companies in the same industry, of similar size and with the same credit rating.
At the present time, 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.
Refer to Note 18 for additional disclosure related to derivative financial instruments.
41
Other fair value disclosures:
Fair value of debt
The fair value of our Synthetic Bonds, Senior Notes and private placement notes are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2017
|
|
|
December 31, 2016
|
|
(In millions)
|
|
Carrying
Amount
(1)
|
|
|
Fair
Value
(2)
|
|
|
Carrying
Amount
(1)
|
|
|
Fair
Value
(2)
|
|
Synthetic bonds due 2021
|
|
$
|
441.5
|
|
|
$
|
633.6
|
|
|
$
|
428.0
|
|
|
$
|
663.2
|
|
2.00% Senior Notes due 2017
|
|
|
300.0
|
|
|
|
300.6
|
|
|
|
|
|
|
|
|
|
3.45% Senior Notes due 2022
|
|
|
500.0
|
|
|
|
506.8
|
|
|
|
|
|
|
|
|
|
5.00% Notes due 2020
|
|
|
215.0
|
|
|
|
240.8
|
|
|
|
209.7
|
|
|
|
237.7
|
|
3.40% Notes due 2022
|
|
|
161.9
|
|
|
|
178.0
|
|
|
|
158.0
|
|
|
|
177.6
|
|
3.15% Notes due 2023
(a)
|
|
|
139.5
|
|
|
|
154.5
|
|
|
|
136.1
|
|
|
|
152.0
|
|
3.15% Notes due 2023
|
|
|
134.8
|
|
|
|
146.5
|
|
|
|
131.4
|
|
|
|
142.5
|
|
4.00% Notes due 2027
|
|
|
81.0
|
|
|
|
90.9
|
|
|
|
79.0
|
|
|
|
89.5
|
|
4.00% Notes due 2032
|
|
|
103.8
|
|
|
|
123.3
|
|
|
|
101.2
|
|
|
|
122.1
|
|
3.75% Notes due 2033
|
|
|
104.4
|
|
|
|
108.2
|
|
|
|
101.8
|
|
|
|
104.1
|
|
(1)
|
Carrying amounts are shown net of unamortized debt discounts and premiums and unamortized debt issuance costs.
|
(2)
|
Fair values are based on Level 1 quoted market rates, except for the 4.00% Notes due 2027 and 3.15% Notes Due
2023
(a)
, which are based on Level 2, quoted market rates on similar liabilities with an appropriate credit spread applied.
|
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, convertible bonds, as well as amounts included in other current assets and other current liabilities that meet the definition of financial instruments, approximate fair value.
Credit risk
By their nature, financial instruments involve risk, including credit risk, for
non-performance
by counterparties. Financial instruments that potentially subject us to credit risk primarily consist of trade receivables and derivative contracts. We manage the credit risk on financial
instruments by transacting only with what management believes are financially secure counterparties, requiring credit approvals and credit limits, and monitoring counterparties financial condition. Our maximum exposure to credit loss in the
event of
non-performance
by the counterparty is limited to the amount drawn and outstanding on the financial instrument. Allowances for losses on trade receivables are established based on collectability
assessments. We mitigate credit risk on derivative contracts by executing contracts only with counterparties that consent to a master netting agreement, which permits the net settlement of gross derivative assets against gross derivative
liabilities.
NOTE 20. BUSINESS SEGMENTS
Managements 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 chief operating decision maker reviews and evaluates operating performance to make decisions about resources to be allocated to the segment.
Upon completion of the Merger of FMC Technologies and Technip, we reorganized our reporting structure and aligned our segments and the underlying businesses
to execute the strategy of TechnipFMC. As a result, we report the results of operations in the following segments: Subsea, Onshore/Offshore and Surface Technologies.
Our reportable segments are:
|
|
|
Subsea
manufactures and designs products and systems, performs engineering, procurement and project management and provides services used by oil and gas companies involved in deepwater exploration and
production of crude oil and natural gas.
|
42
|
|
|
Onshore/Offshore
designs and builds onshore facilities related to the production, treatment and transportation of oil and gas; and designs, manufactures and installs fixed and floating platforms for the
production and processing of oil and gas reserves for companies in the oil and gas industry.
|
|
|
|
Surface Technologies
designs and manufactures systems and provides services used by oil and gas companies involved in land and offshore 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 for exploration companies in the oil and gas industry.
|
Total revenue by segment includes intersegment sales, which are made at prices approximating those that the selling entity is able to obtain on external
sales. Segment operating profit is defined as total segment revenue less segment operating expenses. Income (loss) from equity method investments are included in computing segment operating profit. Refer to Note 9 for additional information. The
following items have been excluded in computing segment operating profit: corporate staff expense, net interest income (expense) associated with corporate debt facilities, income taxes, and other revenue and other expense, net.
Segment revenue and segment operating profit were as follows:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
(In millions)
|
|
2017
|
|
|
2016
|
|
|
|
As Restated
|
|
|
As Restated
|
|
Segment revenue
|
|
|
|
|
|
|
|
|
Subsea
|
|
$
|
1,376.7
|
|
|
$
|
1,517.2
|
|
Onshore/Offshore
|
|
|
1,764.0
|
|
|
|
888.5
|
|
Surface Technologies
|
|
|
248.4
|
|
|
|
|
|
Other revenue
and intercompany
eliminations
|
|
|
(1.1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
|
$
|
3,388.0
|
|
|
$
|
2,405.7
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes:
|
|
|
|
|
|
|
|
|
Segment operating profit (loss)
:
|
|
|
|
|
|
|
|
|
Subsea
|
|
$
|
54.2
|
|
|
$
|
196.4
|
|
Onshore/Offshore
|
|
|
142.8
|
|
|
|
38.4
|
|
Surface Technologies
|
|
|
(18.6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segment operating profit
|
|
|
178.4
|
|
|
|
234.8
|
|
Corporate items:
|
|
|
|
|
|
|
|
|
Corporate income (expense)
(1)
|
|
|
(59.7
|
)
|
|
|
(55.0
|
)
|
Net interest expense
|
|
|
(82.1
|
)
|
|
|
(13.3
|
)
|
|
|
|
|
|
|
|
|
|
Total corporate items
|
|
|
(141.8
|
)
|
|
|
(68.3
|
)
|
|
|
|
|
|
|
|
|
|
Income before income taxes
(2)
|
|
$
|
36.6
|
|
|
$
|
166.5
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Corporate expense primarily includes corporate staff expenses, stock-based compensation expenses, other employee benefits, certain foreign exchange gains and losses,
and merger-related transaction expenses.
|
(2)
|
Includes amounts attributable to noncontrolling interests.
|
43
Segment assets were as follows:
|
|
|
|
|
|
|
|
|
(In millions)
|
|
March 31, 2017
|
|
|
December 31, 2016
|
|
|
|
As Restated
|
|
|
As Restated
|
|
Segment assets:
|
|
|
|
|
|
|
|
|
Subsea
|
|
$
|
13,946.1
|
|
|
$
|
7,823.1
|
|
Onshore/Offshore
|
|
|
4,888.9
|
|
|
|
3,229.3
|
|
Surface Technologies
|
|
|
1,871.5
|
|
|
|
|
|
Intercompany eliminations
|
|
|
(20.7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segment assets
|
|
|
20,685.8
|
|
|
|
11,052.4
|
|
Corporate
(1)
|
|
|
8,930.1
|
|
|
|
7,637.3
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
29,615.9
|
|
|
$
|
18,689.7
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Corporate includes cash, LIFO adjustments, deferred income tax balances, property, plant and equipment not associated with a specific segment, pension assets and the
fair value of derivative financial instruments.
|
NOTE 21. SUBSEQUENT EVENTS
On April 26, 2017, we announced that our Board of Directors approved a capital allocation plan that includes the authorization of a share repurchase
program of up to $500.0 million of our ordinary shares to be completed by the end of 2018 and planning for a quarterly dividend following third quarter 2017 results. The implementation of this capital allocation program is subject to, among
other things, completion of a U.K.-court approved reduction of capital and the availability of sufficient distributable reserves, which is expected to be completed in the third quarter of 2017.
44